Working for everyonePosted: October 6, 2016 Filed under: Affordable housing, Housebuilding, Housing market | Tags: Sajid Javid, Theresa May Leave a comment
Originally posted on October 6 on Inside Edge 2, my blog for Inside Housing
What would ‘housing that works for everyone’ look like?
Housing was a constant theme running through the Conservative conference this week. Communities secretary Sajid Javid said it was his ‘number one priority’ and announced a new(ish) £2bn fund for accelerated construction on public land plus ‘further significant measures’ in a white paper in the Autumn.
Housing minister Gavin Barwell is said to have addressed 17 different fringe meetings on housing and continued his charm offensive with more sensible comments about the need to encourage all tenures and tone down the obsession with home ownership and starter homes.
And Theresa May herself singled out housing as one example of market failure that requires government intervention to create ‘a country that works for everyone’ and an economy where ‘everyone plays by the same rules’:
‘That’s why where markets are dysfunctional, we should be prepared to intervene. Where companies are exploiting the failures of the market in which they operate, where consumer choice is inhibited by deliberately complex pricing structures, we must set the market right.’
‘It’s just not right, for example, that half of people living in rural areas, and so many small businesses, can’t get a decent broadband connection.
‘It’s just not right that two thirds of energy customers are stuck on the most expensive tariffs.
‘And it’s just not right that the housing market continues to fail working people either.’
Note though that it’s pretty clear who she’s blaming for rubbish rural broadband and high energy tariffs, much less clear who’s to blame for a failing housing market.
That’s surprising when she seems to see housing as lying at the centre of a much bigger social and economic reform agenda:
‘Ask almost any question about social fairness or problems with our economy, and the answer so often comes back to housing.
‘High housing costs – and the growing gap between those on the property ladder and those who are not – lie at the heart of falling social mobility, falling savings and low productivity.’
So what is she going to do about it? Again it’s clear that she thinks her government should go further than David Cameron and George Osborne:
‘We will do everything we can to help people financially so they can buy their own home. That’s why Help to Buy and Right to Buy are the right things to do.
‘But as Sajid said in his bold speech on Monday, there is an honest truth we need to address. We simply need to build more homes.
‘This means using the power of government to step in and repair the dysfunctional housing market. It means using public sector land for more and faster house building. It means encouraging new technologies that will help us to get more houses built faster. And putting in more government investment too. It means stepping up and doing what’s right for Britain.’
The optimistic part of me wants to rejoice at a passage like this in a conference speech by a prime minister (and note no mention of starter homes). The cynical part of me is much more cautious. We’ve heard big housing announcements so many times before without anything much improving apart from the notional wealth of existing home owners and the profits of the major housebuilders.
Yet the tone certainly does sound different. Javid in particular went out of his way to claim the legacy of Macmillan as well as Thatcher, arguing that tackling the housing shortfall is a ‘moral duty’ that goes beyond political expediency.
He sent a shot across the bows of the major housebuilders:
‘The big developers must release their stranglehold on supply. It’s time to stop sitting on landbanks, delaying build-out: the homebuyers must come first.
And he also had a message for fellow Tory MPs and councillors:
‘As elected representatives, we are here to take the right decisions – not the easy ones. Ultimately, we have a responsibility to build more houses. A responsibility, not just to our constituents, but to the next generation.’
These were hints perhaps of who May thinks might be exploiting the failures in the market but they only take us so far. The problem, I think, is the assumption that building more homes will on its own be enough to create ‘housing that works for everyone’.
The government’s ‘ambition’ (now downgraded from a target) of a million homes in this parliament is nowhere near as ambitious as many people believe. It was clear from Javid’s speech that the government’s benchmark for this is net additional housing supply rather than housebuilding completions.
That’s a legitimate point but increase from the 170,000 achieved in 2014/15 to the 200,000 a year required to hit a million is a small step rather than a giant leap. It’s still less than the figure the Barker report said was needed just to bring house price inflation down to European levels – not bring prices down. Even if the government does achieve its ambition, it will, in other words, merely slow down the rate at which homes become more unaffordable.
A real ‘housing that works for everyone’ would look more long term than the next five years – but perhaps significantly there was no mention of new towns or garden cities in the main conference speeches.
But it would also look beyond ‘supplyism’ to the system as a whole. To underline the scale of the problem facing May’s ‘ordinary working class people’, a report by the Resolution Foundation last month identified 5.8m ‘just managing’ households on low to middle income. In 1995 this group were twice as likely to own their own home as rent privately but 20 years on that position had reversed. The increase in the proportion of their income spent on housing costs over that time is the equivalent of 14p on the basic rate of income tax.
And the gap between ‘just managing’ and ‘not managing’ is narrowing all the time. Rent shortfalls are rising and benefits are frozen until 2020 and the holes in the homelessness safety net are widening. Just look at the situation in Peterborough, where homeless families first had to be placed in Travelodges and will now get temporary accommodation in homes from which other families were evicted.
Problems like this require action now, not just the promise of new homes in the future. It means acting on Barwell’s words on tenure. But it also raises much more fundamental issues about the divide between housing market insiders and outsiders and the divides that high housing costs cause between and within generations.
In her rhetoric at least, Theresa May got some of this. One of the most intriguing passages in her speech was the one in which she talked of the problems caused by low interest rates:
‘While monetary policy – with super-low interest rates and quantitative easing – provided the necessary emergency medicine after the financial crash, we have to acknowledge there have been some bad side effects.
‘People with assets have got richer. People without them have suffered. People with mortgages have found their debts cheaper. People with savings have found themselves poorer.
‘A change has got to come. And we are going to deliver it.’
She’s right: ultra low interest rates have reduced mortgage costs for existing home owners and landlords and then fed through into higher house prices for everyone else without any discernible effect on rents. What was meant to be a purely temporary response to the financial crisis has now lasted for nearly eight years and made the housing market even more dysfunctional in the process.
Exactly what the ‘change’ might be was of course not spelled out. The conference speeches this week are a good start but ‘housing that works for everyone’ will require action not words.