Under new ownership

Originally posted on October 7 on Inside Edge 2, my blog for Inside Housing

Forget social housing, any kind of affordable rented housing is living on borrowed time in the wake of this year’s Conservative conference.

In his speech on Wednesday David Cameron announced ‘a national crusade to get homes built’ and go from ‘Generation Rent into Generation Buy’.

The headline policy of starter homes does not look any better than it did the first two times he announced it (in December 2014 and again when he doubled the target in March). The original policy had potential because it offered the prospect of additional homes on sites that would not have got planning permission before. Though there were potential problems, what would amount to urban exception sites looked like a good idea, especially if the uplift in land values could be captured to pay for infrastructure.

But the idea has looked worse and worse the more it has evolved. Research by Shelter has shown that even at a 20 per cent discount the homes will not be affordable in most of the country. Despite an advisory committee on design, there’s not much to stop housebuilders cutting costs by making them starter hutches rather than homes and no mechanism has been suggested so far to check that the discount really is a discount. And even if there is a deal to be had for Generation Rent some of the benefits will go to people who could have afforded to buy at the undiscounted price.

Worse still are the impacts on old-style (as we will now have to get used to calling it) affordable housing. As originally announced, you had to check the small print to discover that the plan was to allow housebuilders to count starter homes towards their section 106 ‘affordable’ contribution. But in his speech on Wednesday, Cameron put this aspect of the policy front and centre:

‘For years, politicians have been talking about building what they call “affordable homes” – but the phrase was deceptive. It basically meant homes that were only available to rent. What people want are homes they can actually own. After all, the officials who prepare the plans for the new homes, the developers who build them, the politicians who talk about them…most of these people own the homes they live in. Don’t they realise other people want what they’ve got – a home of their own?

‘So today, I can announce a dramatic shift in housing policy in our country. Those old rules which said to developers: you can build on this site, but only if you build affordable homes for rent…we’re replacing them with new rules. You can build here, and those affordable homes can be available to buy.’

Notice the journey that ‘affordable’ has made since 2010. Once it meant social housing at rents people could afford to pay plus shared ownership, then it meant homes that were ‘affordable’ at up to 80% of market rents, but now it means homes sold at 80% of the market price. Affordable homes for rent are now seen as an obstacle to aspiration and it seems Cameron has never heard of shared ownership.

No wonder his aides could not say how many additional homes the policy will produce in briefings ahead of the speech: they will simply replace the affordable homes that would have been delivered through the planning system anyway. The difference is that the benefits from the planning gain will go straight into the pockets of buyers when they sell (or more likely into the profit margins of housebuilders before they buy) rather than be recycled into more homes.

This will destroy a substantial source of funding for affordable housing for rent. According to report published by the Joseph Rowntree Foundation this summer, section 106 accounted for 37% of all affordable homes delivered in 2013/14 and 65% in 2006/07. But if you’re thinking this is an unintended consequence, think again. When combined with George Osborne’s confirmation on Monday that ‘this autumn we’ll direct our housing budget towards new homes for sale’ this means that the key funding mechanisms for new affordable homes for rent are being redirected towards homes for sale. Greg Clark did at least acknowledge a need for homes for rent in his speech on Monday but the direction of travel is clear.

This would be worrying enough but the crusade does not stop with new homes. Cameron also announced that the government has accepted the deal with housing associations to introduce the right to buy on a voluntary basis – from next year. This explains why Greg Clark did not mention it on Monday and also the timetable for the NHF’s vote.

True, the deal promises to replace the homes sold with new ones, but it also gives associations the flexibility to make the replacements shared ownership or starter homes rather than for rent. And the right to buy discounts will be funded by forcing councils to sell off their most valuable homes.

Just to complete the picture, on Tuesday Zac Goldsmith, the Conservative candidate for London mayor, proposed knocking down and redeveloping thousands of council estates. He stressed this would be with the consent of the communities there would be ‘guarantees’ that existing residents would not be priced out but those are promises we’ve heard before.

So in summary the message from the Conservative conference is this: funding for new affordable rented homes will be redirected to home ownership; and existing affordable rented homes will be sold off or demolished. How much survives, and how much new affordable rented stock is built, will be up to individual housing associations – or perhaps be built on land where councils can dictate terms because they own it.

Exactly where that leaves people who cannot afford to buy even at a 20 per cent discount is unclear, but this may be no accident. In a passage later in his speech promising an assault on poverty, Cameron said that:

‘Conservatives understand that if we’re serious about solving the problem, we need to tackle the root causes of poverty. Homes where no-one works; children growing up in chaos; addiction, mental health problems, abuse, family breakdown. Today, a teenager sitting their GCSEs is more likely to own a smartphone than have a dad living with them.’

In the Conservative mindset, poverty is caused by the behaviour of poor people rather than the fact that they are poor. There are lots of poor people in social housing, therefore it’s social housing that makes them poor. Stopping building it, selling it off and knocking it down does not just promote home ownership, it tackles poverty too.