20/08/2012 11:17 BST | Updated 20/10/2012 06:12 BST

Selling Off Social Housing Doesn't Make Sense

The suggestion by the Policy Exchange think-tank that social housing in valuable areas should be sold and the profits used to build more homes in cheaper places, re-hashes an old argument but predictably grabbed the headlines.

Doesn't it make sense, with 4.5 million people in housing need, to boost supply? Surely those in need and on low incomes should not expect to be housed centrally anyway (the myth-makers like to refer to 'Mayfair' or 'near Harrods' as if these neighbourhoods of the global mega-rich are stuffed with council estates).

Well, no, it doesn't make sense. Because behind the beguiling simplicity of the idea lie some complex realities, and as an MP for North Westminster, and previously for the much-cited example of Notting Hill, I have some knowledge of these.

Let's start with the fact that social housing has existed inner London for 150 years, since the big social philanthropists like the Peabody Trust started replacing the slums which had long existed alongside Parliament, Covent Garden etc.

Swathes of what now include some of the country's most expensive properties were once desperately poor. Even as recently as the 1960s, the Notting Hill Housing Trust started by buying and replacing private homes that were a by-word for slum landlordism- somewhat ironically paving the way for the regeneration which now sees houses there sell for many millions. London has always been socially mixed, is now highly ethnically mixed, and has benefited economically, culturally and socially as a result- and social housing has helped make that possible.

Yet more recently still, certainly in Central London, the international property market has surrounded many poorer neighbourhoods, leaving them like islands in a sea of fantastic wealth. It is now estimated that 60% of new sales in central London go to overseas buyers and £5 billion a year is flowing into 'luxury' housing, feeding the house price bubble and freezing out low and middle income buyers and renters. Is the answer to surrender to the tide and let it sweep all before it?

Sales are the only way to deal with the shortfall anyway. Notting Hill Housing Trust originally bought properties to protect poor people locally, but as these grew massively in value the balance sheet of the organisation strengthened and became the foundation for hundreds of millions of pounds of prudential borrowing for more social homes elsewhere. The same applies to all the other social landlords who operate in 'rich' areas. It wasn't necessary to sell the homes to use their value to create more homes elsewhere, as they proved. New investment made sense in itself, as well, which is why the previous government had an £8 billion investment programme which the Conservatives slashed by 60%. That programme passed the value test - creating an asset that makes will make a profit in its lifetime, and pay off in jobs created and benefit bills reduced, but it was decimated.

The number of council homes has already plummeted over the last 30 years because of Right to Buy with boroughs like my own seeing a near-halving of stock. When this policy came in, Margaret Thatcher promised lots of new homes from the proceeds, but the sold homes were never replaced and most of the money disappeared into the Treasury. Some ex-council homes were rented back to low-income and homeless households at much higher prices- helping fuel the rise in Housing Benefit. People who would once have been eligible for a council home ended up in expensive private rented homes, with the same effect. So the promise was made and broken before. Would it be different now?

Finally, let's return to the issue of 'mixed communities'. We hear a great deal about promoting mixed communities in poor places, like the East End boroughs of Newham, or the south London borough of Southwark. Quite right too- everyone understands that concentrating poorer people in poor neighbourhoods is bad for their life chances and for communities- we were debating this last August when the riots took hold. Those councils want a mix, with more home-ownership and greater affluence. So we can't put more council homes there, then. Yet those arguing for mixed communities in that instance don't apply the same logic where low cost housing is currently limited, because those areas have become more valuable, or because they are away from the inner city, in suburbs, towns and even villages elsewhere. Will London's outer suburbs, or market towns in the surrounding countryside build hundreds of thousands of new council homes and, crucially, offer them to those people, outsiders by definition, squeezed from the inner city?

Or, as seems likely, will already affluent areas become ever more so, communities be broken up and the millions in housing need become more marginalised still?

Karen Buck is the Labour Member of Parliament for Westminster North and Shadow Education Minister