How innovation can help the UK housing crisis?

House prices as a multiple of earnings are going through the roof. This has created a dual society between have and have nots. Have nots are often the younger generation but also migrants that came to the UK in recent years and just cannot save at the same speed house prices rise. In a country with low public pensions, owning a house is for many their retirement plan. Not solving the housing crisis will be devastating to society in the long run. It will make the effects of a bursting bubble, when it finally happens, more devastating. Interest rates will have to go up sooner than later. Unfortunately this is likely to hit harder the younger generations that were able to buy very recently and have the largest mortgages compared to earnings. If a lost generation, as has happened in other countries with a sudden housing bust, is to be avoided, we need to solve the housing crisis now. So what can technology do?

1) Avoiding fraud

One of the reasons houses are overpriced is because at the high-end of the spectrum crazy amounts of money have been paid for luxury housing. If a London luxury flat a few years ago was costing ￡5 millions and somebody now pays ￡10 millions, all of a sudden ￡5 millions more enters the economy. If these ￡5 millions are used to buy five ￡1 million properties which used to be worth ￡750,000, then in total again a ￡1,250,000 of value is newly created. Now this new money can be spend on buying again smaller properties. The point is that if high-end crazy money enters at a high rate into the economy then it has a distorting effect on all house prices, not only the luxury segment. There is nothing wrong if this luxury money is earned in a fair way and the necessary taxes have been paid on it previously. The fact that in London a large quantity of luxury houses is owned by offshore shell companies is a clear indication that taxes might not have been paid on these good fortunes or even worse. How can technology fix this? Blockchain would be an obvious candidate to use to register all owners of property. Blockchain, or more general distributed ledger technology, allows transactions to be grouped into blocks. Newer blocks reference previously blocks and are chained together via cryptographic signatures and hashes. The end result is a distributed ledger that is tamper proof. If the government would use a public blockchain to register all properties, owners and transactions as well as prohibit ownership to be hidden behind shell companies, it would be easy to trace large property purchases to individuals and as such avoid fraud in the high-end of the market. This would stop house prices being artificially inflated by money from dubious origins. Having all houses on a blockchain would also accelerate the transfer of houses and allow for house buying to go a lot smoother and faster.

2) Fixing planning permissions

Slow planning permissions and not in my backyard activism are a second main reason for the housing crisis. If not enough houses are available, then prices go up. Politicians do what voters want. Local voters don’t want more houses to be built because it will depreciate their house values and often strain public health and schooling supply even more. That green belts disappear is the excuse for many because there is few evidence that these local voters are as concerned about the environment when it comes to buying large Diesel powered SUVs or recycling garbage. Since potential new neighbours can’t vote locally, politicians follow what current voters want.

Planning permission is a really opaque and a labour intensive locally organised activity. Big data and machine learning would be enormously helpful in accelerating planning permissions. If data would be publicly available then a larger percentage could be automatically approved. Smaller loft conversions and extensions make up the bulk of planning permissions requests and as such using automated tools to process them would leave more capacity to work on the more complex planning permission projects. Big data can also help map where local public health and schooling is in short supply and allow stamp duty from extra housing to be used to create extra capacity. Big data analytics can also flag which areas are able to be developed. Opening housing data, road data, energy, telecom and water supply data would accelerate planning more housing projects. Better data would also help raising council taxes on houses that are left unoccupied.

3) building faster

The way houses are constructed has not changed as much as other parts of society. Modular houses coming from robotised factories and 3D house printing hold a promise to build houses at a fraction of the time and cost. If we can build them faster and cheaper, then supply of cheaper houses will bring relieve to the housing crisis.

What is your opinion?