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Tory housing policy, like the economy, hits the buffers

Housing is the biggest social disaster area in Britain today, and the report published today of Sir Adrian Montague, chair of 3i investment group and big donor to the Tories, reveals all too clearly why Tory housing policy is stuck in an impasse from which it cannot escape. Even he admits that housing demand has been rising each year at nearly double the rate of new build.

Only some 162,000 houses have been completed annually over the last 10 years, yet an additional 232,000 households are expected to be formed each year over the next 20 years or so, a large proportion within the poorer income brackets. The problem for the Tories is: as growth fades and incomes and tax receipts slide, the demand for housing is suppressed by unaffordability, while in the one area where demand is at its most intense – affordable housing for those on the lowest incomes – housing is put out of reach both by rocketing rents and abandonment of the whole concept of social housing.

After Thatcher eviscerated the national housing budget by three-quarters, the Tory-LibDem Coalition has now cut the already severly depleted housing budget by a further 60%. The original plan was that the cost of building ‘affordable’ housing was to be recouped by allowing rents to be charged on future new-build housing at 80% of the local private market rate. This would more than double existing rent levels, in conjunction with £18bn welfare payment cuts and big housing benefit cutbacks.

As this plan has collapsed, the Montague report is now going even further by in effect phasing out social housing altogether. He proposes relaxing planning regulations (section 106) that require developers build a quota of social housing, and allowing private investors to build on public land (i.e. at less cost to the builders themselves) whilst sacrificing any quid pro quo to assist the lowest-paid excluded from the market.

The real answer is obvious. Increase the housing budget for local authorities to organise a boost for house-building in their own areas, funded by borrowing in the markets at negative real cost (0.5% interest rates compared to RPI inflation of 2.8%). Throw in stimulation of a dormant economy, job creation on a big scale and a turnaround to growth, and it’s a bargain.

But Osborne won’t do it because of rigid ideological opposition to any significant public role in growth stimulation. Instead Montague (and the government) fall back on the usual Tory mantra – a bonfire of so-called red tape and employment protection. The price is 100,000 families homeless and 2 million households stuck on the waiting list as any hope of the home they need recedes ever further into the future.

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