HOUSING PROVISION: SELL OFF THE FAMILY SILVER: LET THE MARKET RIP.

Why is the rate of owner occupation in the USA and the UK only 65per cent whereas in Communist China it is 90 per cent and in Russia 92 per cent ?

‘Owner occupation’ has been pushed by ALL recent Governments as ‘the preferred form of tenure’. So why is owner occupation relatively low in our market economy? The simple answer is there’s not enough supply – but this is TOO simple. Why is housing so expensive?

It is true that declining household size and immigration have increased pressure on housing. However, the key point is that policies intended to increase owner occupation relied on REDUCING other housing options. This has hugely increased the cost of property and thereby perversely undermined the stated Government policy of increasing owner occupation.

To promote owner occupation successive Governments stopped Local Council’s building for rent and compelled them to sell off as much as they could. This was to encourage private renting by reducing the amount of council housing available to force rents up and make private letting and owner occupation attractive. Obscenely, many Council houses actually finished up in the private rented sector!!

Much of the inherited housing stock was sold to tenants or to private landlords or transferred to Housing Associations. Because those properties left were the least desirable and in the worst condition, maintenance costs increased as the Government withdrew subsidies. Rents were deliberately forced up. ‘Let Housing Benefit take the strain’ Mrs Thatcher’s Ministers declared. Council Housing became ‘social housing’ for those seen as Social Services ‘clients’ needing ‘support’. The Housing Benefit bill skyrocketed.

Owner occupation was also promoted by easier access to borrowing. Prices are driven up because developers make sure that housing supply is limited. A place to live is a necessity. People borrow to the limit to buy or are obliged to rent. This forces prices ever upwards. No matter how much land is available this will NOT change. Developers build for profit and will ration land to protect profits. If there is no profit, they will not build unless they receive some kind of subsidy.

What is the current Government strategy towards housing? The simple diagnosis that it is a lack of land supply has been identified and the policy to tackle this is to tear the planning rule book up, increase compulsory purchase powers and build, build, build – MAINLY for owner occupation. ‘Let the market rip’ is a recipe for chaos with stretched infrastructure and destruction of environmental quality.

It will not work UNLESS it is complemented by financing Council’s to build more housing for affordable rent while at the same time restraining rents in the private sector to stabilise property values. Only if prices reduce will the proportion of housing in owner occupation increase and this will only happen if there are alternatives to it.

Housing costs in Britain are high for one primary reason: it is seen as a source of profit and not of social need.