The more the State has withdrawn from housebuilding, the more it has found itself propping up the private market (UK) – British Politics & Policy at LSE

Extract from an article by Daniel Bentley

There is a paradox in modern housing policy, writes Daniel Bentley. The aim of rolling back the state from housebuilding has turned its role from one of subsidising supply into that of facilitating ever greater amounts of spending power, making housing unaffordable for so many.

Margaret Thatcher recorded in her memoirs that, by the mid-1980s, ‘everything in housing pointed to the need to roll back the existing activities of government’. She also felt that, in terms of building, owning, and managing housing stock, ‘the state should be withdrawn from these areas just as far and as fast as possible’.

In truth, the decline of council housebuilding was already under way by the time Mrs Thatcher came to office. But she accelerated a process which saw annual local authority output fall from 154,000 homes in 1967 to the low hundreds during the New Labour years. The consequences of this have been far-reaching, and are at the core of today’s housing crisis.

Not only did housing supply go into terminal decline, as is often noted, but the subsequent dependency on private sector housebuilders for new homes encouraged governments to permit – and increasingly to actively promote – the accumulation of purchasing power in the for-sale market. This weakness among policymakers for stimulating effective demand has been disastrous for affordability, and is engendered by the simple fact that private-sector developers are only able to build as many homes as people are ready to buy.

This much is obvious and has always placed a natural limit on private-sector output, which is why for most of the 20th century it was topped up by publicly funded building. It is a straightforward question of market absorption: more buyers means more new homes, fewer buyers means fewer new homes, and in the absence of a major public housebuilding programme, the effects of the cycle are reflected in the ups and downs of total output…(continues)

SOURCE: Daniel Bentley, “The more the State has withdrawn from housebuilding, the more it has found itself propping up the private market”, British Politics & Policy at LSE, 05 Dec 2016

Link to full article

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