U.K. HOUSING POLICY

The U.K. is - compared with (say) Denmark - a very crowded place. Or, at least, Southern England is. And the problem is going to get worse. The largest country in the E.U. at the moment is Germany, whose population is old and shrinking. By 2050 it is expected to have been overtaken by the U.K., the biggest proportion of whose citizens live in Southern England.

Where will all of those people live? The number of new homes built in 2010 was a mere 134,000. That is not only the lowest figure since the Second World War, but a lot less than the 234,000 new households being formed each year. So not only is there a problem, but it seems to be getting worse.

Basically, there are four "solutions" to this problem, and none of them are easy. The first is to restrict the number of immigrants, who will be responsible for a fair chunk of the forthcoming increase in population. However, as well as not being easy to control (net immigration, the figure that matters, is the difference between two rather large numbers, namely immigration and emigration), it would almost certainly be illegal (if the immigrant were from the E.U.) and undesirable (if the immigrant were highly qualified and came from anywhere else). 

The second is to increase supply, by building lots more homes. Builders and developers would love to do this, and they seem to have managed to have bent the Government's ear to their point of view. The proposed changes to the planning laws, which are currently wending their way through Parliament, put a "presumption" in favour of development, which opens up the possibility of scarce land being turned into building sites, particularly in suburban and rural areas. Not surprisingly, this proposal is being furiously opposed by all sorts of groups who fear that the countryside will be concreted over in the same way that Japan (another crowded island) already has been.

The naysayers do have a point beyond rural nimbyism. That is because although there is an acute housing shortage, there are at the same time nearly 1 million empty homes, of which around 350,000 have been empty for more than 6 months. There are lots of reasons for a home being empty, ranging from going on holiday to being evicted for non-payment of the mortgage. But the third option is to find a way to bring some of these houses onto the market through a mix of carrots (eg tax breaks for renovating) and sticks (eg banning second homes in some areas).

The fourth option is to change the way the population lives. Children could live with their parents for longer, as they do in southern Europe; or elderly people could move out of large properties when their children have left home and downsize to something smaller. However, although in some ways eminently sensible, it is notoriously difficult for Governments to change "lifestyle habits" by decree.

Since none of the solutions is really a solution on its own, existing and future British Governments will probably try to do a mix of all four. Expect some measures to restrict immigration, easier planning laws, tax breaks for renovating old properties and changes to the inheritance tax laws to encourage old people to sell early. And then sit back and listen to the howls of protest from disaffected groups. This is not a problem that is going to get solved in my lifetime. 

Walter Blotscher