This government could head in a deeply unpalatable direction. We must engage

To many of us this is obvious. House builders will only build at a rate that is consistent with protecting their margins, and therefore will not build at a rate that materially improves affordability, or keeps pace with household formation, or delivers enough homes for low-income households.

The First Homes announcement doesn’t change that dynamic.

Arguably it will compound the problem.

Planning reform alone – the Treasury’s preferred approach to increasing supply – cannot and will not provide the solution.

Oliver Letwin’s report makes this point very clearly, and although since writing it he has made a few enemies on the hard-Brexit wing of the Conservative Party, he is a long way from being a socialist.

If the sector can help win this argument, then government’s incentives are at least loosely aligned with our own.

That should mean a sensible settlement on rent and grant, and perhaps some sympathy over the costs in the post-Grenfell era.

If not, the opposite is true, and we could be in for a very rough ride – precisely what happened in the David Cameron era.

Even if we win that debate, there will still be some work to do to win hearts as well as minds, especially if the aim is to persuade the government to invest in the step change in supply that we desperately need.

The challenge is more to do with politics than economics. Given that the Spending Review is ultimately about political choices, that’s quite a big problem.

I think it is simplistic to assume the Conservatives are just antagonistic towards social housing, although that might be true of a few.

The bigger problem is that the system as it stands doesn’t sit entirely comfortably with Conservative world view, even among the One Nation wing of the party.

Their instincts may be to provide a safety net for the most vulnerable, but they are also focused on creating incentives for people to support themselves where they can.

“An awful lot depends on convincing the government that it cannot meet its supply aspirations – or make any inroads into the growing problems of homelessness and affordability – without a major increase in public housing”

They worry that families who are welfare dependent get better housing outcomes than those in employment. And they are strongly in favour of homeownership where this is sustainable.

Although the economic arguments for Starter Homes are of dubious merit, in presentational terms it reflects this outlook. Politics beat economics.

This line of thinking is not new. Churchill once described it as the difference between the (Conservative) ladder and the (Labour) queue.

But it didn’t stop him committing to the biggest public housebuilding programme in the country’s history. We should ask ourselves why.

As things stand our answer to these challenges is to advocate an agenda that looks very similar to the Labour party manifesto. I happen to think these policies would greatly alleviate the housing crisis, but I don’t think they will excite the Conservatives.

When it comes to the crunch – the hard choices between competing priorities – that could make all the difference.

So what’s the alternative?

It certainly isn’t abandoning the idea of providing long-term, secure social housing for the most vulnerable. We need more social rent, and capital subsidy makes a lot more sense than shelling out housing benefit in the private rented sector – for tenants and taxpayers alike.

(On the detail, we should probably be having a debate on a rent formula that is based on 1999 values and takes no account of energy efficiency.)

“I think it is simplistic to assume the Conservatives are just antagonistic towards social housing, although that might be true of a few”

Shared ownership should also be a big part of the mix, although it may need to be adapted to stave off the challenge posed by First Homes.

The missing link is for the group in between – the growing number of people too well-off to get social housing but unable to afford shared ownership. The people who used to get social housing when Churchill was in power.

An intermediate rental product with an option to buy would be really appealing to this group.

It would also tick the right boxes on overall supply as it wouldn’t contribute to absorption rate problems.

This product would need to sit outside the current allocations system, and we would need to keep it simple. A promise to sell at a value frozen from day one would do the job, especially if the deal included a small discount funded through grant.

A rent-to-buy product of this type fits well with the Conservative world view and might even help them win a few votes among the under-40s.

Of course there would be risks of pushing for a change of this type, not least the possibility that a new intermediate product is funded instead of, rather than on top of, traditional social housing.

However, there is also a risk that the Conservatives head in a deeply unpalatable direction without any input with the sector, as we have just seen.

I think we are better off at least trying to work with them. And I am very happy to talk about affordable housing as a “ladder” – as long as we can deliver a major public housebuilding programme that is needed every bit as much as it was in Churchill’s day.

Matthew Bailes, chief executive, Paradigm Housing Group