Sunak fails to look beyond the short termPosted: July 8, 2020 Filed under: Coronavirus, Decarbonisation, Housing market, Stamp duty | Tags: Rishi Sunak Leave a comment
Originally published as a column for Inside Housing on July 8.
This was a Summer Statement that was all about protecting jobs and getting money into the economy as quickly as possible.
Judged in those terms, while it does not go as far as some had advocated, the two big housing measures in chancellor Rishi Sunak’s Plan for Jobs look carefully calibrated to achieve both.
The £3.8 billion cut in stamp duty (increasing the nil rate from £125,000 to £500,000) is calculated to boost transactions, generate jobs and drive additional spending estimated at around 5 per cent of the house value.
And the Treasury reckons that the £2 billion Green Homes Grant (funding two thirds of the cost of energy efficiency work up to £5,000 for owners and landlords and all of the cost up to £10,000 to low income owners) could support over 100,000 green jobs as well as cutting carbon emissions and fuel bills.
But it’s not hard to find holes in the Summer Statement where other housing responses could and should have been: the statement does nothing more for affordable housing, it fails to fill holes in the safety net and, as Generation Rent points out, vouchers to eat out are not much use if you cannot afford to stay in.
And though the two measures that are there should boost the economy in the short term the longer-term benefits of both look uncertain at best even when you judge them in isolation and in their own terms.
Stamp duty holidays are a traditional part of the Treasury response to any crisis because of the way that the housing market influences the rest of the economy.
But even leaving aside the questions of whether there are better ways to spend £3.8 billion or better ways to tax housing, what will the real impact be?
To quote one example, an Inland Revenue evaluation of the stamp duty holiday introduced in March 2010 in the wake of the Global Financial Crisis concluded that it had ‘not had a significant impact on improving affordability for first-time buyers’ and that ‘most of the people who benefitted would have purchased property in the absence of the relief anyway’.
The effects may be different in the current circumstances but the holiday will still do nothing to help tens of thousands of people who did successfully buy for the first time and now find themselves trapped in flats that are unsaleable because of combustible cladding.
By contrast, it seems that second home owners and buy to let landlords are set to benefit from a partial holiday (though still paying the additional rate).
The balance between the short term and long term looks even worse in the case of the Green Homes Grant.
Yes, it will get money into the economy quickly – double glazing salespeople and cowboy builders will be only too happy to take it off you – but the unhappy precedents of the cavity wall insulation scandal and the failure of the Green Deal suggest a need for caution.
All this from a government that abandoned the Zero Carbon Homes target in 2016 and so ensured that the homes we are still building will eventually have to be retrofitted as well.
If you think about what it will take to successfully decarbonise our existing housing stock, and the benefits that could follow, this looks like completely the wrong place to start.
Giving money to people to spend on any old insulation or double glazing or new boiler instead looks likely to minimise those benefits.
What’s needed are reliable, trustworthy methods to retrofit our older housing stock that can work in different types of home, combined with oversight and quality control of the work, plus (in the longer term) a decarbonised source of heating (gas boilers are set to be banned in new homes by 2025).
A report for the Welsh Government last year recommended starting with bringing social housing and private sector homes in fuel poverty up to the highest Energy Performance Certificate A rating by 2030.
A rolling programme could move from place to place, developing skills and jobs and perhaps enabling social landlords to act as anchor institutions in their communities, before applying to the rest of the private sector by 2050.
The scheme announced by Rishi Sunak effectively does the opposite, spending the money as quickly as possible while doing nothing about quality control or skills.
Social housing gets a mere £50 million for a demonstrator project this year – half the amount being spent on Dominic Cummings’s pet scheme of machines to suck carbon out of the air – when the Conservative manifesto promised a Social Housing Decarbonisation Fund worth £710 million over the next three years and £3.8 billion over the next ten.
Maybe it’s unfair to judge a statement focused on the short term by long-term criteria. Perhaps there will be more to come in the Budget and Spending Review in the Autumn.
But even in the government’s own terms this looks like a huge missed opportunity when it could have kicked off the whole programme in deprived communities suffering from the worst fuel poverty in the North and Midlands.
These are of course precisely the communities it says it wants to ‘level up’ and precisely the seats that swept it to power in 2019.