As the General Election rapidly approaches, a surprising late arrival in the list of major issues has been social housing.
Nobody could deny that Britain has a housing problem: our ever-escalating house prices are caused by an increase in population and a reduction in the mean size of households (divorced families need two homes, and single people increasingly want their own homes rather than sharing flats or living with their parents).
These have combined with an inadequate housing stock to cause increases in the costs of private housing through the inevitable laws of supply and demand.
Britain has had a substantial proportion of social housing for many years. At present over 15% of the population live in social housing, with about 55% of those in accommodation owned by local authorities and 45% owned by housing associations. Housing associations, which are not-for-profit bodies that have existed since the 19th century, are in many ways the perfect British solution to a social problem: they apply free market principles to solving social problems, and very successfully so. They are also non-governmental organisations, and so very much in line with fundamental conservative principles of a small state.
At the same time, like many other great British institutions such as the NHS, they are built upon fundamentally socialist principles and so they also fit the fundamental principles of the Labour party.
Yet, despite that, both of Britain’s large parties have decided in the last few weeks before the Election to state their intentions to interfere with them.
Housing associations function outside of state ownership, and develop and expand their housing stock mostly by borrowing against the market value of existing stock. Their ability to meet social housing needs is dependent upon that value. Forcing housing associations to sell stock at all is a form of state interference in private enterprise, while forcing them to sell stock below market value will prevent, not support, the creation of low cost housing.
On a purely practical note, housing associations will have serious problems redeveloping outdated housing stock if cherry-picked units of that have passed into private ownership.
It is sad to say, but the Labour Party’s Lyons Review – on which their policies of giving councils greater powers to tax and compulsorily purchase land are based – is a more thought-out piece of policy.
It is of course firmly compatible with Labour’s principles of a large state with social facilities owned by the state and funded from taxation, and an unpalatable approach for the Conservative mind-set. The Labour announcements of limitations in rent escalation (announced very late in the campaign) are compatible with their philosophy of state control – although certainly not with any free market principles. The Green and Liberal Democrat approaches are essentially exaggerations of Labour policy, but without the academic rigour of the Lyons Review to support the approaches.
At the same time, we should acknowledge that on one point at least, the Lyons Review is absolutely right. It highlights that, over more than a decade of inadequate housebuilding, the British housebuilding industry and skill base has become inadequately small. Any government which accepts that Britain isn’t building enough houses must also see expansion of the national skilled workforce as a crucial step, and Lyons’ approach, of developing this through collaboration between the industry and education sectors, is both right and uncontroversial.
If Labour win the coming election, they will seek to implement the Lyons report, creating significant enlargement of the state housing sector at the cost of increased taxation. They will also move the proportion of that housing back from housing associations to councils, which creates a future conflict between preservation of the social housing stock and other council services.
It will also, potentially, make it harder for housing associations to create new investment in stock themselves. Liberal and Green influence in government is likely to have similar effects.
However, if the current Conservative policy were implemented, it would create an unwanted decision between being forced to increase housing stock through taxation, or a reduced rate of increase in the size of the housing stock. That isn’t a position any sensible government wants to put itself – or its councils – into.
An additional problem is that if any government starts actively controlling the behaviours of housing associations, the £30-40bn or so of current housing association debt becomes part of the national deficit. That would be problematic for any government for the foreseeable future.
Any future British government must find ways to increase our housing stock, particularly concentrating upon the affordable end of the market. It is a matter of political principle whether that increase should be primarily within the private or public sector – but Conservative preference for the small state would indicate that growth should mainly be in the private and non-state not-for-profit sectors.
That does mean supporting, rather than undermining, the ability of housing associations to function effectively, whatever other actions are taken.