Comment

06.01.17

Lessons from Germany to fix the UK’s housing crisis

Source: PSE Dec/Jan 17

Dr Charlotte Snelling, a researcher at IPPR, and Ed Turner, senior lecturer and head of politics and international relations at Aston University, look at the lessons the UK can learn from Germany in tackling the country’s housing crisis.

The UK faces significant challenges in providing sufficient housing, at a price people can afford. The housing shortage is pricing people out of their local communities, fuelling inequality and reducing labour mobility. 

It may not be fashionable, in the months after the UK’s decision to leave the EU, to suggest we turn to continental Europe for inspiration on how to solve domestic problems, but our new research finds there are valuable lessons to be found in Germany. 

In both Germany and the UK, housing is a growing political issue. It dominated the 2016 London mayoral election campaign, and it was equally prominent in Berlin’s recent state election. Long-standing residents find themselves being priced out of the city that they call home. 

On the face of it, Germany’s record is stronger than that of the UK.  It has consistently outperformed the UK in supply, building 30 million homes since 1951 – nearly double the rate of the UK. In recent years, it has achieved over 250,000 completions annually, again comfortably exceeding the UK’s output of 170,000 in 2015, which was the highest number of homes built in a year since the crash. 

House prices, in part as a result, are also far more stable (see chart). 

So, how have the Germans done it? First, Germany relies far less on the market to solve its housing supply problems. For example, its local authorities have powers to declare “urban development measures” where sites are not being developed – a common problem in the UK. They assemble land (paying owners what it is worth in its current state), arrange housing construction, and use the difference in money paid, and money received, to finance infrastructure.     

Secondly, whereas in England the small and medium-sized (SME) building sector imploded in the 1980s and never recovered, in Germany there is far greater diversity, with most houses built by locally or regionally-based firms, and complemented by housing associations and public housing companies. The large upfront financial investment in preparing planning applications with uncertain outcomes has long been a complaint of UK SME builders, presenting a huge barrier to entry. German planning processes offer greater certainty to would-be housebuilders earlier on. When land is earmarked for development, provided particular tests are met, the final planning permission is likely to be granted. This brings benefits for communities, too, by allowing early consultation and meaningful input into land use allocation. 

Thirdly, although home ownership remains an aspiration for many Germans (especially in rural areas), the fixation with this is less apparent than in England, and public support for rented housing is stronger. This is not unrelated to the fact that renting in Germany is, for established tenants, characterised by stable rents and security of tenure. 

Finally, Germany has a more conservative mortgage market than the UK, which keeps a lid on house price booms, reduces exposure to financial crises, and means that those looking for a home are more likely to see renting as a desirable alternative to buying.  

Of course, Germany’s housing policy isn’t perfect. Significant strains have emerged as a result of an erosion of social housing (from 3.9 million social units in 1987 to just 1.5 million in 2013), a consequence of privatisations but also previous legal requirements to retain the ‘social’ rent of a flat only for 20 to 30 years. Rents have spiralled in booming urban centres like Munich, Frankfurt and Berlin, and politicians of all stripes express determination to address this issue. 

Our point here is not that the UK should replicate all aspects of Germany’s housing policy – trying to implant the German market wholesale onto British soil would be a futile undertaking; there are practical, economic and cultural reasons why that would not work. However, we can clearly learn lessons from a country that seems to be finding sound answers to challenges we continue to be stumped by here in the UK. 

With ministers about to publish a housing white paper, the government would do well to learn from the German approach to land assembly, the role of SME builders in the German market, and why the country is so much more successful in turning planning permissions into homes.

1.2 houseprices-01 edit

 House prices in UK and Germany, 1995–2015 (quarterly % change). Source: Bank for International Settlements, BIS Residential Property Price database (BIS 2016).

For more information

W: www.ippr.org/publications/german-model-homes

Tell us what you think – have your say below or email opinion@publicsectorexecutive.com

Comments

Nick Clarke   06/01/2017 at 11:45

Increasing housing supply will create a decrease in house prices and values. What incumbent government will ever want to be responsible for wiping value off of their core voters main asset(s)?

Stephen Forde   06/01/2017 at 13:52

Germany is over 137k sq miles in size England is 50k sq miles in size. England has over two thirds of the population of Germany in little more than one third of the space. The difference in available land and the potential to build new towns without creating endless urban sprawl is so different it makes this comparison meaningless.

Peter Crispin Hack   07/01/2017 at 21:42

i am more than a little shocked that this article makes no mention of controlled rents in Germany. It is significant that the deregulation of rents drove the sold council houses into the hands of private landlords post 1988 and that post 2000 high rental returns and landlord purchasing power has suffocated the first time buyer market. the solution is rental returns on a 30 year basis and strong tenants rights with landlords being responsible for repairs and tenants rents excluding that factor ie an equitable partnership on a resource built by previous generations. This will rebalance the economy; a great deal more emphasis from IPPr on the deregualtion of rents post 1988 would be long over due.

Add your comment

 

public sector executive tv

more videos >

latest public sector news

Sheffield City Region announces major housing pilot

23/11/2017Sheffield City Region announces major housing pilot

Sheffield City Region (SCR) will begin to assess applications for new housing schemes as part of an £8m pilot project across the area. ... more >
London council to launch ‘ethical debt collection’ for residents

23/11/2017London council to launch ‘ethical debt collection’ for residents

Hammersmith and Fulham Council (H & F) have launched “ethical debt collections” service in a bid to reduce costs to residents. ... more >
Council told to reimburse Suffolk woman charged for care she never received

23/11/2017Council told to reimburse Suffolk woman charged for care she never received

Suffolk County Council has been hit by criticism from the Local Government and Social Care Ombudsman (LGO) after a woman was wrongly charged for ... more >
149x260 PSE Subscribe button

the raven's daily blog

City-centric, deeply disappointing and a nightmare – criticisms pile against the Budget

22/11/2017City-centric, deeply disappointing and a nightmare – criticisms pile against the Budget

It’s been a busy day in the PSE office. Philip Hammond’s Autumn Budget included a number of interesting announcements, ranging from new devolution deals and housing measures to changes to business rates. This year’s Statement was described well by Lord Bob Kerslake, who said it had been a “mixed bag” for hous... more >
read more blog posts from 'the raven' >

interviews

‘The HSCN is the realisation of industry best practice’

30/06/2017‘The HSCN is the realisation of industry best practice’

Keith Smith, public sector business development manager at Virgin Media Business, tells PSE’s Luana Salles that health and social care orga... more >
HSCN: The enabler for a more joined-up public sector

26/06/2017HSCN: The enabler for a more joined-up public sector

Mark Hall, Chief Assurance Officer at Redcentric, discusses NHS Digital’s project, the new Health and Social Care Network (HSCN) and what b... more >
Maintaining the momentum for further devolution

25/04/2017Maintaining the momentum for further devolution

Ahead of this year’s mayoral elections, Lord Kerslake, the former head of the Civil Service, tells PSE’s David Stevenson why the argu... more >
New social care funding misses the point

13/04/2017New social care funding misses the point

Clive Betts MP, chair of the Communities and Local Government (CLG) Committee, reflects on the social care funding released in this year’s ... more >

last word

The importance of openness after Grenfell

The importance of openness after Grenfell

Following the recent Grenfell Tower tragedy, Lord Porter, chairman of the LGA, argues that if the public are going to have faith in the safety testing process then everything must be out in the o... more > more last word articles >

editor's comment

25/10/2017Take a moment to celebrate

Devolution, restructuring and widespread service reform: from a journalist’s perspective, it’s never been a more exciting time to report on the public sector. That’s why I could not be more thrilled to be taking over the reins at PSE at this key juncture. There could not be a feature that more perfectly encapsulates this... read more >

public sector focus

Visual.ONS: How to compete with the big data aggregators

13/11/2017Visual.ONS: How to compete with the big data aggregators

Advertisement feature Christopher Gallag... more >
Social value: A fresh way of approaching investment

10/11/2017Social value: A fresh way of approaching investment

In an age of austerity, council leaders are a... more >