LEADING ARTICLE September 19 2017, The Times
The scourge of developers who break promises to build affordable housing has spread to rural Britain, and the government is backing the wrong side.
Anyone who has fielded rival bids for a kitchen extension is likely to be familiar with the pattern: once contracts are signed and work is under way the winning bidder finds ways to cut costs or otherwise boost profits. Committed to the project, the client’s options are to sue or surrender. In the multibillion-pound business of updating and expanding Britain’s housing stock, the equivalent of the kitchen extension is the mixed-used development that includes affordable housing to be let or sold at below-market rates.
Affordable housing is in critically short supply. This drives up prices in precisely the areas where buyers and the broader housing market need them to come down. It forces low-income families to live farther and farther from places of work, especially in the southeast, and it is storing up trouble for a weak Conservative government with little traction among voters aged under 40.
This is a government that has promised 1.5 million new homes by 2022. In principle almost all these homes are to be built by the private sector. In practice developers are being allowed to game the system by promising generous allocations of affordable housing only to dilute those commitments once planning permission has been granted and building is under way. Examples of this underhand but technically legal approach are legion in cities. It has now spread to rural Britain too. The country’s biggest builders are rowing back on affordable housing commitments to the extent of 18 much-needed rural homes a day, leading to a projected shortfall of 33,000 affordable homes in the countryside as a whole by the end of this parliament.
The government should be acting to fix the problem. Instead it is making it worse, siding with developers against local councils in 17 of 23 appeals by builders seeking to cut the number of affordable housing units for which they have had to budget since 2013. Worse still, the process is shrouded in secrecy because it hinges on “viability assessments” that developers are allowed to keep confidential unless a court demands wider access. These assessments should be open to public scrutiny as a matter of course. Sajid Javid, the communities secretary, claims to have adopted an “honest, open and consistent” approach to assessing local housing needs. It is none of these things.
In the housing plans that all local authorities are required to produce, the average requirement for affordable housing in rural areas is 68 per cent of the total. Under pressure from builders that share has fallen to 29 per cent even as the companies post record profits. Those of the country’s three largest housebuilders have quadrupled since 2012.
Britain is a crowded island. Space for new homes is at a premium. Demand for land reliably outstrips supply. Landowners sell to high bidders who seek guaranteed generous profit margins to protect against downturns in a market that they are helping to overheat. This is a classic market failure that might warrant state intervention in the form of publicly funded housebuilding to balance supply and demand at the lower end of the property ladder. This government has ruled that out, however, cutting public spending on social housing by 97 per cent since 2010 and on affordable housing by half in the same period.
At the same time, as the head of the National Housing Federation tells its annual conference today, housing benefit payments have risen by 51 per cent over the past two decades, to £25 billion a year, to help to cover inflated private sector rents.
If the government insists on staying out of the housebuilding business itself it must at the very least make affordable housing quotas binding, and high enough to house those unable to get on the housing ladder any other way. The alternative is a property-owning democracy that founders for want of property to own.