What the Conservatives should offer on housing: More security, more density and more building

Dense doesn’t have to mean ugly.

The state of the housing and rental markets is probably a major reason for the Conservatives doing so badly with younger voters at the election last month.

Housing costs are a major issue for younger and urban voters. 7–8% of under-30s name it as their most important political issue. My suspicion is that is is a very important second or third issue for a much larger number of people, especially graduates who might want to move to somewhere like London for a job.

People of all ages in London, where the Conservatives lost six seats, say housing is the number one issue facing the capital. Virtually everyone I know under the age of thirty is a renter and spends between a third and half of their income on their rent.

Private rents in the UK are some of the highest in the EU, and private rented households spend between 35% and 40% of their post-tax income on rent compared to a European average of 28%. This does not capture the second-order problem caused by expensive housing costs, which is that it is much harder to move to economically prosperous parts of the country where better jobs are, so people end up forgoing better jobs and salaries than they might otherwise get.

Housing quality is also quite poor. New builds in England are some of the smallest in the developed world, and shared living areas are being turned into extra bedrooms in many rented properties, squeezing more people in. In 1996 54% of 16–34 year olds owned their own homes; now only 34% do. That’s a twenty percentage-point drop in twenty years. Over that period the number of renters in that age category has doubled from from 1.1 to 2.2m.

Labour made this a major part of its election campaign. Economists nearly unanimously agree that rent controls do harm, but many voters do not realise the risks. Bans on lettings agency fees and making three-year tenancies the norm similarly sound appealing to people fed up with wheeler-dealer agents and having to find somewhere new to live every year.

These are tangible policies that sound good on the doorstep. The Tory manifesto was vague on housing issues and offered no track record of improvement. The government’s housing policies were basically useless — they only seemed to be interested in getting people to own their own homes, but because they did little on the supply side, policies like Help to Buy mostly only raised prices and changed the distribution of who got houses, not increase the total number of homeowners.

If the Tories want to change any of the economic fundamentals that determine how young people vote, it will need to cut housing costs for both renters and first-time buyers. This requires politically feasible reforms (building on the green belt, as much good as it would do, is probably out), and changing the rules of the game so new developments are good for existing residents as well as renters and first-time buyers.

First, it ought to push for denser and more attractive developments within our cities, letting streets of semi-detached houses be converted into denser Parisian-style terraces in a bottom-up fashion. Homeowners should be allowed to add extra stories to their homes to match the highest building on their street, and hold street-by-street votes if residents want to go higher.

It should be possible to build more densely near new infrastructure, too. Transport for London wants to construct tens of thousands of new homes along the Crossrail 2 route. I’m told that under the existing infrastructure legislation, they can only build five hundred — the same limit as a one kilometer highway improvement. This is mad. With a different planning system entire new rail routes could be paid for by building new homes around the new stations.

And make it easier to build traditionally styled homes, not just avant-garde styles favoured by planners and architects. Ordinary housebuyers prefer Georgian-style and other traditional types of houses, but these are blocked by planning committees and misguided design codes, as Nicholas Boys-Smith of Create Streets has long argued.

People oppose ugly developments near their home. If we want them to object less, we need to stop forcing new homes to be so ugly, even if that wins them fewer awards from architects. It cannot be said enough: tower blocks are not the only route to density — some of the densest housing units are blocks of mansion flats that are five or six stories tall and beautiful to look at. There’s no real reason we can’t allow more buildings like that to be built.

Second, the Government should change the planning regime so that new developments work in favour of existing local residents. Planning permission is extremely valuable — a plot of farmland that gets permission for development can rise in value by over two hundred times — highlighting just how scarce developable land is. But locals usually capture very little of that uplift in value.

We can change that. We should either allow local councils to buy land that does not have planning permission, grant it to themselves and then sell it to local developers for building. Or just let them auction off development rights altogether.

This would raise substantial amounts of money for councils to go on investment in infrastructure, new bus and rail services, new parkland, filling in potholes, and council tax refunds. Give local councillors something to show for a new development, so that everybody wins.

Finally, the Tories should steal a march from Labour and create a new renting model for longer-term tenants. Many Brits who cannot afford to own a house still want more stability than one-year tenancies allow.

We used to have a structure for this sort of arrangement — the leasehold. Leaseholders effectively owned properties for a period of time, and had to pay both up front and annually (in the form of “ground rent”).

This changed when reforms in 1967 and 1993 gave leaseholders powerful rights to “enfranchisement” — either to obtain the freehold or extend the leasehold for 50 years and then 90 years, at no or trivial cost. This destroyed the incentive to ever offer new leaseholds except as a way of selling the property permanently.

The Conservatives must create a new legal structure to allow for something in-between freehold ownership and twelve-month shorthold tenancies. These should allow for a range of splits between up-front payments and regular payments, and they should allow for a range of tenancies: from three years to thirty. We then ensure private renters have an option other than regularly moving or renegotiating their lease.

These reforms would give us more supply and cheaper rents and houses without facing huge political opposition. But the Government needs to act quickly. New units take time to build, and may not feed through into prices for some time. Britain’s building revolution can’t start soon enough.