I was wrong about the reasons for Britain’s chronic housing shortage

The reality is staring us in the face but Starmer is still adrift in fantasy land

27 July 2025 

Daily Telegraph 

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I wanted to devote this column to housing – in particular, Sir Keir Starmer’s ridiculous claim last week that there is “lots available” to accommodate rising numbers of not just homeless UK families but illegal migrants too. But I can’t let the weekend pass without first commenting on the latest public borrowing figures.

The Prime Minister’s optimism around housing supply is delusional

In June alone, government spending exceeded revenues by £20.7bn – a funding gap £6.6bn wider than the same month last year and the second-highest June borrowing total on record. This massive monthly addition to the UK’s £2.7tn-plus pile of national debt was outstripped only by borrowing in June 2020 – when the economy was locked down, generating little tax revenue, as the Tories spent wildly on furlough and misguided business support loans.

More shocking, as Labour continues to “fix the foundations” of the UK economy, is that £16.4bn of the money borrowed on our behalf in June wasn’t spent on the NHS, benefits for the needy or vital public infrastructure. It went, instead, on debt interest charges.

So the Government used over four fifths of the £20.7bn it borrowed in June to service our fast-escalating national debt stock, with interest payments almost double those in June 2024, the month before Labour took office.

Yes, government borrowing costs have risen across the Western world since last summer – as Chancellor Rachel Reeves told the House of Lords Economic Affairs Committee last week. But she didn’t mention the UK’s 30-year gilt yield is now at levels not seen since in the late-1990s – but back then the state was paying interest on a national debt of 35pc of GDP, compared to almost 100pc today.

She didn’t say, either, that the global pension and insurance companies and sovereign wealth funds that dominate sovereign credit markets are now demanding around 5.5pc to lend the Government long-term money.

That’s way higher than during the peak of Liz Truss’s “mini-budget” crisis in October 2022 – and also significantly above comparable yields in the US, Germany and France, as well as previous “debt-crisis” nations including Italy, Spain and Greece.

The Chancellor also downplayed that the UK is a stark outlier in that almost a third of our public debt is index-linked, with payments rising in line with inflation as measured by the retail price index (up 4.4pc during the year to June).

Across the rest of the G7, only 5pc to 10pc of sovereign debt is linked to inflation. So Britain is uniquely vulnerable to an inflation spike which sees debt service costs and required borrowing to meet those costs rise further, generating yet more inflation and higher borrowing costs in turn.

This can already be seen in last month’s numbers, when inflation rose to 3.6pc – the UK now has the G7’s highest inflation rate as well, not least due to escalating net-zero-related energy bills – and debt service costs soared too. That’s why the Government is spending 80pc of the money it is borrowing on interest payments, a sure sign of impending financial ruin.

Ministers, though, continue in a world of fantasy economics, as does much of our political and media class, demanding ever higher spending, ignoring spiralling debt-interest payments and dismissing the most modest spending controls as mad. This situation is unsustainable – and what is unsustainable ultimately will not be sustained.

Against this depressing backdrop, Sir Keir last week demonstrated the same tenuous grasp of UK housing policy that his Government seems to have of broader economics.

Appearing before a House of Commons committee, Sir Keir was asked how he proposes to help growing numbers of homeless UK families, with the price of temporary accommodation driven sharply up by the need to house rising numbers of illegal migrants.

“Oh, there is lots of housing and many local authorities that can be used, and we’re identifying where it can be used,” replied Sir Keir, waving away what he seemed to consider a non-issue. The reality is somewhat different.

There is now an all-time high of 1.3 million households on social housing waiting lists in England alone. Around 170,000 children are trapped in temporary accommodation, their health and development severely impacted.

This is a shocking situation, reflecting successive government failures over several decades. But it’s become far worse of late, with local councils looking to assist homeless UK families now competing with an all-powerful Home Office seeking to house accelerating numbers of illegal “small boat” immigrants.

With the airwaves full of reports about country-wide protests outside “asylum hotels”, even the most loyal Labour MPs on the committee quizzing the Prime Minister seemed astonished by the complacent, utterly unrealistic nature of his answer.

Labour has, of course, emphasised faster housebuilding, setting a 1.5 million new-homes target during this current five-year Parliament. Ministers have been attempting to ease planning restrictions, in a bid to ensure more units are delivered for private purchase, rental and for social housing too.

From July 2024 to mid-June, the preliminary evidence – based on Energy Performance Certificate lodgements – is that 186,000 new dwellings were added in England. That theoretically amounts to an annualised UK-wide total of around 220,000, well short of the 300,000 Labour needs to fulfil its five-year plan.

Back in 2019, I wrote a book called Home Truths, about the UK’s chronic housing shortage. In it, I argued that housing was unaffordable for so many, and the supply of social housing so tight, not due to immigration but because the UK, over many decades, hadn’t built enough homes.

Since then, as illegal immigration has soared into the tens of thousands each year, legal migration has ballooned from around a third of a million annually at its pre-Brexit peak to double and sometimes triple that amount.

Spiralling immigration, both legal and illegal, is now clearly exacerbating the UK’s crippling homes shortage. The facts have changed, so I’ve changed my mind.