Labour needs to get a grip on the wasteful housing subsidy system

As a former bricklayer, I know that increasing the number of small house builders is the key to delivering the number of new homes this country needs.

I was pushing this agenda even before I was elected to parliament in 2010.  Labour’s call for an “army of small builders” is the right step forward to help address the housing crisis, and the Federation of Master Builders (FMB) agrees.

In a speech to the National House Building Council, Labour’s Shadow Housing Minister Emma Reynolds announced today that a future Labour government would require local authorities to allocate more small sites for house building.  She also made a commitment to ensure public land will widen opportunities for small builders.

I met with representatives of the FMB last week to discuss the state of the construction industry, and in particular the plight of small building firms.  There is a desperate need to unlock the potential of these construction companies.  This can be achieved by a combination of a major house building programme, a reduction in VAT to 5% on renovation works and an insulation programme to tackle fuel poverty.

Brian Berry, Chief Executive of the FMB, says:

“Labour’s plans to boost house building by helping small builders enter the housing market is the right step forward.  Over the past 25 years small house builders have been squeezed out of the market.” 

He is absolutely right.  Back in 1988 two-thirds of all new homes were built by SME builders, but that figure now stands at less than a third.  This decline has accelerated over the past five years, as large numbers of firms have either gone out of business or have diversified out of building homes altogether.

Ed Miliband committed Labour to building 200,000 new homes per year.  But we need to be clear that a large majority of these must be council houses.  I say this because the price of a new house is beyond the reach of millions and private renting is also too expensive for many.

A future Labour Government must get a grip of the obscenity that sees housing subsidy being wasted on Housing Benefit.  As a housing subsidy, housing benefit is practically useless in terms of building the homes the country needs, but it’s a great way of using taxpayers money to enrich private landlords.

For every £1 the Government spends on subsidising new affordable homes, it shells out an incredible £21.45 in Housing Benefit.  The latest DWP estimates of benefit expenditure, indicate that for the current 2013/14 financial year, Housing Benefit expenditure will total £24 billion.  Around 61% of this (£14.7 billion) goes to social housing tenants, but 39% (£9.3 billion) goes to private landlords.

By contrast, over the same period, the Government’s ‘Affordable Homes Programme’, which is supposed to increase the supply of new affordable homes, will invest just £1.1 billion in delivering new affordable accommodation.

Housing will be an important political dividing line between Labour and the two coalition parties at the general election.  We need to be clear that Labour will deliver a coherent housing strategy, balancing people’s desire for a home of their own with the need to increase the supply of affordable homes to rent.

Chris Williamson is the Labour MP for Derby North