My Manifesto: Bold housing solutions are needed to help our young people succeed
For British under-40s, the economic future looks grim. Thanks to the size and longevity of the Boomer generation, millennials can expect to work into their 70s, sacrificing large parts of their income in record taxation to pay the pensions and healthcare costs of the often asset-rich retired.
Unable to afford to purchase a home, young people must choose between living with parents or spending a third of their wages on rent. This impacts on family formation, and for the first time ever half of British women now reach 30 without having a child. The falling fertility rate exacerbates pressure on the young, since the chances of the unborn generation being large enough to provide for their own retirement are now looking slim indeed. All these problems are complex and interrelated, but the key to releasing this stuck generation lies in finding a way to enable young people to purchase good homes at affordable prices.
[Young people] are forced to purchase tiny starter homes that are not conducive to living – nevermind starting a family
It’s often said that we just need to “build more houses”. The assumption is that housing supply is too low and this alone is responsible for high property prices. But England has nearly 27m dwellings for a population of 56 million; that’s one home for every two people, and there are nearly 700,000 vacant properties. Though there is certainly some localised housing shortage, I don’t buy the simplistic supply and demand argument which, as any economist will tell you, only applies to functioning free markets.
No one could call our property market functioning or free. Years of artificially low interest rates resulted in an influx of cheap money and turned housing into an investment asset, pushing demand from cash buyers and corporate investors sky high. Property prices are now inflated out of all proportion to their bricks and mortar value, and adding more homes into such a distorted market is not going to make any difference to the price. The housebuilding cartel and their financiers face no market competition and have no incentive to reduce sale prices. So first time buyers are frozen out and, where the young can afford to buy, they are forced to purchase tiny starter homes that are not conducive to living – nevermind starting a family. What we need therefore is to create an entirely new market, insulated from the current broken system, and designed to help young people to buy an affordable – and suitable - home.
Local authorities should build significant numbers of family sized homes that are available only for locally employed first time buyers under 35 to buy at cost price. Rapid modern off site construction methods should be used and councils should employ specialists rather than wasting money on consultancy and percentage fee arrangements. Decent family homes can be built for as little as £150,000, comfortably affordable to a young couple on median wage. And because the property would be a home and not a broom cupboard, there would be no imperative to borrow huge sums to move up the ladder. Of course, the owners of these houses would be free to move if they so desired and could sell the home back to the local authority for cost price plus inflation, thus protecting these specially purposed homes from being consumed by the broken property market.
If this sounds like a significant state intervention, then that’s because it is. When governments interfere with free markets it usually backfires. But when there is a crisis that won’t be solved by the market itself then the government must step in. After the war, the need for housing construction was so acute that only a centralised approach could meet demand. Now 80 years on, and for very different reasons, we have reached another such crisis point that will not resolve itself. Only bold action can give our young people hope for a decent future and a standard of living that their parents and grandparents were lucky enough to enjoy.
Miriam Cates, Conservative MP for Penistone and Stocksbridge
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