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A new ending for a sorry tale of housing shortages

Whatever the character of the government Britain elects on Thursday, the prime minister and his cabinet colleagues are little more than spectators to the challenges of globalisation, strains within the eurozone and the rise of Islamist militancy and Russian expansionism.

But housing is an issue that affects every citizen, and on which government policies have immediate effects. And British housing policy is a tale of disaster. In 1968, 425,000 houses were built in Britain. By 2013, that number was 137,000, a rate that implies a 200-year cycle for renewal of existing stock, even if population remained unchanged in size and location.

How did this come about? The economic travails of the 1970s checked real income growth and led to rapid inflation. By 1980, a Bank of England base rate of 17 per cent crippled housebuilders and made mortgages unaffordable. With public expenditure under pressure for the first time in two decades capital spending bore, as always, the brunt of the cuts.

In 1968 house completions were almost equally divided between government - mostly local authority - and private construction. But public sector housing declined thereafter. This trend accelerated under the administration of Margaret Thatcher, and by 1997 municipal house building had virtually ceased.

The gap in the provision of new affordable homes was not filled by the growth of housing associations, which have never built more than 40,000 houses in a year. Since "right to buy" legislation was introduced in 1980, the proportion of families in social housing has fallen from its peak of 31 per cent in 1981 to about 17 per cent today.

Nor did private-sector building compensate. Construction for owner-occupation did expand as interest rates fell but the subsequent peak figure of 207,000 completions in 1988 was still well below that of 20 years earlier. While private housebuilders erected 219,000 houses in 2006-07 , numbers collapsed after the global financial crisis.

The trends are almost entirely explicable by reference to changes in public policy - the withdrawal of funding for local authority construction, the sale of council houses to their tenants, changes in public expenditure priorities, extreme variations in interest rates, and the malign effects of planning controls.

House prices have risen by a factor of 50 since 1968, and this is the experience of many pensioners who bought their first house the year The Beatles released "Yellow Submarine". Even after inflation, the increase in real terms is almost fourfold.

The consequences are social and political as well as economic. While owner-occupation reached almost 70 per cent of housing stock at the beginning of this century, the figure has declined. With social housing in extremely limited supply, new household formation - young people leaving the parental home - has been checked.

Differences in housing experience and opportunities have significant effects on relative living standards transmitted through generations: policies for social care and inheritance tax are driven by the recognition that housing has become the principal source of personal wealth - and of differentials in personal wealth. Dissatisfaction with the outcomes of housing policy spills over into resentment of immigrants

The policy proposals of the parties - help-to-buy schemes on one side, rent controls on the other - are inconsequential responses to superficial symptoms. We need a relaxation of planning controls, aggressive funding of social housing and a willingness to use the sector as an instrument of counter-cyclical policy rather than allow it to be a prime source of instability. There is, or should be, nothing partisan about this agenda for tackling the most important political question of the day.

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