'Encouraging messages, now Labour must work on the detail.'
Senior policy adviser John Perry takes an in-depth look at Labour's housing green paper.
Jeremy Corbyn launched Labour’s affordable housing green paper last Thursday, promising one million new homes over ten years of which a significant number would be for social rent. The ambition was clear: funding will be restored to the level when Labour last held office, and councils will once again become “major deliverers” of social housing. This would contrast with recent Conservative governments which Corbyn said “have made it their mission to eliminate it”. The only time England has built enough housing, he added, was when councils have stepped in to do it.
Shadow housing minister John Healey was at pains to point out that housing associations would also retain a big role. And it’s clear they will need to, as one of the unanswered questions is how councils will build up the development capacity that has been depleted over the last eight years. As one participant said in discussion afterwards, the skills no longer exist in many local authorities and if many start new build programmes for the first time in years, they will all be competing for the same scarce skills such as architects and quantity surveyors.
A related issue is whether any new programme would embrace the local housing companies now operating or being set up in many council areas. These mainly focus on market housing, and few are building for social rent. If councils have new opportunities to build for letting at low rents, many will want to do so, but will their best building sites have already been committed to housing for sale or rent at market levels?
Rents policy is also a crucial ingredient. Many will be delighted by Labour’s commitment to end so-called affordable rents, but their formula for deciding social rent levels needs to ensure they stay aligned with local incomes and that policy restores the principle of comparable rents for comparable social dwellings in each local area. It should also keep rent levels in line with wages rather than allowing a growing gap to develop, as has happened in recent years. Social housing grant must be high enough to take some of the pressure off rents as social landlords take on higher debt levels as their investment grows.
Another question mark over income is to what extent Labour will reform the benefit system to bring it closer into alignment with housing policy. Of course, abolishing the bedroom tax will help, but tenants’ ability to pay their rent if they are on low incomes is now under assault from the whole range of welfare reforms, of which bedroom tax is only one.
Lower rents for existing stock and for new build reduce dependency on the benefits system. But savings over many years are difficult to offset against the cost of one-off capital grants. One intriguing idea which Labour has picked up, and whose usefulness in Wales has been regularly recorded in the UK Housing Review, is replacing grant (in part or whole) with a ‘housing finance grant’, a subsidy to support annual borrowing costs over 30 years.
Finally, while it is apparent that the shadow chancellor is willing to commit resources to building new homes because he believes they will boost the economy and will be partially recovered through the extra tax they generate, this is only the biggest of several spending commitments that Labour is making, including for example tackling the rough sleeping crisis and ending the right to buy and the receipts it produces.
There is bound to be concern in the markets that any Labour government aims to borrow more, even if it’s for investment and if borrowing costs are still historically low.
Labour promises to look at the borrowing rules relating to council housing investment: if an incoming Labour government adopted new rules they could now argue that they were simply making the same, sensible kind of change as the present government’s recent alteration in the classification of housing association borrowing.
Since April 2012 council housing has, like housing associations, been self-financing, except for any government grant for new build. And like housing associations, there is no good reason why its investment should count as government debt. A rule change would be a radical – but long-overdue – reform which could help ensure that councils keep on investing in new social housing in future years.
John Perry is senior policy adviser at CIH.