We need more council and social housing, but this is first aid and not a solution to the housing crisis. We must also tackle the causes.The only real cure to the affordability crisis is to stop house prices rising faster than earnings. The huge gains made by home-owners should be taxed, and tenancy terms improved so renting becomes a viable long term option. Land banking is a major cause of failures in the construction industry.
Politicians are happy to blame the fall in home-ownership on greedy landlords pushing up prices, when really the elephant in the room is the enormous untaxed profits that owner-occupation brings.
The root cause of the affordability crisis in housing is that house prices have risen faster than incomes since the nineties. The gains home-owners make from the rise in value has to be paid by buyers. Their homes increase in value by more than they pay in interest on their mortgages. This expectation of future gains ('hope value') inflates house prices, and flows through to the value of the land on which they sit. An owner-occupier pays no tax on these speculative gains. Nor do they pay tax on the benefit of living rent free. Paying a mortgage is a cash flow issue matched by the benefit of buying an asset, and is not the same as paying rent which brings no additional benefits.
Countries where tenants can feel secure in good quality rented housing (eg Germany, Austria, and Switzerland) have the most stable housing markets. Rented housing in the UK is taxed increasingly heavily while home-owners, who are generally on much higher incomes, pay no tax on their housing. This is presented as a tax on landlords but it all has to be paid out of rents, and raises them by 18% to 20%. Tenure bias in taxation is higher in the UK than almost anywhere else in Europe.
The hoarding of land banks is the biggest single cause of market failure in the construction of new housing, and could largely be solved by land value taxation. When housing increases in value by more than the cost of construction all of that increase flows through to the value of the land on which it sits, inflating the acquisition cost of potential building sites. In a rising market why sell a potential building site if it is expected to be worth more next year. When house prices fell in the early nineties and more recently following the banking crisis the fall in value of their land holdings put many construction companies either out of business, or vulnerable to take over by stronger rivals, reducing the capacity of the building industry and concentrating market dominance in a few large construction companies, who just happen to be amongst the largest donors to the Conservative Party. Small builders cannot access sites on which to build, enabling the larger ones to maintain increasing dominance.
The enormous increase in lending to fund house purchase is another major cause of house price inflation. If more money flows into housing than is spent on construction or renovation it can only fuel an increase in prices.
Recommended reading on this topic includes 'Rethinking the Economics of Land and Housing' published in 2017 by the New Economics Foundation, and also in my own book 'Housing Policies in Europe' published by M3 Housing in 2014 (www.m3h.co.uk/publications)