February 21, 2014 1:09 pm

‘All That Is Solid’, by Danny Dorling

A house in Stoke-on-Trent in the West Midlands©Reuters

A house in Stoke-on-Trent in the West Midlands. The property was once part of a row of terraced housing that has now been demolished

All That Is Solid: The Great Housing Disaster, by Danny Dorling, Allen Lane, RRP£20, 400 pages

 

If you are an overseas investor curious about British people, or at least their property, I suggest you spend an hour watching the popular television programme Location, Location, Location. A typical episode will feature two couples, each looking for a house. At the outset, they tell us about their budgets, which are tangible, and their dreams, which are intangible but often manifest themselves through the medium of original fireplaces.

The tension between reality and aspiration, heightened by a pair of plummy presenters, makes the show. After a tour of the local market and the ritual sacrifice of an interior design fantasy, prospective buyers will find a place and make an offer, usually from a pub. Cue music. Will the owner accept the bid? Not for that price, surely? Yes! I would not say I enjoy the anxiety but, like millions of others, I cannot turn it off.

They call it reality television for a reason. Britain has mass angst about housing. Prices and rents are rising across the country, particularly in London, where growth is in double digits. In December, official figures showed that the average UK house price had for the first time risen above £250,000, or about 10 times median income. The divide in wealth between those who own property and those who do not is growing, and with it a gap between equity-rich baby-boomers and “Generation Rent”.

After rising throughout the 20th century, the share of English and Welsh households owning their own home is falling in the 21st. Other Europeans may shrug from their plush urban rentals but there are good reasons why Britons obsess about housing. Ownership of property may no longer confer democratic rights but the idea that it bestows social and economic status endures.

It is an idea that politicians have encouraged. After the second world war, the main political parties tried to outbid each other in their promises of housebuidling. But a true property-owning democracy only began in 1971, when, for the first time in the modern era, half of households owned their own home. This trend was accelerated by Right to Buy, the Thatcher government’s totemic policy. Now it is going into reverse – and with it a sense of surety in the future. Stagnation, Stagnation, Stagnation

The UK’s housing crisis is often traced to two acts of parliament. The Town and Country Planning Act (1947) is held by advocates of planning liberalisation to be the source of the Nimbyism that has done so much to inhibit housebuilding. The Housing Act (1980) and its accompanying Right to Buy depleted the stock of social housing and, for critics such as James Meek, author of a widely discussed article in the London Review of Books last month, ultimately pushed millions into the private rental sector.

What these two accounts of the problem have in common, however, is their solution: Britain needs more homes. Whatever the source, supply must rise to meet demand.

In All that is Solid, Danny Dorling dismisses the consensus, arguing that there are deeper reasons for the crisis. “It appears to be the case that the entire culture around property has changed in the last thirty years or so,” writes the professor of geography at Oxford university. From being seen as a right – as shelter – housing has become an asset. This change is due to inequality, not insufficient supply, Dorling says. There are more bedrooms per person in Britain than ever but too many are in mansions. “As economic inequality grows, fewer and fewer people use up more and more housing space and land.”

One of the flaws in Dorling’s breathless book is that his argument for a culture shift is never properly explained. This deprives his account of the history it requires. When was his supposed golden age? The chapters are ostensibly structured by theme (“Building”, “Buying”, etc) but these are flimsy guides. More than once we are given the impression of a book written in haste (the phrase “as I type” appears twice as an annoying reminder of the means of production). The graphics rarely illuminate.

Nevertheless, as any regular viewer of Location, Location, Location can attest, the quality of construction is not always a guide to value. Dorling grasps the importance of the issue. His urgency is warranted. The professor is also often correct.

Maintaining the status quo is in the interest of more people than a few bankers or doer-upper flippers

Dorling is right to say that the housing problem is an inequality problem. Inequalities of income tend to receive more attention in public debate. But inequalities of wealth have grown by far more since the 1990s. Younger people with no parental support are resigning themselves to a future in the private rental sector. As my colleague Kate Allen has documented, private landlords’ total housing equity has more than doubled over the past decade.

And consider land. Housing prices rose sixfold from 1983 to 2007 but land prices rose sixteenfold, Dorling observes. This increase in value came not via effort but as the result of a finite supply of a basic good, aided by demographics, low property taxes and tight planning rules. In every sense, land is the foundation of the housing problem. He is right that it must be a target of public policy, for example via a land value tax, and that the outdated and regressive council tax should also be reviewed.

Nevertheless, updating anachronistic taxes is only part of the answer. Planning does matter. One of the reasons why housing is expensive in London and the southeast is because people want to live there. It is misleading to say that there is “growing inefficiency” in the housing stock in the capital. Plutocrats are burrowing in Notting Hill but elsewhere, people are “hutching up” and making do with less space. Loosening planning rules would increase supply in these high-demand areas.

More houses would help poorer people, too. The coalition government’s housing and “welfare” reforms are catalysing the movement of poverty from inner to outer London. This is on top of the existing mess in social and “affordable” housing. The idea behind Right to Buy was not bad in itself but, as Meek explains, subsequent supply was choked off by government rules and instead, taxpayers ended up footing the bill via housing benefit.

None of this will be easy. Maintaining the status quo is in the interest of more people than a few bankers or doer-upper flippers. Declining home ownership could change the politics of housing; there will be more pressure to improve private rental standards. But Dorling’s culture change looks a long way off.

In a recent episode of Location, Location, Location, a newlywed couple in Bristol find their dream home but are outbid. In the pub, the presenter says they have to be more decisive: “you’re up against the developers”. If only that were all.

John McDermott is an FT columnist

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