The crazy dream of the UK’s ‘property owning democracy’

For decades, UK governments have promoted home ownership… yet fewer and fewer of us manage to buy our own homes. Geoffrey Payne suggests we could learn a lot from countries who don’t share our obsession

What should be the logical response if a policy you propose has not worked? Do you ask why, or double-down and try harder? For more than 40 years, UK governments have promoted home ownership and the notion of a ‘property owning democracy’. Meanwhile, ownership has become increasingly unachievable, not just for those on lower incomes, but even for those on average incomes as prices soar out of reach. Despite the evidence, the current Government remains committed to the excessive promotion of home ownership and is now seeking to enable those living in social housing to become home owners, even if this only applies to a few thousand people.

If a policy has already received vast direct and indirect subsidies, but still failed to achieve its objective, it might suggest a need for reflection rather than pumping in even more money, yet there is no sign that the sacred commitment is being questioned, let alone modified. The only explanation can be that those who were able to buy a home in the distant past when housing was genuinely affordable are now basking in unearned wealth they could not have imagined, and so believe this can be realised by everyone.

Promoting home ownership for the majority of the population creates a big problem – it distorts national economies, by attracting excessive investment into property rather than more productive sectors of the economy. The countries that suffered most from the 2008 financial crisis were those with the highest levels of home ownership, such as Spain, while those with levels around, or below 50 per cent, such as Germany and Switzerland, were relatively unscathed.

As Einstein noted, insanity Is doing the same thing over and over again and expecting different results. The UK would therefore do well to learn from the experience of other countries facing far more severe challenges and with less resources. Many rapidly urbanising countries faced with far higher levels of demand for land and housing, and with far lower levels of funding, have evolved a wide range of pragmatic responses to the diverse needs of their increasing, and predominantly low-income, populations. Most focus on supporting community-led developments, or providing only the things that people cannot provide for themselves, such as basic security of tenure, basic services and the freedom for households to provide their own housing on an incremental basis. When such approaches are adopted, housing becomes a means of self-financed economic development, particularly for poor households.

The inability to impose ‘top-down’ market-based housing policies and adopt more demand-sensitive approaches has enabled millions of low-income people in rapidly urbanising countries to have more control over the location, design and cost of their homes than most middle-income households in more affluent countries. If having control over key aspects of one’s life is a measure of development, this indicates that the global north has much to learn from other parts of the planet.

Countries such as the UK also benefit from an established institutional structure that enables the state, at least in theory, to maximise the public benefit from private investment. After all, when agricultural land is redesignated for urban development, the uplift in value can be many hundreds of times, solely due to actions by the state in approving the change of use. For this reason, the state is perfectly entitled to require a reasonable proportion of the uplift in value in order to realise social and environmental policy commitments. There are many ways in which this can be achieved without discouraging private investment, though it does require the state to be effective in understanding land market behaviour and the level of the likely increment in negotiating the best deal for each parcel of land proposed for development. In this way, developers acquiring agricultural land in the hope of realising the complete increment in land value will need to accept that part of this increase will be  captured by, or shared with, the state, for public benefit.

By applying these principles and ensuring that taxes on land and housing are progressive, urban land and housing policies can significantly reduce currently excessive levels of inequality and promote more sustainable and equitable housing markets. Inevitably, vested interests will find all sorts of reasons for resisting such changes, yet it is evident that as economic growth cannot continue indefinitely on a planet with finite resources and where such growth has already been a major cause of the climate crisis, levelling down from excessive consumption and pollution is as important in ensuring our collective future as levelling-up is for vulnerable groups.

Promoting compact, mixed-use urban areas and a wide range of housing options, including different forms of social or non-market tenure options would enable towns and cities to meet key social, economic and recreational needs within a 15-minute walk or cycle, or via public transport. Such approaches can dramatically reduce our carbon footprint and help address the climate crisis. It does not require high-rise developments, with their high levels of embodied energy, but can be achieved by efficient land use planning and medium-rise developments to create congenial places in which to live, work and play. Even more importantly, the evidence shows that we will all be happier as a result.

A different approach to achieve a different outcome could provide us all with a return to sanity.

Geoffrey Payne is a housing and urban development consultant focusing on developing countries. His new book, Somewhere to Live: Rising to the Global Urban Land and Housing Challenge explores and expands on the ideas above