Wednesday, 26 November 2014

Dromey promises ‘new generation’ of social homes

Labour’s plans to build 100,000 new affordable homes would include a return to large scale social home building, according to shadow housing minister Jack Dromey.

Shadow chancellor Ed Balls today called on the government to invest the likely £3 billion raised from an auction of the 4G network in building affordable housing. The 100,000 homes this would build would be on top of 25,000 social homes the party has pledged to build from a tax on bank bonuses.

Speaking to Inside Housing after Mr Balls’ speech, Mr Dromey revealed that in total Labour would use its plans to build 40,000 social homes, and 50,000 shared-ownership properties with the remainder being intermediate rent.

‘It is a variety of tenures designed to meet need,’ he stated. ‘There is a commitment that is costed. We believe Britain needs a new generation of social homes.’

He emphasised that the plans, if adopted, would help many people to buy their own home.

Mr Dromey added that the shadow chancellor had sent out ‘the clearest possible message that Labour will put housing centre stage’ by making the issue the focal point of his speech to delegates today.

Mr Ball’s drive to ensure the 4G windfall is spent on housing was welcomed by the sector.

Jo Boaden, chief executive of the Northern Housing Consortium, said: ‘This is a very welcome announcement and further evidence that politicians across the political spectrum are beginning to realise the key role housing can play in leading our economy back into growth.

‘CBI figures show that every £1 spent on construction increases GDP by £2.84. A significant investment like the £3 billion Ed Balls is calling for could therefore deliver a £8.52 billion boost for the economy.’

National Housing Federation chief executive David Orr said: ‘Housing drives growth quickly, but almost all of its benefits are retained within local economies. Local jobs are created, local suppliers used and local people housed. House building lies at the heart of balanced, regional growth.’

Readers' comments (40)

  • Chris

    Dear Mr Droomey.

    65,000 is not a return to large scale social home building. It is better than the paltry dozen or so under the current government, or even the few hundred under the last government, but it is hardly a defining aim for a True Labour Government.

    That said, pundits are missing an obvious position on the economic return of house building.

    If the CBI are correct then for each £1 expended on housing £2.84 is gained in GDP. But, tax is paid on the £2.84 at at least 20% returning 56p to the treasury. So it only cost 44p to spend that £1 building a new home, leaving plenty of scope to re-establish properly subsidised social rent through grant to build. But then this will compound savings to the Treasury by lowering housing benefit levels, releasing more funds to underpin the borrowing to invest in building homes people can afford. And if people have more affordable housing they are more able to save, invest and spend in the high street, revitalising the economy further. And more, their families can grow in better security (if security of tenure is restored) and help themselves through social mobility.

    The escalating goodness from the £1 spending on building new homes not only has an immediate economic benefit, but a longer terms one, and as importantly a longer term social value also. Labour used to understand this and were proud to stand on their housing record. It could be again if it took off Maggies clothes and put it's own back on.

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  • Joe Halewood

    Chris - The CBI report ONLY concerns build cost and is only one part of the benefits.

    As I have said many times before the £1.2bn pa social housing 'subsidy' saves £5bn per year in HB cost. That alone is an ADDITIONAL £4 return for every £1 invested just in HB costs.

    The problem with this plan is the definition - "affordable homes" includes LCHO, the risk too far that is AHP, and traditional social housing.

    So that could be 50% LCHP, 49.99% AHP and 0.01% true social housing and we need much more detail and for the economies sake 100,000 true and traditional and genuinely affordable social housing units built per year

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  • Joe Halewood

    Its just being reported that the spilt will be 50,000 LCHO units, 10,000 intermediate rents (Shapps AHP model) and 40,000 traditional social housing units

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  • I have not read the CBI report but I assume they are taking much about the benefit in GDP in the economy by house building, jobs ect. This maybe correct in the short-term but you need to keep this in the long-term as it does little. I'm not sure how building more social units will help the economy over the long-term as LA's are reducing their housing waiting lists to those who are in need only. Most of these will be on or will be on universal credit.

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  • Jon Southall

    Indeed AJM, doesn't it sound magical that you can spend a £1, and get £2.84 worth of GDP from it.

    People like Joe mention that spending 50p on social housing will save £1bn in HB. But of course, savings in HB reduce GDP, because it reduces incomes, and hence reduces the value and quantity of goods and services produced. You are robbing Peter to pay Paul. The same is true of accident prevention - bad for GDP, good for human beings.

    Here is the magic at work...

    £1 is spent on the construction sector (don't ask about the cost of borrowing it).

    £1.09 is spent as a result of supply chain impacts.

    Consumers connected directly or indirectly to the construction sector spend more of their income than before - to the tune of 74p in the £1.

    Let's think about that. £1 comes from borrowing, £1 is spent on the construction sector. Net effect = £0 (less actually when you factor in the cost of borrowing).

    Apparently, the indirect supply chain spends £1.09 presumably supplying goods and services to the construction sector which can only spend the £1 it has borrowed - oh dear doesn't that mean a 9% overspend - how was the extra 9p paid for?

    As earnings rise, there is more evidence that we consume less as a proportion of our earnings - so of the £1 being realised as income, 74p is spent on consumer goods. Of this, some of it will be the tax that has to go on repaying the borrowed £1 + 9p + interest.

    So in reality, the multiplier effect is likely to be much closer to zero.

    Alas, magic is not real, as much as some would like to believe it. There are no silver bullets. If you put in a £1 you haven't got, you still have to repay it later. When you repay it later, you can't spend it on something else. Multiplier in reverse...

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  • abner arrow

    In 1997 Labour promised to invest the income from RTB in building new social housing. Not a penny was invested

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  • Chris

    Are you sure Sexton - the Blairs now have several properties, for instance!

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  • Gavin Rider

    Chris - can you please explain how £1 spent on construction creates a £2.84 gain in GDP as you claim it does?

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  • Gavin - from what i read above the CBI say GDP increases by £2.84 - not Chris. unless of course Chris represents the CBI

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  • Council housing pretty much pays for itself - this strange magic thing called rent that people pay to live in the homes. That is the answer to the perennial question posed by those opposed to building council homes: 'where is the money coming from?'.

    If people can afford to pay private rents (which they can't in all too many cases without some subsidy from the public purse) then they can clearly afford to pay rent for a council home. We might have to nationalise some land but surely the interests of the many come before the interest of a very few?

    It is the system we have created which sees paying rent to a private landlord as a good thing and paying rent to a publically owned landlord as a bad thing. That the private sector taking on debt is good but that the public sector borrowing is bad. An artificial divide that is costing us as a country dear.

    The real magic comes from people paying a fair rent (as they would in a council house) and then having money left over to invest in other things like a car (made in Britain maybe), a meal out (at a local restaurant), a holiday (maybe to a National Park or a British seaside resort).

    Virtually all private landlords simply buy up cheaper properties already built, adding little to the jobs chain and indeed depriving low and middle income home buyers of choice. They then charge excesively high rents and deprive the tenants of the chance to spend more widely inthe community as a whole. Wealth aggregates to fewer people.

    Build council homes and there will be jobs in construction. Bricks etc will be made locally. And there will be more benefits to come as people's wages are spent on something other than swelling the bank accounts of private landlords, who are to all intents and purposes social and economic parasites. private landlord.

    We have created this bizarre situation. A a pledge to build 100,000 homes over five years using money that will be spent bythe time the pledge maker is in a posiiton to do anything about his 'promise' is argued about because it is not private sector driven. Not because it is a bad thing. Not because we don't need the homes.Just because the proposal is to publically support the building of homes.

    We can create something new and better in its place.

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