Author: Tony Clements

I’ve always thought that housing never gets as much attention as an element of economic policy as it should. It gets plenty of coverage as part of social policy, but that reflects the undue emphasis on social housing.
I’m not an economist and so hardly the perfect advocate for this kind of approach, but here’s a bash at some things I think should be covered in a Labour economics of housing:
1)      Unbalanced market as a risk to the wider economy
This is in essence, the lesson of the credit crunch. When people are dependent on the value of their home for their savings, their pension and the vast bulk of their wealth, then falls in house price fundamentally undermine people’s economic security. More than that, it poses a fundamental risk to the whole economy: when prices fall, people feel quickly poorer, begin to worry about their future, stop spending and suck demand out of the economy. Such crises of consumer confidence put a lot of firms out of business.
2)       Lack of labour mobility.
The coalition have gone on a lot about the lack of mobility in social housing, but overall we have a housing system in which it is difficult to move for the majority of people. It’s not a quick and easy task to move if you own your home, especially when it’s an investment decision as well as a location decision. That doesn’t make for a flexible and mobile labour market when people can easily move to take up jobs, confident that they can easily find secure and affordable housing.  
3)      Employment in housing and construction
As I’ve covered in previous posts, during the recession the Labour government invested heavily in housing to keep firms in business and maintain employment. Although construction and residential construction is not a large sector of the economy, it is labour intensive and these aren’t jobs that can be moved off-shore to developing countries.

Regular readers will have noted that we think that Clegg, Cameron and Shapps’ denials on housing benefits changes are rubbish.  Despite their claims, the changes will force lower-income people to move and make some areas ‘no go’ for poorer families. They will fatally undermine London’s mixed communities and force more people on lower incomes into specific neighbourhoods and areas.
This is inconsistent with the Tories professed desire to tackle ‘sink estates’ and concentrations of poverty in social housing.
Shelter have published a map of which areas of London will be affordable after the HB changes and how they shrink over time. I haven’t looked at the sources, but it’s further support for those of us worried about deprivation becoming ever more concentrated in specific areas – exacerbating the disadvantages of worklessness, low aspiration, poorer educational attainment etc.

Curious that Grant Shapps and Eric Pickles aren’t the only ministers involved in developing housing policy.
Cabinet Office Minister and David Cameron’s policy fixer, Oliver Letwin is also running a review into housing and particularly private housing delivery. Building.co.uk has the story here.  
It seems like the review is very wide-ranging, if it is taking seriously issues like land value tax. Though I do wonder how far they will get, if they are not working with other trade and professional bodies or indeed the Homes and Communities Agency.
As talented as the civil servants at DCLG are, the description of the review as involving ‘a small coterie of staff’ from the department, doesn’t inspire that much confidence.
Perhaps Grant Shapps should be somewhat concerned about this review. Does it indicate that No10 doesn’t have full trust in the DCLG ministerial team? After all, Lansley’s health reforms, often tipped as a slow motion train wreck, have also been treated to the Letwin policy review treatment.

Mayor of Newham, Robin Wales, has long been a Labour advocate of housing reform. He’s got this piece in Inside Housing today.
The core argument is that the government’s plans will lead to ever further residualisation in affordable/social housing and turn it into only a tenure of temporary last resort. This blog has agreed with that analysis.
But, is he right that there’s enough space or opportunity in the government’s reforms to use them to counter the government’s direction of travel? Could they be used to support the vulnerable and those working on low and middle incomes to defend a more universal vision of state housing provision?
Full article:

It’s one of the first rules of government: if you are cutting or abolishing something, you need a reform package to cover the crime.
The coalition has cut the affordable housing budget by 75 per cent and has put together a radical package of housing reforms. Unfortunately, if you need housing in the coming years you are likely to find a system that is ever more brutal; from housing benefit cuts in the private sector and the ongoing shortage of truly affordable housing. This does not paint a pretty picture, but I believe Labour-led councils should not fear these reforms and here’s why.
Despite a shaky start on devolution, the government has allowed councils and housing associations some genuine housing freedoms. The coalition has a clear vision for the system these freedoms are designed to create: more people housed in the private sector, a quasi-market system in public housing (with housing associations preferred to councils) and state support used as a temporary ‘backstop’ only in times of crisis.
That may be their intention but, holding the government to their word on local flexibility, Labour councils need not use these freedoms that way. The challenge for Labour authorities is to use some of these freedoms to demonstrate an alternative agenda.
The government’s plans are a recipe for concentrating poverty and deprivation in social housing, especially council housing. Proposals assume that councils should use shorter tenancies to move people on when their circumstances improve and they no longer ‘need’ social housing. Labour councils should demonstrate how affordable housing can support working people. And that affordable housing should be part of mixed communities, in which people put down roots. That means maintaining, not ending, the tenancies of those who are in work or contributing to the community. Allocation schemes should allow working people on low incomes to get affordable housing and even prioritise working people in some areas, where deprivation has become the norm. If used effectively this could help us support people better – particularly those who aspire to improve their lives.
Labour town halls will have greater capacity to do this if they take up the freedom to discharge their homelessness duty into private rented accommodation, with appropriate safeguards. There’s now a tough job to be done to ensure needs are met in that sector. Nevertheless, it does provide the space in social housing stock to offer council housing to a wider group of low-income people.
Government reforms pit housing policy against aspiration and stable, sustainable communities. We should use what freedoms we have to demonstrate the principle that public housing should support people in a range of circumstances.

Eric Pickles made a very big fuss announcing more protections for the rights of property owners – limiting councils’ ability to bring privately owned empty homes back into use:

“The Coalition Government is standing up for the civil liberties of law-abiding citizens. Fundamental human rights include the right to property.”

Quite.
It’s just as well that his Localism Bill doesn’t provide any Tom, Dick or Harry the right to interfere with your private property rights. 
Erm, but doesn’t that very piece of ground breaking legislation provide for a ‘Community Right to Buy’?
This would give local people the legal right to nominate any community asset onto a council’s ‘most wanted’ list. An asset on this list, in the case of its closure, could not be sold until after a ‘community countdown’, in which the community gets time to prepare its own bid to buy it.
So if you want to flog your shop, pub, small business etc, you might find your neighbours ganging up to stop you doing so – for a little while anyway.  
Now, I don’t think a community right to buy is a bad idea. I’m not sure it’ll ever work, but never mind. However, it is entirely at odds with the ‘fundamental rights’ you have to do as you wish with your property.
Both, on their own, are good populist measures in their own terms, so why pause for the sake of consistency?

I thought I’d flag up this article in the Telegraph from last week.
It’s about the construction industry hitting the buffers because of the poor weather in November and December this year.
It also notes that construction, despite being a very small part of the economy (6%) accounted for a significant proportion of what little growth there has been. Construction growth made up one third of all growth in the economy in Q2 of 2010, and one quarter of all growth in Q3. Not a bad contribution from a small sector.
This shows that the extra money invested in housing as part of the fiscal stimulus worked exactly as it was supposed to. The construction growth of the last year has kept people in jobs (and off benefits) and supported firms that otherwise would have gone under or contracted.
Think how much more anemic the growth in Quarters 2 and 3 would be without the extra housebuilding.
More worryingly for the future, construction is now contracting, jobs are being shed at a rapid rate and in particular “residential construction [is] falling at the fastest rate since April 2009, indicating the knock-on impact of a stagnant housing market.”
And I would add, deep cuts in capital for housing investment and the fiscal stimulus coming to an end.
And remember not only did this irresponsible, deficit creating spending splurge keep people off benefits, in jobs and supported competitiveness and capacity in the economy – it leaves a legacy of tens of thousands new affordable homes across the country that would not otherwise have been built.

The tough choices of joined up government…
As we reported, Grant Shapps made the case earlier this week that a stagnant housing market with prices remaining flat or decreasing in real terms would be a good thing for first-time buyers and achieve a more stable housing market in the future.
 At the end of this week, David Cameron argued that the housing market “has become very stuck and we’ve got to get it moving again”.
He rightly points out that mortgages are now hard to get even for those who are able to pay them and are likely to be able to in the future:

“If you are a single person, you are earning a decent salary. You go to the bank or building society, you are actually quite a good risk – they won’t give you 80 per cent of the value, they won’t give you four times your salary.”

Here’s the problem however – as soon as you start opening up mortgage lending again, to exactly the people David Cameron describes above, then house prices will start rising again, exactly what Grant Shapps doesn’t want.
As I said, in my last post the brake on house price increases is mortgage availability. The price of homes in Britain rises to the amount of available credit in the economy. Increase the credit, increase the prices.
It’s one of the tough problems you face in government. They can try to help Britain to develop a more stable and secure housing market. The result of that is locking first-time buyers out of the market in the meantime. Take your pick.
Without some really radical reforms (that some of our previous commenters have flagged) the government has pretty limited powers over shaping the housing market. They’re going to find it really hard to force the banks to free up their lending, not least because they also want to banks to build their reserves back up so they can pay back the public’s money.
In contrast, if/when banks in the future begin to lend more freely and the housing market gets motoring again, they’re going to have to take some pretty tough steps to stop prices spiralling again. Grant Shapps hasn’t said what steps he would take or what levers government really has in these circumstances, but it would take quite a lot of political steel to intervene.

I was thinking about more party reforms that Ed Miliband could pursue, and especially what kind of people we want to be Labour MPs.
There are well known barriers to becoming an MP for some groups and Labour has taken the most steps to address under-representation – most obviously through all women shortlists, which have resulted in Labour having more women MPs than all the other parties put together.

The Tories have tried, but with less success with their derided A-list of bright young things, who ‘get’ the Cameron project.
To become an MP requires in most instances years of steady hard work, dedicated campaigning, attempts at an unwinnable seat or two, a lot of time, supportive friends and family and much more. It’s unsurprising really that given these demands politics is becoming more professionalised.

People who already work in politics-related jobs are most likely to understand the processes and are likely to have employers sympathetic to their ambitions and give them the time they need.

So do we need more people in Parliament who have done different things in life and perhaps have had a career in business, local government, the health service, housing associations and charities, before entering parliament?

The truth is if you have a serious job in any of these fields, you’re going to find it hard to put in the time to devote yourself professionally to winning a seat. Some do, and great credit to them.

So could we have a Labour A-list that supports experienced people onto the Labour benches? People who know how to run things and led serious organisations and have not made professional party politics their lives.
Potentially this would add gravitas to the PLP, probably make for more independent-minded MPs, provide a greater pool of people who would make good ministers (they’ve run things) and widen the pool of talent and expertise from which we draw.

Not directly housing related I know – but I got started on this thinking about the people I know in the housing world. Many in local government, housing associations and housing charities were politically engaged on the left at some point, but chose to pursue their politics through a public service route, to the exclusion of elected politics. It would be good if it were easier for them to bring their skills and experience back into politics later in their careers, rather than being forced to make one choice at an early stage.

I know, I know, we’re not supposed to say this here. But by advocating the need for real terms fall in house prices he is right. Grant was twisting and turning trying to avoid using the term ‘falls in house prices’ on R4 just now, but that’s what his house price stability means. His example is house prices rising by 2% while earnings increase by 4%.
No bad thing – so spit it out next time Grant.
More remarkably, Grant says to Sky News that ‘A house is a home not an investment’ – exactly the stance he attacked Labour for just a year ago. 
It would be bad for the economy to have any sudden drops in house prices, so the aim of gradual reductions I’d say is about right.
Interestingly, Grant wants a housing market that is more ‘rational’ than it currently is. I thought Conservatives were supposed to believe that free markets are necessarily ‘rational’ and it’s state interference which makes them work in ‘irrational’ ways?
It’s good to see a Conservative minister coming round to a left-wing way of thinking.
This aim requires considerable intervention in the housing market by the government. What do the right-wingers in his party think about this? Interfering seriously in a private market and pushing down the value of people’s homes?
Labour could look to make cheap political capital out of arguing that this is an attack on homeowners and homeownership, as Grant did in opposition.
Or Labour could welcome this. I argued here that one of Labour’s future principles should be intervention in the housing market to prevent further excessive house price increases. We should take Grant at his word and challenge him to tell us how he will intervene in the mortgage and housing markets to make this a reality.
He’ll still find that pretty tough to answer.

I remember reading this a few months ago and thinking that as a plan for housing it was fairly anodyne, but largely harmless. The only really interesting measure being the tentative promise to examine council borrowing for housing:
Better and more affordable homes
 In a fair society, everyone should have the right to a decent home, but this is not the reality of Britain today. There should be quality social and private rented housing available for those who need or choose it. And it should be easy to keep your home warm without harming the environment; British houses are frequently poorly insulated, wasting money and contributing to global warming. 
We will:

• Make sure that repossession is always the last resort by changing the powers of the courts. 
• Bring 250,000 empty homes back into use with cheap loans and grants as part of our job creation plan. 
• Begin a national programme to insulate more homes paid for by the savings from lower energy bills.
• Make sure every new home is fully energy efficient by improving building regulations.
• Investigate reforming public sector borrowing requirements to free councils to borrow money against their assets in order to build a new generation of council homes, and allow them to keep all the revenue from these new homes. Over time, we will seek to provide a greater degree of subsidy as resources allow to increase the number of new sustainable homes being built. 
• Scrap burdensome Home Information Packs, retaining the requirement for homes to have an energy performance certificate.

Clearly what I missed in these words were were the seeds of the most right-wing attack on the principle that the state should provide good quality housing for its citizens, above all for those that cannot afford it themselves.
It is, of course, an extract from the Lib Dem Manifesto for 2010. I’m sure they must have said somewhere that they would accept cutting housing investment by 75%, forcing ever more people on to housing benefit at the point where you’re slashing it to below poverty levels – as they admit themselves.