There are not many words of praise for former housing minister Grant Shapps in the pages of Red Brick. But in comparison with current minister Brandon Lewis, the tenure of the coalition’s first housing supremo now almost looks progressive and enlightened. We don’t know if Lewis regards his Housing and Planning Act, just given Royal Assent, as his crowning achievement, but he must know that if his colleague Shapps offered the prospect of a new Spring for council housing, the Act will ensure that it quickly turns into a chilly Autumn.
Shapps’ achievement was to ensure that the deal under which council housing became self-financing, started by Labour minister John Healey, actually came to fruition only two years after the coalition took power. Admittedly the deal wasn’t as good as Healey’s would have been, but many were surprised that it was done at all and Shapps brought reluctant Tory councils into line, making them all restructure their debts on the same day in April 2012. The majority of councils took on new debt, a minority had debt paid off, and all were left with at least the potential to keep up their investment in their existing stock. A succession of reports, invariably discussed in Red Brick, began to explore the possibility of a very significant increase in the output of new council houses. Grant Shapps claimed that he’d made ‘a reform intended to endure for the long-term’.
It’s now obvious however that the undermining of the deal, though now severe and probably terminal, actually began under Shapps’ stewardship; it continued when Messrs Prisk and Hopkins briefly became his successors. It was Shapps that ‘reinvigorated’ the right to buy, raising discounts and reducing qualifying periods from the very date of the self-financing settlement itself. Sales accelerated, although in themselves they would only have damaged, not sunk, the settlement. But two other policy changes began which were to gather pace after the Tories won the 2015 election. The first, the following summer, was the ditching of the rents policy which underpinned self-financing and ensured councils’ ability to pay off the higher levels of debt that most of them now had. The second was welfare reform, with measures like the bedroom tax causing turmoil as tenants tried to downsize and others like the benefits cap making it difficult for tenants to avoid getting into arrears. Instead of increasing, council rental incomes started to look very uncertain.
When Brandon Lewis was reappointed in May 2015 almost his first act was to agree to the Treasury tightening rents policy still further, by requiring councils to make cuts of 1% each year for four years. He’d already agreed (presumably) to the Tory manifesto commitment to launch the right to buy for housing association tenants, with the deposits financed by forcing councils to sell off their better housing stock. When the Housing and Planning Bill came out last October, the two measures that were most damaging to the April 2012 settlement were already in it: the extended right to buy and the pay-to-stay scheme to penalise slightly better-off tenants and encourage more of them to opt for right to buy. Extra measures, such as the ending of properly secure tenancies, would be added later and while they didn’t further undermine the financial settlement they certainly added to the damage being done to council housing’s attractiveness as a tenure.
Then, unexpectedly, there was the announcement that housing associations were likely to be treated as public bodies for accounting purposes. Suddenly the government, which had been indulging in a campaign against associations, was forced into giving them more freedoms and widening the gap (which in April 2012 had been narrowed) between their status and that of council housing. It has to be said that the NHF then had no qualms about accepting a deal over right to buy which both had distinctly better terms than council housing’s right to buy and ensured that any financial penalty fell on the council sector, not on associations.
In these circumstances it’s hardly surprising that councils have retrenched. Soon after the Bill came out I spoke to a housing director of one of the largest authorities who was starting to look at the implications of the coming legislation combined with the rents freeze. He said they would try to buy time by using their reserves, but if policies continued as they were within two years they would be making severe cuts: and this is a council which badly wants to build large numbers of new homes. Already the evidence is that councils are borrowing less money, rather than more. This has started to be reflected in new build starts. In 2014, councils started building eight times as many new homes as they did in the final year of Labour’s last term of office. But by 2015 the number of starts, which should have been increasing year-on-year if the settlement was leading to a sustained increase in new output, had actually fallen by one-third. It now looks as if we might be passing through the (very modest) recent peak of council house-building.
The prospects for the financial health of council housing by the time of the next election look very bleak indeed. John Healey hoped to base his promised commitment to build 100,000 new social rented homes on several years of increasing capacity in the council sector, the experience of housing associations that were still building homes to let at social rents, and a planning system that could still be used to ensure that developers contribute to affordable housing supply. None of these conditions will now apply by 2020. A future Labour promise to build large numbers of genuinely affordable homes will be even more challenging to carry out than it would have been in 2015.