The simple solution to UK's housing problem – apartments

The UK population is growing by more than 500,000 people every year but only about half the homes required are built. I believe there is one key reason behind the UK housing problem: a lack of apartment living. But it’s possible to change this.

I’m originally from Greece and one thing that has struck me about the UK is that British people dream of living in houses. As this chart shows, just 14 per cent of British people live in apartments. This is one of the lowest percentages in Europe. In Germany the figure is 57 per cent, in Spain it is 66 per cent, and the Euro area average is 48 per cent.

There are many peculiarities about this obsession. Flats are cheaper to heat, have better views and – in Europe at least – are safer. Houses on the other hand have higher maintenance costs and peeping neighbours. Importantly, even low-rise apartments should be more affordable to build than the same number of houses. They also use land more efficiently.

Low-density housing is simply not sustainable in the long term in a country with the same population as France but less than half its land. Stay on this path and sooner or later the green belt around cities will have to go. Add a few more decades and National Parks will be lost, too.

The UK housing situation has also had a disastrous impact on the UK economy. UK household debt is one of the highest in the world. The big bulk of all this debt goes towards mortgages for overpriced accommodation. This mountain of private debt can be partly attributed to the limited supply of accommodation in the UK and poses a fundamental burden on the country’s economy.

Overstretched with debt, households face the prospect of muted wage growth due to Brexit in combination with rising borrowing costs – a typical mortgage interest rate now stands at 1.5 per cent. The average historical rate is more than 6%. A population overburdened with debt is also more likely to save less and study for fewer years – both chronic weaknesses of the UK economy compared to other developed countries.

Good reasons

The UK needs a strong supply of homes for its growing population and, for environmental reasons alone, a large percentage of these should be apartments. Yet a lot of British people will, rightly, frown at this assertion.

There are good reasons for the British aversion to apartments. Most flats in the UK are not suitable for happy living, especially not for families. There are myriad grave issues, including basic failures in fire safety, crime, noise, dystopian design, and a lack of community feeling. Many places with lots of flats have become synonymous with poverty.

In contrast, in continental Europe, it is much easier to find apartments with high ceilings, solid walls, nice features and safe communal areas for children to play in. The mistakes of the UK past are repeated in the present as well: newly built apartments in the UK are characteristically low quality. They lack storage space and are getting smaller and smaller. The average home built in the UK is 76 square metres compared to 137 square metres in Denmark.

There is a vicious cycle behind the UK housing problem. Badly made apartments make families avoid them, which in turn makes companies construct apartments unsuitable for families, and the situation gets worse. It results in a housing market that tries to expand horizontally with houses, rather than vertically, even if that’s more difficult, more expensive and less sustainable environmentally.

Making apartments attractive

The UK may lack vast amounts of land for expansion but it is blessed with advanced technology, dynamic entrepreneurship and large amounts of capital for investment. Playing to the country’s strengths can lead to the construction of high quality, spacious, family-friendly apartments that people would be proud to live in. And the toolbox of behavioural economics can help us in that.

To start with, apartments need to become truly desirable for families and be perceived as such. The materials used, internal and social spaces that are built, the functionality and design all need to meet much higher standards. And planning permission should not be granted otherwise.

UK policymakers even need to improve the legal aspect of apartment living: existing owners could have a say in the selection of their neighbours as they do in the US. And real processes against antisocial behaviour and greedy landlords should be set in place. Here, Britain could follow Germany’s lead, a place so effective at protecting tenants’ rights that most Germans prefer to rent rather than buy their properties.

The UK also needs to boost the supply of quality apartments. Economic incentives for companies to build them, public investment and legal changes should work in tandem to achieve this. Tax cuts or even direct subsidies to quality developments, tax breaks on housing bonds, the wider use of construction bonds and relaxing planning permission that controls city skylines would all help.

Public investment in infrastructure and particularly transport can also nudge private sector investment, the key behind Europe’s economic success after World War II.

In an environment of limited supply, investment in property is a zero-sum game between households and investors: the landlord gets a property, the people lose it. But policies that channel people’s capital and entrepreneurship towards industry – in this case, construction – and not against each other can help the whole country prosper.

Alexander Tziamalis is a Senior Lecturer in Economics (Associate Professor) at Sheffield Hallam University, This article was originally published on The Conversation (conversation.com)