Housing has been placed firmly at centre stage in the election campaign with the Conservative plan to allow tenants of housing associations to buy their homes at a 35% discount.
Speaking at the launch of the Conservative manifesto in Swindon, David Cameron said his party has “dreamed of building a property-owning democracy for generations”. He is certainly right that the idea has been a central objective for the Conservatives for a long time.
But that doesn’t mean that it is the right approach for the modern housing crisis. Offering housing association tenants the right to buy their homes may increase the number of owner-occupiers, but will not address the shortfall in housing supply.
The Tory vision
The idea of the property-owning democracy first emerged in the 1920s. It was the brainchild of the Unionist MP Noel Skelton and part of a strategy of “constructive conservatism” designed to win working-class votes during an era of mass democracy.
The idea resurfaced after World War II as part of the Conservative response to the social reforms and electoral success of Clement Attlee’s Labour government. After his party lost to Labour in the 1945 election, Anthony Eden delivered a speech to the Conservative Party conference in which he called for measures that would enable citizens to buy homes, tenant farmers to buy land, and workers a share in industry.
After returning to office in 1951 the Conservative Party enjoyed a series of remarkable successes in housing policy. Elected on the back of a pledge to build 300,000 new homes each year, housing minister Harold Macmillan soon met and exceeded these targets, largely as the result of public sector rather than private sector construction.
Macmillan combined the rapid expansion of housing supply with modest measures to allow council tenants to buy their homes, and policies designed to support the creation of new mortgages.
These measures did lead to a slow and steady increase in the proportion of owner-occupiers. The party’s claim in a 1954 election poster that it was “Smashing Housing Records!” was by no means misplaced.
Many of these ideas resurfaced again in the 1980s, albeit in a rather more radical guise. The Right to Buy scheme - described by Margaret Thatcher as “a crusade to enfranchise the many” - gave council tenants the opportunity to purchase their homes at discounts of up to 70% of their market value. They would also be eligible for 100% mortgages, underwritten by their local authority.
Millions of people seized the opportunity. More than two-and-a-half million homes (approximately 40% of the UK’s total social housing stock) have since been sold under the policy. Local authorities, however, were unable to replace properties that had been sold, much of which subsequently ended up in the hands of private landlords.
The dream fades
The current government has had less success at fulfilling the property-owning dream. After growing consistently under every government since 1918, owner-occupation began to slip back in the middle of the last decade as a consequence of the financial crisis.
After hitting a peak of 71% in 2005, owner-occupation had dropped to 64% by 2011, and is still falling.
Policies designed to address the slide – such as the 2010 extension of the Right to Buy, or the 2013 Help to Buy scheme – have had at best a marginal impact. They may even have helped to fuel the house price increases that have made it so difficult to take that first step onto the property ladder by propping up prices.
Offering housing association tenants the opportunity to purchase their homes may temporarily arrest falling levels of owner-occupation but there are longer term risks.
There could be catastrophic consequences for housing associations, which have borrowed money to build homes and depend on rent from their tenants to cover those debts.
Nor will the scheme address the underlying problems in the housing market. The key issue remains that housing supply has not kept up with housing demand. Nothing short of concerted effort to increase construction will resolve this problem.
The “dream” of the property-owning democracy may well still be alive, but it is certainly imperilled – and there is nothing in this latest announcement to suggest that the Conservatives can fulfil it.