UK Housing Crisis: Help to Buy is Little More Than a Rain Dance

At what point do we just accept that the Government has all but given up on stimulating the country's embarrassingly inadequate housing supply to ensure enough homes are actually built?

Is it when prices rise so high that a two-bedroom, ex-local authority semi on the outskirts of London becomes the sort of attractive investment some moneyed Arab royal throws cash at?

Or is it when we're living three generations of one family in a single room like them good old Dickensian days in the nineteenth century, when pretty much everyone had tuberculosis or cholera?

The facts are these: Britain's population is rising; not enough new homes are being built to satisfy existing demand; demand will only grow year on year.

A report by the National Housing Federation (NHF) warned of the "massive strain" on the housing market – already painfully stretched – soon to be exacerbated by Noughties baby boomers.

As the 6.9 million babies born between 2001 and 2011 grow up into aspirational working adults, assuming there are any decent jobs for them at all, they will be mere tributaries into the gushing river of first-time buyers competing for a smaller and smaller pool of houses. During the same fruitfully fertile decade, just 1.6 million new homes were built.

What makes it even worse is that the current supply doesn't match existing demand, without even considering the growing wave of new homeseekers waiting to flood the market. As the population grows rapidly over the next decade, the housing market problem is going to become ever more protracted.

Government figures show that in 2012 just 100,000 housing starts were made in England and Wales, against estimates of the 250,000 needed to keep pace with demand.

Home ownership rates have rocketed across a century, peaking at 69% in 2001. Then they fell for the first time over the next decade, dropping to 64%. Not because of some sudden cultural shift to a continental preference for renting homes, but simply because fewer people could afford to take that first step onto the property ladder.

As the Office for National Statistics (ONS) puts it, the trend started to reverse because of "high house prices, low wage growth and tighter lending requirements".

Labour didn't build enough new homes during its 13 years in office from 1997. So what has the Conservative-Liberal Democrat coalition government done? Its metaphorical equivalent can only be when Amazonian tribes do a rain dance in the misguided hope that the heavens will open onto a failing crop.

The government's Help to Buy Scheme will do one half of its job very well. It will make mortgages easier to access for first-time buyers by offering a mix of interest-free equity loans for consumers and mortgage guarantees for banks.

What the government wants to do is raise demand in the housing market, enticing construction firms into building new homes. I am not exaggerating by saying this is the government's biggest hope for boosting housing supply, hopeless though it sounds.

One big question mark over this "moronic" plan (as one City analyst put it) is that if there is already less supply in the market than there is demand, why haven't builders already reacted to it by now?

What does Help to Buy change, aside from pushing demand even further away from supply, and risking a house price bubble?

Invest in social housing

We cannot keep leaving this problem for the next government to sort out. Budget deficit or not, billions of pounds in public money must be poured into building new social housing.

Let the shrill austerity harridans shriek and scream all they like. They should realise that there is a clear difference between borrowing to maintain current spending, such as on the welfare bill, and borrowing to invest in an asset from which you can derive an income or sell off one day.

Gilt yields have been at record lows, not because Osborne's had the scissors out and trimmed down the public sector, but because the Bank of England has been gorging on UK sovereign debt through its quantitative easing programme.

If ever there was a time for Britain's government to borrow, it is now. Especially if it is to build a new wave of social housing.

There are countless economic and social benefits to be reaped from doing this. It would be an enormous boost to the construction sector, where output would soar and so would the Treasury's tax receipts. More work means more jobs. Then there is legacy work for builders too. These properties will need to be maintained after they have been built, after all.

There is the enormous improvement we can make to people's lives just by giving them adequate homes. Even just one family living in sub-standard accommodation is too many. We have thousands upon thousands cooped up like battery animals, suffering with problems like damp, which can have horrible knock-on health effects.

What's more, these people will be paying rent. If the local councils own these properties, that is money that is going straight back into the community and its public services.

Moreover, social housing rents are cheaper than the private rental market. Not only does that mean people will spend less of their tumbling incomes to putting a roof over their heads, but also that those in the private sector will see their stinging rents fall. This is especially important when it comes to recipients of housing benefit living in private rented homes - because the government's footing much of the bill.

The case is clear and compelling. Investing in social housing will boost the economy. It will improve the lives of ordinary, struggling Britons. It will bring down the government's welfare costs, as well as the rental burden others face in the private sector because of limited housing supply.

Radical action through a number of measures must be taken to sate the housing market's appetite for more property.

Not just by building hundreds of thousands of new homes, but also relaxing stringent planning laws, introducing tax incentives for private construction companies to build more houses, renovating existing buildings, and placing limits on greedy landlords buying up dozens of homes to rent out at extortionate prices.

If we don't fix the housing market now, we will make the problem much worse for ourselves - and a lot more expensive to solve - further down the line. We're on the cusp of a crisis, but we can avoid it.