After three decades of neglect and 1,634,000 households stranded on council waiting lists by 2005 (probably nearer 2 million by now), a house-building programme is finally getting under way. But it is nowhere near enough.
Investment in public housing has plummeted from 6.1% of government spending in 1981 to just 1.6% in 2005. What this means is that in current price terms the government is now spending £22bn less a year on public housing than it was spending at the end of the 1970s. Added to that the rent-setting formula for council housing has now been changed from the formula known as “pooled historic cost” to one that is partly related to the value of owner-occupied housing in the area. Rents have climbed steeply as a result. Those in council housing cannot hope to buy their way out in the private sector when the ratio of mortgage loans to income can be as much 8 or even 10:1.
A small increase in housing output will not necessarily stabilise, let alone bring down, house prices when the flow of house purchase lending, now at the staggering level of nearly £1tn a year, is rising so much faster. If extra house-building increases the stock by 1-2% a year, which the housing and regeneration bill – given its second reading yesterday – aims to achieve, while at the same time the credit available to buy it increases by, say, 5% or more a year, house prices won’t fall.
What is really needed is a return nearer to historic levels of housing investment and a construction drive targeted at decent-quality council housing made available at rents related to the cost of construction and completely decoupled from ballooning prices in the private sector.
The government’s aspirations are not ambitious enough. It proposes 200,000 new homes a year to 2016 (last year’s total was 169,000), then 240,000 a year to 2020 – 3 million in all. But new household formation alone is now running at 220,000 a year, and if the accumulated unmet housing need of the half-million or more households living in overcrowded, bad quality or damp housing is to be dealt with within a 10-year programme, then at least an extra 270,000 homes a year is now required.
More pressing still, the government is proposing to build an extra 15,000 social rented homes a year, nearly all through housing associations. Council housing still remains largely taboo, since the Blair government only built an average 300 council houses a year compared with the 14,000 built even at the end of Thatcher’s reign in 1990. But the latest surveys show that at least a further 20,000 social homes for rent are needed each year over and above the extra 15,000 in order to meet what is called “urgent newly arising” need and to halve, as the government intends, the numbers who are homeless or in temporary accommodation (currently 101,000). To achieve this, local authorities should now be allowed to borrow on the open market, as housing associations can, against the security of their existing housing stock. At present local authorities are forbidden to do so.
Less appealing in the new housing bill is the proposal to create an unaccountable regulator which would transfer key responsibilities away from elected ministers. This new quango will have control over such sensitive issues as the criteria for allocating accommodation, the nature of housing demand to be addressed, the extent to which demand is to supplied, the terms of tenancies, the levels of rent, procedures for addressing tenants’ complaints, and even anti-social behaviour. After stock transfer, RSLs, ALMOs and right to buy have shifted half of council housing away from local government, this latest move could now go a long way to removing all the rest out of local democratic control.
Worse, profitmaking companies are to be allowed for the first time to register as social landlords under a lighter burden of regulation. And for the first time means-testing is to be included in the definition of social housing. This abandons one of fundamental founding principles of council housing which was to provide high-quality housing for all sections of society, not housing of last resort for those who can’t afford anything better. Only 30 years ago, according to Professor John Hills, 20% of the richest tenth lived in social housing. Now, if this bill goes through, council estates will further concentrate deprivation and council housing will be further stigmatised when what the government ought to be doing is to promote council housing as a tenure of choice for those who wish it.
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