Red Brick

Today’s Policy Exchange report advocating the sale of social housing in valuable areas so that more homes can be built in poorer areas is a boring old retread but of course got lots of coverage.
‘Blindingly obvious’ said Grant Shapps ominously.
The BBC focused on Notting Hill and its wonderfully mixed community – so mixed, open and tolerant they even allow David Cameron to live there. 

Monimbo
Conservative Home, the Tories’ blog with its own local government section, has been getting into a froth about councils’ failure to follow government advice on allocations.  In particular, they object to councils not favouring ex-members of the armed forces and other categories of applicant like people who are in work or ‘volunteering’.  These changes, readers will recall, were a result of the Localism Act, which gave councils more discretion over issues like who goes on their waiting list and how allocations are made.

The growth in the mobile homes sector over the past few years is a reflection of the pressure in the housing market.  Many residents like the lifestyle that comes with it and the normally rural or seaside location.  For people who are priced out of buying in the housing market, a mobile home can represent an affordable option better than paying rent.

The contrast between the euphoria of the Olympics and the riots that were in full swing exactly one year ago could not be greater.  It’s hard to believe this is the same London and the same Britain.

By Monimbo
How much of the recent growth in private renting is being fuelled unintentionally by right to buy sales?  And what impact is this having on the housing benefit budget? This question was posed here last month by Paul Dimoldenberg, based on the evidence he turned up of almost 40% of properties sold under the right to buy in Westminster having ended up in the hands of private landlords.  As he pointed out, this means that money is being spent not only on funding big discounts for the original purchasers but then year-in-year-out on the local housing allowance payments to the many low-income tenants now housed in them, who otherwise could have been in council lettings.

The main reasons for opposing the Government’s proposals to charge more rent to social tenants with high incomes – the so-called ‘pay to stay’ policy – are practical, and the CLG Consultation Paper is seriously deficient in its consideration of the bureaucracy and cost involved in managing such a system.
In short, the plan is to allow social landlords to put rents up if a tenant (or the two highest paid individuals in a household) earns above a threshold of income, which might be £60k, £80k or £100k or even some other figure. 

Following on from Tony’s post yesterday that it is the collapse in construction activity, and especially housebuilding, that has driven the economy into a third successive quarter of negative growth – the Osborne recession – it is interesting to note more people on the airwaves arguing that housebuilding is the best way get the economy moving.  For example, economists Kate Barker and Vicky Pryce on last night’s Newsnight.
There also seems to be a greater recognition that housebuilding can be got moving more quickly than other infrastructure projects such as railways and roads.
It is hard to exaggerate how dire things are in construction.  In his review of construction forecasts, Brian Green on Brickonomics shows how all the leading experts and trade bodies are adjusting their forecasts downwards, and from an incredibly low base.  His summary is that: ‘The weakening economy and lack of resolution in the Euro zone have led the expert forecasters to doubt the ability of the private sector to pick up the slack as public spending cuts reduce demand in construction.’
This week, in a timely review of the housebuilding industry published for Shelter, FTI Consulting, advised by Kate Barker, asked searching questions about the industry and why supply is so inelastic.  It looks at all the key factors that determine housing supply, the broad relationship between housebuilding and the wider economy, and the crisis conditions we have been experiencing since 2008.
Their analysis leads to an unpalatable conclusion that the issues facing the housebuilding market are not just related to the current crisis but might be even more deep-seated: ‘…while action to address market failures and limit the unintended consequences of government action may well lead to an improvement in supply, it still may not deliver from the market the level of house building that is required.’ 
And it raises an essential point: ‘These fundamental and inherent issues about the nature of the house building industry and the housing market raise questions about the appropriate role of the state in facilitating an economically and socially optimal level of supply.’
The report unfortunately shies away from directly trying to answer the question – saying it is beyond its brief – but makes a number of sensible suggestions for policy that might make a modest improvement in the way the market functions.
They are right to call for a re-examination of the role of the state in housing provision.  On Guardian Housing Network recently, also available on Red Brick, I argued:  ‘It will take many years of economic recovery to re-establish a self- assured housebuilding sector. Even then, there is no economic reason why the output from profitable housebuilders should coincide with our national aspiration to build homes.’
It is a relatively straightforward historical point: over the long term, the private sector has never built the number of homes that the nation requires.  Since WW2 it has been surprisingly consistent in delivering around 150,000-175,000 homes a year, and it should be our policy ambition to get back to those kind of figures from the current disastrous lows.  Housing associations have become bigger players and their output is important, but increases in recent years have been marginal in the overall scheme of things.
Total output (across all tenures) reached 350,000 in the 1950s and over 400,000 in the 1960s because there was political will at the centre and because local authorities made a huge contribution (issues of quality are for another day).  As councils slowed down after the 1976 IMF intervention, and shuddered to a halt after the election of Thatcher, the slack was never taken up by either the private sector or by housing associations.
In the future, even if the planning system is improved, even if finance is more secure, and even if more people can get mortgages, there is no reason why the market will deliver the socially optimal output: it will produce the homes that can be sold and not the homes we need.  To answer FTI’s question, the role of the state is not just to tackle the barriers that prevent the industry functioning better but to address the gap between what the market is capable of delivering and what society wants.  Of course, over time the industry may adapt and improve and cut costs.  But as FTI point out in their report, even under excellent conditions, from 1999-2004, when both house prices and mortgage lending levels were increasing, private housing output remained almost stagnant.
Councils remain the key agents in this.  I have reservations but the Government has given them the primary planning role.  There is little choice but to push them to become effective facilitators of housing development.  But to get to where we want to be, Councils also have to build again, and on a large scale.