A reassessment of priorities could provide the sort of sums needed for a real increase in social rented output, writes John Perry.
Immediate reaction to the prime minister’s announcements on housing in her conference speech last month focussed on the contrast between the promise of £2bn over five years for a ‘new generation of council houses’ and the more generous £10bn added to the Help to Buy pot.
But the bigger picture is that, despite the new money for rented homes, government support for affordable housing remains dwarfed by its investment in the private market – and the balance is actually slightly worse than it was in the run up to that Conservative Party conference.
For some years now it has been impossible to find in one official document what the government is spending on financial support for housing, especially via its various interventions in the private market which might take the form of grants, loans or guarantees.
Aiming to fill this gap, the UK Housing Review has for three years been compiling the missing data, and as far as possible corroborating it with Department for Communities and Local Government officials.
Before the conference season the annual UK Housing Review Briefing Paper reassessed the total of government intervention in housing over the period to 2020/21 as £41bn, of which 79 per cent was directed at the private market and the remainder at affordable housing, principally the Homes and Communities Agency and Greater London Authority programmes.
The conference announcement, assuming the detail is confirmed in next week’s Budget, appears to raise the total to £53bn with the split in favour of the private market now at 80 per cent compared with 20 per cent for affordable homes.
’Rag bag of programmes’
The problem about this private market support is only partly that it is very difficult to track how much is going where.
The bigger problem is that it is a rag bag of programmes in which some individual funding streams have clear objectives but others seem to be random initiatives which may well overlap with each other.
For example, while Help to Buy equity loans have a fixed budget, there seems to be no plan for weaning the market off them at some stage, even though (as loans) they should eventually be recoverable.
The fact that they are in great demand is seen as sufficient justification for throwing in an extra £10bn, without fresh questions being asked as to whether those getting the loans would eventually buy a home anyway, and whether they are simply pushing up house prices.
Other initiatives, notably the Help to Buy and Lifetime ISAs, in which savers get a government bonus to help with buying a home, are open-ended cash commitments.
The Office for Budget Responsibility forecasts that these will soon total over £2bn per year, and will continue indefinitely. In other words, on this programme alone the government will soon spend each year more than the total extra sum it has just allocated for affordable housing.
We know, of course, that this is a legacy of George Osborne’s determination to revive the private market. The problem is not only the proliferation of schemes but the fact that there is only minimal monitoring of their outcomes.
Of course we know that Help to Buy has so far helped nearly 100,000 first-time buyers, but we know nothing from official sources about its value for money compared with (say) the ISAs, the Help to Buy mortgage guarantees, or the various other schemes.
The official evaluation in 2015 suggested that it had boosted the market, but that half those helped could have managed without it. A typical household buying with Help to Buy has an annual income of £44,000, well above the average.
The question of whether this is still the best use of government money remains unasked, even while even more of that money is poured into it.
There are many lessons that can be drawn from this but two will suffice.
First, there is an urgent need for the government to take a strategic view of its interventions in the housing market, after several years of what are, in effect, a range of different live experiments.
Is this really the best way to spend over £50bn?
Second, those who are pessimistic about a future government putting sufficient money into genuinely affordable housing can draw some comfort from recent developments.
Not only is building a new generation of council houses now a cross-party commitment, but there is plenty of money in the kitty.
A reassessment of priorities could potentially provide the sort of sums needed for a real increase in social rented output by a government that genuinely recognises its importance.
Today (16 November 2017) Theresa May pledged to take ‘personal charge’ of plans to fix our broken housing market, while Communities Secretary Sajid Javid said: “In next week’s Budget you’ll see just how hard we’re willing to fight to get Britain building.”
We will have to wait and see what the Chancellor has up his sleeve.
John Perry is a policy adviser at the Chartered Institute of Housing