Stephen Greenhalgh and John Moss: Proposals for radical reform of social housing

Stephen Greenhalgh is leader of Hammersmith and Fulham council and heads up the Conservative Councils Innovation Unit, which is tasked with "formulating a bold Conservative blueprint for local government". John Moss is a Chartered Surveyor who has worked in regeneration for over twenty years and worked on the Party’s regeneration policy review under Lord Heseltine; he contested Hackney South and Shoreditch in 2005. Here they preview their forthcoming paper on the reform of social housing.

On the day of the first Opposition social housing debate for three years, we ask here whether this is the time to reform social housing. It may not be an issue for the current intake of Conservative MPs at this time, but it will become an issue for many new MPs elected from target marginals which have far higher levels of social housing. Figures supplied to Greg Hands MP from the Commons Library show that shadow housing minister Grant Shapps's seat (Welwyn Hatfield) has the highest percentage of social rented housing of any Conservative seat. Some key targets have huge percentages: Hammersmith at 36%, Westminster North at 30% and Birmingham Edgbaston and Battersea both at 29%.

Whilst Conservatives are at a highpoint in local government, we still have a mountain to climb in our inner cities. We have no Conservative councillors in Liverpool, Sheffield or Newcastle and just one in Manchester. Many inner London boroughs remain either Labour or Liberal Democrat-run. Our control of Birmingham relies on what Mike Whitby terms "a rainbow coalition" with the Lib-Dems, and in Leeds we rely on the Greens as well. Finally Boris Johnson's stunning victory in our capital city was largely a suburban revolt. Why is this?

The current state and levels of social housing in our inner cities may provide part of the answer. All our inner cities have relatively high levels of social housing compared to their suburbs. Today social housing has become welfare housing where both a dependency culture and a culture of entitlement predominate. Two thirds of social tenants of working age are unemployed and only 22% are in full time employment. 50% of social housing is located in the most deprived 20% of the country. Competition revolves around drawing welfare support and taking something out of the system.  Conservative principles of freedom, self-reliance and personal responsibility run counter to this culture. Calling for the state to provide a “hand up instead of a hand out” is unlikely to resonate

These figures from London might help explain the consequences of this for the Conservative party:

Twenty Boroughs (excluding the City) have less than 25% social housing. Thirteen Councils are Conservative controlled, two are run by Conservative minority administrations, there is one Conservative/Lib-Dem coalition, three Lib-Dem run and one Lib-Dem/Labour run.

The remaining twelve Boroughs have more than 30% social housing. Eight are Labour controlled, one Lib-Dem, two Lib-Dem/Conservative coalitions and just one, Hammersmith & Fulham, Conservative run. H&F provides us with a unique opportunity to view the problems of social housing from the inside.

Public sector housing is run as a national housing service that fails many of the very people it was designed to help and delivers a risible return on assets.  Why has the current social housing system not been overhauled? Politics combines the business of persuasion with the art of the possible. We understand that it is the risk of a political backlash which has stymied the debate over social housing reform. Morrison, Porter and Rachman are three historical figures who must shoulder much of the blame for this.

Currently the political debate appears to be simply about the quantity of social housing that needs to be built to meet "housing need". The issues have been reduced to a discussion about numbers – numbers which are as nonsensical as proverbial production figures for Soviet tractor factories.

However the professional and academic debate is well ahead of the politicians. There is considerable appetite for reform amongst those working for Registered Social Landlords (RSLs) and amongst council housing officers up and down the country. There is real concern that the current social housing system is failing the very people it was designed to help. Social housing was meant to help lift people out of the slums. Instead many social housing estates have become the very ghettos of multiple social deprivation that they were supposed to replace. This is a view not just held by Conservatives. Newham’s Labour elected Mayor, Sir Robin Wales recently told a conference that “Many council estates have become what they were fighting in the first place – social ghettos.”

The Hills Review was a masterpiece in analysing the problems of social housing. However this thoughtful academic ducked pinpointing solutions which would deliver mixed communities that incentivise people into employment instead of leaving them in welfare ghettos. Whilst the social case for reform is undeniable, the financial case is just as strong. A conservative estimate values public sector housing stock at around £300 billion and yet the return to RSLs and councils on this capital investment is barely 1%.

So what should we do? Politicians responsible for large swathes of social housing should and probably do, make every effort they can to create mixed communities in their most deprived areas. However, we also need a brave government to reform public sector housing so that councils and RSLs are free to manage their housing assets in a more sensible way based on what is right for the local area.

In our pamphlet, we set out in four key principles for the reform of social housing:

1. A duty to house and a duty to help
This sets out to define the role of social housing, separating the duty to provide physical housing to those who cannot act for themselves through age infirmity or disability, from the duty to help those in need but who are able to act on their own behalf to secure a suitable home in the market through funding and advice.

2. A right to manage public sector housing
We call for extensive deregulation of the social housing sector to allow RSLs to diversify and councils to manage their assets in order to deliver mixed and sustainable communities. This will require an end to the prescriptive national allocation system for social housing and its replacement with local systems which address local problems. Finally we call for a shift from bricks and mortar subsidies - which have buried the needs of individual households in the rush for numbers - to personal subsidies that would lead to greater individual responsibility and empowerment.

3. A right to buy part of your home
We want innovation and freedom for Councils and RSLs to be balanced by stronger rights and greater incentives for residents. There are many ideas out there. However, at its core, this policy should feature a ladder into home ownership for social tenants through the right to buy part shares in their homes – a right matched with a "buy one get one free " discount to extend that ladder of opportunity further down the income scale.

4. A common and consistent tenure
We call for tearing down the Berlin Wall of varying tenure and rent levels that operates between the private rented and social rented sectors to promote easier understanding and more transparency in management.

There are huge social, economic and financial pay-offs if we reform social housing. The current social housing is warehousing poverty in the core of our great cities – cities which need to be the very engines of economic growth. With the reform of the social housing system that we advocate, social housing would continue to be available to those who cannot house themselves and would provide properly for them, but would provide a hand up rather than a hand out to people who work hard and play by the rules but who cannot afford to buy market housing or pay private sector rents.

More homes would be built but there would be a greater mix of housing types and tenure and mix of people in them. Breaking up the current concentrations of welfare housing in our inner cities would see educational outcomes rise, health improve and crime levels drop as neighbourhoods thrived once again. A system that puts home ownership or partial home ownership at its core would see an increase in personal wealth and encourage greater social mobility.

We estimate that these reforms would increase the money available to Councils and RSLs to build new homes by £5 billion per annum and yield an additional £75 billion over ten years from sales of part shares. That is enough to build 900,000 new homes over ten years, 400,000 more than Labour have set out to achieve. The future recycling of that investment through the perpetual motion we envisage would continue to provide fund for reinvestment in social housing for years to come and wipe out housing debt along the way.

Without radical reform social housing will remain a destination for life for those on welfare rather than a launch pad. Financial returns on public sector housing will remain pathetically low and public sector housing debt will remain high. Welfare reform is also set to fail without a reform of welfare housing. Finally, the rhetoric around localism will ring hollow if a defective national system for public sector housing remains in place. 

What needs to happen now? First the political debate must move from the quantity of social housing built to the quality of the housing environment provided by the state. Then we need a bold Conservative government to listen to the housing professionals who are fed up with tinkering around the edges and embrace a reform agenda that will contribute hugely to fixing our broken society.