12 tests for the Housing White Paper

This is an updated version of a post originally published on January 12 on my blog for Inside Housing. 

The moment is finally here but will radical plans to boost housing supply live up to their advance billing? Here are my tests.

  1. How half-baked is it?

In one very important way, ministers have already passed my first test. Publication of a White Paper seems to mark a return to an earlier era of government when policies went through consultation and scrutiny before they were enacted.

Contrast that with the way that half-baked ideas from thinktanks were turned into equally half-baked legislation in the back of a fag packet Housing and Planning Act.

Speaking of which, how much will we hear about the loose ends that still need tying up from the act? Pay to Stay may be dead in its compulsory form, and the extension of the Right to Buy delayed by another pilot, but we still don’t know what’s happening with forced sales of higher-value council houses or to the receipts they raise.

2) Is tenure neutrality for real?

Ever since he became housing minister, Gavin Barwell has struck a markedly different tone to his predecessors, stressing that ‘we need more homes of every single kind in this country’.

However, will reality match the rhetoric? The balance of New Year announcements on Starter Homes and the Shared Ownership and Affordable Homes Programme begged questions, and then came Theresa May’s speech on Monday.

The only real mention of housing came when the prime minister talked of ‘everyday injustices’:

‘If you’re from an ordinary working class family, life is much harder than many people in Westminster realise. The injustice you feel may be less obvious, but it burns inside you just the same. For you have a job but you don’t always have job security. You have your own home, but you worry about paying the mortgage. You can just about manage but you worry about the cost of living and getting your kids into a good school.’

Note that, as in her first speech as prime minister, ‘ordinary working class families’ who are ‘just about managing’ all have mortgages.

3) What about those who are not managing?

Plans already in place from the last Conservative government mean that the poorest households are set to be squeezed all the way to 2020 by policies like the reduced overall benefit cap, Local Housing Allowance cap and freeze in working-age benefits. That in turn makes it harder and harder for social landlords to house them.

Theresa May’s government has talked about the ‘just about managing’ while carefully not defining who this means and doing just about nothing to reverse looming cuts in tax credit under Universal Credit.

Meanwhile the emphasis on homeownership means housing policy has been about shifting support away from genuinely affordable homes that benefit the poorest households and cannibalising the declining stock of social housing to boost schemes for those aspiring to buy. How much will the White Paper reverse this trend, if at all?

4) Will it deliver more homes?

With that context out of the way, this is of course the key question and the one on which the government most wants to be judged. It’s also a pragmatic argument for tenure neutrality to generate new homes from as many different directions as possible.

However, the real test is not whether the government meets the target of a million new homes by 2020 (with some judicious rearrangement of goalposts this is perfectly possible) but whether the White Paper can deliver a long-term ‘step change’.

That reference back to the days of John Prescott should prompt some caution on that but the indications are that Sajid Javid and Gavin Barwell have put some real thought into this and are even prepared to upset some Tory vested interests to achieve it.

The emphasis on infrastructure to support new development is a promising start. Let’s hope, though, that they come up with more than just meaningless targets for local authorities and a revamped New Homes Bonus.

5) Will it challenge the existing delivery model?

The handful of big house builders that dominate the market have been hit by heavy criticism for business practices such as landbanking.

Some of this is unfair, since they have boosted output and they do need a supply of land, and some of it is simply misplaced: they are large quoted companies with a responsibility to make as much money as possible for their shareholders and that means output will always come second to margins.

However, the scale of support they have enjoyed from the taxpayer demands much more of a quid pro quo from them. Javid and Barwell seem to get this point but will their White Paper really challenge the model?

6) What about land?

As Pete Jefferys of Shelter rightly argues, above all else that has to mean a fundamentally different approach to the land market.

What’s required is a fundamental shake-up to ensure that the benefits of planning permission for homes do not simply disappear into the back pockets (or offshore bank accounts) of landowners.

If all the White Paper has to offer is more pledges to release public land, it will fail this test. It has to go much further and enable that land value to be captured for the benefit of the community, via new legislation if necessary.

As for that public land, it needs to be treated as what it is, a precious and finite public resource, rather than as something to be handed over as quickly as possible to the private sector.

7) What about planning?

That raises a bigger question about the role of planning. Many of the changes introduced since 2010 have been based on the assumption that planning is red tape that is holding back development. At the same time planning (in the shape of regional targets) has been seen as a conspiracy to force through more homes. Resources for local authority planning departments have been cut at the same time as they get blamed for being too slow to process applications.

But what if the solution is not less planning but better planning: the sort of strategic development linked to the original new towns programme, with development corporations where needed and new powers over land?

8) What about other players?

The indications are that ministers see the need to break their reliance on the big house builders. It would be a major surprise if the White Paper did not include more to boost the output of small and medium-sized builders and to encourage the burgeoning build-to-let sector.

Reform of the land market will be one key to this since trading in land is the real competitive advantage of the big firms. More support for custom build and perhaps community land trusts, co-operative housing and other new models would also be welcome.

However, will the government be prepared to go further and remove restrictions on local authority involvement? Mass council housing is not going to come back any time soon and austerity and years of inactivity will constrain their potential, but local authorities should have a key role in building affordable homes and in driving development in their area.

What comes first: delivery for the next 40 years or the ideology of the last 40?

9) What about prefabrication?

Like many ministers before him, Sajid Javid is convinced that building homes in factories is a key part of the solution to the housing problem. As the Farmer Review for the government argued last year, ‘pre-manufacturing’ could also be an answer to the looming skills crisis in the construction industry.

There is clearly momentum behind an idea that also has the potential to spread the benefits of increased housebuilding around the country post-Brexit. However, Javid also needs to bear two other things in mind: first, factories need a consistency of demand that can only come from rented housing, which makes changing the model even more important; and second, as landlords around the country with problem stock can testify, quality can suffer in the rush for quantity.

10) What is the real aim of the White Paper?

Every ministerial statement that I’ve seen ahead of publication makes the same implicit assumption as Theresa May in her speech this week. This is that boosting the supply of homes and making housing more affordable are one and the same thing – but are they?

It’s certainly hard to imagine the affordability crisis being tackled without a major drive to boost supply over the long term. However, even if output could be boosted to 250,000 homes a year, remember that was only the level the Barker report said was needed to restrict house price inflation to the average level in the rest of Europe – in other words, to stop things getting worse. As Priced Out argues, 300,000 a year or more are needed. Will the White Paper go that far?

And what influences house prices more anyway: the supply of new homes or the supply of housing finance? If the government really wants to make housing more affordable, especially in the short to medium term, the White Paper needs to look at more radical options.

11) What about renters?

Reports over the weekend suggest that the White Paper will acknowledge that new homes and Help to Buy will not be enough in themselves to improve the lives of private renters. Suggestions of encouragement for longer tenancies and a ban on letting agent fees are welcome moves that would have been unimaginable from a Conservative government even a year ago. But incentives to institutional investors to offer longer tenancies do not amount to the ‘rights’ for tenants spun in some reports.

12) What about tax?

This is one example that I’m fairly confident will not be addressed in the White Paper, but should be.

One way to make homes more affordable for the housing have-nots is to make it less profitable for the housing haves. A truly radical White Paper would look at capital gains tax and council tax or even a land value tax and start to redress the balance between homes as places to live and homes as investments.

Tax incentives for new homes or for older owners looking to downsize from homes that are too big for them could be built into any new system (one idea that does seem set to make it but within the context of the current system). Instead the government has ramped up stamp duty, which is a tax on new supply.

True, Britain withdrew mortgage tax relief in the 1990s and has just extended this to landlords, but homeowners and buy-to-letters have been more than compensated by lower interest rates. Theresa May clearly sees the distortionary effects of the rock-bottom rates seen since 2009 as a major problem but surely that has to mean action by her government to compensate for them? When it comes to housing, is it prepared to do anything about it?

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