70% home ownership target – wrong in principle and undeliverable

Just before Lisa Nandy was moved sideways from her job as Shadow Secretary of State for Levelling-up, the Highbury Group on Housing Delivery (“an independent group of specialists from the public, private and independent sectors from housing, planning and related professions”) wrote to her on Labour’s housing policy. We reproduce some extracts below. You can read the whole text here.

We consider that the setting of a target to increase homeownership to 70% is both wrong in principle and undeliverable. The main focus should be on increasing the supply of genuinely affordable rented homes for those unable to access market homes. At a time when mortgage costs are increasing dramatically, to suggest government intervention can somehow increase the number of new home owners, when the key current challenge is protecting existing homeowners from losing their homes. All the historic evidence shows that general subsidies to homeownership, whether through grant, loans or tax exemptions, just increases house-prices in the medium and longer term, and is therefore a misuse of public resources. Moreover, encouraging marginal home-ownership can have the risk of increasing unsustainable homeownership and putting new home owners into serious financial difficulty.

It is our view that public resources should be focused primarily on providing and maintaining homes in social ownership available for households in housing need and not in poorly designed subsidies to forms of home-ownership, such as help to buy or discounted sales. Some case can be made for well-designed and targeted shared ownership which entails shallow subsidy and can from part of mixed tenure developments with particular roles in supporting mixed tenure developments, rural affordable provision, family housing in regeneration areas, key worker housing in London, etc. This can make some contribution to increasing home ownership at the margins but will never be more than a minority of new provision.

To rebalance the current tenure mix, local authorities and housing associations should be funded to acquire both privately rented and formerly owner- occupied homes, where appropriate to meet unmet housing need and which are either in good condition or capable of cost-effective improvement. It is noted that some authorities, including the Greater London, are currently funding such programmes. Councils should have the power to buy back for council properties on the basis of market value less the discount applicable under the original Right to Buy disposal.

The Right to Buy

It follows that continuing the Right to Buy, which involves selling at a discount public sector housing stock to households who are already satisfactorily housed, is a serious error. The current housing context is very different from that current when Right to Buy was introduced in that the current tenure balance is no longer capable of meeting the wide range of housing needs. In England, the social sector housing stock (council and housing association) in terms of households in occupation s only 17% of supply, compared with 32% in 1981. Right to Buy has been the main factor contributing to this decline, as well as contributing to the increase in private rented homes as many Right to Buy purchasers have then let their properties or sold to private landlords. At the same time households in privately rented accommodation have increased from 11% to 19%. To propose an increase in homeownership from the current 64% to 70% implies a further decrease in social housing, unless it is proposed that a quarter of private renters can become home owners, which seems highly improbable in the current context.

For Labour to claim credit for introducing council house sales (a proposition made by Hugh Gaitskell in the late 1950’s which did not involve discounts or compulsion) was in the context of a social housing stock which was in most parts of the country adequately meeting the need for non-market housing and was on the basis of councils being able to use receipts to ensure replacement of sold homes. Since the 1980’s, neither of these criteria have applied. We had understood that Labour was considering allowing Right to Buy ‘to wither on the vine’ by phasing out discounts and tightening up eligibility, though not following the Scottish and Welsh precedents of abolition. Given the track record of rates of replacement of sold homes, we are puzzled at the implication that somehow a Labour policy on Right to Buy would guarantee 1:1 like for like replacement, a commitment made by previous governments but clearly not delivered. We would appreciate clarification on this issue.

Funding

We recognise that new sources of revenue for both central and local government are essential for the Labour Party’s vision and policy objectives to be delivered. Until the Labour Party is more explicit about how this revenue is to be raised and the priorities of different programmes, there is inevitably going to be some scepticism about whether the vision or objectives are actually deliverable. We would stress the importance of the most effective use of available resources, and this should not include subsidising house price inflation, capital appreciation by individual home-owners, increasing the profit margins of private developers or the receipts of landowners. However, it is also important to ensure that taxes on land and property, including council tax, stamp duty, capital value taxes, and inheritance taxes both optimise government revenue and avoid negative impacts on the housing market and housing affordability. We are aware that the Labour Party is reviewing options for reforming a range of taxes and levies ( including the operation of the proposed infrastructure levy and the Section 106 regime) and we would stress the importance of taking into account the potential direct and indirect effects of different reform options on housing policy objectives, especial y in relation to the provision of additional socially rented homes and the affordability and quality of the existing social housing stock.