Posted by: Jules Birch21/06/2012
A radical new report out today challenges almost 40 years of orthodoxy about how we subsidise housing - and much more besides.
The think-tank Institute for Public Policy Research (IPPR) says it’s time to reverse the shift from bricks and mortar to personal subsidies that began in the 1970s and get back to building homes rather than subsidising rents.
It’s far from the only big idea in the report, which is part of the IPPR’s fundamental review of housing policy, but it is the most eye-catching. In the current spending review period we are spending £94 billon on housing benefit but only £4.5 billion on building new affordable homes. Is there a better way?
The report argues that after 30 years of ‘pessimism and division’ the housing system is no longer fit for purpose and is getting worse rather than better. Home ownership is out of reach for too many, social housing is being residualised and private renting is unprofessional and insecure.
So far, so uncontroversial but if one measure of being radical is how many vested interests you manage to upset then this report is most definitely radical. If you are a housebuilder, a landowner, a National Trust member or a social housing traditionalist prepare for a few shocks. If you are anyone else prepare to be challenged.
The proposals come under three main headings:
Spreading opportunities for sustainable home ownership
The report argues that the housing system should go with the grain of people’s aspirations. It puts a ‘social case’ for increasing home ownership and argues that any attempts to restrict it ‘would effectively encourage the segregation of our society into those for whom home ownership is deemed appropriate and those for whom it is not’.
However, that’s put in a context of identifying new sources of finance for housing as a whole by creating a national investment bank, encouraging local authority pension funds to invest in housing, imposing new taxes on overseas buyers of homes worth over £2 million and using the proceeds to boost housing investment and changing the borrowing rules for councils.
The report says output of new homes should be boosted by shaking up the development industry and a planning system that gives people ‘in need of new housing effectively no say in the process’. The government should allow failing developers to go to the wall and take over their land banks and insist on rapid build-out and lower profit margins on schemes on public land.
Development should be allowed on low-grade green belt land and landowners would face a land value tax on all undeveloped developable land worth more than £2 million.
At the same time a ‘parallel strategic planning system’ would help deliver a new wave of new towns with land compulsorily purchased at a low multiple of its agricultural value.
Among a range of other proposals on home ownership, the report also endorses the extension of the right to buy to all housing association homes – an idea put forward by David Davis and Frank Field in a paper for the IPPR earlier this year.
Ensuring a better, more balanced deal for those who rent
The aim here is decent and affordable housing for everyone, regardless of tenure. The report argues that private tenants need greater control and increased security but that a combination of a sharp drop in supply and needs-based allocations ‘has led to social housing becoming a force for segregation in our society’.
Recommendations on this include:
- creating a new five-year tenancy for private renting families with children with a five-month notice period
- encouraging new ‘something for something’ deals between private landlords and local government with mandatory licensing schemes and rent stabilisation boards for the mid-market
- giving social landlords more control over allocations to give access to social housing to more people while making greater use of private renting to meet housing needs
- making fixed-term tenancies the norm in social housing with the opportunity to pay higher rent or purchase the property for tenants whose circumstances improve.
Shifting from subsidising rents to building homes
The report argues that localism needs to go much further than the coalition managed in the Localism Act and that public spending needs to be rebalanced from subsidising rents to building homes.
The key proposal here is to give local authorities control of a single ‘affordable housing grant’ combining housing benefit and capital investment. This would obviously involve major changes to the universal credit, with housing costs devolved in total or in part to local level, although the report points out the government is already doing this with council tax benefit.
The grant would last three years and be based on a combination of local population, housing costs and relative deprivation and local authorities would have a statutory duty to improve access to decent, secure and affordable housing on their area. They might start by agreeing deals with private landlords to prevent excessive rent rises to begin the process of shifting resources from benefits to building but would also be able to leverage their enhanced resources with wider borrowing powers.
That’s just a flavour of what has to be one of the most far-reaching reports on housing published in recent years. Much of it is controversial. Is there an over-emphasis on home ownership? Does reducing the segregation between private and social renting have to mean accepting most of the coalition’s social housing reforms or should there be more intervention in private renting? Will a move to greater localism really deliver or will it reduce still further the national safety net for the most vulnerable? Is the big idea about housing benefit really deliverable given the fiendish complexities the report acknowledges?
However, it’s also a rare attempt to look at the housing system as a whole and the way that it relates to the rest of society. While it would be easy to criticise some of the proposals in isolation this is about the system as a whole and the politics of how to change it. It’s impossible to argue with the conclusion that: ‘If, as a country, we are to solve the worsening housing crisis we face, we will have to engage a much wider coalition of support for the change that is needed. Housing must be seen as a matter of broad public concern, not just private interest. We need everyone who is interested in the health of English society to be interested in housing. And we need a candid public conversation about all of its dimensions.’
From Inside edge
Housing commentator Jules Birch puts the latest news in context