Build

Housing Minister Grant Shapps

This week the Government launched its housing strategy, the next day it revealed that during the last quarter the number of new social housing starts had collapsed from 26,000 to 250.

So first the good news. I think its great that the Government have recognised that housing is a key economic driver and needs to be given greater importance. The housing minister is also right to say we need to double the number of new homes coming onto the market. He is also right to be enthusiastic about self build housing and bringing empty homes back into use.

So far so good.

Then we look at the strategy itself launched with three of headline policies:

A mortgage guarantee scheme for new build housing allowing deposits to be dropped to 5%.

A £400m fund and measures to get the housing market moving by investing in ‘stalled’ developments.

A right to buy scheme for council housing which includes a one for one replacement (although not a like for like replacement and not necessarily in the same area where the property was sold).

The mortgage scheme appears like a good idea at first glance but it actually addresses the wrong end of the problem.  The problem is that house prices are too high and that people can’t afford to enter the market. The right wing think tank Policy Exchange has published a report this week which suggests that any support for mortgages will just have the effect of increasing prices and therefore, if they are right, this measure is self defeating. The other main criticism is that this policy is the Government encouraging sub-prime lending, the very thing which got us into this mess in the first place. Given the currently house prices are falling there is also a danger (if policy exchange are wrong) that 95% mortgages could see people descending into negative equity within a year or too.

Stalled developments

The Government are also promising £400m to get stalled developments going again.  This is basically a subsidy to private sector house builders. Given that they all seem to be showing healthy profit growth at the present this looks like completely unnecessary spending, but then builders have a strong track record of funding the Tory party…

The other measure they using to help these schemes is to encourage the dropping of section 106 planning agreements on the projects, in particular the requirement for affordable housing. We have already seen Bristol council dropping these requirements for developments as developers run rings around our elected members. This measure shows that housing for those in need is not a priority for the Government (last year £4bn was cut from the social housing programme).

Right to buy

The one for one replacement promised by the Government takes the right to buy back to the schemes run successfully by councils before the 1981 act which brought in the discounts. However its not clear how this can be paid for from the sales income. There will be a 50% discount in the value, then the first call on the payment is to pay off historic debt on the property and then to pay the Government an amount to allow for lost income. Also there is no guarantee of like for like.  The replacement homes will be at the higher ‘affordable’ rents further reducing the amount of social housing in the country (and increasing the cost of housing benefit). Most social housing sold under the right to buy is three bedroom houses but there is no guarantee that the replacement will be the same size, we could see 3 bed houses replaced with 2 bed flats.  The Government have also said that the money could go into a national pot and not be used in the council area where the home was sold.  We shall see.

The rest

The rest of the strategy is a rehash of measures already announced (one housing magazine estimates around 70% of the strategy has been announced before – I think they are being kind).

One housing professional neatly described it as:

“You know when a band promises a new album but then releases a greatest hits compilation and a couple of cover versions?”

Some elements of it are welcome common sense others are more bizarre. One measure (to allow social landlords to evict or push up the rent of high earning tenants) seems to be aimed at one trade union leader.

As you would expect there is no recognition of the problems brewing from the proposed welfare reforms and no measures to halt the huge cuts being introduced by some local authorities to the supporting people fund which supports the vulnerable and the homeless.

 

This is not a strategy its a list of policies shoved between two covers and given a fancy title. It would be like me laminating my shopping list and calling it a retail strategy.

For a more coherent economic critique of the strategy read this blog post from a Bristol University academic (who is also a lib dem member) posted on a Conservative member’s blog.  Its the best one I’ve read so far:

http://www.iaindale.com/posts/a-new-approach-to-housing-policy

Advertisement