Where is Labour going on housing?

27th September, 2014 12:30 pm

If Labour Conference was great for the Health Service, it was something of a disaster for housing. Statements by the Treasury team will make it very difficult for Labour to meet its own target of 200,000 new homes a year.

The house building figures are well known and they are truly dreadful. We have failed to build enough homes for a generation and now we face at least another five years of inadequate supply even if Labour wins.

It is well known that the private sector and housing associations could do more, but not enough to be transformative. There is no silver bullet, as Labour’s Lyons Commission on housing delivery will show when it reports shortly, but it is widely accepted that it is only by unleashing councils that real inroads can be made into the problem of housing supply at affordable prices.

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Most people went to Labour Conference expecting to hear a confident message that Labour would lift the Tory ‘cap’ on borrowing for council house building. But the opposite was the case, with Ed Balls and Chris Leslie toughening their fiscal policy and ruling out any increase in borrowing, even for council housebuilding.

Of course it can be argued that ruling out extra borrowing that adds to government debt or has to be paid for from taxes is a rational policy, but council housing investment needn’t do either. Councils have substantial potential to finance new investment from their rental income. The Treasury Team seem to have forgotten that new council houses – as opposed to, say, hospitals or schools – are funded from charges (rents) not taxes. And the borrowing only counts against national debt because of specific and restrictive Treasury rules which no other country uses – one of the reasons why they perform better than us in producing social housing. New council housing also saves money year on year in housing benefit compared to private rent levels.

Putting housing investment in competition with health and education misrepresents housing’s unique case. Of course, new schools and hospitals are highly desirable, but because they provide services that are free to the public, the investment inescapably boosts government debt and adds to taxes. Housing is different.

Labour must have a decent housing offer at the election – and the Treasury team must revisit this issue.

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