Published: 5 Aug 2015 by Pete Jefferys

While there’s a broad consensus that we need to build many more homes in England, the debate about the type of homes we should build – whether homes to buy, private rent or for social rent – is far from settled.* That’s perhaps why many people were shocked this week by the comments of the Chief Executive of Genesis, a not-for-profit housing association, who said that they would be moving away from the traditional model of building low rent homes and focus solely on market sale and intermediate part-buy, part-rent schemes.

In fact, he went further, telling Inside Housing magazine:

_“_We are not able, or indeed being asked to provide affordable and social rented accommodation for people who should be looking to the market to solve their own problems.”

And when asked about building affordable homes for those on low incomes, he said:

“I could be really harsh and say that won’t be my problem. My problem will be to supply new housing at different price points in locations where the economics of those schemes stack up and because of where we work [London & the South East], the demand will be there for those properties.”

Clearly these are provocative statements for everyone who believes that housing associations have a primary responsibility to help those on low incomes. At Shelter we’d argue that housing associations will always have a choice: if you want to be dedicated to building and managing homes for poorer households, then you always can be.

However, the comments from Genesis are not isolated. They form part of an important and influential school of thought about the future of housing – one that has strong traction within government.

The “market only” view

This school of thought could be called the “market only” view. It sees only a very limited future for low rent affordable housing and certainly doesn’t see government investment as a viable source of new homes. Under this view, genuine social housing is to be seen purely as a small “ambulance service” for the most vulnerable in their time of need, not a long term option for families alongside other tenures. House builders, including housing associations, should be freed to focus on meeting the demand for lower cost homes to buy in order to boost home ownership. Meanwhile the role of government is to subsidise first time buyers through mortgage schemes and force public assets into the market: again to increase home ownership.

However the “market only” view does not stand up to scrutiny:

• First, and most obviously, it won’t build enough homes – it cannot solve the fundamental problem we face. England has never built enough homes without a mix of building for the market and building non-market homes. This is because our private house building model is based on scarcity. Builders can only build at a rate which lets them sell for the highest price (full explanation here). Without a mix of tenure in house building, including subsidised low rent homes, we will simply never build enough again.

• Second, a lot of people cannot afford market rents or prices, or even close to them. It might sound obvious, but it bears repeating. The post-tax and benefits income of the poorest 2.5m households in the UK is £163 per week (including housing benefit). Even the cheapest private rents in most local authority areas will take up the vast majority of that income, leaving little for food, fuel or childcare. Again, supply will not expand to meet this need – doing so would threaten current and future house prices and land values.

• Third, if housing associations become more like commercial developers the whole housing system becomes much more vulnerable to future falls in house prices. By stripping out the capacity of our house building system to build non-market homes, we are storing up a world of pain for the next time that market falters.

Overall, the “market only” view is a failure to understand the problem we face in housing. It assumes that the failure rests with certain types of organisation: ‘bloated’ housing associations, inefficient councils and slow planning departments. The market only view assumes that driving the efficiencies of private markets into these organisations will unblock the pipes and boost supply. There are grains of truth here, but overall it is a massive error.

The problem isn’t with organisations, it is systemic. Even with super-efficient planning departments, hyper-commercial housing associations and councils sweating their assets aggressively we would still not build enough homes. Just look at the cycles of private market house building over the last seventy years, it’s certainly not a story of private market growth as the state has gradually withdrawn.

Private market house building

Ultimately, the board of Genesis and their Chief Executive are making their decision based on the way in which they think the wind is blowing in government. They think that the market view is prevailing and will drive the reform agenda for the coming Parliament.

They may well be right. But anyone who cares about solving the housing problems that so many millions of people face has got to face up to the real and systemic issues that hold back the supply of genuinely affordable homes. Not pretend that there are cheap or easy fixes.

*Shelter’s analysis is that 250,000 new homes need to be built each year in England, of which 30% should be social rent, 20% for shared ownership and 50% for market rent or sale.