The Government's New White Paper on Housing Offers No Hope for Young People

13 February 2017

By Andy Green

The Government’s new white paper on housing, entitled ‘fixing our broken housing market,’ is not going to fix anything except the share prices of the large private development firms. As Simon Jenkins writes in the Guardian: ‘it is a stew of fake news, old clichés and pretend solutions,’ which is long on consultation and very short on the radical measures needed to solve the UK’s housing crisis. It dodges all the big issues on reforming housing taxation, including the council tax, regulating rents and tenures, and on public responsibilities for housing provision; even the very small measures it does propose come hedged with qualifications and get-out clauses.

The White Paper’s diagnosis of Britain’s housing crisis is simplistic in the extreme. It claims that the problem is ‘simply’ that we do not build enough homes, because of excessive planning regulation and lack of competition in the building sector. It is certainly the case that we have not been building enough homes, but the wider truth is not so simple. The Office for National Statistics (ONS) calculated that there were roughly 27.5 million dwellings (excluding long-term vacant houses) and 26.5 million households in 2013. We have more housing units and more rooms per person than ever, and, on the government’s own figures, there are currently some 600 000 homes left vacant across the country. The trouble is that much of the housing is in the wrong places and the wrong the people are buying it up, including foreign investment buyers and buy-to-let landlords. Our real problem is in the supply of genuinely affordable housing, particularly for young people and first-time buyers. 

The Government’s solution is to provide more incentives for a wider range of developers to build, through a £3 bn fund for small building firms, the relaxation of planning regulations, and additional pressures on local authorities and neighbourhoods to draw up ambitious plans for development. But private developers will never build enough homes, and certainly not enough homes of the right kind. It is in their interests to hoard land, keep supply restricted and prices high.

The measures to increase the supply of ‘affordable homes’ are derisory and, in fact, weaker even than what we had before. The requirement used to be that new developments included 20 percent of affordable homes. The White Paper’s provisions for ‘Starter Homes’ now includes just a ‘policy expectation that housing sites deliver a minimum of 10 % affordable housing.’  Unacknowledged in the White Paper is that the Government has recently diluted its definition of ‘affordable.’  This now means at 80% of market value which equates on average to homes priced at 6.4 times average incomes.

The ‘hoped for’ 10 percent provision is not going to help many young people or even those on average incomes. The White paper says Starter Homes ‘should be available to households which need them most, with incomes of less than £80, 000 pa.’ Does the Government really think the most needy include households in the top fifth of incomes? Saving enough for a mortgage deposit is the major barrier to home ownership for many young people, but the new Help to Buy ISA for first time buyers will not help much. It comes with a 25 percent bonus to personal savings up to £3000 per annum, but in many areas of the country it would take you 30 years to save enough in this scheme to get on the housing ladder. The Government is promising 250 000 new ‘affordable’ homes in this Parliament but it wont deliver on this number and they wont be affordable to most people anyway.

The only way Britain is going to build enough affordable homes to rent or buy is to allow Local Authorities to do the job. In the years between 1950 and 1980 over 300 000 homes were being built each year, most of them by local councils. After the Right to Buy policies introduced in the 1980s, and the limits then placed on councils replacing the homes they sold, they have built fewer and fewer homes, and housing associations and private developers have failed to fill the gap. In 2012 less than 100 000 homes were built with only a third for social housing. Local councils built just 3 000 homes.

New home building has picked up a little since then, and the White Paper says the Government is encouraging councils to build. But a cap on local authority borrowing for house building remains, and councils are still not allowed to use the receipts from the high quality homes they are obliged to sell for building new homes. The Chartered Institute of Housing estimates that raising the local authority borrowing cap to £7 bn (from £30m) would allow them to build an additional 75 000 homes per year. It is only the government’s ideological fixation on market solutions, and it’s refusal to acknowledge the public responsibility of central and local government, which holds back the solution to Britain’s housing crisis.

The Government’s recognition of the need to improve quality in the private rental sector is welcome. Encouraging the larger institutions to invest in private build-to-rent schemes makes sense  when nearly a third of households now rent privately. And tenants do typically get more secure tenures renting from larger landlords than from the small buy-to-let landlords.  But the proposals from Community Secretary, Safid Jarvid, to review housing space standards for new-builds is ominous, particularly given that Britain’s new-build homes are already amongst the smallest in Europe. Prototype private build-for-rent homes by Pocket Homes, for instance, are just 38 square metres, and these are aimed at better-off young professionals – those earning less than £60 000, according to their website. We are heading for the Hong Kong scenario, with poorer residents now living in so-called ‘cage homes,’ often no bigger than a large parking space.

Government proposals for longer three-year private tenancies are, again, a wish in the right direction. But they would only apply to new-build rentals. There is no mention of extending these rights to the majority of tenants in existing rental accommodation, for whom insecurity is extreme, with the average tenures now at less than one and a half years. There are no proposals at all on controlling rental prices, which are spirally out of control in most larger cities, and currently cost the average tenant half their gross household income. The Government’s welcome plans to ban agency fees for renters are still ‘under consultation’ and will only be put before Parliament ‘when time allows.’   

Proposals to reduce land blocking by developers, the prevalence of empty homes and to encourage older people in large houses to downsize are equally half-baked.

The Government acknowledges that building has not yet started on half of the nearly 700 000 sites with planning permission in July 2016 and is considering reducing expiry times on planning permissions from three to two years. This is a good idea but again it is only consultation.

Councils are allowed to impose an extra 50 percent on council taxes for homes left empty for more than six months – but only if they are ‘substantially unfurnished’. So if you put in a couple of sofas and a fridge, it’s still OK to buy investment properties no one lives in.

Older people in large houses with unused rooms are to be encouraged to downsize to smaller homes, with Government committing a further £400 m. for 8 000 new sheltered housing units. The principle is laudable but the scale of the intervention pitiful. A better way to encourage older people to downsize would be to scrap stamp duty for the elderly and to raise council tax rates for larger homes to a level that reflected the actual value of the properties.

But all this is way off-limits for a Government that only believes in market solutions and which consistently privileges older home owners over young renters and would-be buyers.

Andy Green's new book will be published by Palgrave in Summer 2017: The Crisis for Young People: Generational Inequalities in Education, Work, Housing and Welfare.