John Phelan is an Economist at Center of the American Experiment.
Not enough housing? Let the market in.
In 1980, Margaret Thatcher’s Conservative government passed its famous Housing Act. This gave five million council house tenants in England and Wales the ‘Right to Buy’ their house from their local authority at a discount reflecting rent previously paid.
For Thatcher, it was the perfect mix of ideological and practical politics. It made ‘public’ assets private with the handy consequence that owners of their own properties were more likely to vote Conservative than were tenants of government owned properties. Proposing the bill, Environment Secretary Michael Heseltine said it “lays the foundations for one of the most important social revolutions of this century”. Indeed, 1982 saw 200,000 council houses sold to their tenants and by 1987, more than 1,000,000 had been sold. Home ownership grew from 55% of the population in 1980 to 67% by the time Thatcher left office in 1990.
The Act was not universally popular; indeed, it remains controversial. At the time of its passage, Labour Shadow Cabinet member Gerald Kaufman said it would “not provide a single new home and [would] deprive many homeless people or families living in tower blocks from getting suitable accommodation”. It remains an article of faith on the British left that the high cost of housing in Britain today is, in not inconsiderable degree, a result of the Housing Act. In his 2014 book Engels’ England, Matthew Engel meets a Labour councillor who identifies the “major issue” facing his region as “Council housing”:
People come to me and say, “What about my son and daughter? They can’t get on the housing list.” So I say, “You bought your council house, didn’t you? That’s why. We’ve hardly got any.”’
Of course, it has never been clear how the Act – which simply transferred the ownership of some portion of Britain’s existing housing stock from government to the individuals living in it – reduced the overall stock of housing available. In Engel’s Labour councillor’s case, the fact that those parents bought their council house is not the reason it is unavailable for their children to live in: it is unavailable for them to live in because the parents are still living in it. Even if the house was still owned by the council, the parents would still be living in it and it would still be unavailable for the children to live in.
But that shortage of housing is a definite social, economic, and political problem. A new report by the Centre For Cities titled The housebuilding crisis: The UK’s 4 million missing homes claims that:
Compared to the average European country, Britain today has a backlog of 4.3 million homes that are missing from the national housing market as they were never built.
Why?
The origins of the crisis lie in one of the two dramatic changes to housing policy in the United Kingdom that occurred just after the Second World War. One was that council housing became much more important, accounting for roughly half of all new homes built in the post-war period. The other was the introduction of a new discretionary planning system in England with the Town and Country Planning Act 1947, which continues to form the basis for planning across the UK in the present day.
These two changes are at the centre of political debate on the housing crisis today, with both put forward as competing explanations of Britain’s severe housing shortage. One explanation is focused on the introduction of Right to Buy and the subsequent decline of council housebuilding in the 1980s. The other explanation emphasises that England’s discretionary planning system reduces the supply of new homes through its case-by-case decision-making process for granting planning permission.
The report’s authors, “Using newly available data on housing,” find “that Britain’s housing shortage began at the beginning of the post-war period, not at its conclusion.” In other words, it is Britain’s discretionary planning system which is to blame for a house not being built for those two kids to live in, not the Housing Act which enabled their parents to buy a place they already inhabited.
This finding has major policy implications. The solution usually offered to Britain’s housing crisis is a vast program of council house – or ‘social housing’ – construction. On the contrary, the authors note, what is needed is:
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- “Replacing the discretionary planning system with a new rules-based, flexible zoning system… [and]
- Increasing private sector housebuilding…”
Britain’s housing crisis is government made. Not by the Housing Act, which merely transferred ownership of some of the existing housing stock, but by the Town and Country Planning Act which made it incredibly difficult to expand that stock. The market should be allowed to help clean up the mess made by government.