A “net positive” social housing policy will not resolve the housing crisis.
Speaking at a National Housing Federation summit, Shadow Housing Minister, Matthew Pennycook clarified the Labour leadership’s outlook on housing policy when in government. By a “significant” reduction in RTB discounts and focusing the Affordable Homes Programme “overwhelmingly” on social rent homes “we will seek to reduce the number of social rent homes sold off each year with a view to ensuring that we go net positive on social housing numbers within the very early years of the next parliament”.
In other words they will seek to build more than the combined number of homes sold under RTB and those demolished. Currently that would require 14,000 or more. However, in the discussion after his speech Matthew said that we would probably return to the situation towards the end of the last (New) Labour government where there would be a few thousand homes sold off every year. If that were the case then, when you factor in demolitions, you could have a “net positive” situation with as little 5,000 or 6,000 additional homes!
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Despite an increase in funding from Homes England for social rent homes over the last couple of years, they still only comprised 16% of homes funded in 2022, less than 4,000. That year English local authorities built 4,402 new homes and bought another 3,138. One of the reasons they are buying, often ex-council properties sold under RTB, is that it is cheaper than building, and the grant they receive from Homes England is so low. The amount of grant for social rent homes for the AHP 2016-21 was less than £58,000 per property.
If elected Labour would take over the Tories AHP 2021-26. It appears that they are not proposing to increase the funding available for this programme. If the funding that Homes England provides is rebalanced towards social rent homes then less homes would be built than in the current programme, because grant for social rent is higher than for “affordable rent” or shared ownership. We don’t know if Labour would increase the grant. If they did, without increasing the overall funding available, there would be even less homes built. If they leave it at the current parsimonious level, it will not encourage councils to build more council housing, since grant is insufficient. An average of at least, £100,000 per property is needed. The 2019 Labour conference voted for £10 billion a year to fund the building of 100,000 council homes. This is the only means of increasing social rent housing on a scale sufficient to begin to resolve the housing crisis.
In the discussion after his speech, Matthew was asked if there would be a target for social rented homes. He replied
“At the point where we either announce a target for affordable housing overall or metrics by which we will measure success, we want to make sure it stacks up, that we can absolutely deliver it, and we’re not in that position yet.”
Obviously the number of social rent homes built will depend on the funding that Labour makes available. You have to determine how much grant per property will be provided, how much overall, and that will determine the number that is possible. Yet, it appears that there is no guarantee of a target. In contrast the Labour leadership has set a 70% home ownership target without any evidence that they have costed it.
“Turning off the taps” – Right to Buy
Before Lisa Nandy was ‘moved sideways’ and replaced by Angela Rayner she insisted that Labour supported “the principle” of RTB. Yet Matthew Pennycook has said that the idea of extending RTB to all housing associations tenants will be dumped. If you support the “principle” why would you not extend it?
Labour’s position is a mass of contradictions. In the discussion after his speech Matthew said
“What we’ve got to do is make it more difficult if you like…We’ve got to sort of turn the taps off and get back to the situation where we were under the last Labour government, which is, yes, a few thousand social homes sold off every year, but we will be building many many more.”
In fact despite New Labour reducing the discount for RTB sales in 2008, the funding for new build was so puny that in no year of their National Affordable Homes Programme were there more homes built than lost under RTB. We don’t want to return to that.
Why is the leadership baulking at doing what the party members and the trades unions want; ending RTB? We have been told that they are concerned that if they propose to end it the Tories will accuse them of opposing “aspiration”. And yet, here we are with Matthew Pennycook publicly talking about making it more difficult for tenants to buy their homes. The Tories will say the very same thing in response to lowering the discount as they would if Labour committed to ending RTB. Such a position makes no sense.
If you want to “turn off the taps”, the most effective way to do it is to end RTB. Not only is it a cost-free policy but it would guarantee that, for the first time since 1980, all council homes built would increase the housing stock available.
Whilst “repurposing” the AHP could increase the number of social rent homes built we need a commitment, not yet forthcoming, that Labour will end “affordable rent” (up to 80% of market rent) which was part of the austerity programme introduced by the coalition. If it is to be repurposed then all the funding available should go to social rent. Currently 50% of it goes to shared ownership.
How big a priority?
Matthew Pennycook told the NHF summit
“We must once again assert the necessity and the value of social housing1. It is a crucial national asset to be proud of, to invest in, to protect and maintain. Labour will prioritise it.”
If it is “a crucial national asset” why sell it off? How will Labour prioritise it? Asked about Inside Housing’s campaign for 90,000 social rent homes a year he said he couldn’t see how it would be done. Obviously there are practical difficulties such as half of councils not having a Housing Revenue Account because they sold their stock off (many of them under New Labour). Many councils are spending a fortune on temporary accommodation. For instance the cost of Hastings council’s temporary accommodation is one of the key factors in the threat of issuing a Section 114 notice, whilst Worthing is spending £4 million out of a budget of £14 million. Many of these councils without housing stock would certainly build council housing if they could get the funding. So a genuine plan to build on a large scale would involve these councils relaunching an HRA and setting up the organisation to develop a local plan for building. But this won’t happen unless councils are guaranteed funding on an ongoing basis.
How much of a priority is it for Labour? One of the questions that the leadership has yet to answer is what will be the balance for funding social housing and home ownership. From everything we have seen and heard the Labour leadership’s emphasis has been on home ownership. But the more funding that goes towards that the less will be available for council housing.
Ultimately, there is no way that sufficient housing can be built/bought, unless there is a significant increase in grant. If it is a political priority then the money can be found. It is patent nonsense that “there is no more money available”. There is no reason why Labour should keep in place a regressive taxation system. The leadership’s conservative “fiscal rules” are a choice, not a necessity. Necessity trumps fiscal rules.
The NHS was launched and a million council homes built in a country that was virtually bankrupt. The Atlee government decided that council housing was the priority, aiming to build four council homes to every one market home. This was under far more adverse economic circumstances than today. Debt to GDP ratio was 270% not 100%.
Many of the social problems that we face today are connected with the housing crisis. The often extortionate private rents impoverish tenants, whilst the insecurity of the tenure stresses people who are often forced to move. Poor quality housing makes people ill and imposes extra needless costs on the NHS.
It is the shortage of council housing which has helped to promote the growth of the private rental sector, together with government policies. The New Labour government, at a time when it did not allow councils to apply for social housing grant and sought to ‘transfer’ 200,000 council homes a year, promoted the growth of the buy to let landlord with tax concessions.
Without a a renaissance of council housing, funded by central government, then the housing crisis will not be resolved. A “net positive” policy will not provide the homes needed by the more than 100,000 households in temporary accommodation and the more than 1.2 million households on the waiting lists.
Matthew Pennycook does say “We believe that the overriding objective of an affordable grant funding programme should be to provide significant numbers of genuinely affordable social rented homes.” But the problem resides in that word “significant”. Leaving the funding for the Affordable Homes Programme at its current level will not produce anything like the number of homes required to begin to resolve the crisis and to rescue those people forced into the private rented sector.
Martin Wicks
September 29th 2023
1 Talk of ‘social housing’ can be a source of confusion. Council housing and housing association homes are not the same thing. With council housing tenants have a more secure tenure and at least the possibility of voting their landlord out of office. Housing association tenants cannot remove the board of what is a private business. There has also been a process of commercialisation that has taken place, with more building of market homes.
Labour Campaign for Council Housing 