Can Labour solve the housing crisis?

Shadow minister for housing, Alex Cunningham, discusses the viability of Labour's Housing for the Many Green Paper

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It’s the hottest day of the year and Britain’s second-hottest day ever, and Portcullis House is suffering from its own mini greenhouse effect as sun streams through its glass atrium. The 38-degree heat, along with the fact that the previous day Boris Johnson became Prime Minister, is contributing to a febrile atmosphere in Westminster. Alex Cunningham, Labour’s shadow minister for housing, is bemoaning Johnson’s “flippant, off-the-cuff nonsense” in the new PM’s first parliamentary performance just hours before.

Last year, Labour’s Housing for the Many Green Paper announced the party’s intention to build at least 100,000 new social homes every year – or a million genuinely affordable homes over the course of two parliaments. “We need hundreds of thousands every year if we’re going to solve the crisis that is housing,” says Cunningham. According to a report by the Centre for Cities, in the last 15 years house prices have doubled, whilst average wages have risen by just 28 per cent. The real estate boom threatens intergenerational solidarity with a growing divide between asset-rich baby boomers and younger workers and families forced into overpriced private rented accommodation. And as ever-larger slices of incomes are spent on housing, the crisis threatens the wider economy, with huge levels of investment sucked into unproductive capital.

As the newest member of Labour’s housing team – the party plans to establish a separate department with its own secretary of state and junior ministers – Cunningham’s stated task is to help plan the largest council house building programme since the 1970s.

The MP for Stockton North joined the Labour front bench in April. His predecessor, Melanie Onn, resigned in order to break the whip and vote against a second Brexit referendum – hers was a heavily Leave constituency. “Right. You want to talk about housing,” Cunningham declares, after dodging light questioning about the mood of the Labour Party in the wake of Johnson’s barmy ascendancy. He is only interested in talking about his new brief. “I can’t put a figure on 100,000 homes a year,” he says when pressed about the cost of Labour’s policy. “We’re talking about billions of pounds.”

Others have been more forthcoming about how much it would cost. The housing charity Shelter estimates that 1.2m homes are needed for those currently on social housing waiting lists and that 3.1m more social homes need to be delivered over the next 20 years, at a cost of around £10.7bn a year, in order to mitigate the crisis of affordability. In June, similar research by the National Housing Federation (NHF) found that 1.45m new social homes need to be built over ten years, which they estimated would cost £12.8bn a year. Over the decade, the investment would cost £146bn – adjusted for inflation through the building period.

Labour is exploring ways in which this could be funded, floating ideas such as a Land Value Tax to pay for spending plans. “Pension funds could be brought in to fund housing,” says Cunningham, “and that could have a role to play in building the capacity we need.” According to Housing for the Many, public and private pensions, as well as money from Labour’s proposed £250bn National Investment Bank (capitalised mainly through government bond issues, i.e. debt-financed), will be invested in new social housing.

However, this level of housebuilding may not be as expensive as the current approach. Government spending on affordable housing, now less than a third of the allocated budget in 2010, was only £1.27bn for 2017-18. That year, 5,400 homes for social rent were built. However, housing benefit, much of which is used to rent properties from private landlords, cost £23bn – twice as much as Shelter says it would cost to build over 100,000 social homes. This is an almost total inversion of pre-Thatcherite housing policy, when over 80 per cent of government housing spending funded housebuilding, and less than a fifth went on benefits.

Spending £10.7bn per year on social homes would, according to Shelter, lead to dramatic reductions in the number of housing benefit claimants, meaning the policy would cost £3.8bn a year once the lower benefit bill was taken into account. The NHF’s research estimated that this level of capital spending and investment would also add £120bn to the economy through multipliers, creating jobs in the construction industry and down the supply chain. This is echoed in Labour’s Green Paper, which claims that for every £1 spent on house construction, £2.84 is generated in extra economic activity. In the case of municipally owned council houses, as opposed to housing association homes, these dwellings can provide local authorities with steady streams of revenue for decades to come – so long as their council housing stock isn’t depleted by Right to Buy purchases.

“We will stop Right to Buy,” Cunningham says. Margaret Thatcher’s policy of allowing long-term council tenants to purchase their socially rented properties at a discount has already been abolished by the Labour-controlled Welsh Assembly and the Scottish National Party. “It could be decades – at the current rate of housebuilding – before we solve the crisis. Something like 50,000 social homes a year disappear off the register [through Right to Buy]. Many of those end up in the private rented sector.” In a phenomenon known as Right-to-Buy-to-Let, four in ten homes purchased under the Right to Buy scheme have now been re-sold and are let out by private landlords, often at up to three times the original rent. In some cases, the government is paying or subsidising the rents of low earners in these properties through housing benefit.

Labour would also try and combat the phenomenon of empty homes bought as investments. “I live in Battersea, and I can see the property they’ve built in the 9 years I’ve been there, and I can see how few of these properties are occupied,” says Cunningham. “We need to ensure the homes the government boasts about building are actually put into use.” To this end, Labour’s Green Paper proposes a 300 per cent council tax premium on properties that have been empty for more than a year, a policy that Cunningham seems unaware of. “I haven’t seen anything that says triple council tax,” he says, “but I know we’re already in double council tax.” Since the then Chancellor Phillip Hammond’s 2017 reforms, all councils have been allowed to charge double council tax on long-term vacants in their local authorities.

For those currently renting in the private sector, Cunningham promises to rebalance the relationship between tenant and landlord. In 2015, 309 Conservative MPs voted against making homes “fit for human habitation”. Almost one in five MPs are landlords, including 28 per cent of Conservatives, 25 per cent of Lib Dems and 11 per cent of Labour MPs. “We need to apply pressure on them to make sure they’re providing a proper service to their tenants rather than dumping them in a hovel and expecting them to put up with it,” Cunningham says. “Rent controls are something that we’ve got to look at. I know Sadiq Khan in London is looking very carefully at that. But I feel the real solution to high rents is more houses. If we had more houses in the social housing sector, perhaps the rents in the private rented sector wouldn’t be so high, because if people have the opportunity to move into a local council house they don’t need to consider the private sector, which would mean rents would come down themselves.” Rent regulations were abolished in the UK by the same Housing Act of 1980 that brought in Right to Buy. Several European cities operate some form of rent regulation, as well as some cities in the United States. Sadiq Khan has expressed enthusiasm for policies that would stabilise or control rents in the capital, but these currently fall outside the powers of the Greater London Authority.

With an estimated 320,000 homeless, and millions struggling to pay rents or make it onto the housing ladder, the housing crisis has been described by Shelter as a national emergency. For Cunningham and the shadow housing team, their task is no less than a reversal of the last four decades of policymaking, and a reestablishment of the state’s role in housing provision. “I was born an optimist,” Cunningham says as he’s confronted by a member of the public who hears us grumbling about the new PM. “It was only when I came here that changed.”