Bad policy, bad business

Social housing in Chelsea

Hats off to Policy Exchange for another report that stirs a controversy and which prepares the ground for ministers to move further right.

Their idea to sell off the most valuable social homes is, however, bad policy, bad business and there are better alternatives.

First, bad social policy: this policy may remove people on low and moderate incomes from half of all neighbourhoods, not just the most expensive areas. The report says all social homes should be sold, except if their value is in the bottom half of house prices, concentrating social housing in poorer neighbourhoods.

This will create social segregation. Tories argued when the housing benefit cuts came in that the presence of social housing in every neighbourhood would be a bulwark against segregation, even as many people were pushed out of their private rented homes. As the leader of Westminster Council argued in defence of the benefit cuts: ‘We have 25,000 social housing tenants completely unaffected by the benefit cap.’ By removing affordable housing from expensive areas as well, they would complete the job.

Policy Exchange argues that nobody ‘has a right to live in the most expensive parts of town’, but it’s not a question of rights. The question is what makes good, sustainable prosperous communities? We know from experience, at home and abroad, that the answer isn’t segregation.

Second, it’s bad business: this is a short-term and wasteful use of public assets. A home can only be sold once, but by keeping it as a community asset, its value can be used time and time again. No business would ever dream of a blanket policy to sell its most valuable assets. The most valuable homes are the newest homes, with the highest design standards and greatest energy efficiency. The new affordable housing that is being built now would be first in line for immediate sale, leaving the public with older homes, the most expensive to maintain and with the biggest call on public finances.

It is worrying that central government has endorsed this idea. Social housing belongs to local communities through social landlords: councils and housing associations. The homes do not belong to central government. It would require the government to force councils and housing associations to sell these assets with legislation or regulation. So much for localism.

However, the people at Policy Exchange are right to say that the value which is locked in our social housing is under-used. It should be a priority to put that resource to use. A better solution is for central government to free councils to borrow against the value of their social homes, not just the expensive ones, but all of them.

In other words, let councils ‘remortgage’. The average debt on a social home is about £35,000, well below the value of the home. Let them borrow an extra ten or twenty thousand pounds against some of Britain two million council homes to build more homes. Think of it as a mortgage which is almost paid off, but where the income from the rent could comfortably and prudently repay a slightly larger one.

This would immediately free up far more money to build more homes than the enforced sale of the community’s most valuable assets.

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Tony Clements is the editor of Red Brick Blog

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Photo: Derek Harper

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  • http://www.facebook.com/macraegi Gordon MacRae

    Glad to see a critique of this based on the merits of the policy rather than a knee-jerk response to the world view so openly demonstrated by this reports proponents.

    Poor policy that would, at best, only have a limited one off contribution to the overall supply problem. Better that social landlords are able to use a mixed basket of assets to borrow against to create a stable money supply.

  • Anonymous

    Spot on, really good point on selling good assets leaving you with more costly ones.

  • Paul

    I haven’t seen for a long time a more blatant piece of social engineering as this and they can get away with being treated seriously in the media because they have bought the pup that says that Council tenants are better off than those poor mortgagees who cannot afford swanky properties in Central London and are forced out beyond the suburbs into properties that you can’t swing a cat in!
    Another load of right-wing non-think.