16 Feb 2017

Duncan Bowie, Chair of the RSA London and South East Branch
 


There is now a deep crisis in housing supply in many parts of England. The response unfortunately is far short of what’s needed. Policy proposals championed by Government and many commentators are either just tinkering with the problem, or will exacerbate the situation.
We have not learnt the lessons of the 2008 credit crunch and failed to understand the fundamental deficiencies of the current system. Indeed, we would have still faced a housing deficit whether the country had been in boom or bust. The only way ahead is by embracing radical policy change. It is time to throw off long held ideological assumptions as to ideal forms of tenure and the relationship of state to market. While there has been widespread opposition to the Government’s recent legislation both within parliament and from professional and campaigning groups, there is less certainty as to what the alternative is and how we would get there.
There is a systemic housing problem which cannot be corrected by short term measures. More radical solutions are necessary if the housing market is to be stabilised and the delivery of new homes increased. We also need to recognise that if we are to tackle inequity in wealth and opportunities, we need to tackle inequity in housing which is now the central component in inequity between households both within and between geographical areas. It is also central to the growth in inter-generational inequality.
The first priority must be to repeal the 2016 Housing and Planning Act, with the exception of the rogue landlord clauses. Gavin Barwell MP, the new housing and planning Minister has realised that this legislation will do nothing to increase housing supply. Indeed, if actually implemented, it would reduce both social housing supply and the security of new social housing tenants.
The second priority is to redirect current Government housing investment and increase the overall level. This means stopping all forms on subsidy, whether direct or indirect to owner occupied properties and new development for individual or corporate private ownership. Any financial assistance by Government to home ownership or private rented housing should be in the form of an equity stake by a public body, with the equity stake repayable to that public body (i.e. the public body receives its share in any value uplift on resale).
Discounted sale of council and housing association housing constitutes a subsidy to home ownership, by which the purchaser makes the capital gain, and should be terminated. The Starter Homes Initiative which also involves financial support for home purchasers who can then capitalise on market value on sale representing a 20% uplift on purchase price as well as any other gain in market value, should also be terminated.
The Government should reinstate a programme of capital grant to social rented provision through councils and housing associations on the basis of secure tenancies and controlled rents. The level of grant should be on the basis of covering the capital costs of development not covered by capitalised rent income over a 60-year period. This in effect would be a reintroduction of the mixed funding regime running on a system of cost indicators as operated by the former Housing Corporation. Borrowing by the council or housing association would then be entirely fundable from rent income, without recourse to the need to cross-subsidise from other sources, such as through agreements with developers, income from sale of market homes or shared ownership equity or from disposal of other assets. Government limits on local authority borrowing to support investment should be removed and replaced by a prudential borrowing regime where local authorities and other public sector bodies can borrow against the security of their assets and income.
The third priority should be a systematic reform of policy on planning and land. The Government should draw up a national spatial plan which identified general locations for residential and employment growth supported by planned transport, social and utilities infrastructure. The national spatial plan would need to ensure consistency between social, economic and environmental sustainability objectives and be an integrated housing, employment, infrastructure, transport and environmental plan. It would guide national decisions on infrastructure funding and set a framework for the development of regional, sub-regional and local plans.
Local Planning Authorities should be required to allocate housing sites to meet the full housing requirements in their area, or, where this is not possible, reach agreement with neighbouring authorities in their sub-regional or city regional planning area as to identification of residential development capacity. The government should determine these joint planning areas based on travel to work areas and a statutory requirement imposed on the authorities within each area to undertake a combined assessment of housing requirements, a combined assessment of development capacity and should agree on site allocations, based on consistent density and sustainable development criteria. Where agreement cannot be reached, central government should have the power to determine local planning authority residential development targets and site allocations. Local planning authorities should be required to prepare planning briefs for all housing sites, setting out the requirements by built form, density, dwelling size and type and tenure/ affordability based on the assessment of housing requirements in their area. Development proposals which are not in conformity with these briefs should be refused.
Local planning authorities should also have the power to compulsorily acquire any housing site allocated in an approved plan at Existing Use Value (EUV). This is essential if the cost of development in higher value areas is to be reduced significantly. Where a Local Planning Authority grants planning consent for a private development, they should have the power to take an equity stake in the development, so part of any subsequent value uplift is repayable to the authority. This could be used as an alternative to agreeing a planning obligation or requiring payment of Community Infrastructure Levy. There should be a mandatory new minimum standard for all new residential development, irrespective of tenure or location. This should include internal space standards, amenities standards and environmental standards. These should apply to residential units provided through conversion of non-residential premises
The fourth priority should be to reform the regime of land and property tax so it supports housing policy objectives rather than obstructs them. Stamp duty on purchase of residential property should be replaced by a tax on the capital gain on land and property on disposal. Inheritance tax should be revised to increase the tax on the transfer of land and residential property through inheritance. The option of reintroducing schedule A income tax based on the imputed rental value of owner-occupied dwellings should be considered. Valuation of property for the purposes of council tax should be up-rated to reflect current values. There is also a case for the level of council tax being related more explicitly to the size of the dwelling in terms of floor space.
Higher rates of taxes should be introduced for higher value property. Rates of tax on individual property should take into account the level of occupation of properties – properties which are under-occupied to be subject to a multiplier relating to the level of under occupation, with penal rates for vacant property. There should be no limits on the ability of local authorities to set rates of council tax. This would enhance local democracy and reduce the dependence of local authorities on grant from central government.
The core components of reform to the housing market and housing supply are land, ownership, money and power. These are fundamental issues, and any proposition, whether from Government, political parties, academics or practitioners, which fails to operate within these parameters will be inadequate. We must return to a housing policy based on effective use of residential accommodation rather than a policy based on individual asset appreciation.
Duncan Bowie is senior lecturer in spatial planning at the University of Westminster and the author of ‘Radical solutions to the housing supply crisis’.
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.