The cross-subsidy model may be broken but it’s far from dead

With the best will and the most skilled people, it will take time to upgrade our stock to new standards – it will also take a lot of money.

If the sector is expected to find this money, this could have a profound impact on capacity to build new homes. Even the financially strongest of housing associations have finite resources which can only be spent once.

Second, the horizons of politics and housing are way out of kilter and need to be realigned. Housing is a long-term business. When we make investment decisions, they are typically supported by 30-year financial appraisals which we share with investors to secure their confidence and funding.

In arriving at their decisions, investors will ask ‘what about’ and ‘what if’ questions. What about Brexit? What about government support for social rent, share ownership, housing associations? What about fire safety? What about the green paper? What if things change? What if they get worse before they get better?

Presently, it is difficult to see beyond the end of the day, let alone the next 30 years.

The fundamentals are there, we have made real progress in developing a shared vision for the future. In London, with Homes England we have developed a strategic partnership approach – it’s longer term, more flexible and more about making decisions together. But we now need to take the next brave step forward.

In the next evolution of this model we need to think far longer term, be far more ambitious and far more open about how we will deal with the inevitable ups and downs in the market.

Some commentators have announced the death of the cross-subsidy model. But it isn’t dead. Bust, or broken maybe, but is the homeownership dream over?

Are the major house builders, politicians and civil servants planning for a future without homeownership? Of course not.

Even in these uncertain times people are still buying, we are still making a profit from our sales activities and our waiting list for shared ownership has never been longer.

But in an uncertain marketplace we have to manage our sales exposure carefully. That means less cross subsidy and, if we are going to maintain and increase supply, more government grant in absolute and percentage terms. More grant and higher grant rates.

“Even in these uncertain times people are still buying, we are still making a profit from our sales activities and our waiting list for shared ownership has never been longer”

In the longer term, hopefully sooner, buyer confidence will improve, sales profits will rise and government funding can reduce. If things turn out better than planned, the benefit can be reinvested in more homes. If they turn out worse, a pre-agreed risk-sharing formula can be applied.

If we are serious about fixing the housing crisis we have to change our approach. Now is not the time to lose our ambition.

But to take our finger off the pause button we need long-term, open book strategic partnerships between government, local authorities, house builders, small and medium-sized enterprises, investors and anyone else that is serious about delivering a step change in safety, quality and supply.

David Montague, chief executive, L&Q