The Tories need to get serious about the housing crisis

Sam Bailey is a research associate at the Adam Smith Institute.

The recent devastating local election results show that the Conservatives still have a long way to go if they’re serious about rebuilding trust. That process must begin with an honest reckoning about their record – and few failures are more serious than the long-standing inability to get to grips with the spiralling cost of renting.

By now, everybody knows that rents are out of control. Still, it’s worth emphasising just how much of renters’ paychecks go simply to keep a roof over their heads. If you break down the portion of an average renter’s annual earnings that goes straight to their landlord, today – May 6th – would be the day they finally stopped working for their landlord and started working for themselves. And, that’s before tax!

There’s no question that the housing market is in crisis. Across the country, renters – even those on high salaries – are handing over eye-watering sums for homes that, not long ago, would have been considered cheap and affordable. But, while we’ve almost become used to this depressing state of affairs, it would be a mistake to assume that it is inevitable. In truth, the current situation is the product of decades of political decisions – many of which fall squarely on the shoulders of successive Conservative governments.

For too long, Britain has not built enough new properties. Since the 1970s, the construction of homes has consistently lagged behind population growth. This has caused demand to vastly outstrip supply and, in turn, ever-rising rents.

The one thing that is not in short supply, however, are political commitments to get building. In the 2019 manifesto, the Conservatives promised to build 300,000 new homes every year. It was a worthy goal, but a target that was never met. In fact, fears of a backbench rebellion meant that the plans didn’t even pass into law. Today, 4.3 million homes are missing from the national housing market. And even if Labour manages to hit its ambitious target of 1.5 million new homes (a stretch, given its instinct for central planning), it still wouldn’t be enough to close the gap.

It’s worth spending a moment thinking about the root cause of the housing crisis. Many on the right argue that it’s a consequence of mass migration; get control of that and the issue would sort itself out. But, while migration certainly doesn’t help the situation, the evidence that cutting migration would fix the crisis altogether is shaky at best. 

The most optimistic sources estimate that by stopping mass migration, house prices could be reduced by 10 per cent over the next 20 years. Not a bad start, but in the last 20 years alone house prices have already increased by almost three and a half times. The simple fact is, even if migration were to slow, the housing crisis would persist. It wouldn’t make the 4.3 million home shortfall go away. 

A sensible immigration policy is important for so many reasons. But the Conservative party must be honest with itself: a lot more needs to be done to tackle the housing crisis.

While cutting migration is no silver bullet, some of the alternatives being proposed, particularly from the left, would be actively harmful. Rent controls, for instance, may sound attractive at first glance but history shows they consistently backfire. Capping rents discourages investment, reducing both the quality and quantity of homes. To address the housing crisis the government needs to be doing everything it can to encourage house building, and rent controls do the opposite. 

Once again, we return to the wise words of the Swedish economist Assar Lindbeclk: “Rent control appears to be the most efficient technique presently known to destroy a city – except for bombing.” 

Of course, until the centre-right gets serious about planning reform, these discredited left-wing ideas will keep coming back. Making a real dent in the crisis will require bold policy plans. This means confronting vested interests, reforming our outdated planning laws and yes, building on some land that’s currently off-limits. 

The ASI has already outlined a number of sensible, voter-friendly propositions to help alleviate the housing crisis. These include using compulsory purchase orders to buy, and develop on metropolitan green belt land – and then giving local residents a share of the profit to compensate. Another idea is to extend ‘full expensing’ to brownfield sites, releasing vital new land for development. These practical ideas show that we can build consensus around more house building.

Conservatives should lead the charge on planning reform. After all, this is the party of home ownership and housing has long been central to its electoral success. Thatcher’s Right to Buy scheme created a generation of homeowners, convincing millions of ordinary Brits that free-market ideas could work for them.

In the wake of bruising local election results, it’s time for the Conservative Party to return to those core principles. Challenging entrenched NIMBYism is never going to be easy, but unless the party demonstrates a serious commitment to doing things differently, it will not win back all of those voters who have lost faith in them.