Playing the numbers game is only one part of the housing question

Ed Balls’ commitment to using funding from the sale of 4G telephone licenses to support an extra 100,000 affordable homes and to enable the suspension of stamp duty on homes costing less than £250,000 was creative and very welcome.

It is welcome because it would be a genuine Keynesian stimulus which would help the economy in the most effective way possible – unlike many other infrastructure projects, new homes can be brought forward more quickly and housebuilding is an efficient way to create jobs and additional demand in the materials and support industries, cutting the deficit by putting people back to work, off benefits and paying tax.

It is also welcome because it shows that the arguments made in the Labour Party that housing should get higher priority are at last being listened to, and that Hilary Benn and Jack Dromey are proving to be an effective front-bench team.

The plan is that the 100,000 additional homes should comprise 50% shared ownership, 35% sub-market rent and 15% social rent.  Added to the 25,000 social rented homes already promised, which would be funded from the Bankers’ Bonus Tax, this brings the commitment to social rent up to 40,000.  This is vitally important as a signal to the sector that social rent is not dead as some like to claim. Added to the potential output of social rented homes from other sources – section 106 and homes on public land – we are seeing the start of a significant and desperately needed new programme.

Although getting the number of new homes up is important, there is a growing debate that it is not numbers alone that matter.  Not only are there issues around quality and the reinstatement of a commitment to mixed communities, there are doubts about the affordability of shared ownership in high value areas, and the purpose of sub-market rented homes needs to be clarified.

There is an important place  for ‘intermediate housing’ but rents of up to 80% of market rents cannot be seen as an answer to the housing needs of people on low incomes in high rent areas.  The idea for intermediate homes – normally shared ownership and sub-market rent – was to fill the gap between social rent and market homes, to meet the needs of people who would not qualify for the former and could not afford the latter, often key workers.  It was also a mechanism for delivering mixed communities.

We need a policy that gets a suitable mix between private. intermediate and social housing but it is in my view vital to maximise the latter wherever possible because these are the homes that will have the most direct impact on the most extreme forms of housing need.  I would be willing to trade more social rented homes (which need more initial subsidy) for fewer homes overall, and I think this needs to be debated over the coming months.

The Coalition’s concept of ‘affordable rent’ is an abomination.  It pretends that these homes are for the same people as would previously qualify for social rent, but the costs are vast for people on low incomes and the level of rents will not be supported by housing benefits in the longer term.

‘Affordable Rent’ is not about meeting need.  It has been devised to change the structure of social housing in the country – to make a permanent shift away from a norm of social rents at around 40% of market rates to a norm of ‘affordable rents’ at up to 80% of market rates, allied to the removal of security of tenure.  By holding down pay and benefits whilst increasing rents, the Government will increase the share of income taken by housing costs and gets us used to the idea of market rents for social homes.  It is a short intellectual step from ‘affordable rent’ to saying that the market might as well be left to provide all rented housing.

So far Jack Dromey has avoided the trap of being seen to endorse ‘Affordable Rent’ but we are undoubtably in a period where the numbers game is being played, driven by the broader economic need to promote growth.  So there is a focus on who can build the most homes, irrespective of what they are.  The housing question is more complex than that.  Despite the huge housing shortage, it is not always the case that getting the maximum number of new homes built is the right answer.  Just as thousands of apartments with river views being sold to foreign millionaires does little to help the overall balance of supply and demand, so building homes at ‘affordable rents’ without security of tenure will prove to be of little help to most people on housing waiting lists.

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3 Responses to Playing the numbers game is only one part of the housing question

  1. Hi David. I see 2 linked questions for the future.

    First, what income do we want from social rents in total? There is a lot of support for rebalancing back from personal subsidies to bricks and mortar subsidies – that would involve holding rents down and putting in more subsidy when new homes are built. I think that makes sense. Then secondly we need to consider how rents are charged to individuals to bring in the total income needed. Our system has always been to charge for the property because this avoids the need for means tests on everyone. If we switch to income assessment, everyone has to be means-tested. In our current system, people lose benefit if their income rises, in the alternative their rent rises as their income rises, so often the effect is the similar. My leaning is towards the much simpler system which does not involve a huge additional means-test.

    Note that the Tories ‘pay to stay’ policy involves means testing everyone in some way but for a very small return in terms of rent charged.

    By the way, well done to Unison and the Housing Voice initiative – it was very productive and the report deserves to be widely read.


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  3. David Arnold says:

    Hi Steve, The Housing Voice report recommends looking at whether the model used in places like Ireland, where rents are a share of income, rather than referenced to the local market, could be applicable and helpful here. What do you think?

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