A true heir to Thatcher would confront the housing crisis, but neither Sunak nor Truss will

As this death-march of a leadership contest has gone on, younger Conservatives may be finally getting a taste of what it was like to live through the politics of the 1970s.

Now, as then, there are major structural factors holding this country back. Now, as then, many of those enjoy the status of sacred cows. Now, as then, neither party seems prepared to tell harsh truths, nor the electorate to hear them.

Foremost amongst the present-day analogues of the sclerotic nationalised industries and over-mighty trades unions of the Seventies is our broken housing market. If a modern-day Margaret Thatcher were anywhere in view, this would be the dragon she was out to slay.

Yet despite courting the comparison at every opportunity, neither Rishi Sunak nor Liz Truss measure up to the Iron Lady.

Take the green belt. As Anthony Breach recently spelled out, this is not just coincidentally a drag factor on growth but explicitly about constricting our most productive cities. It protects not our beautiful landscapes, but a very often a belt of unlovely waste ground and high-intensity monocrop farmland; a relic of an era when politicians really thought they could simply command industry to go elsewhere.

Sunak certainly knows this; he has also tried to give his candidacy the air of a man prepared to tell hard truths. But after his first u-turn on tax cuts, the real signal he had gone into pander mode was his announcement that he plans to gold-plate the green belt.

Earlier this week, he followed this up with a plan to “to build housing that is affordable and plentiful, while protecting the green belt”, which basically amounted to trying to force developers to build by stacking up financial penalties on projects which aren’t completed in the span of the planning permission.

There are… problems with this proposal. Matthew Spry, a planning and development consultant, detailed the drawbacks of ‘use it or lose it’ last year. A lot will depend on the precise policy, but in broad strokes developments often fail for site-related reasons, and discouraging developers from seeking permissions for risky sites will just gum up the system further.

(Note too that Sunak intends to force developers to “cough up cash to start building schools, roads and shops before they start building properties”, raising the stakes of a risky site even further.)

Then there is the vital fact that, whilst it is a convenient bugbear for politicians, the conspiracy-theory version of ‘land banking’ ignores the reality of our dysfunctional planning system.

A zonal system, as used in most other places, offers certainty: the rules for an area are laid down, and if your proposal meets them, up it goes. Under our discretionary system, every proposal can fall at almost any stage of a convoluted process, often for blatantly political reasons. As developers need a regular supply of work, the only way they can ensure it in the face of that system is to over-bid for permissions.

It isn’t the whole explanation, of course. But it is an important part of it, and trying to brute-force developers into building without addressing these factors risks backfiring. Most obviously, it could be yet another factor encouraging developers to confine bids to only the safest sites.

What about Truss? Well, as was pointed out rather savagely by Kay Burley in the Sky husting, until a few years ago the Foreign Secretary did in fact back building on the green belt. She then said:

“We need to build a million homes on the London green belt near railway stations, and around other growing cities, specifically to allow the under 40s to be able to own their homes. We should allow villages to expand by four or five houses a year without having to go through the planning system, so people can afford to live locally.”

Suffice to say, she no longer professes this view. If there is some new body of evidence to justify this shift by our “first truly philosophy-driven leader since Mrs Thatcher“, I have missed it. Instead, Truss’s housing offer adds up to ducking the problem in a different way.

First – and thanks to Public First’s handy policy tracker for flagging this one – the Foreign Secretary has, in an interview with the Spectator, backed planning reform and a shift towards a zone-based approach.

Unfortunately, she describes these “low-planning zones” in the context of levelling up. This means that these areas will most likely be concentrated in entirely the wrong places. Whilst plenty of areas of the country will benefit to some degree from this, and could usefully receive other assistance, the blunt fact is that the areas which need lots of new houses are London and the South of England. (You can tell because that’s where prices are highest.)

Attempts by Tory MPs to shift unwanted housing targets northwards – even to areas which have undergone population decline – and pretend they’re doing the Red Wall a favour are specious, and leave a bad taste in the mouth. It looks as if Truss’s LPZ plan is just a boosterish gloss on the same nonsense.

Then we have her proposal to end ‘Stalinist’ housing targets, apparently in favour of a vague combination of “incentives for investment through the tax system” and “simplifying regulations”.

Unless that’s code for real planning reform – and it almost certainly isn’t, at least not where it’s really needed – then it will not suffice. The reason we need central targets is because currently, local areas can simply stonewall development they don’t want, even if the nation needs it. It isn’t obvious what ‘incentives’ Truss could offer developers that could empower them to overcome the planning system. Likely result: fewer homes.

Finally, there’s the proposal to force banks to take rent payments into account when assessing an applicant for a mortgage.

This is not, on the face of it, a bad idea. If one has been making regular payments of £X for many years to a landlord, it isn’t immediately obvious why a bank should take that as evidence that you could pay them £X per month instead. I have advocated for this change myself in the past.

But there are at least two obvious drawbacks.

First, there are reasons that banks don’t lend on rent payments. A mortgage has to take a much broader – and much, much longer – view of an individual’s finances, including their ability to weather things such as rises in interest rates (which are already going up).

That means that this policy could end up being yet another attempt to patch a problem by forcing banks to lend to sub-prime borrowers. Best-case, this increases the cost of mortgages. Worst case… well.

Second, it could simply force up house prices. According to the above-linked article, Truss’s team believe that “half of renters could afford a mortgage but only six per cent can access a typical first-time buyer mortgage”. That suggests they hope to allow an awful lot of new entrants to enter the housing market.

But if this influx is not met with a sustained increase in supply, the result will simply be that another wave of money washes into the system and prices equalise at an even higher point, all whilst cash-rich landlords and institutional investors continue to outbid first-time buyers.

Repeat after me: stimulating demand is not the answer.

Neither candidate is wholly to blame for this impasse. There is much honour but little glory in being a political John the Baptist, and Sajid Javid’s brief leadership bid suggests there remains scant appetite amongst MPs or the voters for the message that London and the South need millions of new homes.

One cannot rise to a moment which has not come. Whether either Sunak or Truss would have, in another life, we will probably never know.

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