At the Labour conference today, shadow chancellor Ed Balls called for 100,000 more affordable homes to be built. There’s a growing recognition housing is a priority not just to meet a pressing social need, but also as a key element of a growth strategy.
The construction industry has been among the sectors hardest hit by the recession. A big boost in house building would revive this important sector, create jobs, and increase demand.
An apparent constraint on building affordable homes – the homes most needed – is the dire state of the public finances. Yet, as this short animation shows, in this current spending round the government will spend £100 billion in this area. The problem is that 95 per cent of it will go on Housing Benefit – in effect, subsidizing rents – and just 5 per cent on building badly needed homes:
The video makes it clear that we need a fundamental rethinking of housing strategy. Part of the answer is to allow local councils with strong balance sheets to borrow against their housing assets to finance new affordable house building capable of generating a return.
But we also need to drive a shift from current to capital spending over the medium term – reversing the shift from housing capital to housing benefit. In a recently published report, “Together at home: A new strategy for housing” (pdf), the Institute for Public Policy Research (IPPR) has suggested a way this could be done, by also embracing a radical localism.
The centre-piece would be a long term strategy to decentralise power and responsibility for housing expenditure to local areas – perhaps local government – with a remit for meeting local housing need, including by increasing housing supply. If Labour was to be really bold and radical on housing, this is an idea it should be taking up.