Guardian (UK): The real cause of the housing crisis?

Profile of a new book that describes “…numerous actors in a complex network of landowners, housebuilders [developers], financial backers, professional bodies and politicians who are engaged in propping up the status quo to ensure that their interests prosper – at the expense of everyone else. The housing crisis is no accident…”

A recent article in the UK newspaper The Guardian profiles The Property Lobby, a new book  that suggests the UK housing crisis is the result of a “finance-housebuilding complex” that is “armed with foreign cash and backed by top lobbyists, [to] keep property prices high.”

Author and researcher Bob Colenutt of the Institute of Urban Affairs, University of Northampton, describes issues that seem uncomfortably similar to those in the US.   Perhaps that isn’t such a surprise, given that real estate markets and capital flows are increasingly global — or were, at least, before the COVID-19 pandemic. Perhaps this situation, like many others, deserves a more sober reassessment in the wake of the pandemic.

From the article:

Over the decades, governments of all colours have announced bold new methods to solve the housing crisis, but little has changed. Headlines have continually told us that we are short of 4m homes, that thousands are homeless, that 1.2 million people are on council house waiting lists and that a million private tenants are in deep poverty – not counting the impending impact of the coronavirus pandemic – but no effective action is taken. Instead, funding for social housing has been slashed while subsidies are lavished on the private sector housebuilders, in the hope that affordable housing will be delivered through “planning gain”.
…It’s a Faustian pact from which the public is doomed never to benefit. As Colenutt puts it, the situation has led to “the ultimate absurdity of public authorities actively pursuing higher values from market-led development in order to find crumbs for social housing development.”

Meanwhile, the housebuilders get ever richer. Berkeley Group, one of the Top 10 UK builders, built 3,536 homes in 2017, which sounds like a decent contribution to meeting the housing shortage. That is, until you realise that the average price of these homes – proudly described as “popular with overseas investors” – was £715,000. Tony Pidgley, the company’s founder and chairman, received a personal payout of £48m in 2018, after a previous payout of £23m in 2015, when profits rose 42%. At the same time, Berkeley has consistently reduced the amount of affordable housing on its developments across London, on the grounds that the local authority targets were “unviable”. Over the past eight years, Berkeley made a profit of more than £3bn.

Colenutt is not just describing the problems, but he also offers some proposed solutions:

…there must be fundamental land reform to bring development land forward for housing at sensible prices so that new housing can be truly affordable and existing prices can stabilise. Colenutt points to the examples of Germany and the Netherlands, where local authorities buy up development land at its existing use value, draw up real masterplans, then offer sites to housebuilders, who build to the plans of the local authority. In this way, housebuilders are simply builders of houses, not land speculators.

He says it is finally time to tax developers’ land banks and implement “use or lose it” measures, to discourage housebuilders from hoarding plots with planning permission. And, most importantly, the Treasury and the Bank of England must be weaned off their dependence on land and house prices, and rebalance the economy away from property. All of this is eminently possible, if the powerful property lobby can be resisted, and some local authorities are already beginning to take the lead, in spite of central government policy. As the Coin Street Community Builders’ slogan puts it: “There is another way.”

Read the full article here.