There’s a story about a Soviet factory manager in the 1960s who got bonuses based on the tonnage of nails produced. He manufactured one enormous nail weighing several tons. Technically hit his target. Technically useless for building anything.

The Soviets changed the incentive from weight to the number of nails. The manager produced millions of pins too small to hold anything together. Still hit his target. Still useless.

The problem wasn’t the manager. The manager understood incentives perfectly. The problem was that people setting targets had stopped asking what nails were actually for.

Britain’s housing shortage reveals that we’ve lost sight of the basic purpose of housing: providing shelter, not just investment.

When the arithmetic worked

In 1953, Harold Macmillan promised 300,000 new homes in a year. Post-war Britain was still patching bomb damage, and materials were scarce.

He counted forward. How many people need homes? Build that many homes. Simple arithmetic for a simple problem.

They hit the target. The houses weren’t always beautiful (indeed, some were spectacularly ugly), but they existed, which turns out to matter when people need somewhere to live.

The switch that reversed the river

Around 1980, Britain redefined housing from essential infrastructure to a financial asset. This single change distorted the purpose of building homes.

Once homes are assets first and shelter second, scarcity becomes valuable. If you already own a house, you benefit when fewer houses exist. Your wealth increases as availability decreases.

It’s like owning the only restaurant in town, then voting against new restaurants opening. Rational for you, terrible for everyone who’s hungry.

Why democracies can’t count forwards

The people who vote most reliably are homeowners. The people who attend planning meetings are homeowners. The people who write letters to councillors about protecting “neighbourhood character” are homeowners whose homes are worth about £400,000 more than they were a decade ago.

This isn’t villainy. It’s humans responding to the incentives we created. We designed a system in which building homes harms people who already have homes.

Then we act shocked when building slows to a crawl. It’s like being surprised that wolves eat sheep after putting wolves in charge of the sheep.

Blocking development costs

Blocking development offers immediate, visible rewards. Your view stays clear. Your property value increases. Your street remains frozen in amber like a museum exhibit.

The costs are delayed and diffuse. Someone you’ll never meet can’t afford to live near their job. Another person doubles up in accommodation built for half their number.

A third joins a waiting list of 1.3 million households. In Greater Manchester, the Bond Board helps people who can’t even access those queues by guaranteeing rental deposits most can’t afford upfront.

It’s like running a charity that gives people water during a drought, only to end by turning on the taps. Helpful, necessary even, but somewhat beside the point.

The numbers we’re avoiding

England needs 300,000 to 345,000 new homes annually to meet demographic demand. Last year, only 234,000 homes were built. This leaves an annual shortfall of 66,000 to 111,000 homes, not a minor discrepancy.

Our failure to build roughly 4.3 million homes since the 1980s isn’t just a housing shortfall—it’s the consequence of treating homes as assets instead of necessities.

The average house price is now 8.3 times the average salary. In 1997, this ratio was 3.6. The shift reflects changes in housing policy and restrictions rather than declining construction skills.

What the Romans understood

The Romans built roads, not because individual Romans felt passionate about roads. They built roads because empires without roads stop being empires. The cost was incidental to the necessity.

Medieval wool merchants had a concept called “just price.” You charged what something cost to make plus a reasonable profit. Charge more, and you’re a cheat.

Housing broke free from just price when we stopped asking “what does shelter cost?” and started asking “what will someone pay for scarce shelter?” Those are different questions with different arithmetic.

The circular logic we’re trapped in

Private renters now spend 34% of their income on rent, compared to 26% a decade ago. This increase results from scarcity pricing for a necessary expense.

Every political party says they’ll fix housing. Then they discover that fixing housing means building homes near voters. Those people don’t want homes built near them.

We all agree that housing is a crisis. We all agree that someone should build more homes. We all agree that those homes shouldn’t be built anywhere we can see them.

France can count

France builds roughly twice as many homes per capita as Britain. They haven’t discovered revolutionary construction techniques or summoned materials from thin air.

They’ve just maintained the idea that housing is infrastructure requiring constant investment. Like roads or water pipes, or anything else people need to live.

Britain treats housing like a precious commodity that must be carefully rationed. Then we’re surprised when rationing produces shortages.

What’s always been true

Britain can’t increase copper production through policy. Can’t wish oil into existence. But housing isn’t copper.

Housing shortages persist because we treat homes as investments and count backwards from last year’s builds instead of meeting people’s need for shelter.

We look at what we built last year, add a modest increase, and call it ambitious. Then we wonder why the gap between need and supply keeps widening.

The choice in front of us

Macmillan’s government counted forward. They asked what people needed, then built it. The houses weren’t always pretty. Some were terrible.

But a terrible shelter beats no shelter when someone has nowhere to live. And existence matters more than perfection when you’re doing arithmetic.

In forty years of treating homes as investments, we ignored the basic arithmetic: treating housing as shelter would benefit many more than treating it as a vehicle for wealth.

It’s time to count forward, not backwards. We must demand that our leaders build the homes people need—not aim for little progress but close the gap entirely. Existing and future generations depend on it. Let’s insist on real solutions, not just ambitions.

This article is part of series on housing inspired by my trustee role at The Bond Board.

This article was written with the assistance of AI.