Focus on inputs, not outcomes
As the dust settles on another political party conference season, now is perhaps a good time to consider the state of the nation's housing policies. There is a great temptation to start by rehearsing the 22 housing ministers we have had in 20 years. On the basis that policies stay longer than personalities however, the rest of this article will unashamedly focus on policies. I should stress that in doing so, I have broken one of the golden rules of politics, I have expressed problems rather than providing solutions, but a problem shared is halved as they say!
The party conferences tended to focus on outcomes. Labour offered to get home-ownership rates back to 70%. Thankfully that was later clarified as from a larger cake, rather than just divvying up what we have, and therefore supporting growth in social rent, private rent, and home ownership markets. The Conservatives main talking point seemed uncertainty as to whether to continue with their manifesto commitment of delivering 300,000 homes a year.
Outcomes are easy to communicate to the electorate, but the substance behind them is what matters. The following statement is brave, but fundamentally, housing policy is quite simple. Like most things in life, it relies on the three factors of production - land, labour, and capital. Get those right and problem solved!
So how are we doing?
Quite depressingly really. Let's look at each in turn.
The most neglected factor of production in housing policy is capital. Politicians assume that banks will always lend, and investors will always invest. After all, that is what they are in business to do? But post global economic slowdown, banks are far more constrained by liquidity and solvency rules. Institutional investors increasingly like the look of housing. Social housing especially, is in keeping with the increasing importance of social impact in investment, and its steady income characteristics match investors’ pension liabilities. However, investors have many options, national and international, in which to invest. Policies, like rent caps/freezes, north and south of the UK do not help attract capital to housing. Successive governments do come forward with interventions occasionally, initiatives such as mortgage guarantees or Help to Buy. Homes England also invests public sector funds. Does it have enough to match need? Probably not.
Construction labour is constrained by huge demographic changes. The average age of a construction worker is about 40 years, with a fifth of construction workers over the age of 55. Has Brexit helped? Let’s not go there! There is a huge range of very worthwhile initiatives trying to attract people into the construction sector. These illustrate the range of occupations and generally try to show that construction is not what people perceive. Will the sector recruit this new inflow before the expected outflow? Only time will tell.
The factor of production that gets most attention is land, or at least planning. Whether that attention is beneficial I am not sure. There seems to be a schism that cuts across political parties and communities, as to whether they want housing, and on what terms. Generally, I find local authority planners professional and visionary, but there simply are not enough of them. They also suffer from a constantly shifting sand of national policy change. Focusing on improving what we have, rather than constant change would help.
There is also a tension in the democratic process of planning. Local politicians should express the views of their local communities. They also have responsibilities, however, to put in place sound local plans, that accommodate population and business growth. Alas, the planning system has for a long time allowed a cop-out, which is to simply not put a local plan in place. Despite the strong words of many a Secretary of State for Housing on ensuring up-to-date plans are in place, local politicians continue to get away with fudge.
To be fair, there have been some good areas of housing policy in recent years. A greater focus on quality, for example, is to be welcomed. Even here, however, the factors of production are important. If we don’t have sufficient skilled labour, quality will suffer. If we plan homes, so the only sites available are around the back of the railway sidings, quality will suffer. If we encourage speculative capital at the expense of long-term investment, again quality will be at risk. And we haven’t even touched the huge challenge of retrofitting our housing stock if we are to meet our climate commitments over the next decade.
So, in possibly two years' time, when your local political candidate knocks on your door promising housing outcomes. Smile. Put your best Mrs Brown voice on and say "that's nice!" And then ask them some searching questions about the inputs that will deliver their promises.