Election focus: Housing policy predictions & radical solutions

In the run up to the General Election we will be bringing you insightful pieces from our authors on policy-relevant subjects, including housing, health, welfare and, underpinning it all, increasing social inequality.

Let’s look beneath the distraction of Brexit and Labour’s disarray and examine the issues we really need to be thinking about as we put our cross in the box on the 8th June.

Duncan Bowie

In this piece, Duncan Bowie, author of Radical solutions to the housing supply crisis looks at what housing policies may be included in the party manifestos and explains the radical solutions we need.

“The focus on Brexit and the negotiations on withdrawal from the European Union has meant that housing has not, at least as yet, become the key issue in the election campaign that perhaps would have been expected had the referendum not taken place.

Debates so far have focused far too much on the contrast between Theresa May’s advocacy of ‘strong and stable leadership’ and whether or not the Labour Party leader is fit to be Prime Minister or the divided Labour Party is ‘fit to govern’. There has been little focus on policy issues, though (at the time of writing), the main party manifestos have not been published.

The political parties, including the Conservatives, were all caught on the hop by the election announcement and consequently the drafting of the various electoral offers have been somewhat of a rushed process. Even a matter of weeks before the election was called, Labour housing spokespersons were reluctant to make any policy statements policy on the basis that it would be premature to give commitments before 2020, even though housing was bound to be a key issue in the local and city region Mayor elections, which were scheduled. Labour was even hesitant to commit to repealing the 2016 Housing and Planning Act, despite the fact they had opposed it in parliament.

 

The Conservatives and the Right to Buy

The Conservative Party is saying very little. We know that Gavin Barwell as housing and planning Minister was unenthusiastic about implementing many of the provisions of 2016 Act, and had shifted Government policy towards supporting some forms of rented housing. However the Government’s support of Right to Buy is totemic and the Conservatives, while no longer opposing development of rented homes by councils, were keen to ensure that councils didn’t use local housing companies to avoid Right to Buy.

“As the Conservative Party moves back to the right … it is unlikely that Barwell’s welcome rhetoric will be supported by Government funding.”

As the Conservative Party moves back to the right on issues such as immigration, and with controversies over funding the NHS and adult care, it is unlikely that Barwell’s welcome rhetoric will be supported by Government funding, even if Barwell and his former boss Sajid Javid return to their previous positions after the election. As the Conservatives try to win back support in the Midlands and North, and the local and city region Mayoral elections showed this was popular, we could see some investment commitments move away from London to other regions, which is not good news for Sadiq Khan and his London growth agenda.

 

Labour’s position

Labour has so far made a few announcements – some relatively long standing such as the 1 million new homes over 5 years (reflecting the target set earlier by the Government) but with an indication that half would be rented homes – with occasional references to this proportion as ‘ council homes’ though this should not necessarily be interpreted as being all at council rents with security of tenure. What is unclear is how such a programme would be funded. Labour has just announced that borrowing caps on local authority housing investment would be removed.

While this is welcome, loans are not the same as grants, and many councils, including Labour councils, will be reluctant to borrow to invest if they do not know how to repay the loans. I would be very surprised if Labour would take off the cap on council tax increases, or that even if they did, many councils would risk putting a council tax increase to its electorate. It is difficult to see that without increased income, and with Government revenue support to councils to end by 2020, that we will see significant new council house building programmes.

“I would be very surprised if Labour would take off the cap on council tax increases.”

Labour has also focused on the private rented sector, suggesting 5 year tenancies (though not as a mandatory requirement) and proposing a set of standards for private tenants, though these are not specified – Labour saying they would consult interested parties on the details , which presumably includes private landlords. Labour has understandably been cautious about implying any imposed rent control. In the past there have been suggestions that rent increases might be limited, but Labour recognises that imposing rent limits could lead to a significant withdrawal of private rented supply, which if not replaced by increased social rented housing, would actually increase homelessness. Labour can also be expected to make statements of support for co-operative housing, to parallel the Conservative Party’s support for self-build.

 

Tinkering at the edge

Such initiatives are however only tinkering at the edge of the housing crisis, which in effect has three components – an overall shortage of supply; the fact that the price of existing and new homes is too high for most new households, and this is most acute in London and some other parts of Southern England; and the fact that while much housing is overcrowded much is under-occupied, and the market for new homes is increasingly driven by the opportunity for investment, rather than by the needs and aspirations of would be occupiers, be they purchasers or potential tenants.

None of the major political parties are prepared to tackle these key issues head on.

 

Radical solutions

Planning policy is not the problem, though our cultural obsession with protecting the so called Green Belt has not helped. More important is the fact that in much of the country, land cost can be two thirds or more of development cost, so a key solution is getting land for development at the lowest price, which in effect means a programme of public sector compulsory purchase.

“A key solution is getting land for development at the lowest price.”

We also need a massive programme of investment in social rented housing to return the tenure balance to roughly where it was in the 1970’s – this is a 20-30 year programme, which needs Government grants, not just loans. This could be funded from a tax on capital gains made by home owners, as well as through more progressive systems of council tax and reforms to inheritance tax, which would limit the transfer of property assets between generations, which is now such a critical source of inequality in British society. We could then abolish stamp duty on house purchase, which just taxes households when their finances are most over-extended.

We also need to incentivise more effective use of both the existing and the new housing stock, with penal taxes on vacant properties and second homes and council tax adjustments to tax excess space space. These tax changes would lead to a more efficient housing market as well as have positive redistributive impacts.

These are the real radical solutions to the current crisis. Without them, the situation can only get worse.

 

Radical solutions to the housing supply crisis by Duncan Bowie can be ordered here for £7.99.

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