A dark cloud is falling over Britain’s homeowning aspirations. But this might not be a bad thing, says Jon Cruddas
I have never understood the basic housing paradox: why something so important in our lives is so politically insignificant. Why have successive governments - both Labour and Tory - treated it as a minor policy area not even afforded a seat in our cabinet? Well, this has shifted over the past couple of weeks. And I don’t mean because of the knee-jerk government response of kicking rioters’ families out of council houses. Rather, the two reports which, in different ways, confirm that England’s housing market has simply become dysfunctional.
First, the National Housing Federation forecast that over the next decade homeownership is set to fall back to mid-1980s levels with house prices soaring 21 per cent by 2016 and private sector rents predicted to rise by a similar amount. Then a Crisis report separately pointed to a potential increase in homelessness due to the government’s benefit reforms, allied to the weakness of the economy, rising unemployment and pressure on household budgets. Housing is now firmly centre stage politically -where it should be.
In many ways, the operation of the housing market and house building in particular has mirrored some of the wider traits and failures of the UK economy. In both, far too much emphasis was placed on ‘short term-ism’ and looking for quick returns rather than long-term investment. This was the hallmark of the construction industry which is why it came to a grinding halt. As a result, it became collateral damage in the global financial crash and its continuing reverberations. Fewer house starts are a consequence of problems would-be house buyers face raising the higher deposits now demanded, as well as household concerns for their economic prospects over the next few years. The NHF study picked this up and recognised that in the absence of many thousands of new social rent and affordable homes, more households are resorting to private renting.
The government response seems to me to be both inadequate and wrong. Cutting the budget to build Homes and Communities Agency-funded affordable housing by more than 60 per cent will not be compensated for by the new homes bonus. The ‘affordable rent’ product funding new unaffordable homes at up to 80 per cent of local market rents will almost certainly result in a reduction in the number of homes at social rent level at the end of this spending review period. Put simply, housing associations will be obliged to convert current social rent homes to the higher rents on re-letting.
Things are looking up
However, and this might sound odd coming from a Labour MP, there is some cause for optimism. ‘Generation rent’ - the concept that Britain is changing from a nation of homeowners into a continental-style society where renting is the norm - has awakened interest in quarters that have not invested in housing previously. Institutional investors, pension funds and private equity funds seeking long-term, steady, unspectacular yields are now showing genuine interest in funding rented housing schemes. When you consider their interests and match them with those of social landlords you begin to see some really interesting alignments. Both groups want long-term, safe relationships, not the previous model of quick build and sale. Both want well-managed, maintained and sustainable developments that enhance reputations and for the investor there is the added benefit of ethical investment.
It may well be that for councils with foresight and ambition, this could be a really positive way forward. My own council, Barking and Dagenham, is pursuing this approach to get development moving. It does mean the public sector sacrificing immediate capital receipts and instead investing in land value. Viability for schemes will also depend on local rent levels - too low and the scheme won’t work; too high and affordability will be lost and there is then little incentive to pursue the project.
I mention Barking and Dagenham because it is working with funders to develop all rented homes, with rents ranging from social rented for a proportion of new homes to higher, intermediate affordable levels.
There is a further consequence of this approach which I believe is of real lasting importance. For many years, most councils and housing associations in England only housed people in the direst need with high percentages being without employment. Social housing became - in that terrible term - ‘residualised’. Working families have effectively been locked out of social housing, so that this sector has become ever more marginalised and indeed denigrated in many quarters.
A better option
The creation of intermediate rent homes by councils or housing associations offers a real alternative to private renting for the generation of renters in modest to middle income employment. Not only are the rents lower, the homes and public realm are professionally managed and there is much greater security of tenure - still assured shortholds, but much longer tenures than the usual six months of private landlords. It is also a tangible demonstration to this large section of society that they are no longer ignored in such a vital area as housing provision.
So housing is now moving up the political agenda. All parts of the sector are in real trouble, spelling hardship for many millions. And there is no status quo; the situation gets worse by the day. So rather than using the sector to push political stunts to get themselves out from under the mishandling of the riots, might we not expect our politicians to step up and develop new, durable housing models for today and tomorrow. There are some great, innovative ideas out there. At least we can hope.
Jon Cruddas is Labour MP for Dagenham