Opinion: We need all parties to work together to solve London’s housing crisis

Sarah Teather’s recent interview in the Observer graphically reminded us of the social impact of the housing crisis on large numbers low and moderate earners in London.

Vince Cable, on the Andrew Marr show, emphasised both the need to counter the tabloid rhetoric of benefit scroungers and restrain the growth in the welfare budget. Vince pointed to the urgent need to expand the provision of affordable housing in the capital.

Our Autumn conference in Brighton considered a detailed paper on housing Decent Homes for All that notes that the primary driver of growing housing benefit and Local Housing Allowance bills has been the shortage of housing, leading to higher rents, and increasing number of people unable either to buy or to access social housing. The paper attempts to address both of these. It focused on the most pressing issues where we need to make a difference now, and during the next Parliament:

  • Building more homes – providing environmentally sustainable homes where people need them, creating jobs and kick starting the economy.
  • Giving tenants more power and security – making social landlords more accountable and improving standards and security in the rapidly growing private rented sector.
  • More local control – giving local councils, communities and individuals more power and autonomy to create thriving neighbourhoods in the face of the hugely diverse range of challenges that they face.

This week I came upon a London specific report from Darren Johnson, Green Party member of the London Assembly, Building our way out of the crisis? It has some similar recommendations.

Johnson urges the Mayor to consider other solutions in addition to that of supply:

  • Controls or extra taxes on overseas investors and second home owners, or even by putting a tax on all land values to dampen speculation and stop developers sitting on large unused land banks;
  • Give councils an incentive to release land for housing with community land auctions;
  • Build more social housing that can stay affordable regardless of supply and demand in the market, which would require either a dramatic increase in direct subsidy, redirecting the Bank of England’s quantative easing programme into housing or freeing up councils to borrow at prudential levels;
  • Give private tenants continental style rent controls and protections to slow the rise in rents and give people more stability than the current minimum of 6-month contracts.

He goes on to say:

Some ideas such as taxing and auctioning land are long-term policies to restructure our housing market and improve the level of supply. Others, such as rent controls, could also help tenants struggling with high housing costs today while we wait for supply to catch up.

We will need cross-party support in pressing the Mayor to tackle this crisis, so I welcome Mr. Johnson’s contribution to this important debate.

* Joe Bourke is an accountant, former parliamentary candidate and Treasurer of Hounslow Liberal Democrats

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19 Comments

  • Matthew Huntbach 21st Nov '12 - 2:30pm


    the primary driver of growing housing benefit and Local Housing Allowance bills has been the shortage of housing

    No, the primary driver has been the shortage of housing let out at historic cost price rather than let out or sold at a profit. Unless this is acknowledged, the problem will NOT be solved by the naive “build our way out of it” solution. That “solution” does not ensure that the houses built go to those in need and it does not resolve the problem of houses being held onto purely because it makes more money to buy a house and own it (whether or not you need it or want to do anything with it) than to do almost anything else with spare cash you have. Building houses without dealing with these issues is just throwing more chips into the casino.

    The tabloids are going on about people getting “£500 a week on benefits” as if that’s money in their pockets to spend on luxuries, rather than money which is passed straight to a private landlord. They will not acknowledge that what we are seeing here is a DIRECT CONSEQUENCE of Mrs Thatcher’s “right to buy”. Thanks to that it was madness (or extreme philanthropy) for anyone who happened to be the tenant of a council house to hand it back to the council if they no longer needed it, due to being dead or moving away. If your council tenant granny was on her last legs still in the three-bedroom house where she had been a tenant since she was a young mother, OF COURSE you borrowed money to buy it for her – it was available at a huge discount, you waited till she died, sold it off, made a big profit. This was going on, big scale, in council estates across the south-east (maybe elsewhere, but I know of it in the south-east).

    You might well sell it off to a buy-to-let merchant, or the buy-to-let merchant might lend you the money to do it, and split the profits. Result – when granny died, instead of the house going back to the council to be let out to a homeless family, the buy-to-let merchant lets it out to the SAME FAMILY at three times what the council rent would be – all that extra rent paid for by the taxpayer through housing benefit.

    But you won’t find the tabloids cursing Mrs T for this inevitable result of her policies, will you?

  • @Joe Bourke. You claim that Sarah Teather Observer interview “graphically reminded us of the social impact of the housing crisis on large numbers low and moderate earners in London”. Actually Ms Teather’s piece was not about London’s housing crisis as such, no, it was about the Consevative/Liberal Democrat Coalition’s policy of cutting housing benefits, and the “cruel” consequences of your policy. You do not mention this! According to the Observer Ms Teather believes that the “entire policy [cutting Housing Benefit] will not only be cruel and socially disruptive……”, and because to this policy “many thousands of children will be driven out of their homes and schools and forced to live in areas where rents are lower……” Sarah Teather is quoted “I think some very horrible things are going to happen.” Her concerns, as told to the Observer, are not just of the London housing crisis per se, but that the Coalition’s policies are turning that crisis into a catastrophe for poorer
    tenants.

  • Matthew,

    the thrust of Johnson’s paper Building our way out of the Crisis is that new supply alone will not address the shortgage/affordability issue

    In the summary he says “There is no doubt that housing in London is far too expensive,whether you want to buy or
    rent.The Mayor says this is because we haven’t built enough homes,and that building more is
    the single-most important thing we can do.But my evidence shows that we are unlikely to
    make housing affordable through supply in the next decade,meaning continued pressure on
    house prices and rents.Other solutions therefore have to be looked at. 
    
    Government figures suggest we should have built more than half a million homes in London
    since the GLA was set-up in 2000 in order to keep up with a growing population and rising
    demand.In fact we built half as many.
    
    Combined with irresponsible lending,this sent prices rising two to three times as fast as
    incomes.Prices are now so high that:
    · Half the population is unable to buy threequarters of the homes in London,with housing
    increasingly bought by investors rather than owner-occupiers.
    · Minimum wage workers can’t afford to rent the average room in a shared flat in any
    borough in London,and they struggle to get socialhousing as the stock has shrunk.
    If supply were the main answer,the Mayor could push for two options:
    · Flood the market with enough homes to make houseprices fall by at least 40% overnight
    toaffordablel evels.
    · Build enough to keep prices flat and wait up to30 years forincomes to catch up with prices
    so that homes are affordable again.

    Given our track record in the last decade,the current scarcity of mortgage finance,constraints
    on land supply and the shortage of people able to affordable any newly built homes,it is
    unlikely that private developers will build enough homes in London to achieve either of those
    options.Even if we kept prices flat,we can’t leave people stuck in overpriced and insecure
    private rented housing for30 years while their incomes catchup.”

    The solutions he advocates (in addition to increased supply) in many cases, bear a striking resembalance to those put forward and adopted at our recent conference debate:

    – Controls or extra taxes on overseas investors and second home owners, or even by putting a tax on all land values to dampen speculation and stop developers sitting on large unused land banks;
    – Give councils an incentive to release land for housing with community land auctions;
    – Build more social housing that can stay affordable regardless of supply and demand in the market, which would require either a dramatic increase in direct subsidy, redirecting the Bank of England’s quantative easing programme into housing or freeing up councils to borrow at prudential levels;
    – Give private tenants continental style rent controls and protections to slow the rise in rents and give people more stability than the current minimum of 6-month contracts.

  • @Mathew Huntbach. Spot on as usual. But which political party is acting as an ‘enabler’ to the successors to Mrs T and the continuation of her work?

  • Big Dave,

    the Libdem conference paper recognises the impact of welfare reforms on housing policy but has deferred a policy response to a separate paper. The paper notes “there are important concerns about such issues as the impact of benefit caps and their ability to take into account family size; the impact of changes such as the extension of
    the shared room rate to all single people under 35 (including separated parents and those suffering from health issues); and the impact of rent direct on arrears affecting both tenants and social landlords negatively. This is why FPC has decided to carry out further work on welfare reform policy, including those elements relating to housing cost.”

    The focus of this article is the pragmatic steps that can be taken (with cross-party support) to bring housing costs in London under control in the immdediate future and provide a greater level of security for tenants in both social housing and private sector tenancies.

    Liberal Democrats passed the motion Decent Homes for All at the party’s Autumn Conference in Brighton. The motion calls for a major house building programme of at least 300,000 homes a year, radical steps to free up public land, measures to improve energy efficiency and a fairer deal for tenants, giving them more power and security.

  • Tom Papworth is quite right when he says “it really is enormously unhelpful – both to those struggling with housing affordability and to taxpayers groaning under the weight of Housing Benefits that are inflated by housing costs – to pretend that planning constraint is not the main driver of the problem or that we can solve the problem by expanding our already large social housing sector.”

    Last year CentreForum published a paper Community land Auctions . Quoting the author, Tim Leunig, on the question of Why are House Prices so High?

    “Housing is expensive in Britain because the planning system does not release sufficient land when demand is high. This means that rises in demand – caused by increases in the number of households, increasing affluence, or falls in interest rates – are translated into higher land prices, rather than increasing the supply of land available for housing.
    The failure of supply to increase when demand is high is evidenced by the rise in the price of land relative to house prices over the last twenty years, and by the relatively high level of land prices in those parts of Britain where demand for housing is highest.”

  • Tom Papworth. “……a lot of social housing was sold under the Right to Buy”. Quite. And it should not have been in the way it was. I have cause to remember it very, very well. It was the biggest political bribe in British history. An utter social housing catastrophe, and acknowledged as such by many of all political pursuations. There was not the slightest hint of a housing strategy re. selling Council housing; there was truly only one strategy and that was the election of one Mrs M. Thatcher, to that end it worked like a dream. Of course the selling off of social housing COULD have been part of a sensible social housing policy: IF for every house sold off, two were built by way of replacement. The funds from Council house sales could have been used to aid the finance for this. But that, of course, demanded much more imagination from those in power at the time, in any case, as I have stated the political reasons for selling off social housing were “successful”. Who cares about long housing waiting lists anyway? Certainly not the ’80s Tory party.

  • Steve Griffiths 21st Nov '12 - 10:19pm

    London has a particularly acute problem, but is not alone. It is nearly impossible to find affordable accommodation in my own city of Oxford (for both those on low wages and professionals), I have no doubt there are other towns and cities with similar problems. Successive governments of both main parties have failed to deal adequately with housing shortage and now the coalition government seems equally powerless.

    As a former Lib Dem housing spokesman and housing committee chair on a district council in the early 1990s, I can tell you we struggled to house people with the housing stock we had then. I am sure ‘Decent Homes For All’ is a splendid paper, but we need to do things now to adequately house the people and if an all party approach speeds up the process then so be it.

    It is interesting to see you quote a Green Party report on housing, which advocates a form of Land Value Taxation, to dampen down on speculation. Now where have I heard that before? Maybe if the Lib Dems had hung on to some of the Liberal Party’s old values, it might not have lost so many ground troops and members.

  • ““There is no doubt that housing in London is far too expensive,whether you want to buy or rent.”
    I think that only applies if you are a UK national, as I see it was recently reported that since 2008 London property prices have increased by an average of 20% – largely fueled by foreign investors.

    This dimension to the problem, mentioned inJohnson’s report shouldn’t be under estimated. Unless this is properly addressed, building more homes in London at more affordable prices may just draw in more foreign purchasers …

  • Matthew Huntbach 22nd Nov '12 - 11:45am

    Tom Papworth

    Opponents of the Right to Buy often talk as though the houses were demolished. They still exist and they still house people – either former social tenants (who, without having become owner-occupiers, would still be on the social housing registers) or new, low-income tenants.

    But I am not saying that. In fact, though I have not said it here, I have said it elsewhere – I know that very well because I was for 12 years a councillor in a ward that was once almost all council housing but by the time I stepped down was less than half council housing, mainly due to the right-to-buy being exercised. Many of those houses had been sold on by their former tenants who had exercised this right, and were being let out. The rent of a former council house being let out privately would be about THREE TIMES the rent of an IDENTICAL house next door which was still council owned. In many cases the private tenants were the sort of people who in past would have obtained a council tenancy for such a house but now stand no chance because very few of such houses become available for re-letting. The extra rent was paid through Housing Benefit.

    So, there we have it, there is all this extra rent, being paid out by the taxpayer to the various people who have profited from right-to-buy. You think that’s fine and wonderful. I do not think it is fine and wonderful that thanks to this past policy I am having to pay a lot more tax which just goes to line the pockets of people who have been able to profit from all this – who are (despite all this stuff about “families receiving £500 a week in benefits”) NOT the actual tenants. In fact the actual tenants in these cases would FAR RATHER be in council owned property receiving “lower” benefits, but having the same amount in their pockets due to not having to pass most of it over to their private landlords. They were trapped and often very depressed about it, because the rents were so high they would never be able to get a job which has wages high enough to pay those rents. As a result, it was pointless them even trying to get a job, because anything they earned was taken away again in reduction of Housing Benefits.

  • Matthew Huntbach 22nd Nov '12 - 11:57am

    Tom Papworth

    It really is enormously unhelpful – both to those struggling with housing affordability and to taxpayers groaning under the weight of Housing Benefits that are inflated by housing costs – to pretend that planning constraint is not the main driver of the problem, or that we can solve the problem by expanding our already large social housing sector, at substantial cost to the taxpayer,

    Council house rents are set at cost price. Local authorities have a separate housing account. It is illegal for the general account to subsidise the housing account or vice versa.

    On planning constraint being the main problem, well I sat on the Borough’s planning committees for all my twelve years as a councillor, and during that time spent many hours dealing with requests to use up what little scraps of land were left available in the borough to squeeze more rabbit hutch housing onto. The reality was that we rarely turned down an application because you cannot do that without a legal justification. As a consequence, it was a VERY common occurrence to be sitting on a planning committee discussing some application with an angry bunch of local residents in the audience howling at you because they didn’t want their local green space built all over. Yet you were forced to say “Agree” to the application, because the officers would point out there were no legal grounds to turn it down, and if we did the developers would win on appeal at cost to the council. Local residents never understood this point, they seemed to suppose we could agree or disagree to an application just as it fancied us. So once we said “Agree” they would howl at us “Judas – you’ve been bribed to agree to that, how can you agree to something when local people are so against it?”. There were time when I was afraid to leave the building afterwards for fear of a mob of residents waiting for me outside because I had accepted we had no grounds to turn down a development application that was extremely unpopular amongst residents of the area.

    I find it difficult to square that experience with what you are claiming.

  • Matthew Huntbach 22nd Nov '12 - 12:15pm

    Tom Papworth

    Regulatory constraints imposed by the British planning system can to a large extent explain the high house prices in much of southern England. In most places planning constraints have a larger impact on house prices than physical supply constraints

    Yes, but as I have explained, new housing developments are also very unpopular. I grew up in the Brighton conurbation, squeezed between the sea and the South Downs. When I was a child, downland valleys I knew were still being filled with houses. My mother now lives north of the downs, and there’s a huge issue about fighting plans which would eventually lead to one big conurbation right across mid-Sussex, as the built-up conurbation on the coast already spreads from Rustington to Peacehaven.

    You may say “pour on the concrete, pour on the tarmac, we don’t need green land, there’s plenty left”. Sorry, I know the land I knew as a child and I know how much of that has gone to development, I don’t see it as you do.

    Now, the reality seems to me that if people don’t want your “pour on the concrete, pour on the tarmac” solution, they need to accept the alternative. That alternative is systems of taxation to discourage people from underoccupying, to make it unprofitable to hold onto housing merely as an “investment”. I appreciate that this alternative is ALSO very unpopular – generally amongst the very people who are the most vocal about opposing any new development. Look at how poor Cllr Tarmac-Smyth is being harried by that Libby Local woman over his sensible plans to make best use of the land around Demsbury, for example.

    This is why we need a sense of realism, which we don’t – people are neither wiling to accept your solution nor mine, and politicians don’t have the guts to say it’s one or the other, because the social consequences of neither are nastier than either (and they are what we are seeing right now).

  • Matthew Huntbach 22nd Nov '12 - 12:18pm

    BIGDAVE

    @Mathew Huntbach. Spot on as usual. But which political party is acting as an ‘enabler’ to the successors to Mrs T and the continuation of her work?

    The Labour Party, obviously. Please read what I have written elsewhere, in particular on electoral reform, for the working which arrives at this answer to the question, or otherwise it is left as an exercise for the reader.

  • Could it be that the way to solve the London housing crisis, is to move it. I’m not exactly holding the move by the BBC to Salford Quays as a shining example of success, but the spirit of the idea is certainly sound.
    Also if you simply pour more heat (new housing, escalating Housing Benefits etc), into an overheated London, will you not simply find yourself chasing your tail, doing the same thing every 10 years or so, in a kind of Law of Diminishing Returns.?
    I understand that London is considered a commercial powerhouse, but since we got broadband, 240 volt electricity and flushing toilets, it’s actually quite habitable north of Stoke on Trent. There’s even a local planning application been submitted for a Sushi Bar,…. whatever that is?

  • Charles Beaumont 22nd Nov '12 - 2:02pm

    I don’t disagree with the main thrust, but shouldn’t we also be looking at the skewed nature of our national economy which continues to draw people towards London, thereby exacerbating property prices, congestion, pressure on public services etc.? If our national economy is over-dominated by London and its service sector (I’m not saying that isn’t important, but it shouldn’t be the only engine of growth) whilst whole terraces are being deomolished in Liverpool, we have to ask if that is helpful to the wider cause of national prosperity.

  • Matthew,

    great comments, based on your experiences as a member of local planning committees, that we can all recognise and relate to as the reality on the ground.

    The challenge for our party is how do we go about changing the reality on the ground.

    Fistly, we should not demonize either struggling tenants or provate landlords. Many new property landlords of recent years have opted for properrty investment as an altenative to a private pension sector, that has failed dismally to provide a means of securing an adequte income in retirement. Investment in housing by private landlords has been a significant contributor to economic activity.

    It is the economic fundamentals that drive unhealthy bubbles that we must address and perhaps most important among these are commercial and tax incentives that can make vacant and unde-used land available for housing development. Community land auctions and less restrictive planning law may play a role, but I believe that the introduction of Land Value Tax could be transformational in this area.

    As a first measure at the local level, I would advocate a swift transition to site-value rating for business rates and council tax (as proposed in the Mirrlees Tax review) with no upper band limits. Secondly, I would advocate the replacement of higher rate and additional rate income tax with a national Land Value tax on the top 15% of private landholdings in the UK.

    I would urge anyone who has 40 minutes to spare tp watch this Australian documentary production Real Eastate 4 Ransom.

    Further steps we can and should be taking, right now, are outlined in the Decent Homes for All paper:

    • Launching a major programme of house building, increasing the rate of construction until we reach at least 300,000 houses a year, using untapped sources of finance and giving more freedom to social landlords, local authorities and local communities.• Taking radical steps to improve land supply, through releasing public land with ‘build now, pay later’ deals.
    • Tackling ‘landbanking’ through a competition review of the major builders, ‘Community Land Auctions’ and ‘use it or lose it’ planning permissions.
    • Requiring, wherever possible, all government-owned housing to undergo energy efficiency improvement through the Green Deal by 2018, and all registered providers by 2025, and bringing environmental standards to current levels whenever planning permission is extended.
    • Greater protection for private tenants, promoting longer tenancies and creating a housing ombudsman service.
    • Giving social housing tenants an even stronger role in how their providers are run – with tougher standards of accountability enforced by the Social Housing Regulator. We will also give tenants the power to trigger a vote on whether to move to another housing provider when things go wrong.
    • A stronger role for the Social Housing Regulator, giving it the power to proactively cover ‘consumer’ standards, reintroducing a programme of inspections.
    • Giving Local Authorities greater ability to control second homes – not just in rural areas – but also in areas such as central London, where increasing numbers of homes are bought by overseas investors and left empty.
    • Greater powers to tackle the blight of empty homes, giving local communities, housing associations and individuals a greater role in refurbishing them and bringing them back into use – and providing loans for private individuals to renovate an empty property, repaid through rent or sale.
    • Passing control over Right-to-Buy to Local Authorities, which can vary discounts based on local need and keep all the proceeds, provided they are reinvested in social housing.

  • John Dunn and Charles Beaumont both point to the need for ecomomic regeneration outside of London and the Southeast. Housebuilding is frequently the catalyst for an economic resurgence and the housing shortage problem is not limited to London alone, as Steve Groffiths notes in his comments on Oxford.

    Giving housing associations the ability to issue government backed bonds for the construction of new homes will lay the foundations for economic growth.

    That is the view of CentreForum’s chief economist Dr Tim Leunig and former MPC member Prof Tim Besley, who are urging the government to adopt this short term strategy for getting Britain building again.

    Writing in the Financial Times,A canny way to revive our moribund housing sector Economists Tim Leunig and Tim Besley said:

    “The construction industry has ground to a halt. The Office for National Statistics reports that house building in the first quarter was 20 per cent down on a year ago, 50 per cent down on 2005, and 80 per cent down from levels that prevailed in the late 1960s. This is bad for growth and bad for employment.”

    “We propose that government should give the best housing associations a new role. They would issue bonds – underwritten by government – at low interest rates, secured on their (new) income stream.”

    “Housing associations would then contract with developers to build houses and flats, which the association would sell or rent in the open market.”

    “This is not a strategy for the long term. In the long run, we need well capitalised banks able to lend to credible borrowers, to buy houses built by commercial developers who can obtain land in a timely manner.”

    “Today, however, we are in deep recession of uncertain duration, and that calls for unconventional measures. Governments can and sometimes should underwrite markets and create institutions that can reduce risks by internalising them.”

  • Helen Dudden 27th Nov '12 - 2:07pm

    Of course the right to buy, should have been in the private sector. Often here where I live, property is very expensive. Now trying to reverse the damage done, is not going to be easy. Of course there needs to be property that can be afforded by those on the lower salary. Not all of those in social housing are doing nothing, that is a not the true picture. Part buys are something else, some fall through the system, earning too much to go down that path, too little to buy privately.

    All the writing will not build homes, only being positive and doing just that, will make the economy in a better state. Less arguments over the subject and more working together, this is a social issue, not one of politics.

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