Monday, July 23, 2007

On Affordable Housing

We are going to hear a lot in the next few days about Affordable Housing. It’s at the very centre of the government’s agenda for the future of housebuilding in the UK, as set out in the Green Paper. It sounds like a vaguely worthwhile concept but when you get down to examining the details, the whole concept is littered with inconsistencies and problems.

Take the very word affordable. What does it mean? Behind it lies a wider idea that housing generally has become unaffordable to all but the richest sectors of society; this is pretty much self-evident to anyone living in the South-east of England at the moment. But just what should be done about it? There are lots of policy options out there from doing nothing right through to nationalising all land. Somewhere in between these two extremes are many tax incentives and/or penalties which could be used to make home ownership more or less attractive.

The government’s chosen response is to push for more subsidised housing (with the subsidies coming from the developer’s profits, not taxpayers’ money). But is it right to build a subsidised housing sector at all? We’ve been here before and it didn’t work too well last time. Subsidised housing adds to the social divide and makes another one of the government’s key objectives, social mobility, even less likely. There are other options. In egalitarian Sweden, they don’t have any social housing: instead, they subsidise rents for people in housing need. This way they neatly avoid building ghettos of housing for the poor.

There is another problem that has so far not been discussed, as far as I am aware. Affordable housing schemes are largely financed by money taken from the theoretical profits made by developers on their private market housebuilding activities. This is governed by the so-called Section 106 agreements, the bane of every housebuilder’s life. However, it follows that the very existence of our affordable housebuilding programme has now become dependent on there being lots and lots of new unaffordable housing. And the more expensive it gets, the better it is for the affordable housing sector, because more profit can be creamed off from the housebuilders.

Thus we are creating a paradox similar in many ways to the government’s stance on drinking and smoking. Whilst we are constantly being told what grief these awful habits cause, the NHS itself is hooked on their tax revenues. So it is with social housing. Whilst the government and the local authorities keep saying something must be done about the affordability crisis, they now have a vested interest in keeping ordinary housing unaffordable, because that’s the only way they can deliver affordable homes.

The whole housebuilding sector is slowly becoming a sham, a modern day version of Robin Hood economics. First make the rich even richer by restricting the supply of building land; then rob them blind to build homes for the poor.



Anonymous Anonymous said...

How do you substantiate your claim that affordable housing subsidies come out of developers' profits, Mark? I suggest to you that where there is a s106 requirement on a planning permission, the developer simply pays less money for the land. i.e the landowner pays in the form of less windfall income from the sale of his land. Which is how it should be.

2:00 pm  
Blogger Mark Brinkley said...

I don't think I've been as clear as I might be about this. The subsidies come from the S106 take from the land sale, which is technically speaking the landowners profit, not the developers. It's just that the picture is fuzzy because the deals are negotiated by the developers who usually have an option on the land.

The point I wish to make is that the subsidies get larger as the land values increases, therefore the affordable housing providers have a vested interest in maintaining high land values.

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