Busting the Myths: an alternative manifesto for housing

Posted: July 6, 2012 in Housing
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How can we build the affordable, secure housing we need? This is the question I was asked to address at Housing Justice’s national conference in Sheffield in June 2012. It is a topic directly linked to Housing Justice’s vision – that everyone should have a home that truly meets their needs; and to our mission – to encourage and enable churches and individual Christians to play their part in bringing that vision to reality. And it cuts to the heart of efforts to end homelessness – one of the prerequisites must be that there are homes for people to live in whatever their other needs for support, health care and employment.

I proceeded by demolishing four of the myths that seem to me to be barriers to England having an adequate supply of affordable, secure homes.

  • Myth 1: we don’t need to build more homes – we already have enough to go round

It’s true that there appear to be more existing homes in England than the number of homeless households.  In fact the number of empty homes alone is greater than the number of homeless households; there are about 50,000 households in temporary accommodation, plus about 500,000 hidden homeless people and 1,300 rough sleepers, as against 720,000 empty homes (279,000 empty for more than six months) and 245,384 second homes. However homes, like hospital beds and hotel rooms, require a certain level of vacancies in order for the system to flow smoothly. Some second homes are needed, for example, for people who work away from their family home during the week. It also doesn’t take great powers of observation or analytical skill to discover that the empty homes are not all in the right place, or the right size, or the right cost.

Meanwhile the number of households is increasing at the rate of about 250,000 per year while net housing supply grew by only 121,200 last year. This gap between the rate of household formation and the rate of house building has been happening every year for at least the last ten years and so there is a growing backlog. In addition house building has not recovered from the 2008 economic crisis with, for example,  only 118,000 completions in 2009 and 117,870 in 2011. On top of this UK domestic property has become a safe haven investment for the wealthy from troubled Eurozone economies like Greece and Spain, as well as for investors from countries like China, and for British people seeking a safer and higher return than they can find on the stock market or in a deposit account. These purchasers are keeping property prices high in London and the South East in particular. To add insult to injury, many of these investment properties are neither regularly occupied by their owners nor let out to tenants. Finally it is important to remember that houses, especially modern ones, do not last for ever and so there is always a replacement requirement.

These facts lie behind the calculation by IPPR (published in March 2011) that by 2025 we will have a shortfall of about 750,000 homes. The worst gap between demand and supply is, unsurprisingly, in London, the second worst in Yorks and Humber. The North West is the only region with something approaching equilibrium.

So we do need to build more homes.

  • Myth 2: Britain is full – there is no room for more houses

Land utilisation surveys have been carried out in England since the pioneering work of Dudley Stamp in the 1930s. At first they were done using Ordinance Survey maps. Today digital imaging and satellite technology mean that the surveys are very accurate and reveal the truth – that England is nowhere near as built up as you think it is. In their 2012 report, Arrested Development, the Centre for Cities use a great analogy. Imagine England to be a football pitch. If 10% of the land is built up this equates to the penalty area. That total includes gardens, roads, paths, railways, industry, shops and housing. In fact, housing accounts for just over 1% of the total land available. If we doubled the amount of land used for housing it would still be less than 2.5% of the total.

So there is plenty of space to build providing we develop sensitively and with relatively high density – this is not meant to be an encouragement of urban sprawl.

  • Myth 3: We can’t afford more social housing because the bill for housing support is too high and needs to be brought under control.

It is perfectly true that the cost of housing support is out of control. It is especially disturbing that even with the swingeing cuts being rolled out by the Government the bill for Local Housing Allowance/Housing Benefit is till rising.

But let’s roll back a bit. Providing social housing is a valid policy response to market failure. It is also true to say that the market has not (arguably has never) produced adequate housing for the whole population. In fact social housing was first created as a response to this problem of housing need soon after the dissolution of the monasteries in Tudor England. There are currently two visible aspects of housing market failure in England. The first is a shortage of housing (see Myth 1 above). The second is the unaffordability of housing for many people (this applies to both purchase prices and rents). Previously the provision of social housing was the main response to this aspect of market failure. Today Local Housing Allowance (like its predecessor, Housing Benefit) is the chief policy remedy for this aspect of market failure. Thus the housing support (Local Housing Allowance/Housing Benefit) bill, even after cuts have begun to bite, is around £23bn a year, while public spending on new social house building is only £4.5bn a year.

What would be the outcome if some of the £23bn was diverted into building new social housing? Investment in social house building would create jobs (in building and related trades) and the housing support bill would reduce each time someone transferred from Houisng Benefit in the private rented sector to a cheaper social or affordable tenancy (minimum saving of 20% for each household where affordable rents are 80% of equivalent market rents; much greater savings where the new tenancy is at the target rent or where affordable rent has been set at a lower level as in London for example).

What could be the mechanism to reduce the housing support bill without making even harsher cuts in Housing Benefit? One possibility is to give Local Authorities the power to introduce local fair rent regulations for a limited period (perhaps 3 or 5 years), with any savings being spent on new housing in that area. Another is the system of affordable housing grants suggested in the recent IPPR report, Together at home: A new strategy for housing.

Whatever the mechanism, more social housing would both save money and boost the economy.

  • Myth 4: Renting is always inferior to buying.

The chief positives about home ownership are stability and the likelihood of asset growth. How can renting compete with this?

Greater stability could be introduced into the private rented sector through increased security of tenure, perhaps following the example of the private rental situation in Germany or Holland. If tenants had five year rather than six month tenancies as standard and had greater freedom to maintain and decorate their homes there would inevitably be a much greater sense of stability, and commitment to the local community, than at present.

The cost of renting long term relative to buying should always be lower; reflecting the fact that tenants have less security of tenure and no access to the asset in the property they occupy. Currently renting in the private sector is often more expensive than the mortgage payment on an equivalent property. The introduction of fair rent regulation for tenancies longer than six months could address this so that renting is not more expensive than buying. This would increase the ability of tenants to save (whether towards the purchase of a house or through investment in other assets).

The question of asset accumulation can be addressed through the promotion of new or existing asset classes. One option is the development of vehicles to encourage more widespread investment in industry and commerce. This would have the added benefit of solving the problem that so much of our savings and investment are currently tied up in our homes that there is a drag on the UK economy (the last thing we need at the moment). Alternatively new and improved shared and mutual and cooperative property ownership schemes could allow tenants to grow community assets linked to their homes and communities.

Finally a better quality, more attractive rental market would help to stabilise house prices, reducing the compulsion to own a home as an investment asset.

With all this in place renting need not be inferior to buying.

So how can we build the affordable, secure housing we need?

First, Housing Justice members, churches, and individual Christians should all shout the truth from the rooftops:

    • We don’t have enough homes to go round and the situation is deteriorating
    • There is enough space in England to build the homes we need without concreting over the countryside
    • It will be more cost effective and boost the economy if we build more social housing
    • Renting can be an attractive option providing both security and affordability – homes are not the only available investment assets

Second, all of us need to promote appropriate development in our area. We can do this by finding out what sort of homes our community needs (the Local Authority’s Houisng Strategy is a good place to start) and by taking responsibility for lobbying to make sure that they are built – there should be no more churches leading the nimby charge against the development of affordable housing.

Third, we need to lobby (nationally and locally) for fair rents, for investment in social housing and for improved security of tenure and conditions for private renters. The Government need to know that public opinion supports the building of more affordable housing, and they won’t know if we don’t tell them.

Finally, we need to think collectively about how to develop new asset classes to break the link between investment and housing and to turn the focus back to creating the homes we need. Churches have been prominent in the Credit Union movement; what role could churches play in developing community assets for tenants?

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