“We” should all be in this together. Housing Hypocrisy and the Great Sell-Off

Posted: 23/08/12

The recent suggestion from the Policy Exchange think-tank that social housing in valuable areas should be sold and the profits used to build more homes in cheaper places, re-hashes an old argument but predictably grabbed the headlines.

Doesn't it make sense, with 4.5 million people in housing need, to boost supply? Surely those in need and on low incomes should not expect to be housed centrally anyway (the myth-makers like to refer to ‘Mayfair' or 'near Harrods' as if these neighbourhoods of the global mega-rich are stuffed with council estates).

Well, not this way it doesn't. I'll start and finish with the importance of 'mixed communities'. 'Social' housing has existed in inner London for 150 years, when the big philanthropists like the Peabody Trust started replacing the slums which had scarred the city from Parliament to Covent Garden to Holborn. Swathes of what now include some of the country's most expensive properties were once desperately poor. Even as recently as the 1960s, the Notting Hill Housing Trust started by buying and replacing private homes that were a by-word for slum landlordism- somewhat ironically paving the way for the regeneration which now sees houses there sell for many millions. London has always been socially mixed, is now highly ethnically mixed, and has benefited economically, culturally and socially as a result- and social housing has helped make that possible.

More recently still, certainly in Central London, the international property market has changed the landscape significantly. It has been estimated that 60% of new sales in central London go to overseas buyers and £5 billion a year is flowing into London's 'luxury' housing market. This is helping to feed the house price bubble and freezing out low and middle income buyers and renters alike. Now, foreign ownership of property is an accepted reality- but equally, the scale and impact should not be permitted to distort our own civic life.

Then there is the effect on tenants. Government Ministers praise a mobility scheme which gives tenants a chance ‘to improve their job prospects, live closer to family or simply move to a home better suited to their changing needs'. Sound objectives, but they depend on a varied stock being available. One example given is of a woman living in the countryside who swapped her council house for one in town, closer to her job. But under the Policy Exchange scheme, the village house would be sold off, not re-let. And someone has to do those low-paid jobs in Central London, too- especially those which involve unsocial hours.

Nor is it true that 'existing tenants would not be affected', as claimed. Certainly, the property being sold would be vacant, but what about the family down the road in over-crowded accommodation, or the disabled person needing a medical transfer? They would be either left for longer in poor, sometimes terrible, conditions, or required to move out, regardless of their history, their connections, their responsibilities.

Sales are not the only way to deal with the investment shortfall anyway. In the 1960s Notting Hill Housing Trust bought properties to protect poor people from slum landlords, but as these grew massively in value the balance sheet of the organisation strengthened and became the foundation for hundreds of millions of pounds of prudential borrowing for more social homes elsewhere If you decide to buy a second home, and you have a first house on which you don't owe very much, the best way of raising money is often to extend your mortgage on the house you already have. Councils and housing associations have, on average, outstanding debts of only £17,000 per house and already sweat their assets, so the last thing they want to do is to lose the most valuable of them. New investment made sense in itself, too, which is why the previous government had an £8 billion investment programme. That programme passed the value test - creating an asset that will make a profit in its lifetime, and pay off in jobs created and benefit bills reduced, but it was slashed by 60% by the current government.

Of course, the number of council homes has plummeted over the last 30 years, with Right to Buy massively reducing the rental pool. Lots of new homes would be built from the proceeds, went the promise, but the sold homes were never replaced and most of the money disappeared into the Treasury. Many ex-council homes were rented back to low-income and homeless households at much higher prices- helping fuel the rise in Housing Benefit. People who would once have been eligible for a council home ended up in expensive private rented homes, with the same effect. So the promise was made and broken before. Would it be different now?

Finally, let's return to the issue of mixed communities. We hear a great deal about promoting mixed communities in poor places, like Newham, or Southwark. Fair enough everyone understands that concentrating poorer people in poor neighbourhoods is bad- for their life chances and for the wider community, as was debated last August during the riots. Those councils want a better mix, with more home-ownership and greater affluence. Yet the same logic applies where low cost housing is currently limited, because those areas have become more valuable, or because they are away from the inner city, in suburbs, towns and even villages elsewhere. Will London's outer suburbs, or market towns in the surrounding countryside build hundreds of thousands of new council homes and, crucially, offer them to those people, outsiders by definition, squeezed from the inner city?

Or, as seems likely, will already affluent areas become ever more so, communities be broken up and the millions in housing need become more marginalised still?