UK housing crisis: This is how Tim Farron would solve the homes shortage

We are building about half the new homes the UK needs to meet demand, says the Liberal Democrat leader Tim Farron –- and that is why solving the housing crisis is his top priority.

"Housing is the biggest single issue that politicians don't talk about," Farron told the Lib Dem conference in Bournemouth. "Well, we are going to talk about it, campaign on it, go on and on and on about it, and make a difference to the millions who have been ignored. We have had enough empty rhetoric on housing. We need action now."

And this is the action that Farron is proposing.

Opposing the forced sell off of housing association homes

The Conservative government has promised to give housing association tenants the right to buy their homes. Under the existing Right to Buy scheme, which originated in the early Thatcher years, council housing tenants can buy their rented homes at a discount from the local authority.

The housing shortage is intensifying because homes sold off are not replaced at the same rate. While the Tory policy of extending Right to Buy to housing associations speaks to the aspiration many have to own their home, and gives a leg up to those who may otherwise not be able to buy property, the government's critics have grave concerns.

Farron is questioning what right the government has to force housing associations to sell their assets, an issue some in the sector have said may force them to shutter their organisations because of the financial implications. And when there are 1.6 million people across the UK on waiting lists for social housing, Farron argues we should be building more not selling off this existing stock.

The policy details are hazy. The government will shortly introduce the Housing Bill to the House of Commons, in which the extension of the Right to Buy will be included. But the National Housing Federation estimates it could cost housing associations as much as £12bn ($18bn) if the 221,000 households it believes are both eligible and able to buy their homes do. The government proposes compensating housing associations by making local councils sell their most expensive vacant housing stock, which critics say is just another fire sale of public assets.

"The government has said that the properties sold will be replaced on a one-for-one basis; however, this has raised questions around how replacement will be financed; the timing of replacement (there will always be a time-lag); and where the replacements will be built," says a parliamentary briefing paper on extending the Right to Buy.

Lifting the borrowing cap for local authorities so they can build more houses

Local councils in England and Wales can only borrow up to a total of just over £30bn to invest in new housing, but no more. Some councils have used barely any of this pool, while others have used a lot and would like to use much more to meet their local social housing needs.

The cap is an attempt by the government to move local councils towards a self-financing model that doesn't rely on debt for housebuilding. The government argues that this forces councils to be more prudent with their spending and mitigates the risk of councils having to be bailed out because of profligacy.

But some councils argue this borrowing cap seriously constrains their ability to meet local social housing needs. Moreover, they say they are governed by the Prudential Code for Capital Finance in Local Authorities, which already keeps them from taking risks with their finances. And others say this is a needlessly political constraint governed by the Treasury's dogmatic desire to get the national debt falling as quickly as possible and at any cost.

Local council borrowing contributes to the national debt, so allowing councils to borrow more would lengthen the government's programme for getting the Treasury's budget turning out a surplus – something the chancellor has promised he will achieve within a couple of years.

Farron argues that local councils should be trusted to manage their finances and deliver the housing their electorates desperately need. In fact, Farron believes an extra 80,000 homes could be delivered by local councils over five years if the shackles of the borrowing cap were removed -- as well as boost local economies by creating jobs and activity in the area.

Banning developers from advertising properties to overseas investors before they advertise them in the UK

Foreign investment in property, in particular the London housing market, is controversial. The government has just forced for the first time foreign buyers of UK property to pay capital gains tax. And many Londoners blame the floods of cash pumped into the central London property market by overseas investors, who see it as a safe haven for their capital, for inflating prices and rents by so much in recent years.Moreover, there is the perception that many homes are left empty by these investors.

So Farron wants to go further than the existing gentleman's agreement with developers that they advertise property both at home and overseas at the same time, rather than just foreign investors. He wants a compulsory period of UK-only advertisement of property before it is opened out to foreign investors. This is only really a problem that affects London. But only 1.36% of London's property is empty, or 56,715. Any empty homes is shameful when there are people with nowhere to live, but this is a very small portion – the lowest of any English region, in fact.

Foreign investors are for the most part living in or renting out the properties they buy. What's more, only 15% of new build properties in London are bought by overseas investors, according to Knight Frank. There is no doubt that cash buyers of property in London, a lot of them from overseas, have helped to drive up prices. As has the understanding that London property is a safe haven asset for investors, rather than its literal function – a home for those living in the city.

But the fundamental cause of high prices in London is intense demand from the city's rising population and a serious supply shortage. Until supply is drastically increased in London, piecemeal measures such as the ban on advertising to overseas investors straight away will do little if nothing to make house prices and rents more affordable.

Guaranteeing the protection of the skills budget so the construction industry has the skilled workers it needs to build homes

There is a skills shortage in the construction sector, made worse by the sudden and sharp increase in activity amid the economic recovery. There are even reports of bricklayers in London earning six figure salaries because they are so in demand.

Farron is right to highlight that the construction skills shortage as a serious hindrance to building enough homes in the UK. Investing in training a new generation of construction sector workers is sensible. But there is a much larger threat to the construction of new homes looming on the horizon – the EU referendum.

The construction sector, in particular in London and the south-east, relies on migrant labour, much of which comes from the EU. Closing the door to EU migrants would hurt the construction sector by making it harder to get the labour building firms need, worsening the skills shortage –and the housing crisis by holding up much-needed housebuilding.

Establishing a Housing Investment Bank to boost housebuilding

Farron is responding to calls for much more public investment in housebuilding across the UK. Public money doesn't necessarily have to be spent directly on building itself. It could be to develop contaminated brownfield sites – commercially unviable land to firms who cannot justify the investment needed to bring them up to standard – so developers can build new homes on them.

Or to invest in private sector developments through low-cost loans, or funding to support the construction of more social housing on sites being developed. Some may question why the government doesn't just build the homes itself.

But there are risks involved in this. The government could end up displacing more productive private sector activity by building where companies might have done anyway. And officials in Whitehall are arguably less likely than the market to know where homes need to be built.

Others reject the idea of more public investment in housebuilding, instead arguing there is enough will in the private sector to build much more housing – but they are held up by punitive planning law. In particular the green belt around London. But Farron's call for a Housing Investment Bank is likely to be popular given the serious need for more homes in many parts of the country.

Lay the groundwork to build at least 10 new garden cities in England

Building a new generation of garden cities is also a popular proposal. Farron believes this is a solution in the south-east of England, where the housing shortage is its most acute. But this is expensive and would require a lot of initial investment, probably from the public purse and via the Housing Investment Bank.

Farron argues these cities would become self-funding because of the increase in local land values that would come from the development. He would set up new local Garden City Development Corporations with additional planning powers. But he insists this would be done "with local support". And this is where the problems may begin.

Winning local support for massive developments is notoriously difficult because of Nimbyism, which the bureaucratic planning system favours. It's easy to say you will build garden cities with local support, much harder to do when you realise many local people don't want developments on that scale anywhere near them.