Duncan Bowie on the Tories’ latest wheeze to reduce social housing
Boris Johnson’s post-Partygate policy relaunch centred on two proposals relating to housing policy. Both centred on the Conservative Party’s obsession with promoting home ownership by seeking to attract households into home ownership who cannot afford it. This is based on the belief, which has some basis, that homeowners are more likely to vote Conservative. This fits in with a narrative of implying those in rented council homes are second-class citizens. As put forward by Michael Gove, until recently the secretary for levelling up, the first of the two proposals is to enable tenants of housing associations the right to buy their homes. This has been proposed by Tory governments before, but dropped in favour of pilot or voluntary schemes.
There are a number of obvious problems with the scheme. Firstly, most housing association tenants cannot afford to buy their homes even with a significant subsidy. Secondly, most housing associations are charitable bodies and cannot in law, and in terms of their charitable objectives, sell assets at less than market value, and therefore require compensation for loss of assets. Thirdly, the Government has not said how this compensation is to be paid for – it would have to come from government income.
There is a further problem – the Government has promised sold properties would be replaced ‘like for like’. This was also promised by government in relation to the Right to Buy scheme for council tenants, introduced by Margaret Thatcher in 1980. In practice, councils (under the statutory scheme) and housing associations (under the pilot scheme) have much lower replacement rates: on average, one home replaced for every three sold.
The policy does nothing to add to overall housing supply while leading to a further loss of rented homes. We have witnessed a loss of 70% of council rented housing stock over the last 50 years. Moreover, it is the best homes which tend to be sold, especially the larger street properties, while the replacements tend to be smaller flats. To reduce the social housing stock available for letting to lower income families in greatest need and to force charities to sell off assets originally provided to meet charitable objectives is clearly immoral.
If you think this proposal is bonkers, just listen to the second proposal: tenants on housing benefit should be able to use the benefit to fund mortgages to buy a home. This beggars belief. Most tenants in rented homes are in rented homes because they cannot afford to buy. Tenants with insufficient income to cover their rent, either because they are unemployed or disabled or in low-income jobs, get housing benefit (for private rented tenants, this is called the local housing allowance) to contribute to their housing costs. In an increasing number of cases, the benefit or allowance is insufficient to cover rental costs as caps are applied.
The proposal that low-income tenants could then use their housing benefit to pay towards home ownership is patently absurd. If your housing benefit does not cover your rent, or even if it does, there is no benefit left to contribute to saving up for a deposit, let alone get a mortgage. Moreover, no lender could possibly assume that such an income is guaranteed for a 30-year mortgage period or longer. Housing purchase costs are increasing (the national average is now £266,000, with the London average £650,000 for a second-hand property, £743,000 for a new build), while mortgage interest rates are also increasing from the current all-time low.
These policies are unworkable and irrelevant. Johnson and Gove are more interested in populist rhetoric than actual delivery. Treasury officials surely can’t be happy with schemes which are unfunded. The Government says it has yet to do the impact assessments on the schemes and that we should wait for detailed announcements on how the schemes would work. This only shows that ministers haven’t a clue.