BY Dermot Mckibbin, Beckenham CLP*
This review was commissioned by the John Healey MP Shadow Secretary of State for Housing though is independent of the Labour Party. Peter Redfern, the Chief Executive for Taylor Wimpey chaired the review. (click here Redfern Review for more details)
The review reflects John Healey’s determination to put widening the opportunities for home ownership at the heart of Labour’s approach to housing. It is a signifiant development in the Labour Party’s housing policy for a tenure group that it is often ignored by the Left.
The review takes the view that the fall of home-ownership in England from 71% to 60% frustrates the legitimate desire of most people to own their own home. There have been too many short term initiatives in housing policy. Solutions seeking to improve home ownership without considering the impact on other tenures will be unsuccessful.
The reason for this decline are several. Real house prices rose by 151% from the end of 1996 to the end of 2006, while real earnings have risen only about a quarter as much as that. The growth of buy to let mortgages and the global economic crisis have also contributed.
The review does not adequately address whether subsidising demand for house buyers is inflationary. Page 15 claims their studies show that 1% increase in the number of dwellings would reduce house prices by 1%. However on page 49 the review concedes that a 1% increase in housing stock lowers housing prices by 1.8%. This inconsistency is not adequately explained.
Student loans and tuition fees have hindered young people from saving enough to pay for a deposit. The number of 25-34 year olds living at home with their parents has increased by 1 million between 1997 to 2015. No consideration is given as to how this group would benefit from rent controls in the private rented sector.
The solution is decades of consistent improved supply. This can only on be achieved by a political consensus between all major political parties. The Help to Buy Equity Loan Scheme even though it is inflationary needs to be retained and better targeted especially towards young people. Under this scheme the Government lends buyers up to 20% of the cost of a newly built home. Buyers only need a 5% cash deposit and a 75% mortgage to make up the rest. This scheme is very beneficial for builders.
The right to buy ‘one for one’ replacement policy should be extended so that all council homes sold should be replaced and not just some. Housing policy making would be improved by the setting up of an independent Housing Commission similar to the Infrastructure Commission.
The review concedes that Help to Buy: Equity Loan will inflate house prices to the extent that it does not create incremental supply. According to a 2016 government evaluation study, this means that for every 100 homes built through the support of these equity loans, 57 would have been built anyway. The evaluation study and not the review itself mentions that this scheme is funded to the tune of £9.7 billion until 2020 and is expected to cover up to 194,000 new home buyers. The review does not question whether this amount of public subsidy is fair.
Ideas to support existing home owners to remain in their homes were apparently outside the scope of the review. These are:
- Unemployed home owners only receive state help with their housing costs for 12 months.
- Giving low income home owners greater help to improve their properties.
- Greater legal rights when lenders take possession proceedings against home owners.
No mention is made about the problems faced by leaseholders as covered by the Guardian in a series of articles recently. Taylor Wimpey and others have been criticised for their policy of building leasehold houses and then selling on the freehold. The lease contained a clause that doubled the ground rent every 10 years. According to the owners their house is now unsaleable.
Research by the Coalition Government has found out that there are more leaseholders than previously thought in England and Wales. The figure is up from 2 million to over 4 million. London alone has two thirds of all leaseholders in England and Wales. Over 60% of all newly built properties are flats. Any proposals to improve the rate of home ownership needs to address this widely ignored research.
The Redfern Review will hopefully start a much needed debate within the Labour Party about owner occupation and the leasehold housing market. There needs to be much a much wider debate about whether the Help to buy: Equity Loan scheme represents value for money.
*Dermot Mckibbin is a retired housing lawyer who until recently worked for Greenwich Housing Rights. He is interested in leasehold reform.