In the feverish last few weeks, almost all attention has been on the political reaction to the historic vote to leave the European Union. What does it mean for the Conservatives, and for Labour? Who are the right party leaders for the period ahead?
These are important questions. But they risk pushing aside even more serious concerns – in the short-term, what is the policy response to the emerging economic shock post-referendum? And in the longer term, how does Britain get to grips with the gap between the haves and have-nots that was the breeding ground for Brexit?
Housing is an essential part of any proper answer to both questions.
As ever, housing is a leading indicator of economic downturn. Since the referendum, billions have been knocked off the value of housing developers with shares still down around a quarter, property funds have been frozen, new developments paused and planned purchases put on hold.
While the Bank of England has been on the front foot, Westminster has been too taken up by the politics to wake up to the economics. But it’s already clear the impact of the referendum vote will be severe, and this requires a serious response.
When there’s a private investment strike it makes the role for government even more important. So ministers should immediately increase public investment in housing – building new council and housing association homes to rent and to buy – and stand by to step in with private developers too.
There’s recent model for this sort of smart government action. I did this in as housing minister in the last year of the last Labour government. In 2009, our annual housing investment was nearly £3bn but I secured switch spending from other departments to help put an extra £1.5bn into new homes over two years – creating jobs and apprentices, and spurring on private investment. We could do the same again now – only this time borrowing for investment at the lowest cost in British history. If we fail to act, the housing slowdown will be more severe and more prolonged, with consequences for growth, jobs and housebuilding.
Ministers should also look at other action available. Relaxing the unbalanced legislative and funding restrictions that are forcing public money solely into starter homes and shared ownership at the expense of tried-and-tested rented schemes. Using the power of the government balance sheet to guarantee lending to public and private developers. And being prepared to step in short-term to shore up housing demand through front-loading Help to Buy spending.
Beyond the imperative for an immediate response, we must now be much bolder for the longer term too. Housing has become a totem for government policy failure – it’s hard to think of another area of public policy that has failed so badly in recent decades. And if mainstream politics can’t deal with bread-and-butter concerns like the cost and condition of our homes then people will look elsewhere for answers.
Governments of all colours must share some responsibility for this – and be prepared to do more to shoulder responsibility for fixing the problems.
David Cameron promised a million homes. An empty promise before the referendum – transparently in tatters now. In fact, he’s built fewer homes each year on average than any prime minister since the 1920s.
If we’re to hit or top this million homes target we need action on land, planning and incentives to build. But most importantly we need to ask much more of all parts of the housing sector – councils and housing associations as well as private housebuilders.
There’s only been one year since the end since the end of large-scale council housebuilding – 1988 at the peak of the unsustainable Lawson boom – when we’ve built more than 200,000 homes in England.
As CIPFA’s report today shows, government policy in the last six years has constricted the capacity of councils to build. So giving the public housebuilders the freedoms and resources they need to scale up the number of homes they build must now be a priority. If we are to face the problems of post-Brexit Britain and deal with the housing pressures people face, we need a change of direction that is both fast and fundamental.
