Lord Shipley gives some of the background to Amendment 2 to the Economy Motion.
A year ago our Party committed itself to building up to 300,000 new homes a year. The proposals were outlined in the housing policy paper Decent Homes for All. The aim was to achieve this by supporting private investment and by giving greater powers to local councils and social landlords.
A shortage of homes has made it extremely difficult for young people to buy their own home. Rents continue to rise to unaffordable levels for many and 500,000 people in work now receive housing benefit because rents are so high.
Last year saw the lowest house completion rate since 1923. Only 102,000 were built in 2012-13. Worryingly, in 2012, housing starts were only 98,000 when we need to build on average 250,000 homes a year to meet current and future demand.
Yet, since 1990, annual housing completions have never exceeded 170,000 and they have averaged 140,000, of which 80% have been for owner occupation.
This has led to a crisis in the supply of housing which is driving up prices and rents in most parts of the UK. Increasing house building to 300,000 new homes a year over the next few years is essential. At present, the Government plans to increase the rate of building to 170,000 new homes in 2015. We need to go further.
Despite the 22% increase in private housing starts this year, which is very welcome, and despite the initiatives the Government has taken which are certainly helping to increase demand, there remains an urgent need for more social housing. Not everyone can afford to buy.
The 1.8 million families on social housing waiting lists, the rise in demand for temporary accommodation and the high – and rising – level of rents in the private sector all tell us we should be building more homes to increase supply. In addition, many people on low incomes and subject to the new ‘under-occupancy’ rules want to move to a smaller council home but they can’t because smaller homes don’t exist. We need to empower local government to help solve the problem in their area.
Councils could raise a further £4.2bn above their current £2.8bn borrowing headroom and build up to 60,000 more homes over the next 5 years. Since last year, council housing has been self-financing. The Government should progressively remove the housing borrowing cap imposed on councils and rely instead on the existing prudential borrowing code to guarantee that only sustainable housing investment gets the go-ahead.
The average debt on a council home is only £17,000. There is plenty of scope for additional borrowing against the asset of the existing stock. In addition, across Europe, trading accounts such as these are not seen as part of a Government’s borrowing. The UK uses a much wider definition of public debt than anyone else. The consequence is that we are not building as much social housing as we need to and this must change.
* John Shipley has been a Lib Dem Peer since 2010 and is a former Leader of Newcastle City Council.
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10 Comments
Yes, I agree.
On a couple of small points: “This has led to a crisis in the supply of housing which is driving up prices and rents in most parts of the UK. ”
Well, house prices, yes, but rents, no. Rents are currently up 1.395% over the last year (http://www.rentindex.co.uk/), which doesn’t sound too bad to me, but house prices are up 5.4% in the last 12 months according to the Halifax. When house prices rise at four times the rate of rents then we have a very definite house price bubble, except if your name is Nick Clegg of course, in which case you’ll start briefing that house prices aren’t in a bubble without bothering to cite any evidence to back your claim.
Our “affordable rents ” in Bath, are around the London levels.
How much should a rent take from a salary or wage? and remember, there are those employed in social housing. The name has changed, but the product is the same. I know someone who has two jobs and still very little left over.
I saw properties for sale in the Chronicle this weekend, that are above what most could afford.
I don’t agree with the through the back door inflated prices within the social housing sector, with the shorter tenancies and the loss of the protected tenancy, for those who have to move on. This of course, will only be those who are not in sheltered housing.
I’m off to a housing conference for my housing supplier, I will support them against those who live in the city, who do the petitions, and have the right to prevent building.
Sounds nice, but with problems. Would that be £4.2bn that councils would need, PER YEAR, to build 60,000 homes PER YEAR? But if homeowners cannot afford to buy, how then can they afford to rent? And if they can’t afford the rent, how will councils pay back the interest and principal?
The 60,000 per year would achieve just under half of the shortfall of 130,000 new homes per year that you identified. Will the private sector build the remaining 70,000? Will your extra supply dampen house asset prices, reduce the return on builders’ investment, reduce the money value of collateral, and so reduce people’s ability to borrow?
@Richard Dean
“The 60,000 per year would achieve just under half of the shortfall of 130,000 new homes per year that you identified. Will the private sector build the remaining 70,000? Will your extra supply dampen house asset prices, reduce the return on builders’ investment, reduce the money value of collateral, and so reduce people’s ability to borrow?”
I would certainly hope so! Which rather confirms that this amendment sounds rather simplistic.
For example, John says: “the Government should progressively remove the housing borrowing cap imposed on councils and rely instead on the existing prudential borrowing code to guarantee that only sustainable housing investment gets the go-ahead.”
The problem there is that I think that means that there would be no social housing actually built as a result of the amendment.
What we need is more housing (any housing!), not just more social housing.
@Simon Shaw.
Yes, rocks and hard places.
The reductions in return on investment for builders would presumably reduce the supply of new houses, and the reductions in people’s ability to borrow would presumably transfer the problem of un-requited demand from the housing sector to some other sector, which then has to be rescued!
The economy seems like a multiply-connected organism, and doing things in one sector or place or money flow will generally impact many others. I guess there’s sometimes a negative feedback loop that might nullify an intended benefit. We need to find the positive feedback loops – is housing one of them?
While I agree with John Shipley’s point that we need more social housing, amendment 2 to the Economy Motion (F19) just doesn’t go far enough. In fact it doesn’t go as far as the policy we passed last year – in the motion and policy paper “Decent Homes for All”.
The amendment states, “and further to examine urgently whether Public Sector Net Debt (PSND) could be brought into line with definitions of other EU countries” while the “Decent Homes for All” policy paper stated “Adopting public borrowing accounting rules commonly used in Europe so that Local Authority borrowing against the Housing Revenue Account does not add to government borrowing figures – potentially releasing some £50bn investment in affordable housing over time” (para 2.1.3).
The amendment says nothing about changing the way Housing Associations can be financed while the “Decent Homes for All” policy paper stated “The Bank of England extending the scope of the Quantitative Easing programme to include purchase of social housing-issued bonds” (para 2.1.3), which means we should finance new social housing by increasing the money supply.
@Richard Dean. It seems that the Lib Dems are not aware of the problems with the cost of renting, but then they supported the “affordable rent” as it stands. Not every one in social housing is not working. Not every one in social housing is a problem. Society will always have those who do not fit, but then, it is so easy to judge.
So pleased to read the report from the UN on the subject of human rights, this Government has much to answer for.
@Helen Dudden
“So pleased to read the report from the UN on the subject of human rights, this Government has much to answer for.”
Could you possibly provide a link to the UN Report you have read? No-one I have asked has been able to tell me where to find it.
If you try on line “inside housing” it will give you a true account of what is actually going on with the issue.
I have also made additions to the NHF on the subject of the housing problems where I live in Bath, Don’s territory.
I support my housing supplier, they have said “Yes ” to housing ,asking our Lib Dem Councilors, with others, to please let us build.
In a few days, I attend a Conference as a Curo tenant representative, I want change for those without a voice.
I also say, to those who do the petitions to slow down and prevent, these include the Lib Dem Councilors, please, please, we need homes.
What else can you do? Please, we need homes, let this be a consideration, your Party is making promises, we need debate with all Parties, agreement on how to do things, not, how not to do things.
I feel that compensation should be thought about, for those who have been made homeless, or stressed very badly by the pressure of this arrogant law.