A response to Labour’s Lyons report on housing

For almost a year Labour has been touting its Lyons Housing Review as the central plank of its offer for the 2015 manifesto. But its publication today, after so much foreplay, has left me disappointingly unsatisfied.

It would be unfair to say there’s nothing in the report worth having. Minimum standards on space across all tenures and safety in the private rented sector are of course very welcome, and there’s a wealth of minor recommendations that will all be broadly beneficial though individually only incrementally better than current policy.

It’s not that the report has a lack of ambition, the problem seems to be that the ambition was not to solve the housing crisis but to come up with a set of proposals that neither have a negative impact on house prices nor have any cost implications for the Treasury.

As a renter, my heart sinks as this represents a political willingness for me and for people like me to be exploited in perpetuity to the benefit of homeowners, landowners and property developers.

Is this a harsh analysis? No, it’s maths.

Lyons reports that not only does Britain right now need 243,000 new homes per year to keep up with the growth in housing demand but that there’s a backlog of a million homes needed now to meet current demand. Aside from a failure to include the need for new homes to replace those nearing the end of their lifespan this is a pretty good analysis. So it’s inconceivable why the report targets the building of only 200,000 new homes per year by 2020, with the implication that it will be less before then.

The report itself highlights that at the 200,000 new homes target 230,000 jobs will be created, with a boost of 1.2% to GDP. Surely this must be a justification for an even greater target.

In terms of social housing and the growing intermediate housing crisis, there’s very little on the table beyond a rolling back to the policies of the last Labour government. Even the noises about allowing councils to borrow to build social housing are in the context of absolute Treasury control.

The clue to the failure of Lyons to even try to solve the housing crisis is in the framing of the problem. The report fingers a lack of available land and limited building capacity as the source of the housing crisis. On both counts this analysis is wrong. The lack of land is not the problem, it is the cost of the land that inhibits building affordable homes near where there are jobs. And in terms of building capacity, we are a member of a 28-nation free trade area with plenty of builders with all sorts of skills.

The problem with the housing market is the market price. Developers need the market price to continue to rise as their financial models are dependent on it. And when house prices stabilise, they simply stop building until prices go up again. This is partly about their profit maximisation strategies but also about their capacity to borrow, which affects Housing Associations as much as private developers.

It’s this incentive to restrict supply that has to be addressed because housing is an essential utility. It’s not a luxury good like chocolate; we really do have to consume housing every single day. It’s like water, but unlike water the suppliers are allowed to give you poor quality and profiteer from hoarding the resource.

So this is Labour’s problem. They don’t want to spend any money and they don’t want to interfere with a failed housing market. This has left the members of the Lyons group with an unenviable straight jacket and they broadly did the best they could given the constraints. Though even then, you can see a lack of inspiration in the recommendations.

An example of this is the suggestion that political leadership can be delivered by a Housing Minister attending Cabinet and a cross departmental task force. I’m certain that if you asked the last incumbent of that position, former Labour Housing Minister John Healey, he would say that he would have been able to do more if the role had been at Secretary of State level. And that’s what we’re calling for at Generation Rent; a Secretary of State for Housing, with a Housing Ministry – a named person whose career hangs on their success in the role. We want all those cross departmental bits to be moved to the Housing Ministry so that the Housing Secretary has the levers in his or her hands.

“Bits” doesn’t express the true scale of what we’re talking about in terms of power transfer. It is insane that we’re a nation that spends £1 billion on building social housing and £24 billion on Housing Benefit. The Secretary of State for housing should be responsible for the whole housing market, including Housing Benefit, planning and construction skills.

Bank of England Governor Mark Carney described the housing market as the biggest threat to Britain’s economic recovery and this must merit someone with stature in Cabinet and weight with the Treasury, the lending banks and house builders.

But this doesn’t address the disappointing attachment to an unfettered housing market. Land value taxation, stringent rent controls or a new land use zoning powers would all have the effect of resetting land values, and of course, in doing so suppress the house prices of homeowners and topple the business models of property developers.

While I understand the political desire not to upset homeowners and rich people, I can’t understand why it’s ok for taxpayers and renters to continue to subsidise their own exploitation for the foreseeable future. Help to buy, Rent to buy, shared equity and shared ownership are ever more complicated ways of getting a generation of people into hideous debt so that they can prop up the house prices and land values of much more wealthy people.

Lyons’ proposed expansion of shared ownership and mortgage support for first time buyers sounds great but gives far more benefit to landowners than it does to these buyers. It simply allows people to transfer from rent slavery to mortgage slavery or to somewhere in between. Having a target for housebuilding miserably insufficient to meet demand again ensures that property prices for landowners continue to rise.

At Generation Rent we have been advocating an outright departure from the concept of housing as an investment and a move to housing as a utility. We submitted to Lyons our proposal for a second, cost-price housing market where people can buy a cheap home, but they can’t sell it for a profit or rent it out at market rates. Our proposal was also fully privately funded – and yet there was no sign that it had even been considered.

The report does highlight 6.5 million homes underoccupied by people over the age of 45 but suggests no incentive or penalty to encourage downsizing or the letting of spare rooms. It makes a passing reference to the impact of overseas “buy to leave” investment but makes no recommendations on what to do about it. Why not have the same money laundering protections on cash purchases that exist if you want to set up a bank account or use the services of an accountant or a lawyer?

There are no recommendations on the 200,000 long term empty homes in Britain. Why not advocate a new squatters’ right, which would immediately incentivise owners, domestic or foreign, to ensure these homes were occupied?

The Lyons report on housing successfully outlines an effective plan for propping up the housing market and details many technical measures to make it marginally better than it is today. But it also illustrates that Britain’s nine million private sector renters are at the very bottom of the pile when it comes to housing policy priorities.

The market price is the problem for the whole housing market but only private sector renters are paying the full price without getting any return.

The Glasgow rent strike of 1915 led to rent control legislation that same year. If the next parliament fails to address the current inequity, how long do policy makers think it will be before renters realise that the power to impact the market price is already in their hands? Who wants to be the housing minister that presides over a national rent strike?


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