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Housing: how to build 1m new homes in 5 years and cut Government spending
We can build one million new affordable homes over the next five years and still cut Government spending if measures are taken to reduce the cost of building land and the interest rates paid by social landlords, says a new report from independent think-tank nef (the new economics foundation).
The Government hopes to save £1.7 billion a year on the social housing budget by setting a modest target of building 150,000 homes over the next four years. But the country needs 200,000 new homes a year across all sectors just to keep pace with ever growing demand. There are currently 1.7 million households on the housing waiting list.
nef's new report, One Million Homes, published Thursday 11 November 2010, argues that the Government could make savings potentially even larger than those proposed by the Chancellor while at the same time making serious inroads into the housing shortage. Its recommendations include:
1. Measures to reduce the cost of land.
- 80% capital gains tax on all land sales over £80,000 per acre. The revenue generated would go to a National Land Fund to subsidise the cost of social housing.
- Planning permission for large residential developments would only be given to social housing developers. This would reduce the value of much of the undeveloped land in private hands (see note 2). Local authorities and housing associations would be able to sell the land to private companies, subject to detailed regulations on how often they do this and how they spend the profits.
2. Measures to reduce the cost of capital.
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Introduce a new bond scheme, linked to the retail price index. Housing associations pay 6% p.a. on bank loans: a bond scheme could lower this to 3.5% creating massive savings for social housing landlords. Housing benefit payments would be linked more closely to bond yields – this could lower interest rates even further.
3. Measures to increase the revenue generated by social landlords.
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Higher rents in new developments: While nef opposes the Government’s plans to increase rents in existing social housing, new developments could charge more, forming an intermediate tier between existing social housing and the private market.
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Drive down operating costs, for example by increasing tenant self-management.
“With any reforms there will be winners and losers, but with our plans the winners will be vulnerable families and workers in the construction industry; and the losers will be the land speculators who have exploited the public planning system for decades,” said Charles Seaford, author of the report. “If the Government takes bold action, we can reduce the cost of social housing to taxpayers while also reducing homelessness and improving people’s lives. A million new, low carbon, affordable homes in the next five years is an ambitious goal, but our analysis reveals that it is eminently achievable.”
All these measures would reduce the subsidy of social housing, which currently stands at £54,000 per home. Under some scenarios nef believes that the National Affordable Housing Programme’s budget could be saved in its entirety if Government acted on the recommendations of One Million Homes. Furthermore, these measures will also offer stimulus to the economy, through the growth of the construction sector
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