Bob Weston, founder of the housebuilder Weston Homes, believes the problem has worsened over the last few years. Michael Gove axed compulsory housing targets for local councils and since then, Weston claims, there has barely been a mention of housing in any fiscal announcement. “That’s my evidence that the government has become anti-developers,” he says.
“Supply is 40 per cent lower than it should be because of the number of hoops we have to jump through within the planning system,” Weston continues. “We are accused of land banking [developers buying up land and sitting on it so the value increases] but it takes on average two years just to get the initial planning approvals through the system and then there’s another 30 or 40 applicants to process. It can take three to four years to get close to even digging a hole.”
Jackie Sadek, former government adviser and author of Broken Homes, says “the problem of the housing crisis is so entrenched that it needs a cross-party accord. And before anyone says that’s in the too-difficult box, I heard this idea mooted earlier this year by a very senior Conservative politician,” says Sadek.
“Labour’s target of 300,000 homes a year is not so very different from the totally nonsensical housing targets we’ve not met for the last 10 to 20 years,” she continues. “There is a consensus in the property industry that there is no alternative to a wholesale return to building some form of council housing. Even if you call it something else. The last time we did not have a housing crisis was when the state was still directly intervening in delivery – over 40 years ago. Even the captains of [the housebuilding] industry are positive about a council housing programme funded by the government where they are just hired as the contractor, returning to their construction roots.”
Opposing forces at work
The housing market has become a toxic quagmire, a mixture of short-termist, inflationary policy designed to stimulate sales alongside punitive tax measures, which have the opposite effect – underpinned by the lack of supply.
There are opposing forces at work. The Mortgage Market Review was introduced by the Bank of England after the 2008 global financial crisis to ensure responsible lending practices to high-risk borrowers, which hit the London market harder than anywhere else. “Capping loans higher than 4.5 times incomes meant the deposit requirements shot up in the capital and sales fell to around four per cent of housing stock (from a national norm of five to six per cent). It really weighed on activity,” says Cook. And yet, at the same time, David Cameron’s administration was trying to stimulate demand from first-time buyers through the Help to Buy scheme.
“We live in an age of mortgage regulation. In making sure we don’t allow people to overstretch themselves we have created a tension between the regulators, whose overriding objective is to ensure responsible lending, and policymakers keen to keep the dream of homeownership alive,” he explains.
‘Futile and wasteful’ short-term policies
Help to Buy has courted criticism. The shared equity scheme meant first-time buyers could purchase a new-build home with a five per cent deposit, topped up by the government. It was accused of inflating property prices and lining the pockets of the major housebuilders. But it did get them building and powered the housing market out of the shadow of the global financial crisis. The scheme was scrapped last year.
Help to Buy is an example of a crisis-led, short-term policy to stimulate demand. The next was the stamp duty holiday, introduced in the 2020 emergency summer budget. It promoted a rush to buy as urban families fled the cities in search for space.
However, because there was a deadline, it pushed lots of people to move at once, causing a spike in house prices (particularly in rural and coastal areas) just before 14 consecutive rises in interest rates. This meant many households had paid over-inflated prices in the stampede only to find their mortgage repayments quadrupled.
“The government’s approach to addressing housing affordability has been to engage in symbolic, futile and wasteful policies, boosting demand for first-time buyers,” says Cheshire. “This only increases house prices further in areas with tight constraints where affordability is worse.”
Stamp duty stifles movement
In fact, the entire stamp duty system comes under fire before every Budget or Autumn Statement as a heavy-handed tax that stifles movement.
In 1980 the average stamp duty bill for someone buying a property in London was one per cent of the overall price (£240), 0.5 per cent across England (£92) and 0.5 per cent for a first-time buyer (£76). By 2024 the proportion for Londoners has jumped to 2.6 per cent. That’s a bill of £14,061 on the average property worth £531,212. A family buying a four-bedroom terraced house (with a small garden) in Kingston-upon-Thames for £800,000 will foot a tax bill of £27,500. For the average buyer across the country Stamp Duty Land Tax (SDLT) currently sits at 1 per cent (£2,979).