Iain Duncan Smith is a former Secretary of State for Work and Pensions, founded the Centre for Social Justice, and is MP for Chingford and Woodford Green.
Too often, people find themselves in homes which are no longer near to work, trapped in areas riven with high levels of crime and drugs. Over two-thirds of social tenants have incomes in the bottom 40 per cent. And in some areas, only five per cent of tenants move each year. Almost half of the social housing stock falls into the category of the 20 per cent most deprived neighbourhoods in the country. Although welfare reforms have meant some three million more people are in work, there still remain some pockets of unemployment, centred often on difficult estates.
Jeremy Corbyn, and his enforcer John McDonnell, are demanding the re-nationalising of social housing and the ending of private property rights. This kind of ‘government knows best’ view may at first seem alluring to some, but those of us who remember the sink estates, vast rent arrears and often sub-standard housing when councils ran social housing know that it is far from a panacea.
As in so much of our political debate, we too often fail to look at other countries to see what works and what doesn’t. In France, employer-employee groups provide part of the funding for social housing to support local employees. In Holland, the rent for the cheaper rental homes is kept through non-profit private housing foundations or associations. These financially independent groups act as social entrepreneurs, working to prevent segregation. They also successfully highlight an important problem in the provision and service by public bodies. As Conservatives, we cannot fail to recognise that the present system – where too many of the Housing Associations have grown in size to the point where they now resemble old council estates – doesn’t serve the tenants at all well. That is why we should use this opportunity to re-think the way we build new communities.
In the UK, since the war, we have – wittingly or unwittingly – used the built environment to lock in our place in society. A glance at any city will show that children tend to grow up in houses near to children whose families’ status is very similar. We have low-income estates, middle-class estates and even some areas where housing is only inhabited by the very wealthy. We need to look at how we can create more balanced communities through a mix of tenure and sensitive allocation policies, whilst protecting against the danger of stigmatisation.
It is also time for us to reconsider the way we treat private landlords who buy houses to rent. A large number of them are talking about no longer buying to let, and they blame it on George Osborne’s decision to impose a stamp duty levy on the purchase of homes to rent, to restrict mortgage interest relief to the basic rate of income tax, and to tax a landlord’s turnover rather than profits. This, they believe, has led to private landlords scaling back their operations or even leaving the sector altogether. We should all be concerned about this, because private landlords are a significant provider of the additional housing we need. We won’t be able to provide all the housing in the medium term through aggressive building programmes alone. We will need other sources of accommodation, as well.
That’s why we should be encouraging them with devices such as VAT relief on conversions or even capital allowances, not punishing them. It’s no wonder buy-to-let purchases have fallen dramatically. Despite what has been said and written, they’re not enormous property magnates, for the most part, but often people using the market to help provide retirement income in later life or assets to pass on to their children.
I can of course understand the issue of foreign owners buying up property and leaving it empty, both pushing up prices and taking property off the market, however. Figures show that some 15 per cent of newly built homes in Greater London are snapped up by foreign buyers, rising to over 70 per cent in the city centre. Yet surely, if that is the concern, we would be better off levying a tax on empty homes. As I understand it, in New York apartments can incur a significant tax if they are left empty. We are now in danger of missing the point, for what is certain is that even if we do achieve our housebuilding target, there will still be a continuing growth in demand and a significant part of this will have to be available through private landlords. It is time to review Osborne’s tax changes on buy-to-let landlords.
When the subject of social housing is raised, most Conservative politicians nostalgically recall Thatcher’s council house sales, and the way they empowered many of those who otherwise found themselves trapped without assets. However, successful as that was, its effectiveness is clearly waning now. Perhaps for inspiration we should recall that council house sales was not the original housing policy. A different one was proposed by Peter Walker and others. Their plan was even bigger; to move council housing from the council to the tenants, automatically granting them an asset. It never saw the light of day, but the bold principle underlying it was that the Conservative Party was on the side of those who John Howard of Australia used to call “the battlers” – people who try, but never seem to get a break.
So as we commit to greater house building, we need to see how we can get back to that principle. Sajid Javid has spoken of his frustration that his house-building plan wasn’t included in the Conservative manifesto and whilst we have yet to see whether his plan for an enormous ramping up in house building is accepted we need to settle just what we plan to provide for whom. It would be an enormous mistake to decide that the vast majority of this new housing should be social housing. We need a significant expansion in housing that people can afford to buy as well as social housing. One of the biggest issues we faced at the election was the way so many young people have become disenchanted about their prospects to be able to own a house or a flat they can call home; this aspiration needs to be met.
The Government’s plan to build 300,000 more homes a year must have at its heart the overarching principle that we are not just the party of home ownership but also the party of aspiration. We need to reach out to those who aspire to do better for themselves and their families but find themselves trapped, unable to raise the money to buy their own home. We should plan to give social housing tenants who are doing all the right things a significant shared equity; I believe that it would help address the issue of asset poverty. At present, two-thirds of households without assets are poor and more people are asset poor than are income poor. The best determinant of a family’s long-term economic potential is the ownership of assets. This is why we should now be bold and look again at how we can give tenants an asset share of the home they live in. For owning a home ensures we look after it and take pride in it as well, which in turn supports all the important aspects of family life and helps improve their quality of life.
Whilst the nature of social housing has changed greatly since 1979, with Housing Associations controlling the majority of social housing, when it comes to housing policy, we still need to think about positioning ourselves on the side of the battlers. As this Conservative Government prepares to unveil its plans for housing, we should use this opportunity not just to tackle the lack of housing but also to show all those battlers we will ensure they get the break they deserve.