In a piece for tomorrow’s FT, I describe today’s two housing announcements – and their promise of 200,000 new homes and 400,000 new jobs – as “optimistic, verging on the far-fetched”.
But as one minister pointed out to me (as we trudged through the Manchester drizzle) the figures haven’t been given a timeline. He is right: no one has said that this will be achieved within a year or two, or even in the life of this parliament.
So what is the government doing?
- Firstly council house residents will be incentivised to use the existing “right-to-buy” scheme through bigger price discounts. This could generate funds to build new social housing on a one-for-one basis.The right-to-buy scheme is seen as a Thatcherite success but led to a fall in social housing stock: there is now a waiting list of about 5m individuals waiting to be housed. Right-to-buy deals have slowed to just a trickle (around 3,000 last year) partly because residents now typically pay around 90 per cent of the market price for their home. Bigger discounts should mean more more deals. Senior DCLG figures tell me that until the mid-90s the discount was around 30 per cent, which generated about 30,000 sales a year. Expect a return to that kind of figure.Accelerating right-to-buy may be a vote-winner with existing residents who will enjoy a windfall. But because of deep cuts to the social housing capital budget the replacement homes will have to charge higher rents at up to 80 per cent of the market rate. Will tenants in the new social housing struggle to pay this – in some cases double the current level – even with housing benefit support?
- Secondly the prime minister said progress was being made on a “build now, pay later” scheme – first announced in March – which could by 2015 see 100,000 homes built on state-owned land with no upfront cost to developers.By giving away public land to housebuilders – and only taking payment once the homes are sold – the government hopes to revive the flagging industry.The “build now, pay later” scheme is still at an early stage; contracts have only been exchanged on a handful of sites. (Although ministers will announce a few such deals on Wednesday, I’m told.) And how much of this land is where people want to live?Meanwhile it is still hard to change one of the fundamental problems afflicting the building industry: there is little credit for many builders to produce speculative schemes. There is also less appetite than there used to be from banks to provide mortgages for first-time buyers or buy-to-let.