Today, Policy Exchange publishes a new report, Housing and Intergenerational Fairness, looking at the best way to house Britain’s ageing population and contrasting it with a report out by the Fabians arguing for higher taxes on property.
Housing and other costs can place an unsustainable burden on young people. There are a host of what might be termed ‘inter-generational’ issues. The numbers of older people have risen, and will continue to rise steadily. Numbers of over 60s in the UK will nearly quadruple between 1951 and 2030. The biggest rise over the next few decades will be amongst the very oldest. From 2010 to 2030 the absolute number of those over 74 is projected to rise 73% from 7.4 million to 12.8 million. The numbers of those over 84 will more than double from 2.9 million to over 5.8 million.
People living longer is a great thing. But it has a downside. The Office for Budgetary Responsibility has produced working assumptions about the costs this will create. They estimate with 2.2% economic growth a year over the coming decades, this will require annual expenditure worth around 5% of GDP. This will largely be borne by the young. If the economy grows at a slower pace the cost as a share of national wealth will be even higher.
This is why housing is so important. It will simply not be possible for the younger generation to cope with this alongside ever higher housing costs. We will soon become a society where only the rich and the poor can afford a family. The average rent for a three bed home in London is now 101% of the average 20-29 year old’s take home pay. In the whole of the South of England, the median regional salary will cover between 40-64% of the rent for an average three bed home. How can we claim to be a society that rewards hard work and effort when family homes are simply unaffordable for the vast majority of people?
This is not just about immigration – we need 270,000 homes a year as a minimum. But migration accounted for only 90,000 or so homes a year in the previous decade. The main reason we need homes is that people are living longer and people like to live longer in their family home. Indeed a more pressing issue is emigration. When Policy Exchange polled financial professionals, it found that 86% of this affluent group cited high living costs as more of a reason to leave the UK. Just 18% cited the top rate of tax. In 2008 the OECD noted that 1.1 million UK born people educated to degree level were living overseas, more than any other country and substantially more than other countries such as France (370,000), and the USA (410,000). We will drive our young people abroad unless we allow them a decent home to call their own.
It’s not what you build – it is the way that you build it
The Fabian and George Monbiot solution to this is to force older people out of the homes they worked so hard to afford by higher taxes. This is an affront to private ownership, fairness and aspiration. It’s also so clearly politically unfeasible that Ed Miliband is unlikely to go near it with a barge pole. To work it would have to hugely increase the burden on older owner-occupiers.
A better solution is building more homes. If we built three million attractive homes on greenfield sites at 25 homes a hectare and redevelop one to two million more on brownfield sites in the next decade or so, this would cover a total of less than 1% of England’s land (and includes roads for these homes etc). These five million new homes would solve our housing crisis for decades to come. We would rise from around 9% to 10% of England being developed. We can ensure that such development only occurs in less attractive open land by giving more control to local people. To listen to some groups this 1% equals the destruction of the whole countryside. This is why some in the debate are so hysterical – it hides a lack of evidence or proportion.
The more important issue is how you do it. The Government is coming close resorting to what every government since the 1980s has done, egged on by the worst tendencies within the civil service (although many other civil servants grasp that the current system is simply broken). The summary of the approach is kick the NIMBYs and force more (often shoddy) development down through our broken top-down system, rather than really reform it. This is totally counter-productive, has failed twice before, (once in the late 1980s and once in the late 2000s) and ignores the real problems and solutions. The failing system, not NIMBYs, is the enemy.
For example, some older people need to downsize. But we build smaller homes than other countries, with tiny gardens and often in a mediocre to poor style. Is it any surprise most older people in large family homes take a look at what is on offer and think ‘no thanks’. The most popular type of home is a bungalow, particularly for older people. So what do many councils – and until recently national rules – do? Put in place density targets that effectively made it impossible to build bungalows. So in 2009 we built 200 of the type of home most popular amongst the public and even more popular with older people. Not only does this mean less downsizing, it means new homes are less likely to be acceptable in areas with lots of older voters.
Another problem is that we don’t make it easy for people to build their own homes. Whereas a majority of homes in most countries are delivered by self-build housing, in the UK it is just 10% – of a smaller total. Imagine if people in their fifties could use equity to commission their own dream home and downsize to that. It would be a totally different approach. The problem is that the planning system just doesn’t work in terms of delivering land. And just like everyone else, older homeowners see that new homes don’t come with amenities and infrastructure, and often don’t look that great either. Imagine if in areas with an elderly population there were powerful neighbourhood plans requiring high quality housing and infrastructure with substantial amenities like subsidised sheltered homes for older people. Forcing development to be better – not forcing bad development on communities.
Home ownership started falling well before the financial crisis, from 71% in 2001 to 68% in 2008. It is not really to do with mortgage availability but higher prices. The Government has just two years left. It urgently needs to begin to fix the biggest intergenerational issue – in a way fair to both sides of the generational divide.