There’s no way round this: housing in this country is in a pretty awful state. Waiting lists for the shrinking number of “affordable” or social homes are rising, while fewer people can afford to buy their own home. That would be the case even if the banks were able to lend – which they can’t because of the credit crunch.
Fewer than 100,000 new homes are currently being built per year, when 200,000 - 300,000 are needed. The number of new mortgages being arranged is at its lowest level since 1975, while housing waiting lists have risen from 1 million in 2000 to 1.75 million today. The number of social homes has fallen by 250,000 in the last eight years.
A Policy Exchange report last month called for a root-and-branch reform of the entire housing sector to stabilise prices, cut spending on items like Housing Benefit and build more homes. But there are further, simpler reforms that could be implemented right now.
A second report on housing, published by Policy Exchange today, sets out how an extra 100,000 new homes could be built every year, over the next few years, while saving the taxpayer money. Reforms brought in by the last government mean that housing associations are no longer restricted to taking out simple loans from commercial lenders.
Instead, they can use more creative methods of raising capital – for instance through equitisation. This is a particularly interesting prospect for housing associations as the sector as a whole generally makes a surplus. Natalie Elphicke, the author of the report, calculates that this surplus would be sufficient to raise around £30 billion over five years from investors like pension funds keen on the steady, safe 4-5 percent yield which housing associations could offer.
The report sets out a new vision of housing associations as “social enterprises” using the same sort of capital-raising techniques – like preference shares – used by paragons of mutualism as the Co-Op or the John Lewis Partnership.
Tenants’ rights would stay the same (including in relation to tenure). All that would change is the financial structure of the housing associations themselves. Needless to say, an injection of private capital could also be expected to make the whole system much more efficient. And private-sector cash would more than match the £5 billion a year from government grants which the sector currently receives. In fact, it could totally replace it.
More houses for less money – and all at a time when we desperately need them but are in extremely constrained financial circumstances.
There’s every sign that the coalition is ready to take housing seriously as an issue and is looking for creative ways to build more homes. Natalie Elphicke’s ideas deserve to be studied very closely.
Natalie Evans is Deputy Director of Policy Exchange