Extending the right to buy is a win-win policy
Britain is in a deep housing crisis. High prices and low supply, strict lending criteria, and unbridled rent rises have created a vicious circle. Home ownership is plummeting.
We need a radical new policy both to ease the pressure on social housing and lend a helping hand to aspiring homeowners. David Davis MP and I have published a pamphlet with the Institute for Public Policy Research on such a new policy.
High house prices are part of the reason for the social housing shortage, but there is also the low turnover of social housing. Social housing is an important source of community stability as well as a safety net for those who face homelessness.
However, while some social tenants need state support for life, others see their fortunes improve but remain in social housing long after they need it. In Westminster alone, more than 2,000 social tenants earn £50,000 a year or more, with around 200 on six figure salaries. Some even have second homes abroad.
The coalition government was quick to recognise the problem. Lifetime tenancies will still be permitted for social housing from April 2012, but local authorities will also be able to offer shorter, "flexible" tenancies. However, flexible tenancies will not solve the problem – they will just shift it around.
Worse, the looming prospect of losing a home may create all sorts of perverse incentives, worsening dependency rather than improving it, and making it even more difficult to grow a sense of community. And "moving on" more successful tenants will weaken local bonds which badly need strengthening.
What we need is a system that encourages people who no longer need social housing to become homeowners, thereby freeing up the capital trapped in their homes to build new stock for the less well-off.
In 1980 councils and housing associations built almost 100,000 new social homes. Last year that figure was 25,000. With house prices, rents and population all expected to rise considerably over the next two decades, the shortage of social housing will only become more acute unless this trend is reversed.
So what can we do about it?
I tried to persuade Harold Wilson's government to sell council houses, but Britain had to wait for Margaret Thatcher's right-to-buy policy to transform the lives of some of the least affluent in society. So while council houses are still open to the right to buy, most of the stock in good areas where people want to buy are owned by housing associations which are exempted from the policy. David Davis pushed for the sale of housing-association homes when he was chairman of the Tory party in 2002.
We believe the key to success is therefore to expand the right to buy to housing association tenants on the strict condition that the total money thereby raised is used for a new building programme. With the building industry almost on its knees this new source of revenue will provide valuable employment.
Some critics of right to buy say it makes the social housing shortage worse by diminishing the stock. However, it is not the case that tenants who exercise the right to buy would otherwise be leaving social housing; the vast majority would simply keep renting their home. The home would not become available to others, and the waiting lists would grow still longer.
As long as the total proceeds of social home sales are reinvested in the housing stock, the right to buy is a win-win policy for everyone; tenants become homeowners, the building industry gains a long-term building programme and unemployed building workers get jobs.