To have a broom cupboard of one's own: why solving the housing crisis is not an impossible dream

There is something refreshing about Nick Boles: a Conservative minister and son of a former chairman of the National Trust who is prepared to declare open season on Nimbys to promote more house-building. Alone among ministers, Boles has appreciated that the inability of the young to afford to buy a home is going to be one of the biggest political issues over the next few years. Home ownership peaked a decade ago when 70.9 per cent of households owned their own home; that is now down to 66 per cent and shrinking fast.

The hypocrisy of many of those who oppose new house-building was demonstrated by Simon Jenkins, who debated with Boles on Wednesday’s Newsnight. Jenkins’s solution is to pile more people on top of each other in poky flats in existing cities. As Boles was quick to assert, a man who owns at least two homes should not talk down to people who cannot afford to buy one. We are in danger of returning to a Victorian social structure, in which a large unpropertied class is forced to rent its homes from a small class of landowners.

Yet for someone so brave and precise at diagnosing the problem, Boles has come up with a disappointingly weak solution. His big idea is to bribe communities to drop their opposition to new housing with the promise of money for new community facilities, paid for by the new community infrastructure levy (CIL), a tax on house-building paid by developers.

Communities are already bribed in this way. My own village has a spanking new tennis court built partly courtesy of money from “section 106” agreements: an informal levy on house-builders which has existed for several decades. In any case, the current low rates of house-building have far more to do with the shortage of mortgage finance than problems with planning delays. There are already 487,000 plots with planning permission – 246,000 where building has not yet begun – but developers don’t want to build on them because they don’t think they could find the buyers.

Opening the countryside to the bulldozers didn’t do Spain and Ireland much good; they suffered inflationary booms in house prices in spite of having lax planning policies. It is cheap money, more than shortage, which drives a property boom.

If we want to reverse the inflation that is causing home-ownership to fall, we have to eliminate the speculation. There is an easy way to do this: by imposing on most new homes restrictive covenants which limit them to being bought by owner-occupiers. Such covenants are already used to limit properties in some areas to being used as holiday lets or second homes. If most new homes were limited for owner-occupation, they could not be scooped up by investors as “buy-to-let” or, worse still, “buy-to-leaves” – where speculators leave properties empty because they calculate that the rental income would not exceed the loss in value from scuff marks that tenants might leave on the kitchen worktops.

The community infrastructure levy is part of the problem, not the solution: in some areas it will add £40,000 to the cost of building a new four-bedroom property. Excessive environmental legislation, too, is adding unnecessary cost to house-building. New homes should be required to have excellent insulation, but by 2016 the building regulations will go far further, demanding that all new homes be carbon neutral. Nick Boles’s own department (Planning) has estimated that these regulations will add £38,000 – 50 per cent – to the cost of building a four-bedroom home. And yet, strangely, it does not seem to have worked out the consequences: that the extra costs will drive developers to concentrate – even more than they do already – on building small numbers of luxury properties where the costs can more easily be absorbed.

This trend is already very evident: between 2010 and 2011 – when the housing market as a whole was static – the average selling price of a Redrow Home climbed from £154,800 to £174,100. We will see more affordable housing for buyers only if the cosy little monopoly enjoyed by the established house-builders is broken. This could be achieved if development corporations were set up to compulsory-purchase land at agricultural value, grant it planning permission and then auction it off in lots of various sizes, giving individuals and small developers a chance to build homes, too. Compulsory purchase would eliminate the need for the CIL, as the uplift in land value generated by the granting of planning permission would be captured for the public good rather than, as now, for private profit. Of course, even with reform to bring down the real cost of housing, not everyone will want, or be able, to become a homeowner.

For this group, renting desperately needs to be made friendlier. We have gone from a situation 25 years ago when landlords dared not let out properties for fear that the tenant would be there for life to one where tenants in privately rented properties have no security of tenure for more than a few months.

Tenancy law should be changed to reflect the fact that for most tenants a property is their home, while for the landlord it is just another investment. A tenant who has paid rent on time and looked after a property should be granted the right to renew a shorthold tenancy for up to three years. Tenants who want to move out, however, should be required to give the landlord only two months’ notice.

Many of these proposals may seem politically difficult at present, when a large number of voters still see high house prices as a virtue, and their homes as a big part of their pension funds. But with home ownership plummeting, there will soon come a time when the growing constituency of young people frozen out of the housing market politically overwhelms the vested interests who want to keep house prices high.

‘A Broom Cupboard of One’s Own: the Housing Crisis and How to Solve It’ by Ross Clark is published as an ebook by Harriman House