The Week, 10 June 2022

10 June 2022
By Charlotte Pickles
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What a week. Hot on the heels of the Jubilee we’ve had a confidence vote in the PM, his ‘reset’ speech, a speech from the Chancellor, the publication of the independent report on NHS leadership, the publication of the independent report on “making smoking obsolete”, a new “roadmap” for digital and data, and the RMT confirmed three days of strike action which looks set to bring the rail network to a halt for a week in June (the start of a Summer of discontent?).

The Prime Minister’s speech was supposed to mark the start of a policy blitz showing just how focused the Government is on getting on with the job. The first two thirds of the speech were scene setting ("global pressures”) and a rehash of existing measures and policies (from a points-based immigration system to the latest cost of living payments). Perhaps the most baffling part was when we were told that “the answer to the current economic predicament is not more tax and more spending” — someone should tell him what his Government’s been up to (😬).

Then it was on to the housing parts of the ‘Housing Speech’, with the exam question ‘how do we significantly boost home ownership?’ Let’s start with the good: the Government are launching “a comprehensive review of the mortgage market” to identify ways to enable "better access to low-deposit mortgages”. This is key. As the PM rightly pointed out, many of those locked out of home ownership could afford mortgage repayments, which would likely be much lower than the rent they currently pay, but they can’t build up the deposit needed to access finance. Former Treasury official, now head of Policy at the Tony Blair Institute, Ian Mulheirn has been talking about this for some time — and helpfully just last month the Institute published a suite of ideas to tackle this.

Now the bad and the ugly. The PM promised, just as Theresa May did before him, and David Cameron before her, to extend Right to Buy to housing association tenants. Let’s acknowledge the upside, under Thatcher Right to Buy did boost home ownership, around 2.5 million homes have been sold. One of the criticisms levelled at the policy is that the people who bought those homes were not representative of council home tenants — they were more likely to be two-earner households, middle aged and better off — but these are surely the exact people you would want to help, i.e. those most likely to be able to sustain mortgage payments.

However (and this is the ugly), analysis has shown that 40% of those properties are no longer sustaining the home ownership dream, but instead are being let in the private rental sector (PRS). As it stands, after just five years you can sell your Right to Buy home at market rate and keep the profit.

Which brings us on to the bad aspects of the policy. While you could clearly solve the transfer to the PRS by changing the conditions of Right to Buy, you can’t solve the fact that the policy is unfairly benefiting a small subset of the population who can’t afford to buy a home at market rate — i.e. those who are fortunate enough to live in social housing (where they have also been benefiting from lower, taxpayer-subsidised rents). The discounts available under Right to Buy depend on length of tenure in the property, but can be as high as 70%. Under the recent Midlands pilot of housing association Right to Buy, the average discount was 46%.

The “benefits to bricks” policy floated by the PM — I say floated because there’s no detail and it raises a whole host of complicated questions — similarly fails the fairness test. Allowing housing benefit to pay a mortgage, rather than rent, is literally the State buying people houses… but only some people. And many of those paying the taxes to fund housing benefit can’t afford to buy a home. Practical questions include: how does this group, who by definition can’t afford their own rent, manage riskier mortgage payments (e.g. if interest rates soar) or save for the initial deposit? How does this work with the capital rules in the benefits system?

Some supporters of the policy have rightly pointed out that at the moment we are paying mortgages via housing benefit, just those of landlords rather than claimants. Which is a good point. But this is another example of the wrong policy prescription. The reason taxpayers are bunging billions to private landlords is the shortage of social housing… which Right to Buy has, to date, made vastly worse.

Despite repeated assurances, we’ve never achieved like-for-like replacement for homes sold, we’ve just eroded the stock (and the housing association pilots confirms this is likely to remain the case). That means an increasing proportion of low-income families housed in much more expensive PRS homes. Don’t want to subsidise private landlords? BUILD MORE SOCIAL HOUSING. When asked in the press Q&A what his build target was for social homes the PM avoided answering the question.

As far as 'come back' speeches go, this was a big disappointment.

If you want our take on the Messenger Review into health (and not really social care) leadership, check out this handy thread from our resident health expert Seb Rees.