End game

Originally posted as a blog for Inside Housing.

Policy Exchange is well known for its opposition to the Green Belt but that has not stopped it proposing what amounts to a Blue Belt in expensive areas of the country.

The influential right-wing think tank published a report this morning calling for social rented homes that become vacant expensive areas to be sold off to fund the construction of more homes in cheaper areas.

Ending Expensive Social Tenancies makes a superficially attractive case for the policy and speaks some undeniable truths about the current housing crisis. Waiting lists are much too high, a shortage of new homes boosts house prices and rents and construction of new homes will create desperately needed jobs. More contentiously perhaps, it says that ‘government needs to make even more cuts in future’ and ‘housing cannot realistically expect more money’.

Reaction so far has ranged from a cautiously enthusiastic Grant Shapps (who says it is ‘blindingly obvious’ that £1 million homes should be sold) to a critical David Orr (the idea is ‘fundamentally flawed’).

There appears to be strong public support. In a poll commissioned by Policy Exchange, 73 per cent of voters agreed that ‘people should not be offered council houses that are worth more than the average house in their local authority’ while 60 per cent agreed that ‘people should not be offered council housing in expensive areas by social class, housing tenure and region’. I wasn’t quite sure what the second one meant either but it was actually a misprint for ‘by voting intention’.

Policy Exchange proposes that ‘expensive social housing’ should be defined as above a regional median – £290,000 in London, £190,000 in the South West, £119,000 in the South West – and then be adjusted for bedroom size It argues that ‘expensive areas are close to cheaper ones across the country’ so that ‘new tenants would be housed close to where they want – near friends and family’. As an additional safeguard, if there was no social housing within 30 miles or no replacement stock could be built within 30 miles, there would be no sale.

The total value of this ‘expensive social housing’ is calculated at £159 billion and at a turnover rate of 3.5 per cent, 28,500 homes a year could be sold off to raise £5.5 billion a year. Once debt was written off, that would generate £4.5 billion a year and fund the construction of between 80,000 and 170,000 new homes a year.

With a range of other beneficial impacts, Policy Exchange argues that ‘the biggest question is why DCLG civil servants have not proposed this policy before’.

Here are a few reasons why off the top of my head:

• Most obviously, it conflicts with any attempt to maintain mixed communities. How many social rented homes will be left in Kensington & Chelsea, Westminster, Hammersmith & Fulham, Islington and Camden after this? Despite that 30-mile rule, the impact on rural communities in the South West could be even more devastating. Policy Exchange rejects the idea of using a national median because it mean selling off virtually all social housing in London and the South East and would be unfair but seems prepared to accept the same unfairness within regions. Listen again here to Neil O’Brien of Policy Exchange and Labour MP Karen Buck debate the report on the Today programme this morning.
• It accentuates the social divisions already built into the housing benefit system, with claimants forced out of expensive areas by local housing allowance caps and the overall housing benefit cap.
• It would accentuate social divisions in education by forcing the sale of social housing in the catchment areas of ‘good’ schools (house prices in these areas are already inflated and so any social housing in them will automatically be ‘expensive’).
• It conflicts with regeneration policy in other areas. What would be the future for the plans of boroughs like Southwark and Newham to regenerate council estates with new mixed tenure developments when they would become the destinations for people forced out of more expensive areas?
• Could this Policy Exchange be by any chance related to the Policy Exchange that argued four years ago that there should be a mass migration from failing northern cities like Liverpool and Sunderland to London, Cambridge and Oxford? Even David Cameron called that “insane”. The effect of the latest policy must be to encourage the concentration of social housing in cheaper areas with higher unemployment – although Policy Exchange denies there is any correlation.
• Could this Policy Exchange be by any chance related to the Policy Exchange that argued two years ago for all council and housing association homes should be nationalised so that 84 per cent of them could be sold off to tenants? If at first you don’t succeed.

Policy Exchange cuts through all these objections by arguing that ‘ending expensive social housing will allow real mixed communities’ because there will be larger amounts of social housing in cheaper areas and because allocation policies would be changed to prioritise those in work. Social tenants, it argues, are more likely to mix with people in cheaper private housing.

However, that ignores changes that are already underway in the section 106 rules for new development. Last week, Eric Pickles announced he was sending in specialist advisers to help unlock stalled housing schemes in a move that will almost certainly reduce agreed affordable housing requirements. The Montague report on institutional investment in private renting is expected to propose that the definition of ‘affordable’ should be extended to cover market rented homes too. The long-term result will surely be a minimal proportion of social housing in any new schemes that are built (as is already happening in Hammersmith & Fulham) and no guarantee that replacement homes will be social or even ‘affordable’.

Above all, perhaps, the Policy Exchange report ignores what is already happening on the ground. Individual landlords already have asset management policies: it may well make sense to sell off a vacant street property that is expensive to maintain but has a high resale value and then reinvest the proceeds. However, those decisions are made within the context of overall aims and objectives that will include a commitment to a mix of housing in their local area as well as broader financial objectives. This idea would simply impose damaging and divisive long-term impacts from above in the end game for what Policy Exchange regards as the mistake of ‘socialist’ housing policy.

Meanwhile, of course, social tenants will be gradually excluded from areas of expensive housing leaving mixed communities of overseas property investors, bankers and lawyers free to flourish and grow. Welcome to the Blue Belt.