Lyons does 90% of the job

For housing development nerds the Lyons Housing Commission report, published today, is a cracking read. Commissioned by the Labour Party, and launched by Ed Miliband, it is a serious review of all the problems and challenges facing the Party if it is to achieve its ambition in Government of building 200,000 homes a year by 2020.

The report’s analysis is familiar. It sets out the failure to build new homes, which has now gone on for decades and which may take decades to fix. It lists the consequences for individuals: prices and rents rising faster than inflation and faster than incomes; and many people forced to rent privately and suffer insecurity when they would rather buy or rent from a social landlord. And the consequences for the country as a whole: volatility in the national economy and a serious drag on growth.

Lyons identifies two key causes of the crisis. First, not enough land is brought forward for new homes: he calls this ‘artificial scarcity’ which incentivises trading in land rather than building on it, and says that communities and local councils do not have enough powers to overcome it. Secondly, the capacity to build has shrunk: there are a small number of volume housebuilders and very few small and medium enterprises (SMEs) in the market, and the role of the public sector has been massively curtailed, with housing associations not managing to fill the gap.

To get a long term sustained increase, the report calls for ‘long term political leadership’ making housing a national priority. It argues for decisions to be taken locally but, crucially, ‘on the basis of clear commitments that housing need will be met’. That will not go down well in some places.

Delivery nationally will be through a new cross-Government Task Force and a beefed up Homes and Communities Agency (I’m not sure they’re up to the job) and the consolidation and devolution of existing funding streams to local authorities ‘in city and county regions’ – a vital step.

The land market gets a lot of attention. Lyons says it drives the business model for developers as well as restricting the flow of land for sites. Councils’ role should be strengthened and cross-boundary co-operation arrangements improved. It endorses Labour’s existing policies of the ‘Right to Grow’ and ‘Use it or Lose It’ calling for the ability to levy council tax on plots that are not built out and stronger back-up compulsory purchase powers.

Councils are seen as the key agents, with the report calling for them to take on a greater leadership role with stronger powers to act as lead developers. Housing Growth Areas should be established and a new generation of New Homes Corporations to act as delivery agencies, assembling sites and promoting infrastructure.

What gets built is also a crucial consideration. Homes are needed for people on all incomes and people of all ages. ‘Affordable housing’ it says ‘must be a priority for taxpayer funding as the fiscal position improves over time’, reflecting Ed Balls’ new fiscal stance – a key weakness of the plan in my view. The local authority housing revenue account borrowing cap will not be lifted but there should be ‘active management of the overall borrowing headroom by the Treasury’. That will require a revolution in the Treasury.

Lyons endorses the ‘brownfield first’ policy established by the last Labour Government but loosened by the Coalition. It also supports a new generation of Garden Cities, Garden Suburbs, and Expanded Towns, to be delivered by Development Corporations. Financial incentives and guarantees are proposed to help these new settlements get started.

The report contains a step by step ‘Road Map’ for the next Government to follow, including an early Housing and Planning Bill to bring in the various new powers relating to Housing Growth Areas, Corporations, compulsory purchase, unbuilt land tax, stronger strategic plans. Including a new ‘national spatial assessment’ within the national planning framework will also be an important step, but one that is more complex than it is made to sound. A lot will rest on the new Chancellor’s first Budget Statement which will have to deliver a raft of changes.

Despite the huge detail in the report and the careful consideration that lies behind it, it seems likely that the ensuing debate will focus on what will be done for first time buyers. This is a vital but not the only consideration: the obsession of the Government and the media with this one aspect of the housing market tends to distort policies in an unhelpful way (leading for example to demand subsidies which are self-defeating in the long term). Inevitably, Labour’s response to Lyons is also likely to have this focus, and the report makes some helpful proposals that a proportion of new homes should be ‘reserved’ for first time buyers for a period, and that sales to buy-to-let investors or speculators should be restrained.

For me the central debate needs to be around public investment. Labour’s commitment is to build 200,000 homes a year by 2020, and more thereafter. Even looking at the rather optimistic Road Map it is clear that some of the structural, legislative and cultural changes that are needed will take several years to deliver and more years to become effective. I doubt if a single home will be seen by 2020 from the Garden Cities programme, apart from the already-announced Ebbsfleet. The Treasury will need a bomb under it to take on the proactive role that is envisaged. There will continue to be resistance to new homes in many areas and the ‘UKIP factor’ – blaming housing shortage on immigration rather than housing market failure – has yet to peak. Even in areas where there is some commitment to new homes there will not be enough affordable homes.

The role of central Government grant is crucial in making sure that genuinely affordable housing – and by that I mean homes at target rents and not the Coalition phony ‘affordable rents’ – is provided in sufficient numbers. The report fails to meet the widespread demand for the ‘cap’ on HRA borrowing to be removed or at least raised, and instead goes for a more complex sharing arrangement and supports other models such as Local Housing Companies to increase borrowing for investment. But raising the cap and the other ideas for borrowing do not in themselves guarantee target rents, for that either grant or cross-subsidy is required. Here I think the report is weak and reflects the caution displayed by Ed Balls in his Conference speech and subsequently. It also in my view takes too benign a view of housing associations building for sale to cross-subsidise affordable homes; a good idea in principle but in my view many of the biggest associations are obsessed with growth for its own sake and not primarily as a mechanism to achieve more affordable housing. There is an important discussion of the downside of the ‘affordable rent’ model – higher rents leading to unaffordability and a growing demand for housing benefit – and the need for a ‘benefits to bricks’ policy. But ultimately the report fails to go where the logic of its argument takes it – there must be a significant increase in the level of Government capital grant if the Labour Party’s ambitions to build more genuinely affordable homes and to bring the cost of housing benefit down – are to be fully realised. Ed Balls promises that housing will have higher priority within Government capital spending, but we do not yet know how that will translate in pounds shilling and pence.

Leaving aside that central point, it must be said that Lyons has made a raft of recommendations that will assist Ed Balls – here is just a selection.

First, to review the wasteful and redistributive (but in the wrong way) New Homes Bonus. In my view it should be phased out and the money either restored to local government through general support or re-focused through additional housing grant.

Secondly, to ensure that the public sector benefits to a much greater extent from the increase in value of land following development. The report suggests mechanisms which will help ensure that the costs of affordable housing and infrastructure are covered by the uplift in land value.

Thirdly, it stresses that affordable housing is not just provided with the support from Government grant. It is also funded through planning gain, which has diminished greatly during the recession, and there are proposals to make the process of negotiating planning gain more robust. It considers how viability assessments should be conducted, a process used by developers to get out of their obligations despite growing (some might say excessive) profits. I am less convinced by the suggestion that there should be a new arbitration service between councils and developers (which looks like a recipe for delay rather than decisive action).

Fourthly, it supports ‘overage’ agreements, whereby the authority gains a share of the benefit of future value gains on the site.

So, in summary, my first reading of the report tells me that Lyons has done 90% of the job he was asked to do: he negotiates a practical route forward on most of the key issues. And the 10%? Unfortunately he falls into the common trap of using the term ‘affordable’ too loosely, often without definition. The term has become so debased under the Coalition that it is almost meaningless. He should have been more specific in his consideration of the need for ‘social rented’ housing and how much is required from grant and cross-subsidy to provide what is needed.

If the last Labour Government deserved around 4 out of 10 for its housing policies, and the Coalition deserves around 1/10, implementation of Lyons will push Ed Miliband’s Government up to around 6 or 7. It is a significant and welcome advance. But to go higher will require rather less caution from Ed Balls, and a very different view of the importance of capital investment with Government spending programmes.

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The dog that never barks – will housing feature in the General Election campaign?

The Party Conference season is over and now there is the long hard slog to the Election.

Housing – the dog that never barks in Election campaigns – was much discussed but no-one offered real hope of any transformational policies coming along soon. Once again, voters who care about housing will be left with trying to identify ‘the least worst’.

The Tories had nothing to say other than the usual rhetoric about the ‘home ownership dream’ and yet more subsidy for the sector. Apparently they still haven’t noticed that home ownership has been in decline for 10 years: they have no analysis of why that might be. They have nothing to offer the growing number of increasingly desperate private tenants except more of the same. For social tenants and would-be social tenants it is worse than nothing. Apart from a few brave people on the liberal wing of the Party, for example @WeAreBrightBlue , their desire to end traditional social rented housing  dominates their thinking. Osborne’s next round of cuts makes it likely that housing grant will be slashed again and the Housing Minister has started the softening up process on that.

For Labour, Ed Balls’ new fiscal stance - no more borrowing even for investment – caused endless confusion amongst Party spokespeople, even good media performers like Andy Burnham and Caroline Flint – who were ripped apart by simple questions from Andrew Neil about the differences between capital and revenue in relation to the deficit. Regrettably the policy also dented hopes that councils might become major players in housebuilding again. Housing will have ‘higher priority’ within the existing capital programme, but how high is high and what else will become a lower priority instead?

One bold policy – getting rid of the bedroom tax – has been seized on by the party and has been repeated so often it has now been noticed by the wider public. Another bold policy – to invest in a new generation of council houses – could have been an attractive part of Labour’s platform. Now we have to wait and see if the Lyons report has enough ideas to show how Labour might deliver the commitment to 200,000 new homes a year. The proposed private rented sector reforms – moderate and sensible but still subject to regular scare stories about ‘rent control’ – mark it out from the Tories. Maybe private tenants, amongst whom there is often a low turnout because there is so much ‘churn’ in the sector, are waiting to be inspired to register and vote. At least there is something there to campaign around.

I know how to secure a Labour Government. Give me control of the newspapers for 7 months and I would guarantee a romping victory. Labour needs bolder policies, that’s for sure, but the media narrative needs to be challenged. The spin that Labour did badly in the local elections and in this week’s by-elections, and that it is all down to Ed Miliband’s leadership, should be confronted. Labour needs a stronger narrative around the deficit – it isn’t the most important economic issue facing the country – and the 2008 financial collapse, which would have happened whoever was in power. Gordon Brown handled it brilliantly, and the Tories agreed with Labour’s spending policies up until then. Vigorous debate about policy is fine, indeed it is helpful, but recent personal attacks on Ed Miliband from his own side are unforgiveable. They only feed the media monster which is wreaking revenge for his courageous stand on media excesses and the Leveson reforms.

Do I have anything to say about UKIP? They are riding the wave of media fascination, helping create the story as well as reporting it, but UKIP are still the nasty end of the nasty party. They are tapping into ‘working class Tory’ views to broaden their appeal. Their only housing policy of note is to claim that the housing shortage and waiting lists are caused entirely by ‘immigrants’, and at the moment they are getting an easy ride for that message.

And on to the LibDems. Never has a Party created such a large gap between its own policy and its performance in office. I have argued before on Red Brick that the LibDem Party’s policy on paper is the best of all the parties. But their performance in Government on housing has been worse than feeble – they have been complete patsies, supporting bedroom tax, a 60% cut in housing grant, the virtual ending of social housing, unaffordable ‘affordable rents’, doing nothing on private renting, demand subsidies for home ownership, and so on. Once again good things were said at their Conference and grand-sounding policies were passed, including an extraordinarily unlikely plan to build 300,000 houses a year, but their credibility on housing is zero. Clegg failed to mention the housing crisis in his speech, whereas housing was one of Miliband’s six priorities and even Cameron mentioned it.

So housing seems destined to have little bearing on this Election as with previous ones. I doubt if it will get beyond the usual platitudes about home ownership ladders, and maybe some scare stories about ‘rent control’. Unless Labour finds some more bold statements to make, the LibDems will trump them on housebuilding targets and the Tories will trump them on help for home owners. And a big opportunity will have been missed.

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Brandon tells it like it is

This year’s soon-to-be-forgotten Housing Minister, Brandon Lewis, lists his favourite interviewers as Jeremy Paxman on TV and John Humphrys on radio. So that means he is already my polar opposite as I can stand neither of those rather unpleasant, rude, macho egotists.

This week ‘Bungalow Brandon’ burst forth with a frank and honest statement: he wants housing associations to abandon building homes with Government grant.

According to Inside Housing, Lewis said it would be ‘great’ if housing associations withdrew from capital funding programmes because it would save taxpayers’ money. With Chancellor George Osborne committing the Tories to around £25 billion in additional cuts if they win the Election, it would appear that Lewis is softening up the sector for further reductions in grant – on top of the 60% cut imposed in 2010 – or even its elimination.

For those in the sector that seem to relish the thought of a future without grant – because it indulges their wildest commercial fantasies – Lewis’ statement might feel like justification. However, as David Orr of the NHF commented, it is ‘ridiculous’ to imagine that social landlords could build sub-market housing everywhere without grant.

The 60% cut in grant in 2010 ushered in the era of the grotesquely-named ‘affordable rent’ product at up to 80% of market rents. However the available money was not even adequate to sustain this programme – and so landlords were required to ‘convert’ existing social rented homes to ‘affordable rents’ (up to a doubling) when they became vacant, and they were also required to sell more property on the open market, coyly dressed up as ‘asset management’.

So the Tory future has rents being forced up through reductions in subsidy at the same time as Iain Duncan Smith is planning another major round of cuts in housing benefit – hitting those in low paid jobs particularly hard.

For individual tenants the consequences of these policies are severe – rents rising inexorably because AR tracks the market and housing benefit reducing in real terms at a rapid pace. Raising tax thresholds will be no compensation for a tenant in an AR property earning the minimum wage. The outcome can only be increasing impoverishment and a higher risk of homelessness.

The impact on the public finances is also uncertain. Reduced subsidy leads to higher rents leads to higher HB – even if the gap between rent and benefit grows. And the increased risk of homelessness leads to more households being placed in either temporary accommodation or rehoused in private renting, with even greater HB consequences. The more resonant the argument becomes in favour of moving ‘from benefits to bricks’ the faster the Tories move in the other direction.

The simplistic obsession with ‘the deficit’ (is it really the biggest issue facing the country?) and the national debt ignores the distinction between bad borrowing (e.g. to fund day to day running) and ‘good borrowing’, using historically low interest rates to invest in the future, generate an income stream forever and cut the benefit bill. Ed Balls once agreed with this argument, but apparently no more.

Labour’s timidity on good borrowing is sad to see, but they are still a long way from the George Osborne/Brandon Lewis position. ‘Not as bad as the Tories’ is hardly a positive vision for the future, even if it is true. Shortly we will see if Sir Michael Lyons can conjure up a picture of rising investment in social housing. Labour needs him to pull a rabbit out of the hat. It would help if the housing sector could stop waffling about their innovative commercial initiatives and shout out a more basic message about the crucial need for more Government investment.

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Boris on message for once

boris brick4

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Two bad offers for first-time buyers

At the Tory party conference all the housing talk is about getting people to buy, buy, buy. But are the new offers that have been put on the table any good? If I was a first-time buyer, I’d have nothing to do with either of them.

First up was Rent to Buy, which Eric Pickles ‘announced’ at the weekend before the conference started. This meant the scheme has now been announced three times, the first more than a year ago. It was put forward in the 2013 Spending Round last June, when it was welcomed by the Homes and Communities Agency. Then it was announced again in May, when the DCLG expected ‘huge interest’ in it. And – finally, perhaps – by Eric Pickles in the run up to this week’s conference, with the Telegraph taking the bait last Thursday.

It’s difficult to say anything good about the scheme, except perhaps that it might be better than the one David Cameron was to announce a day later (see below). Tenants will have to pay Affordable Rents at up to 80% of market rates, and will be able to buy after seven years. But how could a tenant who doesn’t have a deposit now save for one in seven years, while paying such high rents? The chances are the plucky tenants will remain just that – tenants – eventually creating a problem for the housing association who built the properties and whose finances may well require them to be sold. This is especially the case in London – to which half the money has been directed.

At least the houses will have been built by social landlords and will presumably be of good quality. Under the second scheme called ‘Starter Homes’, the houses will supposedly be 20% cheaper because they are exempt from Community Infrastructure Levy (used to pay for the roads, sewers, etc) and from section 106 obligations (used to require social housing to be included in the scheme or to require a payment in lieu). Local authorities ‘will still get the taxes which pay for the key infrastructure requirements these homes need – but not more’. But what taxes will these be? They’ll also be exempt from ‘future regulations’ like the zero carbon standard (and presumably other standards included in the recent Housing Standards Review). So the homes will – by definition – be sub-standard and will therefore very likely be of the minimum size and quality that builders can get away with.

Then they will be built on ‘brownfield land’ already zoned for development, that is no longer needed for industrial or commercial uses, including public sector sites. This land ‘costs less’ than other land, but isn’t normally made available to build houses on. Making it available will ‘make a saving’ which will be passed on to the buyer.

There is a whole lot of wishful thinking here. How many sites are there that meet these criteria? Has anyone checked? Will public bodies like the NHS really sell land cheaply? – it seems most unlikely. Are the would-be industrial sites contaminated (and needing expensive treatment)? Are any of them in suitable locations for housing developments? Or will the homes be stuck on the edge of town, remote from bus services and schools, and tagged onto business parks or industrial estates?

It’s amazing that the media soak up these stories without posing questions like these. They accept the 100,000 target figure, which appears to be plucked from the air, and don’t ask what kinds of compromise will be needed to make them profitable to builders, or whether local authorities will actually give planning permission for sub-standard houses on undesirable sites.

One can only conclude that the proposal – which carries no government financial support – is aimed solely at the conference goers and at the press. Whether any real first-time buyers will ever see the houses, or if they do whether they’ll want to buy one, is a question for another day.

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Crisis, What Crisis? Tackling the London housing emergency by David Lammy MP

david lammy

The London my young children are growing up in today is very different to the one I grew up in in the 1970s, and the one that greeted my parents when they arrived here from foreign shores in the post-war years. It is not the city of opportunity and aspiration it was when my father came here in 1956. Then, he was able to buy a house for £6,000 and find work and my mother was given the opportunity to learn new skills which enabled her, too, to gain employment. Those kind of opportunities are simply no longer there for many people growing up in the capital. Today, 640,000 Londoners are in low paid jobs, one in four young people are unemployed and the average age of a first time house buyer is set to rise to an astonishing 52 years old.

I don’t need to tell readers of Red Brick that, right now, the biggest obstacle to that opportunity is the housing crisis gripping the capital.

For the last few years I have been inundated with cases in my surgery that relate to housing. It’s the same for my colleagues across the capital. My sense is that for too long politicians have been ducking the tough issues and not engaging with stakeholders from across all sides of the housing industry.

With all this in mind, I recently released a 41-page report with proposals on how to tackle the crisis. It proposed 34 policy solutions that I believe will together get London building, increase the affordability of housing, and tackle soaring rents.

One of the most positive things to come out of the report is that it has stimulated and broadened the debate on housing. Of course, urgent discussion and debate has been taking place on blogs like this and within policy arenas for years, but we need to take strong, solution orientated arguments to the people of London and be honest with them about the difficult decisions we need to make in order to solve the crisis. My report is an attempt to do just that.

Firstly we need to increase the amount of land available for new homes. Initially that requires us to make more land available. Building on brownfield sites should be our first move and is estimated to provide us with over 360,000 new homes. But as high as that figure is, it is nowhere near enough. London needs nearly a million homes by 2021 and more beyond that. We also need to engage, therefore, with the difficult issues that politicians have ducked for decades, and that means challenging the misconceptions around greenbelt.

Ask most people what greenbelt means and they will talk of playing fields and pristine woodland. Much of the greenbelt is exactly that and, of course, that must carefully be protected. But there are some areas of the greenbelt that are not worthy of the name – parts that were designated 70 years ago when they were verdant are now wastelands and car parks.

The city has changed since then, and so have its needs. It is time to rethink a 70-year-old planning policy in order to prevent the current situation in which local councils have to build on playing fields while car parks remain protected.

We also need to correct the mistakes Boris Johnson has made on ‘affordable housing’. He moved the goalposts on affordable housing so that ‘affordable’ rents can now be charged at up to 80% of market value.  As private rents soar, that mean these ‘affordable’ rents are now being set at thousands of pounds per month. The current debate around affordable housing is a farce – politicians have used the phrase ‘affordable’ but have not been honest enough to admit that it means nothing to most Londoners.

We need to redefine what we mean by affordability and make sure affordable means something again. I have proposed linking affordability to average earnings in each borough and capping affordable rents at 60% of market value. This would mean we are not just building more homes but also making them genuinely affordable for Londoners.

The best way to get councils building again is to give them the money to do it. That’s why I have proposed looking at increasing the number of council tax bands. Currently, a family in Bexley or Barnet pay the same as Roman Abramovich in his Belgravia mansion. The current council tax bands are based on 1991 valuations and so, again, they are a part of the system that simply isn’t moving with the times.

All of these ideas will help make buying a home more affordable. But they will take time: building hundreds of thousands of homes cannot happen overnight. In the short term, keeping London affordable means acting quickly to tackle soaring rents. Ed Miliband is completely right to endorse rent stabilisation through control mechanisms, as I outlined back in February of this year [http://www.newstatesman.com/politics/2014/02/we-need-rent-controls-solve-londons-housing-crisis]. My report further outlines what those controls should be, and how they will protect tenants.

To make London a city where we can all can get on and thrive, we need to tackle the capital’s housing crisis, enabling everyone in the capital to make a home here and still have the means to benefit from everything this fantastic city has to offer.

David Lammy’s report ‘Crisis, What Crisis? Tackling the London housing emergency’ is available at www.londonhousingreport.com

 

David Lammy MP is the second declared candidate for the Labour nomination to be London Mayor, following Christian Wolmar.

Red Brick will be happy to carry pieces from any of the candidates in the run up to the selection, which will take place after the General Election.

London Labour Housing Group is also planning to hold ‘Housing Hustings’ during the selection.

David Lammy MP website

Christian Wolmar website

 

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Are Ed Balls and Chris Leslie missing the point?

Ruling out extra borrowing that adds to government debt or has to be paid for from taxes is fair enough, but council housing investment needn’t do either. That is the message that Labour’s Treasury team still seemed unwilling to receive at this week’s Labour conference.

Ed Balls earlier appeared to leave scope for extra borrowing for capital investment but then closed the option down in his Manchester speech. Following this, Chris Leslie said the economic situation would preclude extra borrowing for new homes and that those who expected it to happen would be disappointed.

Obviously, the Treasury team has two concerns, one is getting down the level of government debt, and the other is avoiding new spending that will have to be funded by making cuts elsewhere or by raising taxes. However, the argument in favour of building council houses – as opposed to, say, hospitals or schools – is that the investment needn’t impact either on government debt or on taxes.

Council housing and one or two other areas where Labour might want to invest (an example is rail infrastructure) are different from most areas of public sector investment in these two key respects. They can be funded from charges (in the case of housing, from rents) and the borrowing only counts against national debt because of current Treasury rules. Chris Leslie seemed to gloss over these distinctions. He was quoted as saying:

‘But those of us who believe in having a collective public realm for public services – whether it’s the NHS, education, housing – have to prove to the public that we can live within our means and manage efficiently those particular budgets.’

He added that injecting capital funding into social housing could ‘make a big difference’ to the housing sector, but ‘what I can’t do is raise your expectations and promise you that straight after the election there will be this splurge in borrowing’.

Fair enough. And Labour understandably doesn’t want to frighten the horses now by promising a change in borrowing rules that would embrace international conventions rather than those that traditionally (and uniquely) apply in the UK. However, it could tell the truth, which is that council housing investment is funded through rents not taxes, and there are councils which have the potential to finance new investment from their rental income but are prevented from doing so by the current borrowing caps. It could say that it wants to explore the possibilities for extra borrowing to build homes, given that it needn’t cost the taxpayer more and that it’s a vital part of achieving Labour’s 200,000 homes target. When in power, it could then look at embracing international rules about borrowing that are already used as the yardstick to compare Britain with its competitor economies.

We could add to the case by pointing out that money spent on house building – unlike that spent on schools and hospitals – also feeds quickly back into jobs and extra tax income. This is because houses can go on site more speedily than just about any other form of capital investment, so the boost they give to the economy (and returns to the Exchequer) are faster.

So, lumping housing investment in with health and education is to misrepresent housing’s unique case. Of course, new schools and hospitals are highly desirable, but because they provide services that are free to the public, the investment inescapably boosts government debt and adds to taxes. Housing is different. Treasury team, please note!

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The housing baton passes to Sir Michael Lyons

In our last two blogposts we have pointed out the vital importance of securing a large amount of investment if Labour is to achieve its target of 200,000 homes a year by 2020 and expressed our concern at the implications of Ed Balls strict line on ‘no more borrowing’ under the next Labour Government. We were looking to Ed Miliband’s speech today  (click link for full text) to raise our hopes.

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In a generally excellent speech, with its huge commitment to restoring the National Health Service, housing was given high priority as one of Miliband’s ‘six goals’ within Labour’s ten year plan. Here’s what he said in the key passage about housing:

Goal 5

And a plan for your family doesn’t just depend on wages, jobs and education. What is it that provides us with security in life and faith in the future? The love of the people we care most about. Decent work properly rewarded. And the confidence and security that comes from having our own home.

So many people in Britain today don’t have that. That most British of dreams, the dream of home ownership, has faded for so many. Under this government, Britain has the lowest level of house-building since the 1920s.

So our fifth national goal is that for the first time in fifty years we will make sure this country is building as many houses as we need. By 2025, doubling the number of first time buyers who get on the housing ladder each year. Again, we will need a national effort to achieve. We will stop the large developers sitting on land and we will back the thousands of small developers and construction companies with access to new loans. There will be new towns, garden cities and suburbs with a half a million new homes. And housing will be a top priority in our capital investment programme. Because we need to start Britain building again.

The phrase ‘building as many houses as we need’ is striking. The current commitment to build 200,000 a year by 2020 is seen by many to be stretching given the well-rehearsed problems with housing delivery. As all national estimates of need are miles beyond 200,000, ‘as many as we need’ is an extraordinary ambition if it is to be taken literally. It implies that beyond 2020 we must have policies in place to increase the number up towards 300,000 and perhaps even beyond that.

The exclusive emphasis on home ownership is disappointing – not because increasing the number of homes for first time buyers is to be sniffed at, but because it fails to acknowledge the importance of providing homes at genuinely affordable rents for those who will never be able to afford to buy. Home ownership has now been declining for a decade and it is almost as if no-one has noticed that a major structural change has taken place. Simply on political grounds the votes of people who want and need to rent count the same as those who are likely to be able to buy. And genuinely affordable rented homes will be just as important in creating balanced communities in garden cities and new towns as new homes for owner occupation.

The only phrase that covers the social housing programme – ‘And housing will be a top priority in our capital investment programme’ – re-states the tougher fiscal stance set out by Ed Balls yesterday. No promise involving extra borrowing, so no promise on the borrowing cap that limits how many new homes councils can provide. It is hard to translate the phrase ‘a top priority’ into hard cash and real bricks and mortar.

It will be hard for Emma Reynolds to put a positive spin on the Eds’ speeches but she has the job of making this appear coherent to housing world.

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From my point of view, I can only say it is disappointing. I was looking for a commitment on the social housing programme and especially on the council housing cap. I was looking for an ambition that a decent proportion of the 200,000 target would be genuinely affordable homes and not just a few more acres of Barrett and Wimpy homes (welcome though they are as part of a balanced housing programme). I was looking for a strong statement to move ‘from benefits to bricks’ through increased investment.

I keep hearing noises that Sir Michael Lyons and his team have written a strong report that will make a real difference to housing delivery. But if he is meeting his terms of reference he is most likely to be recommending raising the cap and using public borrowing to invest as well as making proposals for the private sector. And the level of grant remains critical to getting rents right and beginning the long task of rebalancing away from a dependence on benefit. I think Lyons’ task has been made harder by the new fiscal stance and (I speculate) this might be a reason for delay.

So the housing baton passes to Lyons and I just hope he can impersonate Usain Bolt in the last leg of the relay.

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Ed Balls’ speech – the wrong balance between austerity and investment?

The abject failure of the Tories to build enough new homes, and especially enough new genuinely affordable homes, should present Labour with a golden opportunity. The housing statistics are stark and concern about where a growing population will live has been rising. It is now not only the number of homeless, overcrowded and sharing households, it is the number of 30 year olds living back with parents, the ‘generation rent’ forced to shell out on exploitative rents instead of saving for a deposit. There is growing concern that in the high pressure areas of the country, housing shortage and very high housing costs are a major brake on the economy.

Labour’s policy appeared to be moving in the right direction. By adopting the target of building 200,000 homes a year by the end of the next parliament – not enough to do the job, but a start – Labour demonstrated some commitment. By establishing the Lyons Commission – expected to report this week but now supposedly a few weeks away (a worrying development) – Labour showed it was willing to get into real detail about making the land and development markets work better. And there was a huge head of steam behind calls to end the artificial ‘cap’ on councils borrowing to build new council houses.

Ed Balls is a very clever man, the architect of the stunning announcement on Bank of England independence to set interest rates after the 1997 Election. So I’m hoping that yesterday’s speech only told half of the story and Ed Miliband has grabbed all the good stuff for his speech today.

Everyone in the Party will have views on austerity and the fact that it makes ordinary people and the poor pay for the Bankers’ crisis. But the point that concerns us on a housing blog is Balls’ strong statement that there will be no new policies that increase public borrowing in the next Parliament. Searching for a silver lining, he did say that housing would get increased priority within the existing capital expenditure limits, and that line was also being spun by housing spokesperson Emma Reynolds during the day. That could well mean that the ‘cap’ will be loosened or even lifted and that councils will be able to expand their building programmes – something that is absolutely essential if the 200,000 target is to be met. But the question is begged – giving housing greater priority at the expense of what other capital programmes? I can’t imagine HS2 being reversed to make room for the housing programme and other capital programmes have their own strong justifications.

There is a general belief that the private sector can build a bit more and housing associations can build a bit more, but that the 200,000 target will not be met unless councils are unleashed – see for example the evidence from SHOUT to the Lyons Commission for the full argument (and summary below). I can see nothing but economic benefit from extra council borrowing. It is good borrowing: it creates a capital asset that will bring in income for decades to come; it creates jobs that are still much needed; and it has a long supply chain generating far more economic activity than the original investment. And borrowing is and will remain cheap. Yet Balls’ whole speech was couched as if capital spending was a bad thing because it adds to total government borrowing and therefore the ‘deficit’. (See an interesting article in the FT (paywall) on what the various borrowing figures mean).

There is a further challenge. More borrowing to build does not necessarily produce homes that are genuinely affordable, even if they are built by councils. To get down to traditional social rent levels, subsidy is needed. Good councils, like Islington, are finding new ways of cross-subsiding new council homes to keep rents down. But the national programme would need significantly more grant to enable rents to be kept to sensible levels. The grant programme has been cut by more than 60% since the Coalition came in, which is why rents for new social homes are so ridiculously high.

For many of us, determining how much grant is available is the key decision that Labour has to make in the housing field. Building more homes at genuinely affordable rents is the essential first step towards removing the growing dependence in the housing system on housing benefit. Every home built with grant for social rent saves money forever in the benefits system.

Two previous promises have been made about increasing grant but these appear to have disappeared from current consideration. First, an increase in grant to grow the housing programme was promised out of the proposed Bankers’ Bonus Tax. And secondly, an increase was promised out of the proceeds of the sale of 4G bandwidth. If these are now consigned to history, there are currently no promises about grant levels.

There was also no sign in Balls’ speech that labour will take more radical steps like taking council borrowing for housing out of the prime measure of public borrowing, bringing the UK into line with standard international debt measures and treating councils as ‘public corporate bodies’ who should determine their borrowing on prudential grounds within their own business plans rather than as a conglomeration with central Government. Maybe that will be Balls’ next ‘Bank of England’ moment in May next year.

Imposing a borrowing straightjacket on housing will be a disaster for Labour’s housing ambitions. If housing is to have higher priority within existing spending plans we need to know how much priority and the cost in terms of other programmes. And to give confidence to the people who will actually deliver the 200,000 promise, something signidficant must be said about grant.

Ever the optimist that one day the housing penny will drop, attention turns to Ed Miliband today. There is some speculation that housing will feature big in his speech. Personally, I think it must.

 

SHOUT submission to Lyons Commission

Key Messages

A very significant increase in house building, of all tenures, is required. The Review’s starting point of 200,000 a year by 2020 may well be too low.

The total 200,000 new homes a year (or more) must include at least 100,000 new social homes:

  • an increase in the social housing stock on this scale is needed to provide good quality housing for hard-working people on low to middle incomes at a cost which enables them to have a good quality of life
  • welfare reform will not succeed without it. It would significantly increase the extent to which work pays, remove the need for many households to claim welfare benefit, and reduce the costs of welfare for others
  • Developing new housing on this scale will create a hugely valuable national asset, which will generate economic and social returns indefinitely
  • We won’t get 200,000 homes a year without building 100,000 social properties a year. Garden Cities, and other big new settlements or urban extensions will only be deliverable and socio-economically sustainable with proportionate levels of social housing development

“Social housing” must mean housing at rents comparable to traditional social housing rents. The ‘affordable rent’ tenure introduced under the current government is not in fact affordable for hard-working families, it cannot be financed sustainably by social landlords, and it is poor value for money for the taxpayer.

We can afford 100,000 new social units a year. Its cost is equivalent to just a few days of welfare spending. Even if the entire £4.5bn a year cost beyond current housing capital had to be found within spending totals, it could be accommodated. In fact, the net impact on public spending totals would be significantly reduced by savings on welfare, health and other programmes, and the provision of units by private developers through s106. It would be an investment which would carry on producing benefits to the taxpayer and society indefinitely.

There is a strong case for reclassifying the housing borrowing and spending of local authorities outside the core public sector definitions, in line with international practice and the self-financing business model of social housing.

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If Labour wants to build 200,000 homes per year, it must invest

Labour’s conference this week needs to be about more than how to respond to the referendum result or whether to bail out the NHS. Important though they are, how to put flesh on the bones of Ed Miliband’s pledge to reach a target of 200,000 new homes per year in the next parliament is vital too, and as with the NHS he shouldn’t back away from committing resources to it.

The Lyons Review, due out shortly, should provide a detailed blueprint for how to deliver 200,000 homes and more. But the plan has to be backed by resources if it’s to have a chance of working, and this is where the two Eds come in. It simply can’t be assumed that the target can be met by relying on the private sector alone. A marker has been put down by Tom Copley, Nicky Gavron and a mixture of Labour councillors and parliamentary candidates in London, demanding that Lyons calls for changed borrowing rules for local authorities and that this is in the Labour manifesto. They make a point with which Lyons will surely agree, that historically councils made a massive contribution to total output and they need to do so again. While it’s true that housing associations now make the bigger input to new building, if we are really to achieve the near doubling in output that Ed Miliband wants, both parts of the social sector will have to make a step-change in delivery along with the private sector. Achieving the target through expansion of private output alone is simply unrealistic.

There are several key elements to this. First, the reform of council housing finance, begun by John Healey in the last parliament, needs to be completed by giving councils wider borrowing powers. Ideally, as Red Brick has long argued, borrowing rules would be changed. But if that is not an immediate prospect, then at least a mechanism is needed to allow councils whose borrowing headroom is too low to get more, especially those who have ambitious but thwarted new build plans.

Second, the issue of grant cannot be ignored. While many councils will build without grant, it’s obvious that associations and some councils need grant and that the current regime is not working. Simply continuing with the second Affordable Homes Programme due to start next April will not deliver the number of homes needed at properly affordable rents. The programme must be reappraised. At present it threatens to produce the worst of all worlds: too few homes, designed to be let at rents that are too high. The warning signs are there from the poor response to the Mayor’s section of the programme in London. Even if new resources can’t be found, at the very least the programme must be reconfigured, with the available funding for housing protected and very clearly targeted.

The third key issue is the balance between rents and benefits. The coalition’s policies have been grossly irresponsible, pushing up welfare costs in both the short and longer term and having no regard to the realities of many tenants being in low-paid, insecure and part-time work. Policy needs to be reframed to push back against higher rents and enforced benefit dependency. The worst outcome would be simply to continue the present policy drift.

Finally, local authorities need to be firmly on board as partners in driving towards the 200,000 target, using their strategic housing and planning powers. But again, the reality of how local government capacity has been shredded by the coalition needs to be faced. Housing and planning services have been hit by some of the biggest local government cuts. Together the services account for only around three per cent of local spending, so the problem is not unresolvable. But neither can it be ignored if councils are going to set the local strategies and deal with the planning applications that will be needed if housing supply is to be doubled.

None of the above are comfortable messages for the two Eds, but who said that building 200,000 homes per year would be easy? It won’t be enough to set a paper target, make some reforms to the planning system, and hope for the best. The Lyons report will surely both make that obvious and show what needs to be done if the ambitious target is to be delivered. And although Lyons can’t say it, the Labour Party also needs to ensure it’s the very highest priority and that the test of any shifts in budgets or further welfare changes will be whether they or not they help deliver it.

While Ed Miliband was in Scotland perhaps he had the opportunity to draw useful lessons that could be applied if Labour forms the next government in Westminster. For example, did anyone tell him that Scotland’s 32 councils build ten times as many council houses per head as their equivalents in England? If Scottish local authorities already enjoy the freedom to borrow sustainably from their rental income, perhaps ‘devo max’ can be used to apply the same rules south of the border.

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