Autumn statement won’t cure the housing crisis
Today’s autumn statement promises to “take further action to increase housing supply and support home ownership.” The snag is that even if what is promised is fully delivered it will be nowhere near enough to cure the UK’s entrenched housing crisis.
Allowing local authorities to borrow more to build housing is always welcome in principle, but council finances are too squeezed to allow them to do much, and a further push on Right to Buy simply diminishes the social housing stock. The other proposals are to give grants to private builders to get construction started again on sites where the developers do not feel that they will make enough financial returns. This might help, but it probably won’t be a very good use of public money. We would prefer to see this cash spent directly on social housing, which is where the crisis cuts deepest.
Looking in more detail at what the government has announced:
1: The government says that it will create a £1 billion, 6-year programme to fund infrastructure and unlock new housing sites.The programme will begin in 2014-15, with investment decisions on 9 specific sites, said to be capable of unlocking around 27,000 houses.
Before the credit crunch, builders used to make a contribution to this infrastructure through the process of planning gain. In the new vision, the government will subsidise private building by paying for infrastructure.
There is an obvious danger that this will turn out to be a bad deal for Britain. As the market recovers, and house prices start to rise, builders want to build anyway.
2: The government announced its intention to raise local authority housing revenue account borrowing limits by £150 million in each of the first two years after the 2015 election. If this is taken up, then there would also be some support from the Local Growth Fund for authorities entering into a Local Employment Partnership.
One obvious criticism is that it will be nowhere near enough, given that local authority waiting lists stand at record levels. In addition, willingness to borrow may be dependant on local authorities feeling a bit better about their finances by 2015/2016, given that they are still cutting services and that the government has told them that they must freeze council taxes next year.
3: A further turn of the council housing “Right to Buy” screw is also threatened. The autumn statement says that the Government’s reforms have delivered new affordable housing by replacing council house sales on a 1 for 1 basis.
Most commentators believe that the true figure has been nearer the one hinted at by the numbers in the Regulatory Impact Assessment accompanying the government’s 2011 consultation on” reinvigorating” Right to Buy.
This pointed to a much less impressive payback of 1 new social home built for every 6 sold. No wonder the waiting lists are getting longer.