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The politics of housing supply Matthew Warburton - 14/11/2013

Welwyn_300This morning's Today programme carried a story about this year's Wolfson Prize, worth £250,000, which will be awarded to the best proposal for a new garden city that would be "economically viable and popular".

Speaking about it, Lord Wolfson said that he was particularly interested to see innovative proposals for governance of the city, since, he believed, existing local authorities are normally too preoccupied with the interests of existing residents rather than of those who might come and live there in future.

But, as with the original garden cities established a century ago, a way should be found of enabling existing as well as new residents to share in the increase in land value that went with the development of the new city.

Earlier this week, the National Housing Federation launched a new report on the politics of housing , exploring the reasons why governments since the 1970s have been much less successful than their predecessors in ensuring a supply of new homes sufficient to meet the growth in demand.

The report, commissioned from the Social Market Foundation, asks to what extent successive governments since 1918 have succeeded in delivering sufficient new homes and what factors explain their success - or failure. Both world wars ended with an acute shortage of housing, and in both cases tackling these shortages was a priority for post-war governments.

In both periods it was the supply of public housing - led by councils - which was first to increase; private housing construction took longer to recover and, in the 1920s, was boosted by government subsidies. By the 1930s the National government was overseeing a sharp growth in home ownership, with private builders delivering over 200,000 homes for sale a year - the only time private sector output has reached such levels.

In the 1950s all parties promised a big increase in housebuilding, with the Conservatives' 1955 target of 300,000 homes trumping Labour's promise of 200,000 made four years earlier. Again it was public housebuilding that took the lead, not being overtaken by private construction until 1958.

Yet during the 60s and 70s private construction never topped 200,000 homes a year - council housebuilding programmes above 100,000 homes a year were needed to make sure the post war shortage was eliminated and supply and demand brought back into balance by 1970.

English councils went on supplying more than 100,000 new homes annually during the 1970s, but by 1982 the combined output of councils and housing associations had been cut to 50,000 homes a year, falling below 20,000 by the turn of the century.

Any expectations that the private sector would take up the slack were soon confounded, with completions rarely topping 150,000 throughout the period. A brief increase in social housebuilding in the mid 2000s was snuffed out by the banking crisis and subsequent government austerity policies.

The results are plain to see. I blogged a few weeks ago about evidence that house prices are beyond the reach of most first time buyer households in most parts of England. Kate Barker's analysis, now nearly ten years old, showed convincingly that it will take an increase in output to at least 230,000 homes to stem rising house prices and help make home ownership more affordable. Meanwhile, homelessness has risen and a shortage of social housing makes it increasingly difficult for councils to respond effectively.

Why have governments since 1980 shied away from effective action to tackle the housing crisis? The SMF's analysis suggests that - to put it bluntly - they have decided there aren't enough votes in it. A shortage of homes for future households is not visible in the same way that slums and overcrowding once were.

Most people are relatively well-housed, and attitudes to those who depend on benefits to meet housing costs have hardened. Rising house prices have - until very recently - been widely regarded as a good thing, putting the interests of existing owners above those of households struggling to buy their first home. And councils can be reluctant to promote new development for fear of opposition from existing residents.

Which brings us back to the Wolfson prize. A government committed to reversing the housing crisis would need to be looking for 40-50,000 more homes annually than the 200,000 promised by Labour and the Coalition, including a very substantial increase in building by councils and housing associations. And it would need to have a very clear answer to where exactly the new homes were to be built. A new generation of garden cities could be a big part of the answer - if ways can be found to make them more popular and economically secure.

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