Conservatives claim that extending the so-called ‘Right to Buy’ policy to housing association tenants will give the possibility of home ownership to 1.3 million families.
But at what cost? And is this the right policy priority, given our housing crisis?
What isn’t explicit in the name of this policy (‘right to buy’) is that it involves selling off homes at a very large discount to their market value – over £100,000 per home. This amounts to a huge give-away of public assets to the new owner-occupier of the homes in question – who are likely to be amongst the better-off housing association tenants and already benefitting from a secure affordable home. The Institute of Fiscal Studies has estimated that the total cost of the policy is likely to be of the order of £11.6 billion over the next five years. As Boris Johnson correctly warned on the 25th March, the policy “would involve massive subsidies.” His scepticism of the policy has subsequently been revised, but he was of course spot on.
The government plans to raise the billions of pounds necessary to pay for this policy by forcing local councils to sell-off the most valuable third of their council homes as they become vacant. The proceeds of these forced sales will apparently also cover the cost of replacing the council home being sold off and also be used to create a £1 billion ‘Brownfield Regeneration Fund’. These sums simply do not add up, and even if they did, wouldn’t it be better to spend the £11.6 billion on building more affordable homes for those that desperately need them, rather than giving it away to those already adequately housed?
Not surprisingly, concerns have been expressed by housing charities and most leading housing commentators that the policy will end up depleting the stock of social housing.
It was the introduction of ‘Right to buy’ by the Thatcher government of 1979 that effectively stopped council house building in the UK, as councils could no longer finance the building of new homes if they would be forced to give them away at a big discount as soon as tenants moved in and exercised their rights. It is the legacy of this policy that has left us with a massive under-supply of new homes over the past 30 years.
Sadly the Coalition government reinvigorated the Right to Buy policy for council housing, but this time claimed that there would be a one-for-one replacement with new affordable homes. In fact the Institute for Fiscal Studies says that the actual replacement of council housing has in practice been closer to just one in ten. There must be a risk that this new extension of the policy to housing association tenants will again lead to a collapse in new affordable homes as well as the loss of a significant proportion of the existing stock.
This is at a time when we need a massive supply of extra affordable homes. In London alone there are over 60,000 households living in emergency temporary accommodation. More than 1 in 10 London households are living in overcrowded conditions. In the capital, average house prices are now more than 14 times the median annual wage (up from 4 times in 1997) and rising. At the same time, private rents are also rising rapidly and now on average account for 53% of gross earnings.
None of these problems will be addressed by extending the Right to Buy to housing association tenants. In fact many of these problems that exist in London and around the country will simply deepen in their severity.
As Liberal Democrats we need to do more than simply oppose this terrible policy, we also need to spell out, and campaign for, alternative policies that address the real problems facing those in housing need.
Instead of spending billions extending Right to Buy we should instead invest public money in the only policy that makes sense – building more affordable homes.
Different policies might be needed in other parts of the UK, but to address London’s ever deepening housing crisis there are five steps that should be taken now:
- Double the delivery of new affordable homes through increased City Hall investment and use of publicly owned brownfield land;
- Control runaway housing inflation by increasing the rate of Capital Gains Tax applied to second homes and investment properties;
- Toughen up laws to prevent landlords from evicting tenants who ask for repairs & introduce longer, fixed-term, family friendly tenancies;
- Bring 20,000 long term empty homes back into use as family homes; and
- Introduce a “rent to own” scheme to help first time buyers into home ownership.
Diminishing the stock of affordable homes owned by housing associations and local council properties is total foolishness. An alternative strategy for tackling our housing crisis has never been more important.
* Cllr Stephen Knight is a member of the London Assembly and a councillor in Richmond.
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29 Comments
The trouble is that you could build 100,000 houses but then only 50,000 families find homes. So many houses are being bought as second homes, as investments or as buy-to-let that increasing the supply side will bring down prices and make these purchases more attractive than ever.
Yes, second homes can be taxed, but we have to be clear on what we are trying to achieve. It’s a form of wealth tax or mansion tax, really. And the usual irregularities will appear – two small houses being taxed more than one big one etc.
The problem with CGT on second homes is that it can be legitimately avoided by declaring the second home as your main residence.
How will increasing the rate of CGT reduce the increase in house prices ?
and how does rent to own help -it will just stoke up demand without increasing supply.
“This amounts to a huge give-away of public assets to the new owner-occupier of the homes in question” -That isn’t true for the proposed expansion to housing association properties. They are not public assets- I am very surprised (and a bit concerned) a member of the London Assembly doesn’t realise this. One’s definition of secure is also relative.
Longer tenancies I can see some argument for, but you will have to have break clauses in them which weaken their protection hugely. The difficulty is that the Courts have ruled one sided break clauses (i.e. only one party can break after say 6 months, but not the other) are not enforceable, so you’re going to need explicit legislative provisions overruling this. Good luck getting any House of Commons to vote for that. Plus English law has at its core the idea of freedom of contract- i.e. outside of some set limits/rules, I can contract to do anything I want. To reform tenancies in any meaningful way so that landlords couldn’t just insist on break clauses you’d have to substantially need to infringe on this principle.
Rent to own is unfeasible. Those without mortgages on their properties would be inclined to just not rent them out at all, whilst others may be inclined to simply use property guardians to pay the mortgage whilst avoiding the provisions.
Your CGT reforms also don’t really work. Not all landlords are in it for the capital gain, some make their money from the rental income. In London it’s more the former, elsewhere it’s more likely to be the latter. There are also so many ways round CGT for investment/rental properties that raising the rate will often be irrelevant for people- any buy to let investor worth their salt will have taken measures to heavily reduce the deemed “gain” on the property. So unless you’re going to totally rewrite tax law (good luck with that Commons majority again) you’ve got little hope.
My personal view on this is that it’s quite simple: more houses desperately need building of all sorts. Attempting to wage an ideological war on investors via the tax system is pointless and ignoring the route cause of the problem: growing population, not being met with a growth in the housing stock. I’d like to see the lib dems advocating the building of a new London borough along the lines of Milton Keynes, with new rail/tube connections built in with it. Ambitious, but look how successful the new towns have been.
Of course, the elephant in the room is surely how are we proposing to fund the creation of the million or so council houses that still need replacing?
Well done Stephen Knight for addressing the problem.
What a shame that some people here are doing the work of The Conservatives and the property spivs by criticising Stephen’s five suggestions.
Those that pretend that the so called free market, small state nonsense is the answer to everything are proved totally wrong by the dreadful housing facts in London.
The failure of Orange Book / Conservative economics is clear for all to see in the worsening London housing crisis. Nobody but the very rich or the very complacent would not want to do something about it.
Why should we not just ease the Green Belt around London.
Stephen Donnelly,
The simple answer to your question (without knowing what you mean by “EASE” the Green Belt) is that The Green Belt is not the problem and in addition it is ot where the housing is needed.
Fiddling with planning conditions on the borders of Guidford is not going to help the housing crisis in Hackney.
This is not a Green Blet crisis, it is not a planning crisis, it is a housing crisis.
@John Tilley “Fiddling with planning conditions on the borders of Guildford is not going to help the housing crisis in Hackney.”
But relaxing the Green Belt in Havering, Waltham Forest, Essex, and Hertfordshire probably would. There is a world beyond West London and Surrey 🙂
We need to do whatever it takes to get more homes built where they need to be – ideally, enough built so that homes are ‘affordable’ to most people who want to own even at market prices (Some people will always need help in affording housing so I think there will always be a need for subsidised social rents). While we could (and possibly should) change tax law etc so that BTL isn’t treated so favourably, if there is not enough supply, house prices (and rents) will continue to march upwards after a possible temporary pause or dip caused by such tax changes. To get enough homes built, the evidence from the last 100 years seems to suggest that the state (councils etc) needs to get heavily involved, alongside private developers (possibly with planning permission that expires or is transferred to other firms if not used within a time limit, to reduce land banking). As to where to put the homes, in London this will often be flat blocks on brownfield. As well as TFL land, old industrial sites etc we should build on barely used garage blocks too – such a waste of space currently. Outside London it might be new towns as mentioned.
@JohnTilley
Pointing out how his suggestions are flawed and not actually feasible is not “doing the work of The Conservatives and the property spivs “, it’s understanding the issues and surrounding legal issues. Easy to rant about the “orange book” being to blame for everything, seemingly less easy to explain how anything I said is actually wrong.
Your comments on planning are also short sighted John. Planning is a crucial part of the property crisis. The requirement for very high density housing means that certain types of housing people actually want is simply not being built anymore, meaning prices for that existing stock is going up disproportionately. 2 bed houses are a prime example of this in many areas of the South East. Perfect starter homes, but few are built any more so sell incredibly quickly when they come on. Cash buyers are inevitably in the stronger possession her- not good for your first time buyer. So unless you do something about the planning so these houses are actually built en masse again, you’re not helping this aspect of the problem.
@John Tilley “The failure of Orange Book / Conservative economics is clear for all to see in the worsening London housing crisis.”
Surely the orange book solution would be to recognise the link between the supply of houses and the (hugely increasing) demand for them in London and that the supply is kept artificially low by planning restrictions.
Isnt it time you NIMBYs recognised the harm you are doing ?
James Ridgewell is correct to say –
“…To get enough homes built, the evidence from the last 100 years seems to suggest that the state (councils etc) needs to get heavily involved…”
And this is why Sammy O’Neill and others are so very wrong. They seem to want to continue with the habit of the last five years of defending a right-wing Conservative Party policy on housing. Liberal Democrats do not need to do that any more, Sammy. We can now promote Liberal Democrat views because the dreadful Coalition is over.
The Conservatives pretend its nothing to do with the number of houses that people need, in the places where they need them at a rent they can afford to pay (because who can afford to buy a house in London?).
As is pointed out by Zoe Williams in Monday’s Guardian, the Conservative Government attitude to housing is based on a mean and callous story where people who live in social housing are to be despised and denigrated.
Those in this thread that are either deliberately or unwittingly promoting this rightwing Conservative story need to explain how private developers building houses on Green Belt land on the edge of the London Suburbs will help people people who will not be able to afford such houses (either to rent or to buy).
Dumping people in low wage jobs from the centre of London out to the very edge simply adds a travel problem to a cost of housing problem.
Graham Evans might like to check the annual season ticket costs from Havering, Waltham Forest, Essex, and Hertfordshire to a low paid join in central London and explain how he you could afford it.
He might like to calculate the additional child care costs of extra hours of travel time at either end of the day.
John, before you accuse anyone who mentions “supply and demand” of “deliberately or unwittingly promoting this rightwing Conservative story” can I ask you to tackle the supply and demand argument head on, on its merits. If you can dispose of it, then maybe start impugning people’s motives or intelligence (but even then, what’s the point).
Are you saying that shortage of housing is not pushing up prices?
Are you saying that there is nobody who might be choosing between inner and outer London, enabling one area to soak up some demand in the other?
Greater London has a larger population than Scotland as imminent boundary changes will make clear, unless there are rebellions on the government benches. Other countries have built new towns, such as Brasilia. The Economist suggested Elizabetha in 1962, somewhere in Yorkshire. Labour dispersed government, although telephones and the internet reconnect it. The parliament building is rotting, something must be done.
The UK has a crude surplus of housing, as Tim Farron said at conference, but, of course, people are free to move, for instance for jobs. Derelict coal mining villages have no alternative employment and may be at risk of subsidence. Northern Ireland has excellent housing, built to soak up unemployment, but needs more enterpreneurs.
There is a surplus of housing in the Irish Republic, which market forces have not corrected.
One solution is obvious – get a better Mayor.
Joe Otten
I was not impugning anyone’s intelligence. LDV has many, many examples of intelligent people making poor judgements and following the wrong politics.
To answer your questions —
Supply and demand in housing is not a simple matter.
In London in 2015 we have large numbers of people living in appalling conditions, seven to a room in a rented basement was one of the stores to hit the headines in the last few days.
We now regularly see reports of councils such as Newham selling off entire council estates, shipping out the residents, and selling the land to a developer who replaces social housing with developments aimed at the rich.
These are examples of ‘supply and demand’ working.
Do you call it “working” when it is making people homeless, breaking up long established communities and families?
You ask a question about people “choosing between inner and outer London” as if they are making a choice between a chocolate biscuit or a piece of cake.
I have never met anyone who has said they prefer to share a room with six others in a basement with no natural light rather than buy a £16 Million house like the man who owns Chelsea Football Club.
Have you?
This brings me on to your question about increasing prices. Many of the highest prices are quoted for glitzy riverside flats in gated developments, built and sold off plan to people who live in the far east, who never actually come to see their “investment” in the UK. The flats remain empty (neither sold, nor let) because they form part of the new ‘buy to leave’ market. They push up the prices elsewhere, reduce the land available for more beneficial developments, whilst not providing a home for anyone. Is this ‘supply and demand’ working ?
Simplistic notions about ‘supply and demand’ might be fine in a discussion group in the dafter corners of a Conservative Party fringe group but they conveniently ignore the facts of life.
Here we go again. There is a housing shortage and out comes the lazy assumption that simply watering down the planning system will solve all ills. Not even the house builders are now pressing for any major change to planning rules.
Those who simply call to ‘build more’ would do well to think about who is going to build these houses and out of what.
Labour supply and skill shortages are the main factors inhibiting housebuilding, as to an extent are increased prices of materials. This report from construction industry consultancy EC Harris illustrates the problem: http://www.echarris.com/pdf/People%20and%20money%20-%20fundamental%20to%20unlocking%20the%20housing%20crisis.pdf
The industry has a capacity and is pretty much using it, so anything extra has to come from the state providing money and land and encouraging an adequate supply of trained labour, whether home grown (and so long term) or by attracting skilled workers from elsewhere in the EU.
Mark Smulian
Here we go again. There is a housing shortage and out comes the lazy assumption that simply watering down the planning system will solve all ills.
Yes, and even with the planning system we have, you will find that almost any big development will be met by howls of anger from local residents angry at open space and green views being destroyed. This is what I remember from the time I sat on my Borough’s Planning Committee – so many times you had to slink off at the end, trying to avoid the angry locals gathered outside accusing you of having been “bribed by the developers” for ignoring them. The reality is that the planning system is not nearly so tight as many imagine. You cannot vote against planning permission unless you have legal grounds to do so, otherwise your decisions get overturned and costs the borough legal fees, so most times on controversial developments the officers’ advice was “you have to give permission as there’s no legal grounds to deny it”.
So why do those who blithely talk about scrapping the green belt suppose this is an easy-peasy solution which will bring popular rejoicing?
If we are to protect green land, then we need to make more efficient use of the housing stock and land we already have. Yes, this does mean measures to discourage holding on to property you don’t need as an investment. Sure, this too will lead to the howls of anger, and the idea that somehow it is an attack on “aspiration”. But since the building on the green belt option is just as unpopular, and among much the same people, we need to be tough and put it as a choice, one or the other. And I prefer the redistributive option rather than the environmental destruction one.
@JohnTilley
You’ve fallen into the trap of the straw man argument- i.e. trying to claim I have advocated a view which I actually haven’t, and then devoted your energies to attacking that view. I’m sorry my attempts to highlight how unfeasible Stephen Knight’s suggestions are upsets you so greatly, but perhaps you should spend some time understanding the tax system around the property system.
You have not actually managed to show how a single point I made is incorrect, nor have you offered anything aside from ideological rants. I also don’t think you realise that all of the tube stops in Waltham Forest are no more than 20 minutes from central london (quite possibly less), with the fares being far lower than an equivalent national rail fare elsewhere in the country would be. Similarly for Essex- mostly not more than 30 or 40 mins out, a perfectly normal distance. Significantly less if you are commuting to somewhere like Canary Wharf. As for Hertfordshire a quick morning jaunt from Watford to London and you’ll find the journey is achievable in sub 20 minutes. This is before we even get to London’s excellent bus network or the Overground.
Practicality matters. Let’s have more focus on that, less on the tribalism.
The operative words should be “Affordable Housing”…..Council Housing is the only answer and councils should be able to take on loans and build such homes but, as long as there is a ‘right to buy’, councils will not/can not take on the task….
Private builders have no obligation to do anything more than make the biggest profit and with the ongoing escalation in house prices they will build to attract buyers at the top end of the market….(I know of a small plot of land, in Dorset, on which five houses were built. Large houses with small gardens, selling for between £550K and £700K..They were all sold before completion)….
I do not accept there is a shortage of skilled labour; I advertised for a builder to put in an extra bathroom and had six builders after the job….
The massive post war building programme needs to be replicated otherwise the problem will continue to worsen….
John, thanks for offering to answer my questions, but your comment seems to have got cut off during the ranty bit before you got to the answers.
As with other I am disturbed by the characterisation of Housing Associations as “public assets” they are not, they are private institutions (yes mutuals are private) with a public good that does not give the government ownership of them and the government should be prevented from interfering in the activities of public good entities as if they owned them. It is interesting how Brownite the Conservative government is on certain issues.
Though the point that the Government right to buy is wrong is correct if for the wrong reasons.
While we are on the inaccuracies:
“It was the introduction of ‘Right to buy’ by the Thatcher government of 1979”
Thatcher amended the right to buy, she did not introduce it. You could buy your council house under Labour but you didn’t get the same discount and the revenue was properly used.
Also:
“It is the legacy of this policy that has left us with a massive under-supply of new homes over the past 30 years.”
I’m curious as to why there is no mention that since 1979 the Green belt has doubled in size, so actually the Thatcher era government did restrict supply, yet this is not some on here feel the need to criticise her for… I wonder why?
“This is at a time when we need a massive supply of extra affordable homes”
Not just affordable homes, London will pass its historic peak in population size yet some seem to believe that this historical massive population can be accommodated in a housing stock that they don’t want to allow to expand.
Interestingly Stephen Knight seems to miss some obvious policies that could be proposed:
1 Tax reform – Land Value Tax, encouraging more efficient use of what already exist with lower dead weight cost than other taxes it could replace; abolish Stamp duty to encourage increased moving to make better use of available stock.
2 Investment in the infrastructure of the North (as has been discussed elsewhere is now facing further delays) and other potential cluster areas; to create alternative magnets of population internal migration.
3 Relaxing the Greenfield restrictions that strangle further house building.
Sammy O’Neill
“Practicality matters. Let’s have more focus on that, less on the tribalism.”
Wooow, if we go down that path we may end up with policy based upon fact and reason, dangerous thinking indeed.
Expats: “I do not accept there is a shortage of skilled labour; I advertised for a builder to put in an extra bathroom and had six builders after the job….
I was taught at primary school not to argue from the particular to the general. Just because something happened with your bathroom it does not make it generally true.
The construction industry has for at least the last 30 years struggled with skilled labour shortages other than during the depths of recessions.
It simply does not have the labour needed to meet current demand. never mind doubling the output of houses.
Try reading the report linked my earlier posting if you still don’t believe this.
expats
“Council Housing is the only answer”
I disagree, Housing Associations are an option and one I prefer HA to Councils as you have fewer conflicts of interest and you could see more experimentation. The obsession with Councils running everything seems to emanate from people who have run councils and have overconfidence in their ability to deliver the best of everything.
“I do not accept there is a shortage of skilled labour; I advertised for a builder to put in an extra bathroom and had six builders after the job….”
Your experience is in a situation where there is very low house building nationally, if it were scaled up there would be skills shortages, but the only way to address that is to start scaling up and providing training.
“The massive post war building programme needs to be replicated otherwise the problem will continue to worsen….”
I would agree with the scale of what needs to be done but perhaps to “sell” the idea showing what can be delivered now (we could make houses of much better quality) rather than harking back to that time as some of us have some rather bad memories of certain post war housing.
Given that, as several posters have pointed out, Housing Associations are not public bodies, is it not feasible to challenge this new “sell-off” policy in the courts? Has any government any right to pass legislation that forces a private landlord to sell property it owns to a tenant at less than the market price?
I would like to see a comment on this from one of the (no doubt) many lawyers who follow LDV.
Denis Loretto
Not claiming to be a Lawyer but one of the faults of the UK system is the lack of proper constitutional protections so any government could pass legislation to do whatever it wants, in this case violating the private property rights of socially focused independent bodies.
The worse you will get is a finding of failure to follow the proper procedure in a Judicial Review (which is being restricted) which would only result in retaking the decision again according the correct procedure.
It is a political problem so legal restrictions are not a useful tool.
We should push about how this interference with private property rights will adversely impact on the incentives to invest in housing, in particular by HAs but also if we were to try to get a better managed private rented sector (copying Germany) this activity would increase risk and therefore harm investment.
Trying to sell something you do not own is fraud or theft.
I think if we taxed multiple home ownership hard, many of these issues would dissipate. There is little more galling than the government giving away cut price houses in a market where so many are denied the opportunity to buy, it’s just not fair!
Mark Smulian
The construction industry has for at least the last 30 years struggled with skilled labour shortages other than during the depths of recessions.
It is curious that we are facing a skills shortage in so many areas. As someone who teaches computer programming at university I have discovered this myself – there is a huge shortage of people with that skill, anyone who gets a good grade in my module has a job waiting for them. The job will be better paid than mine, certainly after a couple of years (I’ve been doing mine for 25 years), which is why there’s a huge shortage of people like me who are able and willing to lecture in it (my department has been trying to recruit someone else to do what I do – and has been unable to do so).
To me, a big part of the issue is this constant message pushed again and again by those in control of our society, in government and in media, that the only acceptable way to be successful is to be “aspirational” and to be an “entrepreneur”. And this is assumed to mean being pushy and self-centred and having the gift of the gab. So what we are ending up with is a situation where young people are trained to have a sort of salesman’s attitude, but not to have the sort of quiet self-discipline which is needed to acquire practical skills, whether they be computer programming or bricklaying.
The sort of narcissistic gabby attitude which it is considered so essential to have these days, is actually a damaging attitude for most jobs. This is a message I am getting again and again from employers – so many young people they recruit have this “attitude” problem which makes them very poor employees. So they find the best employees are people who come from other countries where there has not been this constant pushing of the “entrepreneurial” ideal that we have had in this country now for 35 years.
We can see where this is leading to in this country, where we have a huge productivity problem, and an unsustainable need to bring in a new generation of immigrants to do essential jobs for every generation of people brought up here who can’t or won’t do those jobs.