Collaborative Capital and the Housing Crisis

When the coronavirus crisis finally recedes, Britain will need to refocus on the deep systemic problems in its housing market. Our answer? A new form of public/private partnership.

This article was initially published in IPE Real Assets on 6 May 2020.



When we eventually come out of the other side of this most urgent of crises, there will be another issue that require our attention: the dire situation of Britain’s housing stock, which is unfortunately likely to be worsened by the current coronavirus-enforced shutdown.

While UK construction is theoretically continuing during the COVID-19 lockdown, self-isolation and sickness will necessarily delay building projects, and many projects have stopped altogether as contractors and developers rightly prioritise the health of their staff. The housing market was hardly vibrant prior to the outbreak; it is likely to return to life only stutteringly.

This moment of inactivity should be used to re-think our approach to housing in Britain, to strike out on a new course that yokes private capital to public expertise, and fashions a housing market that works, to quote a phrase from a gentler time, to level-up households across the country.

A Brief History of UK Housing

At the end of the 1970s, more than 40% of the British population lived in housing provided by the government; the figure is now just over 10%. Labour minister Nye Bevan’s post-war Housing Bill set out a model that dramatically re-shaped the way housing was perceived in British society. Until this point, council accommodation had been viewed as ‘the housing of the working classes’, but Bevan’s overhaul of the system instigated a new policy that championed ‘mixed’ or ‘balanced’ tenure. The theory was that social cohesion would be improved by ensuring that urban areas in particular did not become ghettoised.

Housing reforms in the 1980s, and particularly the ‘right to buy’ scheme, saw a fundamental shift away from Bevan’s vision. Home ownership became the defining aspirational goal of the age. Tony Blair’s Labour government was happy to continue this policy, with Mondeo Man – the avatar of the 1990s – always pictured on the driveway of his occupant-owned semi. The concept of ‘affordable’ housing was introduced, a sub-class that allowed politicians to brush over the fact that true social housing was increasingly viewed as an anachronism. The idea of mixed tenure was repurposed to encourage the gentrification of previously working-class areas of the country’s cities, particularly London. While homebuilders were forced to include ‘affordable’ housing in any new developments as part of their ‘obligations’, the question of what this fluid term actually meant and the numerous loopholes open to developers played a significant role in the country’s current housing crisis.

David Cameron’s Big Society project was actually more radical and progressive than one might expect. Although his premiership is likely to be remembered for other things, one legacy of the scheme was a renewed focus on mixed tenure housing, an idea that may have been initiated by a Labour government, but is actually firmly in the One Nation Tory tradition. Mono-tenure estates may entrench deprivation and a culture of unemployment, while mixed tenure housing encourages aspiration and social mobility. And yet, despite the obvious benefits of mixed tenure and its place at the heart of government housing policy, recent years have seen a dramatic fall in both social and mixed housing, as illustrated in Figure 1.

Figure 1. Decline in Social and Mixed Housing

Source: Radius Data Exchange; as of end 2015.

The Broken Housing Market

Housing availability has taken centre stage in the narrative of populist discontent and intergenerational friction in the UK. The housing market has been skewed by a number of demographic factors – the influx of foreign capital; the rise in boomer-generation solitary living (the number of over-45s living alone hit 8 million in 2018, with many of these in multi-bedroom properties); the fall in the provision of council housing; the rise in the use of property as investable asset class; and the concentration of high-paying jobs in a number of specific cities, particularly London and the South-East. This transformation has been as swift as it has been dramatic. In 2000, the median earner in the UK could afford to purchase the median-valued property. Even that recently, the housing market was providing for those on middle incomes, while the government and the housing associations addressed the needs of those at the bottom of the income scale.

What has happened since then is that housing has been inflated out of the reach of the middle. In order to purchase the median property in the UK in 2019, we estimate you would have to be in the top 35% of earners. Or to put it another way, in order to afford the median rent in the UK, you’d have to work a near-90-hour week at the median wage. A recent study by Halifax, part of the Lloyds Banking Group, found that the majority of key workers can only afford to own a home in 8% of towns across the UK. These statistics point to a housing market that is broken, where government initiatives have contributed to the lack of affordability for the majority of households, and where a new way of thinking about housing provision is desperately needed.

In 2018 the charity Crisis and the National Housing Federation commissioned Heriot-Watt University to undertake research into the state of the housing market in England. A key conclusion of their study was that England needs 150,000 more affordable homes per year, for 15 years, to meet the basic needs and aspirations of households. Based on the average annual affordable housing completion rate since the early 1990s, and an average cost per new affordable home of GBP160,000, we estimate a total capital shortfall of GBP240 billion. The problem is now too big for government to address it through fiscal or policy interventions alone.

The Answer?

We believe that the answer lies in mixed tenure housing solutions financed through public/private co-investment, whereby patient private capital and UK councils and housing associations come together to deliver high quality affordable housing to those earning the median wage or below. Quality, affordable homes should not be outside the reach of middle-income earners and we believe that one of the key chapters in the evolution of socially-responsible capital ought to be addressing this glaring and invidious distortion of a basic human right.

Public/private partnerships do not have an unblemished history in the UK. Too often, the constraints of public ownership were exchanged for profiteering and mismanagement by private companies. But this blotted copybook cannot be allowed to dictate the future of such relationships; we must learn from the past and convince even the sceptical that capital is not always destructive, that investment returns and societal improvement are not mutually exclusive, and that private finance has a role to play in shaping the way we live in the 2020s and beyond.


To solve Britain’s housing crisis, we need to establish a new model of constructive capital working in partnership with the public sector. We believe that it is possible for a mutually beneficial balance to be struck, with private capital bringing to public housing the rigours of best practice and efficiency, while local councils oversee and regulate operations, ensuring that the worst excesses of the market are not permitted to creep into this model of socially responsible capital.

Now we call upon all parties – housing associations, local councils, capital providers and housebuilders – to use the reset button provided by these extraordinary times to work to fashion a housing market which we can all be proud of and which works for all.