Duncan Bowie on problems for Labour’s housebuilding ambitions
Rachel Reeves chose to focus her first speech as Chancellor on Labour’s ambitions for housebuilding. This was followed quickly by announcements from Angela Rayner, in her role as secretary of state for housing, communities and local government (the “levelling up” designation being dropped), and a series of statements of proposed policy, including a consultation version of a proposed revised National Planning Policy Framework (NPPF). Given housing and planning were not major issues in the election (other than in relation to the perceived impact of immigration), this was perhaps surprising, though it demonstrated the extent to which Labour had been developing its policies in the last few months and also showed the extent to which civil servants had been preparing for a change of government. Myself and many colleagues have in fact been busy over the last year or so briefing the then shadow minister (and now Minister for housing and planning) Matt Pennycock, on a number of policy changes discussed in Chartist.
That there is a housing crisis in the UK and that there is a lack of strategic planning (at least in England) is largely uncontested. There are different views on the appropriate solutions. The ambitions of the new government are welcome, but there are, to put it mildly, major challenges of implementation. The main headline has been Labour’s target to build 370,000 homes a year. Labour’s pre-election target was in fact 300,000, the same as that of the Conservative government, but the figure has been pushed up to the higher figure actually advocated by the LibDems. Average annual output over the last few years has been 228,271. The main constraint has actually been the lack of construction workers rather than shortage of sites or a lack of planning permissions.
What is however missing, as pointed out before, is any target for social rented homes – the previous figure of 90,000 a year was not included in the manifesto. This is partly because the Government does not know how an increased social rent programme is to be funded. It is rumoured that Rayner is seeking to double the housing investment budget, but it seems highly unlikely that this will be included in Reeves autumn budget.
Many local authorities are actually cutting back their housebuilding programmes as they can no longer afford them. Rachel Reeves has apparently said it is not the state’s role to build homes, though I always thought that councils were part of the state.
Labour’s manifesto was very focused on promoting home ownership, blaming the Tories for the increased cost of mortgages. Labour even announced a “freedom to buy”. The manifesto however did not include the previous ambition to increase home ownership to 70% (from the current 62%), which was both an inappropriate priority and undeliverable. What Labour is actually proposing is an extension of the previous government’s mortgage guarantee scheme, which is great for building societies, but could be expensive for the government when mortgagees default.
Moreover, assisting home buyers who otherwise can’t afford to buy, helps a few households in the short term but just adds to house-price inflation as it increases the competition for a limited supply.
On the private rented sector, Labour has rightly committed itself to bringing back the Renters Reform Bill, which fell when parliament was dissolved for the election. This will abolish section 21 (no fault) evictions, which is long overdue.
However, there are no proposals as yet to limit rent increases or initial rents for new tenancies. We also have to recognise that what would be even worse than the current rented sector, would be a reduction in private rented supply, given this is the only option for many lower income and middle income households. Limiting landlord security or revenue income leads to landlords withdrawing supply and without radically increasing social housing supply through new building or transfer of privately rented homes into council or housing association management, the situation becomes worse not better for many households.
The government has announced new mandatory housing targets for each council. The implication being that the government would intervene if councils failed to deliver, though the form of intervention is as yet unclear.
There are however real problems with the approach. Firstly, each council target is based on a 0.8% annual increase in relation to the existing housing stock, with a further increase in areas where house-prices are very high in relation to incomes. This approach has no relationship to any assessment of housing requirements in an area, or to the development capacity within an area. The methodology has the odd effect of increasing the housing target in regions outside London, notably in the Home Counties. This of course raises the issue of the Green Belt. The new Government is rightly suggesting that Green Belt designations should no longer be a justification for not meeting housing requirements, and that “grey belt “sites should be developed, though the definition of “grey belt “is very vague and will certainly be contested on a site-by-site basis. What however is missing is any recognition that appropriate sites (with transport links and social infrastructure) should be developed for housing meeting priority needs including social rented housing, and not just for speculative market development. It is not going to be easy for the government or for local authorities. Further detailed guidance on implementation, and most critically, a lot more public investment is needed if Labour’s ambitions are to be realised.