Must try harder

“We have to confront this simple truth: if we want more people to own a home, we have to build more homes … We want a functional, stable housing market.”

Not my words – the words of the Chancellor of the Exchequer.

In his Autumn Statement earlier today, George Osborne echoed what Shelter has been saying for years: that the only way to fix this country’s massive housing crisis is to build more homes, to stabilise house prices, and to make housing more affordable.  The fact that this is now a truth almost universally acknowledged in political circles shows just how far we’ve come.

Look closer at the detail of the Autumn Statement, though, and what emerges is a piecemeal, underwhelming approach to tackling a problem – built up under successive governments – that is now so big it demands bold, visionary solutions.

There were some good ideas within the Statement.  The announcement that Local Authorities will be able to borrow up to £300 million more to pay for house building is certainly good news, and something which Shelter has called for in the past.  Divide that £300 million between England’s 326 Local Authorities, though, and it doesn’t look like the game-changing figure that we had hoped for.

Similarly, the decision to make foreign owners of residential properties pay Capital Gains Tax when selling their homes is a small but welcome step towards stabilising a property market that is in danger of spiralling out of control.  But it leaves intact the tax advantages that help buy-to-let investors to outbid first time buyers.

More interesting is a £1 billion pound sum to unlock stalled large sites – including in Manchester – which will be spent over 6 years and is projected to provide 250,000 homes. The details on this on will be vital. What sort of guarantees or loans are being made? Can government really ensure 40,000 new homes a year on these sites without a more competitive development sector?

Also interesting, if more worrying, was the line about selling off ‘high value social housing’. There is little detail on this in the official documents and we need to know what scale is being proposed. Policy Exchange have proposed mass sales of affordable homes in precisely the places they are needed most, which would be very concerning.  But in certain cases it may make sense to sell a few high value homes and build more with the proceeds, as councils already do.  The key test will be whether the new homes built are genuinely affordable.  If not, we risk swapping social rents for much more expensive ones.

But the biggest cause for concern – and frustrating in its lack of detail – was the Chancellor’s stated intention to place a cap on future welfare spending.  This is something which he has proposed before, but today gave us a little more information on how it will work.  At the start of each new Parliament, beginning in 2015, the Chancellor will set a cap for welfare spending for each of the next five years.  If that cap is breached, the Secretary of State for Work & Pensions will need to appear before Parliament and explain why it has been breached and what they intend to do about it.

What we don’t know is what will happen to people’s benefits if that cap is breached – and so what the impact will be on the many families who rely on the housing safety net.  This is worrying for us, and not an area where it is helpful to be vague.

Beyond the Westminster bubble, thousands of real people will be wondering if this announcement means yet another cut in the money they have to live on.  The Chancellor was clear that this cap would include Housing Benefit, which has already been cut severely.  Housing Benefit provides a vital safety net for those of us who have to live on a low wage, who lose their jobs or who become suddenly ill – which could happen to anyone – and keeps a roof over people’s heads while they get back on their feet.  Today’s announced cap must not result in this safety net being cut back even further than it has been.

If the Chancellor is serious about saving money, he should invest in bricks and mortar.  It is our lack of affordable homes, as well as the gap between wages and rents, that has caused the Housing Benefit bill to rise year on year – to a point where 95 pence of every pound spend on housing is spent on benefits, and a paltry 5 pence of that pound is spent on building.  Investing such a small amount in our future homes is never going to solve the problem.

Which brings us back to where we started, and George Osborne’s aim to “build more homes”.  It is absolutely the right ambition: it would help stabilise the housing market, it would give families across the country affordable homes to call their own, and it would bring down a rising Housing Benefit bill in a sustainable way that doesn’t leave millions of families on a knife-edge and at risk of losing their home.

But we don’t just need a few more homes in order to do this.  We need thousands and thousands – at least 250,000 a year, to be precise – and tinkering with taxes and borrowing limits, while imposing a cap on welfare that could cause real pain to families across the country, is not the way to go about it.  If the Chancellor is serious in his aims, he’s going to need to think an awful lot bigger than this.

  1. Out of curiosity, what are the tax advantages for buy-to-let investors over first time buyers?

  2. I agree that the only way to fix this country’s massive housing crisis
    is to build more homes, to stabilize house prices, and to make housing more
    affordable. New homes
    should be affordable to those who need them, environmentally-friendly, and
    provide adequate amenities. As the article says, many countries decided to make foreign owners of residential properties
    pay Capital Gains Tax when selling their homes is a small but welcome
    step towards stabilising a property market that is in danger of spiralling out
    of control, for instance, Canada did it. If the property is used as a home and a principal residence as part of
    landing in Canada as a new immigrant, any gains on a future sale will not be taxed. If the property was first used
    as a rental property and then changed
    to a principal residence, taxes will apply on any gains calculated from the
    cost on the date purchased, to the fair market value at the date of the change
    in use.

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