House building fell dramatically following the financial crisis and hasn’t yet fully recovered. Last year 118,900 new homes were built in England. But with the number of households predicted to grow by 232,000 a year for the next 20 years and thousands currently unable to get onto the housing ladder, we need to build more than double that each year to keep up with demand, but we also need to tackle the sluggish housing market. That’s why housing was at the heart of the Budget yesterday, with more help for first time buyers and more money for affordable homes.
The Coalition Government inherited a legacy where house building under Labour had fallen to its lowest rates since the 1920s. Since 1979, the number of affordable homes shrank under Labour and Conservative Governments, with each selling off more than they built. There were 400,000 fewer homes after the Conservatives’ 18 years in power and a further 45,530 fewer after 13 years of Labour, increasing pressure on the existing stock of affordable housing. The Coalition Government wants to help those trapped in poor housing by building more homes and to help people get onto and move up the housing ladder. So we’re taking steps to address the chronic lack of housing – no easy task in the current economic climate.
Although there’s evidence to show that some of the measures the Government has already announced are yielding fruit, there’s more that can and should be done to increase housing supply and ensure houses are built where they are needed. The key elements of the package that’s been announced in the Budget are:
- £225m of grant funding which will help to guarantee affordable housing projects in England and ensure we get good, affordable homes built. This is on top of the £4.5bn of public funding that the Government has already committed along with £15 billion of private investment, to deliver 170,000 new affordable homes over this Spending Review period. It doubles the existing Affordable Homes guarantee programme to support a further 15,000 new affordable homes in England by 2015 and means that, thanks to the Liberal Democrats, the Coalition will be the first government to deliver an increase in social housing during its term of office for more than thirty years. More important than all the announcements though, the figures show that we are on track to deliver this. If we want nurses, teachers and firemen to be able to live in towns and cities, we need to make sure there’s housing they can afford, so I welcome this announcement.
- Current social rental policy is set at increases of up to RPI+0.5% plus £2 until March 2015. I’m pleased therefore that the Budget confirmed that the Government will set long term rental policy out to 2025 at this year’s Spending Review, giving certainty to social landlords to enable them to plan their future housing developments.
- A new scheme was announced called Help to Buy. This scheme, which will replace FirstBuy, is aimed at increasing the supply of low-deposit mortgages and new housing. It’s made up of two schemes – “equity loan” where the Government will loan you up to 20% of the value of your new build home and “mortgage guarantee” where lenders will be incentivised to make more mortgages available for people with small deposits. The Help to Buy equity loan scheme will provide £3.5bn additional investment to help people into home ownership as well as providing a boost to the construction sector, while the Help to Buy: mortgage guarantee will support up to £130 billion of high loan-to-value mortgages. Although I admit that the names of some of these schemes could be less similar, this is a really positive step which will help support up to 74,000 households into home ownership.
- There will be more money for the Build to Rent Fund. This fund is a £200m pot which developers can access to back the construction of rental homes until they are built, let out and managed, giving them the confidence to build now rather than delaying for a year or two. The fund has been hugely over-subscribed, so it’s being increased to £1 billion: £700 million to be spent in 2013/14 and 2014/15, and a further bidding round in 2014 for £300 million. With this scheme proving a success, topping up the pot to make sure that houses are built and that pressure on the rental market is eased is absolutely the right thing to do.
- Something Liberal Democrats should welcome with open arms is the clear commitment from Government on the need for new houses to be built more sustainably and be more energy efficient, by confirming that they will have to meet “zero carbon” standards from 2016. This policy works hand in glove with the flagship “Green Deal” which aims to improve the energy efficiency of existing housing stock. By May the Government will publish detailed plans, setting out the response to the 2012 consultation on the energy efficiency requirements in building regulations. This will be followed by a consultation on next steps in the Summer. Builders have repeatedly pressed us for certainty on Zero Carbon, so I’m really pleased about this announcement which will both inject confidence into the house building sector and the broader supply chain, and help us live up to our green credentials.
- Of course there were also announcements some Liberal Democrats won’t be so keen on, for example on Right to Buy where we’re reducing the time before social housing tenants qualify to buy their home to three years and; and raising the discount cash cap in London to £100,000. But, as ever, this package has involved give and take, and where we insisted on more money for affordable housing, our Coalition partners were keen to extend Right to Buy. But I am pleased that the additional receipts from increased sales will be used to pay down housing debt and support the Government’s commitment to 1:1 replacement of all additional homes sold.
There is always more that can be done. I support the idea of unlocking the potential local authorities have to build more houses. Already the Government has allowed councils that have retained council housing to borrow against future rental income (up to a combined “cap” of around £30 billion – with some £2.8bn still available). We could, for example, raise the cap, or let all councils use their “prudential borrowing” powers for house building, or – at the very least – allow Local Government Pension Funds to be used to support house building. The “prudential borrowing” route could enable councils to build up to 60,000 new homes over the next five years. This is a work in progress. It isn’t something we’re delivering now, but I hope it’s something we’ll look at closely in the next couple of years.
The Government has already committed to invest over £11 billion in housing during this spending review period. We are also, building on Andrew Stunell’s excellent work in this area, working to bring thousands of empty properties back into use, including empty spaces above shops. This package builds on the work that’s already ongoing with measures to support those who want to get on or move up the housing ladder, and steps to get houses built. Most importantly, it’s about making sure there’s more housing for the longer term so that the next generation doesn’t face an even worse housing crisis than the one we’re taking action to solve now.
* Don Foster is MP for Bath, Liberal Democrat Chief Whip and Coalition Deputy Chief Whip.