Ross Clark

The ‘pay to stay’ council house policy ignores the reality of the housing market

The 'pay to stay' council house policy ignores the reality of the housing market
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Instinctively I feel I ought not to feel sympathy for the 70,000 council house tenants earning more than £40,000 a year in London (£30,000 outside London) and who are going to be made to pay an average of an extra £1000 a year to stay in their subsidised council homes. They are better off than average and at a level of income at which they ought not to be reliant on the charity of the state. There was a time early on in my working life when I earned substantially less than the average earnings, and not for a minute would I have dreamed of applying for social housing.

But then we aren’t in the early 1990s now. We are in an age of vastly inflated property prices, caused by government policies which are deliberately aimed at keeping prices high. Earning £40,000 a year might make you well off in some respects but not when it comes to buying or renting home in London.

There is no point in the government being stubbornly free-market over housing demand when it simultaneously maintains a planning system which artificially constrains supply. If the government wants a free market in housing, it will have to abolish the planning system so that anyone can build what they like, wherever they like. Land prices would crash and so too would house prices. There would then be no problem whatsoever in people on average earnings affording a home.

If the government is not prepared to do this – and there is not the remotest suggestion it will, given that it would be electoral suicide in Tory areas -- then it will have to accept the need for it to subsidise social housing, so that people on ordinary salaries can afford somewhere decent to live. There is one way in which the bill for social housing could be made more palatable – to abolish the right-to-buy. That policy – which was sensible enough in the early 1980s when there was an over-supply in many areas – has come to look absurd. Relatively wealthy council tenants, some of whom only qualified for social housing because they inherited a tenancy from another family member, are being given huge hand-outs while the social housing stock lost in this way is not even nearly being replenished.

'Pay to stay' is just one more bungled George Osborne policy. In theory, it is promoting self-reliance. But in practice -- given a housing market inflated by his other policies – it will hurt the very strivers whom he ought to have been encouraging. Theresa May would do well to squash it – or at least to raise the threshold well beyond £40,000 to a level which accurately reflects the cost of housing in London.