The Chancellor has put housing policy at the front and centre of his spending plans for the next parliament. The plethora of announcements was wrapped together in a £7billion package to promote homeownership and the delivery of more than 400,000 "affordable homes" across England.
There were several welcome policies. The increase in Stamp Duty to pay for affordable housing is an opportunity to reconnect the cost of rising house prices to the delivery of affordable housing. If that link between house price inflation and cash for new development can be maintained and even expanded, housing finance could be placed on the firmer, long-term footing that it desperately needs.
The additional £1billion per year to fund 135,000 shared ownership homes is also a welcome investment if they can get the product right, and ensure that it is genuinely affordable to those on modest incomes.
The focus on homeownership is understandable and will be popular, and is happening at a time when number of people able to buy their own home with a mortgage has plummeted. There are now 470,000 fewer homeowners than there were a decade ago (and home ownership is down 7 percentage points in a decade from 70% to 63%).
For all that, while the extra cash will help some households onto the housing ladder, spending public money exclusively on home ownership is unlikely to achieve its target figure, and does not recognise different housing needs across society. Not all will want to own a home, or be able to afford to do so.
The Government's investment in their flagship Starter Homes initiative is one of the most problematic of their announcements today. Starter Homes allow people to buy a newly built property at a 20% discount from the market rate. This is being funded by giving £2.3billion to developers over this Parliament. While the extra cash injection into housing is generally welcome, there are a number of problems with betting the farm on Starter Homes:
a) The scheme allows for Starter Homes to replace the provision of genuinely affordable homes.
b) The £2.3billion to support 60,000 of the Starter Homes will provide developers with a subsidy of £38,000 per home -nearly double the Government's last programme to fund more affordable social rent housing, around £20,000 per home. The government could build more homes for less money.
c) The scheme will ultimately deliver owners a tax free capital gain of on an average priced home of £59,000, or near £100,000 in London.
This subsidy for developers is not good value for money. The £2.3billion could be used to fund a wider range of homes for a wider range of families. Using half of this sum for social rented housing could provide an extra 40,000 homes for those on the lowest incomes, and still deliver 35,000 Starter Homes for those who could afford them. Building social rent homes as well homeownership options would save money on households living in temporary accommodation, and end up with a publicly owned home that the government could sell at a later date, or borrow against to build even more homes in the future.
Ultimately, the Chancellor's focus on building new homes in the Spending Review was welcome - but helping a broader range of people, not just aspirant home owners would be a more positive way of using the additional money.