This crowded isle must come home to the city

Changes in the way we live mean the number of homes is massively outstripping the rise in population. We will need five million more in the next 20 years
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Tony Blair leads a charmed life. Not only does he win an election by a monster margin, he also gets a new house, a massive profit on his old one and, to top it all, the biggest bed you've ever seen outside a bordello. Most of all, in the whole process of moving, he hasn't once had to call in a builder.

You can't move these days for people renovating, improving, underpinning, extending or installing new bits to their homes. If the Eighties were the story of the Amazing Rising House Price, the late Nineties are the tale of the Astoundingly Late Building Work. Everyone has a horror story to tell. My builders don't read papers like this so I don't have to be nice to them. As it happens they are charming and conscientious. Yet, neither they, nor my architect, nor I, can explain why a job that was supposed to be finished in 16 weeks is still carrying on after 24 weeks - nearly half a year, dammit - and shows no sign of completion. It will, I promise you, be this year's dinner party talk amongst the chatterati.

But the roof over your head is not just an obsession of middle class improvers. Most MPs will tell you that housing is the subject which, above any other, fills their postbag. At one end of the scale there are complaints about housing transfers, and pleas for help negotiating the maze of benefits available to the poor; at the other is the desperation of the 300,000 or so repossessions - in spite of rising prices, repossessions are nearly three times as frequent as 10 years ago. Somewhere in between are the people who live in the upwards of 1,600,000 properties declared unfit for human habitation by the government; and looming over it all, for seven out of 10 households who own their own homes, is the threat of a rise in the price of borrowing.

Yet none of that figured in the election campaign. It's all the more puzzling when you consider the case made by the housing specialists' professional body, the Chartered Institute of Housing, whose Harrogate conference finished this week. The institute published a detailed and closely argued set of policies for the new government. At the heart of its case is the belief that an effective housing policy can take the pressure off many other areas of policy. For example, our inflexible housing market makes it hard for workers to move around the country; thus labour costs rise unnecessarily, goods become expensive and uncompetitive. What price, then, Mr Blair's and Mr Brown's flexible worker of the future?

The poor state of our housing stock - the average-aged English home would qualify for a bus pass if it were a person - leads to poor health and costs the NHS a fortune. The high cost of borrowing encouraged by our commitment to home ownership drives up interest rates and leads to a partial diversion of funds into bricks and mortar when they might be modernising our industry; yes, the money we pay the banks and building societies is eventually invested, but an awful lot of middlemen have taken their cut by the time it reaches the poor old wealth creator.

Even the increasing congestion and pollution across the land can only partly be dumped on the car; at least part of the problem is that we have not built, and are not building homes near enough to where people work.

But housing provides a specific challenge to what could be a two-term Labour administration. There are currently some 20 million dwellings in England and Wales. We add some 50,000 each year, but because of long-term changes in the way we live, the number of homes we need is massively outstripping the rise in population. Current projections from the government suggest that in the next 20 years we will have to add up to 5 million homes. That means the construction industry somehow has to find the capacity to build at least 250,000 homes a year for the next 20 years. It is a tall order. However it is not unprecedented; during the 1950s and 1960s we built an average of more than 300,000 homes a year. There are, though, three obstacles to repeating the feat.

First, a simple one: if we take the Sixties as our template, we certainly managed to house millions - but look at how we did it. Leave aside the excesses of Rachmanism, and concentrate on the urban jungles created with the now-maligned tower blocks. When we built them, they seemed like the answer to just such a crisis as the one we now face. In hindsight it was the wrong answer.

Second: we need people to build these new homes. Have you tried to find a plumber or electrician who can fit you in at a reasonable price lately? If you have, you will know that if they are not tied up on some lottery- financed project or other, they are getting money far above the rate you can afford, because skilled craftsmen of all kinds - chippies, masons, sparks - are all in fierce demand. The revival of the private housing market will make things worse.

The third problem is the biggest. Where are we going to put all these people? Rural authorities have already posted signs saying "Keep off" to the Government, in case the idea of new towns should surface. Urban authorities recoil at the idea of fitting more bodies, cars and dwellings into their congested spaces. And everyone else shrugs their shoulders and says "No room at the inn". Even if the Government does take a firm line of one kind or another, our archaic planning system, a dense thicket of bureaucracy and pettifoggery, masquerading as democratic consultation, will ensure that it is powerless to make anything happen.

There are answers to the where and who. The where first: transform some of the outdated office accommodation in our city centres into accommodation for young single people. They are less likely than families with children to clog up the space with journeys to drop kids to school, and many have yet to buy cars. If necessary, the renovation might be supported by locally raised one-off taxes.

Next, the who: encourage the construction industry to hire and train young craftsmen and women by removing VAT on home improvements. This would principally benefit small contractors, who currently cannot afford to hire, and who often live hand to mouth chasing small domestic jobs. This kind of easement would mean that they could start to provide new jobs within months. In the medium term it would not be an inflationary step, and would provide a home for the 250,000 young people that Mr Brown expects to train with the windfall levy. The truth is that unless we find ways of providing them with real jobs, now, the whole welfare-to-work proposal could end up an expensive washout. The building trade may not be as glamorous as information technology or leisure and entertainment, but for the foreseeable future it will provide more, better paid, and attainable jobs for young men and women.

By taking the two steps above we can start to meet the challenge of the next two decades immediately. As far as the issue of the quality of new housing is concerned, I think we can now safely leave it to the market. One legacy of the Eighties is that the British people have acquired a taste for their own homes; the 1.2 million who bought their council houses are not going to go back to what they see as the bad old days of municipal housing, however unjustified that may be. People will get the homes they want. Though, frankly, unless the construction industry stops treating its deadlines as a bad joke, they may have to wait a decade or two.