Kevin Gulliver details the flawed concept and execution behind the government's new housing strategy, but welcomes the desire for stimulus which lies behind it.
Yesterday the coalition government launched its much delayed housing strategy purporting to ‘get Britain building again’. In fact, it is far from strategic and is effectively a list of policy rehashes, previously announced initiatives and last minute add-ons.
Even worse, it largely ignores the fundamental needs of the national housing system which centre upon under-supply of affordable housing over the long-term, an attachment to home ownership verging on the irrational, a dysfunctional planning framework, pervasive nimbyism and residualised social housing since 1979.
Yet ‘laying the foundations’ is interesting politically since it is the first sign that the government is spooked by the flatlining economy and the failure of public spending cuts to tackle the deficit and ‘re-balance’ the economy towards private sector investment and employment.
As anæmic economic growth erodes revenues to the exchequer and unemployment rises, the government clearly acknowledges the need, even if implicitly, to use house building as a means of injecting some investment capital into the economy.
That the prime minister and deputy prime minister launched the housing strategy and wrote its foreword, and that communities secretary Pickles was the main media spokesman, leaving housing minister Grant Shapps with a bit-part role, indicate that it is an attempt to demonstrate action in the face of dire economic statistics.
For those who champion housing investment this is a welcome recognition and helps housing climb up the political agenda. The housing strategy is pretty thin gruel though and sidesteps any attempt to tackle deep-seated housing problems that go back at least thirty years.
On the positive side, there are measures to boost house building including self-build (although how much of this housing will be ‘affordable’ is open to question) and to bring a relatively small number of empty homes back into use. On the negative side, it fails to learn the lessons so ably taught by the credit crunch and its continuing aftermath.
The housing strategy’s centrepiece is its proposal to introduce a mortgage indemnity scheme, under-written by the house building industry and ultimately the state, to enable first-time buyers to access 95 per cent mortgages. Coupled to more generous discounts to council tenants through the right-to-buy, previously announced at the Conservative Party conference, the government’s aim is to kick-start a floundering housing market through an influx of new buyers.
As some commentators have pointed out, much of this policy development stems from successful lobbying by the house building industry, which will be the main beneficiary.
Even the Daily Telegraph caricatures the indemnity scheme as a ‘Freddie Mac, Fannie Mae’ retread and a return to sub-prime lending. This is evidenced by how close 95 per cent mortgages are to negative equity at the moment; recent studies have shown that 360,000 households who bought homes since 2007 are now in negative equity.
What’s needed is a real housing strategy that recognises homeownership reached its zenith in the mid-noughties, that social housing needs to be revived and that the UK has under-performed as a house builder; both quantitatively and qualitatively.
The transfer of state subsidies away from bricks and mortar to rents in both the social and private sectors since the Housing Act 1988 has a lot to answer for.
Today’s housing benefit bill to the tax payer stands at more than £22 billion annually – twenty times higher than in 1979 – while public investment in social housing has halved over the same time frame and is now less than one quarter of rent subsidies. Only partial replacement of social homes sold through the right-to-buy has also contributed to an unbalanced housing system.
A return to publically funded housing investment would enable more homes to be built, see less public money going into the pockets of private landlords and financial institutions, which have lent £38 billion to support housing association development plans since 1988, ensure greater employability of tenants through a reduced poverty trap, and their increased mobility without relying on Grant Shapps’ preferred methods of mutual exchange or house boats.
The UK must also find ways of reducing the often pernicious effects of the home ownership market on the wider economy and as a generator of household debt.
There are ways of widening asset ownership, through community mutuals for instance, without coercing people into unsustainable home ownership. But this will need a government with the courage to promote new housing and ownership models against the backdrop of the British love affair with home ownership; in other words, not very likely.
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• Inflation is worse for the worst off – Alex Hern, November 6th 2011
• Livingstone: Taking action on London’s housing horrors – Ken Livingstone, October 24th 2011
• ‘Back of a fag packet’ housing policy continues – Kevin Gulliver, October 3rd 2011
• Social housing needs a ‘New Deal’ – Kevin Gulliver, September 28th 2011
• Why isn’t Boris coming up with any solutions to London’s housing crisis? – Jenny Jones AM, September 9th 2011