Can Labour deliver 100,000 social homes annually within five years?

This was the headline promise from the leaked version of Labour’s manifesto. How feasible is it?

Labour seems to have stepped back from a much more ambitious – arguably, far too ambitious – target of delivering 500,000 affordable homes over a five-year parliament. The new pledge – if it is included in the final manifesto – is still ambitious but appears much more realistic. It says ‘By the end of the next Parliament we will be building at least 100,000 council and housing association homes a year for genuinely affordable rent or sale’. Let’s have a closer look at what it would require.

Assuming for the moment that ‘genuinely affordable’ has the same meaning as under the coalition, the statistics show that neither Labour nor the coalition came close to delivering 100,000 units in recent years. DCLG’s live table 1000 shows that Labour’s peak output was 61,090 in 2010/11, and the coalition managed 66,700 in 2014/15. Output fell sharply in the following year, to only 32,630, because the end of the previous financial year had been the cut-off date for the previous Affordable Homes Programme.

The pre-election Tory government had a target of ‘delivering 275,000 new affordable homes between 2015 and 2020’, suggesting output of 55,000 per year, far below Labour’s new target but higher than current performance (albeit, of course, the definition of ‘affordable’ is now widening and its meaning in the this context isn’t defined). In crude terms, therefore, Labour is both aiming to almost double the Tories’ planned output and tighten the definitions to make affordability ‘genuine’.

Can it be done? The first and most obvious requirement is money. John Healey, Labour’s housing spokesperson, developed his ideas on a Labour building programme in reports for the Fabian Society and for the Smith Institute a couple of years ago. The chart shows how the programme would build up over 5 years, from about the level that it’s at now.

Roll this forward to start two years later, in 2017/18, and you get an idea of what Labour’s programme might be. Just over a fifth would be non-grant-funded, which now seems a little unambitious given that the NHF’s regular bulletins show about 40% of homes get no grant funding. Healey’s Smith Institute paper also forecast 16,000 homes coming from developer contributions, of which 80% would require grant: in fact, NHF figures suggest about 40% of homes come via developer contributions, most without grant funding. The proportions with nil grant and via developer contributions heavily overlap, and of course more grant would be needed if rents were to be ‘genuinely affordable’, but the NHF figures suggest that the Healey plan is far from unrealistic in its expectations of how much can be achieved without grant.

Healey’s costings rely heavily on savings in housing benefit, which of course are real but accrue over the long term, and the credibility of the plan when judged by bodies like the OBR and IFS hangs on the immediate capital and revenue costs. The main element of his plan would require grant levels of £60,000 per unit to deliver many more dwellings for let at social rents, rising to about 78,000 (out of the total 100,000 target) in the fifth year. This would cost about £4.6 billion in capital in the final year, without taking account of savings in the benefits bill.

How feasible is that level of expenditure? As it happens, it’s comparable to spending in the last year of Labour’s National Affordable Housing Programme, which invested an average £3 billion per year and reached close to £4 billion in 2010/11. After taking into account the limited inflation since then, there is hardly any difference between to two. Furthermore, as Red Brick readers know, the Tory government is currently investing a massive £50 billion in housing, via grants, loans and guarantees, over the period to 2020/21. Only some 16% of this is destined for affordable housing. Even with Labour’s apparent commitment to keeping the Help to Buy scheme, there is plenty of scope for redirecting more of this money into social housing.

Of course there are many other pieces of the jigsaw that need to be put in place, not all of which can be examined here. First, social landlords’ finances have to be stabilised, which means a coherent policy on social rents to replace the frequent changes and recent drastic cuts made by the Tories. Second, the council housing finance settlement, which John Healey pioneered as minister, needs to be reinstated as he originally intended (it has been ripped to shreds by the Tories). Third, reforms will be needed to achieve more planning permissions, developer contributions and land supply, building on the work of the Lyons commission. Fourth, especially following the EU referendum, there is a growing problem in the building industry of both capacity and standards. Fifth, there is urgent work needed on the Tories’ so-called welfare reforms to ensure that the worst elements are curbed and that tenants can pay their rents. And sixth, we must not (like the Tories) neglect the existing stock, which also needs massive investment to maintain and exceed Labour’s very successful Decent Homes Standard.

This is why building up to higher output over five years, making full use of housing associations, councils and developer contributions, is very sensible. It not only allows the financial contribution to be stepped up progressively but also gives time to tackle the other massive challenges of delivering such a big change in government housing investment priorities. But no one should argue either that the programme isn’t feasible financially or that it’s not needed. This programme is ambitious but, with care and effort by a new dedicated Minister of Housing, it could be delivered.

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3 Responses to Can Labour deliver 100,000 social homes annually within five years?

  1. Ben Jamin' says:

    Affordability issues have got nothing to do with high land values or housing supply. They are cause by those values being capitalised into selling prices and rental incomes, which act as a transfer payment from those that own relatively little land by value, compared to the taxes they currently pay to those where the opposite is true. Typically from the young/poor to the elderly/rich.

    This is why affordabilty issues for some parts of our society are concomitant with excessive individual, inter generational and regional inequality.

    Increasing housing supply will only somewhat reduce that payment, while at the same time increasing costs by expending labour and capital.

    Whereas dealing with the actual problem by ending the transfer payment completely and permanently with a 100% LVT, would reduce costs in our economy by eliminating excessive vacancy and under occupation.

    Of course building Council Housing is better than nothing. But why go for a third rate solution when solving the problem is, in principle, very easy to do?

  2. monimbó says:

    Alan – I touch on this but I very much agree. Capacity is a serious issue, not necessarily properly addressed by (for example) prefabricated construction methods, around which there seem to be a lot of doubts. Energy retrofits are also vitally important – but there is only so much one can cover in a short article!

  3. Alan Chapman says:

    No mention of who is going to build these homes. Recruitment and training of construction workers has been woefully underfunded for the past 40 years, some argue we need 400000 new recruits to have any chance of building the planned infrastructure projects and increasing housing supply. We also need to complete energy retrofits on 23 million houses if we are to honour the commitment made on carbon reduction by 2050. As a fit 73 year old retired construction worker perhaps I should return to work?

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