Searching for a Higgs Boson to explain the unsolved problems of the housing market

Searching for a Higgs Boson to explain the unsolved problems of the housing market

Over the past few months, particularly the past few days, I have bathed in data, ideas, business models, policies and blue sky thinking on how we can deliver more housing in the UK.

This was the central theme running through yesterday’s Housing Market Intelligence conference. It was the broad thread that tied together the expert analyses in the associated Housing Market Intelligence report, which I edit. It was also the basic question that underpinned an Institute of Economic Development London debate two days ago at which I was a panel member.

It’s certainly a hot topic. More importantly there’s clearly a broad and broadening consensus that we need to deliver more housing.

That consensus was evident across the political spectrum listening to Danny Alexander and Hilary Benn speak at the start of yesterday’s conference.

More significantly it was evident in the final session on planning where Taylor Wimpey’s Peter Andrew and the CPRE’s Neil Sinden sat side-by-side and appeared to share large tracts of common ground.

So that’s good. As a nation we accept the need for more homes. Now let’s get on and do the job.

But sadly that ain’t so easy.

In the heavily debt-ridden austere post-war era, looking back, it seemed the answer was simple. When the consensus was that broad you’d just chuck cash at the problem and somehow the homes got built.

Yes, there were some diabolical mistakes, but probably fewer than myth would have us believe. I’ve heard many a time how huge swathes of the social homes built in that period were knocked down. Somehow the data doesn’t seem to support that position.

Intriguingly, the data for the stock of homes dating from that era somehow seems to suggest there are more homes in number now than were theoretically built. Without wishing to unpick the data and assuming I haven’t made some huge mistake in the sums, it seems fair to say while many were demolished, most still stand and provide good homes.

But leaving that point to one side, today adopting a similar simple approach to the housing problem is not de rigueur.

This government and its predecessor adopted broadly the same approach, putting in place a cluster of supply-side and demand-side measures. Running through the logic behind most of these scheme was concern that the fault lay either with the planning system or with the mortgage market.

The schemes were so designed to tweak, prompt, prod, push, tease, cajole and barge the market in an attempt to increase production.

Among the big winners of this policy approach have been the observers, and there are many of us, who have been spoon fed a constant supply of things to talk about, criticise, deride or applaud.

Sadly, though, after a horrendous collapse five years ago we are still delivering pitiful numbers of new homes. So each year the shortfall in the stock needed expands, burdening the economy and blighting people’s lives.

Naturally at the Housing Market Intelligence conference there was much talk of Help to Buy. Not surprising, given the audience profile, there was a high degree of praise for it. Personally I have reservations, but that’s not the point.

Even there, among what might be described as the scheme’s fan base, there was a fairly wide acceptance that Help to Buy may only provide a relatively short-term lift – and then what?

What happens when it tapers off? Will the industry be in a better shape? Will the scheme or similar remain in place?

Put bluntly, this is clearly a sweet spot for house builders. They are pretty much commercially obliged to “fill their boots” for the next year or three and hope something else comes along later, such as a full market recovery.

So for all the support provided by Government, both the Labour administration and the Coalition, it seems to me from discussions at the Housing Market Intelligence conference and more widely and the evidence in the data, that the politicians have not stumbled yet on a lasting or even particularly adequate short-term solution to the housing crisis.

What’s more, as Crest Nicholson’s chief executive Stephen Stone fabulously illustrated in what I felt was the pick of some strong presentations, the industry has lost a vast chunk of its people. Rebuilding the skills base is a big challenge. In the meantime lack of skills will constrain growth.

This challenge will be met. As it is we will hear the recurring theme of prefabrication and the need for technical solutions. There should be constant exploration for better ways to build, but as things are structured housing-related technology will play just a small part in solving the housing crisis.

I tend to sympathise with a view expressed by Savill’s Yolande Barnes at the Institute of Economic Development debate. Simply put, there is no silver bullet we have to keep trying things to see what works.

I would add, however, that I remain a supporter of a big house-building programme to support the industry in recession and address the pressing need for massive short-term action in the face of a major market failure.

But in a quest for the long-term fix, the more I consider the problems underlying the housing crisis the more I suspect the solutions do not lie exclusively in fixing planning, the mortgage market, house building or the housing market per se.

The challenge the panel was set at the Institute of Economic Development event was to discuss whether London’s housing market was damaging its economy. My first thought was that any sensible answer here had to be conditional on what economy and society you want or expect for London. The housing market almost inevitably reflects the society and economy it serves.

So, for example, the notion that we can maintain very high levels of home ownership seems in conflict with an economy and society where incomes and wealth have become more widely distributed.

In seeking solutions to the housing crisis perhaps policy makers look too directly at housing and, with the possible exception of demographics, insufficient at the long-term underlying shifts in society and the economy.

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