How could they build more houses in the 20s and 30s than now?

At a time when we are barely able to build 130,000 houses a year in the UK, it is interesting to note that we managed to build more houses, indeed many more houses, each year during the 1920s and 30s.  The 1930s in particular were a time of economic depression, and also a time when governments throughout Europe were spending vast amounts on armaments.  But they still managed to build more houses.

According to The 1930s Home, a book by Greg Stevenson published by Shire in 2003, more homes were built during the 1930s than in any decade since.  Four million houses were built during the inter-war period from 1919 to 1939, three million of them between 1932 and 1939 alone – a rate of almost 400,000 per year. Now we are struggling to build 130,000 new houses a year, for a larger population.

Why can we not build more houses now, compared with the 1930s?

Factors restricting housebuilding

There appear to be three key factors:

1. Political divisions – At the end of World War I, Britons were united in their belief that a serious shortage of houses in the UK made it imperative to build “homes for heroes”.  This underpinned the rapid pace of building during the interwar period. By contrast, in 2014 Britain is seriously divided on the housing issue. Older Britons have benefited enormously from house price inflation.  They perceive (correctly) that they would lose out if sufficient new houses are built to reduce the current shortage, thereby reducing house prices and, indirectly, the nest eggs they have built up for their retirement.  Young people by contrast desperately need cheaper housing, whether to buy or to rent.  The young have however failed to mobilise support for more building – partly because they appear to be overwhelmed at the ballot box by their elders, partly because they seem to genuinely accept that an increased scale of housebuilding would negatively affect the environment (particularly in greenbelt areas).  At the same time, house building has become a hostage in the debate over immigration and Britain’s continued membership of the EU – it is said that we would not need to build more houses if we did not allow so many new immigrants to enter the country. This is a red herring, however, as we need a large amount of new housing simply to house the existing residents of the UK.

2. Lack of capital – The availability of capital for housebuilding is another key factor.  According to an Oxford thesis written in 1998 by Alan Crisp entitled The Working-Class Owner-Occupied House of the 1930s (which is available on Kindle or you can read it here: http://www.pre-war-housing.org.uk), the ability to build more houses during the 1930s was facilitated by two factors.  The first was a reduction in interest rates following the UK’s departure from the gold standard in 1931 and (QE).  The second was the need of building societies to boost their earnings from house mortgages, which enabled them to charge higher rates of interest than they could obtain through investments in other safe assets such as gilts.  Whatever the reason, abundant finance was available throughout the 1930s to fund the purchase of new houses.  By contrast, at present banks and building societies are seriously constrained from undertaking new lending. This is at least partly due to the general weakness of the the UK’s banking sector following on the financial crisis, but it may also reflect concerns that current house prices will not be sustained.  Whatever the reasons for the lack of financing, it does appear that the British economy may be much weaker overall in 2014 (even after the recent upturn) than it was during the 1930s – if we are no longer able to build more houses as they could then.

3. Planning restrictions – The final key factor lies in the planning process. Alan Crisp comments in his thesis that house building in the 1920s and 1930s “was little affected by the pitifully inadequate planning measures in place at the time”. He also notes that “Government played only a passive in the housing boom which developed [during the interwar period], choosing not to restrict or direct its growth”.  By contrast, the building of houses is now heavily constrained by planning requirements. At the same time, new houses and flats are much smaller than those built in earlier periods and are generally considered to be less attractive – “pig ugly” was the term used to describe them by Nick Boles, a former Planning Minister in the Coalition Government.  It is no wonder we cannot build more houses.

Where do we go from here?

Clearly something must be done to build more houses in the UK.  Families are living in back garden sheds in London suburbs. Large companies say they cannot tempt young professionals to move to London with £70,000 salary offers because they are concerned about housing costs.

However, we will not manage to address our housing needs until we tackle the political divisions, lack of capital and planning restrictions mentioned above.  As I have noted in previous posts on this blog, there is clearly movement at the political level, but our leaders must do more to convince the public of the need to reduce planning restrictions.  This would tackle two of the key issues.  As for the lack of capital, banks have recently opened up the spigots somewhat, lending more for house purchase.  It has also not prevented the massive recent increase in house prices, particularly in the southeast, so it cannot be too much of a constraining factor.

So let’s get on with it and build more houses!

Michael Ingle

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Categories: Economics, Housing, Politics

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