Invest, invest, invest

“Britain is engulfed in a national housing crisis” says… The Daily Mail.

The “news” that home ownership has fallen to its lowest level for 30 years led to much wailing and gnashing of teeth in the right of centre popular press. The fall from 71 percent in 2003 to 64 percent today, with the biggest reductions in places like Manchester, Outer London and the West Midlands, violates their dream of a property-owning democracy.

But the question that these newspapers need to explore next is, how has this been allowed to happen? Readers of Inside Housing will know the answers – a lack of public investment, an over-reliance on a dysfunctional house-building industry, the unregulated growth of Buy-to-Let, NIMBY opposition to new homes, an obsession with the Green Belt, the failure of local authorities to put local plans in place. Above all, it has been the government’s obsession with home ownership that has, paradoxically, made the problem much worse. Pumping public money into a raft of home ownership schemes without addressing wider structural issues of supply has just pushed up prices and made the dream of ownership a distant mirage for a growing generation of young people.

But post-Brexit and post- Osborne do the conditions exist for a fundamental change in approach? The SHOUT campaign has been arguing for over two years that the private market will never provide enough homes, and that private provision must be topped up with 100,000 social rented homes a year. It seems that more and more influential figures are coming to the same conclusion. Most recently, the House of Lords’ Economic Affairs Committee slammed the government’s “narrow focus” on homeownership and its failure to build homes for social rent. It called for 300,000 homes per year, including new borrowing powers for councils to build social rented homes. Committee member Lord Michael Forsyth described the obsession with home ownership as like “trying to play a game of golf with one club”.

On the steps of Downing Street, Theresa May said, “If you’re young, you’ll find it harder than ever before to own your own home.”, a phrase that the new Housing Minister has repeated, raising fears that the home ownership obsession will continue.

But the point is that investment in social rented homes could also help to boost home ownership because it will remove low-income customers from the clutches of unscrupulous private landlords who would then be forced to sell their properties to first-time buyers. The private sector, which is the place where most tenants do not wish to be, has grown by almost 2 million homes over the past decade. Building 100,000 social rented homes a year would have a huge impact on that sector over the course of a decade. After all, it has been the rapid growth of the private rented sector that priced a whole generation out of the housing market.

And there has never been a better time for this switch of emphasis since British government borrowing costs are at their lowest ever levels. Ten year gilts are below 0.8 percent. The SHOUT/NFA Capital Economics’ report showed that the government could save almost a £trillion in little more than a generation by investing in social rented homes, but these savings will be even greater with this fall in gilt rates. If the economy is facing a rocky path ahead, public investment would help to stimulate the economy, provide jobs and homes and give a bedrock of stability to the house-building industry.

If not now, when?

(This blog first appeared on the Inside Housing website on the 4th August 2016)

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