More than £42 billion of government money to prop up the private housing market, and just £2 billion invested in affordable rented housing: even before Brexit this looked like a huge distortion, now it simply looks absurd.
Most readers of Red Brick will undoubtedly be focussed on wider political issues than housing finance just at the moment. But the analysis carried out for the latest UK Housing Review Briefing Paper is a reminder of what is at stake. The Tory government is so obsessed with restoring home ownership to previous levels, and with ensuring that public money sustains the housing market, that it has cut its support for below-market rented housing to a derisory figure. In fact, the sums only just cover the commitments made in the now defunct Affordable Homes Programme that was to have run until 2019/20. To replace it, we now have a ‘Shared Ownership and Affordable Homes Programme’ that will run until 2020/21. But this has virtually no provision for below-market rented housing: it will, as its name suggest, focus almost entirely on shared ownership. In parallel, we have the £2.3 billion devoted to Starter Homes, itself only part of the total commitment to build 200,000 of this new type of product, most of which will be delivered via planning gain. So instead of being a reliable, continuing source of homes to let at social rents (or, at worst, at Affordable Rents), the planning system’s ‘affordable’ housing output will soon be another variant of houses for outright sale.
Readers might be forgiven for thinking there is a ‘now you see it, now you don’t’ quality to these commitments, however, for a range of reasons. One is that the products are either untried (Starter Homes) or else have never been built on the scale now proposed (shared ownership housing). Other commitments like the Help to Buy ISA and the (new) Lifetime ISA are dependent on take-up and whether potential savers believe they will really help them overcome what the UK Housing Review calls the ‘deposit barrier’ to home ownership.
The Briefing Paper flags up two government targets that were difficult to meet before Brexit and may now prove wildly unrealistic. First is the aim to help an extra million new first-time buyers into the market. Even the last English Housing Survey showed numbers going down (564,000 in 2014/15, down from 617,000 the year before). As the Briefing says, ‘The reality is that younger households are less able and less willing to buy a first home.’ The Legal & General’s report The Bank of Mum and Dad suggests that home ownership in the UK will actually fall further, to only 55% by 2025.
The second government target is the aim of building one million new homes over the five years to 2020/21. Oddly, Brandon Lewis, who appears to still be the housing minister, denied that this was a target only yesterday, barely a week since (as part of the Remain campaign) he was talking about the target’s importance. Even the government website quotes Lewis referring to the ‘aim,’ ‘intention and ‘ambition’ of building one million new homes. (We might add that, by denying that these terms equate to setting a ‘target,’ he indulges in the sort of evasiveness that has helped undermine respect for politicians and deliver the referendum result.)
Overall, as the Briefing Paper says elsewhere, even this government’s massive market intervention represents only a relatively small part of total market activity, so that for example despite Osborne’s moves to make the tax system less favourable to buy to let landlords, the rented market is still a lucrative one for many would-be investors and is likely to continue to compete strongly for properties that might otherwise be available to first-time buyers.
Looming over the whole of the housing budget, especially those parts that have yet to come on-stream, is of course the referendum result and its likely effects both on the public finances and on the housing market itself. Brandon Lewis would have been received more warmly at this week’s Housing 2016 conference in Manchester if he’d been honest and said that an extra one million homes was the target, but he now simply has no idea if it can be delivered and, indeed, whether the £40 billion plus stimulus package can be maintained. To repeat an over-used cliché, we are in uncharted waters: how long before the government’s housing budget shares the fate of many other projects that the FT thinks are now likely to be ditched?