Tackling the housing crisis won't be easy, but half-measures won't do ... Andrew Fisher sets out the policies a Labour government should implement.
Piketty's basic rule applies to the housing market. Housing's return on capital is exceeding growth - and has been for a long time. From 2001 to 2011 UK house prices rose by 94% while wages rose by just 29%. As housing became more unaffordable for the many, its ownership became more concentrated in the hands of the few.
According to the Royal Institute of Chartered Surveyors (RICS) there is no end in sight to this trend - with house prices on a "firmly upward trend", having risen by 10.9% in the last year according to Nationwide (8.5% according to Halifax), and RICS forecasting that house prices will rise by an average of 6% in the each of the next five years. No one is expecting either wage or economic growth to be anywhere near that.
So as a nation we are collectively participating in a giant game of Monopoly - the money and property is being concentrated and more and more are being left behind. This is the inevitable consequence of the shift from the Attlee welfare capitalism settlement to the Thatcher free market capitalist settlement. Under this shift housing has gone from a home to an investment opportunity.
The carnage of this policy is evident - 1.8 million families languish on coucil waiting lists - and the crisis is even more acute in London. Many of these people will be living in overcrowded or temporary accommodation - damaging children's life chances, causing huge stress, and disrupting their lives.
Ed Miliband's proposals this week, to scrap letting fees, make 3 year rental agreements the standard, and to limit increases within those period are all welcome. But are they enough?
Moneyweek tells us that, "Right now, what the private rental market needs more than ever is private institutional investment". I disagree, what the private rental market needs more than ever is regulating and replacing.
So Ed Miliband's other housing commitment to date - to have the UK building 200,000 new homes a year by 2020 - needs a one word tweak with the insertion of 'council' between 'new' and 'homes'. Labour must promise to a mass programme of council housing.
By building council housing, rather than just private housing (to buy or to let), you can target building in areas where there is need (and to meet the needs of those in need), stipulate minimum standards, and most importantly set rents at a rate that reflects affordability rather than profit maximisation. Lower rents also mean a saving for the taxpayer, through lower housing benefit payments.
Jeremy Corbyn wrote in an excellent analysis of the crisis and Miliband's proposals, "The real issues are housing supply and the cost of the private rented sector."
Stabilising housing rental costs at their current levels - the best that Miliband's proposals could achieve - is not sufficient at a time when landlords are attempting to evict 525 households every day. Both 'social' and private landlords are recording more than double-digit increases in applying to the courts for repossession orders.
Of course many of these evictions are being made by local authorities due to the bedroom tax and the benefit cap. Labour, like the SNP in Scotland, has vowed to scrap the bedroom tax, but remains supportive of the benefit cap. So Labour should vow to scrap the benefit cap too.
But none of the above will address the affordability crisis now - and it needs addressing. Since 2010 alone, rent levels have gone up by more than £1000 a year in London. LSL estimates that the average rent across the UK rose 11.5% in real terms between 2009 and 2012. In January this year, Shelter reported one in 11 households were worried about being able to pay the rent or mortgage this month. So Labour must give councils the power to control rents in their area, so that councils help tenants to stay in their homes.
Labour should also introduce powers fr local authorities to bring in a Land Value Tax on empty properties and undeveloped brownfield sites to encourage them to be brought into use, with revenues hypothecated to fund new council house building. A wealth tax to fund social need - Piketty would be proud.
But Labour also needs joined-up policies. The housing crisis of affordability is also due to low wages - which need a living wage, and an end to exploitative zero hour contracts. Tax changes to stop the effective subsidising of buy-to-let landlords, as recommended by the Intergenerational Foundation, should also be implemented.
At the basis of all these policies must be one simple principle: "Housing is a right. Amassing wealth is not."
- Andrew Fisher is the author of a new book - out 20 May - The Failed Experiment ... and how to build an economy that works