Selling expensive voids to increase social housing supply? Southwark shows the way

This morning Policy Exchange have published a report entitled Ending Expensive Social Tenancies. It argues that with a housing shortage it doesn't make sense for councils and housing associations to retain million pound houses when they become vacant.

Nobody would be thrown out of their homes under the Policy Exchange proposal. The policy would apply when homes become vacant. For expensive social homes turnover is 3.5%. That comes to 28,500 properties becoming available a year. Selling them would release £5.5 billion for housing construction. That could build between 80,000 and 170,000 new homes a year (at Parker Morris standards.)

What constitutes expensive? Policy Exchange suggests a "regional median" of average property prices.  A council property valued above that would be sold. Thus in London the threshold would be £290,000, in the north east of England £119,000. The number of bedrooms would be taken into account. (In London the median for a one bedroom property is £170,000 for four bedrooms £390,000.)

I have written before about how, when I was on the management committee of the Shepherd's Bush Housing Association, I suggested that retaining a £4 million house in Kensington Square wasn't the most effective way to alleviate housing need.  This turned out to have little support.

It is an odd brand of socialism that argues that the state should provide luxury mansions for the few rather than sell them to enable an increased supply of housing for the many. Socialism by jackpot. Yet that is the brand of socialism favoured by David Orr, the chief executive of the National Housing Federation.  It is also the socialism favoured by Karen Buck, the Shadow Minister and Labour MP who debated the issue on the Today programme this morning.

On the other hand, it is not an approach favoured by most voters, or even most Labour voters. 63% of Labour voters agreed with the statement, when polled by YouGov, "people should not be offered council houses that are worth more than the average in their local authority."

Nor is retaining expensive council properties a policy that Cllr Peter John, the Labour leader of Southwark Council, recognises as sensible. He doesn't think it is the best way to get more homes or to cut the 19,000 waiting list. 

This morning he tweeted:

Policy Exchange proposal on social housing is variation on work we are doing in Southwark with Affordable Housing Fund.

So, for instance, in March the council approved the sale of these empty Victorian terraced houses in Barry Road and Oakhurst Grove.  Each property had a value in excess of £300,000 - which is the threshold they had decided on. The alternative of retaining them and making them habitable would have required "substantial investment."  The proceeds are being used for building new homes including "hidden homes." It is also going on repairs and improvements for existing properties. Last year, according to the disposal figures in the Statement of Accounts, the council raised £35 million from selling high value empty properties. They propose a 1,000 new homes by 2020.

What about localism? Should a council be able to retain mansions worth millions if it wants to? I think it should face financial penalties from central government as a result of such wanton extravagance as well as transparency requirements that show the value of properties being relet.  For housing associations that behave in such a way there should cease to be any further taxpayer subsidy.  The Policy Exchange report adds this interesting point regarding their charitable status:

There is a strong case that housing associations’ charitable status carries a responsibility to use scarce resources appropriately. Charity trustees are legally obliged to invest sensibly, which this report’s policies do. This policy will recycle assets to benefit housing association tenants, given the poor benefits and high costs of expensive social housing. Thus housing associations that
wish to retain charitable status should engage with this programme.

What would help the policy work (and greatly help the public finances) would be for far more surplus state owned land to be sold for housing.