Plan C

So the Conservatives will pledge a ‘housing revolution’ at the election. Sound familiar?

In an interview with the Sunday Telegraph over the weekend, George Osborne outlined a Tory plan to help a million more people into home ownership in the next parliament thanks to schemes like Help to Buy, Right to Buy and the Starter Home scheme.

‘I would like to see us double the number of first time buyers, up to half a million. That is the kind of level we saw in the 1980s. There is no reason why our country can’t achieve that again. That’s a goal we set ourselves today.

‘I think we can deliver a revolution in home ownership and make this the home-owning democracy, the home-owning society that I think is one of the Conservatives’ core beliefs.’

The chancellor says that visiting building sites is ‘the best part of my job’, not to mention donning high-vis jackets and being pictured with happy first-time buyers. ‘It reminds me of why we are doing this. Ultimately this is about people’s aspirations, their futures and their dreams.’

Osborne said the starter home scheme and a ‘rejuvenated and refreshed’ right to buy would be key. But he was coy about the much-rumoured manifesto pledge to extend the right to buy to housing association tenants. ‘We will see going forward,’ he told the Telegraph. He did not rule it out but he was not ready to propose such a plan ‘right now’.

That’s not exactly a denial. It sounds to me more like he could be keeping his powder dry for an announcement later in the campaign.

So why does all of this sound so familiar? Because it’s actually the third Tory ‘revolution’ on housing since 2010. Add countless strategies, 200 initiatives and more than 500 announcements on housing and you get the picture.

First came the localist ‘revolution’: the scrapping of Labour’s ‘Stalinist’ top-down targets on housebuilding; the introduction of local incentives plus the National Planning Policy Framework; and the reforms to social housing in the Localism Act.

Next came David Cameron’s speech to the Conservative conference in October 2011:

‘The failure of the housing market is bound up in the debt crisis. Because lenders won’t lend, builders won’t build and buyers can’t buy. We’re sorting this out, bringing back the Right to Buy and using the money to build new homes. Macmillan made us the party of the property-owning democracy. Margaret Thatcher gave people the Right to Buy. Now let us, in this generation, inspire a new Tory housing revolution.’

A month later Cameron promised in a ‘radical and unashamedly ambitious’ housing strategy to ‘break the current cycle in which lenders won’t lend, builders can’t build and buyers can’t buy’. The key policies were the NewBuy mortgage guarantee and a ‘reinvigorated’ right to buy with homes sold replaced on a one-for-one basis by new ones.

So where do things stand after two revolutions?

Despite the first and the billions pumped into schemes like Help to Buy, housebuilding is still at half the levels needed. The last official figures before the election showed starts falling for the second quarter in a row, indicating perhaps that the modest recovery is petering out.

As for the second, a survey by the CIH, LGA and NFA over the weekend found that fewer that most councils expect to be able to replace half or fewer of the homes sold. Official figures now show starts running at one for 11 sold.

And you’d never guess from the third revolution’s call for more first-time buyers that home ownership fell by 210,000 in England the first four years of the coalition and that the number of household buying with a mortgage fell by 764,000.

In the absence of any meaningful action to boost supply or control house prices, the revolution may have to look elsewhere.

There were 311,400 first-time buyers in the UK 2014, according to CML statistics, up from 199,000 in 2010. All those frustrated buyers out there mean there is plenty of pent-up demand but house prices remain out of reach of earnings in large swathes of the country. It’s not clear whether Osborne’s pledge applies to England or the UK but achieving 500,000 will be challenging even with all the different flavours of Help to Buy and 40,000 starter homes a year.

Interestingly, the 2014 figure is about the same as in 1980. However, the numbers had risen to more than 500,000 by 1984. Much of this was down to the 640,000 right to buy sales in the UK (530,000 in England) between 1980 and 1985, all of which will have counted as first-time buyers.

You can see the temptation for the Conservatives do the same again in 2015 by extending the right to buy to housing associations (despite dropping the policy from their manifesto in 2010).

The argument that prevented this in 1980 still applies: they are charities. Another that might give the Treasury pause for thought is how their borrowing could continue to count as private borrowing if the state directed them to sell their assets at a discount.

Then there is the impact on the supply of affordable rented homes. Extending the right to buy would limit associations’ ability to borrow to finance new homes. Allowing housebuilders to count starter homes as affordable will restrict the contribution from planning obligations and mean no net increase in supply. The council stock will continue to shrink despite the ‘one for one replacement’ pledge.

A truly radical Conservative housing policy would be based on building many more homes for people to buy and rent. This one merely looks set to cannibalise the stock that already exists while reducing inheritance tax for existing owners. If the first two Tory housing revolutions achieved little, the third looks stuck in reverse gear.

Originally posted on Inside Edge 2, my blog for Inside Housing