The funding of new homes by direct government borrowing is highly efficient, writes Ken Livingstone.
AS PART of his successful campaign to be re-elected Labour leader this summer, Jeremy Corbyn pledged to “build a million new homes in five years, with at least half a million council homes, through our public investment strategy. We will end insecurity for private renters by introducing rent controls, secure tenancies and a charter of private tenants’ rights, and increase access to affordable home ownership.”
Such a bold and radical approach is exactly what we need to tackle the housing crisis, boost the economy and win votes for Labour.
The scale of the housing crisis was starkly highlighted this summer when Shelter published research highlighting the fact that millions of working people are struggling to afford sky-high housing costs — a problem that many of us in London know.
Here in the capital, the average house price to earnings ratio for first-time buyers was 3.7 in 1983. By the second quarter of this year it was 10.4.
In the 2000s, as London mayor, I was proud to put my London Plan to use by requiring 50 per cent of the capital’s new homes to be affordable. But then we saw Boris Johnson become mayor and the Con-Dems come in at Downing Street.
It’s important to understand that for ideological reasons the Tories are both against greater public sector building and see planning policies that “interfere” in the market negatively. It was therefore no surprise when Johnson abolished this 50 per cent target for affordable housing in 2008.
But in no way is the escalating housing crisis constrained to the capital. To give one illustration, there are 1.24 million households on council waiting lists in England.
The aforementioned Shelter report revealed that a fifth of working parents face the prospect of being immediately unable to pay their next rent or mortgage payment if they lose their job. The survey questioned 8,381 adults, including 1,581 members of working families with children.
Furthermore, 37 per cent would be unable to cover their housing costs for more than one month with no job and 48 per cent of families named the cost of housing as the biggest drain on their budget.
Shelter’s chief executive commented that these families are “stretched to breaking point and barely scraping by from one pay cheque to the next.”
This crisis should not come as a surprise and has been getting worse for years, especially with the Tories total commitment to ideologically-driven austerity — and it could be about to get even worse.
As a motion passed at the recent Labour Party conference put it: “The Housing and Planning Act is an exercise in social cleansing, gerrymandering and a threat to all except landlords and developers making money from the housing crisis.”
Local councils across the country have correctly called on the government to pause and review the Act’s provisions, as if this Act is implemented, it will exacerbate the housing crisis, increasing the problems facing those in need of decent and affordable housing to a disastrous degree.
Key measures in the Housing Act include introducing a “tenant tax” to increase the rent for many social housing tenants to unaffordable levels, forcing councils to sell off high-value council dwellings, further reducing stocks of social rented housing, scrapping permanent, secure, social housing tenancies and replacing the planning requirement for social rented units with that for unaffordable starter homes.
Building on Corbyn’s pledge for a million new homes in five years, the aforementioned Labour conference motion concluded that in government, Labour will deliver a massive increase in the supply of council housing, a housing strategy that uses public money and land to increase the supply of council housing with security of tenure at genuinely affordable rents and, crucially, a massive council house building programme which will both rebalance the economy by creating jobs and also empower local authorities with the necessary resources.
In terms of funding new homes, direct government borrowing is highly efficient with a very positive return, and supplementary funding can be provided by the National Investment Bank Labour is planning, which could offer loans to local authorities via the Public Works Loans Board.
Additionally, I would argue that the “help to buy” scheme should be ended as it simply exacerbates rising prices. Instead it could be transformed into a “help to build” scheme, offered to local authorities as a £40 billion guarantee “using the strength of the government’s balance sheet” in the now departed George Osborne’s words to take on the risk of borrowing to build — this would be especially effective in that these risks are minimal given the housing shortage.
As part of the credible and coherent economic alternative that Corbyn, shadow chancellor John McDonnell and the Labour front bench are articulating this progressive vision for housing can provide part of the basis for winning the next election and transforming Britain.
First published in the Morning Star