Think-tank unveils new vision for housing in the UK

Published by Jon Land for 24dash.com in Housing

A radical vision for the future of housing in the UK was today unveiled by the Institute for Public Policy Research (IPPR).

The left-leaning think-tank uses the 'Together at Home' report to promote the "social value of home ownership" by expanding the opportunities for people to own their home.

The report, written by Andy Hull and Graeme Cooke, says fundamental reform of the current housing system is required to create the right conditions for their new vision of home ownership to prosper, with the under-supply of new housing and affordability two of the most significant barriers.

It also calls for reform of the private and social rented sectors to ensure that those not interested in home ownership can live in decent, secure and affordable housing.

The IPPR's vision includes:

• Identifying new sources of finance to support more house building by:

– creating and capitalising a national investment bank
– encouraging local authority pension funds (worth over £150 billion nationally) to invest in new housing
– imposing capital gains tax and a new annual holding tax of two per cent of the property’s value on overseas buyers of English second homes worth £2 million or more (measures on which the government is currently consulting)
– adopting fiscal rules and accounting practices based on general government rather than public sector debt to enable local authorities to leverage their assets and income
– prioritising government housing capital expenditure by allocating £750 million more to it each year in the next spending review than in the current spending round (using the revenue generated by recent and proposed reforms to the tax regime for the buyers, sellers and owners of very expensive properties in order to invest while the cost of capital to government is low).

• Shaking up the development industry to raise housing output by:

– allowing failing developers to go to the wall, with government then acting as a clearing house for their land banks
– insisting on rapid build-out and lower profit margins through public land programmes
– encouraging local councils and the mayor of London to release more public land for house building in return for equity stakes that secure public benefit.

• Reforming the mainstream planning system to enable more development by:

– reclassifying for development purposes some low-grade greenbelt land (such as low-value agricultural land and land that has previously been developed)
– allowing local authorities to charge higher planning fees in return for an expedited planning process
– ensuring that councils produce joined-up local plans with neighbouring authorities
– levying a land value tax on all undeveloped developable land above £2 million in value to encourage new building and raise funds for housing investment.

• Establishing a parallel strategic planning system to deliver a new wave of new towns by separating the processes of land acquisition and house building.

The report states: "Important as infill and densification of our existing towns and cities is, it will not by itself be enough to deliver new homes at the volumes the country needs.

"‘New Towns’ programmes in the past have seen the highest level of new house building in this country since the second world war. Notwithstanding the formidable political obstacles and economic constraints such a policy would now face, we propose to reform and revitalise this proven approach, rendering it fit for today’s political and economic landscape."

• Regulating the mortgage market to reduce the risk of a housing bubble by:

– asking the Financial Services Authority to cap the loan-to-value ratio for mortgages at 95 percent
– cracking down on self-certified and interest-only mortgages
– regulating the behaviour of non-banks and buy-to-let mortgage lenders
– exploring the feasibility of extending the existing mortgage rescue scheme into a more widely available ‘right to rent’ for those who face repossession.

• Extending the rights to buy, acquire and manage to all housing association homes, levelling the playing field in terms of opportunities for ownership and control in social housing.
• Promoting innovation in alternative models of ownership, including shared equity, mutuals and cooperatives.
• There are also strong grounds for making better use of our existing supply of housing, beyond the desire to support sustainable homeownership. This could be done by incentivising owners of empty or under-occupied properties to bring them into full residential use by:

– removing the council tax discount on long-term empty properties
– uprating the relief on income tax on renting out a spare room in line with RPI
– supporting the development of new HomeShare schemes
– encouraging local authorities to use empty dwelling management orders more often
– enabling the change of use from ‘commercial’ to ‘residential’ without the need for formal planning permission when properties have been vacant for over a year.

The report states: "Homeownership is an aspiration that runs deep in the vast majority of English people. It allows us to put down roots, gain a measure of security and feel part of the neighbourhood in which we live.

"Owning a home is about far more than accumulating an asset. Indeed, our current housing problems stem in part from various attempts to suggest otherwise. The political right has often encouraged the notion that housing is primarily a personal financial investment and pursued distorting and destabilising policies based on this partial conception.

"Largely accepting this economic frame, the left has sometimes adopted a sceptical posture towards homeownership, fearing that it drives inequality, instability and exclusion. Both political traditions have neglected the social value of ownership, the sense of belonging and identity that it can bring, and its potential to support aspiration and
security, mobility and roots.

"Our vision is one of a society characterised by broad and sustainable homeownership. This would mean expanding the opportunities for people to own their home, where this is what they want, in ways that are beneficial to the economy as a whole in the long term.

"Sadly, however, our present housing system is very far from embodying this ideal. The principal reason is an under-supply of homes of the type in the places and at the prices people want and can afford.

"This, in turn, is linked to trends in house building, household formation, population change, the labour market, regional imbalances and wages. Short-term factors create further headwinds, especially the effects of the economic
crash and recession on public expenditure, living standards, the development industry and the mortgage market.

"All the indicators suggest that, without countervailing action, homeownership rates will continue their steady fall.

"And it will be those with the least economic and political power who will miss out. Reversing this decline will not happen by accident – the forces acting in that direction are strong. In addition, the experience of recent years teaches us that there are good and bad ways of pursuing higher rates of homeownership."

On reforming the private and social rented sectors, the report states: "Too often in the past, the two rental sectors have been treated independently both of each other and of the owner-occupied sector.

"This contributes to segregation, while undermining mobility. To advance a more integrated society, those who live in the rented sector, whether by choice or necessity, must have an experience that is as similar as possible to those who live in homes they own.

"This means enjoying good-quality accommodation over which they feel that they have a degree of control. It must also, as far as possible, mean people are able to move between sectors and have the chance to own their homes in the longer run, if that is what they want."

Responding to the report, Mark Henderson, Home Group chief executive said: “The IPPR report outlines what Home Group has been saying for a long time. While many people wish to own their home there is a significant section of society for whom that will never be an option.

“We need to ensure that we provide high quality accommodation for people and that we also provide homes in the areas of greatest need.

“The suggestion to give local authorities and other Governmental bodies greater freedom in making land available for development along with encouraging alternative sources of funding and investment in the sector is something we support.

“We agree with IPPR that a greater mix homeowners living alongside social renters produces balanced communities and promotes social mobility. We would like to see increased requirements for use of section 106 provisions in the planning process. ”

Home Group, which was one of the sponsors of the report, also welcomes the idea that social housing providers can go beyond merely renting out bricks and mortar and instead be an instrument of social change through the provision of health and criminal justice services.

Home Group’s subsidiary Stonham – the largest provider of care and support in England, is currently working with a number of local authorities and Primary Care Trusts to look at expanding the services it provides and examine whether some services currently provided by public bodies could be delivered in the home by third sector providers.

Mr Henderson explained: “A major part of our philosophy is to provide housing with care.

“Many of the people who are in the greatest need of social, health care or criminal justice provision, live in social housing and we believe the home can act as a hub for many services currently provided by the public sector.

“There are opportunities to provide some of these services in the community. We’re all ready running exciting pilot projects, such as our A Good Death service, which enables people who are terminally ill to remain at home for longer which benefits them and reduces the impact on NHS budgets.

“Social housing providers can also help with the provision of some low level criminal justice function including the accommodation and monitoring of those on bail or early release from prison along with providing offender rehabilitation programmes.”

David Orr, chief executive of the National Housing Federation, said: "The IPPR are absolutely right that the nation’s housing benefit bill could be reduced if there were sufficient affordable homes to go round.

"Unlocking investment to build new homes is a way of managing down the housing benefit bill, by addressing the weaker supply side, and boosting the economy. Yet there is still too little recognition from Government as to the impact a strong housing sector will have on our economic recovery.

"Not only does it drive growth quickly but, unlike infrastructure investment, almost all of its benefits are retained within local economies. Local jobs are created, local suppliers used and local people housed.

"More must be done to encourage sustainable homeownership, including support for the role that housing associations play in offering shared ownership to help aspiring homeowners buy into their homes. However, extending the right-to-buy model to include all housing association homes would reduce the number of social rent homes and make it difficult to develop more affordable homes in the future."