Enemies of the state

Originally posted on July 5 on Inside Edge 2, my blog for Inside Housing

Bring it on. We are determined take you on. Who do David Cameron and George Osborne have in mind?

If you haven’t seen it yet, you need to read their op-ed in Saturday’s Times on ‘Here’s how to build a homeowning Britain’. They mean England of course. You can read extracts on the Number 10 website but that only gives a flavour of the full article so I’ve posted it here.

Ahead of the Budget, they promise that ‘a shake-up of inheritance tax and crackdown on nimby councils will give young people a foothold on the property ladder’. It is not just an explicitly, distinctively Conservative vision for housing but also a declaration of war against anyone opposed to that vision. Here’s my take on the key points:

‘Having your own place is an important stake in our economy. It’s also one of the best expressions of the aspirational country we want to build, where hard work is rewarded.

‘It’s also about social justice. We don’t want this to be a country where if you’re rich you can buy a home, but if you’re less well off you can’t. We want it to be One Nation, where whoever you are, you can get on in life.’

This is breathtaking cynicism. Most people do want to own their own home but our current system delivers unearned and under-taxed gains to people who already own one at the expense of those who work hard, do the right thing and are stuck paying rent to a private landlord. The cut in inheritance tax, according to the IFS, will serve further to damage and distort an already broken system of housing taxation’ and ‘do even more to lock older home owners into possibly inappropriate properties’. It will only exacerbate existing structural forces that are progressively restricting home ownership to the wealthy, and those with inherited wealth. Access to the Bank of Mum and Dad is already as essential as a mortgage for many young buyers.

‘In the past five years, we got builders building, lenders lending, and government-backed schemes alone helped more than 200,000 people on to the property ladder.’

This is true up to a point: builders are building more but still half what we need; lenders are lending more but much of it is going  to buy to let landlords; and government schemes have helped more people on to the ladder but they have mostly inflated house prices to benefit people already on it. As quickly as the off-balance-sheet billions are poured into Help to Buy, house prices escalate further out of reach.

Cameron and Osborne strangely neglect to mention that in their first four years as prime minister and chancellor overall home ownership fell by 186,000. Or that in their first three years mortgaged ownership fell by 513,000.  Or that their ‘aspirational country’ is actually a rentier nation with an extra 676,000 private tenants since 2010 and millions of new private landlords. Naturally enough, the piece has nothing to say about reform of buy to let.

‘We will also boost supply. We will build 200,000 starter homes by 2020, sold at below market rate and for first-time buyers under the age of 40. To deliver on this commitment, we will ensure every reasonably sized housing site includes a proportion of these homes for young people.’

This sounds like good news even if it will be open to manipulation by housebuilders. But the second bit gives the game away: these homes will not be additional, they will merely replace affordable housing produced under section 106 agreements.

‘We will also undertake a massive programme of regeneration around our train stations, as part of a wider drive to release public sector land for 150,000 homes.’

Great, and not sure I’ve seen the reference to land around train stations before. The only trouble is this is coming from the same government that claimed it would release public land for 100,000 homes in the last parliament and has just been officially exposed for fiddling the figures.

‘We will also make the planning system more effective. We will set out more detail next week, as part of our productivity plan. It is unacceptable, for example, that many councils are still not close to having a plan for delivering the homes their communities need. We will take action, in consultation with local communities, to deliver the plans for those areas which have failed to do so.’

Councils without local plans include many that are Conservative-controlled, with local Tory MPs and communities who voted for them because they do not want more homes. If Cameron and Osborne are really planning to take them on, great, but somehow I doubt it.

And then come the real enemies that Cameron and Osborne are determined to ‘take on’.

‘First, the opponents of Right to Buy. There are those who think it’s unfair on private renters, who don’t get these discounts. But we’re offering them help through schemes such as shared ownership and Help to Buy. Let’s now help others, some of whom are the least well-off in our country. We’re proud that it’s the Conservatives who are giving them some hope, and if anyone wants to argue with us on that, we say bring it on.’

Note there is no help offered for people still stuck as private renters. See above on Help to Buy, though that is an interesting statement of support for shared ownership.

‘Then there are those who oppose Right to Buy because they think it won’t work, and will reduce housing stock. But the system right now doesn’t work. One of the main ways to encourage housing associations to build more homes is to increase their revenue. That means increasing social rents. And that means increasing housing benefit — which comes from either taxing or borrowing more. This is another of the Labour-inspired merry-go- rounds we need to get off. Housing benefit already costs us £24 billion a year, two thirds of what we spend on defence. That figure needs to come down. And despite housing benefit revenue doubling in the past 13 years, some housing associations aren’t building enough homes — indeed, some aren’t building at all.’

I’ve written about housing since 1993, so almost back to the start of the period when housing associations became the Conservatives’ favoured vehicle for dismantling council housing. There is no doubt that the love affair is now over. Housing associations are now lumped in with tax credits as symbols of Labour failure.

While few people would claim that a system so reliant on housing benefit is anywhere near perfect, Cameron and Osborne conveniently forget that it was their government that created the even bigger Tory merry-go-round of ‘affordable rent’, which was explicitly designed to maintain investment through lower grant and higher rents. And it was an earlier Tory government that built the ‘housing benefit will take the strain’ fun park in the first place.

This is not just a defence of the extension of right to buy but an attack on the entire current funding system for affordable housing. Rumours are swirling that the Budget will see a reduction in the CPI+1 formula for rent increases. Plans leaked over the weekned to reduce the ‘pay to stay’ threshold to £30,000 will not change much unless there is some sort of compulsion on landlords to charge market rents – though some reports do say that. However, does this paragraph a decisive change in direction for the affordable homes programme away from renting to ownership schemes (or even a change of heart on having one at all)? Does it also signal a movement towards the idea of ‘free’ housing associations able to rise beyond the current system?

‘We have a better model. By helping people to own their own home, through Right to Buy, we can turn tenants into homeowners and reduce housing benefit bills. And by selling off the most expensive council houses when they become vacant we can replace every home we sell — whether an expensive council house or one through Right to Buy. And we will do so quicker than the current three-year rule requires.’

If you’re thinking that one for one replacement has been an abject failure so far, or that government spin doesn’t stack up, get with the programme. If you question the back of an envelope sums behind the policy, or the fact that it will mean massive transfers of resources from areas with council housing (like London) to ones that don’t, back off. London Tories including Boris Johnson are pressing for the right to buy discount to be replaced with equity loans to limit the damage. That could be a way out but Cameron and Osborne tell housing association tenants here that ‘they will get a discount of up to 70 per cent’.

‘So we will transform Britain: from a lower-home-ownership, higher-tax, higher-housing- benefit country to one that encourages home ownership, reduces taxes, lowers housing benefit bills and builds more homes.’

This is an explicit reference back to Cameron’s speech last week on ‘opportunity’, with housing associations and social housing clearly on the wrong side of the line along with benefits and tax credits. Affordable homes are now assets to be stripped to boost ownership while the government tinkers with planning but does nothing to address other key structural issues in the housing and mortgage markets.

‘It’s simple: you are either pro-reform, or not; for building homes, or not; on the side of young people, or not. We know our position. As a One Nation government, we will always be squarely on the side of those who want to get on.’

Just after the election I blogged about One Nation Conservatism and housing and asked whether it was anything more than PR puff by setting out 12 tests for policy. It’s almost beside the point that they will flunk 11 out of 12 of them.  Or that thanks to devolution Scotland and Wales are moving in the opposite direction to England on most of this agenda. With welfare cuts including the £20,000 regional benefit cap that Osborne confirmed on Sunday, this is an audacious attempt to change the very meaning of One Nation and dismantle what we might have thought it meant in housing until now.

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