Housing policy is a disaster – so let’s make it worse

http://www.theguardian.com/commentisfree/2015/may/29/housing-policy-buy-to-let-disaster

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George Osborne reminds us so often of his “long-term economic plan” that it’s hard sometimes to remember he hasn’t got one. The chancellor does have a long-term economic belief, though, which is that if you cut taxes and state subsidy, economic plans will sprout up all over the place, melding together into one big “plan”. Hopefully. The government has a long-term economic hope that the consequences of its short-term economic plan will be positive.

Even though the Blair-Brown interregnum involved quite a lot of state spending, they left one aspect of the previous Tory government’s long-term economic hope pretty much to its own devices. The UK’s long-term economic plan for housing has been running ever since tenants got the right to buy their council house in 1980. Part of the plan was that councils should refrain from supplying affordable housing, liberating the home-building sector from unfair competition and causing it to start providing affordable housing itself. Alas, the result instead has been a chronic housing shortage, making homes less affordable than ever. What went wrong?

Housing associations, it appears. With councils greatly hampered in their ability to provide affordable housing, and the private sector discovering that people were so keen to buy that there was absolutely no need to make the homes they were building “affordable”, housing associations moved into the councils’ slot and became the premier suppliers of affordable homes. Now, 35 years on, housing associations in turn face the prospect of being forced to sell their assets at a government-subsidised discount. Which, of course, will make it harder for them to raise the money to build new affordable homes, even though they’re more or less the only people doing it.

Related: Ex-council homes in London are a 'gold mine' for landlords

In a twist that would be delicious if it wasn’t so tragic, the government counters those pointing out that their idea will exacerbate a huge problem, rather than help to solve it, by explaining they are also going to force councils to sell their most expensive council houses and spend the money on building new ones. Which was exactly the thing that right-to-buy legislation forbade in the first place, thus making the need for housing associations more urgent. In other words, we’ve just spent a third of a century discovering a policy didn’t work, on about 40 different levels, only to spend the next third of a century re-enacting it.

I’d like to believe the government’s rhetoric – that this is a policy aimed at improving the lives of deserving individuals who can currently only dream of owner-occupation. The difficulty is that those people live in private rented accommodation, and can currently only dream of council or housing association occupation. The government’s plans only make those ideas even more distant. If anyone needs the right to buy, it’s people who are renting privately.

Yes. I know. The government would run considerably more than a mile. But it’s still a thought experiment worth having. In buy-to-let-landlord world, all is not well. Landlords complain that the cost of buying a property is so high in many places that rents need to be prohibitively high to cover the mortgage, let alone make a profit. It’s hard to believe people think they should be able to make a profit on a transaction whereby they magnanimously allow someone to buy a valuable and appreciating asset for them, in return for letting them look after it for a while. But there you are – they do.

Giving tenants the right to buy – or at least enter into a shared ownership agreement – if they are covering more than, say, half the mortgage might educate landlords into understanding there’s no such thing as a free house. Or shouldn’t be, anyway. You could even waive this obligation if the landlord had provided a new-build home himself and was marketing it at a social rent. You could call him a “housing association”. It would be exactly what the government is proposing to do, except completely inverted.

Decent houses built now could be providing the pension income of the future

Britain is in such a weird position in terms of housing. Everyone knows what is wrong – demand outstrips supply. But the asset inflation is so extreme and so lucrative that for people even modestly on the “right” side of it, fixing this miserable and loathsome problem feels like killing the goose that’s laying the golden eggs. For many years now, Westminster has spent all of its energies on thinking up ways of making the goose keep on laying. The fact they can stand before us calling this socially toxic short-term desperation a “long-term economic plan” is astounding.

The pity is that housing works really well as a long-term asset, and really badly as a short-term one. Britons are delighted to live in homes that have been standing for hundreds of years. But tens of thousands of homes have been built and demolished within my lifetime, on the principle of piling ’em high and renting ’em not-very-cheap. It seems to me that decent houses built now could be providing the pension income of the future. But even members of parliament think the smart thing is to buy-to-let or flip for a quick return. So the long-term economic plan that housing could so easily deliver simply never does get laid.