We won't build 250,000 homes a year through the market aloneby John Healey / February 26, 2016 / Leave a comment
Read more: Is the government right about “Sink estates”?
The most important pieces of legislation define the politics of the period in which they are passed. During my time as an MP, the Minimum Wage Act in Labour’s first term after 1997, and the Conservative-led Coalition’s Health and Social Care Act after 2010, both did that.
The first captured an optimism that the economy could be moulded to ensure that low-paid workers weren’t left behind by globalisation; the latter a determination to reshape the heart of the welfare state.
The Housing and Planning Bill, which is currently going through Parliament, is also such a defining piece of legislation. I believe it may come to characterise the attitude of the first Conservative majority government for two decades.
At its core is an unbalanced housing policy that sounds the death knell for affordable rented homes, thereby choking off an essential source of new housing and locking out young people and families on low and middle incomes. The Housing Bill pushes this short-term and extreme programme on at least three fronts.
The first is an extraordinary forced sale of council homes, outlined in Part 4 of the Bill. Unlike the right-to-buy policy introduced by Margaret Thatcher to sell people the homes they live in, this Government is forcing the sale of council homes not to tenants, but to the highest bidder, including buy-to-let landlords and speculative overseas investors.
Councils are simply invoiced by George Osborne based on the value of the homes in their areas. So the worse the local housing affordability problem, the higher cost of their housing stock and the more they have to pay. And the proceeds go to the Government—not to the cash-starved councils that are selling their assets.
This measure pays for the second front—the much-trailed extension of the right-to-buy to housing association tenants. Throughout the passage of the Bill the Government has refused to adopt even the most basic safeguards to make sure that any homes sold are properly replaced, like-for-like and in the same local area, as Labour has repeatedly proposed.
The third front is perhaps the least recognised—but could do the most damage. Private developers currently incur an obligation to build affordable homes to rent and buy, in exchange for planning permission for their developments. This source of private funding built more than half of all affordable homes to rent and purchase over the last decade—almost 250,000. That is set to change, as Part 1 of the Bill diverts this private investment almost exclusively into new “starter homes”: houses for sale at up to £450,000 and out of reach for those on average incomes in most parts of the country.
All told, the housing charity Shelter predict that the Bill will mean the loss of 180,000 affordable homes to rent and buy over the next five years. The Chartered Institute of Housing say 195,000 homes for social rent could go. The backdrop to this is the Chancellor’s decision in the Autumn Statement to stop new funding for affordable rented homes, breaking a cross-party consensus stretching back to the “Addison Act” of 1919.
It adds up to an assault on an ideal of affordable public housing a century in the making—all done in little more than 200 pages of draft legislation. Public housing was given its major impetus by Bevan after the Second World War. But—crucially—it was championed by the Conservatives too. When Harold Macmillan became housing minister in 1951 he announced a “great housing crusade” with public housing the major contributor. Over the 1950s as a whole, over 1.5 million council and housing association homes were built, against only 800,000 by private enterprise.
Even in the 1980s, when capital grant was cut and the introduction of right-to-buy shrunk the asset base that local authorities could use to build new homes, council and housing associations averaged over 40,000 homes a year. Tory Ministers would do well to remember that public housing used to be a cause that all political parties could back.
But the arguments for more public homes to rent and buy don’t need to be backward-looking or nostalgic. Here are five pressing and positive reasons why we should build more public homes—and should oppose the measures in the housing bill that would choke public housing off.
First, supply. There is now a broad-based consensus that we must build around 250,000 homes per year in England. But absent from this debate is an honest admission that there’s no chance of doing this through the private market alone. In fact, there has only been one year since the end of high-volume council house-building when we have managed to build 200,000 homes in England, and that was at the height of the unsustainable “Lawson boom” in the late 1980s. Even then, councils were still building 15,000-20,000 homes per year. Public housing used to make up a large part of the new overall housing supply each year. If we are to build the houses our country needs, then it must do so again.
Second, affordability. For millions of households who find it hard to meet their rent or mortgage at the end of the month, who are living with friends or relatives because they can’t get a place of their own, or even who need help because they are at risk of homelessness, there is a housing costs crisis. We know that simply building more homes only feeds through into affordability weakly and slowly. So the type of homes built matters, not just the quantity.
Third, work incentives. Housing costs are a critical factor in making work pay. The steep taper on housing benefit withdrawal is a disincentive to earn more, and higher rents mean that disincentive lasts for longer. This will continue under universal credit.
Lower rents can make it more worthwhile for people to improve their financial situation. A two parent, one child family with both parents working part-time on the national minimum wage would be £1,300 a year better off as social renters rather than private renters.
Fourth, jobs and the economy. With the British and world economy slowing, and interest rates still at near-historic lows, the opportunity for prudent public investment is clear. According to government estimates, every £1m of building investment supports 12 year-long jobs.
Fifth, investment in public housing can pay for itself. As I showed last year in a report for the Smith Institute, working up to building 100,000 new social rented homes a year by the end of this parliament would not only pay for itself in less than 30 years but would also provide a net benefit to the public purse of almost £6bn through lower housing benefit cost—and all with a modest upfront investment comparable to the average annual investment when I was Housing Minister. Continuing to build at this scale beyond the present five-year parliament would multiply these savings.
The truth is that tackling the housing costs crisis requires every part of the housing sector to play a much bigger part. The Government’s housing policies are increasingly narrow and short-sighted; it falls to Labour to make the case for a more balanced, long-term programme. A central part of our argument will be this: if you want to fix the housing crisis, you must build many more public homes.
Now read: The government’s hi-vis housing plans for 2016