A mixed reception for Labour’s housing green paper

 

In April, the Labour Party launched its strategy for tackling the housing crisis in England. Housing for the Many presents a 50-point plan, with proposals that include:

  • investing £4bn a year to build one million ‘genuinely’ affordable homes over 10 years
  • lifting of council borrowing caps
  • removing the ‘viability loophole’, making it impossible for developers to dodge their affordable housing obligations
  • zero tolerance of developments without any affordable housing provision
  • a stricter definition of affordable housing
  • scrapping the ‘bedroom tax’
  • suspension of ‘right to buy’
  • cut-price government loans for housing associations
  • protected housing benefit for under 21s
  • consideration of mandatory space requirements
  • a new generation of garden cities and new towns

Following its publication, analysts in the housing and property sectors gave their thoughts on the strategy.

More affordable homes

The most ambitious proposal is the plan to build 100,000 homes each year.

For Emily Williams, associate director at Savills, this proposal was the most eyecatching:

“The emphasis on investing to deliver more homes to solve the housing crisis, rather than relying on housing benefit to support people who can’t access market housing, is something we have been talking about for a long time.”

However, Savills estimates that the £4bn figure is insufficient for Labour to hit its one million homes target, suggesting that a further £3bn would be needed.

Elsewhere, Carl Dyer, partner in Irwin Mitchell solicitors expressed concern about where the money would come from:

“After Labour’s last 13 years in power from 1997 to 2010, their out-going Chief Secretary to the Treasury famously left a note for his successor: “Sorry, there’s no money”. There is still no magic money tree, and no indication here how these homes are to be funded.”

Developers

Labour’s policy of no development without affordable housing has raised concerns in the property industry.  Justin Gaze, head of residential development at Knight Frank told Property Week that the proposals risked deterring developers from undertaking new projects:

“There will be instances where affordable housing cannot be provided, for example on conversions of some buildings where it’s difficult to deliver both open-market and affordable housing side by side.”

The land market

One of the less reported proposals caught the eye of Luke Murphy, IPPR’s associate director for the environment, housing and infrastructure. Writing in CityMetric, Murphy highlighted the proposal to create an English Sovereign Land Trust that would allow local authorities to buy land at cheaper prices to build affordable homes.

“It is here, through intervention in the land market, that the state could have the biggest impact – not to just build more affordable homes, but to make all new homes built more affordable.”

But he argued there was still room for improvement:

“… on land reform, there is scope to be bolder and go further to ensure that affordable housing really is available ‘for the many’, rather than the preserve of the few.

Redefining affordability

The Royal Institution of Chartered Surveyors (RICS) commented on Labour’s proposal to redefine affordable housing to relate it to average incomes rather than housing as a percentage of market rates:

“This makes sense as a measure of affordability, however, this will likely lead to a trade-off between affordability and the numbers of affordable homes delivered, unless capital grants are available at the outset, geared to the income segment to be accommodated.”

RICS also welcomed the plan to lift council housing borrowing caps.

“This is certainly something RICS has been calling for, however appropriate measures must be taken to ensure that local authorities do not expose themselves to too much risk.”

Benefits reforms

The Chartered Institute of Housing wondered whether Labour would reform the benefit system to bring it closer into alignment with housing policy:

“Of course, abolishing the bedroom tax will help, but tenants’ ability to pay their rent if they are on low incomes is now under assault from the whole range of welfare reforms, of which bedroom tax is only one.”

Final thoughts

The housing crisis has been decades in the making, and there is no quick fix for tackling the problems of housing shortages, affordability and homelessness. Just last month, research by Heriot-Watt University found the chronic shortage of housing in the UK was greater than first thought, amounting to four million homes. To meet the backlog, the researchers estimated that the country needs to build 340,000 homes a year until 2031. This is significantly higher than the targets set both by the Conservative government and the Labour Party.

The new green paper from Labour has presented clear alternatives to the government’s housing policies, and later this year the government is set to publish its own green paper on social housing. The debate will continue, and housing will remain high on the political agenda.


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What’s all the fuss about housing affordability?

brightly painted housesBy Brelda Baum

In the Radio Times Magazine last Sunday, I read about a TV programme called ‘How rich are you?‘. This Channel 4 offering set out to examine the polarisation of wealth in the UK. Having watched the programme, I’ve become more aware that wage distribution has experienced dramatic changes over the last three decades and the majority of earners have become poorer in relative terms. It seems that our wealth gap is the widest in Europe and, to quote from a Richard Bacon article in the same magazine, on the subject:

‘…the richest 10% has more than 100 times the wealth of the poorest 10%; and Britain is the only G7 country where wealth inequality has grown since the start of the 21st century. It seems that ‘the rich are getting richer’… and ‘if you’re born into the bottom 10%, your chances of getting into the top 10% are between 3% and 6%’. 

This scenario clearly links with very real concerns about inequality and affordability. Put simply and in stark terms, if our major Smart Cities and towns become ‘unaffordable’ for the ordinary person, if he/she cannot afford to live in such urban areas, who is going to drive that train or bus? Take care of our health and social care needs? Who is going to collect our rubbish? The links between affordability and the likelihood of future localised labour market shortages goes on and on. For example, it’s been estimated that the economic output of London could reduce by £1 billion per year with a cumulative cost of £85 billion by 2025, due to the capital’s failure to provide suitable housing for core workers – including young, highly skilled, affluent renters.

Of particular interest is the use of the terms ‘affordable’ and ‘affordability’ within the housing context and how the impacts of affordability (or lack of affordability) spill over into a range of other social areas, such as poverty, health, education, wellbeing, and food choice. But what is meant by affordable/affordability?

The Oxford English Dictionary defines affordability as ‘The quality of being affordable; inexpensiveness’ and the adjective ‘affordable’ is described as something ‘That can be afforded (in various senses); inexpensive, reasonably priced’. The key terms here are surely inexpensiveness and reasonably priced.

A definition set out in ‘Affordable Housing and the Labour Market in Scotland‘ provided the following measures of affordability:

A household is considered likely to be able to afford a home that costs 3.5 times the gross household income for a single earner household, or 2.9 times the household income for dual income households. A household should be taken as being able to afford market housing in cases where the rent payable would constitute no more than 25 per cent of their gross household income’.

The Scottish Government defines affordable housing in the Scottish Planning Policy as ‘as housing of a reasonable quality that is affordable to people on modest incomes’. It indicates that ‘in some places the market provides some or all of the affordable housing needed, while in other places it will be necessary to make housing available at a cost below market value to meet an identified need. And that a range of tenure types can contribute to affordable housing, including social rented, subsidised low-cost sale, shared ownership and shared equity; plus unsubsidised low cost housing, mid-market or intermediate rented’.

According to a 2011 Shelter report, ‘the threshold of affordable housing costs … is at between 25% and 35% of net household income’. It also suggests that rents and service charges should cost no more than 30% of net household income. For example if a median average private rent for a two bedroom home takes up: 50% or more of median average full-time take home pay – it’s ‘extremely unaffordable’; at 40%-49% its ‘very unaffordable’; at 35%-39% its ‘fairly unaffordable’; at 30%-34% its ‘fairly affordable’; and at under 30% of take home pay, its ‘affordable’. Arguments for a ‘living wage’  continue to be voiced, and would go some way to address the affordability conundrum.

The Department for Communities and Local Government has developed a housing affordability model to consider the required levels of housing production, necessary to meet regional affordability targets.

Affordable rented housing is defined by the Homes and Communities Agency as ‘Rented housing provided by registered providers of social housing, that has the same characteristics as social rented housing except that it is outside the national rent regime, but is subject to other rent controls that require it to be offered to eligible households at a rent of up to 80% of local market rents.’

And in DCLG’s 2012 ‘National Planning Policy Framework’, affordable housing is defined as ‘social rented, affordable rented and intermediate housing, provided to eligible households whose needs are not met by the market. Eligibility is determined with regard to local incomes and local house prices. Affordable housing should include provisions to remain at an affordable price for future eligible households or for the subsidy to be recycled for alternative affordable housing provision.’

The focus of these definitions appears to be primarily on the relationship between income and housing costs (for purchase or rent). But there is also a need to consider wider affordability factors such as cost and quality of public transport, access to education, access to social and leisure facilities, and the range of local retail options etc. These are all considerations when making an affordability assessment of a neighbourhood, town or city and all need to be factored in when assessing the affordability of housing that is available.


 

Further reading

Florida’s planning requirements and affordability for low-income households

Housing and transport expenditure: socio-spatial indicators of affordability in Auckland

The Idox Information Service has a wealth of research reports, articles and case studies on a range of housing topics. Abstracts and access to subscription journal articles are only available to members.