To solve the housing crisis, we need a National Housing Fund

Some houses, of exactly the sort that you will never own. Image: Getty.

Welcome to the housing crisis, part 4526. So far this month, we have learnt that planning permission has been granted for 320,000 homes but they have not been built; the housing market is slowing down; and people are spending more of their incomes on housing than ever before. But even with the scale of the problem, and a hamstrung government, things don’t have to be this way.

Housing is a significant challenge for our cities, a major solution to which is getting more homes built. It’s not surprising that all of the newly elected metro mayors are prioritising it – from Ben Houchen in Tees Valley, who wants to build a new small town to meet local housing demand, to James Palmer in the Cambridgeshire & Peterborough, who put affordable housing at the centre of his manifesto, and Andy Burnham, who is refocusing the Greater Manchester Spatial Framework to tackle the housing crisis. Efforts by the new mayors are welcome – and if central government gives city regions more powers and flexibility, they will be able to make a much bigger contribution to meeting local housing needs.

But all cities exist within a wider national context. Planning permission is being granted but homes are not being built in all parts of the country. Giving local authorities the powers to deal with that is likely to take years, especially when no party has a majority in parliament to drive through new legislation.

The business model of private housebuilders does not vary from city to city: homes will only be built at the rate at which developers think they will be able to sell. Moreover, a market downturn that starts in London is likely to mean fewer homes are built in all parts of the country.

What we urgently need from government is action at the national level to, first, speed up new development: those 320,000 phantom homes would make a real difference around the country if they got built. Second, investment needs to be focused on getting the market working better over the long-term. That means supporting smaller builders so that we have a more diverse marketplace with more people in the business of building.

Third, we need to build the right types of homes. Building more homes for sale won’t help those who will not be able to afford a deposit anyway. Building more homes at reasonable rents will help people more quickly.


That’s where ResPublica’s new report comes in. Working with leading housing associations, we are proposing a National Housing Fund that would invest substantially (£10bn annually for ten years) in new homes for rent: we project at least 40,000 new homes a year could be built. These would be available under family friendly long-term tenancies, at reasonable and predictable rents.

It could buy homes on existing planned but stalled developments to reduce that number of phantom homes; and would support small developers to bring forward plans for more new homes by providing them with certainty of sale. Each year some tenants, enabled to save by paying reasonable rents, would be offered opportunities to buy their homes; proceeds would be reinvested in building replacements.

How can we afford this major new investment? After the 10 years of investment, housing associations would start paying back off the government’s investment.

In the meantime, our research finds that an investment of this kind is not only realistic: it’s highly desirable. The fund itself could be self-sustaining. Rents would more than cover costs of the borrowing and of managing the properties. And there would be significant wider social and economic benefits – 180,000 new jobs and £3.4bn in tax increases and welfare savings per year.

This is all about adding to existing housebuilding and policy initiatives. If cities or local authorities wanted to work with private sector developers, or build homes themselves, the fund would be there to fund it. With all parties in their manifestos committed to investing in new housing, parliamentary arithmetic need not get in the way of delivering this much-needed and overdue investment in housing.

Edward Douglas is policy & projects manager at the think tank Respublica.

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What do new business rates pilots tell us about government’s appetite for devolution?

Sheffield Town Hall, 1897. Image: Hulton Archive/Getty.

There have been big question marks about any future devolution of business rates ever since the last general election stopped the legislation in its tracks.

Not only did it not make its way to the statute book before the pre-election cut off, it was nowhere to be seen in the Queen’s Speech, suggesting the Government had gone cold on the idea. (This scenario was complicated further recently by the introduction of a private members’ bill on business rates by Conservative MP Peter Bone, details of which remain scarce.)

However, regardless of the situation with legislation, the government’s announcement in recent days of a pilot phase of reforms suggests that business rates devolution will go ahead after all. DCLG has invited local authorities to take part in a pilot scheme which will allow volunteer authorities to retain 100 per cent of the business rates growth they generate locally. (It also notes that a further three pilots are currently in operation as they were set up under the last government.)

There are two interesting things in this announcement that give some insight on how the government would like to push the reform forward.

The first is that only authorities that come forward with their neighbours with a proposal to pool all business rates raised into one pot across a wider geography will be considered. This suggests that pooling is likely to be strongly encouraged under the new system, even more considering that the initial position was to give power to the Secretary of State to form pools unilaterally.

The second is that pooled authorities are given free rein to propose their own local arrangements. This includes determining, where applicable, a tier split (i.e. rates distribution between districts and counties), a plan for distributing additional growth across the pool, and how this will be managed between authorities.

It’s the second which is most interesting. Although current pools already have the ability to decide for some of their arrangements, it’s fair to say that the Theresa May-led government has been much less bullish on devolution than George Osborne in particular was, with policies having a much greater ‘top down’ feel to them (for example, the Industrial Strategy) rather than a move towards giving places the tools they need to support economic growth in their areas. So the decision to allow local authorities to come up with proposed arrangements feels like a change in approach from the centre.


Of course, the point of a pilot is to test different arrangements, and the outcomes of this experiment will be used to shape any future reform of the business rates system. Given the complexity of the system and the multitude of options for reform, this seems like a sensible approach to take. But it remains to be seen whether the complex reform of a national system can be led from the bottom up. In effect, making sure this local governance is driven by common growth objectives, rather than individual authorities’ interests, will be essential.

Nonetheless, the government’s reaffirmation of its commitment to business rates to devolution and its willingness to test new approaches is welcome. Given that the UK is one of the most centralised countries in the western world, moves to allow local authorities to keep at least some of the tax revenue that is generated in their area is a step forward in giving places more autonomy over how they spend their money. That interest in changing this appears to have been whetted once more is encouraging.

There are, however, a number of other issues with the current business rates system which need to be ironed out. Centre for Cities is currently working on a briefing of the business rates system, building on our previous work in this area, and we’ll be making suggestions as to how the system can be improved.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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