Another budget, another missed opportunity to build the homes we need.
Housing was once again prominent – just as it was when Help to Buy was launched in 2013 or Stamp Duty cut in 2014 – but the main policy announced was yet another gimmicky scheme not even close to facing up to what’s needed. Instead of bold plans to build affordable homes, we had more government cash to prop up high house prices.
What really frustrated me yesterday was the fact that the government are clearly willing to spend significant money on housing, just not on building homes. It simply won’t wash in the future that ‘there’s no money’ for housing. There is, so spend it in a useful way.
The Help to Buy ISA will cost at least £2.1bn according to the government, which could rise to well over £3bn if the scheme has high take up (and with free cash, why wouldn’t it?). That money could instead build north of 65,000 new homes, with a priority for low Social Rents.
If the take up of Help to Buy ISA is high, then by 2020 we’ll spend the same amount on Help to Buy ISAs as is needed to plug the affordable housing gap. What a wasted opportunity.
I’m not even that convinced it will help those it’s intended to help. It will take nearly 5 years to save enough through the scheme to claim the full £3,000 subsidy from the government, by which point house prices are expected to be £40,000 higher. For those truly priced out without a deposit then, this won’t take them any closer to their own home. Unless we deal with the reason it’s so hard to save a whopping deposit – high house prices – there’s no light at the end of the tunnel for struggling renters who can barely save anyway.
In reality then, Help to Buy ISAs are more likely to provide a bit more cash to those who are already fortunate to have help from the Bank of Mum and Dad. Should that be a priority for public investment? As John McDermott at the FT argues, the Treasury knows this weakness and that’s why this sort of scheme has been rejected in the past. Most of the people it helps would have been able to buy anyway.
So what should the budget have done for housing?
- The money spent on Help to Buy ISAs should have been spent on building homes instead. The government should increase the Affordable Homes Programme by £1.2bn per year and the extra cash should prioritise funding for desperately needed Social Rented homes. Combined with other measures, this would double affordable home building over the next parliament.
- A better savings scheme would be Help to Build ISAs. Capital Economics have shown how using ISA accounts to provide value loans to Housing Associations could help build thousands of affordable homes. This is how the majority of affordable housing is funded in France.
- We should create a Housing Investment Bank, within the Homes and Communities Agency. As well as running the Help to Build ISA scheme, this bank would provide long-term finance to England’s growing cities and new Garden City Corporations to buy land and build the sustainable new communities we need.
- We should allow councils to borrow prudentially against their assets, in order to build new local affordable housing. Raising the artificial caps on their borrowing to a fair level could help build nearly 10,000 extra affordable homes per year.
A package like this, combined with far greater devolution of powers and budgets to city-regions to tackle their own housing problems, would have been a far more credible plan.
There were a few glimmers however. Buried in the detail is a bold plan for the government to take the lead in a major housing scheme near Cambridge – a move that’s desperately needed after years of stalling. The government shouldn’t be afraid of targeted intervention on the supply side, when it seems so enthralled with intervention to prop up demand.
There was also more cash and priority for Housing Zones, a concept that’s going down the right lines (local leadership, public/private joint working) but needs rocket boosters. We would argue city-regions and developers should be able to negotiate lower land prices and plough the savings into affordable homes and infrastructure. That’s a way to build affordable homes without upfront public investment.
Overall, this budget was not what we needed to solve the housing shortage and that’s a disappointment. But if it has proved one thing, it’s that politicians can’t ignore housing any longer: they just need to pick the right solutions.