Posted by: Jules Birch17/07/2012
This blog has a tendency to be negative at times so I’ve been trying to accentuate the positive ahead of the announcement on housebuilding expected later this week.
The good news is that the government is definitely taking housing seriously. Peter Schofield, director-general of the DCLG, confessed at the CIH conference last month that the Treasury had barely considered housing when it drew up its original plan for growth last year. In the run-up to the growth plan mark 2 and publication of the Montague report on the private rented sector, I’m told that David Cameron has been making the point that ‘all roads lead back to housing’ while Nick Clegg was using housing to rally his party faithful over the weekend at the Social Liberal Forum.
After the draconian spending review and underwhelming housing strategy, it’s taken the coalition just over two years to realise that more - much more - is required. That’s happened considerably quicker than under the last Labour government: acceptance of draconian Conservative cuts in housing investment in its first term; semi-successful promotion of a ‘step change’ in housebuilding delivery in its second term; belated realisation that it had not done remotely enough on affordable housing in the third term.
Considered judgement will have to wait for the substance of this week’s announcement and what follows. As Inside Housing is reporting today, it seems clear that the plan will include a scheme to reduce the cost of borrowing for housing associations. Ministers argue that it is now time to use the government’s hard-won credibility on public borrowing and that it could be possible to guarantee associations borrowing to bring rates down to as little as 20 basis points above gilts. That would be somewhere over 2 per cent rather than the current 4.5 to 5 per cent or more. If it’s not quite the quantitative easing for housing that I’ve been advocating, it does look like a creative idea. The alternative of writing off associations’ historic debt appears to have been ruled out as too complicated and expensive.
Beyond that, I’m told ministers are willing to look at any ideas to get housebuilding moving provided they do not risk undermining that fiscal credibility– and there is a recognition that housing projects are a far better way of delivering growth than large-scale infrastructure projects that take much longer to get off the ground. That looks like a reversal of the presumption in favour of infrastructure with a bit of rhetoric about housebuilding that made up the original plan for growth. When the economy is still shrinking, the argument that 100,000 new homes means 1 per cent growth in the GDP is bound to carry some weight (even if there is also a good case can be made that most of the deficit reduction so far has come from cutting public investment).
The other key announcement to look forward to is publication of the report of the Montague review on the private rented sector. If Sir Adrian and his team can really find a way to attract institutional investment they will have solved a conundrum that has defeated all previous attempts and opened up a major new source of finance for new homes. I understand that one of the key problems is that institutions will want to buy stock of 2,000 homes or more and at the moment there is nobody around to build them. One solution could be to incentivise housebuilders to do so. A leak to Inside Housing last month suggested that the review could recommend changing the definition of affordable housing for planning purposes to include private renting and government loans to promote new large-scale construction.
Another way of boosting housebuilding would be to promote the construction of new towns – or new garden cities as they were carefully branded by David Cameron in a major speech in March. The idea is being pushed not just by the usual suspects like the TCPA but by the influential right-wing think-tank Policy Exchange too. I’m told that work continues to get medium-sized schemes like Northstowe and Ebbsfleet moving but that grander ideas for using compulsory purchase to kickstart new towns on the scale of the post-war programme have been considered but rejected as politically impossible.
My understanding is that even an old faithful from the housing lobby - a change in the public sector borrowing rules - has not been ruled out altogether. The assumption within the housing world may be that the key obstacle is the Treasury but it seems that chancellor George Osborne is agnostic about the idea and there has even been lobbying in favour of it from within Conservative local government. The two barriers are first that the UK Statistics Authority and Office for Budget Responsibility would have to agree to the reclassification and second that even if they did the markets might hear too many echoes of the profligacy of Spanish regional government for comfort.
So there you have it: the case for a bit more positivity about the prospects for more homes. I won’t be shaking off the negative habits of a lifetime, I am worried by the mood music about yet more subsidies for the major housebuilders that have already received billions in subsidies and I’m prepared for some of the over-hyping that accompanied the ‘greatest investment since the Victorian age’ rail plan earlier. But at least there is a positive case to be made.
From Inside edge
Housing commentator Jules Birch puts the latest news in context