Want to make a real difference to the country’s problems? Commit serious resources to social housing.
Being in government doesn’t half expose the difficulties of politics. The easiest things for politicians to change are laws, taxes and benefit entitlements. But these seem so ineffective against the major problems that our society faces.
Reforming taxes does little to rebalance inequality – an inadequate treatment of the symptoms that does nothing to change the causes. Raising benefits does little to help the wellbeing of those trapped in poverty. Cutting them does not so much restore incentives as kick people while they are down. Talking about it just makes people sour and resentful. And if passing laws in Parliament really helped people the last Labour government would have taken us to the Promised Land already.
So what to do? A bit of direct action to fix some of the country’s problems would not go amiss. And one issue lies close to the heart of the country’s dysfunction. Housing. Of course many of us over 50 are doing quite nicely thank you. We occupy some of the nicest housing in the world. But property prices are now so high that these nice properties are out of reach to the next generation except through inheritance. Never mind the many older people who were no quite so lucky in life’s lottery.
And meanwhile our social problems are concentrated in nasty council estates, or in substandard private accommodation supplied by unscrupulous landlords and subsidised handsomely through housing benefit. For thirty years the supply of social housing has been shrinking; and much of the stock before then was pretty awful anyway.
No free market solution is on offer. Developers aren’t really interested in building decent homes for those that need them most. And being free and easy with mortgage lending mainly benefits those already with property, and ends in tears.
So why not make a real difference to people’s lives and build more social housing? Lots more. Proper, decent family homes especially.
Of course what we don’t want is the sort of mega, high-profile prestige projects so beloved of Labour that treat tenants as grateful pawns. We want lots of human scale projects involving tenants in the design process. They should not be the get rich quick schemes based on house sales favoured by most commercial house-builders. We need rental funded projects from housing associations, community cooperatives and direct council ownership, with right to buy only as a long term option.
So how to take this forward? I’m no expert, and the experts can make the whole thing very complex in seconds. But we should hold sight of three critical blockages: finance; land; and political will.
Finance. This has dried up in both private and public sector. But the government is finding it quite easy to borrow money right now. We can expand the national debt so long as it is clear that any investment will pay back financially in the long run (unlike Ed Balls’s VAT cut). And you can do that with housing. Rents provide a revenue stream; and you can allow sales in due course. The returns cannot be as high as private developers would demand. But they don’t have to be. How about a government Housing Bank designed to lend to social housing projects from all comers?
Land. Britain isn’t short of land to build on. According to the Building & Social Housing Foundation (BSHF) only 1% of land in England is covered by domestic dwellings. But there is a shortage of land with planning permission. There brownfield sites – but not enough, especially when you realise that some valuable city green spaces are classified as brownfield! We can use and redevelop some existing housing developments, raising its quality. Government agencies often aren’t charged for the land they own, and are often using it wastefully. But we have to realise that some green fields will have to be developed. And some of the poorer quality green belt land is a logical place to look.
Which brings us to the biggest blockage of all: political will. Politicians talk a good game, of course. The Coalition government has launched a raft of policies designed help improve housing supply, including social housing. But it’s piecemeal, with no overarching narrative, and a distinct lack of urgency. Mention “greenbelt” and you won’t see most politicians for dust. This is difficult political territory. The property haves always have their reasons for opposing developments needed by the have-nots. Extra finance means more flexibility from the Treasury – and almost certainly extra government subsidies too.
But politicians should be leaders, not followers. Everyone wants a better Britain. We must make the case. How about using real political courage to support the disadvantaged for once?
* Matthew is a Lib Dem activist who blogs at thinkingliberal.co uk.
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25 Comments
Social housing is subsidised, so you would also need to cover the subsidy, as well as the proportion of the initial build cost that will ultimately be covered by the rental stream.
Building any houses would help – if we had more private houses, private rents would fall, and that would also help a lot of people. It would also cut the housing benefit bill.
Of course, LDs and the coalition are committed to community land auctions, which would give local authorities the biggest incentive ever to allow houses to be built.
this is an excellent article, well done matthew!
Good to read this Matthew. Congratulations.
The US Federal Reserve has just published a White Paper demonstrating how the ongoing problems in the U.S. housing market continue to impede economic recovery and suggesting ways in which housing policy can boost the economy.
http://federalreserve.gov/publications/other-reports/files/housing-white-paper-20120104.pdf
I have never understood why QE should be used to buy junk paper derived from mis-sold homes, rather than buying those homes directly for use as social housing, shared equity, let to buy schemes.
Finance is not a problem. Just print the moeny. The People own the presses
Great LIberal Democrat initiative/campaign.
A well thought out article…many questions…
As a radical start…I am old enough to remember post-war ‘prefabs’ (No I’m not THAT old) People were living happily in them well into the 1960s.
The housing crisis is such as to need a similar response. There are many thousands of skilled building workers unemployed and it cannot be beyond the ‘wit of man’ for local government to oversee planning, and pay salaries directly for the erection of such homes.
The crisis is a direct result of Thatcher’s political ideology and we must remember that housing is more than just a roof over our heads, it will force private rents down, allow empl;oyment for those caught in the ‘no address/no job’ situation and, being local, can allow older tenants to ‘downsize’ whilst staying near family and friends and free up larger houses.
Tim. Yes at heart there is subsidy going on in social housing, and it is about redistribution of wealth. I think that this more effective redistribution than simple tax and benefits, though – and arguably fairer. To make it politically more palatable the art is to keep the subsidy is hidden and painless as possible, through the unequal access government has to cheap finance, risk tolerance, planning rights, land and so on…and of course trying to redirect existing subsidy (e.g. housing benefit) more effectively.
Matthew
Bill. I’m not sure if the problem is access to any housing, as much as access to decent housing – especially for families. Part of the need is to raise the quality of social housing. The strategic aim to raise the quality of life across all sections of society. I don’t think that mass building of cheaper homes will achieve that – even if that was the right answer in the 1940s/50s.
Matthew
Whoops. I meant Jason, not Bill! Sorry to both of you
…………………………..The strategic aim to raise the quality of life across all sections of society. I don’t think that mass building of cheaper homes will achieve that – even if that was the right answer in the 1940s/50s………..
We MUST build cheaper homes; cheaper doesn’t mean sub-standard. Reading any estate agents website shows masses of houses for sale; the reason?too expensive…The coalitions ‘tinkering’ (subsidised deposits, etc.) will not solve an ever worsening problem.
As far as the raising of quality of life goes…Offer anyone in council B&Bs, overpriced private housing, run-down unmaintained house, etc,. today’s equivalent of a post-war ‘pre-fab’ and you’ll be trampled to death in the rush.
Jason. I will accept value for money over the longer term – something which our current building industry is very bad at. That’s why it is so important that properties are built to rent. The builders should have a stake in the long term viability. But what we should avoid is the 1960s style developments, undertaken to keep costs down, which turned out to be disastrous.
Interestingly there was a public housing project as part of the Festival of Britain in 1951, which apparently was very successful – but it was dismissed by the authorities as being too expensive compared to tower blocks. Over the longer term the economics may have been somewhat different!
But good quality basic is what we are after.
…….But what we should avoid is the 1960s style developments, undertaken to keep costs down, which turned out to be disastrous….
.I agree…However, the ‘pre-fabs’ were comparatively luxurious with indoor lavatories, bathrooms and well designed kitchens they also had small gardens. The tower block mentality was understandable but materials were often sub-standard and underpasses, lifts, etc. took no account of upkeep costs, crime and vandalism
……..But good quality basic is what we are after….again, agreed.
Matthew – great article. I don’t disagree with a word. One our greatest shames in Coalition has been Andrew Stunnell’s willingness to particpate in the slow death of council housing and to be such an enthusiastic advocate of the abdonment of those in greatest housing need in southern England through the (misnamed) Affordable Rent programme.
it’s worth noting that council housing construction costs are paid back over time through rents. Most council housing is not actually subsidsed any more, although tenants are through housing benefit.
Just before conference i heard rumours that NIck Clegg was casting around for good housing ideas to differentiate us from the Tories. i may have been misinformed, and it may have been that he was looking for ideas to end up in the Govt’s housing strategy of last November, but being advocates for a post-keynesian programme of council house building would not only be a great policy on its own financial and moral terms, but would outflank labour and win back many left-leaning ex-supporters, myself included.
Will we have the political balls or nous to do it, though?
LondonLiberal
Yes this gets tied back to housing benefit. My understanding is this benefit was introduced to replace lower rents as an incentive for the market to produce more accommodation. Not an outstanding success – but keeping it does make building more homes easier. The interesting bit is what happens if the benefit passes from private landlords to the new public or community ones. My hope is that it would take lower end private sector prices down and make the private sector more accessible too.
But then we are reforming housing benefit…which won’t help in London
I don’t understand why we need more houses when the population size is not increasing. Are there too few houses, or too few houses in the right place, of the right quality at the right price? Should we also think of regenerating business and facilities in places which already have housing?
@ Matthew Green
The housing benefit refomrs are hard to atgue against. but the real scandal isn’t that people are claiming high HB amounts, rather that rents are so high for EVERYONE that HB ends up taking the strain. Why are rents high in London? Lack of mortgage finance has pushed otherwise-able-to-buy-households into the private rented sector, pushing up rents in London by 15% last year. Lack of supply of decent housing of all tenures for all incomes is also to blame, partly because builders can’t access development finance, partly because the public sector is not building in the volume it did twenty or thirty years ago, and partly becuase foreigners are buying up more than half of all properties for sale in central Lonodn, pushing local purchasers out of the market.
The answer is to build more homes for social rent. These can house those otherwise paying high HB-subsidsed rents in the private sector. This will reduce the HB bill, free up private rented sector supply, and create a public asset that councils will be able to borrow on the back of to finance either decent homes investment or even more new supply, thanks to reforms to councils’ housing revenue accounts.
@tim leunig
“Social housing is subsidised, so you would also need to cover the subsidy, as well as the proportion of the initial build cost that will ultimately be covered by the rental stream.
Building any houses would help – if we had more private houses, private rents would fall, and that would also help a lot of people. It would also cut the housing benefit bill.
Of course, LDs and the coalition are committed to community land auctions, which would give local authorities the biggest incentive ever to allow houses to be built.”
I very much agree, Tim.
I’ve always argued that what we really need is more housing, rather than “more affordable housing” or “more social housing.”
Here’s a genuine question: If we have an appropriate Housing Benefit system (and maybe we don’t have that), why do we still build subidised social housing?
Ideally we shouldn’t have any housing benefit at all. We should just build and build until rents fall to sensible levels. We should end tenure and social housing should be distributed according to need. The planning system should be reformed to favour individuals and smaller developers. Community Land Auctions could potentially just reinforce the existing system where developers hoard land with planning permission. We should develop a longer term form of tenancy agreement which gives more security and stability to private renters. We should charge full council tax for empty or 2nd home properties as they are a magnet for crime.
“We should charge full council tax for empty or 2nd home properties as they are a magnet for crime.”
Some of the most dilapidated buildings are ones where the actual owners or ground landlords are hard to find.
Perhaps we should have completion of land registration (and correction of errors in it) – started in the 1960s – as an aim.
As Matthew says, there are issues of financing of housing, both public and private, and having the right sort of tenancy and benefit regimes – again both public and private. Land value as a component of house prices is also an issue.
However, we shouldn’t be too complacent about the existing housing stock. Anything built before 1970 is liable to have disasterous standards of insulation, for two reasons: fuel was much cheaper then, and central heating wasn’t universal – people accepted that for some of the house, and in all of it for some of the time, freezing temperatures were acceptable. So we ought to be working towards also replacing or updating much of the existing stock. (Of course, building work is a major source of CO2 emissions…..)
Richard G. Population is increasing. Also there seems to be added demand from people staying single longer, marriage breakups, etc. Then there are second homes, etc. There is also the issue of homes being in short supply where the jobs are (in the SE mainly).
Simon, Alistair. Purely market based solutions are not a convincing solution. First because the country is addicted to build for sale, to often shoddy standards. Second because market solutions gravitate towards helping the better off – more second homes than social housing. The private sector does not do well at dealing with the complex social issues that good social housing projects can help with. Housing benefit simply drives up rents.
And also we should remember that there is a wealth redistribution element. The property price boom has left society divided between generally older haves, and a large class of have-nots, which are spawning a whole range of social problems. Subsidised social housing helps raise wellbeing and living standards of the worse off – and if it requires taxes from the better off to fund it – then so be it. I think it is a better way of addressing the problem than through tax and benefits alone.
@Matthew Green
“Subsidised social housing helps raise wellbeing and living standards of the worse off – and if it requires taxes from the better off to fund it – then so be it. I think it is a better way of addressing the problem than through tax and benefits alone.”
But why is it better than a well designed Housing Benefit system?
One of the problems with the subsidised social housing approach is that of “tenants on over £100,000pa” (or even tenants on over £30,000pa). Why should comparatively high earning social housing tenants be subsidised?
@simon shaw
Social housing tenants paying full rent- and those on the salaries you quoted would be- are not subsidised. The cost of building council housing is paid back over time in rents.
@Londonliberal
Sorry, I don’t follow you.
Social housing tenants pay the same (subsidised) rent whatever their income. Those on very low incomes are eligible for Rent Rebate on top.
Rents aren’t sufficient to pay back the full cost of building social housing, particularly after taking account of maintenance and management costs.
Good points well made. Affordable homes don’t mean low quality homes, and social housing doesn’t mean soulless, low quality properties. There is a serious shortage in reasonably sized family homes in all our towns and cities. Cutting housing benefit isn’t a solution either, and as you say, is a kick while they’re down.
The government made much of their investment in housing at the end of the last year, but it certainly remains to be seen how beneficial these plans will be, not just for current residents of social housing, but for the future of the housing sector as a whole.
@ Simon shaw
“Rents aren’t sufficient to pay back the full cost of building social housing, particularly after taking account of maintenance and management costs.”
hi Simon, yes they are. it takes about 30 years. an ippr report last year confirmed this: http://www.ippr.org/publications/55/8116/build-now-or-pay-later-funding-new-housing-supply
@LondonLiberal
Sorry, I had a look at that IPPR report (including doing a PDF ‘Search’ for “30”) and the only thing I could find in the report was the bald statement “Council property, for example, pays for itself within 30 years of being built.”
There was no supporting evidence for that, and I have serious doubts about it – for example,does it perhaps mean it in simple cash terms rather than on a (more correct) DCF basis?
I used to help audit some Liverpool Housing Associations in the 1980s, and I remember that there was then something called HAG (Housing Association Grant), which was the significant capital subsidy needed, from central government, to ensure that rent covered the outgoings. I would imagine that the current equivalent to HAG is even greater.
@ Simon
If you look at the total amount paid by tenants through the collective total of English HRAs, you see that there is a national surplus of income over costs. Now that is an opaque system of measurement, but even HRA devolution, which will see a lot of council housing debt allocated to councils, will see all councils collectively (although not necessarily individually) deliver a surplus of income over costs (subject to them being well managed and actually collecting rent efficiently) within the coming 30 years, even after accounting for decent homes imnprovements.
Housing Associations don’t get grant from government anymore, except a very small amount to help build a property – down from around £100,000 to about £20,000, thanks to the coalition – and of course money from hb to cover rent.