The prime minister has promised a crusade to build 200,000 cheap homes before 2020. Here are six reasons why the proposals won’t help.
1. It will reduce supply for housing associations
Put very simply, private developers currently have to build subsidised (“affordable housing”) alongside their ‘for sale’ stuff. These affordable homes are then sold broadly at cost to a housing association to manage. They rent them to people in need of subsidised housing. Crucially, they ensure they are always used by people in such need (although admittedly little has been done to turf people out or up the rent once they can afford to pay more).
By changing it so that properties are sold – rather than built for subsidised rent – Cameron is stripping away the only major lifeline of supply for affordable housing rent we have left. With no state-funded home building, this will basically make life even tougher for those in need of subsidised housing.
2. They will allow speculators to play the system
Today’s proposals will not have anyone to manage the process after sale– in the way that housing associations currently manage affordable housing. Therefore, there’s nothing to stop so-called ‘starter homes’ being picked up on the cheap and rented out at full price to someone else, wholly undermining the point. Councils don’t have the resources to police this.
3. The homes aren’t even that affordable
It’s not hard to find homes outside of London for £250,000. Inside of London, where the cap for starter homes will be £450,000, the sort of salary required – and a deposit which is reasonably going to be over £60k – still puts these out of reach of anyone not on a large salary who also has parental help.
4. It’s ignoring Bank of England advice on rising debt levels
The BoE recently warned against rising housing debt by expressing anxiety over buy-to-let landlords taking on lots of highly leveraged loans. With interest rates only going one way, it doesn’t make sense to be pushing those at the lower end of earning brackets into massive debt they may well be stretching themselves to afford. This could have a crippling effect on the economy if rates rise and people are left with mortgages they cannot afford. It means more cash is tied up in unmovable assets with less of it floating around the economy.
5. This will do nothing to increase supply
Private development of homes has been relatively stable since the 1980s. Both tiny and fundamental changes to planning over the years have done little to shift stuff for the simple reason that house builders have a certain amount of finance to play with and a level of appetite to build. These measures are robbing Peter (affordable housing) to pay Paul (starter homes) – not making it cheaper to build, bringing any more land forward cheaply or reducing the cost of planning. Why? Because that would not go down well with core government supporters, some would argue.
6. Private renting is the fastest growing tenure of housing
There are more than 9 million renters. Many would love to own, of course. But many would not. Many now value lifestyle and flexibility over the need for a mortgage and would rather spend money on nights out and holidays over costly house repairs and whopping chunks of stamp duty which most experts agree is a regressive tax. The point is that renting has become a lifestyle choice and rather than steadfastly oppose it, Cameron should embrace it and think about ways to build more homes for rent that are professionally managed – rather than all being owned by amateur investors.
7. Bonus point: Corbyn has little clue either
If the Conservatives’ plans were playing to the gallery of their supporters then Labour’s plans are equally ridiculous. Rent caps would of course destroy what little investment we currently have in housing for rent. The suggestion that heavy-handed regulation can fix a free market that requires a fundamental overhaul is both ridiculous and irresponsible.
So what would help?
1. Focus on building homes for rent: getting money from long-term investors (pension funds) is already seeing benefits
2. Public sector partnerships: councils forming JVs with developers to turn unused buildings or land into homes which the state can profit from
3. State funded housing – forward-funded and then sold to pensions funds (much like railways or roads)
4. More funding for council planners (rather than more cuts): better resourced planning departments can do more. If this is really a priority, ministers should put their money where their mouths are.