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| We needed a housing revolution. The chancellor gave us a sticking plaster | |
| (about 1 hour later) | |
| When the chancellor stood up on Wednesday to deliver his budget, it was against a tough economic backdrop. It’s been a decade of stagnating wages, rising inflation driving up the cost of living, increasing household debt as people borrow to make ends meet, and growing wealth inequality. And things are about to get much, much worse. With productivity growth massively downgraded, wages are not forecast to return to their pre-crisis levels until 2025. | When the chancellor stood up on Wednesday to deliver his budget, it was against a tough economic backdrop. It’s been a decade of stagnating wages, rising inflation driving up the cost of living, increasing household debt as people borrow to make ends meet, and growing wealth inequality. And things are about to get much, much worse. With productivity growth massively downgraded, wages are not forecast to return to their pre-crisis levels until 2025. |
| The scale of the challenge facing the country cannot be underplayed. But it also creates an opportunity. What was desperately needed from Philip Hammond was a big, bold budget with real action on the cost of living, proper investment in the everyday economy, and above all the fundamental reforms to fix our broken economy. We got none of that. | The scale of the challenge facing the country cannot be underplayed. But it also creates an opportunity. What was desperately needed from Philip Hammond was a big, bold budget with real action on the cost of living, proper investment in the everyday economy, and above all the fundamental reforms to fix our broken economy. We got none of that. |
| Housing is the perfect example of how this budget failed to meet the urgency of the moment. It’s an issue that sits at the heart of Britain’s inequality crisis. The average house price in the UK is 7.6 times average annual salaries. Home ownership among young people has halved in the last 20 years. In London, a nurse would need an 80% pay rise to afford an average house. | Housing is the perfect example of how this budget failed to meet the urgency of the moment. It’s an issue that sits at the heart of Britain’s inequality crisis. The average house price in the UK is 7.6 times average annual salaries. Home ownership among young people has halved in the last 20 years. In London, a nurse would need an 80% pay rise to afford an average house. |
| Nothing in this budget offered the kind of bold policy needed to even start to address the housing crisis. At first glance, the chancellor’s promise of £44bn for housebuilding seemed to acknowledge the scale of what’s needed. But closer inspection reveals that the bulk of this is spending that had already been committed, with only £3bn a year of new investment. The partial lifting of the cap on council borrowing for housebuilding is welcome. But only £1bn of new borrowing headroom was announced by 2021 in total, and councils will have to apply to access it. Meanwhile, much of the additional support was in the form of loan guarantee schemes targeted at private developers that can’t or won’t build homes that are genuinely affordable at the scale we need. | Nothing in this budget offered the kind of bold policy needed to even start to address the housing crisis. At first glance, the chancellor’s promise of £44bn for housebuilding seemed to acknowledge the scale of what’s needed. But closer inspection reveals that the bulk of this is spending that had already been committed, with only £3bn a year of new investment. The partial lifting of the cap on council borrowing for housebuilding is welcome. But only £1bn of new borrowing headroom was announced by 2021 in total, and councils will have to apply to access it. Meanwhile, much of the additional support was in the form of loan guarantee schemes targeted at private developers that can’t or won’t build homes that are genuinely affordable at the scale we need. |
| Hammond did not waver from the government’s longstanding approach: spending much more on first-time buyer schemes which stoke house prices, than on supporting local authorities, housing associations and communities to build genuinely affordable homes. His apparent showstopper – an end to stamp duty on some homes – will not lead to the delivery of a single new affordable home. According to the Office for Budget Responsibility, it will mainly benefit existing homeowners, and will actually push up house prices. With this approach, it is hard to see how we can ever meet the target of 300,000 homes per year set by the chancellor. | Hammond did not waver from the government’s longstanding approach: spending much more on first-time buyer schemes which stoke house prices, than on supporting local authorities, housing associations and communities to build genuinely affordable homes. His apparent showstopper – an end to stamp duty on some homes – will not lead to the delivery of a single new affordable home. According to the Office for Budget Responsibility, it will mainly benefit existing homeowners, and will actually push up house prices. With this approach, it is hard to see how we can ever meet the target of 300,000 homes per year set by the chancellor. |
| There is another, more prudent and effective way of delivering the homes we need. The chancellor made positive noises about increasing the supply of land for homes. And it’s true that a lack of land underpins the housing crisis. So why is the government selling off land it already owns? If public land was kept in public hands, it could be used to back a People’s Land Bank to deliver at least 320,000 genuinely affordable homes by the end of this parliament. The People’s Land Bank could also be expanded by giving councils the powers to buy any land at “use value”, moving land that is being banked for private gain into public use. This land could then be leased out to community groups and housing associations to build homes at prices that are affordable for the local area. In one go, we could increase access to cheap land for housing, and break up a housing market dominated by a handful of developers, by getting the social sector building again. | There is another, more prudent and effective way of delivering the homes we need. The chancellor made positive noises about increasing the supply of land for homes. And it’s true that a lack of land underpins the housing crisis. So why is the government selling off land it already owns? If public land was kept in public hands, it could be used to back a People’s Land Bank to deliver at least 320,000 genuinely affordable homes by the end of this parliament. The People’s Land Bank could also be expanded by giving councils the powers to buy any land at “use value”, moving land that is being banked for private gain into public use. This land could then be leased out to community groups and housing associations to build homes at prices that are affordable for the local area. In one go, we could increase access to cheap land for housing, and break up a housing market dominated by a handful of developers, by getting the social sector building again. |
| We needed big reforms on housing but instead we got a Band-Aid. So goes the rest of the budget. The chancellor had an opportunity to rise to this occasion. Faced with a historically difficult situation, he had a political window to present the fundamental reforms we need. The truth is he fluffed it. | We needed big reforms on housing but instead we got a Band-Aid. So goes the rest of the budget. The chancellor had an opportunity to rise to this occasion. Faced with a historically difficult situation, he had a political window to present the fundamental reforms we need. The truth is he fluffed it. |
| • Miatta Fahnbulleh is chief executive of the New Economics Foundation | • Miatta Fahnbulleh is chief executive of the New Economics Foundation |