The day afterPosted: May 8, 2015
So it turns out that the winners in the ‘the housing election’ are upmarket estate agents and housebuilders.
The soaring share prices of firms like Berkeley Homes and Foxtons this morning may be as much about Labour defeat as Conservative victory. Take the mansion tax and moves against non-doms out of the equation and prices of expensive London homes are set to go on rising along with the profits of the firms that trade in them.
The mood could hardly be more different in a housing sector facing up to an unexpected Conservative overall majority that changes all the pre-election calculations about the right to buy (it won’t happen under a coalition) and huge cuts in social security (another party will block them).
David Cameron pledged during the campaign that legislation to extend the right to buy to housing associations and force local authorities to sell their best stock will feature in the Queen’s Speech. We are now set for battles in the courts and in the House of Lords (where housing association right to buy was defeated in the early 1980s). The policy might have been traded away or modified after a defeat in the Lords under a Tory-led coalition but an overall majority changes everything.
With no restraining Liberal Democrat influence the door is now open to full implementation of the Policy Exchange agenda for housing. The conversion of social housing to affordable housing will accelerate while starter homes will replace affordable homes generated through the planning system. Is it possible that the government could force the sale of even more ‘expensive’ council houses and cut the affordable homes programme?
The £12 billion cuts in welfare will presumably be spelled out in the Spending Review to follow. We already know that the Tories will freeze working age benefits for two years, cut benefits for the under-21s and reduce the benefit cap to £23,000 but there are another £10 billion of cuts still to come. Presumably these will happen before any deal on fiscal autonomy for Scotland.
The options available are so stark that they could make the cuts in housing benefit seen since 2010 look mild by comparison. DWP documents leaked to The Guardian this week proposed increasing the bedroom tax and removing housing benefit from the under-21s. However, they were proposals to prevent a breach of the welfare cap – these plans could go much further with a potentially devastating impact not just on claimants but on funding for new affordable homes too.
How the housing sector in England responds to all of this is clearly now a huge question that I will leave hanging for now. Will it move into active opposition or do what it has always done and quietly adapt to the new reality? Where next for Homes for Britain? Where does the housing establishment stand on the housing protests that will inevitably grow and get louder?
Beyond that, I’d raise three other questions about the future of housing under the Conservatives.
First, how feasible is all of this? After a campaign of startling promises, the Conservatives economic approach mixes a commitment to austerity with unfunded tax cuts and spending increases, unspecified spending cuts and locks on further tax rises. Exactly how they will square the circle remains to be seen, and I’m not sure they even know themselves yet. Chris Cook of Newsnight speculates that the right to buy extension could be quietly killed off. I’m not so sure, given that Cameron mentioned it in his acceptance speech.
Second, how does the election result affect the balance of power between the Tory economic liberals and the nimbys? George Osborne may lead the first camp and seems committed to delivering more new homes through the market. But many backbenchers campaigned on blocking greenfield development and a narrow majority hands them extra influence.
It will be interesting to see what happens in any reshuffle. Cameron and Osborne (if he continues as chancellor) could signal their commitment to new homes by replacing Eric Pickles with a more dynamic figure or even by appointing a housing minister with more clout. Keeping Pickles will signal the opposite.
Third, what happens with the wider housing crisis? Housing was a big (if not decisive) issue at this election for a reason: we are not building enough homes; house prices are too high; the cherished home owning democracy continues to go backwards as young people are priced out; low pay plus high rents means the housing benefit bill will continue to rise; homelessness and social polarisation will continue to get worse; and an eventual rise in interest rates could send the housing market sharply into reverse.
For all the policies like Help to Buy ISAs and the Starter Home Initiative, for all the celebrations in the upmarket boardrooms, these issues will not go away. The Conservatives will suffer in 2020 if they fail to address them now.
Originally posted on Inside Edge 2, my blog for Inside Housing