Britain, at last, has a housing minister who recognises that it is not his job to sit idly by while housing becomes more expensive. In an interview at the weekend, Grant Shapps identified the social problems created by house price inflation very well: a generation of young people with scant prospect of ever owning their own home.
It is gratifying to hear a minister argue that Britons should regard a house primarily as a place to live, rather than an investment. And it would indeed be desirable, as Mr Shapps says, if the general cost of housing increased by less than earnings each year. He might have added that by sucking up so much of our national income, expensive housing distorts investment. It means that cash flows into unproductive bricks and mortar, rather than into those new enterprises that would make Britain, as a whole, more prosperous.
But the question is: will the Coalition do what is necessary to achieve a saner housing market? House prices are expected to decline in the immediate term as the banks reduce their lending to first-time buyers. Yet in the longer term there are still powerful structural economic incentives for people to engage in housing speculation.
There are ways that the state can curb prices. It could increase taxes on housing, perhaps by imposing capital gains tax on first homes, or a land value tax. This would reduce the profits from speculation in housing. It could build (or encourage the building of) more houses. Increasing the supply of housing would depress prices. It could reform the rental laws to make long-term renting easier (as it is on the Continent). Rent reform would reduce the profitability of being a landlord, thus taking some air out of the buy-to-let market which has contributed substantially to house price gains in recent years.
The obstacles to these reforms are political. A great many Britons (particularly older generations) have done well out of expensive housing. Since a large part of their wealth remains bound up in housing, they have a vested interest in seeing prices continue to rise. And these social groups tend to have a louder political voice than those who are presently being penalised by unaffordable housing. The angry response to Vince Cable's suggestion of a mansion tax at the Liberal Democrat conference in 2009, and the fact that the policy subsequently failed to make it into the Coalition agreement last May, was a demonstration of the power of this lobby.
The Coalition has tied its own hands, too. Ministers have taken a gamble that, despite the spending cuts, the economy will make a rapid return to strong and sustained growth over the course of this Parliament. Any sort of housing market correction over the coming years could undermine consumer confidence and damage short-term growth. The Treasury is going to be extremely wary of any policies – particularly on housing – that could interfere with its immediate economic goals.
Mr Shapps talks of increasing incentives for house-building. Yet the carrot alone will not be sufficient. To increase the supply, ministers will also need some stick. They must face down powerful local lobbies (which tend to be made up of those who have an interest in maintaining high house prices) opposed to building projects in their area. That one of the Coalition's first acts was to announce the end of Labour's regional house building targets is not an especially encouraging sign.
Mr Shapps has reached the first stage of recovery by admitting that a problem exists in the housing market. But he should be aware that without accompanying remedial action, that recognition will count for precisely nothing.