Tuesday, August 31, 2010

Cash in the Attic

There is a big new Policy Exchange report, Making Housing Affordable, out today. For me, there were three main points that stood out about it and one big issue that it raised. Firstly, the report’s argument is that reforms in housing can both improve the current situation in housing and save taxpayers a whopping £20 billion a year – with savings kicking in from day one. That is a pretty huge sum.

The second thing was the potential political gain of one of the key recommendations - to allow every working council tenant to purchase their home at their existing rent under a new revamped Right to Buy. This could create swathes of Conservative voters in urban working class areas – the very areas that they often failed to capture last time.

The third point that stood out is the report’s argument that a better planning system in the UK would allow us to built more and better quality homes which in turn should stabilise house prices. This would both increase home ownership and cut pressures on government spending - for example, if more people could buy their home this cuts social housing waiting lists, which under Labour almost doubled.

Now, I am not saying that the report’s analysis or recommendations are necessarily correct. But the big issue that occurred to me was that as the government makes unprecedented cuts in spending then it must continue to be serious about looking beyond Whitehall for ideas on how to save money. As Ministers sharpen the axe then they could do worse than study reports like this.


Anonymous said...

All of which is a more constructive approach to the 'housing crisis' than the National Housing Federation (representing the biggest buy to let landlords - oops, sorry, 'housing associations') who are just complaining about having their funding cut.

Evsie said...

I like the right to buy, it makes sense on several levels.

The problem is that there is an increasing need for social housing. Unless the money received from the people buying their homes is re-invested in housing stock (thus creating building jobs as we go and helping the economy) we will end up in a situation where those reliant on the government safety net are renting privately and having it paid through HSA.

Obviously, this will cost more in the long term as the government then end up paying not just for the cost of the homes, but for the owner's profit margin too.

My worry is that in this time of austerity cuts the government will not re-invest that money, but use it to pay down debt, or for some other project. That would make a bad situation worse.

caw rock said...

how this study together with softening building regs, drying up funding and financing while looking beyond Whitehall will safe money escapes me, sorry.

The Purpleline said...

I would like to see social housing linked to derivative share price in the property that could be linked to a monthly purchase scheme attached to the rent.

For example the mortgage provider in this case it would be the local authority would issue 100shares for each property. So for a 50k property each share would be 500 pounds to buy. Throughout the lifetime of the tenancy the renter could buy a share at this fixed price. When they accumulated 25% they could
1) Sell this back to the local council and move away if so desired picking up an interest rate of cpi over the period +1%

2)Sell back and buy 25% of another council property anywhere of the same value

3) Buy out the remaining 75% at the fixed price.

4)Every 10 years a revaluation of the property would be conducted giving the buyer (renter) the option to sell any shares for a profit or hold should prices be lower and just use as a savings account as above.

This would encourage renters in social housing to save in a safe manner linked to an asset that could be used to finance loans or other requirements they might have.
It should be Tax free savings and limited to one house per family.

Janner said...

There is no 'increasing need' for social housing

There are more single households

There are more single parent families

There are more elderly people living in social housing that is too large for them after their families have grown up

There are too many people sub-letting their social housing on the black economy

There are too many people living in social housing that could afford commercial rent/mortgages but choose not to

Is it the government's job to provide housing for all these lifestyle choices?

Before I get branded a swivel-eyed right winger I have direct personal experience of all of these

Tapestry said...

Houses can be built for £4000 in Poland. The winter is far worse than here. Tells you something about things being barmy prices over here.

Victor, NW Kent said...

How can this cut social housing waiting lists? They would be buying the social housing they live in so there would be no movement at all.

I haven't read the report but please tell me how you come to make this statement that waiting lists would be cut.

P. Stable said...

If you can afford to buy a house, you can buy one on the open market like everyone else. If you can't afford to buy a house, you can rent one on the open market like everyone else. And if you can't afford to rent one on the open market, then the state should step in and provide council housing until such a time as you can afford to stand on your own two feet. Simples.

There should be no right to buy at all - social housing is supposed to be a safety net, not a means of getting a foot on the housing ladder. Unless, of course, you also introduce a right to buy for people (like me!) who have lived in the same private rented property for a decade...

Scary Biscuits said...

Cameron has no interest in making significant savings. Why else would he have ruled out tax cuts for the 'forseeable future', as he did this weekend?

Why else, also, would he have promised ever greater public spending, under the mantra 'sharing the proceeds of growth', and sticking to Labour's spending plans long after everybody else realised they were unsustainable. Cameron is just an old-fashioned Heathite paternalist, spending our money as he knows best.

These 'cuts' the Coalition are talking of are really nothing of the sort, just a reduction in the rate of increase (a 'cut' as defined by Labour).

Finally, on the Policy Exchange report, a lot of people have yet to come to terms with the fact that there is no housing shortage, as evidenced by the fact that real prices are falling and expected to continue to fall for the next ten years or more. The only thing that stops the market returning to reality is continued government intervention in the form of bail-outs to the banks and housing subsidy. If you live in the South East, you may be forgiven for not believing that there's a housing shortage but that is really a job shortage elsewhere in the country as people continue to vote with their feet in Labour areas, something that Cameron's tax increases, such as the increase in VAT, are unlikely to help.

Unknown said...

Next they need to remove the vote from those non-taxpayers out of work and on benefit.

There's no taxation without representation, so let there be no representation without taxation.

Opinicus said...

I think an extension of right to buy is a very good idea - into social housing too
I am very against relaxing planning controls if we are to have any environment worth living in.
The current pressure on housing is due to the huge increase in the numbers of households.
This in turn is caused by the breakdown of the family and by immigration. The high cost of housing is the one aspect of social policy curtailing these two forces. Increasing the housing stock would let both rip with deeply unConservative consequences.

Jimmy said...

"if more people could buy their home this cuts social housing waiting lists"

Are you quite sure about this?

Tim Carpenter said...

1. Subsidised housing should not be sold for less than market rates as that would be a form of vote buying, and so corrupt. I am shocked that this is seen as a good thing.

2. I have reservations about the mechanisms of what land will be earmarked or protected. I can see all manner of problems with this, so whomsoever proposes it in detail must ensure no vested interests get the upper hand. That said, the issue of land supply really must be addressed, but another distortion upon existing distortions may not be the way forward. Land Value Tax is touted as an answer, but I remain as yet unconvinced, though I will not close the door on it.

3. If the State owns land that will be turned to housing, it should be sold off lot by lot in public auction, so everyone can have a chance of buying land. Selling land as massive plots favours incumbents. Such competition will encourage/enable innovation and show who wants to buy what side by side. This will enable individuals to decide the density of housing and allow a more organic growth, just as villages and towns used to grow. The State has to STOP trying to control everything. Most favourable areas were not centrally planned, but grew up ad hoc or by spec builders a dozen or so houses at a time.

4. If the State is to provide housing, it should be provided at commercial rates and any subsidy provided via housing benefit. This way, as tenant's income changes, the benefit reduces and so automatically we deal with the issue of people "squatting" in low cost housing when they can afford to live elsewhere.

5. Vital to the issue of housing cost is the need to not distort the interest rates. Artificially low interest rates in recent years has created a housing bubble. The sure fire way to be rid of this is to end the monopoly of the Bank of England, abolish legal tender laws and introduce free banking. The BoE will have no option but to preserve the value of Sterling as it competes with other currencies.