The housing crisis needs an economic solution, not political gimmicks

Yesterday I wrote that there was no cause for optimism for housing and homelessness as we enter 2016. Yes, hundreds of millions of Pounds are being spent on various housing initiatives, most aimed at helping first time buyers and extending the Right to Buy to social housing.

Unfortunately, none of these measures will have much, if any, impact in the south-east with its overheated housing market. Something far more fundamental needs to be done.

The larger, developing housing associations have failed over recent years to deliver the homes at social rents. Last week we heard that private developers are sitting on vacant plots for 600,000 homes.

The Guardian questioned how much Berkeley, Barratt, Persimmon and Taylor Wimpey are doing to help solve housing crisis in Britain. The answer is quite simple: these private developers have no obligation to build homes to meet housing need.  Their directors have a legal duty to maximise profits for shareholders.  Why do politicians put faith in them, unless their agenda is not to deal with the housing crisis.

The Guardian reported that “Berkeley, Barratt, Persimmon and Taylor Wimpey – the four biggest companies in the industry – account for more than 450,000 of the plots. They are also sitting on £947m of cash and declared or issued more than £1.5bn in payouts to shareholders in 2015.”

But large housing associations are equally to blame, in part, due to decisions of successive governments to reduce and, now, remove all grant subsidy for social housing for rent. The immediate consequence is that social housing rents have gone up, actively encourage by government, to 80% of the market. This facilitates borrowing from financial institutions.

Unfortunately, the cost of this policy is seen in the escalating housing benefit bill. It was so obvious that this would be one of the consequences of previous government policy.

The government, in an attempt to curb this spiralling cost to the public purse, is imposing caps on the amount that social landlords can charge (going against its previous decision to encourage rents at 80% of the market) and to cap at Local Housing Allowance levels what a tenant can claim in housing benefit support.

There is a simple solution which, sadly, is not even on the agenda of politicians. The housing crisis needs an economic solution, not political gimmicks.

There needs to be a to return to grant subsidy to locally based housing organisations (embracing the principles of localism) so that organisations whose primary interest is in meeting the housing needs of local communities, can build at rents that do not cause an inflationary impact on the housing benefit bill.

Local authorities will need to change how they dispose of land for housing, not crudely at best value to large developers (housing associations or private developers), but considering the social value the disposal will bring.

Local housing associations could facilitate greater mobility between localities so that people can follow jobs. Social housing currently makes little contribution to aiding employment mobility.

In 2016 we will hear a lot more about first time buyers and the extension of the Right to Buy. And the housing crisis will only get worse.


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