2017 Housing Perspectives #7: ‘Unfolding before our eyes is a glaring missed opportunity to overcome the housing affordability crisis’
by Alice Martin
In the latest of our exclusive articles compiled as part of the 75th anniversary of the Beveridge Report, Alice Martin argues the government needs to get smarter about selling public land to make sure we get the mix of homes we need.
The New Economics Foundation is pursuing routes to enable more people, in partnership with local institutions and civic powers, to take back significant control over housing locally. Halting the fire-sale of public land, diversifying the types of homes we build and curbing the inefficient, speculative use of housing are three critical steps to be taken now if we are to address both the long-term drivers of the affordability crisis and mitigate potential risks triggered by the Brexit vote.
The UK is facing a major housing affordability crisis with millions of people across the country priced out of a decent and secure home. Following the Brexit vote, new private housing supply – already falling short of what is needed – may well falter further as firms suffer increased material costs and uncertainty over the sale price of their projects.
In the short-term at least we know that this “Brexit effect” is likely to worsen the gap between incomes and housing costs. The sterling depreciation is likely to further erode household incomes whilst house prices and rents are unlikely to reduce as fast.
In the midst of this crisis, the government is pursuing a policy of aggressively selling off publicly owned land – much of which is lying vacant rather than being used for affordable home building. As land is sold and social housing torn down families are torn apart. We are losing control over what is built where, and by whom – and crucially, what is deemed affordable and for whom. A dramatic change of course is needed.
Build affordable homes on public land
Unfolding before our eyes is a glaring missed opportunity to overcome the housing affordability crisis. The public land sell off across the country is not only a waste of public resources, it’s a further stepping back of the Government’s role in addressing the crisis and a significant ceding of power. The sell-off so far has achieved little. Developers are hanging on to newly acquired sites without building, intending to profit from the value of the land alone. As highlighted in the latest Public Accounts Committee report, the rate of new homes built on the land sold so far remains appallingly slow. Meanwhile large developments are being proposed on sites with no plan to include any genuinely affordable homes.
The Government’s costly moves to subsidise the housebuilding sector to build more quickly – whether through de-risking the sites before they sell them off or investing in new roads and other infrastructure – are unlikely to speed things up. Homebuilding targets have been consistently missed year on year since talk of the crisis began.
Policy tinkering and subsidies like this are failing because the problem is structural. The inflated price of land in the UK, propped up by a financial system prioritising loans against property over loans to the real economy, has been a major cause of the housing crisis. Why? Inflated land costs provide a perverse incentive for developers to sit on plots and drip feed new homes at a slow rate to keep house prices up.
We need another approach
In an initial snapshot survey of urban public land sites being offered for fire-sale, we identified 10 plots of publicly-owned land that could provide 4,631 good quality, low cost homes. Building non-for-profit housing to rent and buy on these sites would begin tackling the housing crisis straight away. It would also bring a much better deal for taxpayers, prioritising a long term revenue stream from rental homes over a one off cash receipt for the land.
We found that:
• In the ten sites we looked at, an average 50% of the cost of building affordable housing would be recouped through reduced housing benefit payments over 30 years
• For most of the sites the savings on housing benefits over 30 years are greater than the one-off sales value of the land
• On average, public housing on sites would become net contributors to the public purse after 20 years
• Building affordable housing linked to local incomes on these 10 sites alone could reduce the housing benefit bill by £231m over the next 30 years
What’s more, keeping a stake in land means we can ensure that homes built are put into effective use rather than being left empty or under-occupied. As we’ve seen, soaring house prices create a powerful financial incentive for people to “overconsume” the housing we have and for housebuilders to meet this demand with new developments.
As demonstrated recently by the residents of St Ives, neighbourhood plans and local government taxes can be used to curb this type of speculative demand that proliferates ‘build to leave’ and second home developments. Retaining land in public or community ownership, or as a long term equity stake, will help more regions – whether coastal, rural or urban – put good quality first homes for local residents, ahead of speculative, second home investments.
What kind of homes do we need?
In the midst of the crisis, people in all tenures are losing what control they had over their homes and, crucially, the areas in which they live. The loss of social housing puts those who cannot afford to buy at the mercy of private landlords, with weak protections against eviction or rent hikes. Even those who own a home are living precariously. Home ownership does not mean safety, security or control if you find yourself unable to pay the mortgage, or in negative equity.
In recognition not just of the affordability crisis, but the stark erosion of control people are experiencing – the priority now must be to provide a variety housing models, at scale, that lock in affordability and long term security.
Trying to subsidise homeownership in an inflated market has been a costly mistake. With levels of home ownership at an all-time low, the promises of right to buy and help to buy to give more people a share in the nation’s property wealth have failed dramatically.
Instead we need to scale up the models that give people the long term security and control that, in its existing form, homeownership is failing to deliver. What could this look like?
• Community Land Trusts (CLTs) provide affordable housing by taking land values out of the cost of housing– so the buyers/tenants only pay for the bricks and mortar – with priority given to local people in housing need. An asset lock prevents the land from being sold, which in theory makes CLTs more durable than traditional social housing with homes kept permanently affordable. The trust model can be used to build new homes such as the St Clements project in Mile End, or buy out, manage and improve existing homes as a resident-owned housing association – such as the 640 homes managed by Waltern & Elgin Community Homes in Westminster.
• Mutual Housing Ownership (MHO) is a form of shared ownership which the New Economics Foundation helped to pioneer, in which residents own an equity stake in a mutual property trust rather than an individual property, dependent on what they can afford. LILAC, a co-housing development in Leeds, is the first example of this kind of scheme in action. The growing demand and potential for large-scale MHOs is currently being explored by OPAL housing, a partnership project between Bioregional and Transition by Design.
• Renter cooperatives give tenants security and control over their space and spending. The option of longer-term tenancies and rents set according to incomes allow people to budget and save for the future. If provided on a large scale, these models are an attractive investment option for pension funds and other institutional investors as they provide a long-term rental income.
All of these models work alongside social housing, or themselves can be used as a more empowering way of delivering it. Crucially, like social housing the rental income component means they are financially self-sufficient, providing a revenue stream for the public body or community trust that owns the freehold of the land.
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However without access to affordable land these models cannot be developed at scale. With public land sales tipped heavily in favour of largescale private developers who can produce plans demonstrating how they will maximise profits and achieve ‘best value’ for the sites, the longer term economic benefit of not-for-profit housing schemes – that focus on quality, affordability and long term security for the dweller – are not being considered.
We are embarking on a yearlong project to challenge this bias, in line with RIBA’s recent recommendation that public land must be used for homes that ensure best value over the long term – not in terms of a cash receipt for a quick sale.
Alice Martin is research and campaign coordinator at the New Economics Foundation.
This article was written for the Webb Memorial Trust and the All-Party Parliamentary Group on Poverty as part of the 75th anniversary of the Beveridge Report and is part of a series of articles we will be running in the coming weeks.