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Martin Pawley: housing collapse? what housing collapse?

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Shelter has produced an odd report on housing. Called Risks, it predicts that the number of homeless will rise to 11 million by 2006 as a result of the repossession of the homes of the self-employed, part-time workers, temporary workers and the unemployed - a total of some 2.5 million persons, all of whom it defines as 'insecure' and therefore up to three times more likely to end up homeless than full-time employees. The last does not seem to be borne out by recent developments, but by offering a deadline two parliaments away, the Shelter report neatly avoids criticising New Labour - from whom it presumably still expects great things on the housing front. Instead, by declaring that the problem lies squarely at the door of insurers, lenders and the benefits agencies, it leaves itself only one answer: to build a lot more public-sector housing.

At a time when housing policy is deliberately being privatised, threats and promises from non-governmental organisations in the field have taken the place of official pronouncements of earlier years. As a result, at Millbank Tower more importance is attached to the ephemeral economic activity generated by sport, arts and heritage than the solid billions that are still washing around in the housing market.

Up until the 1970s, housing policy meant producing houses in huge numbers. Then production faltered and, because nearly 60 per cent of all householders were already home-owners, demand became the driver. Margaret Thatcher knew all there was to know about demand-led housing policy. From 1974, when she was made shadow environment minister, till her fall from the premiership in 1990, the housing market was the keystone of her success. She knew that large numbers of voters could get rich through the housing market provided that not much new housing came into it. Hence 'Right to Buy' and the Poll Tax. The first separated out the cottage estates from the system-built ghettos and thus privatised all the mortgageable local- authority housing stock, while the second promised home-owners the biggest tax break of modern times.

Today the housing market is unbalanced. It doesn't work the way it used to in the glory years, but it hasn't collapsed either. Collapse is what has happened to the world's equity markets this autumn, to the accompaniment of billions wiped off the value of shares, banks failing, brokers' phones being disconnected and markets plunging more than 40 per cent overnight. Nothing like that has happened to housing, so its assets are intact.

At the top of the 1980s housing boom, Shelter announced that homeowners held in excess of £700 billion in equity, equal to half the fixed assets of the country. Since then, based on average house prices, they have lost no more than 10 per cent of it - most of it, incidentally, from the withdrawal of miras, not from falling house prices or soaring interest rates. Say a total of £70 billion shared among 14 million dwelling units, an average of less than £35,000 per household.

If anything is to happen by 2006, it is far more likely to be a housing market recovery than a binge of council house-building.

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