Fixing the Roof

3 Feb 14
Just as growth returns, a new housing crisis is edging its way up the political agenda. So can Sir Michael Lyons put some flesh on Labour’s plans for a mass housebuilding programme that will help get the economy back on track?

By Judy Hirst | 3 February 2014

Just as growth returns, a new housing crisis is edging its way up the political agenda. So can Sir Michael Lyons put some flesh on Labour’s plans for a mass housebuilding programme that will help get the economy back on track?

Sir Michael Lyon_Akin

Sir Michael Lyons is angry. Or at least what passes for angry on the part of a mild-mannered member of the public sector’s great and good. ‘People have been sold a pup,’ he tells me. ‘They’ve been encouraged to believe in home ownership, but have now discovered it will take 20 years on average to save up for a deposit. I can’t understand why they’re not collectively hammering on politicians’ doors.’ 

Lyons’ agitation is perhaps a sign of the times. Affordable – or what used to be called social – housing is one of those issues the media chatterati traditionally views as boring, snoring: the provision of adequate homes for low-income households is, well, worthy but dull.

That could be set to change. The ‘little housing boom’ that George Osborne reputedly told Cabinet colleagues would create a feel-good factor ahead of the 2015 election has indeed set pulses racing around middle-class dinner tables, at least in London, southeast England and other property hot spots. But for every winner from the house price inflation fuelled by the chancellor’s Help to Buy mortgage guarantee scheme – and by near-zero interest rates – there’s a growing army of losers, particularly among first-time buyers. 

It is slowly dawning on many observers that, with housing starts at a record low of 104,000 a year, simply pumping up demand may not be the wisest idea. In a number of areas, the cost of putting a roof – any roof – over your head looks increasingly prohibitive, as rental costs track soaring property prices. Suddenly housing affordability is a hot political issue.

Which is where Lyons comes in. The former BBC Trust chairman – a doyen of numerous official commissions and reviews – has been tasked by the Labour Party with addressing the housing supply problem. As chair of a new independent housing commission, with prominent members drawn from across the housing sector and building industry, he has until September 2014 to deliver some answers.

The Labour leader set out the bare bones of the commission’s remit at last autumn’s party conference. Among the initiatives mooted were a target of 200,000 new homes a year by the end of the next parliament; ‘use it or lose it’ planning measures to prevent speculative land-banking; a legal ‘right to grow’ housing developments across local authority boundaries; new towns and garden cities; and reform of the Housing Revenue Account to free up council borrowing. 

‘Ed Miliband has used muscular language on some of these issues,’ says Lyons. ‘And I think that’s right. What’s needed is a very clear message from government that it really means business.’ He admits to being attracted by an approach ‘that focuses on the whole population, rather than just on social mobility, which has turned out to be a rather bogus promise.’

‘I’ve been amazed at how the housing question has remained so quiet, given the woefully inadequate provision for a substantially growing population,’ he says.

For the Opposition, housing is shaping up as central to its New Year offensive on banking, welfare, education and other issues, targeted on ratcheting up the debate over squeezed living standards.

With ‘generation rent’ now unable to get on the housing ladder until at least age 35 – and the likely impact of an eventual rise in interest rates on cash-strapped mortgagees – Miliband wants to show that the lack of affordable housing is as much a middle- as a low-income issue. Shadow housing minister Emma Reynolds has called for a major social housing programme: some thing Labour hopes will resonate with the 1.8 million households on council house waiting lists.

For Lyons, an economist by training, focusing on housing supply has an added bonus. ‘The chancellor and the Treasury are still preoccupied with the issue of house prices as an economic stimulus, the so-called “wealth effect”. But we need to take a much broader view of investment in housing as part of the social infrastructure, and the role it can contribute to the growth of national income.’

Interestingly, he notes, a number of Conservative commentators are arriving at similar conclusions. ‘They’re saying why on earth are we stimulating the appetite to buy without any increase in supply?’ Fears of a new housing bubble – and all-too-recent memories of the US sub-prime housing crisis – feed into this debate.

Fixing housing supply could simultaneously help fix the economy, argues Lyons – an area where the Opposition faces a credibility gap. But there’s a more personal reason for his interest in affordable housing. ‘I grew up in Custom House, in the East End of London, on the top floor of a house built for dockworkers. It had very poor facilities that were very challenging for my mother.’

His parents were the first in their extended families to eventually buy their own home – something that had an important influence on what he could do later in life. He thinks today’s generation should get the same chance.

So how does Lyons – who started his working life as a street market trader, and whose CV includes inter alia chief executive of Birmingham City Council and four turbulent years at the Beeb – propose this might be done? Particularly with no extra funding for those 200,000 homes, whoever wins the next election.

Lyons readily concedes that, since the glory days of the 1960s, when 400,000 homes were being built in some years, successive governments have failed to live up to their rhetoric on housing. Under the last government, notwithstanding economist Kate Barker’s housing review in 2004, and other major pieces of research, little headway was made.

‘Yes, it’s absolutely true that if you took all the people who’ve been pontificating about housing in recent years, and gave them all a trowel instead of a pen, we’d probably have made greater progress.’

He knows from experience – witness the fate of his own, very pragmatic, 2007 local government review – that most of these things end up yellowing on Whitehall shelves. Even so, Lyons is determined to revive the post-war spirit that he says was defined by a will to place housing at the top of the political agenda. The trick, he argues, is to come up with proposals that are workable even in the most challenging of times. 

This could involve taking on some big vested interests. The headlines about ‘Stalinist land grabs’ that greeted  Miliband’s forays on land speculation were indicative. Lyons suggests ‘something’s not right’ with a system where a very high proportion of sites with planning permission for housing are not in the hands of housebuilders. He notes that planning minister Nick Boles has implicitly admitted as much by reverting to a three-year time limit on planning permission for such sites.

On the controversial ‘right to grow’ proposal – and ‘Nimbyism’ in general – Lyons says carefully that although he ‘absolutely understands’ why people want to protect their own homes and amenities, ‘we have to make sure one community doesn’t hold another, or indeed the nation, to ransom’. Robust procedures are needed, he says, to get authorities working together to tackle issues around the green belt, brown-field sites and ‘urban sprawl’. Stevenage and North Hertfordshire are among a number of authorities where housing plans have been landlocked. 

As for the HRA, it is still far too bureaucratic, and it remains ‘perverse’ that local authority investment in housing is included in the public sector borrowing requirement. ‘It isn’t in many other European countries, or if the investment is made by housing associations. We’ll be looking at this and making proposals.’ 

Tackling housing supply has obvious ‘read-across’ advantages too, he says: for example, cutting the overall Housing Benefit bill, and enabling a switch from revenue to capital spend, as councils pour less into B&Bs.

All of which is highly pertinent, but still small beer in terms of meeting the burgeoning housing need. Unless Lyons can make a strong case for more housing subsidy, and for local borrowing caps to be lifted or scrapped, he will fail, one industry insider told PF. 

CIPFA chief executive Rob Whiteman doesn’t mince his words either, about the failure of all parties to address the housing problem. ‘They make big pledges, but once in power it’s a different story,’ he says. Many proposals for council spending on housing get stuck with the Treasury. ‘And politicians become genuinely concerned about creating overly dependent communities.’

As former chief executive of Barking and Dagenham council, Whiteman personally favours mixed tenure, sustainable developments. Lyons doesn’t disagree. ‘Yes, the whole spirit of the mission is to create the right mix of affordable housing. I’m not a simplistic municipalist who believes the public sector can do this by itself.’

But neither, in the opinion of local government expert Tony Travers, can it happen without a massive push from government: ‘It needs a dirigiste, centralised approach, that will involve a significant shift from consumption to investment, and away from other areas of spending.’ 

He gives Lyons ‘10 out of 10 for persistence’, and compliments him on his dispassionate approach. So could the man some called Gordon Brown’s ‘Mr Fix-it’ be up for giving housing that much-needed shove from the centre, and taking on those vested interests? Is he interested, given the chance, in implementing his commission’s ideas?

‘On this occasion, I’m not ruling that out,’ says Lyons. If the circumstances are right, ‘it’s possible I might respond to such an offer.’ After all, if there’s one thing his multifarious career should have taught him, it’s that reviews are one thing – but there’s nothing quite like doing the job for real.

This feature was first published in the January/February edition of Public Finance magazine


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