03 August 2007
Housing is back at the top of the political agenda, with a green paper promising to solve the affordable housing crisis. But how is the new prime minister going to square a return to social rented housing with aspirations for home ownership? Will Hatchett takes stock
Gordon Brown can be unlucky with his timing. He became the nation's number one mortgage broker just as housing unaffordability reached an all-time high. Then last week he spearheaded a major house-building drive – much of it on flat, tempting flood plains – when large tracts of England were under water.
The headlines of the housing green paper had already been leaked – an eye-catching 3 million more homes by 2020 and a 'super quango' to give out a new funding stream called housing and planning delivery grant. The fact that councils, or at least their arm's-length management organisations, 'would be able to build houses again' (gasp) had also been extensively trailed.
The detail, unlike some earlier flimsy concoctions, is substantial, and it comes with some large numbers. The green paper, launched by housing minister Yvette Cooper, promises a doubling of social house-building to 45,000 a year by 2010, backed by £8bn from the Comprehensive Spending Review. It will also bring new housing growth in selected towns; a flotilla of local housing companies; new community land trusts; five 'eco towns' (providing up to 20,000 homes each); a £300m community infrastructure fund; substantial transport funding; and some new sticks and carrots in the planning system. To receive housing and planning delivery grant, authorities must provide for five years worth of mixed-tenure development sites in their
15-year planning policy statements (PPS3). There is an ominous promise that if they don't, planning inspectors (given stronger muscles by the planning white paper) will overturn their refusals of planning permissions.
Brown is clearly very serious about this but, in a New Labour way, he is not dogmatic about who does what. Hybrid bodies called local delivery vehicles (some old, some new) will be his frontline shock troops. They will include local housing companies, special venture vehicles, urban development corporations and city development companies.
The scale of council house-building will actually be quite small. It will be carried out initially by local housing companies and arm's-length management organisations on land already owned by councils. Experts predict only 1,000 or so units next year, perhaps rising to 3,000 in 2009. This is such a tiny fraction of the total number of homes to be built that it would be wrong to talk about a return to mass council house building – it is more of a symbolic gesture and a logical development of joint venture models already being developed.
Ten councils have been given the go-ahead to bid to build homes under the delivery grant. They are Ashfield (Notts), Derby, Kirklees, Knowsley, Sheffield, Norwich and the London councils of Westminster, Hillingdon, Hounslow and Brent.
On the home ownership side, the green paper speaks of a larger shared ownership programme and policies, which might not be achievable, to facilitate long-term, low-interest mortgages and securitised mortgages for high-risk borrowers. Just after Brown became Labour leader, he said that affordable housing would be 'one of the great causes of our time'. It invited the response, 'yeah, right'.
However, we can now see that the green paper indeed marks one of the largest postwar housing initiatives, on a par with Aneurin Bevan's 1945 housing white paper and breaking the bi-partisan Thatcher-Blair agreement that banished local authorities from the top table. Old-fashioned politicians 'did' housing like the new ones do education and health. Harold Macmillan, for example, based his 1957 premiership in large measure on housing promises. As housing minister from 1951, he had already successfully delivered an ambitious programme of up to 300,000 new homes a year. His achievement carried him to Number 10.
Brown's landscape is different. His ideal is not just to build more roofs; his vision is for wider home ownership, promoting general contentment. He has set his own terms. His success or failure in this sphere will provide a major benchmark of his leadership.
Logically, Brown had to bring local authorities back into the frame and put more oomph into the planning system, explains Peter Williams, executive director of the Intermediary Mortgage Lenders Association. Private house-builders account for only about 160,000 home starts per year, about two-thirds of the new homes that Brown is projecting. Williams comments: 'I welcome the green paper. It is easy to be critical but it shows the government's real desire to drive forwards the housing agenda. It's a big bold commitment and good luck to them.'
But he adds that all of the new-build on brown and greenfield sites, the eco villages, the inner-city key worker flats and the mixed tenure estates might not be enough. There has been a chronic under-supply for years, especially in the Southeast of England, and there is a huge pent-up demand. He explains: 'Housing is a big bus. Even if you put your foot flat on the floor now, the supply is going to be far behind for a long time. Frankly, we are going to face an acute shortage for a number of years. In the meantime, we will face rising prices and problems of restricted access. There is also the issue that a lot of the new housing is being built on flood plains and that the design quality is often extremely low.'
Williams thinks that Brown is guilty of facing two ways at the same time. 'To the Labour party, he stresses social rented housing, while to the public he focuses on meeting aspirations for home ownership. Well, which is it?' Williams says that, in the short term, the government can increase the numbers both of homeowners and social renters (if not the percentages), because of the overall under-supply. But with demand being stoked up and interest rates rising, home ownership could face a crash landing.
Merron Simpson, head of policy at the Chartered Institute of Housing, announced herself to be 'ecstatic' in June at the prospect of a Labour Party that was serious about housing. Following the release of the green paper, she has retained her optimism and good cheer. She comments: 'With the new leader, things that were inconceivable before are now happening, like the
3 million new houses. Housing is now at the top of the agenda. It is better to have ambitious targets and have a good go at meeting them, rather than targets which are set far too low, which we have always had and still failed to achieve.'
Simpson is delighted about the impressive-sounding numbers, the housing and planning delivery grant, the ability for councils that build new homes to keep and recycle right-to-buy receipts and the hints about the unfreezing of housing revenue accounts for the million homes that are still owned and managed by councils.
She is pleased too, that the green paper promises action on 'land banking' – the developers' practice, which they deny, of sitting on land with planning permission to boost their balance sheets, rather than building on it. She says: 'There is not much correlation between how much money builders make and how many houses they produce.'
But she is not surprised that Brown has backed away from imposing a planning gain supplement on builders. The green paper talks about other models of extracting money from builders to help to pay for the infrastructure on new developments. One of these, at least, should be adopted.
The green paper is posited on a further blurring of the public, private and voluntary sectors. Simpson does not mind this – after the decades of Thatcher and Blair, she did not expect a return to direct labour organisations and huge estates of pebble-dashed houses. She is attuned to pluralism, and is simply pleased that councils will soon have more power over developers and are to play a physical part in the building programme. The builders won't like whatever mechanism is adopted to siphon off some of their huge profits into infrastructure costs. But they will just have to lump it.
Dermot Finch, director of the Centre for Cities think-tank, is not surprised that the new prime minister has managed to confound his doubters and to produce a range of achievable and credible policies. Brown, he points out, has played a huge role since 1997 in the physical reconstruction of the UK. Large-scale investment in the decency standard for public housing and massive regeneration programmes have substantially succeeded – although the Centre for Cities has recently pointed to mixed successes for cities, with Reading, Bristol and Southampton forging ahead and Newcastle, Sunderland and Birmingham trailing.
Finch predicts that, under Brown and new Communities and Local Government Secretary Hazel Blears, skills building and economic development will provide the main focus of urban regeneration, with the social and individual emphases of the Blair era – antisocial behaviour orders, the 'Respect' policy, parenting classes – less to the fore. However, one thing that Brown is really keen on – part of the US tinge to his political philosophy – is home ownership.
Finch says: 'Home ownership is hugely important for Brown. He believes that even a 20% stake in your property is better than nothing. He would like a far bigger push at the low-income end of the market through clever financial devices, like securitised mortgages. He was held back by the Treasury but now that he is at Number 10 he may able to push them through.' We have seen the start of this already, Finch points out. He cites measures announced by Brown's protégé, Chancellor Alistair Darling, to promote improved covered bonds, and the appointment of audit commissioner Brian Pomeroy – chair of the Treasury's Financial Inclusion Taskforce – to advise the government on the development of the shared equity market.
Finch argues that Brown has been more responsible for successes in urban regeneration than any other politician in the past decade. He says: 'The main thing that happened was that the macro economy was stable and grew steadily. Without that, nothing else would have worked.' The chancellor successfully moved away from the old model of grant-giving to promoting business development, through methods such as building skills, lighter touch regulation and enterprise zones.
A continuing problem is the spaghetti-like tangle of overlapping responsibilities and funding streams at the regional and sub-regional level. For example, the National Audit Office was recently highly critical of the Thames Gateway, one of four housing 'growth areas', citing the lack of an implementation plan and financial information. It said it urgently needed an overall programme plan to co-ordinate projects and present a live picture of progress.
However, Brown might be on top of this too. Last week's report of the Treasury's long-awaited sub-national review of economic development should lead to a more streamlined structure, with single strategies and funding streams for each region, strengthened regional development agencies and local authorities grouped into city regions, bound by multi-area agreements. For most commentators, this looks better than the confused mess that existed before, thanks to the benign indifference of Blair. The acid test will be whether harmony will reign in the Thames Gateway and the three other growth areas, which are to bear the brunt of the new development.
So, there is Brown's achievement – a formidable ten-year legacy – and there is the new stuff. Some problems attach to the new stuff. Will house prices for first-time buyers continue to spiral upwards? Will the government be able to honour its promise to preserve the green belt and, for that matter, should it?
But Brown is formidably intelligent. He might not have the glamour of Blair, but his forte is long-range politics (commission an incisive report and then act on it); he has his hands on lots of levers, including the economy; his party is still with him and he is an astute tactician. For example, he easily outflanked the now weak-looking David Cameron by abolishing regional assemblies, a prominent Conservative policy.
Some important questions remain. After all, the US model of society, which Brown favours, comes with blighted urban ghettoes, separated from areas of extreme affluence. Last month, a timely Joseph Rowntree Foundation report on poverty across Britain found that there were still huge gulfs between different areas and between rich and poor. Brown is looking 15 to 20 years ahead. Some observers worry that, in the shorter term, his vision of a US-style, home-owning and asset-owning democracy could come unstuck.
In the US, they point out, more than 6 million people on low incomes were recently tempted by new mortgage products, despite their lack of cash and poor credit histories. Their risky, so-called sub-prime mortgages were parcelled together and sold off as collateralised debt obligations, or CDOs, to investors and equity houses. There was a feverish demand for CDOs, a kind of mini-South Sea bubble. Surprise, surprise, in the summer the value of CDOs collapsed as house prices fell. It all ended in tears.
It is a salutary lesson, which one hopes that Brown has noted. UK house prices are already unsustainably high and the market is unstable. Does the PM really want to expose more low-income borrowers to the vertiginous risks of hedge funds, equity slices and synthetic CDOs? It could be, his critics say, like pouring paraffin on to a smouldering bonfire.
Will Hatchett is the editor of Environmental Health News
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