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Do we really need to build more homes? Matthew Warburton - 09/05/2014

Brick_300pxHaving spent a large part of January marshalling the evidence that the chronic shortage of housing demands an expansion of housebuilding to at least 240,000 new homes a year, I find it a refreshing challenge to consider the argument - made by a respected Oxford professor - that a shortage of housing is not the fundamental reason for our national housing crisis, nor is building a lot more homes the answer to it.


In his book, 'All that is Solid' Danny Dorling argues that inequality is the true root of our housing problems, and only by beginning progressively to separate housing from wealth can we end them.


For Dorling, the fundamental problem is that a growing proportion of our housing has become treated as an investment, rather than as just a place to live. Resurgence of the private rented sector means that there is a new generation of landlords in business to make money from housing. And for many owners, their home has become their only or main source of wealth, in effect their pension plan and savings pot. Housing equity represents 61 per cent of England's net worth, or around £4 trillion.


At the same time as housing benefit for the poorest tenants is removed from spare rooms, owners have strong incentives to buy the biggest home they can afford in the most expensive area, since the return on their investment is likely to be correspondingly greater. In 2001, the best off 10% of households had 3.7 times as many rooms per person in their homes and the worst-housed tenth.


Tenure-based inequality is compounded by inequality among areas and regions. While house prices in London and the South East are now rising fast enough to prompt concerns about the creation of a housing bubble, prices in some other parts of England continue to flatline or fall. Partly this reflects the economic buoyancy of London compared with the rest of England, but it also reflects the fact that the buoyant housing market is a major contributor to the economic buoyancy of London and surrounding areas. But the effect is that, while housing is expensive and hard to come by in London and the South, houses stand empty and unused in other parts of the country.


Contrasting the years since 2008 with the corresponding period after the 1929 crash, Dorling argues that in 1929 there really was almost no unused housing so that the building boom of the 1930s was both necessary and successful, although it is arguable that it might have run out of steam if war had not broken out in 1939. Today, however, there are 2.3 people for every dwelling, compared with 4.3 in 1931. It is for this reason that he argues that the key challenge is to make better use of the homes that exist, rather than focus on building more.


So, what should be done? Dorling offers ten options to think about, including raising benefit levels and reintroduction of rent controls, but his most challenging suggestion - for any government that seriously considered implementing it - is that council tax should be progressively transformed into a national land and property tax based on current property values.


Presumably the idea is that this would help to level the playing field between housing and other investments and help damp down house price rises. Even if one accepts his analysis of the problem, it would be an uphill struggle for any party to win electoral support for such a policy. 


As Dorling says "the great challenge we face today is that many people have forgotten - or not been told - that not so long ago we were a much more equal society". His argument is that they need not just to be reminded of this, but persuaded that it is both desirable and feasible to be a more equal society again.

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ARCH Member Comments 10 people like this

  • Colin Herbert, Lincoln City Council - 16 May 2014

    In the end inequality in society always leads to it's inevitable downfall.