The challenge for the UK housing market is that we don’t build enough and have largely failed to do so since the second world war. Unfortunately the majority of solutions which are suggested to the market’s challenge are focused on increasing demand. Measures need to be focused on increasing supply. A wider debate, with bigger thinking is required and should include:
1. An independent body to govern long term housing delivery. If UK monetary policy can be depoliticised, why not the nation’s essential infrastructure, including housing? With real long term planning many cyclical tensions and capacity constraints could be alleviated. It could potentially square the paradox of the public purse paying such a high housing subsidy to a largely unregulated, disaggregated and arguably inefficient private rental sector. It could also support new build publicly sponsored social housing. The effect of this could be akin to a geographically precise pseudo-QE (Quantitative easing), much as was achieved by the Addison Act of 1919 and subsequent Housing Acts in the 1920s that created Council Housing programmes. These could be appealing investments for conservative property investors, replicating some the predictable income qualities of bonds.
2. Regulation need not be detrimental and reactions suggesting that they will be are misjudged. Rent regulation can be consistent with creating appealing investment characteristics. Some of Europe’s largest institutional residential investment markets, including Germany and Holland, have strict rent regulations; yet these markets flourish. Arguably one of the UK market’s strongest areas of investor interest in recent years has been in the long term, indexed-linked commercial properties. These are not so very different from long term residential property subject to rent control, privately or socially rented.
3. Attracting large scale professional investors is within reach. It has already been achieved in the UK student hall market and elsewhere in the world in the wholesale Private Rented residential market. The growth of such investible supply is nascent in the UK, but growing fast and potentially becoming very considerable, meeting the needs of residents and investors alike. These investors prefer up and running schemes. But if there were more certainty in the system (planning, building regulation, rent controls etc) they would have greater confidence to also fund much needed new developments. This would add a major boon to supply. The pool of investors is larger than many people think as the UK property investment market is highly regarded globally. It is the bedrock of international investment programmes for many scale investors and commonly they have a far greater allocation to residential and readily understand the issues. In other words, the challenge is finding schemes for them to put their money into.
With long term planning and fair and appropriate regulations it is extremely likely a favourable investment sector could emerge resolving huge supply tensions to the benefit of us all. But this will not happen without bigger thinking.
