The UK housing crisis has reached such a peak that it has become impossible for any politician in the country to ignore. With annual population growth nearing one percent it is thought that around 280,000 to 300,000 new homes need to be built every year. Yet from 2016-2017 just 217,000 homes were built, with only 41,530 being affordable.

It is the affordable aspect which is key here: while more than one million people have been on affordable housing waiting lists during the past year, just over 40,000 affordable houses were built in that same period. And the housing market is only growing: it has been reported that UK housing wealth has reached more than seven trillion pounds for the first time ever.

We are seeing action – or at least promises of action – as a result. The Labour Party’s popular manifesto promised to build at least a million new homes over the course of the next parliament, and the biggest council house building programme in more than thirty years. In light of this, Chancellor Philip Hammond’s November budget pledged to build 300,000 new homes a year by the mid-2020s–the top end of what experts say is needed. This sounds like good news, and the building of new homes is of course welcome. But this announcement reflects the very problem with the way the crisis has been approached since the 1980s. If attention was shifted beyond the construction of new homes to existing issues within the housing sector – government cuts, rent and real estate prices, the role of big developers – alternative solutions would likely emerge.

The beginning of the housing crisis can be drawn back to Margaret Thatcher’s first government. Two key policies had a drastic impact on reducing the availability of council homes. Firstly, her popular ‘Right to Buy’ initiative offered council tenants opportunities to buy their home for cheap. While attractive for those who benefitted from it, the long-term consequence was council homes entering the private market, thus compromising future affordability. This was met with a policy of replacing bricks with benefits: reducing council housing construction in exchange for increased housing benefits. Council homes were sold, less were built. This plummeted further during the Blair and Brown governments: statistics show Thatcher built more homes in one year than both Labour governments managed in over a decade.

By November 2017, a total of 1.93 million homes had been sold through Right to Buy, with private landlords running forty percent of them. Since the scheme was launched again in April 2012, close to 50,000 more council homes have been sold with only one in ten being replaced by councils. Undoubtedly, the privatisation of council homes has had dire consequences on their availability in the UK.

George Osborne’s 2010 Whitehall spending review oversaw sixty percent cuts to affordable housing grants. In return, the government enabled housing associations to raise rents on new homes to up to eighty percent of market rents. Welcomed perhaps by housing associations, this mark up on social housing rents did nothing to support those living in, or seeking, affordable housing. These supposedly affordable homes have come to substitute cheaper social rents. As a result, the so-called social rents became too expensive for those who depended on them.

With the state making major cuts to affordable housing projects and housing associations, the private sector has become the main player in charge of building affordable homes. The issue is that the private sector has little incentive to build affordable homes – though there have been some attempts made to regulate the realm of private-sector affordable housing. Each local authority in the UK is responsible for setting targets for affordable housing. Developers are then required to reserve a certain number of units for social rents – but have in reality avoided doing so in order to maximise profits on their investments. The ‘financial viability assessment’ loophole has made this possible.

The loophole is formed by the fact that these targets set out by local authorities are not legally binding, and legally superseded by the national planning policy. So as long as developers are able to show that prescribed quotas make their projects financially infeasible, local authority quotas can be negotiated down. Consequently, developers have used financial viability assessments to prove to councils that affordable housing quotas are unprofitable. By adding together the total estimated cost of the project, including a twenty percent profit margin, and deducting this from the expected revenue, developers can make the case that the affordable housing targets are not viable when assessments project a loss.

And so developers often succeed in getting targets reduced – helped along by hired experts willing and able to provide favourable assessments in comparison to cash-strapped councils. In this way, developers comfortably exploit the loophole to their advantage: usually without accountability as it is rare for financial viability assessments to be made public. As viability expert Christopher Marsh told the Bureau of Investigative Journalism: “if local authorities were sufficiently well-equipped, you could safely say the overall amount of affordable housing would be greater”.

The Bureau’s recent investigation found that out of eighty-two of the UK’s largest development projects in major cities, only forty percent satisfied affordable housing quotas. Research by housing charity Shelter also found that up to 2,500 affordable homes were lost across eleven councils in nine English cities in 2017, all as a result of financial viability assessments.

Developers have also been accused of overpaying for land in order to dupe financial viability assessments. In doing so, they are able to argue that affordable housing targets are uneconomic, yet make back their losses in selling more private homes. This also underlines the important issue of artificially increasing land value.

Foreign investment and speculation have been key in artificially increasing real estate value, creating a market for that is unaffordable to the majority of UK residents. One of the many consequences is empty homes: there are over 1,650 empty homes in the Borough of Kensington and Chelsea and an estimated 200,000 long-term empty homes across the UK.

While families are priced out of their neighbourhoods, a population is priced out of its own housing market with homelessness continuing to rise as empty homes sit idle. Dedicating political resources towards tackling the affordable housing crisis brings immediate solutions to the issue. But sooner or later the root causes – from legal loopholes to disempowered local councils – will need to be tackled. As Labour continues to offer policies along these lines the popularity of the opposition party is only increasing, with polls to prove it. The Conservative government would be wise to pay attention to these issues and tackle them before it is too late.

About the author

LUCIEN BEGAULT is a Staff Writer at Raddington Report. His areas of interest cover contemporary Middle Eastern politics, British politics, development, security and culture.