At the Conservative conference David Cameron gave great prominence to a scheme aimed at providing affordable starter homes, exclusively for first-time buyers under 40, as part of the strategy to increase home ownership across the country.
Cameron cannot deliver 200,000 new homes per year without social housing investment
The buyers will benefit from a 20% reduction on market value and the houses are to be built on brownfield land.
With a completely straight face, Cameron said we needed to celebrate this new initiative where these starter homes are set to cost no more than £250,000 outside of London and £450,000 within London.
Doesn’t that tell us nearly everything we need to know about the scale of our housing crisis in the UK? Starter homes at £450,000? He thinks that is affordable?
We now know that they won’t be new homes at all. Instead of the existing section 106 obligations on developers to build a percentage of houses for social rent they will now be able to build starter homes for sale instead.
In the 1950s and 1960s, the UK managed about 300,000 new build starts, in all sectors, each year. It slumped to less than 200,000 in 1980-81, as Thatcher cut council house building, and it never recovered.
A decade ago, the Barker Review said we needed to build about 250,000 homes every year to prevent house price inflation and an affordable homes shortage. So in 2007 the Brown government set a target for 240,000 homes to be built a year by 2016 – an increase from the record high of 219,000 in 2006-07.
After the global financial crisis, new starts slumped to a post-WW2 record low of 135,500 homes in 2012-13. This was after then-housing minister Grant Shapps told us: “Building more homes is the gold standard upon which we shall be judged.”
Owner-occupation is falling quickly, but being replaced by buy-to-let, fuelled by overseas finance and housing benefits.
House prices are 6.9 times average earnings; that’s below the 2007-08 peak of 8.1 times, but still higher than most competitor countries. Owner-occupiers have enjoyed low interest rates; this cannot continue.
Rents and housing benefit are still rising above general inflation levels. For overall economic purposes, as well as government expenditure and housing reasons, that has to be reversed.
Homelessness is rising rapidly. Families are being forced from their homes, away from family, friends, and schools, to towns where the rents are cheaper.
The government has now plucked a promise of 200,000 new home starts a year out of mid-air. Let’s be clear; there is no chance of this being achieved without a significant investment in social housing, which is essential. While we need to build more homes for owner occupation there is also an unanswerable case for investing in social housing. It will need capital subsidy to deliver but it will reduce the benefits bill over time. Ninety-five per cent of government housing subsidy goes into benefits, not development.
But the policy on starter homes , when taken together with the housing association right to buy funded by council house sales, and reduced rental income for all social landlords announced in the budget, will reduce the number of homes available at an affordable rent.
Even if the building programme can be greatly expanded, that in itself will not be enough to deal with absurdly high house prices fuelled by the high cost of land. While a long-term housebuilding programme must see building on brownfield as a priority, there will still be a need to build on some greenfields as well. We must therefore address the nonsense of farmers growing wheat today and becoming millionaires tomorrow as the land is zoned for housing.
Let’s return to the original principle that where the value of land increases as an act of public policy, it’s the public purse that should benefit. The 1947 Planning Act envisaged councils buying up land at existing use value and then benefiting from the uplift in value when sold on for housing. The landowner would receive the current use value plus a helpful top-up but not the windfall bonus of today’s system.
So far we have failed to deliver on this. I remember the bureaucratic labyrinth of the Community Land Act and the withdrawn planning gain supplement which lead to the community infrastructure levy (CIL). Anyway, CIL is really a tax on development rather than a recovery of windfall increases in land prices.
If there is a bigger challenge ahead than building sufficient homes, it’s ensuring a fair deal for taxpayers from the planning decisions which will make those homes a reality.
Clive Betts (Lab), chair, communities and local government committee