Housing policy was centre stage last week when Jeremy Corbyn unveiled the Labour party’s Green Paper on social housing. With commitments to build 100,000 affordable homes a year and introduce a new definition of affordable housing, the party’s plans certainly don’t lack ambition.
These ambitious commitments are long overdue. Housing supply has not met housing need for decades with house price growth far exceeding wage growth for years. There are over a million families on the waiting list for social housing, and rough sleeping has increased by 169 per cent since 2010. The list goes on.
At the heart of the housing crisis is a set of political choices which have rarefied the concept of housing as an asset rather than a place to call home. Central to this process has been the marginalisation of the role of the state in the housing market.
Since the Second World War, we have only ever met housing need with a significant contribution from the public sector. Between 1948 and 1978, local authorities built an average of 90,000 council homes a year, but by the 1990s it was next to nothing. Housing associations have made a growing contribution – but they’ve not been able to fill the gap. Research by IPPR last year showed that 92 per cent of local authorities were failing to build the number of affordable homes their areas needed.
Concerted action is needed, and the role of the state is crucial. It should begin with much greater investment in affordable housing and the freeing of councils to build the homes their communities need. Arbitrary rules introduced by the current government prevent councils from borrowing prudently against future rental streams to build council homes: these should be scrapped as Labour recommended.
The justification for these limits is that it will add to Public Sector Net Debt (PSND) the UK’s measure of government debt. The main international measure of net debt – the General Government Gross Debt (GGGD) – excludes debts of public corporations involved in such activities. We should adopt the international standards, and free ourselves up to allow greater investment in housing – just as our global competitors do.
Investing to build more affordable homes is critical, but ensuring they are affordable in the first place is just as important. That’s why Labour’s proposal to scrap the current definition of affordable housing is vital. Under the current definition, ‘affordability’ is linked to prices, not wages. As a result, research by IPPR has found that a couple with a child on low incomes, one working full-time and the other part-time, would find many ‘affordable’ homes unaffordable. In places like London the problem is even more acute. We must return to an affordable housing measure that is linked to incomes, not market prices.
Perhaps the most crucial, and under reported, aspect of Labour’s plans was a small section on an “English Sovereign Land Trust” which will allow local authorities to buy land at cheaper prices to build affordable homes.
It is here, through intervention in the land market, that the state could have the biggest impact – not to just build more affordable homes, but to make all new homes built more affordable. The price of land has risen exorbitantly over the past few decades, and in high demand areas is the most significant cost of building a home. Yet the increases in the value of the land often has very little to do with the actions of a landowner and everything to do with the awarding of planning permission by a local council on behalf of their local community.
Under our current system we have few mechanisms to capture that value effectively for the community, with the majority of it going to the landowner or developer. Moreover, we rely on private developers and land speculators to bring this land to market, meaning they carry all the risk but also get most of the reward.
It doesn’t have to be like this. In other countries they have far more effective ways of dealing with these issues, either by using more effective property and land taxes which help capture land value increases, or through planning mechanisms which reduce the cost of land for development, or help capture the land value for the community.
Labour’s green paper yesterday was a huge stride forward in setting out substantive proposals to tackle the housing crisis. But on land reform, there is scope to be bolder and go further to ensure that affordable housing really is available ‘for the many’, rather than the preserve of the few.
Luke Murphy is associate director for the environment, housing and infrastructure at the IPPR.