Number crunching

The internet is a dangerous thing. You get all steamed up about what some nincompoop is saying on-line and then you meet them face to face and they are charming. 

So it was when I debated with Chris Walker from Policy Exchange at the Manchester conference last week. His 2014 report on “Free Housing Associations” raised my blood pressure and prompted me to write a couple of blogs saying what a bad idea it was, and that it would lead to housing associations heading down the road taken by the demutualised building societies and the inevitable annihilation of their social purpose. We had a good-natured discussion, excellently chaired by Alison Inman,  but I believe I “won” the debate, because few people in the room, apart from a couple of G15 CEOs seemed to support Chris’s main points. One of them argued that the SHOUT position is unrealistic and politically naïve. Perhaps it is, but social rented housing is an idea that has made a huge beneficial impact for over a century and it is a concept, like the NHS, that happens to work. It pays for itself over a period of years and any surplus is re-invested to build new homes, rather than being paid out to shareholders. Just because government policy is hostile to social rented hosuing today does not mean that it cannot work tomorrow, or that we have to bend over backwards to appease every new governement intitiaitve that comes along. Another senior CEO made the claim that housing association rules cannot be amended. Well I’ve been to plenty of AGMs where rules have been changed. I’m presuming he is referring to rule G11 in the model rules about charitable status, but if grant is converted into debt, as Chris proposes, there is no reason why rules should not be amended in the future in order to allow for the privatisation of assets. It’s happened across swathes of the public sector so to believe it could not happen to social housing is naïve.

The trouble is, Chris and I both agree on the fundamentals, but our solutions come from opposite ends of the telescope. We both agree that we need to build around 300,000 homes a year and that local authorities need to release much more land, and we both agree that smaller non-developing housing associations should do more, and that the sector as a whole needs to build 100,000 homes a year. But whereas the SHOUT campaign argues for 100,000 social rented homes a year. Chris, in his latest Inside Housing article attacking the SHOUT agenda, argues for 40,000 “affordable” homes a year and for associations to build many more market homes. In theory, I am agnostic about tenure. If we really did build 300,000 homes a year for the next twenty years and not one of them was for social rent I would be reasonably  happy, because we would have added 6 million homes to our national stock and the pressure on the PRS and social sector would have eased considerably.

But it’s not going to happen.

A key message of the SHOUT campaign is that the private sector, for decade after decade, has shown that it will never produce more than 150,000 homes a year, whether demand is high or low, whether building costs go up or down, whether land prices are high or low, whether labour is cheap or expensive. This is incontrovertible. Unlike clothes or cars, we don’t have a free market in land, so free market solutions do not work. The state, by its nationalisation of land development in 1947, created the problem, so it has a duty to fix it. That’s the SHOUT message. (And paradoxically, it’s those who are most likely to vote Tory and own their own homes who are the most vehement supporters of this innately socialist state control of land.) Beyond this, I don’t see why the housing association sector should be making up for the deficiencies of the private market by builiding more homes for market sale and rent, products that are inherently risky and which few fully understand. For example, I recently came across a couple of associations that run market rent schemes, but where you need to have a local connection to qualify! If you set a market rent and then restrict who can qualify then it’s not a market rent. They don’t seem to understand how markets work. 

Chris argues that affordable housing provison has to be seen as part of wider market provision and few would disagree. It’s certainly the SHOUT message that 100,000 social rented homes have to be added to a boost in output of the private market to at least 150,000 homes a year. This would help to cut waiting lists, to ease pressure on an over-heated housing  market and slowly bring down rents and house prices, an outcome that most sensible people would approve of. Most importantly, it would save the taxpayer almost a trillion pounds in housing benefit costs, a figure Chris appears to disagree with. But whereas he seems to put his faith in dodgy DWP impact assessments our case is built on solid empirical evidence as set out in our Capital Economics report, “Building new social rent homes”.

So in spite of our largely civiised debate, I still think his ideas are dangerous!