Are We Really Solving The Housing Crisis?

For many years, a large revolving door adorned the rather impressive entrance to the Ritz Hotel on Piccadilly, a portal through which all guests, both great and good, would pass. Some years ago, it became the victim of progress, to be succeeded by a door more attuned to the modern requirements of health and safety. Yet the good old revolving door has proved to be alive and kicking, at least metaphorically, at the Ministry of Housing, now incorporated within the auspices of the Department of Levelling Up, Housing and Community. With eleven housing ministers in almost as many years, the revolving door analogy is often quoted in the media’s assessment of this often briefest of ministerial briefs.

What lies behind this almost embarrassingly high turnover of staff? Is Housing just a fast-track programme for talented up-and-coming politicians looking to cut their teeth and quickly move on? Or perhaps it’s simply that housing is the hottest of potatoes that no politician can handle, in which case we’re probably still waiting for the right candidate to rock up with their asbestos gloves. Given that we’ve had the likes of Yvette Cooper, Margaret Beckett, Grant Shapps, Alok Sharma, Dominic Raab, Esther McVey, and now Michael Gove all try their hand, I’m not sure it’s an absence of perceived talent that’s the issue. Which would suggest that it may indeed be something of a super-heated spud.

Let me ask you a couple of questions that should bring the political housing dilemma facing the government into sharp focus. Firstly, raise your hand if you think that any government of the day should proactively address the housing crisis by taking steps to ensure more new homes are built? There will doubtless be many hands in the air; it’s difficult to argue that we don’t need new homes, particularly if they’re of the affordable variety. Now, keep your hand raised if you’re happy to have a shedload of these affordable homes built just around the corner from where you live? Ah. And therein lies the problem. Everyone loves the idea of new homes being built unless they’re going up on their own doorstep, in which case, they’ll violently object and will even use the power of the ballot box to make their feelings known. Which is something of a no-win position if you happen to be a body with responsibility for housing and for whom votes are quite important. The worst of it is that the public can’t share the burden of new housing; it’s not like a tax hike where everyone pays their share. There will be winners and losers, and the losers will likely be very upset. And with 300,000 new homes needed each year, that’s going to mean quite a lot of losers out there.

So what’s happened over the last decade or two while we haven’t been solving the housing crisis? The answer is not a great deal. We’ve had lots of ideas and plans. There has been much debate, drawing of breath, and gnashing of teeth. We even had some bold yet not universally popular new planning legislation in the offing for a while, which turned out to be a bit too ballsy and has now morphed into something allegedly more palatable under the new ‘Levelling Up’ label. Lots of noise and a distinct whiff of mañana about when it’s all going to happen. But here we sit, with a planning system in tatters and zero prospect of hitting the government’s own new homes target this side of pretty much any date you care to mention.

It’s as if the government has become resigned to the fact that all it can hope to do is kick the housing ‘can’ far enough down the road without it becoming an election loser. The dog gets tossed the occasional bone in the form of an attractive yet frothy concept or idea to create the impression that progress is being made without having any meaningful impact.

This year’s Queen’s Speech was a case in point. It was notable for several things, not least the fact that the Queen didn’t make it. But, as ever, it was an opportunity for the government to showcase some forthcoming legislation and gauge subsequent public reaction. We’d already been told that the eagerly awaited new Planning Bill would be scrapped, and any changes would instead be incorporated within some of the forthcoming levelling up legislation. And to some extent, this proved to be the case, although the meat was thin on the bones, detail-wise.

On the subject of froth, there were several appeasement housing policies briefed in advance of the Queens Speech, although not all made it into the speech itself, hence the lack of detail. We had a policy allowing residents to vote on local planning issues that affect them, one for doing something about empty shops on our High Streets and another to help locals get a foot on the housing ladder in areas where second-home owners had snapped up the housing stock and pushed up prices. So, lots of worthy causes and potentially positive headlines, but exactly how much closer does this bring us to solving anything?

Let’s consider the concept of ‘street votes’. The basic premise being proposed by the government is that residents can hold referendums on their neighbours’ property extensions as well as on new homes. The main focus of street votes seems to be on design and quality issues rather than whether new homes can be built in the first place. Now, I know what you’re thinking; this could go horribly wrong if we’re not careful, and things could quickly turn quite nasty on Acacia Avenue. There’s certainly plenty of scope for a few neighbourly fall-outs. At the time of writing, we’re awaiting further detail, but one gets the distinct impression we’re fiddling around the edges. We’re trying to assure people that they will have a say on local planning issues, whereas the reality is that the limit of their influence may well turn out to be the size of Mr. Jones’s extension or the finials on the Khan’s new conservatory. The elephant in the room is that we need to build more houses, full stop, and how many proposed housing estates do we think will be put forward by street voters for their own neighbourhoods? In fact, how convinced are we that people will be more worried about what a new housing estate looks like than whether it’s built on their doorstep? And won’t this concept simply introduce a new level of bureaucracy and red tape to already stretched planning resources? The hard facts are that the government’s increasingly wobbly target of 300,000 new homes per year is a lot of new houses, AND we can’t just build a new county’s worth of homes each year in the middle of nowhere. Homes need to be built where there is existing demand, jobs, and infrastructure. In short, on somebody’s doorstep.

Another idea being put forward is that planning authorities would have the power to instigate auctions to take leases on vacant high street properties. There are a couple of interesting issues in play here. Firstly, the government again wants to appear to be tackling a significant problem, in this case, the subject of a near-dead High Street, by forcing landlords to rent out their empty properties. So, on the face of it, a vote-winner, since everyone enjoys a good old tut at the state of the High Street. But hold on a moment; why are all these properties empty in the first place? Is there a cartel of shop-owning landlords looking to deprive shoppers of their retail therapy by leaving their buildings untenanted and presumably receiving no rent for the privilege?

Or perhaps, more likely, there isn’t a queue of businesses looking to rent these properties in the first place, which is why they’re empty. So who exactly does the government think will be bidding to rent out these vacant properties? And what happens to the value of a property with such a tenant? The logical outcome is that rather than have their properties rented out for peanuts to potentially low-quality tenants; landlords will either install sham tenants to dodge the draft or use permitted development rights to convert their buildings into residential. Now, hats off if the latter is the government’s ultimate plan since it neatly accelerates their ambition to have more homes in our town centres. But I’ll let you judge whether they’re likely to have been that prescient.

The other interesting issue that the High Street rental auction idea impacts is property ownership rights. The other day my wife pointed out a pair of trousers in my wardrobe that I hadn’t worn for a while and asked me if I wanted to chuck them out. Now, they’re my strides, and, marital harmony aside, I reserve the right to do with them as I wish. Ownership, after all, has its privileges. Or, at least, it used to. Imagine if, instead, there’d been a knock at the door from some trouserless chap who’d come to pick them up because he’d bid successfully to rent them from me at a knock-down price at a government auction. All because I’d not worn them for a year. How exactly would I feel about that? I’m being ridiculous, but it’s the same principle. If you own something and elect not to use it, should that be your choice, or should the state be allowed to intervene and take control of it? Once more, addressing the problem is laudable, but the mechanics of the solution leave a boatload of question marks and a potentially worrying issue about state intervention on something rather fundamental like the ownership of assets and property. And meanwhile, the housing crisis rumbles on in the background.

As for second-home owners, the proposal appears to be that they should pay up to double the going council tax rate for home number two, subject to certain criteria. It mirrors a similar principle adopted in Wales, where second homeowners will face a council tax bill up to four times higher than owner-occupiers from April 2023. The underlying issue is critical; there are simply not enough homes for local people to live in. But ask any five-year-old what the logical solution to not having enough houses is, and I suspect they probably wouldn’t suggest a 300 percent increase in council tax for second homeowners. But of course, the far more obvious answer would involve politicians grasping the nettle and doing something that could potentially put their jobs at risk, namely building more homes. Far less risky politically to point the finger at those pesky wealthy second-home owners instead.

None of this would have happened at Hogwarts, where presumably a bit of wand-waving would have magicked up a handful of hitherto non-existent counties that could be slotted in somewhere without anyone noticing, and we could build as many houses as we liked. But is there a real-world solution that gets homes built without alienating voters?

No, is the short answer. To be fair, the government has tried quite a few other things recently to alienate voters, so perhaps there’s an argument for just taking the plunge. Maybe the wails of nimby Britain will be drowned out by the cacophony of discontent from other quarters. Yet interestingly the government already has a pretty good plan for fixing the High Street and partially solving the housing crisis, too, namely converting existing unused brownfield stock into residential. The CPRE estimates that there are enough empty brownfield properties to create 1.3 million new homes. The government has taken great strides towards making it easier to convert these into residential use by creating a raft of new permitted development rights, which have changed the game significantly. Converting existing buildings is, to some extent, the perfect solution. It would unlock around four years’ worth of new homes, and votes are far less likely to be lost since these buildings already exist, and most people would rather see inhabited homes than empty commercial buildings. Most of them can be found where there is already infrastructure and demand, plus it will encourage a renaissance in our town centres since more people will start living there, creating a need for local shops and amenities. It also doesn’t involve building on our precious green belt.

So, what’s not to like about this brownfield conversion model? Well, one of the biggest challenges with brownfield sites is that they’re not attractive to the major housebuilders. The projects are usually way too small, plus they’d have to design a bespoke solution every time and work around the existing structure, which isn’t a skill they major on. They need a big empty field on which to build their established house designs. And so it will fall to a different group of developers to solve the problem, namely the small but ever-increasing army of ‘small-scale’ SME developers. These are often individual property investors who are happy to make a few hundred thousand from putting flats above a shop or converting a small office building into residential and who aren’t looking to build housing estates or even develop full-time.

And given the volume of empty properties in almost every town in the country, there are certainly plenty of opportunities.

Interestingly, these new small-scale developers are often drawn from the ranks of disillusioned buy-to-let landlords who have been left licking their wounds following the recent spate of tax hikes and increased rental regulation. And, of course, an influx of six-figure profits can work wonders for accelerating one’s portfolio growth.

Politically, Mr. Gove is no lightweight and is renowned for having a thick skin when implementing unpopular policies. Will he be the man to set the country on a path to biting the bullet and building more homes? History will judge, but for the time being, commercial conversions look like being the best way to create new homes without losing votes and an excellent opportunity for new developers to make hay while the sun shines.