The economic consequences of current housing policy

Last Thursday (23rd April) I gave a presentation to the Hove Civic Society on the supply of affordable housing to buy and to rent in Brighton and Hove.  I have prepared four bite size summaries of my presentation.  On Sunday I posted about The scale of the problem and yesterday about The need to build build build.

Today, the economic consequences of current housing policy

There are tens of billions of public subsidy going into housing, mainly into paying for housing benefit, the Right to Buy, and Help to Buy.

The majority of public subsidy used to go in investment into bricks and mortar, thereby allowing social rents to be changed while an asset was created for current and future generations.

That changed in the early 1990’s when councils were no longer allowed to develop and housing associations had to rely increasingly on private finance.  The subsidy moved from investment to ongoing revenue support, year in year out.

It was an economically illiterate decision which was not reversed by the later Labour government and accelerated by the Coalition government.  We are paying the price today.

In 1991/92, the housing benefit bill was £8.6 billion.  By 2012/13 it was £21.5 billion and will increase to over £25 billion unless there is great vision and incredible courage by our politicians.

It will require borrowing, something most politicians will not consider. A survey, carried out by Ipsos MORI for the Chartered Institute of Housing (CIH), published in April, found that 54% of adults in England would support government borrowing to fund more affordable homes for people to buy or rent.  Only a fifth (21%) were opposed.

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