Pride comes before a fall

If pride comes before a fall, then these Tories are in for a hell of a tumble. David Cameron at PMQs last week had the nerve to boast about big increases in housing starts and completions as if they had cracked the problem. And Grant Shapps had the effrontery to brag about the Government’s affordable housing record, placing it at the top of his list of Tory achievements in a piece on Conservative Home, bizarrely entitled ‘a blast on the trumpet for full orchestra conservatism’. In it he claimed that they are building 170,000 affordable homes, bringing about ‘the first net increase in social housing for the last three decades’.

As PMQs and the recent House of Commons housing debate show, the dispute about the relative housebuilding records of the last two Governments is becoming increasingly sterile. The public would be forgiven for ignoring it altogether – arguments about who has built least since which year in the 1920s do not get the juices flowing. I can’t do better than agree with Jules Birch that the debate resembles bald men fighting over a comb.

As far as I can see from the reams of housebuilding statistics – feel free to root around in the CLG’s Live Tables – housebuilding was going along at a gradually rising and reasonably solid rate until the global banking failure, ironically triggered by the USA’s housing finance sector. However, output continued to be hopelessly insufficient in relation to the requirement, as it had been for 3 decades, and there was long-term upward pressure on prices, especially in high demand areas. Unsurprisingly, the credit crunch led to private housebuilding confidence collapsing as developers found it hard to borrow and households were unable to get mortgages. Gordon Brown, bless his cotton socks, put his foot on the affordable housing accelerator in a compensatory Keynesian move. Given the inevitable lags involved, this inheritance made the Coalition Government’s record (and in particular Boris Johnson’s) look much better than their policies deserved.

After the 2010 Election, housebuilding, like the rest of the economy, experienced 3 wasted years of austerity, kept in the doldrums by huge cuts to public investment. It is now beginning to recover, as it always would – that’s how capitalism works. There are two considerations: could Government have done more to get recovery going faster? – to which the answer is undoubtedly yes; and are the Parties’ policies for the future going to get us back to pre-credit crunch days – and much more? This is the debate we should be concentrating on.

The modest housebuilding recovery seems largely cyclical and would have happened anyway, but the danger is that the cycle has moved permanently to a lower level. There is no sign of a policy that will make a difference on the scale that is required. Coalition initiatives – New Homes Bonus, fiddling with Planning, and a contradictory mix of localism and centralism – have been largely ineffectual. Their biggest move – Help to Buy – by common consent may have a supply effect but will have a bigger price effect and is therefore more dangerous than beneficial.

Under Jack Dromey, Labour quietly built a sound policy platform but housing’s key decisions are made in the Treasury Team not the Housing Team. The promise by the two Eds to produce 200,000 homes a year by the end of the next Parliament is an important step although it is not entirely clear how a virtual doubling of output will be achieved. There is the Lyons Commission to come, on which a lot rests, but a start has been made with a clear national target, action on land and property values (use it or lose it, right to grow, Mansion Tax), raising the cap on council HRA borrowing, modest but specific commitments on affordable housing grant, and additional New Towns.

We are all aware of the hubris of Grant Shapps but he should not crow about affordable housing. His greatest achievement has been to sow such confusion about the meaning of the words ‘affordable’ and ‘social’ that it is almost impossible to discuss the topic at all without endless caveats and explanations of terms. He created the ‘affordable rent’ (AR) product which is not affordable. He set policies (virtually all new grant-assisted homes at AR, conversions of existing social rent to AR, enhanced right to buy, encouraging open market sales of existing homes to fund the programme) which are designed to remove social rented housing step by step. Now they have a new ploy: they have started calling ‘affordable rent’ social housing and hope to get away a further statistical manipulation.

The big difference between Labour and Coalition policies has been the huge reduction in grant per new dwelling since 2010. Providers have to borrow considerably more to finance each dwelling, additional borrowing which can only be financed by increased rental income and cross-subsidy from sales. Raising rents rapidly makes many more people eligible for housing benefit, a budget they are trying to increase and squeeze at the same time.

So what are the figures on affordable homes?

Labour’s National Affordable Housing Programme covered the years 2008-09 to 2010-11, although completions continued into 2011-12 and 2012-13. It produced 93,200 homes for social rent and 80,700 homes for low cost home ownership, a total of 173,900 starts over 3 years, over 57,000 a year. Completions from Labour’s programme that occurred during Boris Johnson’s first term in London and after the Coalition came to power nationally in 2010 enable them to make claims that they have provided some social rented housing.

The Coalition’s first Affordable Housing Programme for 2011-12 to 2014-15 claimed (at September 2013) to be producing 69,694 homes for rent plus 18,853 LCHO, a total of 88,547 or over 22,000 a year. Virtually all the rented homes were ‘affordable rent’ not social rent.

The Coalition’s second Affordable Housing Programme, for 2015-16 to 2017-18, promises to produce 55,000 affordable homes of all kinds each year, around 165,000 in total over 3 years. Around 60% of the homes will be for rent, but these will all be at ‘affordable rent’.

Grant per dwelling has fallen from over £51,000 in Labour’s programme to £17,400 in the Coalition’s second wave. Total spend on grant has dropped from an average of £2.97 billion a year under Labour’s programme to £0.96 billion in the Tory/LibDem second wave. (All figures thanks to the excellent UK Housing Review).

Shapps’ talk about an increase in ‘social housing’ when they are only building homes for unaffordable ‘affordable rent’ is another cynical semantic trick by the artful dodger. ‘Social housing’ means homes that are provided by registered providers at ‘target rents’ set under the rent convergence formula established more than ten years ago by Labour. These rents have been rising faster than inflation but are broadly around 40-45% of the local market rate. The Coalition’s ‘Affordable rent’ homes can go up to 80% of market rates and average around 70%. There is no way on earth these can be counted together as if they are the same thing.

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