Talking to the Treasury

This autumn, the Treasury will be sorting out what is going to happen to public spending over the rest of the Parliament. They’ve asked anyone who thinks they have something to say to contribute so (with our friends at National Federation of ALMOs, TPAS and Placeshapers), we thought “why not?”  After all, the report Capital Economics did for us and NFA talks the Treasury’s language. 

Fairly or otherwise, there is a view in Government that the social housing sector has too often simply held out the begging bowl.  Our submission takes a radically different line:  the proposals we make are about saving money and getting more homes built, something we know matters to the Treasury, because housing scarcity and affordability, and the boom and bust and other problems which tend to go with a dysfunctional housing market are a big problem for the economy. 

Over thirty years of not building nearly enough homes of any kind, including at rents low-income households can afford, means there is a growing problem: the Government has to pay, through the welfare system, for people to live in expensive private rented housing.   The number of working households claiming housing benefit in the private rented sector (we’re not talking about Benefits Street or “shirkers” here) has more than doubled in the last 6 years. 

Using the findings in the Capital report, we show that over the next 50 years, starting to build social rent homes at scale will mean the Government borrows less (over 5 per cent of national output), largely because many more low-income households would pay sensible rents, and either don’t need to claim benefit, or claim less.   At the same time, even if private sector building doesn’t increase too, the country would be building over 200,000 new homes a year, in the ball park which is needed.  If we carry on doing this year after year, as we propose, we would start to make a dent in house prices and rents across the board. 

We know the Government wants more people to be owner-occupiers too.  Building low-rent homes is not an obstacle to this, quite the reverse.  People who want to buy often find themselves trapped in a cycle of paying rents which are so high they can’t save for a deposit.  If they can pay sensible rents for a few years, they may find they can save enough to get a mortgage.  That could be buying in the market, or buying the home they live in through Right to Buy.   If landlords are allowed to keep enough of the sale receipt to build another low-rent home, we end up with a new owner-occupier household and we can still house another who are not able to buy at the moment.   A lot more building will also help more generally, by tackling house price inflation, and providing the basis for more efficient supply chains.  All this seems more likely to do the trick than a few “Starter Homes” which will still be out of the reach of lots of people

But (and there always is a “but”) we know the Treasury are worried about the short term cost of building lots of new properties.  The proposals in the Capital report aren’t actually all that costly (because we can’t jump from building 20-30,000 social homes a year to 100,000 overnight), but, drawing on what Capital say, we suggest ways the Government could finance that investment without more public borrowing: changing the national accounts so borrowing for investment in council and ALMO housing businesses is not treated the same as borrowing to pay welfare benefits, and setting up a Housing Investment Bank (or maybe a number in the different City Regions) to finance building at low interest rates. 

Let’s hope they listen.  If you like what we say in the submission, do send it to your MP.  And if anyone reading this lives in the Tatton constituency….

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    UPDATED October 2016 Capital Economics report: Building Social Rent homes
    SHOUT Supports ending the Housing Crisis in a Generation