According to Labour we are facing a chronic housing crisis.
And Labour has in response promised to build 1.5 million homes in England within the coming five years. But will Labour's plan actually work?
The Big Promise: 1.5 Million Homes
At face value, Labour's plan sounds like precisely what the country needs. T
he UK has been fighting a long battle with the problem of truly affordable housing, especially in areas with the highest demand, such as London and the South East. There are hundreds of thousands of people unable to afford their first steps on the property ladder, effectively stuck in a perpetual rental trap.
However, solving this isn't quite as simple as just building 1.5 million new homes.
The Problem with Profit-Driven Housebuilders
The supply of housing in the UK lies with a few large housebuilders -six major players monopolising the sector.
And they have no incentive to build houses at the pace Labour wants... this would drive the property prices down and eat into their profits. They want to drip-feed houses into the market, keeping supply low and demand high.
The Speculation Problem
Even if Labour does hit its 1.5M target by 2030, there's no guarantee they would go to first time buyers anyway. The chances are many of those new properties would end up in the hands of investors.
Since 2016, more homes in the UK have been bought as second homes and buy to lets than by people simply looking for their first home to live in.
Unless Labour tackles this head-on-through higher taxes on second homes and much tighter regulation of buy-to-let investments-building more homes will not solve the problem; it will just feed the speculation machine.
The Surplus That Isn't Helping
Here's the irony.... England actually has a massive housing surplus. If we look at bedrooms per person, there are more of these than ever. It's not a supply problem, it's a distribution problem. (Like wealth!)
Many older homeowners are living in large family homes, while younger generations are crammed into tiny flats or stuck renting. Building new homes on greenfield sites might sound like a solution, but it doesn't address the inefficient use of existing housing stock.
Incentivising people-through stamp duty reforms or help with moving costs, for example-could free more homes for those families that really need them by encouraging people to downsize.
A Wider Solution Is Needed
While building more homes is an important part of the puzzle in some areas, it's not enough on its own.
Labour's strategy should focus on broader reforms that ensures that the market can be both more functional and far fairer for all participants, including mechanisms against speculation in real estate, efficient use of current housing capacity, and providing for genuinely affordable construction.
Without these changes, there's a real risk that Labour's plan could end up making the system even more dysfunctional, with new homes being hoarded by investors while ordinary families continue to struggle.
Housing in the UK final thoughts...
It looks like Labour is shooting itself in the foot again with a bold headline grabbing plan that it won't be able to achieve, and even if it could achieve it wouldn't solve the problem it's trying to achieve anyway.
Posted Using INLEO
