THE BLOG
06/03/2018 11:49 GMT | Updated 06/03/2018 11:49 GMT

More Ambition Needed To Tackle The Housing Crisis

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Theresa May’s speech Monday hailed a return by the Prime Minister to the domestic agenda. After a series of speeches focused on Brexit, the PM has refocused on the issue that she made her personal mission to solve at Conservative Party conference last year, what she calls the ‘national housing crisis’.

The Prime Minister’s personal commitment to this issue is hardly surprising. At the 2017 election, the Conservatives lost in every age group between 18 - 49 with the growing divide in the housing market identified as a key issue. Recent research by the Institute for Fiscal Studies (IFS) highlighted the sharp fall in home ownership for young adults with middle incomes. In 1996, two thirds of those aged between 25 and 34 on middle incomes owned their own home, now that has fallen to a little more than a quarter. The main cause of this has been the increase in house prices relative to family incomes.

Theresa May acknowledged the scale of the challenge Monday setting out a strong analysis of the broken housing market. Moreover, her proposals to ensure a common assessment of housing need, to take a tougher approach to developers who don’t build out quickly enough, and end the practice by developers of using what are called ‘viability assessments’ to dodge affordable housing requirements were welcome. The consultations launched following the PM’s speech on developer contributions and reform of the National Planning Policy Framework also contain some promising proposals. However, the Prime Minister’s speech Monday fell some way short of a plan to tackle what she called “the national housing crisis”.

The Prime Minister needs to be much bolder if she wants her ambition to meet the scale of the challenge ahead. First, action should begin with tackling the dysfunction at their heart of housing market - the dysfunctional land market. The high price of housing which Theresa May spoke about in her speech Monday is driven by the high price of land. Right now, landowners can expect high windfall profits from the granting of planning permission which pushes up house prices and reduces the amount of affordable homes and infrastructure that can be provided as part of any development. To overcome this issue the government should be reforming the compulsory purchase laws to bring down the cost of land and remove the unreasonable expectations of landowners.

Second is a new approach to affordable housing. Research by IPPR published last year found that provision of affordable housing was falling short in 92 per cent of local authority areas. Moreover, the research found that affordable housing was consistently unaffordable in many parts of the country, particularly London. We recommended that the government should develop a new measure of affordability, which is genuinely affordable, against which all housing should be measured. Furthermore, the government should learn from the Mayor of London and take a tougher approach to affordable housing by applying a minimum threshold of 35 per cent for affordable housing to all private developments across the country, with a higher threshold of 50 per cent on all public land.

Third, is additional investment. Local authorities are restricted unnecessarily from investing in the housing that their local communities need. The government should support a large-scale council house building programme by removing the arbitrary cap placed on borrowing through the Housing Revenue Account (HRA). This would free up local councils to get on and build genuinely affordable council homes.

Fourth is reform of the private rented sector. One in five people now rent privately with the number of households in the sector rising by 74 per cent since 2007. Underneath these numbers is a significant rise in the number of families with children with nearly 2 million now renting privately, more than double what it was just a decade ago. The government is taking some action to improve the poor housing quality in the sector and also reduce costs by banning letting agent fees but it doesn’t go nearly far enough. The one transformational housing policy that could deliver in popular terms as the right to buy did in the 1980s, is the ‘right to security.’ Giving the one in five households who rent privately the right to a longer-term tenancy of at least three to five years with caps on rent rises, delivering them the security they need but the flexibility to move on if they need to. It’s common in other countries, it could be done here.

With housing now consistently registering in the top five issues for the public and Labour consistently trusted more than the Conservatives to tackle the housing crisis, it is no surprise that housing is one of the issues at the top list of the Prime Minister’s agenda. But if she wants to deliver on her personal mission to tackle this crisis, Monday’s speech doesn’t go nearly far enough.