It’s never easy doing politics in the Local Government Association. Some commentators carelessly say that it is ‘Conservative-controlled’ because the Chairman, elected under carefully balanced internal horse-trading rules, is at the moment a Conservative.
But in reality it is a perpetual coalition, with each of the four political groups having a veto on the association’s public stance. This applies to any issue and to any press release.
So it is good to see that the LGA has now published a statement on the Housing and Planning Bill, even if the …
I made it clear over the summer and in my conference speech that housing and homelessness would be a top priority for me as leader. I said we would oppose the Right to Buy extension to Housing Associations and fight the Government tooth and nail in the Lords.
The fight is now well underway. I have been speaking in Parliament and will continue to lead our campaign in the House of Commons. After Christmas the legislation will be debated in the Lords, where our Lib Dem team will aim to cause the Government serious problems – which they have shown us in the last few weeks that they can do!
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.
Housing is Londoners’ top priority according to the polls. Not surprising – with problems ranging from the cost, to shortage and too often to the quality too.
Yet the Conservatives’ lead housing policy – to extend the right to buy to housing association tenants – will solve none of these London housing problems: we should make attacking it a Lib Dem campaign priority for next year’s GLA elections.
Today there are more affordable products than ever. Not only have freer markets driven down prices on almost every consumer good imaginable they have expanded range. You can get more luxury goods than ever before but you can also get more discount/budget goods. Electronics, clothing, food, beauty products, household items, I could go on… And yet we are experiencing a so-called ‘Cost of Living Crisis.’ This is a fundamentally dishonest way of framing the debate about cost of living today. There is no ‘cost of food crisis,’ no ‘cost of washing machines crisis,’ and no ‘cost of clothes’ crisis. The only thing that is more expensive is housing.
Housing outside London is 35% more expensive than its equivalent in wider Europe according to a new study, ‘The impact of the supply constraints on house prices in England,’ set to be published in the Economic Journal. This is certainly not due to a lack of enfranchisement. Like everything else credit and mortgages are cheaper than they have ever been due to interest rates being kept artificially low. So what’s the problem? According to this paper, houses are too expensive because the supply has been needlessly cauterized. The UK has suffered from dysfunctional housing policies since the aftermath of WWII. However, the seeds of this dysfunction were sown even earlier. The Town & Country Planning Act 1947 deepened this dysfunction and houses are meaner in size and shorter in supply than they ought to be directly because of this legislation and its subsequent incarnations. The supply issue was subsequently worsened most notably under Thatcher and Blair.
I missed it yesterday, but have just caught up with Lib Dem chief secretary to the treasury Danny Alexander’s (rather flailing) attempts on BBC Radio 4’s Today Programme to justify the second stage of the Coalition’s ‘Help to Buy’ scheme for folk wanting to buy their own house. You can listen to it here or below.
There are two stages to ‘Help to Buy’. The first, announced by George Osborne earlier this year, offered anyone purchasing a newly built home costing less than £600,000 the opportunity to apply for a 20% government-guaranteed loan with just a 5% deposit. The Economist explains the rationale:
The basic economic thrust makes sense. Rental rates are high in Britain, meaning punishing payments to landlords. Given that a mortgage can be cheaper, wider home ownership could put more disposable cash in Britons’ wallets. In an economy where private consumption accounts for four-fifths of spending cutting housing costs in this way is likely to boost GDP. And since this part of Help to Buy is tied to building, it should work even if the new nests end up in the hands of buy-to-let landlords: a bigger housing stock should drive down rents, and provide jobs for the workers that build them.
The big problem comes with the second stage of ‘Help to Buy’, which breaks the explicit link with new-build housing. From this month, pre-owned property also qualifies. If widely taken up, it will stoke demand among eligible buyers but do nothing to increase supply: a recipe for house price inflation in many areas, especially London and the south-east. That will be good for the equity of home-owners like me, but rubbish for those not yet on the housing ladder who find themselves once again priced out of the market. Here’s The Economist again:
The prospect is unnerving, especially since the new part of the scheme may well distort banks’ incentives by driving a wedge between what they lend and the risks they face. With the housing market already rampant in London—up 20% annually in the trendiest parts of the city—and pepping up in the rest of the country too, Help to Buy is adding heat to a market that does not need it.
The Coalition appears to be banking on the winners from the scheme being happier and more numerous than the losers. Depressingly, there’s a chance they’re right. After all, Margaret Thatcher’s ‘Right to Buy’ did serious damage to the country’s social housing stock, but was (unsurprisingly) highly popular with those it helped. That said, the latest polling on ‘Help to Buy from YouGov suggests the public, post-credit crunch, is more alert to the dangers of house price inflation than it was: by 58% to 17%, voters reckon the new scheme risks creating a housing bubble.
Danny thinks it’s all worth the risk: “Our housing market has to be opened to a wider range of people,” he says. Don’t we all? The way to do that, though, is by increasing housing supply, not by the kind of blatant market-manipulation the Coalition (rightly) slams Ed Miliband for when he makes similarly ill-thought through promises to fix energy prices.
The Conservatives’ proposal to resuscitate the Right to Buy through increasing discounts appears to be an attempt to bask in some of Mrs Thatcher’s reflected glory. Unlike the 1980s version, though, Mr Cameron and Mr Shapps are emphasizing that each property sold will be matched with a newly built property at “affordable” rent. This is an attempt to head off criticisms that the Right to Buy reduces the supply of “social” housing. So, it would appear, this initiative could lead to a net increase in the housing stock.
Of course, things are never as they first appear. It is not yet …
Joe Bourke Public spending will need to increase at least in line with inflation but this will not provide for improved services or benefits.
To increase the level of pub...
Joe Bourke The above OBR forecasts expect a deficit of 5.1% of GDP. To increase public spending requires either idle resources that can be brought into use or competing wi...
Robin AG Bennett Will the City of Edinburgh Council be up to the task of enforcing the new law? Landlords who have responsibly sought planning permission for short term lets ha...
Peter Davies The last three major rail construction projects (HS1, Jubilee line extension and Crossrail) all brought the tunnelling in on time and on budget with everything ...
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