Real Estate

Elaine He oversees Bloomberg Gadfly's data visualization work in Europe and also pursues her own columns combining business and markets coverage. Before joining Bloomberg, she was a graphics editor at the Wall Street Journal and the New York Times.

British Prime Minister Theresa May is breaking with one of her predecessor Margaret Thatcher's signature policies: getting local authorities out of the housing market.

Instead, she's pledged an additional 2 billion pounds ($2.7 billion) to encourage councils to build more homes that can be rented at below-market rates. These charts show why she had little choice but to revive the council house.

House prices have soared amid an explosion in the amount of mortgage credit available to fund purchases and a shortage of new homes.

New Heights
U.K. Nationwide House Price Index
Source: Bloomberg
Note: Data are quarterly.

While that rise has been great for homeowners, the government is under growing pressure from younger voters who can't afford a place to rent, let alone get on the housing ladder. That generation's discontent contributed to May losing her majority in this year's election.

As recently as the early 1980s, councils accounted for about 40 percent of all new homes in England. In the post-Thatcher era, that figure has sunk to less than 1 percent.

Vanishing Act
Councils used to account for 40 percent of all new home construction. No more.
Source: U.K. Department for Communities and Local Government
Note: Data are quarterly.

Private companies haven't been able to fill the gap left by councils: the number of new homes completed each year is still less than when Thatcher came to power. 

No Building Boom
Private companies haven't filled the gap left by councils
Source: U.K. Department for Communities and Local Government
Note: Data are quarterly.

That hasn't stopped the building companies themselves from doing very well, something Gadfly's Chris Bryant has noted. May's comment that it's now up to developers to "do their duty" should be read as a shot across the industry's bows.

Skeptics may call May’s move a cynical ploy to court voters. Building more council homes won't address Britain's restrictive zoning rules. It will take more time -- and in all likelihood more money -- to address Britain's housing crunch.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Elaine He in London at ehe36@bloomberg.net

To contact the editor responsible for this story:
Edward Evans at eevans3@bloomberg.net