The number being helped by Help to Buy is at a record high. That’s not a good thing

Help to Buy, Bristol, 2013. Image: Getty.

James Brokenshire the secretary of state for the Ministry of Housing, Communities and Local Government (MHCLG) has been having a busy week. On Monday, the department published its rough sleeping strategy, while Tuesday saw the release of the long awaited social housing green paper.

Neither has filled commentators or the housing sector with much confidence – not least because they offer no new support for genuinely affordable homes. This is a problem because, well, there aren’t enough and building more will cost money. 

Since 2010, affordable housing funding has taken a significant hit. Financial support for building social rented homes, where rents are linked to local earnings, has been cut in favour of rents set at 80 per cent of market rents. As a result the supply of new homes at social rent has dwindled dramaticallyIPPR research has shown that, across the country, the so-called affordable rents which have replaced them are simply too expensive for many households on low incomes.

This lack of a support stands in marked contrast to government’s approach to homeownership, as figures released today on sales through the Help to Buy show. Help to Buy loans, in which government lends a household 20 per cent of the value of a new build home (40 per cent in London), are at a record high. To date, around 170,000 homes have been sold through the scheme.

But the Help to Buy policy has two key problems. Firstly, far from supporting those who otherwise couldn’t afford to buy, the scheme is instead assisting households who would be able to buy at some point without support; lower income households continue to be priced out. The government’s own analysis shows that many of those buying through the scheme would have been able to buy at some point in the future without the scheme.

At the same time, the data released today shows that more than a third of those who have made use of Help to Buy to date have household incomes of £50,000 or higher. Around 1 in 10 of those who have bought through the scheme have a household income of over £80,000.

Secondly, far from improving affordability, Help to Buy worsens it. Research by the housing charity Shelter has shown that, through boosting demand for scarce housing, Help to Buy has inflated house prices. 


The main beneficiaries of this are the developers who have factored the scheme into house prices and as a result have seen a significant increase in their profits. Take, for example, the excessive bonus paid to the CEO of Persimmon Homes earlier this year of £75m (originally £100m), which stoked such shareholder and public fury: that was linked to a surge in profits driven by the Help to Buy scheme.

Both of these critiques demonstrate that government is currently not putting its balance sheet to best use. To date, Government has leant out £8.9bn through the Help to Buy. In 2017 alone, the money could have been used by councils to build somewhere in the region of 22,000 homes for social rent, over 400 times the amount actually built in 2016-17.

Letting councils borrow to build affordable housing would make significant steps towards delivering the 145,000 affordable homes which are needed each year, tackling poor housing conditions, over-crowding and poverty. At the same time, it would generate a return for councils, which could in turn be used to invest in more affordable homes and improve existing ones.

Yet, our absurd national accounting rules currently prevent this from happening. Help to Buy lending is not counted towards the deficit. This is because, asGeorge Osborne boasted when launching it, the Help to Buy scheme is a financial transaction, and therefore the taxpayer would be “making an investment and getting a return”.

By contrast, under rules imposed by the Conservative Government of 2010-15, councils are subject to a debt cap on what is called the housing revenue account. This prevents them from borrowing prudently against future rental streams to build council homes. This is despite cries from the Local Government Association that councils want to get building in order to tackle the housing crisis.

On a more positive note, the social housing green paper indicates that the government is starting to budge on this. It has already lifted the borrowing cap slightly in areas with pressure on affordability and is using these schemes to test the possibility of going further. 

This is welcome, but as the social green paper shows warm rhetoric on its own is not enough. Government should commit to changing the borrowing rules, lifting the local authority debt cap and phasing out help to buy.

Darren Baxter is a Research Fellow at IPPR he tweets @DarrenBaxter.

 
 
 
 

Five ways in which the rest of the world can avoid the homelessness crisis plaguing the US

Housing for all. Image: Nicobobinus/Flickr/creative commons.

Homelessness is a growing problem in the UK, where the number of people sleeping rough has doubled since 2010, yet it is dwarfed by the scale of the issue in the US. More than 500,000 homeless were found across the US during just one night, compared to the UK’s 2017 count of 4,751. Changes in the definition of homelessness and flawed methodologies suggest that the true number for the US could be anywhere from 2.5 to 10.2 times greater.

Millions more live in overcrowded or slum housing, forced to choose between the damage that poor conditions do to their physical and mental health, and the street. All of the US’s housing issues – from foreclosures to evictions to poor conditions – hit communities of colour the hardest.

This is due to a legacy of discrimination, which continues to undercut any commitment to safe and decent housing for all residents, whether in the private or public sector. In my recent book, City of Segregation, I explain how the long, violent history of creating spaces for the white and privileged classes is embedded in a number of practices, which continue in US cities to this day.

Exporting inequality

As private developers and investors seek out urban land in major cities around the world to secure their fortunes, real estate patterns and practices developed within the US are increasingly being observed elsewhere.

In cities as diverse as London, Sydney and Durban, community groups which have been working for decades to improve their neighbourhoods languish with little public or private resource. Meanwhile, developers create spaces for foreign investors and new residents, who anticipate certain protections and privileges such as greater security, high quality amenities and neighbours with similar interests and backgrounds.

This is a driving force behind rising evictions and the criminalisation of homelessness, alongside gated communities, hostile architecture, “broken windows” policing with its focus on prosecuting activities such as graffiti or jaywalking and the growing privatisation of public spaces through regeneration.

But there is still time for other countries to choose a different path. The UK, in particular, can build on the legacies of the post-war political consensus that all residents should have access to quality housing, and its acknowledgement of institutional racism and some history of government anti-racist campaigning.

Both legacies should be improved, but a renewed commitment to a programme of housing and anti-racism are central to increasing equality, prosperity and well-being for all. Based on my research, I’ve come up with five steps which the UK and countries like it can follow, to ensure that future development reduces – rather than drives – homelessness and inequality.


1. Build social housing

Unlike the US, the UK acknowledges a right to a home, and within living memory provided it for a huge swathe of British society. Social housing – whether in the form of traditional council flats, cooperatives or community land trusts – provides a variety of housing types and keeps rents from rising too far beyond wages.

When social housing is widely available, it makes a huge difference to people who – for one reason or another, and often through no fault of their own – become homeless. With social housing to fall back on, homelessness is a temporary condition which can be safely resolved. Without it, homelessness can become a life-destroying downwards spiral.

2. Preserve and expand community assets

Severe segregation in the US stripped entire communities of access to quality food, jobs, education, green spaces, services, banks and loans. Poverty is endemic, and can easily tip into homelessness. While far from perfect, the UK’s post-war commitment to universal provision of services, such as education and health care, and building social housing across all neighbourhoods underpinned a surge in upward mobility.

This achievement should be salvaged from the damage done by Right To Buy – a policy which sold off social housing without replacing it – and austerity, which has prompted a sell-off of public assets and land, as well as the closure of childrens’ services, libraries and community centres.

3. Decommodify housing

A market geared towards building apartment blocks for the portfolios of investors who will never live in them cannot produce the kind of housing and neighbourhoods which residents need, much less at a price they can afford.

While London has been badly affected for some time, this trend is now spreading to other areas of the UK and Europe. Local and national governments must act to prevent global demand for housing as investments from driving prices beyond the reach of those who need real homes.

4. Build communities, not walls

Gates, bars, armed security and homeowner restrictions are all ugly traits of private housing developed within the US context of desperate inequality and racism. The UK has a long and vibrant tradition of community development, creating a supportive built environment and social infrastructure of schools, libraries and other municipal services for residents.

Community assets. Image: Helen K/Flickr/creative commons.

This kind of development, and the social mobility and growing equality it fosters, safeguards public health and safety – not big walls, barbed wire and security guards. The private rented sector in the UK should be regulated to bring it more in line with Europe, where tenants prosper with security of tenure and strong regulation of rents and rent increases.

5. Raise your voice

Those who are bearing the brunt of our current housing crisis must be at the centre of efforts to change it. From tenants’ associations and renters’ unions, to campaign groups such as Justice for Grenfell, it’s vital to support those voices advocating fairer housing rights.

This also means rejecting austerity’s constant cuts to public services, funding social support for physical and mental health and ensuring that homes are safe, decent and secure, to create a safety net for those who are working to improve their communities.

The Conversation

Andrea Gibbons, Researcher in Sustainable Housing and Urban Studies, University of Salford.

This article is republished from The Conversation under a Creative Commons license. Read the original article.