The five giants: Squalor

Vidhya Alakeson

70 years on from Beveridge, housing is once again in crisis. We are just not building enough homes of any kind. Inadequate supply is keeping prices high even during the recent downturn, creating a generational divide between older households who own their homes outright and younger households whose only option is relatively insecure accommodation in the private rented sector.

For the very poorest, the situation is one of overcrowding, temporary accommodation and rising homelessness. All of this comes at a high price to government, which spent £24.4bn in 2011-12 to subsidise unaffordable rents through housing benefit.

The challenge of addressing the housing crisis is perhaps greater than the one Britain faced 70 years ago. Then, a major programme of council house building created a new supply of affordable homes. Today, with the public sector deficit continuing to grow, it is not a simple matter of launching a major government building programme. More creative solutions are needed in three areas.

First, we need to change the incentives for the house building industry to make it more profitable to build houses at scale, rather than to constrain supply and hold onto land that could be developed so that its value rises. It is unacceptable that the UK’s large house builders are posting huge profits at a time when the country has a serious housing shortage.

Second, national and local governments need to work closely with institutional investors to get private capital flowing into the rented sector. Large housing associations have already attracted billions in bond finance into the development of affordable homes. Local authorities such as Manchester city council and Barking and Dagenham are increasing the supply of market rent and affordable rent homes through intuitional investment. Other government entities need to follow suit and make this a priority.

Third, there is a strong case for government investment to stimulate the growth of part-ownership. Shared equity and shared ownership products offer people the chance to build assets and have a stable home, whether or not they eventually become fuller owners. In many cases there would be no long-term cost to government because the initial investment would be recouped through growth in capital values.

There is no quick fix for housing. The scale of supply we need cannot be delivered in a couple of years and the wider economic impacts of a dramatic fall in house prices would be severe. But addressing today’s housing crisis on these three fronts would pay dividends over the next 70 years.

1 comment:

  1. David Beere

    Housing: a modest proposal
    It was a councillor – Labour obviously – who first alerted me to the latest in a long line of weasel words in politics- “affordable”, as it applies to housing.
    Of late I have thought about the word quite bit when driving or walking around the ward. It is obvious that quite a lot of houses are deteriorating in condition.
    Although the Conservatives, those great defenders of the legendary free market, would have us believe that the market always delivers, lots of people now know otherwise from experience. It is a grotesque fact that the percentage of people in private rented housing has risen from 8 to 16 per cent over the last 17 years, mainly because of the profligate sale of council house stock over the last thirty years but also because far fewer people can afford to buy at the price of homes nowadays.
    Those that have benefitted from this change are those who have had the money or the borrowing power to buy property to rent out. Because people who would have previously been in council homes are now obliged to live in private rented accommodation this has provided a ready market for landlords able to charge more or less what they want – particularly given the fact that housing benefit has subsidised the rental market. The Coalition government is now about to reduce payments for housing benefit by capping what tenants can get, rather than by controlling rents. This will happen at a dreadful social cost. But the Conservatives and Liberal Democrats are determined to cut benefit payments, rather than control rents.
    Younger Fabian members may not realise things have not always been this way.
    I can remember that Friday October morning in 1964 biking to school past the Labour Committee rooms when the country was waking up to the realisation that 13 years of Tory misrule were coming to an end. In 1964 Labour successfully campaigned to stop the abolition of Rent controls started by the Tories in 1957.
    We all know that Austerity is Bunk , that we won’t make society and the economy richer and better by making the least well off poorer. Millions are suffering from pay cuts and pay freezes, including millions in the public sector, and millions of young people everywhere. Mr Cameron’s totally cynical and inaccurate “we’re all in it together” should come back to haunt him at the next General Election.
    Surely Labour could be campaigning, right now, for controls that would freeze rents in the private sector ? If earned income from salaries and wages is being frozen, why can’t unearned income from rents be as well? A very modest proposal indeed. And perhaps we could then start thinking about controls on rents, and real security of tenure for families, in the future.
    The right wing are always complaining about costs in the public sector. Freezing rents would cost the exchequer nothing and help win many marginal seats.

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There are no quick fixes when it comes to housing but the government can do more to support those in need of affordable accommodation, says Vidhya Alakeson