The government's new housing strategy does not quite live up to the hype. But at least it recognises that the issue has to move way up ministers' 'to do' list
There are warm words about the importance of housing in the new strategy announced by David Cameron today. It talks of ‘urgent action’ to build homes, and housing being crucial to ‘social mobility, health and wellbeing’ as well as to the wider health of the economy. If this is belated recognition that it was a mistake to target housing for the deepest of last year’s spending cuts, the injection of new funding - £400 million – is modest compensation in relation to the scale of the task.
And what a task it is. As the government admits, demand from new households is projected at 232,000 homes per year, while its own figures show that the starting point is nearly 2m households already in need. Meanwhile there were just over 100,000 new homes on site last year. The government is right to say that their predecessors left them in a hole. If they have decided to stop digging, that’s good news, but will their strategy get them (and us) out it?
There are three main strands, none of them new. The main one is to rely on the housing market and private builders. While the government's original assessment of the barriers to the market was that it was all about blockages in the planning system, they now recognise that access to mortgage finance is a major barrier too.
There is to be a new indemnity scheme to facilitate the 95% mortgages that are currently virtually unobtainable. There will be a new £400m ‘investment fund’ available to builders who can’t get development finance. But details of both are sketchy, and their impact depends on whether lenders, builders and buyers actually take them up. Beyond these schemes the supply of new ideas runs out, as the rest of the package to stimulate the market is already in place and not yet having much effect.
The second strand is about a changed approach to social housing. The problem is – and this government is not alone here – there is still tremendous confusion about what social housing is for. Is it only for those in real need or do we want to make sure wider groups can get access to it? The strategy seems to want to do both, but with lower levels of investment in new supply. While social landlords would love to cater equally for the worst off and for the ‘squeezed middle’, they can’t do both at a time when demand is sky-high and supply is barely increasing.
The confused priorities are most apparent in the boost the government wants to give to the right to buy. Is the best use of a house built with public funds to sell it off cheaply to the current occupant who has enough money to buy it, when to replace that house you are going to tie up a big chunk of the landlord’s borrowing capacity? As the strategy admits, the receipt from a sale is only a fraction of the cost of a new home. So even if (and it is a very big if) the new right to buy is taken up, it will at best leave the social sector the same size as before.
The strategy’s third strand is private renting, where there is an inevitable acceptance that the sector is growing fast because existing owner-occupiers can’t sell and potential new ones can’t buy. The proposals to help boost its role further are modest indeed, perhaps because ministers can see that it’s growing anyway and further expansion is a mark of failed ambitions for more homeownership.
Couldn’t they have made a virtue of necessity and put in place a strategy for better quality private lettings across the board, encouraging people to rent as a longer-term choice with greater security? It would make sense to many people in the current economic climate.
Private tenants get little from the strategy, and while landlords are rather vaguely promised some incentives, they will be much more aware of the target of £2bn in housing benefit cuts and the effects on poorer tenants’ ability to pay their rents.
But even if we conclude that all this falls short of a real strategy, I suspect most of those in the housing business will welcome its arrival. The problem until now has not so much been lack of a strategy as lack of any recognition of housing’s importance at all. The 88-page document changes that. It doesn’t restore last year’s massive cuts, and it doesn’t really tackle the underlying problems of a dysfunctional housing system. But it does at least recognise many of them. The government has finally put housing nearer the top of its ‘to do’ list.
