Britain’s housing crisis is unique in the Western world: in the 1970s, the average buyer needed under three gross annual salaries for a house. Now they need over seven.
In my recent book Raising the Roof, co-authored with Jacob Rees-Mogg, one of the central theses is that the cause of this housing crisis is found in how we are governed. It is no coincidence that Britain has the worst housing crisis in the democratic world, and its most centralised government.
In Britain, 95% of our tax goes direct to Whitehall (in Canada, for instance, this is more like 50%), so local governments get little benefit from housebuilding, but plenty of burden. The incentive to block new homes means an adversarial and costly planning process only a few big housebuilders can navigate. Smaller developers are priced out, identikit housing estates spring up across the land.
The result is Nimbyism. Here, the public are accused of irrational behaviour, wanting housebuilding nationally while blocking it in their own neighbourhoods. But if you know the houses being planned on the field next door will harm the character of your town and the value of the home in which you invest your salary, you will be right to fear them. You may oppose building even as you know houses must be built, perhaps for your own children. Nimbyism is a symptom, not cause, of our problems.
Beyond the proportion of tax that goes to the central government, the punitive amount it takes has made this worse. High Stamp Duty penalises transactions; Capital Gains Tax on shares diverts savings and inflates house prices; taxing buy-to-let landlords cuts housing supply; and Help to Buy has made houses harder to buy, inflating demand without increasing supply. In all these examples, there is but one winner: the state. The housing crisis is often described as a market failure, but it is a failure of state intervention.