Why Compare the United States with the United Kingdom?
The United Kingdom is currently experiencing many of the same housing challenges as the United States, such as similar trends in homeownership among generations currently coming of age, unaffordable rents, and a lack of available housing supply. The government of the United Kingdom is actively working on building policies to address the same issues that the United States government is also concerned about.
Additionally, the United Kingdom has a similar political system when compared to the United States. The United Kingdom is also a democracy that elects its leaders, though it is a parliamentary democracy rather than a democratic republic like the U.S. This means that whichever party elects the most candidates get to choose the leader and will make the policies. In the United States, our system elects the leader separately, so the common situation of Congress and the President disagreeing and having to compromise on policy does not happen in the UK. It is easier to get policy passed and enacted in the United Kingdom and thus there is little motivation for elected officials to compromise on the design of policy and programs, whereas U.S. housing policy is often a product of political compromise. The United Kingdom has a developed post-industrial economy like the United States. While it has more social welfare policies to assist citizens who experience poverty, it still has an expansive, powerful private market..
The UK also executes its housing policy in a similar way as the United States in that they are mainly administered at the local level. Local governments have a strong influence on housing policy in both countries. British cities also have strict zoning regulations like most American cities, and these uncompromising laws can limit the amount of housing that can be built.
Housing History and Policies in the United Kingdom
Like the United States, the United Kingdom experienced a housing boom after World War II, though for different reasons. The United States government provided low interest and guaranteed mortgage loans for returning soldiers that made homeownership accessible for the first time for millions of Americans. The United Kingdom instead focused on rebuilding the housing that had been destroyed during the war. Given the rise in popularity of socialist policies in post-war Britain, such as establishing a national healthcare system and the nationalization of important industries, the post-war government ultimately built over four million publicly owned housing units. These housing units had reduced rent rates for residents and, in the decades following the war, were referred to as “social housing” or “council housing.” The UK built a diverse range of housing types, while the United States focused on high rise building for social housing. At its peak in the 1970s, 33% of United Kingdom citizens lived in social housing.
When Margaret Thatcher assumed the role of prime minister in 1979, her more ideologically conservative government began privatizing many of the post-war government-controlled industries. Her government implemented a policy referred to as “right-to-buy” for Britain’s social housing. If a household rented a social housing unit for two years, they would then be able to purchase the unit at a steep discount. While it provided an easy transition to homeownership on affordable terms for low income households, the government has not been replacing the social housing at the same rate that units are being purchased. This policy has remained in place since its implementation by the Thatcher government and while it has helped raise the homeownership rate in the United Kingdom, it has also limited the amount of social housing units available for rent for today’s low-income households.
Modern housing policy in the United Kingdom has focused on increasing demand for housing rather than policies that increase the supply of housing. In 2013, the UK government under David Cameron created homeownership loan programs that offered favorable mortgage terms. While the goal of this policy was to encourage private developers to build more housing and increase the overall homeownership rate, there ultimately was no increase in home construction but an increase in the price of housing as more households were demanding housing as homeownership became more attainable through these programs. The current government, led by Boris Johnson, has targeted the strict zoning regulations in the UK as a reason for the declining homeownership rate and the increasingly unaffordable price of housing. His government has loosened government regulations on local planning and zoning, but the effects have yet to be seen.
What can the United States learn from Housing Policy in the United Kingdom?
The United Kingdom has historically had a larger government presence in the housing markets through the construction of abundant social housing following World War II. While many social housing units are now privately owned, 17% of British households live in social housing today. Comparatively, less than 1% of Americans live in public housing today. Even with this amount of regulated rent units, there is still a thriving private market for housing. The United Kingdom currently has a 70% homeownership rate, higher than the United States’ rate of 65%. The current state of housing in the United Kingdom suggests that a developed country can have a significant amount of government owned and regulated housing units for low-income households while still having a large amount of private real estate.
Additionally, the United States could consider the policies of diversifying the types of public housing available, loosening zoning restrictions to allow for the construction of more housing, and implementing a version of a “right-to-buy” policy for public housing residents. Americans considering changes in national housing policy should also consider whether the government influencing the supply of housing or the government influencing the demand for housing will be more successful. While supply-based housing policies, such as the UK’s social housing program, are historically more effective, they are usually more costly than policies that affect the demand for housing. United States housing policy has focused on influencing the demand for housing, with millions of families being able to purchase homes with favorable mortgage loans from the US government and with Section 8 vouchers but could consider beginning to favor supply-based housing policies, such as increasing the amount of public housing units available or increasing the funds available for private developers of affordable housing.
