We don't need 'social housing'. We need housing

The Housing and Planning Bill, which will speed up the sale of social housing, has come under fire from various quarters. The Local Government Association described it as a shift in public spending "from bricks to benefits". The opposition parties are united against it, and at the local level, it does not seem to be popular with Conservative politicians either.

There is indeed much to be criticised in the bill, especially the extension of Right to Buy to social housing associations, whose housing stock is not the government's to give away. And yet overall, the quibbling over the Housing and Planning Bill is missing the point.

The bill's main impact will be to transfer parts of the housing stock from one subsector of the housing market to another, with no impact on overall supply. Yet the basic problem with UK housing is one of insufficient overall supply, especially in places with good jobs prospects. There is no specific lack of council housing, or non-council social housing, or private rental accommodation, or homes for first-time buyers. Rather, there is an overall lack of inexpensive housing across all tenures, and the current dispute is an unnecessary distraction from that.

In Belgium, Luxembourg, Germany and the Netherlands – all densely populated countries – the supply of housing (measured as total residential floor space) per household is between one fifth and one third above British levels. In France and Austria, housing supply is around 40% higher than in Britain. So of course housing is more affordable in these countries – they have a lot more of it. With this in mind, fighting over whether or not some fraction of our woefully inadequate, meagre housing stock should be transferred from one sector to another is a waste of time.

The claim that there is no specific lack of social housing in the UK may come as a surprise to some readers, given that we are constantly told that social housing is being "decimated". Yet social housing (councils and housing associations) still accounts for one fifth of the UK's housing stock. This is the third highest share in Europe, and a higher share than in the Nordic countries, which social housing enthusiasts often praise as role models.

Even the fact that there are nearly two million people on waiting lists does not indicate a specific lack of social housing. It indicates that too many people are being priced out of homeownership and private rental, thus turning to social housing not because they particularly want to, but because they have nowhere else to go. The solution, then, is not to preserve social housing, but to give people viable alternatives.

Those alternatives would probably be better anyway, because social housing is not especially "social" in its effects. It often leads to ghettoisation, creating clusters of disadvantage. Social housing tenants are less likely to be employed, and their children are more likely to drop out of school, than people with otherwise similar socioeconomic characteristics in different tenures.

There is a popular myth doing the rounds, according to which council housing holds the key to solving the affordability crisis. Proponents of this view argue that local governments are held back in their ability to build council housing by borrowing caps imposed upon them. If only that cap were lifted, the argument goes, councils would embark on ambitious housing projects again, just as they did in the 1960s and 1970s.

But this argument is unconvincing, because the vast majority of councils are not even making use of the borrowing powers they already have. Some 17 out of 20 councils could easily borrow another £1m ($1.4m), and would still be within their borrowing limits. The truth is that councils do not build houses, because they do not want to build houses.

There is a reason for that. Just like the national government, local governments in the UK are in thrall to well-organised anti-development groups. Our housing policies revolve around the sensitivities of groups like the Campaign to Protect Rural England (CPRE), whose members feel offended by the sight of houses other than their own. They are already well-housed, and now use their political muscle to deny the same housing opportunities to other people.

This means that regardless of whether you believe that the solution lies in more social housing, more private rental, more owner-occupation, or whether you are tenure-neutral, the main policy implication is the same: we must break the stranglehold of anti-housing groups, and make it much easier to build new homes. This must include cutting back greenbelt protection, easing height restrictions, and localising tax revenue so that local communities can capture the benefits of development.

Once we have resolved those issues, arguing over what the optimal housing mix should be would make a lot more sense. But by then, this would have become a luxury problem.

Dr Kristian Niemietz is Head of Health and Welfare at the Institute of Economic Affairs (IEA).