[Continued from Friday’s Part 1.]
By: David A. Smith
As we count down to the United Kingdom’s election this Thursday, I think housing is the most important issue for Britain’s economic and social viability:
[Britain faces] the challenge of building 300,000 extra houses needed a year to tackle [the country’s] housing crisis.
That’s going the wrong way, fellas
That’s nearly three times average annual new housing production, and it’s strangling Britain in under-housed accommodations:
[Liberal Democrat leader Nick] Clegg, who is speaking of boosting links along the “brainbelt of Britain”, will say: “Britain faces a housing crisis. Every day, 200 fewer families own their own home, as homeowners die and more young families get stuck renting, unable to afford to buy.”
Housing prices and housing shortages are a huge issue with the voters:
“Housebuilding is stuck in the doldrums, with nowhere near enough homes being built to meet demand and keep prices affordable for those families desperate for a home of their own.”
Despite all this, we saw in the previous Part 1 that though the parties know the voters want better housing, none of them will bet political capital on production. None of the parties are proposing anything like a development policy, and in fact the Conservatives’ main proposal is an expanded Right To Buy, which though it may be a very good thing for the households who are able to buy and for economic activity generally, will not by itself produce a single new apartment.
And we’ll be back the moment there’s any sign of improvement
Opinionated sources used in this post
(font colored in rough approximation of party affiliation)
The Guardian (October 6, 2014; russet font)
Financial Times (February 12, 2015; by Jim Pickard and Kate Allen, tory blue)
BBC (April 14, 2015; by Robert Peston, Lib Dem orange)
Financial Times (April 26, 2015; by Judith Evans and James Pickford, Labour red)
Previous AHI posts on issues relating to the UK’s housing policy
April 5, 2005: What price greenfield?
July 14, 2005: Struldbrug buildings
October 25, 2010: Homeownership, a road to wealth or to poverty? (5 parts)
February 6, 2012: Floggings will continue until supply improves (2 parts)
We’re keeping our footprint small
Moreover, at least described in concept, Her Majesty’s Government would need to do some deft financial structuring, and the Euromasters in Brussels would also have a say:
He warned that such government intervention would also risk bringing housing associations’ £60bn of borrowings on to the public balance sheet.
It could – in the same way that a botched Fannie/ Freddie privatization would bring all their securities onto Treasury’s balance sheet – but that would be legislative malpractice and for this purpose is a boogeyman.
We’re grabbing your balance sheet
Brendan Sarsfield, leader of the G15 group of London housing associations, said that giving away homes at deep discounts would undermine the sector’s financial viability.
“It would mean giving away assets, many housing associations have large loans, what would the banks do if suddenly our assets were eroded in this way?”
As a non-profit, Sarsfield doesn’t believing in giving things away
Kate Davies, chief executive of Notting Hill Housing Group, said the proposal “would have to be backed by significant public funds”.
Here in Notting Hill, I have to be backed by significant public funds
Or guarantees or other things to make the sums work.
Pushing hard for the Right (to buy, that is!)
The extension of Right to Buy is being pushed by Iain Duncan Smith, the work and pensions secretary. He is understood to have support from some senior colleagues including Lynton Crosby, who is in charge of the Tory election campaign.
Who polls, wins
He backs a proposal from the Centre for Social Justice, a think-tank he set up in opposition, for discounts of up to 30% of a property’s value.
How convenient to have a think tank present proposals that coincide with its founder’s views! Why didn’t I think of that?
Mr Duncan Smith is also floating an even more radical idea: giving away all social housing to its tenants.
Never mind the apparent irony of a Conservative government proposing a redistribution to each according to his needs, while the concept has had ‘ownership society’ appeal from Jack Kemp onwards, it blithely sails over a mountain of difficulties, costs, and risks.
Margaret Thatcher takes tea with former GLC council house tenants in Balham in 1978.
Photograph: Kenneth Saunders for the Guardian Kenneth Saunders/Guardian
Under this idea, any tenant who has worked for more than a year would be given their home.
How will the housing association address its outstanding debts?
The association would retain a stake, perhaps 40%, which could be used to pay off any residual debt on the property.
That doesn’t work, because the debt is a cash obligation, and the ‘40% stake’ would be an illiquid position that could be monetized only if the new owner either (a) sold the property, defeating the purpose of giving it to him or her, or (b) immediately refinanced the property (but who would lend?).
It was first put forward by Paul Kirby, a former civil servant in the Number 10 Policy Unit, who wrote: “Essentially this is a simple proposal — give away the homes, clear £75bn of debt, relieve tenants of their rents and save billions per year in benefits.”
Now there is the idea’s kernel – to swap out the current annuity-style housing benefit, which is an ongoing and rising obligation, akin to US public housing operating subsidy or Section 8 vouchers, for a one-off payment. But it makes the breathtaking leaps that the sums will work, and that people who exchange a welfare check for a property ownership stub will suddenly know how to protect their nest egg.
The FT then dryly notes:
This proposal has met resistance from the Treasury.
Prime Minister, HMT has a frowny face
Indeed, for it is, shall we say, adventuresome.
They’re giving us the bricks?
Mr Orr [of the National Housing Federation] said [Mr. Duncan Smith’s proposal] was “a genuinely stupid idea”.
That’s another way of saying it.
Critics say this would leave even less social housing for rent.
That’s obviously true, because the supply of ‘social housing’ – meaning publicly-owned housing – would go own. But the total number of homes wouldn’t go down, and some people who were lifetime renters would become homeowners.
More than a third of former council homes bought by their tenants in one London borough are now owned by private landlords, according to research.
Does that mean the people who bought them later resold them? Or perhaps their new owners have moved elsewhere, and now rent their former residence? Though the FT invites readers to conclude that one-third now privately rented is a bad outcome, that’s not a conclusion, it’s an unstated premise.
“Right to Buy is a vote-winner.“ said Mr Sarsfield –
There’s the rub; almost every observer (probably including most voters) think this is just an election-weeks ploy.
As the election looms, David Cameron – who in his early leadership days seemed to present himself as more the heir to Blair than Thatcher – wants a bit of Margaret Thatcher’s election-winning magic dust.
No one can touch the Beeb for casual syntactic sneering (‘magic dust’):
Got any magic dust?
So he has nicked and reworked her totemic policy of flogging council houses to their working-class tenants – some of whom redefined themselves as a new generation of aspirant Tories.
Totemic flogging? BBC, you’re letting your biases show.
Beeb snark aside, the right-to-buy idea has been pulled, like a rabbit from a hat, with scarcely any thought, the flimsiest of program description and the sketchiest of analytical support
Shallow and unsubstantive? Me?
It invites – but neither raises nor answers – the core policy question: What is the purpose of expanding homeownership?
Is it:
- To transfer government subsidy wealth to families?
- To encourage families to invest in place and property?
- To develop a ‘forced savings’ model for eventual retirement or children’s education?
- To strengthen people’s connection to civil society?
- To give people what they want (rather than what they need)?
You can’t always get what you wa-ant
As the question is profoundly important and profoundly difficult, I will, as the parliamentarians do, refer to my previous (five-part) answer: Homeownership, a road to wealth or to poverty?
I previously explained I’m not going to explain, and I’m not going to explain that explanation
[At some point, when I have suitable seed material I’ll return to the purpose-of-homeownership issue more fully. Housing is Tocquevillean, in that it promotes civil society and democracy, and that concept deserves a better exposition. – Ed.]
On the other hand, what the Conservatives’ right-to-buy proposal may lack in conceptual or policy rigor, it more than makes up for with the spluttering incoherence of the objections being raised to it:
Thank you for that informed comment
[Continued tomorrow in Part 3.]