Housing crisis

A true Thatcher heir would tackle the housing crisis, but neither Sunak nor Truss will

As this death march of a leadership race continues, young conservatives might finally get a taste of what it was like to experience 1970s politics.

Now, as then, there are major structural factors that are holding this country back. Now as then, many of them enjoy the status of sacred cows. Now as then, no party seems ready to speak hard truths, nor the electorate to hear them.

At the forefront of today’s analogues of the sclerotic nationalized industries and superpowered unions of the 1970s is our broken housing market. If a modern-day Margaret Thatcher were in sight, this would be the dragon she wanted to slay.

Yet despite seeking comparison at every opportunity, neither Rishi Sunak nor Liz Truss are up to the Iron Lady.

Take the green belt. As Anthony Breach recently explained, this is not simply a growth-stifling factor, but explicitly a restriction of our most productive cities. It does not protect our beautiful landscapes, but very often a belt of wastelands and high-intensity monocultures; a holdover from a time when politicians really thought they could just order the industry to go elsewhere.

Sunak certainly knows this; he also tried to make his candidacy look like a man willing to speak hard truths. But after his first U-turn on the tax cuts, the real signal that he had gone into flattering mode was his announcement that he planned to dump green belt.

Earlier this week he followed up with a plan to “build affordable and plentiful housing, while protecting the greenbelt”, which essentially amounted to trying to force developers to build by piling financial penalties on projects that don’t. are not. carried out during the term of the planning permit.

There are…problems with this proposal. Planning and development consultant Matthew Spry detailed the downsides of “use it or lose it” last year. Much will depend on the precise policy, but broadly speaking, developments often fail for site-related reasons, and discouraging developers from asking for permissions for risky sites will only further gum up the system.

(Also note that Sunak intends to force developers to “cough out money to start building schools, roads and shops before they start building properties”, raising a site’s stakes even further. at risk.)

Then there is the vital fact that, while a convenient bogeyman for politicians, the “land bank” version of the conspiracy theory ignores the reality of our dysfunctional planning system.

A zonal system, as used in most other places, provides certainty: the rules of a zone are defined, and if your proposal follows them, it goes up. In our discretionary system, any proposal can fail at almost any stage of a complicated process, often for overtly political reasons. Since developers need a steady supply of work, the only way to ensure that against this system is to outbid for permissions.

That’s not the whole explanation, of course. But it’s an important part of it, and trying to brutally force developers to build without considering these factors risks backfiring. Obviously, this could be another factor encouraging developers to limit offers to the safest sites.

And Truss? Well, as it was underlined rather savagely by Kay Burley in the Sky husting, until a few years ago the Foreign Secretary actually backed off relying on the green belt. She then said:

“We need to build a million homes on London’s greenbelt near train stations and around other growth towns, particularly to enable people under 40 to be able to own their homes. We should enable villages to expand by four or five houses a year without having to go through the planning system, so that people can afford to live locally.

Suffice to say that she no longer professes this point of view. If there’s any new evidence to justify this change by our “first truly philosophy-driven leader since Mrs. Thatcher”, I’ve missed it. Instead, Truss’ housing offer amounts to dodging the issue in a different way.

Firstly – and thanks to Public First’s handy political tracker for pointing this one out – the Foreign Secretary has, in an interview with the Spectatorsupported planning reform and the move towards an area-based approach.

Unfortunately, she describes these “low planning zones” in the context of the race to the top. This means that these areas will most likely be concentrated in the wrong places. While many parts of the country will benefit to some degree and could usefully receive further aid, the fact is that the areas that need a lot of new homes are London and the south of England. (You can tell because that’s where the prices are highest.)

Attempts by Tory MPs to move unwanted housing targets north – even in areas that have suffered population decline — and claiming they’re doing the Red Wall a favor is specious and leaves a bad taste in your mouth. It seems Truss’ LPZ plan is just a gloss on the same nonsense.

Then we have his proposal to end “Stalinist” housing goals, ostensibly in favor of some vague combination of “investment incentives through the tax system” and “regulatory simplification”.

Unless it’s code for real planning reform – and it certainly isn’t, at least not where it’s really needed – then it won’t be enough. The reason we need central goals is because currently local areas can just block development they don’t want, even if the nation needs it. It’s not obvious what “incentives” Truss might offer developers that might allow them to overcome the scheduling system. Likely result: fewer houses.

Finally, there is the proposal to require banks to take rent payments into account when evaluating a candidate for a mortgage.

This is not, a priori, a bad idea. If one has made regular payments of £X for many years to a landlord, it is not immediately obvious why a bank should take this as evidence that you could pay them £X per month instead. I myself have advocated for this change in the past.

But there are at least two obvious downsides.

First, there are reasons why banks don’t lend on rents. A mortgage should take a much broader – and much, much longer – view of an individual’s finances, including their ability to withstand events such as rising interest rates (which are already rising).

That means this policy could end up being another attempt to fix a problem by forcing banks to lend to subprime borrowers. At best, this increases the cost of mortgages. At worst… well.

Second, it could simply push up real estate prices. According to the article above, the Truss team estimates that “half of renters could afford a mortgage, but only 6% can access a typical first-time buyer mortgage. This suggests that they hope to allow a very large number of new entrants into the housing market.

But if this influx is not accompanied by a sustained increase in supply, the result will simply be another wave of money pouring into the system and prices equalizing at an even higher point, while cash-rich owners and institutional investors continue to bid first. -time buyers.

Repeat after me: stimulating demand is not the solution.

Neither of the two candidates is entirely responsible for this impasse. There is much honor but little glory in being a political John the Baptist, and Sajid Javid’s brief leadership bid suggests there remains little appetite among MPs or voters for the message that London and the South need millions of new homes.

You can’t rise up to a time that hasn’t come. Whether Sunak or Truss would have done it, in another life, we’ll probably never know.