Rachel Reeves will be presenting her Budget on November 26, if the Labour government of which she is a part lasts that long.
I will be commenting on that Budget on the day on BBC Radio 2, and elsewhere afterwards, but what is already clear is that whatever Reeves has to say, she will miss the required mark by a very long way. Being aware of that, I thought it appropriate to offer an alternative Budget speech ahead of the time when she offers her own. Given the significance of this issue, it will be addressed in parts over the next week or so, leading up to Budget Day.
This sixth part addresses how the UK's housing market needs reform, touching on mortgage and social housing funding reform as ways to fundamentally change our relationship with housing.
It is all well and good talking about reform of the UK's financial institutions and the forms that savings should take, but it is also essential that consideration is given at the same time to reform of the biggest consumer market for financial institutions in the UK, which is the funding of the purchase of properties.
I am ignoring the commercial property market at present. I have already addressed many things that need to be dealt with in this Budget, and there is more to come; that issue is not high on my list for attention.
On the other hand, the provision of mortgages to help people buy their own homes, and for funding buy-to-let properties, is a massive cause of concern for me and for this government because it is so clear that our domestic property market is out of control and is, as a consequence, causing massive stress to the people of this country.
Within the lifetime of people now in retirement, it was quite possible to buy a home suitable for a family on the basis of one reasonable, but not excessive, wage. There was a ratio of mortgage debt to income of little more than three to one. The result was obvious.
There was more time for things other than work in life.
There was more time to provide for children.
There was more time to cook.
There was more time to participate in communities.
And all of that was because less of people's income was extracted from them for the benefit of finance, and more was available for the sake of living.
Mortgages were much more affordable than they are today.
And, for those with long memories, it will be recalled that this all went wrong after what the Tories called the Big Bang in financial services in the UK in the mid-1980s, when excessive funding was made available to the mortgage market, giving rise first to a property price boom and then to a crash that harmed the well-being of many late in that decade.
Since that time, mortgage rates have varied considerably, from over 15 per cent in the early 1990s to the lows of the last decade. But it is the case that mortgage interest extraction is pushing many households to their limits again, now because of the extraordinary increase in house prices and the rising increase in loan to income ratios based on two incomes a household that now faces many people.
At the same time, very many young people have almost no prospect of ever acquiring a property without the assistance of what is called the Bank of Mum and Dad. This means that there is now a massive class divide in access to domestic security, which is unacceptable to us as a government.
In addition, the age at which a person can acquire a property has increased considerably. This has had an enormous impact on social life in the UK, not least by motivating a massive reduction in the childbirth rate as people delay having children because they cannot afford a property, whilst many now have only one child because the demands of their bankers prevent them from thinking about doing anything more, when two children were once commonplace.
The situation of renters has also become intolerable.
The government has retreated from the provision of social housing.
The definition of “affordable housing” that governments have used has made a mockery of the term "affordable".
And all the time, houses have become smaller, shared accommodation has become more common, dignity has been lost, whilst those paying up to 50 per cent of their net incomes in rent for housing that is often inappropriate for their needs have no chance of accumulating the deposit required if they are ever to own a property of their own. This leaves them trapped, without hope of ever securing the long-term homes that they desire and which are the basis of strong communities.
People ask why our productivity is so low, and why we have such crises of ill health in this country. My answer is that all of these factors are major contributors. It is time to address these issues.
I have already explained how I would reform the UK housing market and savings market. I suspect that some here and outside this House are already raising concerns that high returns will need to be generated to cover the cost of interest on the maybe hundreds of billions of pounds per annum that will be entrusted to this government as a result.
One of my responses is that many of the activities on which these monies will be spent already have an implied cost of interest within them. That is already true of most government expenditure budgets.
In addition, sums to be expended on improving our national infrastructure, including that in the utilities and services that we will nationalise, will usually be undertaken on a commercial basis where an interest charge at the level expected will be applied.
But there is the matter of housing to consider as well. I know there is a practical limit to the amount we can spend on infrastructure, new housebuilding, energy transformation, and more. There is a finite number of people available to undertake these tasks in this country. The reality is that we will have more money available than we can spend, but I will not risk inflation by trying to spend it when resources are not available to buy.
This, however, will not create a problem. We also have a mortgage market that is failing people, and these funds will be used to assist those in need of housing in two ways.
Firstly, we will create a national mortgage scheme where a person can take on a fixed rate that is expected to last for the entire life of their mortgage. And before anyone says that this is not possible, please note that it happens in the USA, and so if they can do it, so can we.
Of course, there will be moments when market rates will be higher or lower than those that this scheme will charge, but setting a fair rate is within our capability, and we will have a secure source of funding. The consequence is that we can transform the mortgage market in this way to ensure that families will no longer face the peril of remortgaging when the Bank of England has decided to punish them for the simple desire to live in their own home. That era will be over, although it will take a few years for this promise to be fulfilled in full.
Private mortgage suppliers will, of course, be allowed to match these offers, but we will not hear their objections to what we are proposing. When they have failed this country for too long, we must act.
We must also be radical in the rental sector.
Firstly, we will put in place radical reforms to deliver new social housing.
Every local authority in England, with encouragement being provided for similar action in Scotland, Wales and Northern Ireland, will be expected to create a plan for how they can deliver more social housing in their area. They will be encouraged to apply for budgets within guidelines that we will supply. This will not be a lottery. This will be action intended to create change from the outset. We will provide a clear indication of the scale of funds available to each authority before they begin their work, although we will, of course, be willing to hear their views on alternatives to our plans. There will be new social housing available everywhere, and the commitment will continue into the future.
In addition, where private housebuilders have been offered planning permission and have not used it within two years, then that planning permission and the land to which it relates will revert to a local authority, which will have the right to buy the land in question at the price for which the developer acquired it, or at a fair market value if it is believed that the price in question was artificially high as a consequence of related-party transactions.
The local authorities in question will then be offered funding to use the land acquired for social housing purposes. They will not be required to build the plans previously submitted by the private house builder, which may well not be suited to social housing needs. They will, instead, be allowed to submit a fast-track alternative proposal so that social housing can be delivered instead. The idea that the private sector might landbank to exploit potential homeowners at a cost to society at large must come to an end.
Even so, there is a real risk that these programmes will not deliver sufficient social housing and will not address the problem, now that many buy-to-let landlords are leaving the market, creating a supply shortage that is driving up rents again. This has become another form of exploitation, and we cannot tolerate that.
As a result, if any landlord now intends to sell their property and gives notice to a tenant that this is their intention, that tenant will have the automatic right to appeal to their local authority for that property to be acquired as social housing. We will put in place procedures to ensure that these properties are acquired by local authorities, subject to their suitability for long-term use. Payment will consider such factors, as well as the current condition of properties. It is not our job to sustain artificially high property prices, and to ensure this situation is not abused, we will put in place compulsory purchase options at realistic valuations. The consequence of these proposals will be an increase in the supply of social housing, which is essential to provide security for people in the UK.
The last Labour government introduced welcome measures to address some issues in the private rented sector. We are going further, using capital from savings in this country, to ensure that communities can provide opportunities for younger people, in particular, to live with the security of tenure for the sake of their well-being and that of their children.
We are confident that the schemes I outline will be very popular and will encourage savings in the programmes that we are putting in place, and can be self-funding. After all, the arrangements they will replace are. But if insufficient funding is provided in that way to turn savings into social capital, we will consider providing further funding of this sort through specific bond issues.
Only a decade or so ago, Tory Chancellor George Osborne used the government's power to create money to advance funds to banks to boost mortgage lending with the apparent primary intention of inflating house prices to keep the Conservative vote happy. Now we will use the power of the government to ensure that everyone has the right to enjoy appropriate housing. That's what a responsible government should do. We will not go down the irresponsible path that the Tories took.
Housing is at the centre of this government's priorities, and we are offering a joined-up policy to ensure that, as our programmes roll out, everyone has the chance to live well.
Other posts in this series:
- The Alternative Budget 2025 – The Background
- The Alternative Budget 2025, Part 2: Understanding tax and ‘borrowing'
- The Alternative Budget 2025, Part 3: Creating a new fiscal framework
- The Alternative Budget 2025, Part 4: Renationalisation
- The Alternative Budget 2025, Part 5: Reforming the UK's Savings System
Taking further action
If you want to write a letter to your MP on the issues raised in this blog post, there is a ChatGPT prompt to assist you in doing so, with full instructions, here.
One word of warning, though: please ensure you have the correct MP. ChatGPT can get it wrong.
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“The local authorities in question will then be offered funding to use the land acquired for social housing purposes”
Portsmouth: centre. Large block of flats near the university in a residential area -block & land owned by the council. Block was pulled down in last 10 years.
(was well north of 50 units).
Council no money to re-build/not allowed to rebuild by tory/tory II govs (take your pickof options).
I am confident the above is repeated across the country. Quick fix: fund LAs to build on land they own that was occupied by housing that was demolished for various reasons.
It will not happen under this tory gov’. Tories out, all of them, forever.
May I flesh out the Mortgage proposals
Lets call it the Citizens Mortgage
1. It should only apply to properties which meet certain criteria in terms of size/cost/energy efficiency – no ‘luxury’ property’s, Mc Mansions, swimming pool etc
2. But it MAY be possible to get a mortgage on a ‘non compliant’ property if you can demonstrate a need eg very large families
3. Planning Consent will NOT be granted for new developments that do not meet Citizens Mortgage criteria
4. It should include ‘Insurance’ for unemployment, ill health etc and a Mortgage Rescue scheme
5. It should be possible for existing borrowers to transfer into a Citizens Mortgage
I have previously suggested that Stamp Duty should be replaced with a levy paid by purchasers of ‘second hand’ properties which can then be claimed back if approved energy efficiency measures are installed. This may be backed with an element of Government funding especially for lower priced properties
I like a lot of that, especially (1) and (2) and (4). I assumed (5). I am not sure (3) is worth the fight, as yet.
and a fair amount of garden, perhaps with restrictions on selling the garden off for building. a lot of new builds have tiny gardens and covid showed the difference in peoples quality of life with access to a decent amount of outside space
Agreed
The Right to Buy must end.
Building many more council houses is urgently needed but their provision will be defeated unless the Right to Buy is abolished, as per the Green Party’s Manifesto 2024, or at least suspended.
Councils were permitted to sell council houses before Right to Buy and sales should be left to their discretion rather than be forced with the big discounts on market value available under Right to Buy.
Interesting.
All I would add is that there is still going to be excessive churn in social housing caused by Right to Buy. Really, Labour should have just stopped RTB dead when it came to power. I’m sure I’ve seen a figure of well over 10,000 units that are due to be lost as the deadline for change was issued. To be honest, Reeves has a second chance to stop it dead now and she should, when 41% of ex council homes end up being let in the private sector!
I think that your plans would help, because there is no way my team are going to replace over 400 homes as quickly as my authority is going to lose to applications before the RTB restrictions came in (over 400 units). You proposals would take some of the sting out of demand.
And of course the other issue is the condition of the existing stock which due to cuts in maintenance support from central government will continue to decline.
Yes, I know that we can only do so much in terms of capacity even if the money was made available, but what my comments really serve is the real truth of austerity – that in the longer term, austerity actually costs us more – both monetarily and socially.
I should have mentioned that: sorry. I focused on funding.
No need to apologise Richard. We have a family friend who used to be the head of one of the big public sector departments in the North of the country. Whilst I never escaped from middle management, we both agree that public sector funding and policy is snakes and ladders, with far too many snakes provided by Whitehall to steer one towards market solutions.
Your instincts are fine.
Thanks
Just for the record, the right to buy council houses was abolished n Scotland in July 2016.
A few technical but important points on how the new housing is located and built.
Building a whole quarter / estate of single tenure social housing tends to be problematic. Much better to build socially mixed developments with a variety of tenure (local government, coops, housing association, private to live in, private to rent), housing types (work/live, terraces, flats, mews, townhouses/maisonettes, mansionhouse flats, duplex, fourplex, detached / bungalow/cottage…) with services / light industrial well located near public transport and not too far from the town centre and not high density high rises. If mixed tenure can be in the one building as we see in Swiss coops the better, otherwise small social housing apartment buildings peppered around the site. From a sustainable viewpoint 5 to 6 stories maximum eg top of floor 2 story duplex . The general public prefers traditional looking housing though some modern designs with varying scalar ratios, some symmetry and well detailed could be acceptable. Social housing that blends with the surrounding architecture is preferred.
The urbanism is important and with design codes a lot can be gained from replicating good local examples see Create Streets, https://www.createstreets.com/wp-content/uploads/2024/12/BRM_CreateStreets_New-Towns-Report_111224.pdf Missing middle housing https://missingmiddlehousing.com/ , New Urbanism https://www.cnu.org/resources/what-new-urbanism.
Vis right to buy. A lot of social housing has been lost that was well located.
Thanks
And I like the the logic: I like mixed housing. I live about three doors from my nearest social housing (‘about’ means it’s over the road)
Interesting article here
https://medium.com/the-polis/why-america-cant-build-homes-for-the-middle-class-anymore-8d376b1b0e27
While its about the situation in the US clearly there is a huge issue about ‘productivity’ in housebuilding in the UK as well – and of course quality
Also the comment about Japan
Japan treats housing as infrastructure, not as a speculative asset.
So should we
There will be a podcast on this out on Tuesday – just recorded
Kevin Anderson, Manchester University : Serious climate would mean … mobilising labour and resources to deliver a public good for all… a stable climate with minimum detrimental impacts.
An early win would be
• an immediate moratorium on airport expansion
• a fair 80% cut in all air travel by 2030.
• a huge shift away from private cars in urban environments
• a shift towards public transport and active travel.
• retrofit of existing homes – rolling it out street by street.
• all new properties to be passive house standards with a maximum size of 100 to 150 square metres, still large homes, but with much less resource and material use – and less land! And when we sell existing very large houses, have them carefully and creatively divided into normal sized homes. All of which would free up labour and resources to achieve the necessary decarbonisation agenda.
We also need a massive expansion of electrification in the energy system. This on an unprecedented scale and rate of change – pushing the productive capacity of society to its limit and consequently demanding the reallocation of labour and resources to deliver a decarbonised, sustainable and prosperous future.
The climate crisis requires that we drastically reduce the amount of energy required for transport and for the construction of transport vehicles and road and rail facilities. Likewise, new buildings consume vast quantities of energy-dense materials while many existing buildings are under-utilised.
Above many town centre shops there is existing space for one or two flats. These could be converted by their owners, or compulsorily purchased, refurbished, insulated and draught-proofed. However, changes in regulations would be required because [Decades of obsession with cars have bequeathed ‘there must be two parking spaces for each one- two- or three- bedroom dwelling’.] https://www.sgr.org.uk/sites/default/files/2023-05/SGR_RS5_2023_Anderson.pdf {Shortened}
Juan Carlos Monterrey Gómez of Panama at COP 30: “One, we’re failing to stabilise greenhouse gases. In the past 33 years they have doubled. We’re on a pathway to assassinate half of all living creatures.”
“Two: The science is clear. Fossil fuels are making the planet hotter.
“Three: The climate crisis, biodiversity crisis, land crisis, ocean crisis, plastic pollution crisis … are all the same crisis … the product of an economic system that favours unhinged production, that pollutes everything in its way.”
Finally, We’re giving subsidies to fossil fuel producers, when we know everything they produce kills us.” Guardian 20/11/2025
I have long called it a Green New Deal, bit I helped co-author it.
another issue to consider is the cost of materials/materials in general.
this is an issue with MMT that I still don’t understand with regard the UK.
do we not import a lot of raw materials?
and if so does this impact MMT in the sense of Keynes “what we can do we can afford”?
What if the cost of importing things makes what we can do harder?
(Sorry if this isn’t entirely clear)
Yes, we import things.
And we export them, just not enough.
And there is a price.
But so what? Wat is the issue that things have a cost? MMT can embrace this: it just says the constraint is the price and if we over consume the exchange rate will fall. That’s it. All the measures are in placxe.
So many new housing developments have no equivalent of a village hall. If we are to build communities there must be somewhere for people to meet. If a versatile space is provided, people will use it! And on mixed developments – I mean a variety of housing targeted for residents of all ages – it encourages social cohesion. I think it should be a statutory requirement on developments of more than 400-500 homes.
David Byrne says:
Legislation is needed to force housing developers to include enhanced thermal insulation and solar energy capture in future designs.
Accepted. I can’t cover everything – nor does and Chancellor.
Many of the funding issues for social housing derive from the uplift in land values when planning permission is given for housing. Yet ‘we’ in effect nationalised development rights in 1947 and subjected the uplift in value to tax, initially at ( from memory) 100% dealing with the shortage of suitable building land with wide compulsory purchase powers. Over the years we relinquished this source of funding replacing it with weak s106 agreements, but why not bring it back, hypothecate the proceeds to fund social housing and allocate it to local authorities thus incentivising them to grant planning permission?
During 2024-25 the MHCLG ran a consultation on how and where its proposed new towns might be built. The House of Lords ran a parallel study. To both, I contributed a paper describing how to build a new kind of very densely populated city-under-one-roof of 500 000 settled residents and maybe 80 000 transient residents (students, asylum seekers, low risk prisoners, the otherwise homeless etc) all housed in council owned homes (the entirety of the city and its vast green surroundings being owned by the city council) of the highest quality and at unmatchably low rents. (Bristol’s population is a bit lower.) The USP of the city would be its proximity of all with all. Its carbon and ecological sustainability would be completely unattainable in any other kind of city. The social, health, educational and recreational and cultural resources would all be world class. Its business and industrial environment would be comprehensive and benign. The whole would be liveable-in as no city before. Its extreme compactness and free-standing, self sufficient (including in electricity and water) characteristics would help avoid, or greatly alleviate, all of the bogging-down-in-procedure problems that launching any of the ministry’s orthodox large scale housing developments will inevitably encounter.
Its construction mainly in the steel to come out of the UK’s new electric arc manufactories and on-site training in the necessary skills would mean little competition for materials or workers with other home builders Its New Town Corporation established as a non-profit, bond issuing entity (like Welsh Water) would save HMG doshing out for other than pump priming finance and doing the legal, procedural, CPO work that it must do for all its other home building initiatives anyway. Construction would cost about £2B a year, would take 10 years and could start in two (after the CPO).
My proposal didn’t make the cut. (Twelve other new towns did and building three (about 50 000 homes between them) might start before the end of this government.) Perhaps nobody could be bothered to read my 48 000 word paper and its detailed consideration of how the city would work from disease control (the topic being considered uniquely in the world of new city planning and somewhat before COVID) to the way proximity of all with all would shape the city’s cradle to grave education structure? Or perhaps it was all too bold?
Too bold is, I suspect, the answer.
I would reinstate the fair rent Act of the 1970’s
Tenants should not be paying over the odds.
Landlords hated it and Councils didn’t implement it .
But it might force a lot of landlords to sell and hep establish a fair price for housing.
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