Steve Hilditch, Author at Red Brick

Occasionally an article comes along that encapsulates what you’re thinking. In the January 11 Economist there was an article entitled ‘The Housing Ladder, 1950-2005’ (https://econ.st/48Svcls note paywall) which came close to summing up my gloom about housing policy over recent decades. Its key theme is that ‘a redundant metaphor (the housing ladder) is blinding policymakers’.

The ‘housing ladder’ has been with us as an idea for a long time, and I remember being subject to endless images of ladders when I was on the board of a major housing association, being used to justify turning away from the production of social rent homes. It was linked closely to the other deadly notion of aspiration, which was of course defined in a way that suited the new policy.

I used to argue a) that the first step on the real housing ladder is a decent affordable home in any tenure, noting that the ladder might only have one rung, and that b) being brought up in an aspirational working-class family meant that my parents wanted their children to stay at school and have better chances in life, their own wishes to own a home were real but secondary. I always hoped that the housing ladder as a concept would wither away and stop being so damaging to the emergence of a comprehensive cross-tenure housing policy, but it looks once again that it will be the main housing topic when the general election comes.

Of course, calling out the housing ladder as a myth is likely to get you classified as a wild-eyed loon – it is so firmly in the centre of housing’s Overton window (ie the range of acceptable opinion) and is used by media and politicians of all shades all the time – so it’s great to see a serious mag taking the idea to task.

‘The housing ladder’ is the notion that aspiring people will naturally progress (through thrift and hard work – and by avoiding smashed avocado on toast) from buying a modest flat (or even a share of one) at a young-ish age then trading up over the years as incomes grow and housing equity increases.

Graphic: The Economist, based on ONS data.

The problem is the facts no longer fit the fable, as the article shows. Home ownership peaked 20 years ago at 70% and has since fallen despite vast policy interventions. The ratio of house prices to earnings was around four from 1950s-1990s and is now eight. Home ownership before 30 is now around a third when it used to be more than a half and is increasingly dependent on inherited wealth or family support. Those who make it onto the ladder are much less likely to trade up. The flood of easy mortgage finance across the world following financial deregulation is now a thing of the past, after the USA mortgage market triggered the global financial collapse, and homeowners’ vulnerability to higher interest rates is now plain to see. The Tories, at huge cost, have tried to reinvigorate home ownership through demand subsidies, but the 1990s paradigm isn’t returning any time soon.

The Economist, data from the Resolution Foundation.

The article places the right to buy of council homes in this context, noting that this ‘one time trick’ transferred a tenth of the housing stock from the state to private ownership in a little over a decade, costing billions but giving a major boost to the appearance of success of home ownership. It also comments that even the successful implementation of the target to build 300,000 homes a year for a decade would only reduce the house-price to earnings ratio to 7. It argues that the ageing population means that homes recycle back onto the market much more slowly than they did.

Normally if I make this kind of argument I get challenged with the sneer: ‘I bet you are a homeowner’. Indeed, I am, and I’m a classic housing ladder person although without much trading up – starting in a council house, fortunate to buy a share of a £15,000 London house in a poor area in the 1970s because it was cheaper than private renting, just when Westminster Council allowed joint mortgages between unrelated people for the first time. All I had to do was sit and watch the value rise. But the responsibility of the lucky generation – mine – is to think about what policies are suitable for the less lucky generations that have followed.

So, as the article states, the private rented sector is no longer ‘a waiting room’ prior to home ownership. It is a destination. Social housing has been shrunk massively and deliberately and can no longer meet more than a small share of need. Those who get into home ownership are taking on mortgages well into normal retirement age. The housing costs of older people – home owners and private renters alike – are escalating rapidly, pensioner poverty will rise, and the state will catch much of the burden.

“The housing ladder may have died two decades ago but its allure as a metaphor remains. That continues to blind Britain’s politicians and voters to the reality of the property market. Rather than harking back to a bygone age, Britain’s politicians need to accept that there is more to housing than home ownership.”

The Economist.

The case I’ve always made is for a comprehensive national housing strategy that covers all tenures, building on their strengths and tackling their weaknesses. It will take a generation to turn things around and to stop housing costs crippling most of our households. In case you doubt it, I support home ownership as the preference and the best solution for many households. It will rise again in a sustainable way when peoples’ incomes rise in relation to property prices, so we should build more, subsidising supply where it is sensible but not wasting cash on demand subsidies that push prices up. We must tackle land costs and developers’ profit-first models. We must build much more social housing for those that need decent homes at lower rents, a hugely successful model that requires investment but not ongoing subsidy. And we must professionalise the private rented sector, the last great unmodernised industry, defining its role more clearly as home ownership and social rented gradually climb back, as surely they will.

See ‘The Housing Ladder, 1950-2005’, The Economist Jan 11 2024. Online https://www.economist.com/britain/2024/01/11/the-housing-ladder-1950-2005 (note paywall). No byline.

Steve Hilditch was a founder member of LHG when it formed 42 years ago, and edited Red Brick blog for 10 years, publishing a compendium book of 100 posts in 2020. He has worked as a housing professional and consultant, advising the last Labour Government, various Select Committees and many Labour Councils on housing matters. He recently carried out a detailed housing review for the new Labour Westminster Council.

The ‘Final Policy Documents’ from Labour’s National Policy Forum for Labour Conference include the core housing policies from which Labour will draw its Manifesto for next year’s general election. It is therefore probably the most important statement since the 2019 Manifesto and the Housing Green Paper ‘Housing for the many’ produced by John Healey in 2018.

It is right that our national housing policy should be comprehensive, dealing with all tenures and tackling issues that affect people across the range of incomes and stages of life. So, I welcome the fact that the document looks across the housing landscape. However, I also remain convinced that the big-ticket item in housing is how to provide many more homes for social rent, and the document is not impressive on that front.

The document addresses access to home ownership and proposes a mortgage deposit guarantee scheme for first-time buyers, a good proposal that is long overdue after years of inflationary and hugely expensive Tory demand subsidies. There are good proposals to reform stamp duty and to back schemes like ‘first dibs for local people’ on new developments (first pioneered by Islington).

I also fully support the emphasis given to reforming the feudal leasehold tenure – about which Dermot McKibbin has written persuasively for Red Brick. The document repeats the target of 70% home ownership, with no timescale, but not the previous commitment to restore social housing as the second biggest tenure. The latter was a statement of intended direction, and its disappearance is a big concern.

The proposed reforms to planning, flexibility around the green belt, scrapping the infrastructure levy, and the ‘unleashing’ of ‘patient capital’ into housebuilding, and higher disability standards, are all outlined, although the devil will be in the detail of each of these and the word ‘reform’ is used too often without saying what and how. Planning needs to stop being so reactive and developer-led so I hope it is true that we will ‘pioneer new models of strategic development’ – but we need meat on the bones.

I like the proposed reform to compulsory purchase orders and there is a hint of awareness of the underlying problems caused by the land market and developer profits, but overall the package of land-related reforms seems weaker than the 2015/2017/2019 Manifestoes. As there is little discussion of the public investment needed to purchase land and build infrastructure, it is not clear how the package will transform the planning process in practice to secure the claimed major uplift in housebuilding. In an era of Metro Mayors and at a time when councils are itching to build themselves, I am not convinced by the idea of new development corporations. No-one wants to wait for new administrative structures to be established.

Following the Tories’ huge cuts to social housing grant, planning gain (the mechanism of s.106 agreements) has produced half of all affordable housing. More could be achieved but maximising affordable supply – especially achieving social rent rather than sham affordable tenures – through planning rather than accepting what is offered might also require additional subsidy. One key change not addressed is to end the abuse of the specious ‘viability test’ through which developers pay too much for land and understate their likely profit to escape their responsibilities to the community by arguing that affordable homes are not viable in the resulting development.

I like the promise raised by the Warm Homes Plan – which will ‘upgrade all the homes that need it’. It’s a critical issue on the path to net zero but, as elsewhere in the document, additional spending is implied without being it being clear where the funding will come from. Homeowners and landlords are unlikely to put up the money without a lot of central government help, and it would take up the bulk of the green investment budget to upgrade all homes. There is a commitment to ‘improve the quality and safety of existing social homes’ but we need clearer guarantees in the post-Grenfell era and following the spike in damp/mould problems in the stock.

Any comprehensive strategy must address the private rented sector. Here the document has good ambitions and quite strong proposals – a Renters Charter, ending no fault evictions, a binding decent homes standard and action against poor landlords, banning discrimination against those on benefits and a national landlord register. My first worry is that there is no assessment of what will happen to the market if all these changes are made: we need to understand what the outcome might be and to plan the further interventions that might be needed. Secondly, all these changes, excellent in themselves, require local authority intervention and enforcement, and on a large scale. It will not happen without the resources – in the form of tenancy relations officers and environmental health officers especially – to implement it, and there is no mention of resources. And thirdly, nothing is said about rent levels or about the iniquitous impact of the Local Housing Allowance and total benefit cap levels: none of the proposals will meet the document’s claim that it will make private renting more affordable.

So, what about the delivery of homes directly to people in housing need, the 100,000+ households in temporary accommodation and the millions on waiting lists or stuck in the misery of the private rented sector who need a secure genuinely affordable home? Except for those who retain a quaint belief in trickle down – ie that the poor will eventually benefit from building market homes – most people understand that only social rent meets these needs. Yet this is the tenure that is addressed least in the document – and this is its greatest weakness.

It starts ok: ‘Labour will also put genuinely affordable housing, and in particular social housing, at the heart of our plan to increase housing supply.’

But what are the specifics? Let us remember that we were committed to gearing up to building 150,000 additional social rent homes a year, including 100,000 new council homes. The commonly accepted minimum requirement is for 90,000 social rent homes a year. Gearing up to any of these figures would be a challenge over a Parliament and very substantial increases in grant and local authority/housing association prudential borrowing would be required. We know that councils have been itching to build many more homes, it is only central government and funding that has held them back.

Making the case for housing investment is a constructive challenge to Labour’s economic as well as housing policy. There have been many studies over the years which consistently demonstrate the positive economic impact of housing investment, including by the SHOUT campaign, all of the housing organisations, and most economic researchers. New social rented housing should never be considered as simply a cost, it also generates an income stream for ever, reduces the cost of benefits, and creates real productive growth.

Regrettably, the document has no targets for affordable or social rented housing. Its key proposal is that Labour will ‘Reprioritise government grant by reforming the Affordable Homes Programme’. The current AHP runs from 2021-2026 and by late 2024 it will be very largely committed. Even then, extra subsidy (grant) would be needed to shift the very final stages of the programme from, for example, ‘affordable rent’ to ‘social rent’ homes – but there is no promise of the extra spending needed to go with the idea.

The ‘reprioritisation’ commitment would have more credibility if it targeted the totality of housing expenditure programmes rather than just the AHP, because some remaining housing demand subsidies could be repurposed.

And what about the years beyond 2026 – the last 3 years of a Labour Government? On current Tory spending plans, capital spending on housing falls off another cliff at that point. With no new AHP announced for 2026 onwards, the UK Housing Review reports that predicted spend on affordable homes will fall from £2233m in 2025/26 to £529m in 2026/27. If Labour sticks to Tory plans there will few affordable homes of any kind. To avoid huge further cuts and to maintain a programme – even at the current inadequate size – Labour must commit to additional spending on housing over and above current Tory plans.

Although reforms to restrict the right to buy are proposed, the policy will continue in some form. Adding in demolitions, losses will continue but at a reduced level. There is a hoped-for increase in social rent from planning but an inevitable reduction in output of new homes from the AHP after 2026. On balance it seems unlikely that the document’s proposals will lead to a net increase in the social housing stock until well into the Labour government, and possibly not at all. This is unconscionable.

Even if we provide the additional spending needed for a new AHP the homes will take some years to produce. We face a housing emergency where we are currently unable to meet the need for temporary accommodation let alone the increasingly urgent need for permanent homes. With 130,000 children living in temporary accommodation, we know the costs of bad housing and homelessness are huge in health, education, well-being, and life chances. The only effective short-term response to the housing emergency will be a major programme of acquisitions, bringing homes into the social rented stock for early use.

One final gripe. The document has only a few words on homelessness – we will have ‘a workable strategy’ which will ‘transform lives’. But it appears to be only about one aspect of homelessness – rough sleeping – and is platitudinous. It is miles away from what is needed if a new Labour government is genuinely to tackle homelessness.

The NPF document’s first words in the housing section – ‘Housing is a human right’ – should be at the core of Labour’s policy making, but there is no commitment to put the human right into law. As they stand, the policies set out will not take us much nearer to achieving that aim.

There are some good ideas and proposals, but the document is seriously deficient in failing to identify serious targets, means of delivery and, above all, resources. It is particularly weak in failing to adopt a target for additional social rented homes or even a sense of direction or some hope. There is a serious risk that, by the end of Labour’s first term, trends that have become entrenched under the Tories – rising homelessness, increasing housing need, and growing unaffordability – will not have been reversed.

Housing investment contributes positively to all Labour’s Five Missions. It secures growth; it makes a major contribution to achieving net zero; it promotes good health and well-being; it builds safe communities; and it breaks down barriers to opportunity. Housing should be Labour’s Sixth Mission.

Steve Hilditch was a founder member of LHG when it formed 42 years ago. He worked as a housing professional and consultant and advised the last Labour Government, various Select Committees and many Labour Councils on housing matters. He recently carried out a detailed housing review for the new Labour Westminster Council. He edited Red Brick blog for 10 years, publishing a compendium book of 100 posts in 2020.