Housing — House of Commons, 2019-03-28
Topic: Housing
Richard Michael Bacon (Conservative, Centre-right): I am sorry to see Members leaving the Chamber, because we are about to discuss the Government’s top domestic priority, which is of far more concern to many people up and down the country than our endless talk of Brexit. I have entitled this debate "Housing" because I did not want to be confined to any specific part of the housing debate and wanted to give the Minister the opportunity to address any question within the housing space It is absolutely clear that we have a very big housing problem, and have had a very big problem, for some years. I have been attending seminars, roundtables and conferences on housing for at least seven years. I first went to the QEII Centre to hear Adri Duivesteijn, the godfather of the self-build and custom house building movement in the Netherlands—a former Dutch Member of Parliament who then became the mayor of Almere, a community in the Netherlands that I think I am right in saying the Minister has visited. Since then, I have been to many events of various kinds, and everyone has their own diagnosis of the problems and their own solutions, but generally they all mention land, planning or finance. They often mention the role of the volume house builders, the way in which local council planning authorities are stretched and the difficulty in getting access to land Many of these points have a great deal of truth about them, but the issue can be encapsulated much more simply in the following sentence: the supply of housing does not rise to meet the demand for housing. In many other areas of life, it is true that supply generally does rise to meet demand. In what I would call orthodox, rather than classical, economics, if someone is making what economists call supernormal profits—profits that are in excess of what one might expect—two factors generally combine to bring those profits down to normal levels. One factor is that other actors in the marketplace will see the opportunity of those high profits and will move in. In other words, new suppliers will move in, with competition, increasing choice for consumers and driving down the profit margins. But that is not the situation that we have in the United Kingdom. In fact, over the last 30 years, the situation has steadily become the reverse of that. We effectively have permanent supernormal profits Some 30 years ago, in 1988, 66% of houses in this country—a large fraction of the total—were built by SME builders, which were represented by excellent organisations such as the Federation of Master Builders. The situation now is that less than 20%—perhaps 15% or 17%—of houses are built by SME builders, with all kinds of extra problems that make it more difficult for them to engage. Now a very small number of very large companies build most of the houses; for the most part, they are the members of the Home Builders Federation The strange thing is that if one asks consumers what they think and what they want, as has been done several times by independent, authoritative opinion pollster organisations that have been commissioned for the purpose, they will come up with the following result. Somewhere between two thirds and three quarters of people do not want to buy the products of volume house builders. The figure of 75% comes from a YouGov survey conducted by the National Custom and Self Build Association, which is a trade body for, as the name suggests, self-building and custom house building, whereby houses are manufactured offsite—perhaps a better way of putting it is "high-tech offsite construction"—and then delivered to a site where they are constructed. The figure of 67%—the two thirds of people who do not want to, or would prefer not to, buy the product of the volume house builders—comes from the volume house builders themselves. Their own research tells us that most people do not want to buy their product. Now, in a vaguely competitive ecosystem where there was choice for consumers, that would be corrected by new suppliers coming in and providing something that consumers did want Let me be very clear that the numbers themselves suggest that between a third and a quarter of consumers do want to buy the product of volume house builders. If they wish to do so, they should be free to do so, as long as those products are built to the right standards in terms of health and safety and building regulations. I have no issue with that at all. It is true that, over the last 30 to 40 years, houses have got smaller and more expensive than they were in the not-that-distant past. However, if people wish to buy the product of a volume house builder, they should certainly be free to do so, as long as those volume house builders operate within the law; I do not object to that at all. But fundamentally, the two things required for this ecosystem to function are low barriers to entry and consumer choice, and those are the two things that are fundamentally absent We all know what the consequence is. I have tested this with nine-year-olds in primary schools in my constituency. I say, "What happens to the price of something if there is not enough of it?", and every had goes up and they say, "It goes up." Then, just to make the point really clearly, I say, "And what happens to the price of something if there is too much of it?", and every hand goes up and they say, "It goes down." It is not difficult to understand—it is intuitive to the point where a nine-year-old can grasp it. That is what has happened to the housing market, if one can call it a market, in the UK. I suppose that an economist might say that of course it is a market, but a very oligopolistic one—in other words, something approaching, but not quite, a monopoly That means that the suppliers making supernormal profits can keep on doing this for a very long time without let or hindrance. At the same time, the average price of an average dwelling has gone from three and half to four times income a generation ago to about eight times income now. That depends on where one is in the country, of course. For South Norfolk, the last figures I saw from the National Housing Federation—admittedly slightly out of date now, but they will not have changed that much—were about 8.2 times average income. The same numbers suggested 8.2 times average income in Harlow in Essex, 13 times average income in Hertfordshire, and 17 times average income in Oxford—and in some of the really hot boroughs in London, it was completely off the charts. Even in the poorer parts of the country where incomes are lower and properties are less desirable, it is now five and half to six times average income in many cases. I pumped my parliamentary salary into one of the websites just to see what a lender would lend, and I was quite horrified that the first number that came out was five and half times income. That would not have been possible a generation ago. We have had more money chasing roughly the same amount of houses, and, not surprisingly, the price has gone up. That has a number of consequences.