Home Truths: A Progressive Vision of Housing Policy in the 21st Century

Report by David Adler, Research Fellow
Tony Blair Institute
Click here for PDF version.

Excerpt:

Executive summary

A housing crisis is sweeping through cities from Sydney to London to San Francisco. Following a short slump in 2008, house prices across the OECD have soared, contributing to a decline in living standards and a rise in wealth inequality. Today, housing is the source of economic anxiety, social resentment, and political frustration.

This report sets out a bold new progressive agenda for housing reform. Many governments today are caught between the competing interests of different housing tenures. The result is timid policy that tinkers at the edge of the housing market. The goal of this report is to move past the gridlock to forge a new political consensus that balances the aspirations of renters and homeowners and builds a future of shared prosperity.

We begin with the principles. For decades, the goal of housing policy has been to boost homeownership. But the promise of these policies has recently given way to their pitfalls: levels of homeownership are at record lows, while levels of rental sector evictions are reaching record highs. Progressive housing policy must therefore be rooted in a broader set of principles: providing security for all tenures, promoting community between residents and newcomers, and guaranteeing macroeconomic stability against excessive property speculation. 

We propose five policies to advance these principles, including a community reinvestment programme based on a land value tax and a sovereign property fund that expands public housing investment. Together, they aim not only to boost overall housing production, but also to guarantee that the houses we produce are affordable.

Housing reform will never yield easy win-win solutions. Each of the policies presented in this report involves trade-offs. We need now to address those trade-offs head-on. Only an open and honest discussion of the politics— not just the policy — of housing can move us toward a housing market that works for the many, not the few.

Introduction

We are in the grips of a prolonged housing crisis. London is not alone: Cities from Sydney to San Francisco are struggling with soaring rents and housing shortages that displace families from their homes and young people from their life prospects. In the course of the Great Financial Crisis, many observers expected a sustained price correction in the housing market.1 In the years since, however, rental prices in many large cities have continued their ascent to pre-crisis levels, while real wages have remained stagnant. As of 2014, over 60 per cent of OECD countries were experiencing real house price inflation. 2 Housing has become prohibitively expensive not only for low-income tenants — but for middle-income households, as well. 3

Across Europe and North America, the cry for housing reform is growing louder. Following decades in the background of political debate, the housing question is becoming a more salient feature of candidate platforms and party manifestos.

The race for the London mayoralty in 2016 was a ‘referendum on London’s housing crisis.’ 4  The race for New York City in 2013 hinged on Mayor Bill de Blasio’s affordable housing program.5  And in Paris, Mayor Anne Hidalgo pledged in 2014 that her ‘absolute priority is housing.’6  In some cases — as in recent elections in the United Kingdom and Germany — housing has come centre-stage in the national contest, as well.7 

But the solutions offered by these policymakers have been timid. Most governments tinker at the edges of the housing market: They pledge some money for new housing construction, or they pledge new benefits for first-time buyers. But they shy away from substantive reform that might alienate a constituency of homeowning voters.

Such tip-toeing around the housing status quo threatens everyone — not just the needy. In the short term, renters lose out. They are excluded from the wealth gains of their homeowner neighbours, and they are also excluded from the opportunities available only in expensive superstar cities like London.8 In the long term, though, the housing market presents serious risks to homeowners, as well. Many commentators are worried that the recent house price inflation is evidence of a new housing ‘bubble,’ which — if popped — could send millions of homeowners into negative equity and the broader economy into recession.9 

This report begins from a broad policy frame. Most standard approaches treat housing as a welfare issue, much like health and education. Housing policy therefore focuses on housing need, and housing provision is relegated to planning departments and other second tier ministries often tightly reined in by delivery departments and the Treasury.

But housing is not like the other pillars of the welfare state.10 In the cases of health and education, it is possible to devise policies that help those who lack resources without hurting those who do not. In the case of housing, no such pure win-win solution exists. It is not possible to address housing need in isolation: the management of housing welfare is tied directly to the management of housing wealth. 

In other words, housing markets are broadly zero-sum. While some are suffering through a housing crisis, others are saving their property as a nest egg for retirement. We are all bound together in this see-saw dynamic — urban and rural, homeowners and renters, migrants and citizens.

The solution to the housing crisis will therefore not just be a technical, targeted fix. It will be a political negotiation that requires bold leadership.

This report sets out a new progressive vision of housing policy that is attuned to these politics. It explores the effects of the housing crisis on key dimensions of political life and develops a set of shared principles and policies to address them.

Why We Should All Care About Housing

Housing plays a fundamental role in our lives. It provides security: shelter is a necessary component of a decent living standard. It can determine mobility: homeownership is, for many households, an avenue to wealth expansion. And it shapes identity: our homes give us a sense of place, and our neighbourhoods give us a sense of community.

Yet housing remains marginal to the analysis of our politics. There is broad consensus that voters today are reacting to a mix of anxiety, resentment, and frustration.11 But recent studies have largely failed to consider the key role that housing plays in each. Economic analysis tends to focus on the labour market, overlooking the role of homeownership in wealth formation. Sociological analysis tends to focus on race, ethnicity, and immigration, overlooking the role of housing in integrating the population of ‘outsiders’ into our communities. 

This section makes the case that housing should be central to the understanding of our political moment.

Please let us know what you think to these proposals either by emailing us at [email protected] or joining the discussion on Twitter via the hashtag #TBIhousing.

To read the full piece visit the Tony Blair Institute.

Footnotes

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