May day

Originally published on July 12 on Inside Edge 2, my blog for Inside Housing

Where does housing fit into Theresa May’s vision of ‘a country that works for everyone’.

The home secretary launched her campaign for the Conservative leadership with a speech in Birmingham on Monday. Within two hours she was certain to be prime minister. And by Wednesday night she will be in Downing Street.

Whether Monday’s events were choreographed with Andrea Leadsom or not, May’s speech sounded like one made by a leader in waiting. So much so that, as many people have noted, the bits about predatory capitalism and the cost of living read like they were lifted from one of Ed Miliband’s speeches before the 2015 general election.

After six years at the Home Office, May is still something of an unknown quantity on housing. A speech from 2013 that was widely seen as positioning herself to run for leader did not even mention the word.

The Birmingham speech fills in some but not all of the blanks – and once you strip away the rhetoric it begs all sorts of questions about how much she will really change.

She talks first about social injustice. She means black people treated more harshly by the criminal justice system, working class people les likely to go to university and women paid less than men.

‘But…fighting these injustices is not enough. If you’re from an ordinary, working-class family, life is just much harder than many people in politics realise. You have a job, but you don’t always have job security. You have your own home, but you worry about mortgage rates going up.’

As in her initial pitch to be leader, the ‘injustice’ is all about home ownership, with no recognition that most ‘ordinary, working-class families’ rent and may have a few more injustices to worry about. It hardly sounds like a country that works for everyone.

But she goes further when she talks about the aftermath of the financial crisis in 2008. It was ordinary members of the public who suffered, losing their jobs or seeing their hours reduced, not getting a pay rise, paying higher energy bills and:

‘Monetary policy – in the form of super-low interest rates and quantitative easing – has helped those on the property ladder at the expense of those who can’t afford to own their own home.’

This is a welcome recognition from a senior politician of the way that record low interest rates and QE have titled the table in favour of existing owners. As I’ve blogged many times before, people with mortgages are collectively paying £36 bn a year less for them than they were before the crisis. That huge sum has helped to prop up and then inflate house prices at the same time as banks have become much more cautious about lending to first-time buyers. These are major reasons why, as she puts it, ‘it’s harder than ever for young people to buy a first house’.

What was meant to be a temporary rescue package for the economy has now lasted for seven years and the Bank of England could cut rates even further and restart QE either this week or next month.

Does that mean that prime minister May would seek to level the table again, potentially through the tax system? The conventional Tory approach would be to cut taxes – perhaps stamp duty as advocated by Allister Heath in the Telegraph. A bolder one in tune with May’s rhetoric would be more radical reform of property taxation.

Housing also features in May’s vision for economic reform, including ‘more Treasury-backed project bonds for new infrastructure projects. More house building’.

The first bit sounds like the Stephen Crabb/Sajid Javid plan to issue bonds to pay for roads, railways and housing. With George Osborne’s deficit target abandoned, May and whoever she appoints as her new chancellor will have scope for this and more. She could, for example, change the public borrowing rules if she wanted without anyone batting an eyelid but it seems unlikely that she will.

As for the second bit, as I blogged last week, the section of her website on ‘over-development’ and her support for objectors to new homes in her constituency do not suggest anything especially radical.

May would also ‘put people back in control’, an echo of the Leave slogan that involves putting employees on company boards and blocking takeovers. On housing:

‘As the Government reforms public services, we should encourage public sector workers to set up mutuals. As we take infrastructure decisions – like with new housing, roads, or exploration for oil and gas – the benefits should be shared not just with local authorities but with local people themselves.’

That sounds not just like an endorsement of neighbourhood planning but also like she might be willing to take up ideas floated by Policy Exchange and others to use land value uplift so that local communities get some financial gain when permission is granted for new homes.

Finally, there’s ‘giving people more opportunity’. This goes to the heart of her Conservativism. Where Labour talks about equality and ends up holding people back ‘we believe in setting people free to go as far as their talents will take them’. She goes on:

‘That is why school reform is such a passion for so many Conservatives – and I will be setting out my own plans for schools policy in the coming weeks. But it is also why housing matters so much, and why we need to do far more to get more houses built.

‘Because unless we deal with the housing deficit, we will see house prices keep on rising. Young people will find it even harder to afford their own home. The divide between those who inherit wealth and those who don’t will become more pronounced. And more and more of the country’s money will go into expensive housing instead of more productive investments that generate more economic growth.’

The link she makes between policy on schools and housing is interesting, almost as though she recognises that both are essential foundation stones for opportunity.

The reference to ‘the housing deficit’ is spot on and a welcome recognition of the importance of new homes. She’s right too about the links between home ownership, inherited wealth and inequality and the way that our housing market sucks in resources and investment. But the focus on home ownership alone is again hardly a country that works for everyone.

And what should be done about it? May’s analysis might suggest the need for a radical change in approach. Her argument that ‘Brexit means Brexit’ might suggest the need to move away from a market-led approach to housebuilding that relies on migrant construction workers when more capacity is needed. A training scheme for UK youngsters could help tackle skill shortages but it would require counter-cyclical government investment to make it work.

Equally, and more depressingly, her analysis could just be used to support the status quo: Help to Buy, Starter Homes and the remorseless switch of investment from social housing to home ownership. All of them promoted as giving hard working families the chance to own their own home while delivering the real benefits to people already on the housing ladder. We all know the script and it’s the one that Brandon Lewis thinks she’ll follow.