Tories try to steal Labour clothes

Investing in council housing was just one of the new policies that Theresa May pinched from Labour in her disastrous speech. Tackling student debt, mental health, energy prices and even organ donations all figured in the list of stolen policies she launched at the Tory conference. But there was another one that was uniquely Tory: putting an extra £10 billion into Help to Buy loans, which means the scheme will make over £22 billion worth of loans in total, all to help those already well up the income ladder.

How much difference will the £2 billion for social housing over five years actually make? First the positives. It raises the total allocated to ‘affordable’ housing investment to £9 billion over the next few years, or to £10 billion if other bits and pieces are taken into account. But as Red Brick pointed out recently, this compares with over £30 billion in support for the private market, and this was before the Tories added the extra £10 billion for Help to Buy. So the split between affordable and private market investment has just got worse – but at least there is more cash in the ‘affordable’ pot.

Second, it recognises that grant has to be higher if rents are to be kept down. An average grant of £80,000 (based on £2 billion generating 25,000 new homes) is higher than that being paid by Sadiq Khan for ‘London Affordable Rent’ units in the capital and probably quite a bit higher than is needed to build social rented homes elsewhere. Even if the grant level comes down, possibly leading to higher output, it should be enough to deliver a significant number of homes at genuinely affordable rents.

Third, the announcement is coupled with a new policy on rents to kick in in 2020. There are a number of caveats about this too, but at least there is recognition that higher grant alone won’t lead to more investment: stability of rental income is also important.

Now the downsides. First, if it produces 25,000 social rented units, that’s a drop in the bucket compared with the 122,000 already lost (through right to buy, and conversion to higher ‘affordable’ rent) since 2011. If output reaches 5,000 per year, it will only restore social rent building to the level of a couple of years ago and will be well below the peak years of Labour’s National Affordable Housing Programme when social rent output alone reached nearly 40,000 units.

Second, we don’t yet know the mix – will all these be new homes for social rent? Why not also improve the mix of the existing programme, to deliver more social rent (not permitted until this week’s announcement) alongside the other ‘products’? If the government is serious, it needs to re-evaluate its whole programme, not merely tag on a bit of new money.

Third, while this is billed as extra council housing, in practice housing associations are going to be much better placed to use the new money. Relations been them and local councils, already under strain, might be made worse. Why are they better placed? Because with the extra certainty of rising rents after 2020, and their already much greater development capacity, they can bid very competitively for the new cash. Just when collaboration between the two parts of the sector is most needed, it might only happen if the GLA and HCA specifically prioritise bids that give councils a role.

Finally, councils continue to be hamstrung by constraints over which they have little control unless the government steps in and makes additional changes. Right to buy sales continue, with heavy restrictions on the use of receipts (including a prohibition on combining them with grant aid). Borrowing caps are still in place, and councils have suffered more than associations have from the recent curbs on rent increases. Despite the government remaining silent on the promised right to buy for housing association tenants, the threat to force councils to sell their higher value stock hasn’t been removed: this has already made councils cautious about building more houses that might simply have to be sold off. And as well, councils have been hit more than associations by the need to invest in tower blocks following the Grenfell Tower fire, with no promise of government help.

Despite these reservations, the new money is better than a poke in the eye with a bent stick. Even if May’s stated ambition of a ‘new generation of council houses’ is hardly likely to result, it’s much better than the Cameron-Osborne attitude that council housing was obsolete and only served to create more Labour voters. The fact that Labour already has a plan to build much more council housing (and housing at social rents built by associations) is given added credibility by the Tory proposals, inadequate though they are. If the Tories are convinced that a Corbyn government will turn Britain into a ‘failed socialist state’ as Phillip Hammond suggested, why are they so keen to borrow the policy ideas that (according to them) will achieve exactly this outcome?

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4 Responses to Tories try to steal Labour clothes

  1. Pingback: No new money will be made available for post-Grenfell works | Red Brick

  2. Brian Lund says:

    Reality and Rhetoric

    Monimbó asks ‘If the Tories are convinced that a Corbyn government will turn Britain into a ‘failed socialist state’ as Phillip Hammond suggested, why are they so keen to borrow the policy ideas that (according to them) will achieve exactly this outcome?

    The answer is they are not. The reasons are explained by Monimbó to which might be added the declaration in the 2017 Conservative Party Manifesto:

    We will enter into new Council Housing Deals with ambitious, pro-development, local authorities to help them build more social housing. We will work with them to improve their capability and capacity to develop more good homes, as well as providing them with significant low-cost capital funding. In doing so, we will build new fixed-term social houses, which will be sold privately after ten to fifteen years with an automatic Right to Buy for tenants, the proceeds of which will be recycled into further homes.

    (Conservative Party Manifesto, 2017 p 71)

    Ten to fifteen years before sale, with an automatic Right to Buy, is little better than the current ‘cost floor’ threshold.

    It is all part of an agenda to position Theresa May as ‘Radical Joe Chamberlain’, a different type of Tory, but reality has not matched May’s rhetoric. Neither did David Cameron’s. Remember his promise as Prime Minister that there would be a one for one replacement of the houses sold under the new right to buy.

    The announcement that social rent increases will be the Consumer Price Index (CPI) plus 1% for 5 years from 2020 is unwelcome.

    According to David Laws’ ‘Coalition Diaries, 2012–2015’ (2017) Cameron wanted to push all social rents to market levels. Between 2010 and 2015, council house rents increased from 12% of average earnings to 13.8% and housing association rents from 12.7% to 14.3%. Affordable rents, unknown in 2010, were 20.2% of average earnings in 2015 (UK Housing Review, 2017 p 214).

    Yes, from 2016 to 2020 ‘social’ rents are subject to reductions, but affordable rents are not. The White Paper ‘Fixing Our Broken Housing Market’ (DCLG, 2017) stated that local authority rents take 40% of mean weekly household income (30% after benefits) and housing association rents 45% (32% after benefits).

    When, on October 5th, Today broadcast clips of Harold Macmillan (he organised the building of 171,000 local authority homes per year in England between 1951 and 1955), I was quite excited. I should have known better.

    Brian Lund

    • monimbó says:

      Brian, it is incorrect to say that ‘affordable rents’ are not subject to the current 1% annual reduction. See the DCLG guidance at https://www.gov.uk/guidance/welfare-reform-and-work-act-2016-social-rent-reduction

      • Brian Lund says:

        Dear Monimbó
        Thanks for the information link.
        There is plenty of room for higher rents in the affordable rent regime.

        Ross Fraser’s, in his recent Redbrick post said:

        ‘Red Brick readers will be familiar with local authority concerns about the lack of alignment between new housing association supply and the social rent housing they need to meet their statutory obligations to those in housing need. But the problem goes deeper. New lets are only 12% of the quantum of social lettings each year. The government-enforced conversion of social rent lets into higher ‘Affordable Rent’ lets is of equal concern. Around 25% of housing association lets are now at the (so called) Affordable Rent’.

        Nicholas Ridley’s ambition to push all rents to market level is alive and kicking. As time goes by, it will be interesting to monitor average social sector rents to find out if David Laws was right and the caps were cunning plan to push cash strapped social housing providers to offer new tenancies at the full 80% of the market rent. In 2015 they were 67% of the market rent. Inflation plus or inflation minus, the result seems to be rents closer to the market.

        When are ‘social’ tenants — I use the quotation marks to warn of its denigrating undertones — going to benefit from accumulated value? In the local government domain, having taken £42 billion from local authority housing revenue accounts, the Treasury allowed local authority housing to become ‘self-financed’ but at the extra cost of a £8.5 billion payment from local authority housing revenue accounts to the Treasury. Post 2015, no subsidies, no Treasury purloining of surpluses, thereby theoretically freeing local authorities to make ‘business’ decisions on new investment etc. Yet, between 2012 and 2015 the Treasury took £358.1 million of the £1.52 billion acquired from council house sales.

        Let me repeat the figures from Fixing Our Broken Housing Market (DCLG, 2017). Mean rent payments as a per cent of weekly income in the private landlord sector 52% (after benefits 46%), in the housing association sector 45% (after benefits 32%) and in the local authority sector 40% (after benefits 30%).

        Brian Lund

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