The Housing White Paper: little more than a facade

The long-awaited Housing White Paper, which was published on Tuesday, gives itself a laudable aim: to “fix Britain’s broken housing market.” Unfortunately, despite an adequate analysis of at least some of the causes of the current crisis, and despite some worthwhile interventions, it ultimately fails to provide a substantial reality behind the facade of its expressed intentions. In particular, it fails to accept that private housebuilders can not solve the problem of high house prices, of which they, and richer, predominantly older, people are the principal beneficiaries; and it fails to address the problems suffered by those not fortunate enough to fall into that category.

What it gets right

Above all, the Housing White Paper (HWP) is welcome because it acknowledges that there is an issue at all. Politicians of all parties have shown a marked reluctance to consider the interests of anyone other than home-owners, or to consider the idea that rising house prices might not be a Good Thing for everyone.

The HWP also acknowledges that private renters have a raw deal, and proposes that letting agents’ fees should be abolished. (As we shall see, however, this is far too little, too late.)

It recognises that land-banking is a factor contributing towards the shortage of land, and proposes some welcome measures to address this: the reduction of planning permission from 3 to 2 years, the opening-up of Land Registry data, and requiring more information on build-out rates from developers.

It continues to acknowledge that plan-making is vital to housing delivery, and proposes a standard methodology for determining how many dwellings are needed (objectively assessed need or OAN; the current situation, in which LPAs are able to come up with their own formula, encourages them to massage their assessment of need down where sites are scarce, and up in certain situations where developer contributions are needed for the Chief Executive’s pet project). It proposes more money for planning departments and a fee for planning appeals.

A renewed focus on density is also welcomed: density standards have been absent from official guidance since 2012. Low-density development is not only problematic at times of housing need because fewer dwellings can be accommodated on any given site; it also makes provision of local shops, facilities and public transport services more difficult, increasing the need to travel by car.

A renewed emphasis on brownfield development is also welcomed, although with the caveat that developing brownfield land alone is very unlikely to supply all the dwellings the country needs. Likewise, the idea of bringing empty homes back into use is a good one – around 200,000 dwellings in England have been standing empty for over 6 months (Empty Homes Agency, 2017) but these dwellings tend not to be concentrated in the areas of highest demand (Overman, 2012).

What it gets wrong

The HWP is most at fault, I think, when it focuses on interventions that can not, by themselves, address the issue at stake and which could have perverse effects.

Firstly, it promises to bring in a “housing delivery test” under which, in local authorities with low levels of housing construction, a “presumption in favour of sustainable development” would apply*. Now, of course, when there is a greater demand than supply for any commodity, its price will tend to rise, and therefore, it is only right that LPAs should be compelled to demonstrate that they have allocated sufficient land for housing – as they have always had to do. But, at present, LPAs do not build houses themselves. Removing their right to refuse permission because of the failure of private-sector housebuilders to build on identified sites is, firstly, unfair, secondly, unlikely to affect the housebuilders themselves, and, thirdly, liable to lead to very poor developments in inappropriate locations.

Secondly, the HWP reiterates, without context, a determination to protect the Green Belt. This is perhaps intended to be reassuring to those fearing development in the open countryside, and it seems to have placated the CPRE. Actually, this is a cowardly move. Not all undeveloped land is Green Belt; the term refers only to areas designated as such in Local Plans, generally areas surrounding towns and cities. There are robust reasons for protecting Green Belt where appropriate. However, in situations where the demand for housing outstrips the availability of land, some Green Belt sites – close to existing facilities, services and transport links – are likely to be less environmentally damaging than sites further away from major towns. Rigidly protecting the Green Belt, but imposing a “presumption in favour” outside it seems likely to push development towards the open countryside.

Thirdly, the HWP implies that the cost of building is too high. To address this, it proposes a £2.3bn Housing Infrastructure Fund. But it simply doesn’t make sense to suggest, when their product is going for an astronomical cost, that developers can’t afford to build. In fact, their profits are multiplying, without a corresponding increase in dwellings. “End of year profits for the biggest five firms (after taxation, impairments and exceptional items are taken into account) increased from £372 million in 2010 to over £2 billion by 2015 – an increase of over 480 per cent.” (Archer and Cole, 2016.) Using public money to subsidise an industry that is already profiting handsomely from a skewed market seems immoral to me.

It also seems immoral to suggest, as the HWP does, that the recently-introduced National Space Standards should be relaxed, and that “design should not be used as a valid reason to object to development where it accords with clear design expectations set out in statutory plans.” New dwelling sizes are already much lower than in comparable European countries – 38% smaller than in Germany and 40% smaller than in the Netherlands (Hilber, 2015). This is another manifestation of the canard, in the face of developers’ increasing profits, that good housing is too expensive to build. It makes no sense to try to address a shortage of housing by permitting the construction of units that are not fit to live in.

Which brings us on to the HWP’s main failing: that, despite its rhetoric, it fails to take adequate action because it will not do anything to upset those who benefit the most from the current situation – that is, private-sector housebuilders, and existing property owners. Above all, it fails to acknowledge that the private sector can not and will not build enough dwellings to bring costs down.

Why not? Simply put, it has no reason to do so. Expensive houses are great for those who build and sell them, and developers act to keep prices high by controlling supply – to “phase” development so as not to “flood the market”.

Existing home-owners, meanwhile, with their obvious vested interest in keeping prices high, are a significant electoral force. They are older, on average, than renters, and this correlates with increased voting; renting correlates independently with reduced voting, because renters are more transient and therefore less likely to be on the electoral register. Furthermore, supporting those making money from property is entirely in accordance with the current government’s neoliberal agenda.

What it doesn’t do

So what does the HWP not do? Well, it visibly fails to react appropriately to the points it makes.

Firstly, the HWP acknowledges the contribution of housing associations but, instead of providing meaningful support to them, persists in reiterating the aim of making them sell off their dwellings – with, of course, taxpayer subsidy. Again, public money is to be used to transfer social goods into private hands. With regard to local councils, the HWP acknowledges that they could have a role in delivering housing, but fails to discuss why they do not – namely, that they haven’t got the money, they aren’t allowed to borrow it, and, if they could, any new dwellings would be vulnerable to forced sale at a discount. The HWP emphasises the need to build on surplus public land, and states, feebly, “We will work with local authorities to understand all the options for increasing the supply of affordable housing” but it fails to come up with the obvious solution – that local authorities be supported to develop their own land.

Secondly, although the HWP identifies that more affordable dwellings are needed, it fails to tighten requirements for genuinely affordable housing – choosing, rather, to weaken the definition of “affordable”. As well as social rented housing, the proposed new definition includes shared ownership, discounted private rented housing, and, above all, the products of the wretched “Starter Homes” scheme, in which dwellings costing a mere £450K (£250K outside London) are to be sold at a discount to those lucky enough to be able to get a mortgage to pay for it.

Thirdly, it fails to acknowledge that putting more money and power into private developers’ hands cannot help those in greatest need. So, the “Help to Buy” scheme – subsidising mortgages for new-build housing – is to be retained. It was suggested when it was introduced in 2013 that it would have an inflationary effect upon house prices, which have, indeed, risen. Furthermore, the households benefiting from it have a median income of over £10,000 higher than that of all households (Elledge, 2017, (2)). So, the scheme has benefited the relatively wealthy while potentially making it harder for everyone else.

Fourthly, though it mentions at the very start that an average house in the South-East “earns” more in equity than its occupants, it fails to address the issue of taxing unearned income from land and property. There is no discussion of extending capital gains tax to an individual’s residence, land value taxation, or even re-examining the relationship between house price and council tax.

Fifthly, though it promises mechanisms to bring about secure tenancies for private renters, the small print indicates that this will only apply to new dwellings specifically classified as “Build to Rent”. That is, it would apply to a tiny proportion of rented dwellings now and in the future. It certainly wouldn’t apply to the many former council dwellings that have been sold off in recent decades and which are now owned by private landlords, so that they are rented by lower-income people as they used to be, only with reduced security of tenure, potentially lower standards of maintenance, and higher rent.

We would expect a lack of action on poor conditions for private renters from a government being lobbied by housing developers. A dysfunctional private rented sector is good for housebuilders: people who are quite happy renting, as most do in Germany, don’t bother paying through the nose for a Barratt box.

The HWP could have been worse. It acknowledges the pertinent issues, and suggests at least some worthwhile measures to address them. It could have extended the Starter Homes programme, or reinstated Pay to Stay. It could have removed reasonable planning constraints. However, in total, it is too little, too late: a work, long in planning, which promised a palace and delivers a cottage.

*The word “sustainable” in this context is largely meaningless; this is to be discussed in a subsequent post.

Bibliography

Archer, T., and Cole, I., (2016) Profits before Volume? Major housebuilders and the crisis of housing supply. Centre for Regional Economic and Social Research, Sheffield Hallam University.

Bibby, J., (2017) Government promises more security for renters. Should we believe the hype? Accessed at: http://blog.shelter.org.uk/2017/02/government-promises-more-security-for-renters-should-we-believe-the-hype/

Council for the Protection of Rural England (2017). Housing White Paper: CPRE reaction. Accessed at: http://www.cpre.org.uk/media-centre/sound-bites/item/4511-housing-white-paper-cpre-reaction

Coyle, D., (2015) The private sector will never solve the UK’s housing crisis. Accessed at: https://www.ft.com/content/e1cdd8fb-a38c-3d2c-8d3b-094b86786960

Department for Communities and Local Government (2017). Fixing our broken housing market. HMSO, London.

Elledge, J., (2017). (1) The housing white paper is a damp squib – because the government is afraid of Middle England. Accessed at: http://www.newstatesman.com/2017/02/housing-white-paper-damp-squib-because-government-afraid-middle-england

Elledge, J., (2017). (2) Depressing housing chart of the week: Help To Buy meant help the rich. Accessed at: http://www.citymetric.com/politics/depressing-housing-chart-week-help-buy-meant-help-rich-2783

Elledge, J., (2016) Depressing housing chart of the week: oh, so that’s why millennials don’t vote. Accessed at: http://www.citymetric.com/politics/depressing-housing-chart-week-oh-so-thats-why-millennials-dont-vote-2464

Empty Homes Agency (2017). Website. Accessed at http://www.emptyhomes.com/research.html

Hilber, C., (2015). UK Housing and Planning Policies: the evidence from economic research. Centre for Economic Performance / London School of Economics.

Moore, R., (2016). Housing in crisis: council homes were the answer in 1950. They still are. Accessed at https://www.theguardian.com/cities/2016/apr/30/housing-crisis-council-homes-are-the-answer

Overman, H., (2012). The UK’s housing crises. In CentrePiece, Winter 2012. Centre for Economic Performance / London School of Economics.

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