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22 November 2017

Hold the champagne, renters: Philip Hammond just made the housing crisis worse, again

Is... is that it?

By Jonn Elledge

This government’s housing policies have fallen into a depressingly predictable pattern over the past few years. A set piece announcement – a conference speech; a Budget – approaches. Briefings go out suggesting the centrepiece will be radical action to fix the housing crisis. Awful, terrible phrases like “ownership revolution” or “generation buy” start to appear in Tory-friendly news outlets.

But when the big day actually arrives, it’s the same, disappointing nonsense all over again, and the actual policies turn out to be about as radical as cornflakes.

The explanation for these repeated cycles of disappointment isn’t hard to find. The Tory party is determined to arrest the decline in home-ownership numbers; it’s also determined to keep house prices up, to prevent upsetting either the economy or older voters. These two impulses cannot, mathematically, be reconciled. So the government compromises by promising big things, but then not actually bothering to deliver any.

And here we are again. In today’s Budget statement, Chancellor Philip Hammond was chucking out housing policies like they were confetti. True to form, though, the big one is something which will actively make things worse. The closest this Budget had to the once traditional rabbit from the hat was to abolish the stamp duty paid by first-time buyers on any property worth under £300,000. Those paying up to £500,000 will also see a hefty reduction.

At first glance this sounds brilliant – tax cut for young people. Woohoo! The problem is that house prices are set by what buyers can afford to pay, including costs like stamp duty.

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In all likelihood, then, slashing stamp duty will feed into higher house prices, as money that would previously have gone to the Treasury diverts to the vendor. (That’s certainly what the Office of Budgetary Responsibility is expecting to happen.) Like Help To Buy before it – a policy that was audibly jeered in the Commons when Hammond mentioned it earlier – this is nothing but an attempt to prop up house prices, disguised as help for buyers.

So what else was in the speech? Hammond promised 300,000 net additional homes a year by the mid-2020s, “the biggest annual increase in housing supply since 1970”, which would be impressive if it were also credible.

But most of the actual policies described in the speech were baby steps, rather than the radical reforms that experts believe we’d need to hit such targets. Land reform is still off the table: Hammond promised to make “the most of urban land and continue the strong protection of our green belt”. And the money dedicated to making the most of said urban land is still, in the scheme of things, tiny.

That £400m for estate regeneration is nothing at a time when flats on those estates can easily go for £400,000 each. In the same vein, £1.1bn to unlock strategic sites and £2.7bn for infrastructure sound great, until you recall it took £9bn to regenerate London’s Olympic Park alone.

It also feels significant that both those figures were dwarfed by the £8bn of new financial guarantees Hammond promised to support private house building: this government’s preference is still to throw more money at developers and hope they’ll somehow forget it’s in their interests not to build too fast. (Spoilers: they won’t.)

Oh, and that £44bn of extra cash to support the housing market as a whole? It’s actually just £15bn of new money over the next five years: £3bn a year. That’s it. It’s a joke far funnier than the one Hammond mad about Top Gear.

There was some good stuff in the speech. The plans for the Oxford-Milton Keynes-Cambridge corridor – five new garden towns, another 1m homes by 2050 – are long term, but probably positive, given that the region contains a lot of very high value jobs.

And perhaps the most important announcement was one of the driest. Lifting the HRA cap for councils in high demand areas is basically code for “borrowing to build council housing”. That might, eventually, get us somewhere.

But most of Hammond’s promises were almost comically weak. A 100 per cent premium on the council tax paid on empty properties sounds great, except there aren’t that many homes actually standing empty. Then there was the “urgent review” to investigate why there were 270,000 residential planning permissions going unbuilt. Unlike the last six urgent investigations into questions to which we already know the answer, this one will lead to real action, I’m sure.

At the conclusion of the housing section of his speech, Hammond noted that his “right honourable friend the Prime Minister has said we will fix this problem. And no one should doubt the government’s determination to do so.”

The problem is, we do doubt it, Chancellor. We really, really do.

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