There were many pledges in Prime Minister Theresa May’s keynote speech at the Conservative party conference last week.
Most notably, she announced £2bn of direct funding for housing associations to build affordable homes to rent.
This is certainly a good start in alleviating the housing shortfall but it seems the government’s policy could be more joined up than is currently the case.
Only a few days before her speech, May’s government announced an extension of the Help to Buy scheme, promising £10bn in funds. With tight housing supply, this demand-side stimulus will only raise house prices, which ultimately defeats the objective of helping first-time buyers.
Of course, the market recognises a subsidy for housebuilders when it sees one and their share prices jumped when the announcement was made. The Adam Smith Institute, among many organisations, has harshly criticised the policy’s economic illiteracy. It can also be argued that the state should support those least able to afford housing.
No new initiatives were announced on the supply side. As understaffed planning authorities are often the cause for delays in reaching decisions, many expected news of more resources to expedite the planning process. We also need a re-evaluation of what constitutes green belt. There are too many areas of wasteland and quarries within green belt areas which are given unnecessary protection and the loss of which would not impact genuine green belt areas. There is also a real need for regional and municipal governments such as the Greater London Authority, The mayor of London and the Greater Manchester Combined Authority to be more involved in accelerating housing development.
Housing policy should also be shifting to building properties to rent. In the long term, increasing this supply will make renting more affordable and enable tenants to save for a deposit for a home of their own. It will also help reduce the high levels of gearing required by first-time buyers, which is an economic risk.
Social housing policy seems very confused. On the one hand, the government announced a £2bn boost. On the other, housing associations and councils are haemorrhaging stock through Right-to-Buy, making it more difficult for them to raise finance to build new homes for social rent. The promise of one-for-one replacement where, for every home sold, a new one is built to replace it, has failed to materialise, with the National Audit Office reporting only one home replaced for every five sold. And it is not as if right-to-buy has affected owner occupation levels. Of social housing stock sold, often at a major discount, 40 per cent are now in the private rental sector. Whether the taxpayer is getting value for the sale of their national assets is another important question to ask.
So, how do we provide more homes to rent? Help to Buy and discounts on Right to Buy need to be reconsidered. Allowing housing associations, councils and municipal bodies to raise bonds, combined with central government grants and guarantees, will enable them to finance the building of desperately needed social and affordable homes to rent on public land. With economies of scale and the avoidance of land costs, steady rental returns from such schemes will enable them to cover their build, maintenance and financing costs.
Build-to-rent homes also have a role to play and should be encouraged through the planning system. This, combined with social and affordable properties to rent, will provide quality rental homes for a range of income levels, helping to underpin socially diverse and more equitable communities. Homes for owner occupation are, undoubtedly, important, but should not be subsidised by the government if it is committed to solving housing need rather than playing politics by buying votes.
Read more: The UK must get off the help to buy binge