Tories wrestle with failure to fix Britain’s housing crisis

The Conservative party’s grip on office is loosening in part because of its failure to resolve Britain’s housing crisis after 14 years in power, leaving the government under pressure to improve its policy pitch to those most affected — younger voters. 

Despite the ruling party’s decades-old commitment to help people on to the property ladder, home ownership rates have stagnated over the past decade. The government has fallen short of its targets for new housing, while an era of low interest rates for most of the time since the Tories came to power in 2010, has exacerbated the rise in prices, making buying a property unaffordable for many.

The end last year of the Help to Buy equity loan scheme, which had been a totemic Conservative policy, has left Prime Minister Rishi Sunak in search of a new flagship housing initiative to appeal to would-be homeowners and boost his popularity with young people ahead of a general election expected later this year.

Only a tiny fraction of younger voters are likely to back the Conservatives, according to current polling. Recent research by YouGov showed that the Conservatives were only ahead of Labour among homeowners without mortgages — who tend to be older — while Labour has a strong lead among private renters, social renters and people with mortgages.

The Tories have “presided over a massive rise in the cost of housing for people renting or trying to buy a home since 2010, which has . . . fuelled an accusation from young people that they are living in a gerontocracy where they have been locked out of social mobility that their parents and grandparents felt entitled to,” said Tim Bale, professor of politics at Queen Mary University of London.

Sunak, chancellor Jeremy Hunt and housing secretary Michael Gove have at times been at odds over what policies to bring forward to try to boost home ownership levels, as the government prepares for the Budget on Wednesday. 

Gove has argued for cuts to stamp duty for both first-time buyers and older owners hoping to downsize, although Hunt is thought to oppose this policy on grounds of cost. A scheme to back 99 per cent mortgages for first-time buyers was under consideration but is now unlikely to make it, according to officials.

Nor is Hunt expected to revive Help to Buy with the chancellor wary of policies that would stoke demand for housing without encouraging more supply — fearing this could add to inflation.

The Tories have faced increasing criticism of their approach to addressing housing supply after an influential caucus of anti-development backbench MPs forced the government into planning policy changes that experts warned were likely to reduce the number of homes being built even further. 

Lord David Willetts, a former Tory cabinet minister, said the party needed “to be making housing part of a major offer” to younger voters. 

“There is a myth that somehow young people are not aspirational,” he said. “If you look at people’s aspirations, they want to own their own home, to have a decent job with a decent wage, and be able to afford to raise their kids — young people are not young Marxists.”

Opposition leader Sir Keir Starmer has sought to capitalise on the housing issue and appeal to younger voters with a pledge to make Labour “the party of home ownership”. As a party more reliant on urban voters, Labour is more comfortable promising a liberalisation of the planning system than the Conservatives, with their bigger rural supporters base.

The number of first-time buyers getting on to the ladder has collapsed in the past year to the lowest in a decade, in large part because of the sharp rise in interest rates and relatively resilient house prices.

Column chart of Number of loans  showing Mortgages for first-time buyers were at a 10-year low last year

The recent hit from higher borrowing costs comes after a decade where the rate of home ownership in England remained stuck at around 65 per cent, down from a peak of 71 per cent in 2003, according to government data. 

New research from CBRE shows successive governments have fallen short on the supply side, with at least 1.5mn fewer homes built over the last two decades compared to targets set under the then Labour administration.

Jennet Siebrits, head of UK research at CBRE, said “earnings have failed to keep up with house price growth” over 20 years, meaning that “for young professionals, the dream of owning their own home seems to get further out of reach”.

CBRE said the average house price in England has risen from 5.92 times average earnings in 2003 to 8.28 times in 2023. The average first-time buyer deposit has risen from £22,600 to £68,700, increasing from 0.6 times average incomes to 1.2 times.

Starmer has said Labour aims to return to 70 per cent home ownership, with measures to boost housebuilding, give first-time buyers priority on new homes and identify sites for new towns. 

Jennie Daly, chief executive of Taylor Wimpey, one of the country’s largest housebuilders, warned against policies that only boosted demand without increasing building. “There is no benefit overall to stimulate the market without making sure that we are also driving up supply,” she said.

The government said: “We are on track to build 1mn homes in this parliament, and our target to build 300,000 homes per year remains”, adding: “We have laid out an ambitious long-term plan for housing that includes speeding up the planning system, cutting bureaucracy, and reducing delays”.

In the run-up to the Budget, Gove has announced some planning policy interventions, including proposals to create a “presumption in favour” of development on previously built-up land in large cities.

But a senior executive at one developer said Gove’s moves were mostly “recycling and tinkering around the edges . . . These are small levers that are being pushed and pulled”.

Bale agreed the recent spate of housing policy announcements was “a case of too little too late . . . This problem is going to take decades to unwind, if it’s possible to unwind it at all. The idea that you can do it in the run-up to the election is delusional.”

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