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Housing: schemes are not solutions

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It is beginning to look as though Ed Miliband made the right call in September when he arranged his tanks on the basis that the cost of living might be the key battleground for the next general election.

The first salvo was aimed at energy prices. David Cameron and Nick Clegg have been all over the place, each changing their response several times.

They have not been helped by the internal battle on climate change and renewable energy.

Incidentally, I expect many tons of steaming manure will soon be heaped on the heads of all those involved in the farce of the Green Deal.

Having ditched a successful energy conservation programme, the coalition has produced a botched scheme of gargantuan proportions.

The government had predicted that 10,000 homes would have had energy-saving improvements completed by the end of this year. To date just 57 households have had work carried out in the past eight months.

Ministers had set aside £125m of “cashback” to kickstart the deal, allowing households to claim money off the cost of energy efficiency measures. But 97% of the 5,733 payments have gone to households that have got a £310 cashback simply for replacing their boilers. What a rip-off.

But the biggest household cost is housing. I suspect this issue is rapidly going up the cost-of-living political agenda.

On average, 20% of household income is spent on housing. But, already, 1.3m households spend more than a third of their income and that number is rising as rents increase above general inflation and incomes fail to keep pace. By contrast, before 1940, on average, housing accounted for less than 10% of household income.

So, one might have thought that the government would have reflected this right across its agenda. It appears not.

In fact, it has downgraded its political leadership on housing. Having inherited a model with a housing minister with the right to attend Cabinet, the coalition first downgraded this to a more junior ministerial role in the Department for Communities & Local Government, and has now downgraded it to an undersecretary of state. This hardly seems to reflect an understanding of how crucial housing is to the country’s economic recovery.

As this government has achieved record lows in both housing starts and housing completions, it is worth remembering that its first, more powerful housing minister Grant Shapps told us: “Building more homes is the gold standard upon which we shall be judged.” No wonder he was moved.

Last year, the communities and local government select committee concluded that DCLG was not punching its weight on cross-cutting policies. We expected that on an issue as prominent as housing, it would have got its act together, particularly in regard to both risk and impact assessments of particular policy initiatives.

There is some relevant form, of course. The National Audit Office found a huge error in the New Homes Bonus impact assessment.

This has reduced the estimated number of new homes the bonus is suggested to lead to by 25%, or 32,000 homes over 10 years.

So, eyebrows were raised to some of the answers from permanent secretary Sir Bob Kerslake and other senior civil servants when questioned about more recent housing risk and impact assessments.

“What do you think about the scrutiny unit’s assessment that the government is relying on house prices of new-build properties included in the scheme rising by two-thirds over 25 years (2% per year) to cover its own borrowing costs?”

“I have not seen that particular report.”

Next, it took repeated questioning to uncover that, under the equity share element of the Help to Buy scheme, the latest internal impact assessment suggests that just 2,500 to 5,000 extra units will be produced annually, rather than the 25,000 continually publicised.

Then we tried to find out how many new homes would be built in the next 12 or 24 months as a result of the mortgage guarantee element of Help to Buy. After a lot of waffle about ‘promoting wider confidence across the housing market’ we discovered that the Treasury was responsible for assessing any impact and that there had been no discussions at all involving DCLG about either the estimate of how many more homes were to be built or the impact for the construction industry.

It suggests the government is putting billions of pounds behind guarantees with no real understanding of risks or impacts. It is less than surprising therefore that there is enormous criticism, across the spectrum, of a scheme whose major impact appears to be to inflate house prices.

Over the past 35 years, housing supply has fallen rapidly whenever the economy has shrunk or house prices have fallen, but supply has not increased during the boom years despite growing demand.

Sixty years ago, Harold Macmillan presided over a massive increase in council housing to address the postwar housing crisis. That looks a better bet in all respects than the policies currently being promoted.

Clive Betts (Lab), chair, communities and local government select committee

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