Building houses and the economy

According to an article in the guardian newspaper ‘A 1930s-style building boom could bring back growth’

House building after the great depression revived the economy, tackled overcrowding and kept property prices stable for years

Eighty years ago, when Franklin D Roosevelt was waiting to move into the White House and the New Deal was still in the future, Britain was already recovering from the Great Depression. As the first country to come off the gold standard the UK had the advantage of being the first country to devalue, and that – together with the protective wall around the British empire – helped manufacturers to export.

Departure from the gold standard in September 1931 also let the national government run a cheap money policy. The bank rate was cut to 2%, which is where it remained for almost 20 years. The result was the building boom that gave us the 1930s semi.

It’s hard not to think that the approach of the 1930s was a lot more sensible. Building houses, both before and after the second world war, helped not just tackle overcrowding and squalor but also ensured house prices stayed relatively stable until the early 1970s. Government policy today has the avowed intent of pushing up asset prices, which is good news for the haves but not so for the have nots.

Comment    It is always interesting to look back to a golden age and then try to emulate it.  But the 1930s were not a golden age.  The south saw growth much of the rest of the UK was mired in depression.  Large areas including Cornwall were lands ruled by despair.    The 1930s were similar to the situation now, some sectors of society were unaware of the poverty and desperation which for others was all that beckoned.

The spread of housebuilding in the 1930s was also instrumental in galvanising those who realised that left to itself the proliferation of house building would lead to substantial areas being covered in housing development.   From that recognition came the planning legislation of the 1940s.

The article alludes to the probability that Government policy is more likely to create an asset boom rather than provide housing for those that need it.   We know that simply building houses does not solve the problem of housing affordability.   Neither does building more houses result in price stability let alone a reduction in prices.  What the proponents of the ‘lets build more discourse’ fail to accept is that Britain is locked into policies that create housing stress.

There is the obsession with growing the population.  An odd, indeed unwise policy in terms of the impact on overall sustainability; an even stranger policy to pursue in an already overcrowded and consumption obsessed country.   This goes hand in hand with the belief that anyone, from anywhere with lots of money should be able to purchase as much property as they wish.

Such a combination can only result in more houses being built, higher house prices and increasing levels of unaffordability.   Both policies need to be reversed.

The policy framework should include:

  • Funding affordable housing directly;
  • Rebalancing the planning system to restrict the loss of housing to the non-residential sector;
  • Eliminating the open market in housing which allows property to treated as an investment;
  • Reducing disparities in wealth and income which distort the housing market;
  • Adopt a steady state population policy;
  • Developing economic policies which are sustainable.

If you’re walking down the right path and you’re willing to keep walking, eventually you’ll make progress *.”

Can we make progress “Yes we can*.

[*Barack Obama]



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