This week’s report by the IPPR Commission on housing in London, chaired by Lord Bob Kerslake, is another worthy contribution to the development of a real strategy capable of tackling the capital’s housing crisis. After treading the familiar territory of terrifying descriptions of the scale and intensity of the crisis, it endorses the conclusion that the housing requirement in London is 50,000 extra homes a year to deal with household growth (a doubling of recent performance) and over 60,000 a year to also deal with the existing backlog.
Building more homes is therefore the only way to create the step-change in supply needed to improve affordability in the capital for the long term.
IPPR report
The report calls for a new deal for housing in London including
- Exempting London from the National Planning Policy Framework so the London Plan is paramount and the mayor more able to drive housebuilding
- Introducing fees for planning to cover the costs of ensuring that planning has the resources and expertise to do the job – developers would make more money from faster planning than the cost of the fees
- Allowing the mayor and boroughs to borrow more for infrastructure and housebuilding
- Devolving taxes including stamp duty, offset by a reduction in grants, to allow local policies to develop
- Allowing higher council tax to be charged on empty homes and second homes and on some undeveloped land
- Increasing Government grant to London by at least £350 million a year
- Fully funding from central budgets the cost of the housing association right to buy
- Moving towards greater flexibility in social housing rent setting
- Improving private renting through more flexible licensing schemes, a 10 year target that all property should meet decent homes standard, longer tenancies, and by relinking local housing allowance to local rent levels.
A number of challenges are set for the next mayor:
- To negotiate a new deal for London housing with the Government
- To identify all brownfield land opportunities
- To review greenbelt policy especially near transport and develop a new policy on ‘densification’ across London
- To create a dynamic ‘placemaking’ team in city hall encompassing all the skills
- To offer housing associations a deal to double output by 2020 in exchange for better access to public land
- To establish new and much simpler guidance on negotiating affordable housing with developers
- To establish a London lettings hub for private lettings
Despite its polite language, the Commission is not impressed by what the Government has done so far. Indeed, the report calls for an almost complete reversal of policy, especially on affordable homes:
Even in the best possible scenario, it will take time for housing supply to catch up fully with population growth. In the meantime, market prices will continue to rise – which, other things being equal, means a further squeeze on household finances, rising homelessness, and growing complaints from businesses that their workers cannot afford to live in London. We also risk continuing to see many private renters living in substandard conditions.
To mitigate these consequences, we need continued intervention by government – at national, city and borough level – to ensure that a significant proportion of housing is genuinely affordable and that the standard of rental property is improved.
IPPR report
So far so good. Lots of good ideas and positive proposals, things that would make a difference if they were ever done. But but but…. The report reminds me very strongly of other worthy reviews – the Lyons Housing Review and report done for the Labour Party before the Election and the report of the London Finance Commission chaired by Professor Tony Travers which reported in 2013. These also contained lots of good proposals – but many were total anathema to this Government.
The Kerslake report acknowledges that the Government may not come forward with the extra powers rapidly (if at all) so, as listed above, it has plenty of advice for the new London mayor. To be frank, its conclusions go with the grain of Sadiq Khan’s policy position, and are certainly much closer him than to the supine mouthpiece for Lynton Crosby that is Zac Goldsmith.
‘The London Housing Commission does not claim to have all of the answers, but it is clear that the status quo will not do. The housing crisis will not solve itself, and radical measures of the sort we outline in this report will go a long way to delivering the volume of quality, affordable homes that the capital desperately needs.’
Lord Bob Kerslake, chair
The report could have said more about the business model of the big developers – which puts profit maximisation above maximising building. They are still living with the backwash from the financial crisis but a clearer and more demanding strategy and a more robust but responsive approach could modify their practices, as was achieved by Ken Livingstone a decade ago. The Commission seem to be misled by their own description that ‘developers will only build as many homes as they think they can sell’. It should say ‘that they can sell at an acceptably high rate of profit’. Despite demand, developers are holding land back because scarcity benefits their bottom line. The Commission is right to mention the importance of cash flow to developers – an issue the new mayor should discuss with them – and it is also right to say that part of the solution would be to facilitate more mixed tenure developments that spread the sources of investment.
The Commission is hugely optimistic that the mayor and boroughs can negotiate a ‘new deal’ with Government of the type suggested or even that they can work closely together – Government is pulling in the opposite direction and is no longer interested in housing people on below average incomes. Their real attitudes were revealed by Nick Clegg recently when he claimed that Cameron and Osborne blocked plans to build more social housing during the colition because it would “produce more Labour voters“. The Party of Dame Shirley Porter is alive and well.
Even if the Government were to agree to some of the big changes (which seems unlikely) they would take years to come about. In addition to its long term ‘new deal’ for London, the Commission’s ‘Immediate Actions’ seems to lack urgency. The report has a good discussion about the vital role of Government grant in the London context but it does not make an increase in grant funding a headline recommendation. Finding new ways of borrowing to build is one thing, finding the subsidy required to keep rents down to affordable levels is another.
A short term increase in Government grant could make a huge difference and should be a central demand. The current London capital grants programme, largely squandered on high rent properties by the current mayor in a desperate attempt to keep the numbers up, is around £550 million a year. It is peanuts and, given the huge economic benefit that capital expenditure brings, could be increased with no economic detriment. The Commission suggest an extra £350m but in reality that is a drop in the bucket. Even a figure of £1 billion would be unnoticeable in national accounts terms and within the margin of error in next week’s budget. It would triple the London programme. If deployed strategically, providing grant to make schemes viable but relying on developers and housing associations and councils to do the heavy borrowing, a number of things could be achieved:
- First, rents in the current (unaffordable) ‘affordable rent’ programme could be dropped towards social rent levels, generating a permanent saving every year in housing benefit and making homes genuinely affordable.
- Secondly, extra grant could be put into schemes that are currently on the margins of viability, making it possible to negotiate a larger share of social rented homes.
- Thirdly, it could fund an emergency acquisition programme of existing homes to take more families out of temporary accommodation – again generating a large revenue saving.
- Fourthly, it could fund councils to proceed with schemes on their own land, especially those that are being mothballed due to the uncertainty caused by the Government’s imposed rent reduction and fears around the forced sale of valuable council stock.
An emergency programme using additional grant would also act as a statement of intent and would be the thin end of the wedge of the more strategic changes down the line. Given that the Government is currently stripping out even the (unaffordable) ‘affordable rent’ programme and getting rid of social rented housing, stuffing everything it can into new subsidies for home ownership, the impact of the report is likely to be minimal. The Government will not put more money into genuinely affordable rented homes. It is using planning to get more home ownership, it will not reverse that to get more social renting. It will not agree to devolve tax raising powers if the aim is to produce lots of extra social rented homes. The report is right to say:
Promoting homeownership, if it comes at the price of fewer affordable rented properties, will add to London’s housing challenges.
IPPR report
So another good read, another volume for the ‘London Housing’ bookshelf. But only a thumping victory for Sadiq Khan is likely to make it influential.