It’s no surprise that house prices have risen faster over the last year than they have in almost the last twenty. After all, everyone has realised what a difference a home can make: the extra space for a home office, a garden for fresh air or even just a quiet corner to escape the reality of lockdown. Not to mention a stamp duty holiday encouraging people to buy quickly. But the luxury of homeownership is slipping away for many young people.
While these increased house prices are a boon for those lucky enough to be on the housing ladder, it spells further disaster for those of us waiting impatiently on the sidelines. House prices have reached an almost record high, growing 13.4 per cent in the year to June. It’s not all down to Covid either. The surge in house prices reflects the ongoing mismatch between supply and demand in this country. There are far too few homes to meet housing needs.
Without enough homes in the places people want to live, we will have an ongoing battle whereby increasing numbers of young people are fighting for a relatively stagnant number of homes. There were 243,000 homes built in Britain in 2019/20. It’s more than in recent years but it pales in comparison to the 400,000 during the 1960s when our population was substantially smaller. While homeowners sit pretty watching their net worth grow, generation rent sees their dream of homeownership drift further and further out of reach.
This is a man-made problem. Normally when demand outstrips supply in a market, more producers enter the market to profit and fill the gap — then prices go back down. But we have designed a planning system that makes it diabolically difficult to get permission to build more homes. This not only pushes up prices but reduces social mobility and drags down incomes because people cannot live nearby to where they are most productive. Building enough homes could boost GDP by more than 20 per cent in a decade, allowing the UK to overtake Germany’s economy.
A driving factor for lack of homes is the disincentive for homeowners to welcome building in their area. ‘Local cohesion’ and ‘overdevelopment’ are used to bat away any chance of progress. And as with many vested interests, homeowners have significant political sway: enough to encourage the Liberal Democrats to go against their national platform for house building in local elections; enough to ensure that local MPs advocate for housing, as long as it’s not in their own constituency, of course.
With little chance of busting this housing cartel outright, the only hope is to bring them along. We will need to emphasise win-win solutions that ensure more supply of housing while maintaining public support.
The clearest solution is to truly democratise house building. As proposed by the Adam Smith Institute and Yimby London, we should introduce street votes: giving residents the chance vote on graceful, higher density development. This means allowing a street to opt into additional stories, extensions on unused parts of existing plots and design codes for future development. This would bring power back to homeowners, allowing them to maintain or increase the value of their assets while creating more, and more beautiful, homes.
Whatever the solution, our current system is unsustainable. Homeowners striking down any and all new developments, the return of stamp duty clogging up transactions and a restrictive planning system have resulted in a generation of young people getting the short end of the stick. And with everything that young people have sacrificed over the last 18 months, can we really be expected to sacrifice homeownership as well?
It’s time for a change in consensus; young people are not dispensable, their needs and lives matter just as much as the previous generations, and it’s time we start acknowledging that. Homeowners should want to be part of creating a better future for their children — more opportunity and more prosperity than they could have imagined. Instead, they’re saddling an entire generation with an insurmountable challenge. If the Conservatives want to maintain a property-owning democracy, a strong basis for a liberal free market economy from which their votes flow, they will need to take serious action towards righting this wrong.