Home Truths: The UK's chronic housing shortage – how it happened, why it matters and the way to solve it

By Liam Halligan

The UK's chronic housing shortage is lowering the quality of life for millions, turning the British dream of home ownership into a cruel nightmare – not least for 'generation rent'. Countless vulnerable families are meanwhile being deprived of access to decent social housing, causing homelessness to spiral.
In this searing polemic, Liam Halligan offers radical solutions to the most urgent political issue of our times. Fully updated, with a foreword from former Chancellor Sajid Javid and drawing on extensive interviews with Cabinet ministers, civil servants, leading developers and struggling homebuyers across the country, Home Truths is a no-holds-barred critique of the UK's housing crisis.

• Language: English
• Publisher: Biteback Publishing
• Release date: Jan 13, 2021
• ISBN: 9781785904820

Liam Halligan

Liam Halligan has written his weekly Economic Agenda column in the Sunday Telegraph since 2003 and has been recognised with a British Press Award. He is Editor-at-Large of bne-IntelliNews and has extensive business experience.

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GLOSSARY

INTRODUCTION TO THE PAPERBACK EDITION

‘There’s no place like home.’¹

F

rank

L. B

aum,

1900

As the hardback edition of Home Truths was approaching publication in the autumn of 2019, Brexit still dominated the print and broadcast media headlines. Parliamentary gridlock – which had begun after MPs overwhelmingly rejected Theresa May’s European Union Withdrawal Agreement in January and continued through spring and summer – meant other policy areas barely made the news.

In July, Boris Johnson had replaced May as Prime Minister, having convinced the Conservative Party he would find a way to implement the 2016 referendum result. The struggle to get some version of Brexit through the House of Commons duly intensified. Under Johnson, though, perhaps because a political reckoning seemed imminent, other domestic policy issues started to gain some media traction. And prominent among those was the need to build more residential real estate, not only to help aspiring homeowners and private renters facing sky-high prices but also to tackle rising over-crowding and outright homelessness among those reliant on state-subsidised social housing.

As it turned out, when Home Truths was published in November 2019, the UK was in the midst of a general election campaign. The Commons had finally accepted that breaking the Brexit impasse meant going back to the country, allowing Johnson to call a ‘snap’ election – which pushed housing down the news agenda once again. But when the Conservatives secured a thumping eighty-seat majority the following month, it was widely assumed the new government, while fulfilling Johnson’s campaign promise to ‘Get Brexit Done’, would have the time in office and political scope to implement some radical policies.

This included a ‘levelling-up’ regional agenda, in a bid to retain ‘red wall’ seats won from Labour in the Midlands, north-east and north-west. More broadly, the new Johnson administration was expected to pursue a raft of vigorous pro-growth reforms, including measures to promote more housebuilding. ‘The Conservatives have always been the party of homeownership,’ Johnson had said on the campaign trail. ‘But under a Conservative majority government in 2020 we can and will do even more to ensure everyone can get on and realise their dream of owning their home.’²

The reality has been, of course, that since early 2020 UK policymaking – and domestic and international politics more generally – has been entirely dominated by the Covid pandemic. Most issues not directly linked either to measuring or tackling the virus have failed to punch through. That’s led to a renewed paucity of policy debate, similar to the years when the struggle over our Brexit policy was so all-consuming and hotly contested. Away from the headlines, though, this Covid-related lockdown, implemented to varying degrees from March until the time of writing, has refocused and intensified the political discourse in several important policy areas – not least housing.

The UK government’s response to this virus has meant that, for much of 2020, the majority of us have spent much more time than we had previously at our place of residence, with millions working from home rather than travelling to an office. This has put into stark relief the gulf in circumstances between those who enjoy spacious accommodation with spare rooms and gardens and others living in cramped, over-crowded conditions.

As such, Covid has emphasised the reality that for far too many people in Britain, their physical accommodation, rather than acting as a place of comfort and refuge, is a major source of misery. And it may even be a serious risk to their health. As early as May 2020, little more than a month into lockdown, there was strong evidence of an acute and disturbing link between inadequate, over-crowded housing and death from Covid. Research published by the Inside Housing website pointed to a striking positive correlation between localities with a high incidence of sub-standard accommodation and deaths from the virus.

During March through to mid-April 2020, in areas with less than one household per 100,000 in temporary, local-authority funded accommodation, the average death rate from Covid per 100,000 people was 27.4. In localities with more than fifteen households per 100,000 in such housing, though, the average Covid-related death rate was as high as 102.9. There was also a clear correlation between areas with the most acute shortages of social housing – as measured by the length of the waiting list – and fatalities attributed to Covid.³

This Covid pandemic, and our response to it, has clearly accentuated the very significant human impact of the UK’s systemic housing problem, bringing the chronic shortage of adequate homes into sharp focus. The government-imposed lockdown has exposed – more starkly than at any other time in living memory, perhaps – the disadvantages of not living in decent, relatively spacious accommodation.

‘We need to build, build, build,’ declared Johnson in June 2020, as he unveiled a ‘£5 billion new deal for Britain’, centred on more housing.⁴ This is the latest in a very long line of promises by British governments of all political stripes to ‘finally solve our housing crisis’. Yet there is, at the time of writing, even allowing for the very significant distraction of the pandemic, scant evidence that this government is different to any of its predecessors. The new Johnson administration has shown almost no sign whatsoever of a willingness to take the bold steps necessary to unlock a sustained and significant rise in residential construction – whether for purchase, private rent or social housing. On the contrary, the measures so far announced as of the autumn of 2020, while presented with much fanfare, amount to more of the same.

GENERATION RENT

The average UK home now costs eight times average annual earnings, over twice the historic norm. This crippling affordability multiple rises to twelve times across London and the south-east. In many parts of the country – including the north-west, the Midlands, the West Country and parts of Scotland and Wales too – countless young adults, even well-paid professionals, are priced out of the housing market. Often spending half their income on rent, while enduring long commutes, their home ownership dream is slipping away.

Back in the early 1990s, 36 per cent of 16–24-year-olds owned their own home. Now it’s just 10 per cent. The share of 25–34-yearold owner-occupiers has plunged from 67 to 38 per cent over the same period – with well over half a generation denied the security of home ownership at this crucial family-forming age. Some 78 per cent of 35–44-year-olds were homeowners in 1991, but just 56 per cent are now.

Over recent years, the share of pensioner owner-occupiers has soared, but UK home ownership overall has plunged – from a high of 73 per cent of households in 2007 to just over 60 per cent today, well below the EU average. And, lower down the income scale, high rents, reduced housing benefit payments and a chronic shortage of social housing, available at below-market rents, have all added to a shocking increase in over-crowding, homelessness and the expansion of a marginalised underclass. In the immediate aftermath of the Grenfell Tower tragedy of June 2017, there was a sense of public outrage, creating a clamour for more and better social housing. Since then, though, the political pressure generated after this shocking fire, in which seventy-two people died, has been lost under Brexit-related and now Covid-related noise.

While the UK needs around 250,000 new homes a year to meet population growth and household formation, housebuilding has failed to reach that level since the mid-1970s. There’s a massive backlog shortage of homes, amounting to between two and three million properties, built up under successive governments over decades. This is the main reason property prices have spiralled way ahead of earnings. As a result, millions of young adults are stuck in shared, rented accommodation and have put their lives on hold. Frustration and insecurity abound as, for so many, the instinctive and entirely reasonable ambition of home ownership is thwarted.

Four out of every ten thirty-year-olds now lives in private rented accommodation, compared to just one in ten as recently as 1996. Not only is the incidence of renting among young adults so much higher now than in the past, but these would-be homebuyers are spending a much higher share of their total incomes on housing costs. With house prices consistently outpacing earnings, today’s young adults are spending more on housing, and are less likely to be owner-occupiers, than any generation since the 1930s. We are in the midst of a near-nationwide housing affordability crisis.

Rising house prices mean that ‘generation rent’ will keep expanding, set to increase to 7.2 million by the late 2020s, by which time little more than a quarter of 25–34-year-olds will own their own home. The sense of injustice they feel at being denied a fair chance to buy a property is one of the cardinal political developments of our time. These voters are coming of age, voting in greater numbers and, as their chances of buying a home seem to slip away, are becoming increasingly angry. This growing gulf between Britain’s ‘property haves’ and ‘property have-nots’, a gulf now increasingly being maintained from one generation to the next, casts serious doubt over the UK’s claim to be a progressive society.

Since Home Truths was first published, Jeremy Corbyn has been replaced by Keir Starmer as Labour leader, following Johnson’s victory at the polls in December 2019. While Corbyn lost the most recent general election, it is worth remembering he came very close to power two and a half years earlier in June 2017. Fewer than 10,000 extra votes in that election, spread between certain constituencies, would have seen Labour win more seats than the Conservatives, allowing Corbyn to form a minority government. And the sharp rise in support for Labour, which saw Corbyn take 40 per cent of the vote, up from Ed Miliband’s tally of just 30 per cent in 2015, derived largely from ‘generation rent’ – the millions of 30–39-year-old voters who, unlike their parents, are unable to buy a home.

Growing numbers of voters entering middle-age, even highachieving professionals in dual-income households, face the locked door of housing unaffordability. As a result, and quite understandably, many feel capitalism isn’t working for them. Just as owner-occupiers are more likely to vote Tory, young adults desperately upset they cannot buy a property are prone to vote for ‘a shake-up’ – the electoral trend which took Corbyn within a whisker of power. And while the 2019 general election was largely about Brexit, with millions angry at Labour’s attempts to engineer a second referendum, housing will return as a potentially pivotal issue in elections to come. There should be no doubt about the widespread voter dissatisfaction generated by the inability of millions of British voters to access adequate housing – be it the unaffordability of homes to buy or rent, or the unavailability, for low-income and other vulnerable households, of subsidised social housing.

Since 1997, the number of UK households of all ages in the private rented sector has risen substantially, from 2.1 million to 4.7 million. Some nine million working-age adults now live in rented homes. As prices spiral way ahead of wages, ever more first-time buyers (FTBs) – including those holding down professional jobs – need financial help from their family if they are to buy their first property. Half of all FTBs now rely to some extent on ‘the bank of Mum and Dad’, rising to no less than two-thirds in London and the southeast – an option that only exists, of course, for those from relatively wealthy backgrounds.

Since 2013, the government has responded with Help to Buy (HTB). But this has just further stoked demand, handing huge profits to large developers by channelling FTBs into often sub-standard, over-priced new-build homes. The central argument of Home Truths is that we need radical reforms to the supply side of UK housebuilding instead, particularly the opaque and deeply dysfunctional market for land. At present, landowners and large developers, who increasingly dominate the industry, have every incentive to sit on their land holdings, even if they have planning permission. Relentless housing demand, in the face of slow supply, pushes up land prices, and ultimately the prices homebuyers must pay, and developer profit margins, even more. Over recent years, as local councils have granted more and more planning permissions, the clear and undeniable reality is that the big players now dominating housing supply have engaged in a deliberate building go-slow, making higher profits overall by building fewer homes.

Official ‘new dwelling’ numbers are up – but this increase reflects a spate of often shoddy one-off conversions of office buildings and shops, rather than the sustained rise in housebuilding required. Overmighty builders are producing far fewer homes than before the financial crisis, despite gorging on taxpayers’ cash courtesy of the misguided HTB scheme – which has helped some homebuyers to secure a home but served only to push up prices even more for the vast majority who can’t access the scheme.

Only bold action can break this ‘low-build’ deadlock. There should be stiff fines for developers that unduly delay building once planning permission has been granted. The threat of compulsory purchase should be used, if necessary, to release acreage. When residential planning permission is granted, land values rocket, often more than 100- or even 200-fold. This vast ‘planning gain’, which currently accrues almost entirely to landowners, should instead be shared in a much more systematic, transparent fashion with local government, then ring-fenced to fund the new schools, hospitals and other infrastructure that would make housebuilding more popular with existing communities.

The value of residential building plots reflects, after all, the proximity of existing state-funded infrastructure and local commerce, so the broader community is entitled to a sizeable chunk of the windfall profits related to further development. Planning gain is systematically shared in many countries – including France, Germany, much of the United States and many Asian nations too. It’s an idea that goes back to Adam Smith and the Scottish Enlightenment. And it used to happen here.

The UK’s post-war building boom was driven by legislation allowing such land value capture (LVC) by government – which damped down speculative demand for land, keeping the cost of building plots reasonable. This, in turn, allowed millions of relatively affordable homes to be built, mainly by small- and medium-sized enterprises (SMEs) – developers which build out planning permissions quickly in order to aid cash flow. This access to reasonably priced land was the key feature underpinning what was then a truly competitive housebuilding industry – one that was far more beneficial to homebuyers, with multiple building outfits competing on both quality and price, rather than just a few over-mighty operators stitching up land access and controlling the pace at which homes are supplied.

The principle of LVC was also at the heart of the 1946 New Towns Act, which led to the creation of thirty-two settlements, funded partly on shared planning gain, allowing the construction of relatively affordable homes, complete with decent local infrastructure. Such ‘New Towns’ are now home to over three million people. Cheaper land also meant that, throughout the 1950s, local authorities were able to build millions of low-rise, low-density social homes – that were spacious and with decent gardens, because acreage was available at reasonable cost.

During the 1950s, though, successive Conservative governments led by Churchill and then Macmillan pandered to big landowners and developers, passing a series of laws stymying the use of LVC. Ultimately, the Tories passed the 1961 Land Compensation Act, ensuring that landowners and land-holding developers were entitled to the full land valuation upside when planning permission was granted, including the ‘hope value’ of any conceivable future development. This legislation has since fuelled rampant speculative investment in land and remains in place to this day. The 1961 Act, more than anything else, explains why the price of land for residential building – and, in turn, the cost of housing – has spiralled over the past half-century, resulting in our current affordability crisis and chronic lack of social housing.

A wide range of policy reforms is needed to raise the rate of UK housebuilding significantly, to start addressing the huge backlog shortage and, over a considerable period, to gradually bring prices back more in line with earnings – making homes affordable for would-be owner-occupiers, while providing enough decent subsidised housing, too. But Home Truths argues that one rather bold policy shift – reversing the 1961 legislation and introducing a transparent system under which planning gain is shared fifty–fifty between owners and local authorities – is essential, a prerequisite, if we are to have any chance of fixing the UK’s broken housing market.

HOME TRUTHS

Housing is a particularly complicated and multi-faceted area of public policymaking, ranging from planning and credit availability to architecture, safety, climate change and design. Few aspects of government policymaking, though, have a more direct impact on the lives and livelihoods of millions of people across the UK. Home Truths does not present a detailed history of British housing policy – not least as there are several such volumes already.⁵ Many important aspects of Britain’s housing debate will be barely touched upon in this relatively short volume, and some won’t be covered at all. What this book seeks to do, instead, is to explain the current reality of our housing market to as broad an audience as possible, while drawing on the author’s countless discussions over many years with ministers, MPs, civil servants, housing industry professionals and priced-out potential homebuyers to highlight some policy options.

Many of the recommendations made, despite resulting from conversations with those at the front line of politics and policymaking, will no doubt be dismissed as unworkable and simplistic by powerful vested interests opposed to change and benefiting handsomely from the status quo. The author would observe, though, that rising numbers of young adults are spending half their incomes on rent and are unable to buy a home – an issue causing immense frustration to themselves and their parents. As home ownership falls, and successive waves of ‘generation rent’ emerge, the political geometry is starting to shift. The previous large majority who wanted less housebuilding will soon be outvoted by the growing ranks of priced-out younger and now not so young adults who have been financially locked out of home ownership and so desperately want much more.

Consider, also, that homelessness is at record levels. And beyond the tens of thousands of families in temporary accommodation, many with children, rough sleeping has become an increasingly common sight. That’s why senior politicians from all parties are increasingly convinced that major reforms are needed to address the UK’s highly dysfunctional housing market, so it delivers homes for rent and purchase and subsidised housing, at reasonable prices, to as many people as possible.

Chapter I of Home Truths – ‘The British Dream’ – provides a quick overview of UK housing policy since the end of the First World War, explaining how we became ‘a nation of home-owners’ and why the rate of owner-occupancy in this country has recently plunged. It also seeks to explain something of the author’s motivation to write this book.

Chapter II then outlines the scale of the UK’s current housing crisis in twelve graphs, focusing on the long-standing and significant shortfall in the building of new homes compared to the growing number of households. This widening gap between supply and demand has seen house prices increase much faster than wages over several decades, particularly since the mid-1990s, and then again after the 2008 financial crisis, resulting in a sharp fall in owner-occupancy among certain age groups – particularly young adults.

Chapter III – ‘A Place of Our Own’ – restates the case for home ownership, countering those who say that, for a large part of the workforce, living in your own property is now an unobtainable and misguided dream. Buying a home with a competitive mortgage is generally cheaper than renting each month and gives ordinary working people the opportunity to amass some capital, providing greater financial security and choice. The fall in home ownership since 2007, particularly among young families, is now driving wealth inequality and social division as the gulf grows between those who do and don’t own their own property.

Chapter IV – ‘A Broken Market’ – identifies seven features of our housebuilding industry, and the regulatory system in which it operates, that help explain why successive generations are being priced out. Too few homes are ‘completed’ each year because the housebuilding industry has become much too concentrated. Powerful developers are engaged in a deliberate building ‘go-slow’ – exerting undue control over the pace at which new homes come to market, which keeps prices rising far faster than economy-wide earnings. Starved of access to land and finance, there are now far too few SME developers involved in housebuilding to challenge the big, overly powerful building firms. Frequent political donations from large developers have coincided with a marked lack of policies to counter their growing dominance, a manifest expression of modern-day ‘crony capitalism’.

Chapter V – ‘How Ministers Made the Housing Crisis Worse’ – assesses UK housing policies since 2010. Rather than supply-side measures to ensure more homes are built, successive Conservative-led governments have instead stoked up the demand side of the market via the flagship HTB scheme, reinforcing the dominance of the largest industry players. Dubbed ‘Help to Sell’ by housing industry insiders, HTB has pushed up prices and handed massive multibillion-pound windfalls to the UK’s leading developers, consolidating their grip on the market. Rather than reversing the policies of her predecessor David Cameron, Theresa May compounded his error by repeatedly extending what was meant to be a one-off HTB programme, pouring further billions of pounds of taxpayers’ money into a scheme that has helped a lucky few but made affordability far worse for the vast majority.

Chapter VI – ‘No Shortage Nonsense’ – tackles the notion, increasingly promoted by large developers and their political and media allies, that there is no shortage of homes in the UK. Easily disproved, the promotion of this idea is not only self-serving but an insult to the millions of young adults still living in their childhood bedroom, the additional millions of ‘concealed households’ in cramped lodgings and other priced-out young and middle-aged adults across the country unable to buy or rent their own home. This chapter also discusses another highly contentious issue – the link between years of net UK immigration and our current shortage of housing to both buy and rent, including social housing.

Chapter VII – ‘New-Build Nightmares’ – focuses on Persimmon, one of the UK’s largest developers. Over recent years, Persimmon has been widely criticised for producing shoddy houses and flats and selling homes with extremely punitive leaseholds. At the same time, senior executives have been awarded disproportionately large bonus payments, often running to many millions of pounds. While operating within the law, Persimmon has, for many, become emblematic of a housebuilding industry that is over-mighty and exploitative, providing a sub-standard product to customers who face little choice amid an ongoing shortage of available homes.

Chapter VIII – ‘Fat of the Land’ – traces the history of LVC in the UK, outlining how the policy was effectively used following the Second World War, a period of mass housebuilding, before it was essentially abolished in 1961. There are now growing demands from across the political spectrum – from campaigning housing charities and left-wing pressure groups through to centre-right thinktanks and Conservative Cabinet ministers – that our housing shortage is now so serious and the affordability crisis so acute that LVC should be reintroduced.

The focus of Chapter IX – ‘Beyond Grenfell’ – is the UK’s social housing sector in the aftermath of the worst residential fire since the Second World War. Some 17 per cent of the UK population lives in social housing, down from a third in the late 1970s. There will always be a need, in any advanced economy, for some subsidised housing that provides decent, affordable accommodation for low-income households and other vulnerable groups. The UK’s current policy, of increasing reliance on private landlords to house social tenants, as rents rise, is causing the housing benefit bill to spiral. These costs will escalate, and over-crowding and homelessness will rise, until the UK decisively reverses the long-term decline in social housebuilding.

This penultimate chapter also asks what lessons can be learnt, both good and bad, from the UK’s post-war New Towns programme. While often criticised for shoddy architecture, the New Towns successfully used gains accruing from the granting of planning permission to build local amenities and provide other community development priorities, including social housing.

Home Truths concludes with ‘A Manifesto for Change’ – ten explicit proposals to encourage more housebuilding across the UK, in the right places, at affordable prices. The state needs to put some of the land it already owns to better use, making far more of it available for housebuilding. Steps must be taken to address the over-concentration of the UK’s housebuilding industry, with particular incentives and assistance for SME builders. Developers granted planning permission must be incentivised to deliver homes promptly – and penalised if they do not.

With no new, substantial settlement built since 1970, the UK also needs to launch a modern-day ‘New Town’ movement. The legal basis of LVC must be finally reinstated so commercially built homes are affordable and social housing can be built more economically, while raising funds to provide local amenities to go alongside new homes – making housebuilding more popular with existing communities.

Housing is the most pressing domestic challenge facing the UK today. Far too few homes have been built over the past thirty years – and relentless demand, in the face of inadequate supply, has seen prices spiral upward. Millions of hard-working people – even well-paid professionals – are now being denied the security and stability of home ownership. And, lower down the income scale, a desperate lack of social housing is driving serious over-crowding and record levels of homelessness, resulting in considerable misery and suffering.

LITTLE APPETITE

Since Home Truths was first published in November 2019, the housing debate has continued in Parliament, across local authorities and elsewhere, albeit with little national media attention given the focus on Brexit and now Covid. In early 2020, the House of Lords Economic Affairs Select Committee, after the strong impact of its ‘Building More Homes’ report published in 2016, held a follow-up inquiry. The new investigation re-examined UK housing demand, the government’s response and possible solutions via planning reform, public land use and housebuilding by local authorities and housing associations. The author accepted an invitation to appear before this Lords committee to provide oral evidence.⁶

A similar reinvestigation, focused more specifically on the provision of social housing, was launched at around the same time by the House of Commons Housing, Communities and Local Government Select Committee – also responsible for a series of influential reports over recent years, arguing for more housebuilding and, in particular, the use of LVC to dampen speculative pressure in the market for residential building land. Again, the author was asked to submit evidence to this parliamentary inquiry.⁷

In terms of actual policy developments since autumn 2019, the new Johnson government has yet to demonstrate much understanding of the issues outlined above – and described in detail throughout this book. Ministers know they need to ‘fix housing’, given the consistently high placing of the issue among focus groups outlining voters’ most pressing concerns – which they acknowledge both publicly and in private. But we have so far seen little appetite to consider the tough decisions needed to unlock a significant and sustained rise in housebuilding, even allowing for the distraction represented by the Covid crisis. On the contrary, the measures introduced since last autumn suggest a failure to grasp the need for significant change.

In August 2020, ministers launched proposals and a consultation process to reform Britain’s often tortuous ‘case-by-case’ planning system.⁸ The government indicated it wants to use more ‘zoning’ in some localities where there is particularly strong demand for housing, with clear and predictable residential building rules, to lessen the uncertain and often labyrinthine nature of existing procedures. This is a good idea – and is among the policies proposed in Home Truths. But streamlining the planning system is just one part of tackling the much broader set of structural issues which remain unacknowledged. For the claim by HM Treasury in spring 2020 that ‘land availability, as constrained by the planning system, is the most significant barrier to building more homes’ simply isn’t true.⁹

The reality is that since earlier planning reforms in 2011, there has been a very sharp increase in residential planning permissions granted – with around 80 per cent of such applications now being approved. The real issue – which ministers not only fail to address but deny even exists – is the ever-lengthening delays between permissions being granted and houses actually being built. Big, powerful developers are hoovering up the vast majority of new planning permissions, then deliberately delaying the build-out of many of them to make sure fewer homes are produced overall – so prices keep rising and their own profitability remains artificially high. Unless ministers address this massive and deliberate market failure, our chronic housing shortage will remain, with all the social and political fallout that entails.

Between 2010 and 2015, the previous planning shake-up saw the number of annual permissions granted increase by 75 per cent. But the number of homes completed annually rose just 33 per cent over the same period. Similarly, between 2015 and 2017, as planning permissions approved each year increased 36 per cent, the number of homes actually completed was just 15 per cent up. The growing delay in build-out rates is significant and undeniable.

After so many SME builders collapsed in the aftermath of the 2008 financial crisis, the housebuilding industry became more concentrated as a handful of large firms took control. The government’s HTB scheme, dominated by the half-dozen biggest housebuilders, and particularly the top three, further consolidated the sector, stymying local competition – resulting in sharply rising prices but also a spate of under-sized, low-quality new-build homes. Research contained in this book indicates that between 2010 and 2017, a period when our housing shortage became chronic and unaffordability spiralled, UK housebuilders applied for and were granted clearance to construct close to two million new residential properties. Some 48 per cent of those – almost a million new homes – they chose not to build.

Prior to 2008, SME builders accounted for over two-thirds of all new homes. Since then, most of the smaller operators that avoided being wiped out by the financial meltdown have been hindered instead by an inability to raise finance to access often wildly overpriced building land. That helps explain why the ‘volume builders’ – those accounting for over 2,000 units per year – built less than a third of new homes in 2008, but now account for almost two-thirds. They use their well-resourced legal departments to obtain multiple permissions, some of which provide a legitimate ‘building pipeline’, but many of which they won’t use. Such unused permits to build bolster their balance sheet, boosting share prices and related executive bonuses. And once ‘captured’, of course, while helping local authorities to fulfil their ‘building plan’, meeting Whitehall-imposed targets, such permissions then aren’t available for SME builders, who would build them out promptly.

So ‘land availability, as constrained by the planning system’ is not, as the government claims, the main problem. Streamlining the planning system won’t solve our housing shortage. For the underlying issue is the lack of land with residential planning permissions in the hands of developers prepared to build relatively quickly in order to adequately meet pent-up demand. What we have, instead, is large developers controlling the rate at which homes come to market in many localities, boosting profit margins while keeping smaller rivals at bay. That’s the main reason why our housing market is ‘broken’ – because the industry is dominated by a few very large players deliberately restricting supply.

While such analysis sounds controversial, it is actually well understood by objective researchers with detailed knowledge of the UK housing industry. Any decent equity analyst, for instance, knows to ascribe the highest valuations to those large, listed house-builders with the greatest ability to ‘manage supply’, as measured by the planning permissions they have in hand, alongside the amount of land they own outright and control via option agreements in the localities where they operate. That’s why the House of Lords investigation of 2016, conducted by some of the UK’s most distinguished economists, concluded that the UK housebuilding industry ‘now has all the characteristics of an oligopoly’.¹⁰

A full Competition and Markets Authority inquiry into an industry imposing ‘contrived scarcity’ on homebuyers, limiting the number of new homes to artificially boost profits, is now long overdue – a necessity that ministers and officials continue to reject. Fines should also be imposed on developers if homes aren’t completed, ready for sale, within two years of permission being granted – as proposed in Home Truths. Planning permission should be viewed as a contract to build between developers and the community, not an option to build if developers feel like it.

In an attempt to bat away these difficult realities, ministers have claimed over recent months that using ‘zonal’ planning in some localities will help SME builders by making the acquisition of planning permission cheaper and less uncertain, challenging the dominance of large developers. Yet SMEs will still be held back, and struggle to compete, as long as residential building land prices, driven by the speculation generated by large developers and landowners, remain so high. And that will continue unless and until the 1961 legislation, which makes the UK an outlier among other advanced industrialised countries, is finally reversed. Rather than taking this step, though – a policy with a wide range of support, from the campaign group Shelter to various parliamentary inquires and MPs of all parties, including leading Conservatives – successive governments have continued to side with the all-powerful vested interests controlling the supply side of our housebuilding industry at the expense of ordinary renters and homebuyers.

During the year after June 2019, the Conservative Party received more than £11 million from some of the UK’s leading developers, according to figures from the Electoral Commission.¹¹