Let councils choose where they build

Cllr Jonathan Glanz, the Cabinet Member for Housing on Westminster City Council, says flexibility is needed to provide more affordable housing

Planning Minister, Nick Boles MP has been very passionate in declaring that the lack of new housing in England was a serious threat to social justice. Much of the media attention about ‘Boles’ Bungs’ was on convincing rural communities of the need for new homes in the shires but the crisis in central London is just as acute.

House price to earnings ratios in some London boroughs are now as high as 27 meaning that for young people in some parts of London, regardless of their long-term connection to an area, any prospect of maintaining that link is fairly unrealistic unless they are either in desperate need of housing to an extent that they get moved up the housing waiting lists or have annual incomes in excess of £100k and capital to match.

Indeed, an international survey of more than 80 major housing markets published last week found that London is one of the least affordable places to live in the world behind only Hong Kong, Vancouver, Sydney, San Jose and San Francisco.

There are many reasons for this but at a very simple level we have not built enough homes in this country over the last few decades. Given the size of the challenge it would be completely unrealistic to claim that local government has all the answers but I do believe that with a few tweaks to the orthodoxy and a slight loosening of the shackles imposed by Whitehall, local authorities could make a concerted effort to tackle the housing crisis.

1. Dealing with social issues caused by a lack of housing: Even since the economic downturn in 2007 house prices in many areas of the country have continued to rise. In central London, median prices are now 15.4% higher than before the credit crunch took hold. This is not just an urban issue though. Because property price increases have gone unmatched by wage rises parts of Dorset, Cumbria and Herefordshire median house prices are now 9-10 times average local wages. As well as pricing out long-term residents, there is a risk that this can lead to polarised communities and/or a high proportion of second homes creating ghost towns.

Localising an element of Stamp Duty would help to mitigate some of the symptoms of unaffordable housing. Government could either localise Stamp Duty on new homes or, more modestly, return a proportion of the revenue generated from the new higher rate £2m threshold to spend on affordable housing in that area. We have estimated that localising just 15% of the receipts from the new threshold could help build more than 2,000 new affordable homes per year in the country’s least affordable areas whilst
sustaining 3,400 construction industry jobs.

2. Putting our assets to best use: Last year, after a decade of discussion, the £28bn Housing Revenue Account (HRA) – through which 171 local authorities manage their housing assets – was reformed to allow councils to borrow against future rental streams. Because in the UK, unlike elsewhere in Europe, this borrowing is added to the Public Sector Borrowing Requirement, the Government quite understandably imposed a individual caps on the amounts that could be leveraged. On average, housing authorities will have 14% more to spend on existing and new stock but these allocations are made on an individual basis and borrowing capacity is not necessarily aligned with requirement or willingness to lend.

A marketplace for borrowing headroom would better match need and capacity ensuring that the maximum possible new homes could be built. With total headroom in the system of £1.5bn, local authorities could build around 10,000 new homes whilst limiting any increase in net borrowing by the public sector. This would also allow councils that do not wish to invest to benefit by trading its headroom with others thereby gaining either nomination rights on new properties or a cash payment.

3. Relaxing rules over where new houses are built: Current HRA rules place geographical restrictions on where new homes can be built. Properties are required to be constructed within the local authority area even though land might be extremely costly.

Applying common sense to house building: Insisting that homes be built in some of the most expensive neighbourhoods in the country holds up development despite many councils having affordable housing funds capable of building many homes by thinking more creatively.

This is particularly frustrating when, in the grip of the housing crisis, more attention is being paid to arbitrary boundaries than the need to house
families. In practice it can often be possible to build considerably more units even just a mile just across the road or around the corner. This need not be the norm but in special circumstances it could be the
difference between giving a family a home and them languishing on a housing waiting list for years.

Ministers are right to be addressing the housing crisis with increased urgency. It is evidently a task of grave importance. Local government will not solve the problems that have built up over decades but I believe we can have a role in at least alleviating the pressure on our communities.