Few of the Government’s current investment initiatives address the housing affordability issues faced by the ‘just about managing’, but there are measures that could be taken without extra spending.
Rather unusually, and surely for the first time in several years, a government housing policy statement has been welcomed by the industry and by most lobbyists. Perhaps it was the title of February’s white paper, ‘Fixing our broken housing market’, that did it. Was the secretary of state actually agreeing with most pundits that the housing market is in urgent need of repair? And was he going to do something about it?
One reason for optimism is that the government had been putting out a fairly consistent message since Theresa May took charge last summer. She’d made a commitment to address the housing shortage on the steps of No. 10 in July, and at the party conference in October she’d actually said the government need to ‘step in and repair the dysfunctional housing market’. Sajid Javid, the communities secretary, followed this up in November by telling builders at an NHBC event to ‘pull out all the stops’. Javid is leading a cross-Whitehall task force on housing supply and he clearly expects both government and industry to deliver. That’s why much of the paper was about land, the planning system, and the need for developers to build out sites more quickly.
There was also a sense, however, that while the intentions are excellent Javid had little new to put on the table. One reason for this is that the Chancellor’s Autumn Statement in November had already buttoned up the government’s pockets and he was always unlikely to be able to conjure up any extra funding, even for a major white paper. Last October the government announced a new Accelerated Construction fund of £1.7 billion, aimed at getting builders working on public sector land. They also re-announced the £3 billion Home Building Fund, which provides development finance to the private sector. It was unlikely that any more loose change could be found and indeed the only new spending item I could find in the 100-page document was £45 million for a Land Release Fund – also aimed at freeing-up public sector land.
You will search the white paper in vain for an overall summary of what the government is spending on housing. It repeats the mantra that £7 billion is allocated to building affordable homes, and it mentions many of the schemes the government has put in place to support the private market. But to get an overall picture you have to look instead at the CIH’s recently published UK Housing Review 2017, which puts all planned government investment programmes for the life of this parliament into one convenient table. The rather astonishing conclusion is that it adds up to more than £51 billion, of which 84% will be spent on the private market. Sajid Javid is therefore right to hope that such largesse will lead to builders pulling the stops out.
A strong point in the white paper’s favour is – oddly enough – that, with the exception of the minor venture just mentioned, it doesn’t create yet another multi-billion fund and announce it as the solution to all the problems of delivering more homes. It rather goes about doing the unspectacular job of what the UK Housing Review calls ‘a myriad of adjustments to help ensure the market delivers more’. It has switched some of the government pressure that was focussed on alleged failures in the planning system onto the ‘broken’ market itself and the real failure of developers to build out sites which already have planning permission. However, while it hopes to encourage more small builders into the market and creates some extra sticks to beat the big developers alongside the carrots already available to them, it can’t risk upsetting the housebuilders too much given that there are wider reasons for market uncertainty. Not only does Brexit loom, threatening consumer confidence, but personal finances are hardly healthy either, with static real-income growth, excessive personal debt and tighter controls on mortgages now in place and unlikely to be relaxed.
Given this situation it is rather surprising that Sajid Javid hasn’t paid more attention to the needs of what the prime minister calls the ‘Jams’. These are the ‘just about managing’ that the Resolution Foundation says number 5.8 million households nationally who are ‘hanging on.’ The Foundation’s definition excludes the very poorest ‘benefit-reliant’ households and focuses on those with low to middle incomes earning up to half average earnings. While older members of this group may have bought a home and even paid off a mortgage, younger households in this segment find it almost impossible to buy, have little chance of getting social housing and are forced into long-term private renting.
They face obstacles to getting affordable housing that are much bigger than the rather better-off groups favoured by Help to Buy and starter homes (the latter are aimed at those earning £70,000 or more). But few of the government initiatives within that £51 billion investment fund will help to tackle these obstacles. The government has (to some extent understandably) put a tax squeeze on buy-to-let landlords designed to hold back the growth of the private rented sector. But the alternatives it offers are shared ownership, new build by social landlords let at ‘affordable’ rents of up to 80% of market levels, and the yet-unproven model of ‘build for rent’. These don’t adequately respond either to the scale of need or the fact that the ‘Jams’ are often spending more than one-third of their income on housing costs.
It’s clear that, as well as getting developers to pull the stops out, Sajid Javid also has to address the affordability issues faced by the millions who are just about managing. There are three things he could do without spending more money. First, he could ensure that developer contributions made through the planning system remain firmly in place, after the pounding they took from his predecessor-but-one Eric Pickles, so that the planning system continues to supply genuinely affordable housing as part of new development. Second, as well as looking at the affordability of homeownership, he needs to make rents affordable too. And third, he could take another look at the government’s £51 billion investment plans, and shift some of that money away from propping up the private market and into genuinely affordable housing. Then he really would be acclaimed for fixing a broken housing market.
Original article: Town and Country Planning, April 2017