Andrew Rawnsley argues that if there is just one thing radical that Philip Hammond should do in the forthcoming budget then it is to let local authorities issue bonds to finance the building of new social housing. His argument is that this was the great success of Neville Chamberlain. I presume Rawnsley is not trying to kill the idea by saying so, although that might be the result. And such a line of reasoning is not required. This idea, which I have promoted since 2003, makes complete economic sense.
It stimulates the economy in every constituency.
It meets glaringly obvious need.
It puts the mountain of unproductive savings in UK bank accounts and ISAs to productive purpose.
It tackles the fundamental pension failing in the UK, which is that the older generation are not leaving enough capital goods for the next generation so that the younger generation can afford to forego part of their income to care for the elderly.
And it reduces social and economic tensions.
It's a no-brainer then. Which makes it odds-on not to happen.
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Sadly, you’re right. It’s not going to happen.
In addition to the economic logic, there’s the moral issue. One wonders why we ever bothered to become a signatory to the Universal Declaration of Human Rights :
Article 25.
(1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
(2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.
I despair 🙁
Worth recalling that we are signed up to that
Being a social housing development officer the words ‘Pope’ and ‘Catholic’ might be appropriately come into play.
But being objective now, this would really make sense. Up to 2020 social landlords will be having 1% of their income taken off them (George Osbourne’s parting shot in 2015) so any surplus to be reinvested into the housing stock (for maintenance and redevelopment) is now under pressure. The additional funds fro such a budget would go a long way.
I can tell you that every time we build a house a private contractor gets a contract to build foundations (one of the most expensive parts of the build), brickwork (very expensive as Brickies and bricks are in short supply) windows and roofs. My org’ recycles the teams we employ to fit new kitchens, bathrooms and heating systems on existing investment improvement programmes. We get double the work out of these folk now but we are really stretched but it keeps contract costs down. And remember that the supply chains are all private sector. For the private sector and the economy as a whole what is there not to like in that?
The group who really needs housing at the moment are the U35’s whose rent for a place to live is now deliberately lowered by this Government to the LHA rate for (wait for it) a shared bedroom in a house! I’ve done the business plans for building new homes for this emergent client group and they do not stack up even for a non profit org’ like us – in other words they lose too much money without subsidy. Our Housing Revenue Account (HRA) will have to take the strain but this means that we can only cope with building so many at a loss. So need (currently applications for U35 in my LA area are around over a third of all applications) will not be met. Only a small portion of it will. And the properties may well have to be built more cheaply to be affordable at all.
If this was not bad enough, consider the situation of the Homes & Communities Agency (HCA) who provide funding for social housing and so called affordable Homes to Buy in the private sector. This is open to interpretation by even me but the grant regime as driven by the Tories has proven to be so unattractive in the face of rising construction costs that the HCA has underspent its grant budget allocation because developers have NOT bothered to apply given the paltry rates of grant subsidy on offer (not to the mention the work that has to go into getting approval for it in the first place). Councils are also under pressure to spend their RTB receipts too which offers a route to higher development subsidy than the HCA offers (see below).
So what is happening now? Only that the HCA is discussing openly with RSLs upping their grant rates in order to get rid of their grant funding budget as we begin to exit 2017. If the HCA underspends its budget, the Treasury will penalise the HCA. And heads might roll too. But it shows you just how badly housing policy is being managed by the Twatties….er…sorry the Tories. In this case it did not work – but they were told that it would not and did not listen.
To add further insult to injury there is the issue of the RTB receipts (right to buy). Councils can use their RTB receipts to fund 30% of each new home it builds (the grant rate from the HCA can be as little as 18% per property in my experience). So RTB is the way to go right – more subsidy? Ideally yes but……………
Local government planning department performance has in my opinion deteriorated in my area. It is taking much longer to get schemes through planning officers as they are so stretched being under resourced . Added to this is that council owned land that could be transferred into the HRA and be used to build new social housing on is instead having to be considered for disposal to the private sector in order to raise money for the general fund to keep the council coffers (under pressure from relentless government grant cuts) going.
So Councils are running out of land and time to develop using RTB receipts.
Councils can only keep the RTB receipts for so long and if they are unspent we have to send them to Westminster who does what they like with them. My LA is considering giving RTB receipts back to Government EARLY because we know that we cannot spend them all before we have to surrender them!! No doubt the Twatties – (damn – sorry again!) – the Tories will use this to tell the public that it is because Councils are so inefficient at spending public money.
So the development game for social landlords has been a bit like snakes and ladders really. You think that you have found a way through but the bastards have already got you going down a blind alley (is this ‘nudging’ by any chance?).
Keeping with my Hobsbawmian theme this morning, if the eminent historian were alive today writing the history of this time it could well be called:
‘Housing Policy in the Short 21st Century: Complete and Utter Bollock’s’.
Many thanks PSR
Your real concern is apparent and your contribution appreciated
Marvellous piece Pilgrim!
Richard & Bill
Thanx for the thanks and the encouragement.
Carol
We also buy stock and you are right in that this speeds up social housing provision but in doing so also risks putting up prices in the market when we are active (LVT or no LVT) so we dip in and out to try to avoid this which as you may realise slows progress!!
I must also tell you from experience in my area that the unit cost of buying complete housing is higher than building from scratch between £5-15K. Prices at the moment are crazy. Your suggestion however would make any Government very unpopular because if we are honest, landlordism is the new pension scheme because existing pension schemes are crap. If you are going to take something away then it’s not a bad idea to offer an alternative?
What I’m saying is that the housing problem is ..well……bigger than just housing. This is why I advocate Richard’s more holistic approach to addressing these problems in ‘The Courageous State’.
Thanks.
That sounds like an easy win is out there PSR for both the social rented sector and the private sector to deliver housing for those on all income levels – to go back to the light-touch regulations of the 1930s when housing up to 6 storeys didn’t even need planning permission.
Oh yeah? So you want use this topic as a premise to push for “de-regulation” and more Grenfell Towers. That’s one way to miss the point entirely. I’m sure there are others.
It takes a long time to build up the social housing stock from new build. The quickest way to solve the housing crisis is to tax all land value, but to make landlords a special case. You could set the LVT rate at the maximum (about 5% capital value) on the basis that they, unlike other businesses, have escaped the property tax historically here. This would force most private rented stock onto the market, reducing prices dramatically and enabling local authorities to buy up all the stock they need. Then most housing benefit would accrue to them rather than landlords. There might be a few bankruptcies for the banks to cope with – the government could help with that if necessary, but the benefits would be huge.
LVT would decrease the price of land generally so councils could buy for new builds too.
You mean we’d be bailing out the banks again when they go insolvent as the housing bubble bursts?
This may be necessary, yes, or perhaps we can this time nationalise and restructure.
With regard to Pilgrim’s comment I would say that we are only going to get LVT with a Labour government, which will also have to address the pension problem, preferably by reinstating SERPS, the best pension scheme ever invented.
Landlordism was always anathema to the labour movement – and it should be again.
Carol Wilcox
“Landlordism was always anathema to the labour movement — and it should be again”
I think, though that it shouldn’t have been so. When the Trades Unions were investing their, then substantial, funds in ‘Fine Art’ (a speculative racket if there was one) they might have more usefully invested in housing for their members.
Dogma is always going to produce bad outcomes.
They have the power to do this for a long time; The Localism Act 2011 means they can borrow without government restriction by setting up a company to do so ( and not have to deal with a lot of the perplexing crap that is applied to HRA).
It is a ‘ no-brainer ‘ . I live in a nice , old detached house with some land on the edge of a nice village in the home counties, but I grew up in a council house in the fifties which my parents were oh so grateful to have. In our village about five years ago a terrace of five ‘ affordable ‘ houses were built following the demolition of some dilapidated farm outbuildings. No-one objected ; the new houses were well designed and fitted in to the rest of the village. I see opportunities like that in towns and villages everywhere I go . It would not be difficult to come up with a scheme whereby the landowner was granted planning consent in return for a sum something above existing use value, but not as high as full development value with the explicit condition that the land was to be sold to the local authority. At present we do not have a ‘ housing policy ‘ and I cannot imagine Hammond as the man who will make provision for one. The ‘ market will provide ‘ mantra is likely to continue until this government is no more.
“It would not be difficult to come up with a scheme whereby the landowner was granted planning consent in return for a sum something above existing use value, but not as high as full development value with the explicit condition that the land was to be sold to the local authority.” There would be no need to compensate the landowner in any way (rewarding rent extraction) with LVT. The land could just be designated for residential development by the local authority. The value would soar, so would the LVT. The landowner would be begging the local authority to take it off his hands.
Pilgrim has written an interesting informative piece. He is also dead right in saying right in saying that “landlordism is the new pension scheme because existing pension schemes are crap”.
That is one of the reasons why the Tories will always be reluctant with social housing — because they have become the party of the rentier and the middle —aged landlord. New social housing compromises the landlords’ overall position by adding to supply.
I am not sure if Carol’s suggestion would work in the way that she imagines it would it although she is right in considering the situation with existing stock as well as new supply. One thing that would be useful in supply terms is anything forces unoccupied “investment” properties onto the market (whether it is the rental or sales market).
Social housing building is going along at a pace in Scotland due to the 2014 Housing Scotland Act. That would suggest to me that the UK government has little interest in good quality affordable housing.
As a private landlord and a great supporter of social housing, I often find myself compromised in these debates. People assume that all landlords want to squeeze their tenants for the maximum return and don’t care about their quality of life. Some of us are highly conscientious and have, on the whole, very happy tenants with good quality accommodation at an affordable (if market) rent. My partner is an architect, and we bought a couple of large houses (one which was a brothel in its previous incarnation) and converted them into self contained flats. We have eight flats, and also let out my partner’s little terrace house. This gives us a modest income and is also our pension. There are of course thousands of people in our position across the country – many because as PSR says – the alternative pension provision is so bad – but additionally in our case because it is a sensible use of our skills.
However I am still hugely in favour of social housing and see a huge council/social housing project as working very well alongside the private rented sector rather than being in direct competition. We also need better regulation of private landlords. In Wales we now have this, and it seems to work really well.
On Carol’s point about tax, I am less clear on the implications and unsurprisingly nervous about the overall effect of such policies. However I am not against, and am happy in principle with tax changes that affect us negatively, and certainly with a cooling of the housing market, as long as it is incremental and not catastrophic upon our business. I think we need to break down the divide between private and public landlords, sweep away the ideological stuff and really talk about the details – in public – to find a workable solution that doesn’t destroy the good along with the bad.
I think it inappropriate to think there is no role for good private landlords
As with almost everything in the economy the answer is getting the balance right
Don’t beat yourself up too much if you do the right thing: that is possible as a private landlord
Thanks for the vote of confidence Richard. I don’t beat myself up, and our tenants tell us often enough about previous bad experiences to know that we are appreciated where it counts. The problem is the increasingly divisive discourse on pretty much all political and economic matters (stirred up as ever by the media). Hanging around with mostly arty/socially active types myself, I have tried to be honest about our shadow lives as landlords, and it can be uncomfortable at times. But the reality is when we discuss these matters calmly it is clear that we are all broadly on the same side – that of social justice and the absolute need for everyone to have access to good quality housing. Most of us make personal decisions within the wider structural web that we find ourselves in. The trick is to alter the structure whilst not causing too much havoc to individuals in the process. The solution, I think, is creating a space for dialogue as the detail is hammered out.
Jenny, I don’t condemn you in the least. Where there is insufficient housing provided by the local authority it’s a good thing and, as you say, you have both put your own labour into creating these homes. However, when it comes to your ‘pension’ the land value portion of your portfolio has not been created by yourselves but by the whole community, especially by the local public goods and services provided continually from general taxation. It’s the system which is wrong not you.
The biggest builders in the UK are sitting on 600,000 plots with planning permission in their collective land banks
http://www.theguardian.com/cities/2017/jan/31/britain-land-housing-crisis-developers-not-building-land-banking
Apart from the fact that it’s not in developers’ interests to build too many at one time, one of the problems is Section 106 Agreements and the Community Infrastructure Levy. These are both development land taxes (DLTs) and foster corruption. Put a tax on an activity and you discourage it. Labour governments introduced 3 DLTs – all had predictable outcomes. They even tried to introduce another one, the Planning Gain Supplement, following Kate Barker’s review on housing supply (what a waste of effort that was).
LVT would fund infrastructure in the most efficient way and initiate a virtuous circle of public infrastructure investment => increased land values => increased revenue => increased investment.
Tax does not discourage activity
That is a myth
http://www.labourland.org/downloads/papers/Vic_Blundell_DLT.pdf
Whilst I agree with the sentiment of the Rawnsley article it is perhaps unrealistic of him to expect change from a Chancellor with skin in the game – https://www.thetimes.co.uk/article/philip-hammond-could-land-1-5m-in-green-belt-housing-deal-b5l6wtc92
The thing that worries most about much of the social housing and indeed housing issue generally, is this insistence on building ‘affordable housing’.
Affordable housing is a trap and a snare and a euphemism for building nasty little boxes for poor people in just sufficient quantities to satisfy regulations but without any reference to housing need.
The last thing this country needs is more substandard housing – pokey little rooms, poor build standard and the rest.
We have millions of ‘affordable houses’ in this country, but they are too expensive. They need to be emptied of their inhabitants by moving them into better housing and the old houses need to be brought up to a 21st century standard.
Parker Morris build standards were streets ahead of what we accept now. (Albeit they had different take on insulation and fuel efficiency which was not an issue at the time)
Some of this should have been started with the income from Council house sales, but councils were forbidden to use the money. Another example of a sensible Thatcher idea that was completely hijacked by the people who fed the idea to her to suit their agenda.
And the council houses shouldn’t have been ‘given away’ at knock-down prices; there was no rational justification for that. It was just one more example of selling the family silver at scrap metal prices.