Cast your mind back to last July. Remember the pledge from Keir Starmer to be a “government of service”?
Many people in July 2024 were hoping for more from the Labour government after the nightmare years of Conservative administrations failing to provide enough truly affordable homes and allowing developers to cut corners when it came to paying for the infrastructure needed to support new housing.
Well, if the recent leaked memo becomes national policy this government could be shaping up to be even worse than the Tories!
A Labour government memo is looking at slashing developers’ affordable housing and infrastructure contributions.
As I and my fellow Lib Dem members of the LGA’s Inclusive Growth Committee argue in the letter published by The Guardian today, “It’s a slap in the face for people who are crying out for homes they can afford to live in”.
It would fail to be the “government of service” promised in last year’s optimistic pledge by the Prime Minister – unless of course you regard lining developers’ pockets as a service.
You can read our letter in full here.
* Cllr Carl Cashman is the Leader of the Opposition on Liverpool City Council and is lead LGA Lib Dem Group member on the organisation’s Inclusive Growth Committee.
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39 Comments
The number of Labour Councils who have settled for cosy relationships with developers over recent years should have alerted us to what we might have expected from a Labour government.
I find the whole idea of building new houses, which are build to be ‘affordable’, strange. We don’t take the same approach with cars – I have never bought a new car because I find the cost of new cars unaffordable. I buy second hand because they are cheaper – that’s what makes them affordable to me.
I understand that a young couple starting life together will usually prefer to buy than rent, but why the expectation that they will be able to afford to buy brand new? As developers build new houses, people will be tempted to sell their existing property to move to a new one, allowing some other owner to also move to what they will see as a better house. At the bottom of this chain, a first-time buyer will probably buy an old single bedroom flat and thereby get themselves onto the property ladder. By all means let us help first-time buyers make that first step to a second hand house, but why is the focus always on helping first-time buyers buy a brand new house as their first house?
@Jean I totally agree with the thrust of what you say but sadly I doubt many people see new houses as better than old ones. I’m in the process of moving to a much older house which I hope is better built than my current one. The requirement to build affordable homes may be a significant factor in the poor quality of modern new build.
I am pleased there is reference to new homes rather than just houses. In my view the emphasis needs to be on switching away from houses, we need to be building well designed apartment blocks….and these new homes need to be for rent.
But as mentioned, none of this is of much use if the infrastructure in all its forms is not provided too. It’s always promises, promises. No strategic thought and no attempt to address local needs. Thus creating homes for people who are not local solves nothing locally.
The reality is that the Labour Party simply does not care.
Sadly the link to the Guiardian doesn’t work!
Presumably the reason the Government are doing this is because they believe the current requirements for numbers of social homes are causing a lower number of homes to be built overall. If that’s the reasoning then there would be some sense in what they are doing, since the main reason house prices are so unaffordable is that there aren’t enough homes for all the people who want/need them. So if you can get enough houses built, that would naturally lower the market price for both buying and renting, and therefore reduce the need for social homes anyway.
Ultimately if – say – you can build 10 homes, none of them subsidised, you’ve done more good and helped more people than if you build 5 homes with one of them subsidised to make it ‘social housing’.
The idea of having just some “affordable” housing which is somehow held at below market prices is flawed. The government can try to find ways to prevent properties being resold or re-rented at full market prices; but, equally many less unscrupulous lucky beneficiaries of more “affordable” prices will be doing their best to find ways around any barriers. The problem of informal, and often illegal, sub-letting in London is particularly acute.
The promotion of some “affordable housing” is little more than a PR exercise by various Govts in collaboration with the bigger developers in an attempt to be seen to be trying to do something positive.
The only way to actually make housing more affordable for the younger generation is to make all housing more affordable for everyone. This requires either all prices to fall or all incomes to rise substantially whilst keeping prices from rising. Neither are likely to happen any time soon.
Governments are actually quite scared of a collapse in house prices and will move to try to prevent it happening. There are reports than government is considering removing stamp duty which is a sign that they could be more worried than usual right now. The high price of housing is the collateral for a sea of private debt which keeps the economy functioning as it does. Take that away and the high level of private debt turns into a high level of bad private debt which could cause another 2008 style crash.
should be “more unscrupulous”
@Mick: I believe this is the full letter: https://lb2.local.gov.uk/lga-libdem-group/our-press-releases/guardian-letters-editor
It is interesting that in a LibDem blog on housing, no-one has mentioned the council housing being built by a number of LibDem authorities. Kingston and Eastleigh are 2 such examples. OK it is small scale so far, but it’s a start. Surely we should be giving information and encouragement for other LibDem run authorities to do likewise?
In an overheated housing market, where prices are generally too high for first time buyers in many parts of the country, local councils and housing associations should be building affordable homes for rent.
In the UK we have an obsession for home ownership. In other parts of the world, renting plays a much higher part in the housing market and many people, even the pretty well off choose to live in rented homes. Whilst lower costs affordable homes are very desirable, surely we should be focussing on getting people in homes they can afford, rather than pretending that private developers will provide the solution?
Let’s not forget that all the alleged problems of planning are an invention of house builders. There is stacks of land with planning permission that isn’t being developed because builders can’t make huge profits on it.
I’m not sure if Mick’s use of the term is deliberate but yes, in addition to building social homes for those on the waiting list, they should be building affordable homes to rent for those singles and childless couples who will never make it to the top of the waiting list and can’t afford to buy even on an ‘affordable’ scheme. At high density, with the prospect of commercial rents and no threat of losing them to right-to-buy a council could afford to build high quality, thermally efficient homes along with the infrastructure to create neighbourhoods.
Peter Martin is absolutely right to put “affordable” in quotes, and to point out that it is little more than a PR exercise. Some years ago, some intellectually dishonest wonk came up with a definition of an affordable rent as not more than 80% of market rent. A moment’s thought shows that if market rents have spiralled out of control, 80% of market rents will also have spiralled, just not quite so much.
Any meaningful assessment of affordability must relate to incomes, not market rents.
If the Conservatives under Macmillan could build half a million (solid and decent) council houses in a country that was still ravaged by the war, I really do not understand why it is now regarded as impossible, except that it would involve giving those Nasty Local Authorities the sort of freedom of action that gives the Treasury hives.
Mick Taylor – not sure what Lib Dem Blog you refer to but plenty of examples of Lib Dem councils providing more council houses (among other areas of work) can be seen in this publication: https://www.local.gov.uk/publications/liberal-democrat-achievements-local-government. Portsmouth for example is increasing its council housing stock – 600 units so far and growing!
@RobBanks. I was, of course, referring to LDV and the article by Carl Cashman. Happy to know of more councils doing the right thing.
It is surely time for the government to change the definition of ‘affordable’ linking it to wages, not to property prices. I recall a somewhat heated debate on a street in Welwyn Garden City after a community event, with the then secretary of state for housing and local government Grant Shapps when the new definition was being introduced under the coalition government (shame on our then MPs for allowing it through, although hopefully there was a ‘win’ elsewhere to ‘balance’ it).
I also recall that in the assessment of housing needs for our current local plan there was an assessed need for 75% of our new housing to be affordable given the unaffordability of housing in the southeast. Naturally this was ignored (by the Tory-led council) as being ‘impractical’.
The whole idea of right to buy was completely wrong like most of the other Thatcherite policies. Council houses and flats were great for young people and made it easy to move areas for better jobs etc. Tennant’s could then move into the private sector when they could afford to and were settled.
There seem to be two major problems over housing provision – not nearly enough houses being built at all, and not nearly enough that are affordable to people with modest incomes. Would not both problems be helped if modular factory-built houses of different sizes were provided by councils and developers? I have heard that somewhere in Germany shipping containers have been converted into acceptable homes, and here prefabs have been used for holiday homes of various kinds as well as offices. Variety of provision would seem a good idea, especially for young people.
@Katharine: Modular houses sounds an excellent idea. It’s in part what the Government did post-WWII to get lots of houses built quickly, and although I’m not an expert, a quick Google suggests they are cheaper to build than normal houses and still good quality.
Ultimately there are two big restrictions that put a floor on house prices: Firstly, the market will always price to match supply and demand, and it’s basically impossible to avoid that, not matter what the Government does. You want cheaper houses, you have to increase supply by building more of them.
Secondly, you can’t expect developers or anyone else to sell new houses for less than it costs to build them. If you demand that companies do that, no-one will want to build anything – which is probably why the Government are trying to reduce social housing requirements.
If modular houses allow more houses to be built more cheaply, that would help to lower both of those ‘floors’ on house prices.
@ Katharine,
Of course the government can provide the necessary housing if it wants to. It pretends it does, but does it?
The government could do what it did in the immediate post war period by buying up agricultural land at agricultural prices. 20% or so could be added if the government wanted to be generous. The money could either be created or borrowed via the creation of gilts. Maybe a special bond could be set up to encourage young people to save for a deposit risk free.
The Government could issue tenders for the building of the houses, and the necessary local infrastructure, which would be sold or let on completion. Given the pent up demand for housing it would be just about impossible for the govt to lose out on the deal. Profits could be returned to the Treasury for the next round of building.
So if it doesn’t cost anything and with competent management should easily make a profit, what’s the problem? I would say that the government doesn’t really want to see lower house prices. Has anyone got a better explanation?
@Peter Martin: Yes the UK Government could do that. Building new towns on that basis has worked in the past and could again. They could also change local government financial rules to allow and encourage them to do the same on a smaller scale.
Prefabrication has particular advantages in the UK. We have very few people who can or want to build homes and plenty of people who want factory jobs. What is more the people who want factory jobs don’t for the most part live in the areas of greatest housing shortage and couldn’t afford to move there.
Our housing crisis does make you wonder whether legislation is required to bring house building into public ownership or at least to create public interest non profit making organisations, at least until no-one is homeless because there are not enough homes.
@Peter Hirst: Don’t confuse builders with developers. There are already too few developers without merging them into one nationalised company. Adding the UK, devolved and local governments would be a move in the right direction. Building is already a working market and we should do nothing to break it.
Thanks for your interest in the idea of modular factory-built housing, Simon R., and I also like the interesting takes of the three Peters above. I am going to look again at our party’s housing policies, and see whether they might possibly be extended at the next conference. Basically, there has to be greater supply, and I would think there would be no difficulty in selling or renting decent-looking modular houses, provided the necessary services were linked to them.
Having lived most of my working life in excellent Milton Keynes, I am an enthusiast for well-planned new towns, even if others can’t now match what the Development Corporation achieved so effectively there. But I would like to know what some of our councillors would think of maximising supply by the means discussed here.
Hardly a mention about local authorities and the pressure they are under from immigration in regards to housing. And you wonder why Reform are topping the polls.
@Peter. There is one big problem with your idea of buying up agricultural land for houses: with climate change and geo-politics, we need to produce more food, not less.
Though I doubt that bothers the UK government, given it thinks wildlife is an obstacle to Progress and farms a tax cash cow to be milked.
Relying on big developers to build lots of house that will bring prices down is a vain hope. They have already shown that they prefer to landbank homes with planning permission to keep prices up.
I can remember when the local council I was a member of was building council housing. The council would draw up a specification of the houses they wanted to build and invite tenders from builders and would, usually, accept the lowest tender. The work would be supervised by council building inspectors. Of course big builders didn’t like this one bit and lobbied, successfully, to be allowed to build houses on their terms. That meant they build executive homes where big money could be made and found all sorts of excuses not to build more affordable homes.
Councils were ‘persuaded’ to transfer their homes to housing associations – though a few did not – and council houses almost ceased being built. Housing associations do build some homes, but never enough to satisfy demand.
Councils now need the power to force developers to build the homes they have permission for and if they don’t then the councils should be able to compulsorily purchase said land and develop it themselves.
Oh, but that will upset powerful and wealthy people. Clearly Labour won’t do that, so we must.
@peter Martin – “ The government could do what it did in the immediate post war period by buying up agricultural land at agricultural prices.”
Sometime back I did the calculations to support the number of houses at current densities plus land for industry/business/shopping etc. the government would need to purchase the whole of Northamptonshire, Buckinghamshire and Oxfordshire… However, that would only be sufficient to handle the current supposed shortfall, ,whilst these houses were being built (over several decades) the government would have to purchase further counties, given current levels of immigration, that’s effectively one county every decade.
Basically, attempting to build the number of houses we supposedly need is an exercise in stupidity and denial of reality.
One seemingly plausible argument is that the UK’s problem of high housing costs is a consequence of a relatively high and growing population coupled with a lack of available space.
So, on this basis, would we expect a country like Australia with its far lower population density to have the same crisis?
https://www.bbc.co.uk/news/articles/c9vg923vkdko
@Cassie I’m not convinced that the requirement for agricultural land will trump house building. We do need a land use strategy as long argued by people like the Food Farming and Countryside Commission (see their Multifunctional Land Use Framework) as well as environmental campaigners across the board. Currently far too much of our land is used for the production of livestock, and too little for fruit and veg which is far more efficient in terms of calories per acre. In order to meet the challenges of the climate and nature crises as well as the housing needs we need joined up thinking.
@Roland. If Northamptonshire were developed to the same density as Greater London, it would house about an extra 12m people. I’m not sure why you would need to use Oxfordshire and Buckinghamshire.
@ Roland,
We probably should build more flats and if necessary as tower blocks to avoid the Urban sprawl you are obviously worried about. They are popular at the top end of the market and we have to make them work for everyone too.
@ All,
There doesn’t seem to be much disagreement that the reason house prices are so high is because they’re fuelled by private debt. Government intervention mainly isn’t to make housing more affordable — it’s designed to let people borrow more and take on even greater debt. The law of supply and demand in the housing market clearly isn’t working as it many believe it should. If higher prices created a greater supply we wouldn’t be having this conversation.
The emphasis is far too much on the extent of government debt. That can be a problem if it leads to inflation but it doesn’t lead to the kind of crisis we saw in 2008 when high levels of private debt turned into high levels of bad private debt. Price bubbles are likely to burst again on a worldwide scale. There’s probably not a lot that Rachel Reeves can do to prevent it but running an overtight fiscal policy will certainly make the effects of it worse in the UK.
“Price bubbles are likely to burst again on a worldwide scale”. So we need to ask how do you get the air out of a bubble without bursting it. I think the rate that house prices can fall without creating negative equity is about 2% in absolute terms. That’s currently about 6% in real terms but government doesn’t have the sort of fine control that would let them keep it constant. Markets tend to panic and exagerate any movements. A long term program of building homes faster than population growth should bring fairly gentle falls in real terms but we should probably start by getting rid of right to buy and all the schemes to encourage debt financing of house buying.
“. I think the rate that house prices can fall without creating negative equity is about 2% in absolute terms. That’s currently about 6% in real terms”
I’m not sure it is. When we, the post war generation, bought our houses, in the 70s, we we lucky enough never to have to worry about any kind of negative equity. The idea was to financially stretch as much as possible and let inflation whittle away the value of the loan. This was far more important than any reductions in the principle due to repayments made. In addition the price of housing was rising steadily so most of us managed to sell at a profit and repurchase something better after a few years.
This led to the process of house buying becoming known as a ladder. It’s not a ladder any longer – especially if the price of housing starts to fall. Even by 2% p.a.
Another reason for high prices is that land owners selling land to developers set the selling price based on the number of building plots multiplied by the expected selling price. This means that the developer has a set price they need to sell the houses for to break even let alone make a profit taking into account the cost of land, cost to build and cost of interest if they have borrowed the money to buy the land plus of course section 106 money.
Also I note that no one has mentioned the great increase in net inward migration under the Blair government. Even if you are in favour of freedom of movement allowing net inward migration at a significantly higher rate that new homes being built was asking for trouble in the form of rapidly increasing house prices. Advocating for a policy which allows unrestricted net inward migration when there is already a house affordability crisis and no prospect of increasing home supply at a higher rate that home demand is asking for even more trouble.
The crisis in the housing market evidently demands more urgent action now from government than their attempt to speed up planning. It’s reported this month that even the number of housebuilders nationally has fallen for the first time in a decade, apparently linked to the close of the Help to Buy scheme in 2023 and rising mortgage costs reducing demand. Government plans for 1.5 million new homes and our own policy especially concentrated on provision of much more social housing are threatened.
They and we are looking for the building of at least ten new towns, and it seems that the position of a first three has been determined. In the need for government intervention now in securing sites and facilitating rapid new housebuilding, surely factory-built modular housing should be an important part of the mix, whether undertaken by development corporations, developers, councils or housing associations or them all, to produce thousands of well-sited attractive but affordable homes within the next couple of years.
@Peter Martin: When you buy a house, you need a 5% deposit so you start with 5% positive equity. each year, the amount you repay goes up a little and the size of your debt goes down a little. If the value of the house is declining by a fixed proportion x% each year then the absolute value of your loss goes down each year too. There comes a point where your loss each year is less than your repayment and your equity starts rising again. There is a value of x for which your minimum equity would be 0%. This depends on the mortgage terms but I believe it is currently about 2%.
As I said, Govenment does not control house prices directly and they wouldn’t know where to start to keep house price inflation at precicely -2% across the country year after year. Mortgage lenders would probably increase the required deposit or increase repayment rates if house prices stopped rising and that would reduce prices further.
Negative equity of course does not mean you lose your home. It just means you find it very difficult to move for a few years. Even if you have positive equity, moving home is extremely expensive so moving up the ladder after a couple of years is really no longer an option.
Jean you are sweet but a bit behind the times most older properties are being snapped up by buy to rent landlords converted into HMOs who charge extortionate rents for a single person bed space and a shared kitchen and utilities. This in turn is inflating house prices for first time buyers and renters . System built housing reserved for social housing use is the only real solution.
The conversion of family homes into HMOs is not the cause of high rents, it’s the result. The extortionate rates charged for them are still the lowest available to single people who don’t qualify for subsidised rent and can’t afford the deposit for subsidised buying.