Another Harold Wilson? Britain’s Housing Market in 2017
Firstly let me say this is just observations I have made with a few inferences, and probably quite a significant portion of factors, influences and opinion left by the wayside. It certainly isn’t a historical white paper. I’m not a self professed expert on history (while fascinating), and I certainly wasn’t around for this part of it being brought into the world at least 10 years after this was all water under the bridge, but I felt it would be interesting to explore as now there are strong inferences being drawn between Theresa May’s DUP Coalition crumbling before our eyes, and a similar state of affairs which took place in the late 1970’s leading to the election of Labour Prime Minister Harold Wilson.
We currently face a situation in the UK where house price growth has been astronomical and has outstripped wages and normal economic growth by mind boggling degrees. This doesn’t seem normal. We have a huge demand for Housing in the UK, but we don’t seem to be able to step up to the plate and build – why? Successive governments have failed to deliver on promises to build the housing we need, and major developments in prosperous areas are opposed due to planning legislation, public consultation, measures to tackle urban sprawl and just plain NIMBYism.
I have taken an interest in this period to study what happened to the housing market when political uncertainty led to a swing in power and policy away from Conservative Edward Heath (1970-1974) to Wilsons apparently drastic policy changes, many of which he achieved (at a cost).
Wilson is regarded as having been the driving force (or at least a significant proponent) behind Britain’s 1970’s house building boom during his first term as Prime Minister between 1964 and 1970, with a record of 425,830 new homes built in 1968 as part of a program of house building conceived in the early 1960s to address an ongoing housing shortage.
Some of these words sounding familiar yet?
The 1960s saw a huge increase in tower blocks – an idea somewhat successfully utilised in the 1930’s for slum clearances for inner city areas – they were heralded as the new modern utopian way of housing large numbers of residents in a small area, however the reality of the vision was that the new tower blocks were not only financial failures, but social ones too – people simply didn’t enjoy high rise living.
The recent Grenfell Tower tragedy brings the question of the suitability of our aging 1960s and 1970s tower blocks into question – indeed this is not a new conundrum for the government and local authorities as in May 1968 a tower block known as Ronan Point suffered gas explosion killing two people and injuring many more. While the events sound eerily and morbidly familiar, the reasoning was different – Ronan Point suffered from an unsound concrete structure, which did no favours for the public’s perception of tower blocks. The tower was later demolished and, ironically, replaced with low-rise terraced housing, the very thing tower blocks were designed to replace.
To compare the time periods, it’s important to note that of course the cultural, demographic, economic and political landscapes are different, and in the modern age arguably infinitely more complex, however some simple truths can be extracted. In 1961 Privately owned homes accounted for just 44% of the market, as opposed to 66% in 2009. The private rented sector halved in size from 32% to just 16% over the same period, and social housing or council renters slimmed down from 24% to 8%.
So we know that since 1961 more people have been in a position to buy their own home, and have gone on to do so – we know that this is due to a period of economic prosperity during this time, but surely it must also have had something to do with building more homes. Even rising population statistics didn’t catch up with Wilsons landmark ideas for building since the UK population in 1961 was 52.4million, and by 2009 it had swelled to 62.2million – an increase of nearly 20%, and this has been exponentially rising ever since.
The number of new UK homes built in both the private and public sector consistently fell from 1965 to 1974 before Wilson regained power and pushed hard to build again in the mid to late 1970s before Margaret Thatcher took power in the 1979 election and introduced the 1980 housing act, allowing council tenants the right to buy. At this point, private building soared to its peak in the late 1980’s but council building dramatically decreased.
Studying the impacts of the way housing has been affected with these policies is clear when the data is examined. Traditionally a Conservative government shows good returns for property owners, but relatively poor figures for building. The effect is that prices remain high and increase, which is understandable since it is simple economics to show that an increase in supply will offer those creating the demand more choice, and therefore prices will soften.
The successive Labour policies of building solved one problem, but created another – inflation. Under Wilson the RPI hit 24.2% in 1975, meaning whilst housing was becoming more readily available, goods and services became more expensive.
Whatever happens within the next few months with Theresa May and Jeremy Corbyn staring each other down in a Mexican Standoff, the policies will of course be modern, and reflect our current needs, however I cannot help but notice the similarities between some aspects of the housing market during the 1970s and today.
We have a housing shortage, and we need to build – the number of new properties built has been in sharp decline since 2009 and there are many more of us to house, and many clear and present dangers to face such as safety, space and planning considerations. Whoever we, as a nation, choose to back as our next PM, the need for another Harold Wilson style building programme is abundantly clear – and it is not beyond either party to achieve. The keys to achieving this will be to overhaul our planning system, locate and earmark new sites for development, embrace new building technologies and methods and much as it may be an unpopular opinion, all of us will have to compromise a little. We also need (and I say this with an intentional sense of irony) a strong and stable leader with the tenacity to push these kinds of manifesto pledges through to becoming a reality.
Is the alternative that we all go to hell in a handbag? Of course not – we may just see a cyclical return to a slowly growing rental sector, however with the current tax environment this is likely to be dominated by businesses run by landlords rather than direct deals with private individuals, which may give way to higher private rented standards. On the opposite end of the seesaw, only those with a good proportion of opportunity, luck or nous will realise the apparent dream of home ownership – perhaps it’s fast becoming a thing of the past. The reality is that average house prices have nearly quadrupled since 1999, only faltering in the 2007/8 financial crisis, and average wage growth was only approximately £6000 on average for the entire period – meaning your home will have earned more than you.
The danger of this of course is that gripping more and more tightly to the notion that preserving your house price position, or actively working on increasing it eventually leads to an interesting problem – when nobody can afford to buy what you’re selling, it becomes largely worthless, and therefore we need to consider very carefully that affordability and availability balanced with quality of life will have a very large bearing on financial solvency when it comes to bricks and mortar.
To finish off my little foray into the past, while from a business perspective I am personally politically agnostic, I do think that the public need to realise that if you want to live somewhere and be able to afford it, we either need less people or more houses – one of those is sensible, the other is madness. I’ll let you decide which is which!
Written by Alasdair Melville