«high aspirations, sound foundations: a discussion report on the centre-ground case for building 100,000 new public homes By John Healey MP THE SMITH ...»
We must also not lose sight of the vital changes that need to be made in other parts of the housing sector. A growing number of private rented homes could be a positive development, but it doesn’t feel like that for many of those who rent at the moment. Parts of the private rented sector are too insecure, in too poor a condition, and too expensive.
The number of private renters with children has almost trebled in the last decade to 1.5m households, and we know renting privately can be particularly tough for them.
Home-ownership levels meanwhile are the lowest in a generation because younger people are just getting priced out. Home ownership shouldn’t be a luxury, but it’s fast becoming so in some of our major towns and cities.19 So there’s a big task for government to help bring down the cost of owning a home too.
19 See Smith Institute report The end of the affair: the consequences of declining home ownership (2011)
Conclusion Any government that wanted to consider building on this scale would face big challenges.
Some of the necessary arguments and ammunition have been set out above. But by way of conclusion I want to outline three further challenges which must also be met: cost, public support, and delivery.
1. Cost The extent to which further austerity measures are needed to reduce government borrowing (predicted to be 3.7% GDP in 2015/16) is subject to political debate. Politics is always about choices and proper fiscal targets can be set and met in different ways. But when framing an alternative to the course that this government has set upon for public housing, we need to consider first the upfront cost of a social house building programme.
As set out above, there are a range of policy changes which will increase the number of social homes built at little or no cost to the public purse. Restoring the private contribution towards public homes by tightening up on developers’ obligations to include social housing in their projects could yield big rewards and without harming overall viability, as could ending the giveaway of tax-payer investments through big right-to-buy discounts. The Lyons Review on housing which was published last year set out a number of further ways in which we could increase the supply of new homes within existing fiscal constraints.
Even with these changes, a bigger social house-building programme would require some additional capital spending. The politically and economically crucial distinction between this and other sorts of government spending is that this is borrowing to invest. Just like when prospective home-owners take out a mortgage, a business buys a new capital good, or a student decides to go to university. And the proof of this as I have shown above is that this investment creates a long-term asset and yields a financial return to the public purse in lower housing benefit payments.
Right now it’s a particularly attractive investment for the public purse to make. With yields on 10-year gilts currently below 1.5 per cent, UK government borrowing costs are just about the lowest they’ve ever been.
But campaigners and politicians alike have more to do to capture the language and arguments to convince a sceptical public that government must behave more like a good business and invest for the future. That challenge may become less pressing as the budget deficit decreases over this Parliament, but it will not go away.
THE SMITH INSTITUTE
2. Public support There are good overall levels of public support for the idea of social housing. Polling by YouGov for the Fabian Society last year revealed that a majority of people (57 per cent) back more social housing being built, and more support than oppose social housing being built in their area (44 per cent vs 27 per cent). That’s true across social class, gender, age and region. A recent Ipsos-Mori poll for the Chartered Institute of housing found a majority of people would support government borrowing for affordable homes to rent and buy, and with particularly strong support from private renters.20 We also know how we can increase support for social housing: good design standards, and allowing local people to stay in their area by giving them greater access to social homes built in their neighbourhood can both help.
But the wider challenge in securing strong public support remains what it has been for at least a generation - to correct the marginalisation of social housing and the perception that public housing is ‘not for people like me’. Fewer social homes means only those with higher support needs can often get new social tenancies, which reinforces the perception amongst many people that council or housing association homes are not for them or their family and reduces public support for new social housing.
Part of the answer lies in building to make more homes available but its also vital that developments are mixed so communities are mixed too. This is why requiring social housing to be built alongside open market housing via ‘planning gain’ is so important, not just to ease pressures on the public purse but because it is essential in creating mixed-tenure developments. Local housing allocation policies also have an important role to play here in ensuring that a broader range of families can access social homes.
We should also explore how we can make a new wave of public homes relevant for a generation who were born long after the heyday of mass council house building finished. Could a set proportion of new public homes be allocated to young people just starting out on a timelimited tenancy or to families with children of school age? These are the questions that those determined to assemble strong support behind a new public house-building programme will have to be serious about answering.
3. Delivery Building public homes on the scale required is a huge delivery challenge, for central government, local authorities, housing associations and the private sector.
To kick-start construction, the government should strike a national ‘new deal for housing’ – a national target for new social homes and a commitment from all the players in the housing field that they will do their bit. Government needs to provide funding and land, developers must build and be mindful of the social obligation they have to cater for all who need a home and not just a few, and local authorities and housing associations must focus on increasing the number of homes built while staying true to their social mission of providing genuinely affordable accommodation.
None of these challenges are insurmountable. But each must be taken seriously and with urgency at a time when public housing is under serious attack. For those who value it, the arguments are there, and now more than ever must be brought to bear.
Appendix - notes on sources and methodology As part of a wider project on housing and housing benefit (of which the results presented in this report are one part) we received advice from PricewaterhouseCoopers. The 30year housing benefit model they helped produced is sensitive to both housing and labour market changes.
Some of the key assumptions and references in the model are:
• Overall housing benefit expenditure is taken from the Office for Budget Responsibility’s Fiscal Sustainability Report published in July 2015.
• We use the Department for Work and Pensions out-turn and forecast data until 2019/20, amended for changes announced in the Summer 2015 Budget.
• Award and caseload in the social sector, and award in the private sector are calculated based on previous trends and industry estimates. Private sector caseload is derived from these other results, combined with the OBR top-line forecast.
• All figures are expressed in 2015/16 prices, using the Treasury’s GDP deflator, which is derived for future years.
• The published figures above are not discounted. Discount rates are controversial and the subject of wide international variation. Applying the Treasury’s current preferred rate to the figures above does not change the case but simply increases the payback period. It is possible to bring that period back within 30 years if we include other benefits of house-building, notably increased tax take or the asset value of the home itself.
• Labour market impact is calculated using Labour Force Survey microdata and a bespoke benefits and tax credits calculator.
For the housing policy simulations we rely mostly on readily available data sources,
LGA/NFA (2012), Let’s Get Building for the potential of councils to build, if released • from housing revenue account borrowing restrictions.
• DCLG data on s106 obligations for the potential to deliver more homes through the planning system.
Capital Economics (2014), Increasing Investment in Affordable Housing for data on • the potential impact of borrowing guarantees and a housing investment bank.
The National Audit Office (2012) Financial Viability of the Affordable Housing Sector • for grant levels.
The Smith Institute The Smith Institute is an independent think tank which provides a high-level forum for thought leadership and debate on public policy and politics. It seeks to engage politicians, senior decision makers, practitioners, academia, opinion formers and commentators on promoting policies for a fairer society.
If you would like to know more about the Smith Institute please write to:
The Smith Institute Somerset House South Wing Strand London WC2R 1LA Telephone +44 (0)20 7845 5845 Email email@example.com Website www.smith-institute.org.uk Twitter @smith_institute