As Tony suggests in his post I agree with Grant, Grant Shapps deserves (begrudging) respect for raising the importance of achieving long term house price stability, but I hope he has his tin hat on in anticipation of the reaction in some parts of the media. The Mail has already highlighted Shapps’ own personal property dealings as they smell ‘hypocrisy’. Of course, never one to miss a political trick himself, Shapps also tries to pretend that house price hyper-inflation came in with the Labour government in 1997, whereas all the key trends and policies, long booms followed by a sharp and damaging busts, have been in place for a couple of generations now.
The real problem is that I can’t see anything in his or the government’s philosophy that might lead to the necessary actions being taken to bring house price stability about. The Mail quotes Shapps as saying that homeowners should no longer rely on their houses to fund their retirement and that ministers were hoping to engineer an era of ‘house price stability’ in which property values would gradually be eroded by rising earnings.
‘Engineering’ a market seems rather at odds with everything else they stand for.
Indeed rather a lot of extremely heavy engineering projects would be required to achieve long term price stability. We may need the housing equivalent of Isambard Kingdom Brunel because all of them are hard to achieve.
The first is a better balance of supply and demand, which will need policies to massively increase the rate at which new homes are built over a sustained period of time, more than a decade. With the regional planning framework scrapped, and huge cuts in infrastructure investment, this seems a forlorn hope to me.
The second is the stable supply of mortgage funds on sensible terms, targeted towards the cheaper end of the new build market, to encourage developers to produce more affordable homes. This will require a stiffer attitude towards regulation than this government promises and lenders are used to.
The third is to tackle land prices and not just house prices – the problem in many places is not the cost of construction, but the price of the land – which can probably only be done through some kind of land value tax, not natural territory for any of the main political parties.
And fourth, we need a stronger safety net for home owners when interest rates spike or redundancy strikes – Labour’s policies during the credit crunch were a good start in this direction. Stable or falling prices need to be accompanied by reduced risk for individual households.
At the bottom of it the hardest change to make will be in attitudes. A good home ownership market is vitally important, but it will fail if it is regarded as the only tenure that brings status and respect, or as a get rich quick scheme or a proxy pensions market or even a place to bung the latest bankers bonus. The core business should be about delivering reasonably-priced homes to people on reasonable incomes, and shared ownership to people on ‘intermediate’ incomes who want it. But the market will still fail unless we have a better understanding of the relationship between tenures. A balanced housing market needs far more renting as well as more homes built for sale, so people at all income levels have real choice at different stages in their lives and are not forced into debt that they cannot sustain.
More care is needed with the language of ‘aspiration’, which has become synonymous with wanting home ownership. Of course many people would like to own their own home if they can afford it, but the aspirational classes may well give higher priority in future to getting their children through college and protecting their retirement.
These are real challenges not just for Grant Shapps but also for Labour’s housing policy review when it gets under way. It would be nice if a new consensus was emerging that enabled serious long term policy options to be discussed rationally, but I suspect the odds are against.