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Autumn 2016

Where next for housing policy?

Policy challenges From Theresa May’s very first speech on the steps of Downing Street, it was clear that the Prime Minister wishes to be remembered as a social reformer, as a “one nation Tory” who fights “burning injustice”. She has spoken extensively about social mobility, opportunity for all and some of the entrenched poverty and disadvantage that exists in our society today. The failings of housing policy are a key driver of this disadvantage and intergenerational unfairness, a point underscored by the Prime Minister during her speech at the Conservative Party Conference.

This is problematic for the new Secretary of State and Housing Minister because in many respects, David Cameron pulled the obvious levers available to Government.

It is easy to see why. As the Institute for Fiscal Studies noted in its recent report on living standards, middle class families are increasingly coming to resemble poorer families. They are much more likely to be renting and they are now spending similar proportions of their income on housing costs.

The scale of this challenge is immense but the rewards are significant, socially and politically. If Theresa May wants to advance social mobility, then fixing the housing market would be a near certain way to do it. It is also something that could reap enormous electoral returns as the Conservatives seek to reclaim younger voters and the aspiring, striving C1/C2 working class voters they could rely upon in the 1980s.

Housing remains at the top of the political agenda and there is real pressure on the new Ministers at the DCLG to deliver. England continues to fall c.100, 000 houses short of demand each year and despite all of Government’s rhetoric, we have yet to see a significant increase in house building post-recession.

To stop the decline and get the numbers moving in the right direction, the Government will need to address the longstanding issues afflicting the housing market. These include enormous land values , shortage of new housing supply, high deposit and affordability ratios and poor allocation of housing stock.

The new Housing Minister has already been speaking about home ownership in a broader way through a focus on shared ownership.

Politics and personalities Sajid Javid Secretary of State for Communities & Local Government

Despite, the central role housing can play in the social mobility agenda, the Prime Minister has made a slightly surprising choice in making Sajid Javid Secretary of State. The former banker felt at home in his previous guise as Business Secretary where he could talk of stripping out regulation, cutting taxes and getting out of the way of business. However, while housing policy often requires nuance, the current status quo cannot be allowed to continue and Javid’s pro-market and reforming zeal might be a major asset to help deliver the radical increase in supply the UK needs. In terms of special advisors, Sajid has also taken his long-term adviser Nick King with him to the department. Carrie Symonds is covering Salma Shah’s maternity leave. Although neither have any particular expertise in housing or local government, both are highly competent operators who deservedly command the trust and respect of their Secretary of State. Brandon Lewis, the former Housing Minister and a supporter of Theresa May in the leadership election, was moved from his brief at the DCLG to the Home Office. His replacement, Gavin Barwell is another local government man with experience as a Councillor in Croydon. Barwell is also a veteran of Conservative Campaign Headquarters and worked closely with Lord Ashcroft on the Tory targets seat campaign. This demographic most affected by the housing crisis bears a striking resemblance to the sorts of floating voters the Tories must win if they are to remain a majority Government. Combined with the right policies, Barwell’s diligence and campaign experience could see him become a highly effective Housing Minister at a time when it is crucial for the Tories to deliver on this key electoral issue.

Gavin Barwell Housing Minister

The new administration seems determined to exercise more control over policy from No 10.

HM Treasury will likely have far less influence on housing policy under Theresa May than David Cameron and the Chancellor of the Exchequer will not have the roaming brief over domestic policy that George Osborne enjoyed. People should also look for a number of housing ideas coming out from Downing St. The Head of the No 10 Policy Unit, John Godfrey was involved in much of the innovative work that his former employer, Legal & General, were doing in the housing market on modular building, social housing and build to rent. While the Government passed the most recent Housing & Planning Act, it did so under fire from a number of respected housing figures in the House of Lords. This Second Chamber has shown itself highly adept at causing mischief, notably by the former Permanent Secretary to DCLG, Lord Kerslake who was a constant thorn in the side of the Government.

Impact of Brexit The impact of Brexit on housing policy is largely an issue of economics rather than policy. It was the major housebuilders and property developers who suffered the largest falls in their share price on the morning after the result. Building by private housebuilders remains over 70,000 units below the pre-recession peak and it would be enormously regrettable for private developers to slow down delivery again.

The major challenge for the sector is one of confidence. The Government is hoping to address this through the Home Building Fund which at the time of its announcement during the Queen’s Speech was £3bn. In light of the referendum result, funding has allegedly been increased by £2bn to support small and medium-sized builders to increase their capacity.

Policy risks The primary risks for housing policy will continue to be the link between housing supply and issues of affordability and ownership. Any economic slowdown could have a profound effect on the ability of people to get people on the housing ladder. There remains a problem for people who can’t afford Starter Homes but who also do not qualify for social housing. These are households who are in work and desperate to get on the housing ladder but are priced out of the market.

Theresa May could also become liable for any of the initiatives launched under her predecessor. Any problems stemming from the Voluntary Right to Buy and Starter Homes could well distract the new Prime Minister.

Where next? The Prime Minister’s early speeches have focused on the advantages of those already on the property ladder over aspiring homeowners. This could mean action to rebalance ultra-low interest rates and quantitative easing through further savings initiatives.

medium sized housebuilders, ending the reliance on large builders. This is the aim of the Government’s new Home Builder’s Fund and gives an early indication of where Housing Minister, Gavin Barwell is keen to focus. More action in this space could well follow.

The cancellation of Help to Buy represents a significant change in policy for the Government and demonstrates a willingness to examine underlying problems with the market rather than treating the symptoms.

DCLG will be focused on the safe passage for the upcoming Neighbourhood & Infrastructure Bill which could raise similar controversy for Tory MPs as the NPPF.

Ministers are unlikely to copy Sadiq Khan’s lead on housing with rent controls in the form of his London Living Rent and 50% affordable housing requirements being attached to most new developments. The Government seems likely to continue many of the housing policies of the last administration focussing on affordability, ownership and swift delivery of planning permission. However, in a break with the past, Sajid Javid is expected to take a tougher line with the bigger housebuilders and do more to increase competition in the sector. There is also a strong desire by Government to nurture a resurgence in the growth of small and

It also offers the Government the opportunity to be far more radical in their approach. Will the Green Belt be up for discussion? Will the Government go further in empowering local authorities to release land? Perhaps, in the mould of Joseph Chamberlain, the political idol of No. 10 joint Chief of Staff Nick Timothy, councils could even build or commission homes themselves. If they want to make a serious impact they could be bold and incentivise more efficient stock allocation by cutting stamp duty or expanding direct commissioning to increase housebuilding and supply . For both electoral and moral reasons, the Prime Minister will want to radically increase house building and home ownership rates. Those who can help scale up housebuilding, bear down on costs and improve standards, will find a Government receptive to their ideas.

Required build approx

232,000 Current build approx

132,000 0 Official estimates from government suggest that we need to build 232,000 new homes each year until 2033 in England. England falls short of meeting this by almost 100,000

Westbourne team

James Bethell Managing Director Jennifer Powers Partner, Head of Advocacy James Garland Partner, Head of Engagement Ben Walker Account Manager

For further information please contact: jennifer.powers 020 3397 2413 07903 078488

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Westbourne - Where Next for Housing Policy Paper