I answer Metro readers' questions on housing

With footnotes from housing expert Jamie Rumbelow

A London newspaper's readers ask questions on housing. We answer them.

UK Prime Minister Sir Keir Starmer answered readers' questions in the Metro, a newspaper given away free around the UK¹. As a politician, he answered them vaguely and deferentially. I answer them specifically. Jamie, CEO of housing startup Tract, writes sassy explanatory footnotes.

Alexa: Will we actually get affordable housing? I've been on the affordable housing list since 2014. There have been zero properties to bid for in the past 14 weeks. We have moved twice into unaffordable private accommodations. I've been back at my parents' for 3 years.²

Starmer: This is exactly why I'm so determined to be ambitious on House Building. Everybody who opposes building houses should read about your situation, Alexa.

It is unfortunate that the previous government let this crisis fester for so long. We have a Renters' Rights bill going through Parliament that will give tenants protections against eviction and new powers to stop unreasonable rent hikes, and we are regulating to make rental homes warmer and cheaper to heat.³ And we are going to build 1.5 million new homes.⁴ Within that we will deliver the biggest increase in social affordable housing in a generation. And we have restored mandatory housing targets so affordable homes are built where they are needed.⁵

Me: Your pain matters to me, Alexa, but also I cannot help you in the way that you expect. It sucks not to have affordable housing. But if we want it, someone has to pay for it.

Should that be the private sector or the Government?

We don’t make private hospitals pay for all of the NHS, nor private schools pay for all of education.⁶ Similarly we shouldn’t make private housebuilding pay for all new affordable housing.

So that leaves the Government. And right now, the UK Government doesn’t have much money. Luckily there is another option. We can stop blocking housebuilding. House builders want to build on land in the UK.⁷ Especially in London and the South East.⁸

But I am sorry for your pain and many others’ pain in the meantime. Government isn’t wealthy enough to fix this problem,⁹ nor clever enough to centrally manage it—we need a different approach, which looks like getting out of the way.

Ben: I put an offer on a flat that was accepted. I paid for search and solicitors, but it was gazumped¹⁰ by a landlord buyer and lost £2,000. In other countries there are fines for pulling out and other protections in place. What plans do you have to protect buyers?¹¹

Starmer: Just last week, we announced plans to digitise the house-buying process, making it quicker and easier for everyone - speeding up the process and reducing the rate of fall throughs. This will actively even the playing field between professional landlords and many people trying to get on the housing ladder.

Me: Sir Keir's answer here is quite good. Digitisation will help. If buying could be done in 5 minutes, with appropriate bank checks, there wouldn't have been an opportunity for someone to gazump you.

But I think landlords get blamed too much. They're just wealthy people, some good, some bad. The problem here is that your seller and this new buyer disobeyed norms. And with a digital process that will be much harder to do.

Paul: Will the government set a target of 50% council housing in new developments?

Starmer: Our next generation of new towns will have a target rate of 40% affordable housing, with a focus on genuinely affordable social rented homes.

Me: No. Again, we need more houses. Setting a target like this means that builders get less money. It’s effectively a tax. So it will cause there to be fewer houses. That is the opposite of what we want.

If we want more council housing, councils or the Government could buy them or give people money. As I said to Alexa, we don’t make any other private service entirely support the public version. We don’t have enough housing, we shouldn’t limit it further.

We’re going to give councils some of the uplift from new council tax, so that when new housing gets built, they can spend it on buying council housing if they want.¹²

Maya: As much as I want my own home, I don't want it to come at the expense of the environment.¹³

Starmer: I think we can build the housing infrastructure we need to protect the environment at the same time.

For example, better roads reduce great congestion. Improving public transport is good for the planet. And developing clean energy alternatives will reduce our long-term dependence on fossil fuels. Both are absolutely vital.

So new developments will not come at the expense of environment or wildlife. We will always look to use brownfield sites first¹⁴, but we know that brownfield alone won’t solve the housing crisis we have inherited.

That’s why councils who cannot meet their new housing targets will have to review their greenbelt land and prioritise development on grey belt land such as disused petrol stations and car parks.

Me: The good news is, your home won’t come at the expense of the environment. Really, the places we most need housing are the places that affect the environment least: Cities! People living in cities pollute less, because they use public transport more and live in blocks that use less energy to heat.

More broadly, we should focus our environmental effort. For the same amount of effort we spend ensuring that individual houses follow complicated rules, we could protect large areas of countryside or build new carbon capture technology. It’s a question of focus.

Adam: I'm a London borough planning officer. Developers have to include affordable housing in their private schemes, but can argue to reduce that amount down to none at all. Will you change that?¹⁵

Starmer: We’re going to strengthen the system to ensure new developments provide the right balance of affordable homes and infrastructure.

This year we’ll also update viability planning practice guidance - meaning we will only allow negotiations on those critical affordable homes where genuinely necessary¹⁶. And because every community needs affordable homes when it comes to any major development involving new homes in the green belt, we’re clear they must be subject to our ‘golden rules’. That means, No site-specific viability can take place for reduced development contributions, including affordable housing.

Me: Adam, again, it is not the job of private developers to build affordable housing. If we want those things built, we should pay for them. That's got the right incentives. I think we’re gonna see more affordable houses our way too.

But if you want the Government to pay for hundreds of thousands of affordable homes, what do you want us to cut?

Leslie: Could you look into ‘Huf-Haus’ style homes, a German concept that has homes rolling out of production lines, pre-fabricated but high quality?¹⁷

Starmer: It is absolutely essential that we build more homes at high volume but that are also high quality well designed and sustainable. I'm delighted we've had more than one hundred proposals across the country to build the next generation of new towns. These will be led by local communities that local people will be able to shape what the design is important to them whether that's modern architecture or Georgian-style homes.

Me: Huf-hauses? I may check them out. Though to make my point again, it’s not the Government’s job to build houses. And its not our job to tell people how to build them. We aren’t very good at it. We are going to make clear what isn’t allowed (unsafe housing) and then developers can use whatever processes they like. I love a good system, though!

Alex: You claim to be helping first-time buyers, so why did you lower the first-time buyer stamp duty threshold from £425k to £300k? Why not increase the stamp duty for those who have many homes instead?

Starmer: We inherited an unacceptable situation in the public finances from the previous government.

This housing crisis is so acute precisely because Liz Truss thought she could introduce policies without properly funding them. If we had not taken tough decisions, the housing situation would be a lot worse.

I am confident we will make it easier for people to own their own home. Indeed, our figures suggest we are already on track for 130,000 extra transactions over the next five years from first-time buyers.

And we are launching a permanent comprehensive mortgage guarantees scheme that will open up home ownership for more young people¹⁸.

Me: First, no, I am not for first time buyers, I am for the British people, and, to a lesser extent all life, now and for the future. The UK has been trying to twist systems for first time buyers and it’s been hugely expensive and it hasn’t worked.

We are going to stop blocking homes, many will get built and house prices in expensive areas will fall.

But yes, stamp duty seems like a crazy tax. We should want a system where it’s easy to buy and sell houses. A big tax on this process makes people not want to do it. I don’t know what the right system is, but it could be a property tax, assessed against the property’s value¹⁹. And then we should give some more money to poor people.

I know this doesn’t help first time buyers very much, but reduced house prices will fix that problem.

Panos: Do you plan to review the legislation about leaseholders rights? Will it become cheaper to renew the leasehold period?

Starmer: Yes we are removing the two-year ownership rule for leaseholders. And we are beefing up powers so that leaseholders can take control of their buildings more easily and cheaply. This will help them to tackle spiralling charges and unacceptable poor service.

We are also introducing a new right to a 990-year lease extension on both houses and flats. And we will make extending a lease cheaper for leaseholders by requiring each side to pay their own process costs such as valuation and solicitor’s fees.

Me: I am going to agree and disagree. I think leaseholds can be confusing and we are going set guidelines to make it clearer what people are signing up for. But in general, I think adults can get into whatever contracts they choose. If owners want to lease buildings for 100 years or 1 year, that’s between them and the lesser.

Instead, we are going to allow there to be a lot more houses, so that if someone doesn’t want a leasehold they don’t have to.²⁰

Sarah: Many tenants and homeowners suffer from poor quality new builds. How you ensure that Labour's removal of so-called red tape doesn't make the situation even worse.

Starmer: I don't take an ideological view on regulation. Sometimes we need red tape. Often we don't. At the moment we are trying to remove barriers to building because people across the country need good quality affordable homes but we won't compromise on quality or safety.

Me: Starmer is right here, but let's have some more specifics. Many kinds of housing that people like are illegal for safety reasons. We can’t have big windows because we fear people may fall out of them, builders have to build two staircases in 6 storey buildings. These rules don’t make people much safer, but they do make houses much more expensive.

The UK is a nation of adults, but for the last 30 years we have built housing as if we are all clumsy parentless children, who need to be coddled and protected at all costs. And so we have seen less and uglier housing than we otherwise would have.

Mrs Monteith: Builders sell a portion of new properties to foreign investors driving up prices. Would you consider changing the law, so only UK nationals, living in the UK, can purchase property

Starmer: This is something we're working on in detail—it's not right and something we must address.

For the first step we've put a stamp duty for people buying properties that are not their primary residents— increasing the higher rate of stamp duty on additional dwellings from 3 to 5%. In addition, overseas buyers pay a 2% stamp duty surcharge.

Me: I understand your frustration here. It feels like foreigners are getting a good deal, piggybacking off our country. But would we feel this way for any other good, for cars or bread or apples? Wouldn’t we be glad that foreigners were buying them? The reason that foreign buyers drive up house prices is because we have limited supply. So that’s the main problem to fix.²¹

More generally, I’d like to see immigrants paying into the UK in a way citizens can see. Whether that’s an additional income tax or a tax on property I don’t know, but I want British people to see money in their pocket or a new hospital ward and see that immigrants paid for it. I think that would ease a lot of tension.

Jenny: Why are you suggesting building so many new towns when there are so many empty flats in London?

Starmer: Across the country there is a housing crisis. I get to visit every corner of our country and people are constantly asking what we can do to build more affordable housing.

New towns are a part of the solution. People often say to me “we don't mind house building but we worry about there being not enough infrastructure for the homes”. New towns are a tried-and-tested way of making sure that isn’t the case

You raise a good point about empty flats, however.²² We are absolutely encouraging councils to use the tools available to them on that issue. For example, they can charge additional council tax on vacant properties.

Me: I’m sorry to say that sometimes these talking points are just wrong. The UK has one of the lowest vacancy rates in the developed world. And what happens with a low vacancy rate? House sales get tangled up in long chains.

What’s more, it’s not our business if people wish to buy and own empty flats. We should tax on the level of income and wealth. Should a person who owns 1 large house pay less tax than a person who owns two small ones of the same value? No.

Rota: What is the government doing to protect leaseholders from excessive service charges?

Starmer: By law, service charges must be reasonable and where cost relate to works and services there must be a reasonable standard, but we need to do more to protect leaseholders. So we will bring the feudal leasehold system to an end this parliament, we'll also consult on plans to give leaseholders more transparency on the charges they pay as well as greater rights, powers and protections.

Me: Regarding leaseholding, lessors need to make clear what the charges are going to be, but in general, people can run whatever system they wish. It isn’t the Government's job to legislate consensual contracts between adults.

You already know what I am going to say at this point. If there were more houses, you could choose not to lease if you didn’t want to.

M. Pantlin: If immigration was controlled properly and illegal immigrants were repatriated to their own countries then clearly far fewer homes would be needed.²³

Starmer: We recognised that migration puts additional pressure on demand. The last Government's open borders experiment has left us a huge challenge. We have a two pronged approach. First, we are committed to cutting net migration. We’re cracking down on illegal migration as well as making sure we our [sic] domestic workforce has the skills to meet our labour market. The second part is to build more homes.

Me: I generally like immigration, but it does seem obvious that if you have lots of people coming into the country then we’re going to need more housing. We need to stop blocking housing and allow the market to build that housing.

I probably think we should cut immigration and then actually make the case to people. Currently lots of migrants have “No Recourse to Public Funds” on their visas, but still end up getting support from councils. This seems bad. If migrants can’t afford to live in the UK, we are going to remove them. This, coupled with higher taxes on immigrants to fund infrastructure should build trust in what I am confident of - that British citizens are better off with higher immigration.

Pauline: Please make mortgage lenders accept proof of previous rental payment over a number of years as qualification for mortgage. I have relatives who have been paying much more rent for years than a mortgage would cost. Yet, they can't get one.²⁴

Starmer: We're demanding that mortgage rules be relaxed so they no longer block first-time buyers, but we are also going further. We will step in and back buyer ourselves through a permanent mortgage guarantee scheme that will mean lenders will loan to people with smaller deposits.

Me: Pauline, I agree with you on mortgage lenders accepting proof of previous rental agreements. This does seem crazy. We're going to be telling banks that they've got to give us a reason why they're doing this. I'm not gonna force them to, but I'm confused by it and it seems predatory.

Keir is wrong here. For the last 30 years we have constantly tried to support first time buyers by giving them benefits. It hasn’t worked. We are not going to run another scheme to juice demand. My Government is going to ensure there are more houses.

Carroll: Why are developers allowed to land bank, holding back building the 1 million homes already with planning permission.²⁵

Starmer: This government has been very clear that once house builders have been granted planning permission, we expect them to build as quickly as possible. Our new home's accelerator has already unlocked 20,000 new homes that got stuck under the previous government.

Me: My understanding is that land banking is that this isn't really a problem in the way people think it is. Developers have long development horizons and so they need to hold land for the building work they're going to do in future. Really if we had much more land that could be built upon then much more would get built, but some of it still would be left in the planning pipeline. I think this is just a normal feature.

Jay: Where will you get enough skilled trades people?

Starmer: It's true we need to create the construction workforce required. We’ve already taken action with £140 million of industry investment for 5,000 more construction apprenticeships per year. That will join 32 new Homebuilding Skills Hubs that will deliver fast-track training to areas that need more housing. Just last week we announced 10,000 more apprentices will be able to qualify per year as the government cuts red tape to boost growth.

Me: Regarding skilled trades people, I think part of the problem in the UK is that we have inconsistent construction. If we had a lot of houses that could be built now and there was confidence that would be the case in the future, I think we'd have a much larger construction industry.

The Government shouldn’t choose how many apprenticeship places there are - the construction industry should pay people to get the training they need. We're going to work in partnership with those industries to try and find the money or create financing options to ensure these workers exist.²⁶

Also make sure to read Jamie’s footnotes if you didn’t, he is an expert on this stuff.

1. NY: These answers are from the print version, but the web version is similar here.

2. JR: I was going to write a little rant about ‘affordable housing’ is an ugly solution to an ugly problem, PR triumphing over politics, etc. And I’m sure I will cover these issues below. But Alexa’s tone here is quite revealing. She’s exposing a kind of helplessness, a social contract broken, a promise unfulfilled. An underrated moral benefit of free markets is that they allow anyone that meets some low baseline of competence to demand what they need and have it supplied to them. Markets give people agency, allow them to make trade-offs. Something which our current housing market has singularly failed to do. The housing crisis is a failure of positive liberty.

3. JR: I am more sympathetic to these sorts of policies than I normally would be, since we are in such an acute supply crisis that there is immediate pain to be dealt with as well as the longer-term structural problems to resolve. But this must not be seen as an adequate solution to the problem. There are many jurisdictions with much worse renters’ protections whose renters enjoy better quality homes and more predictable rent rises. Why? Because there is enough supply; landlords compete for renters – not the other way round.

4. JR: No you’re not

5. JR: We’ve been missing our housing targets since the 60s. And they have been essentially mandatory for almost all of that time (and still had ‘enforcement mechanisms’ – i.e. the tilted balance – even after the last government made them non-mandatory!) Just saying “they’re mandatory” doesn’t solve the problem.

6. JR: Well, kind of - we now tax private schooling through VAT. The problem with affordable housing is that it isn’t a tax on consumption, it’s a tax on production – and, even more frustratingly, a tax whose rate can be determined on a transaction-by-transaction basis (S106 agreements are negotiated per-approval). (We also tax its consumption, through SDLT, though there are often exemptions.)

7. NY:

If you have a hectare of farmland in the southeast of the country, then it would be worth about £25,000 for the hectare. If you get permission to build houses on it, it will increase in value by about 180 times. You’re almost literally printing money to get permission to build houses in the southeast.

Sam Bowman, 80,000 Hours podcast

8. JR: When we were fundraising for Tract, the number we kept using was the countrywide median: the value uplift of land is £20,000/ha for agricultural usage, and £2.4 million/ha for residential permissions. And that’s the median! Not even in London/SE!

This difference represents the constraints we put on supply. A careful analysis would also need to include location premia, cost of capital, construction costs, and other minor factors. But we are in a situation where the all-in construction costs are 1/5th of the sales price, which means land prices can absorb a 50% fall in house prices and the land values would still be worth twice what it costs to build the fucking thing.

9. JR: Better local authority financing regimes could help here. If the Île-de-France wants to build a new métro line, say, they can put a 0.5¢ tax on income or something and this gives them a revenue stream against which they can borrow to pay the capital costs. If we had proper property taxes, and local authorities were more responsible for raising and spending it, they could do something similar to pay for more social housing.

10. NY: British slang for "the seller accepts a last minute higher offer".

11. JR: Oh, fuck off, Ben. I’m sorry you lost £2,000 because you signed a contract without reading it properly. Learn your lesson and tell your solicitors to include a penalty clause next time. The state isn’t responsible for you being an idiot. (Unless you were state-educated, in which case, I am sorry that we let you down.) The state certainly isn’t responsible for you not taking your licks with some pride. For goodness sake, Ben, be a man.

12. JR: This is an incomplete answer. Marginal increases in council tax can’t and won’t work. You need to a) replace council tax with something that functions more like a property tax, b) remove a bunch of the unfunded mandates on councils (eg bring responsibility for social care into DHSC), c) give councils the ability to issue bonds, and d) make a credible threat that if councils fuck it up they won’t be bailed out by govt.

Under the current system you could maybe thread the needle by using JVs to fund capital expenditure privately, but you wouldn’t see the results reflected in your tax base and, regardless, any increase in revenues would likely be swallowed up by an actuarially-driven increase in your expenses.

13. JR: Oh, fuck off, Maya. How bad do you think it is for the environment that people in zones 3-5 drive cars? Or that basically everybody outside of London drives for basically every journey? Or that deliveries have to go further to make the same number of deliveries because housing isn’t dense enough?

14. JR: The PM’s elliptic reference to brownfield-first here could be explained further. It’s not only that we don’t have enough brownfield land to actually deliver the houses needed (at least at the sorts of densities the planning system would allow), but also that brownfield land has a HUGE problem with margins of viability. Soil contamination, drainage issues, alternative use value, and the complexities of doing a big construction project in an existing urban area all make it much more expensive, which makes these projects a lot more vulnerable to local fluctuations in housing prices.

15. JR: Every planner should have to go away and read Order without Design and Basic Economics then come back to me before they are allowed to do their jobs or say anything this stupid with a straight face.

16. JR: Surely the problem is you’ve decided to keep a system where essential public services are provided via a feudal tribute? (NY: I queried this, and Jamie responded that councils get to negotiate on each development, forcing house builders to go cap in hand, like a feudal tribute.)

17. JR: The Guardian and the Liberal Democrats have done more harm to this country than both World Wars

18. JR: I wish I knew more about UK mortgage regs. My impression is that they are unduly stringent – I guess downstream of our post-2008 banking regs – and that, at certain margins, it harms buyers and unnaturally distorts housing demand. Similar schemes exist in the US (Fannie Mae and Freddy Mac). So this might be a good long-term policy, though not, of course, while our existing supply crisis is so acute.

19. NY: Texas has one of these (this source seems anti-tax, but serves to show that Texas raises a significant proportion of state revenues from property taxes).

20. JR: I can’t bring myself to have an opinion about any of this. Whereof one cannot speak, and all that.

21. JR: Could somebody dig up the numbers on foreign investor purchase rates of newbuilds? I’d be very surprised if it is higher than 10%. And the optimal amount is greater than zero – having a reserve bidder against British property whose willingness to invest isn’t purely a function of the British market (as economists would say, endogenous) makes everything more robust to random shocks. (NY: I looked and was unable to find a number here)

22. JR: No she doesn’t! Our long-term vacancy rate is like, half a percent or something! We need to be targeting something like 4-5% vacancy for a good, elastic market!

23. JR: Both Nathan and the Prime Minister’s replies address the issue appropriately, I think.

24. JR: I think I have addressed this adequately already.

25. JR: This meme never dies, despite the at least half a dozen – from my memory, the real number I am sure is more – reviews, both government-led and independent, that we’ve had in the last 20 years alone.

The one million number (often quoted as 1.4 million, sometimes 1.2 million) is extremely unreliable, since we don’t have any good data. But let’s assume it’s correct.

Housebuilders’ business model is to sell houses. They have costs, like their supply chain (pre-ordered supplies, labour they need to employ, etc.) and the cost of capital which they need to pay for regardless. So it would only make sense to ‘land bank’, in the conspiratorial sense Carroll means here, if the returns from sitting and waiting exceeded these costs, which, I can assure you, would only happen in the very rarest of cases.

So the economic logic is faulty. Where else might this number be coming from?

Nutrient neutrality rules are responsible for stalling ~140,000 homes either allocated or permitted. Sometimes you get outline permission but need to put in more reserved matters applications to be able to build legally. Sometimes you get given permission subject to various conditions. Sometimes you go through the process of getting permission – which can take years – and the regs change, so you need to redesign your scheme.

And after you subtract all of that away, there are the homes that, as Nathan says, need to be in a developer’s pipeline to underwrite any future investment in housing. You can’t be stopping and starting - you need to be able to move from one project to the next. Because it is expensive and uncertain to get planning permission, you need a buffer of land that is either permitted already or later in the process.

How do I know that I’m right about all this? When the CMA looked into this last year, with access to all the developers’ internal documents (provided at pain of perjury), their numbers mapped roughly to the number of homes planned nationally for two years.

26. JR: Nathan is right. If you’re so worried about this, subsidise traineeships or create a new temporary visa category or whatever. But builders want to build, they need workers to do it, so they’ll solve this problem themselves.