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The Chartered Institute of Housing is the independent voice for housing and the home of professional standards

‘The overall shape of policy is skewed too much towards home ownership’

17/11/2015


CIH chief executive Terrie Alafat assesses the potential impact of the new Housing and Planning Bill ahead of giving evidence to the House of Commons Public Bill Committee.

TerrieHow will it affect local authorities?

Our fear is that some of the proposed measures will make it incredibly difficult for councils to build new homes – and that vital council housing could be lost without extra funding.  David Edwards of Oxford City Council told a conference last week that its plans to build 1,000 new homes had been “canned” because of the amount it expects to have to pay the government to compensate housing associations for the homes they sell under the extended right to buy.  And according to our analysis, almost 7,000 council homes a year could be lost when right to buy is extended to housing associations if no extra funding is provided.

‘Pay to stay’

This is the policy that will require households living in social rented housing earning more than £30,000 (£40,000 in London) to pay higher rents.  I think there are lots of issues here – there is the risk that it will discourage tenants from finding work or increasing their earnings, and also that it will push people into housing benefit entitlement.  Although it might bring in some extra income for housing associations, that’s likely to be cancelled out by the cost of administration (and councils won’t even be able to keep any extra cash, they’ll have to give it to the Treasury.)

There’s also the risk that it will derail the government’s attempts to return housing associations to their previous private status, after they were reclassified as public corporations by the Office for National Statistics (ONS) last month, because you could argue that this kind of detailed interference is exactly the kind of government intervention that drove the ONS decision in the first place. 

Ultimately however, you simply cannot class a household with an income of £30,000 as ‘high income’.  A single person with no children might seem relatively well off, but what about a couple who both earn £15,000 and have three children?  And the definition will become even more blurred with the introduction of the national living wage.  Based on the current level of £7.20 per hour (and a 40 hour week) a household where two earners are each on the living wage will earn £29,952 a year, so they would just escape the current threshold. By 2020 the living wage is due to rise to £9 per hour, which means that same family would be earning £37,440 – tipping them over the ‘high income’ threshold. It must be contradictory for a household to be both on the statutory minimum wage yet to be classified as a high earner for housing policy purposes.

Overall impact

No-one is saying the government shouldn’t support aspiration, but the overall shape of policy is skewed too much towards home ownership. What about people who simply can’t afford to buy? In many developed economies there are around 20 to 25 per cent of people who can’t afford a home of their own, and home ownership has actually been declining for the past 10 years and even at its peak only 70% of households were home owners.  Our housing policy framework must recognise that there is a significant proportion of the population who are not home owners and that the private and social rented sectors need greater attention – especially in terms of new supply.

Some of the policies in the bill are designed to address declining home owership, but will they really help people on lower incomes access home ownership? As Shelter has pointed out, on current average lending ratios you’d need an income of £50,000 and a deposit of £40,000 (and substantially more in London) to afford a  new ‘starter home’, even with their 20 per cent discount. If the government is going to build one million homes by 2020 it will need to have all parts of the industry firing on all cylinders and building all types of tenures. But some of the measures in this bill will stop local authorities from building and create real challenges for housing associations. Instead, we need to put in place policies that encourage all parts of the industry to build all types of homes so we can deliver more and better housing.

Stay in the loop with Terrie. . .


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