Section 106 agreements will not fund building on the scale we need

Increased central government grant for council housing is necessary and possible

“The 100,000 social rent homes a year, and more, that are needed to liberate a new generation from the private rented sector, will not be built without central government grant.”

Keir Starmer has said that Labour will build 1.5 million homes over five years; a target of 300,000 a year. Yet he said nothing of the tenure break-down of that number. Shadow Housing Minister Matthew Pennycook has told Inside Housing that Labour cannot agree to its call on political parties to commit in their manifestos to 90,000 social rent homes a year. He says it is “unfeasible”. It is true that there are material obstacles in the way of reaching such a level of output again. Half of local authorities have sold off their council housing. To build again will require funding to put together the teams to plan to build, and the funding to do it. But we face a housing emergency, with more than 100,000 households in temporary accommodation, more than 1.2 million households on waiting lists, and millions of people forced to live in the expensive and often poor quality private sector.

As a result of Right to Buy there are less than 1.6 million council homes in England. In 2021/22 only 51,000 were let to new tenants. A Labour government cannot even begin to resolve this housing crisis without a return to large scale council house building and ending the disastrous policy of RTB, as has already happened in Scotland and Wales.

When Labour goes into government they are proposing to stick with the current government’s parsimonious funding of its Affordable Homes Programme. Matthew Pennycook has said that this funding will be “repurposed” towards social rent homes. Yet as Peter Apps has pointed out, without an increase in ‘the size of the pot’, this will fund less homes. The grant for social rent is higher than for “affordable rent” or shared ownership.

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, not just a majority of it, should go to social rent. Labour needs to commit to ending “affordable rent”, which is unaffordable for many and costs more in housing benefit than social rent.

Underpinning the present policy timidity are Labour’s ‘fiscal rules’; a straight jacket which will prevent a Labour government resolving the housing crisis. If there ‘is no more money’ it is only true if you leave a regressive taxation system in place, and passively refuse to challenge the Bank of England’s interest rate rises.

The Labour leadership is ignoring the party’s own history here. Whilst the economic situation has deteriorated it is nothing compared to that faced by the Atlee government. Then, the debt to GDP ratio was 270% compared to 100% today. In a country that was virtually bankrupt after a world war, the government launched the NHS and funded one million council homes. Aneuran Bevan tripled the grant for building and increased it from 40 years to 60 years. The government determined that council housing was a priority to house people living in over-crowded, insanitary and slum conditions. So they funded four council homes for every home built to sell on the market.

The 100,000 social rent homes a year, and more, that are needed to liberate a new generation from the private rented sector, will not be built without central government grant. Section 106 agreements will not fund building on the scale which is needed. In any case this funding is subject to market conditions. The big builders would rather not build than have to fund ‘too much’ social housing, because it will cut their profit margins.

We have been told by senior figures that Labour would not commit to ending RTB because the Tories would accuse them of being opposed to “aspiration”. Yet speaking at a National Housing Federation event Matthew said Labour would make it more difficult for people to buy by cutting the discount. We have to “turn off the tap”, he said. Of course, the most effective way to “turn off the tap” is to end RTB. It is a cost-free policy and it will guarantee that however many homes are built they will, at least, increase the available council housing stock for the first time since 1980.

Many of the social problems we face today are related to the acute shortage of good quality social rent homes. Poor housing results in poor health. As we know from Rochdale it can kill. The private rental sector places millions under intolerable financial pressure. They struggle to get by financially, month by month. “Eating or heating” is a desperate choice for many. Poverty, induced by high rents as well as low wages, leads to tenants not being able to afford to put the heating on, producing or exacerbating problems of damp and mould.

Social rent council homes can prevent the ongoing social costs that result from poor and expensive housing. They can save spending for the NHS. They will cut the benefit bill, which is being driven up by much higher rents in the private sector.

Matthew Pennycook has said “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. Even if the discount for RTB was cut, and sales fell, you would still need to build 5,000 or more council homes to stop the loss. If Labour determined that 90,000 or more social rent homes were a priority, then funding could be found, by progressive taxation measures. It would save money down the line.

Martin Wicks

Secretary, Labour Campaign for Council Housing

This is a comment article for Inside Housing. You can read it here (if you have access – there is a paywall) though under a different title.