Image: Michael Kirkham Photography
“Unless we take radical action [...] the lack of supply will push prices and rents so high that unless you or your parents are very rich, for so many young people, living in your dream home is going to be a pipe dream.” - Nick Clegg, speaking at the National House-building Council, 22/11/12 
“We used to build, in Britain, over 200,000 homes a
year, and about half were council housing. Thatcher stopped building. Blair
carried that on. So throughout the 1980s and 90s we were building about half
the homes we needed to, to cope with the demand. That's why prices have gone
through the roof.”
- Ken Livingstone, interviewed by The Guardian, 5/10/12 
“As long as there is more demand than supply, prices
rise. There is no way around that fundamental fact of capitalism. That means,
if we wish to moderate housing prices to limit displacement of lower-income
citizens, we have two options: reduce demand, or increase supply. [...] And
this points to the hard truth here: we need to build, and build a lot. [...] To
keep many cities affordable, we need policies that result in thousands,
sometimes even tens of thousands, of homes built each year. This is basic
economics.” - Alex
Steffan, advocate of Bright Green environmentalism, 22/10/12 
Since 1997, housing costs in Britain have risen at an unprecedented rate, having more than doubled in real terms over a decade (and in some areas tripled) . All of the public figures quoted above seem to think that price hikes come down to supply failing to keep pace with demand. They are correct in one respect. Mankind cannot escape the need to build. Since our distant ancestors settled in mud-brick cities of the sort which arose in Mesopotamia some six thousand years ago, ceaseless construction has been the hallmark of civilization, its one immutable requirement , furnishing us with housing, employment and the infrastructure necessary for common life . With around 275,000 new households formed annually , and annual completions down to levels last seen in the 1920s , Britain is failing to meet its civic duty to build.
Nevertheless, the view that high prices can be boiled down to supply and demand is a gross over-simplification. The real explanation is rather more political: In recent decades, the public have been encouraged to view housing as an investment, and investors worried about the bottom line give short shrift to the idea of affordable housing, thereby eroding its status as an enduring human need. And far from being the result of “basic economics”, successive government policy is to blame.
With the end of capital controls in 1979 and the so-called “Big-Bang” financial deregulation of the City in 1986, the old-boy networks and gentlemen’s agreements which until then had informally upheld the separation of privately-financed mercantile banks and taxpayer-backed high street banks came to an end, allowing international capital to flow through London. With these vast new deposits, London could challenge Wall Street’s prominence as the centre of a newly-globalised world . In this way were the foundations for the recent price hike laid.
A period of low inflation followed, driving down yields from government bonds. In a bid to satisfy investors starved of high returns, banks began pooling together loans into novel financial instruments called “asset-backed securities” and selling them on for cash. A credit boom resulted. Upon receiving the power to determine domestic monetary policy in 1998 from New Labour, the Bank of England pursued low interest rates, allowing many with access to credit to borrow cheaply from newly-liquid banks . Increasing profitability and competition between private lenders drove down lending criteria until 100% mortgages were being offered (Northern Rock even offered 125% mortgages) . New Labour’s reform of taxation around buy to let mortgages, their slashing of capital gains tax and declining social housing stock (a consequence of council fire-sales and an effective moratorium on construction), saw private investors all but replace councils as the default landlords for societies’ least well off. In terms of home-ownership, buy to let landlords have effectively displaced young buyers, driving up prices. Throughout this period, reckless lending prevailed. GMAC, for example, the financial arm of General Motors, were offering buy to let loans with only 11% deposits, the lowest available .
And what of the current government? In a further capitulation to a market-based approach to housing, the most recent National Planning Policy Framework redefines “affordable housing” as housing provided to “eligible households whose needs are not met by the market.”  As of last year, providers of affordable housing can now charge up to 80% of the local market average , an upper limit which vastly exceeds even the highest charged by social landlords previously. The problem here is that 80% of market rents are still typical of the housing market, albeit the cheaper end. Since working households that can afford 80% of market rates are in all likelihood already accommodated by market housing, this redefinition will be of little help to those “whose needs are not met by the market”. The only foreseeable benefit is handed to developers, who stand to earn more in rents whilst still laying claim to providing “affordable” housing.
In summary, between financial deregulation, the handing over of key powers to central bankers, the introduction of new types of mortgage financing, predatory lending and changes to planning legislation, a raft of successive government policies have refined housing in line with a market-based approach and won British investors around to viewing property not only as the safest store of wealth, but a viable source of income in itself, eroding the status of affordable housing as an enduring human need in the process.
But this is only one half of the story. Governments must be held to account not simply for what they have achieved, but for what they have not. A tireless campaigner for social justice, the nineteenth-century English philosopher John Stuart Mill proposed a tax on what he termed “the unearned increment”  - windfall gains on the value of property which owe nothing to the effort or expenditure of the owner. The failure of successive governments to collect the unearned increment on rises in property values underpins the view of housing as an investment, and facilitates the present erosion of affordable housing’s status as an enduing human need. Council tax - the only annual tax on property - is woefully inadequate both at collecting windfall gains, and discouraging speculation based on expected and unearned rises, the maximum annual payment of which is a paltry £2,536 based on obsolete 1991 valuations . Reform is clearly due.
If we count only labour and materials, the cost of building a family home could be as low as £15,000 . The average British house grew in value by the same amount last year . What, then, accounts for much of the remaining cost? Land, in a word. The vast differences in the cost of an identical house, in similar neighbourhoods but in different parts of the UK, neatly illustrates that home-owners have not been banking on the rise in the price of their house, so much as the value of land under which it sits. As Andy Wightman, legal geographer and campaigner for land reform, explains: “The boom in house prices in recent years is, in fact, a boom in land values.” 
An astonishing £3.83 trillion, almost half of all UK wealth, is currently tied up in residential property  - that is to say, largely in the land under our feet. By ensuring the rise in land values goes straight to those whose property sits upon it, successive governments have engineered an unlikely alliance between home-owners and developers, both economically wedded to the relentless rise in land values, whose shared expectations now set the agenda for the entire housing market. “All comes back to land value,” as Winston Churchill bellowed into the House of Commons more than a hundred years ago, “and its owner is able to levy toll upon all other forms of wealth and every form of industry.” 
None feel this toll more acutely today than those poor in assets. The working poor, young couples and professionals find themselves increasingly priced out of the housing market, unable to secure mortgages or do anything about an ever larger portion of their income going on rising rents.
The view to which Clegg, Livingstone and Steffan ascribe is incorrect. We must build simply to keep pace with the annual rise in households, not to keep prices down. Either we increase incomes and de-leverage the land market, or the cost of housing for the least well off amongst us will continue to climb, furthering eroding the status of affordable housing as enduring human need.
A statutory living wage for those of working age, coupled with the replacement of council tax with an annual tax on land values would do the job. The recent hike in land values is value which, if taxed at an appropriate rate, could fund vast public infrastructure projects and new rounds of housing. I have shown that individual mortgage-holders, owner-occupiers and developers are not responsible for recent hikes in the value of their property - the twists and turns of successive government policy are behind that. Why, then, should they keep it?
 Karen Armstrong’s A Short History of Myth (2005, Canongate: Edinburgh), pp.59: “New structures were erected upon the levelled ruins of their predecessors, and the process of decay and renewal was thus built into the new art of town planning.”
 And yet, according to the 2009 United Nations Environment Programme study, the global construction industry in its present form is responsible for up to 30% of all emissions, and consumes up to 40% of all energy produced. http://www.unep.org/sbci/pdfs/SBCI-BCCSummary.pdf
 An annual increase of 1%. The number of households in England is projected to increase by an average of 232,000 additional households per year, Scotland by 21,230, Wales by 12,920, and Northern Ireland by 8840. See http://www.communities.gov.uk/documents/statistics/pdf/1780763.pdf, http://www.gro-scotland.gov.uk/files2/stats/household-projections/2010-based/2010-based-household-proj-publication.pdf, http://wales.gov.uk/docs/statistics/2010/100929hseholdproj2008en.pdf, and http://www.nisra.gov.uk/archive/demography/population/household/NI08_House_Projs.pdf.
 Andy Wightman’s The Poor Had No Lawyers: Who Owns Scotland (And How They Got It) (2011, Berlinn: Edinburgh), pp.195.
 Phillip Coggan’s The Money Machine: How the City Works (2009, Penguin: London), pp.39.
 http://citywire.co.uk/money/gmac-rfc-buy-to-let-loan-rings-alarm-bells/a263504 Many thanks to Olly Huiston for alerting me to this point.
 ‘Programme of the Land Tenure Reform Association’ in The Collected Works of John Stuart Mill Vol. V, pp. 687-95, ‘The Right of Property in Land’ in The Collected Works of John Stuart Mill Vol XXV, pp.427.
 According to Tony Gosling, presenter of a weekly politics show on Bristol’s BCfm, 1500 man-hours at £10/hour suffices for a six-bedroom house. http://www.indymedia.org.uk/en/2012/05/496425.html
 “Annual house price growth stood at 6.7 percent in July , the biggest increase since August 2004. The average price of a new home is now £14,791 more than the same time last year.” http://www.smartnewhomes.com//media/assets/0/snhnewhomesindex_august_683.pdf
 Wightman, pp.195.
 Office for National Statistics, Social Trends 41 - Income and Wealth, pp.15.
 May 4, 1909, http://www.andywightman.com/docs/churchill.pdf
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