The Localism Bill must put an end to short-term thinking and allow councils to determine how to resolve their residents’ housing needs, says Jon Cruddas
One of the critical elements of the Localism Bill is the proposal to end the Byzantine and unfair housing revenue account regime for council housing and replace it with a self-financing system. The whole negative subsidy system was, for many authorities, an increasing sore point, so this is a welcome change.
This initiative follows through the commitment made in the last year of the previous Labour government in Council housing: a real future. As a firm believer in local democracy I was very pleased that the coalition government decided to implement the plan, albeit with one or two retrograde changes (right to buy receipts being one of these - but more on this later).
HRA settlements will finally be announced at the end of January. For those councils that will have some available headroom to borrow, and provided they have the local political commitment to build new council homes, the opportunity may exist to do something positive to address their residents’ housing needs. Of course, this will depend on them having the available developable land in the public sector.
Crucially, it will also be dependent on councils having the foresight not to grasp the very short-term capital receipts available from developers for the land - which in current market conditions would be likely to yield a knock-down return in any event. Yet all councils are cutting budgets and it might be difficult to resist. Beyond these factors, it will also require councils to be innovative. In particular, to look for new types of partners to unlock housing development. All of this is asking a lot: new innovative partnerships, an end to short-term thinking, a political desire to build more council units and the like. But there is a route through.
In the past, pension funds and other institutional investors have kept their distance from housing development in the UK. This is changing and is to be greatly welcomed. Councils are beginning to look like safe havens for investors. Are we seeing the beginning of the end of short-term thinking in the housing market? A new emphasis on longer-term yields rather than the madness of a few years ago? We can only hope.
My own council, Barking and Dagenham, has certainly embraced these approaches to get the delivery of much-needed new affordable homes. In my view, the aim should be to maximize the proportion of new homes at social rent in these schemes, but I also recognize that to ensure viability there needs to be a range of other affordable homes at sub-market rent levels in the mix as well as some at local market rent. A genuine mixed economy.
Who gets priority?
Other housing aspects of the Localism Bill open the way for more local discretion over allocation policies. There has been quite a lot of attention paid to the implications of this. At both the Labour and Conservative annual conferences views were expressed about the importance of ensuring that people seeking employment should be given a degree of priority in accessing council or housing association lettings. London councils as politically diverse as Newham and Westminster appear to be taking up this theme. However, I would suggest there might be a different way of going about this. Call me old fashioned, but I still think unemployed people should be able to bid for council housing.
Of course, we do have to address the needs of hard-pressed households in modestly paid employment who can no longer access homeownership. At present, this large and growing section of society is turning to private renting as a tenure of last resort - sometimes subject to rogue landlords and all the insecurity that private renting holds. It seems to me that councils have the chance to offer an alternative to private renting for at least some local working people if they can get a rental level mix on new housing schemes in their areas. The higher priced, but still classified as affordable, rented homes could be targeted at people in employment where the household disposable income is at a level that ensures that the rent is no higher than 35 per cent of the net income.
A numbers game
Yet I am afraid to say the theme of localism is not totally consistent in coalition thinking. Just when councils were coming to terms with the ability to make long-term asset investment plans for their housing stock, up pops the prime minister to announce an as yet to be worked out extension of the right to buy. So councils that are carefully working on their 30-year business plans for their housing stock, predicated on assumptions about the probable number of homes they will own, could find that number (and their plans) dissolve. Talk about policy running in different directions.
Moreover, the government’s ripping up of planning guidance on the pretext of trying to promote economic growth is also severely at odds with local democratic accountability. What has been totally missed in this debate so far is the number of homes that already have planning consent. A lack of planning consent for new homes is not the issue, despite what the developers say.
There are literally hundreds of thousands of potential homes with planning consent. Why not build them? That is where the government should be pushing developers. Yet, as we know, it is the developers themselves which appear to be writing the policy.
The message in all this confusion is that housing is a long-term business and is best addressed by local councils that understand the needs of their people, communities and areas. The man - or the developer - in Whitehall does not know best.
Jon Cruddas is Labour MP for Dagenham