Tom Cordell on how the new Government’s plans to increase home ownership will only result in housing inequality rising further in the UK.
Within days of the most right-wing administration in recent British history taking power, the newly appointed Housing Minister Esther McVey fronted a Government-produced video clip evangelising about her commitment to turn more people into home owners.
With an election likely within months, it’s a predictable offer that, in the past, has been a vote winner for the Conservative party.
But, after years of stagnant wages and rocketing house prices, it’s hard to see how the Government can deliver on its promise to expand home ownership. McVey should be familiar with the economics of the housing sector as, between 2015 and 2017, she worked as a consultant to real estate investors the Floreat Group.
So, what do the Government’s plans really mean for housing?
Part of the answer can be found in the carefully chosen backdrop to McVey’s video: Daedalus village in Gosport, Hampshire, where – despite the rhetoric – the homes aren’t actually being built for private sale. Instead, they’re being offered for shared ownership – where residents borrow as much money as they can with a mortgage to buy part of their home, and are locked into renting the rest.
It’s a business model that acknowledges the inherent impossibility of true home ownership for even relatively affluent British people in today’s inflated property market. If McVey’s plans won’t deliver the true home ownership they promise, they will at least help to keep house prices inflated, delivering strong profits for developers and the finance industry.
McVey’s key policy innovation to get more homes built is to accelerate the sale of public land as sites for new housing. But, with the Government pushing land at private companies in the hope that they will build more homes, it creates no incentive for developers to make housing more affordable by reducing sale prices. Instead, it tips the deal in favour of the developers, who can base their offer for the land to ensure an industry standard profit margin of around 20%.
In his book The New Enclosures, Brett Christophers shows that the process of public land sell-offs – the biggest of the post-1979 privatisations – has had vastly negative consequences for society. From housing to football pitches, land ownership determines how and where we get to live, work, and play. As land has been sold off, less and less of it is available as a public resource, driving Britain’s transformation into a rentier economy where property ownership allows landlords to extract rental income, driving a massive increase in inequality. Put simply: if you own land, you are probably comfortably off and, if you don’t, you almost certainly have no choice but to make yourself poorer by renting it from someone else.
How does the new Government plan to house those who cannot afford these shared ownership schemes?
Ministers have been notably silent on the subject of council housing, despite the outgoing Prime Minister Theresa May’s recent acceptance that it was needed to adequately house people on low incomes. Instead, in a speech last week in Manchester, the new Prime Minister Boris Johnson hinted at a new approach.
For decades, developer lobbyists have insisted that red tape is holding back housing delivery. In his speech, Johnson proposed a total review of all planning rules in a bid to boost housing delivery numbers. Yet, there is already disturbing evidence of what planning deregulation would mean for those who have no choice but to live in the private rented sector. Since 2013, developers have been free to convert office buildings into housing, outside of any control of local planning officers.
The consequences have been predictably appalling, creating thousands of new homes that are squalid by design, with individual flats often smaller than a car parking space. Some minuscule units have even been built without a single window for daylight or ventilation.
Expect deregulation to deliver more of this kind of housing – packing the poorest in society into these hyper-dense, new-build slums. For a government fixated on private profit and market solutions, it is the only way to sustain an economy based on the contradiction of low wages and high land values.
The market fundamentalists in the Cabinet may see the disposal of public land and the abolition of planning rules as key victories in their noble campaign to roll-back the state, but to anyone less ideologically-driven, it looks more like a fast-track plan to recreate the worst housing inequality since Victorian times.