Is Devolution the Answer to Britain’s Housing Crisis?

This week the think-tank Localis released their much-anticipated report on the role local authorities can play in developing housing policies that will deliver more new homes, Power Behind the Home: Why devolving housing powers will build more homes. The paper makes the case for why local authorities must and need to be granted more power and flexibility from central Government to be able to effectively face their own local housing issues with their own local solutions.

The report’s introduction states that rather than a single housing crisis, the United Kingdom is currently grappling with housing issues which are many and varied depending on which part of the country you live in. (Indeed, some have recently gone as far to say that it is wrong to call this a ‘crisis’ at all). ‘Affordability’ may be a key concern in, say, central London or Cambridge, but the problems are different in, Wales and Teesside, for example. More devolved powers would allow local areas to implement policies that are better tailored to their specific needs.

Following months of consulting with a variety of local government officials of varying levels across the country, Localis has published eight recommendations to give more local flexibility around housing provision. Below are some of what we think are the most interesting points among these:

  • Affordable Housing
    There needs to be a more flexible approach as to how localities deliver affordable housing. Current central policy, more often than not, goes against the grain of the local housing markets rather than working smoothly with them. The ‘one solution fits all’ approach is hindering the ability of local authorities to deliver affordable and genuinely affordable homes. If this inflexibility continues then those on lower and middle incomes will be hit the hardest. The Department for Communities and Local Government this week released figures which show that the number of affordable homes built in England has decreased by 52% in 2015-16.
  • Living Rent
    Government should give consideration to a Living Rent framework as a possible replacement to the current Affordable Rent. This would set rents at a rate in relation to local income levels, as opposed to the definition of affordable being up 80% of the private market rate. The adoption of this would give those on lower incomes a better reflection of what is affordable to them, and provide a more realistic financial window within which to save.
  • Right to Buy
    One hundred percent of all Right to Buy receipts should be fully retained locally. In doing this, local authorities would be much better resourced to replace the social housing stock lost by this policy – of 12,246 homes sold in the year 2015/16 only 2,125 have even begun to be built. Secondly to this, local authorities should be able to place a moratorium on any property bought through Right to Buy being entered into the private rental market. Over a third of units have currently done so, increasing rents further and pushing those on lower incomes out, which in turn places greater pressure on local authorities to provide social rents.
  • ‘Use it or Lose it’ Powers
    As the House of Lords Economic Affairs Committee and Institute for Public Policy Research has already recommended – and supported by an overwhelming 88% of local authority officials surveyed by Localis – plots that lie unused without being built on within an ‘appropriate’ time frame should be liable to a council tax. The aim being to incentivise developers to build-out quicker and avoid ‘drip-feeding’ the market at the expense of homebuyers to drive-up demand, pricing, and profit.
  • Land Commissions and SMEs
    Placing the creation of Land Commissions by combined authorities on statutory footing will enable a greater amount of public land available for development to be identified. Much of this land will include smaller plots that big developers tend to avoid, there would be scope here to encourage more SME housebuilders to develop on this land. The number of homes delivered by SME developers has declined staggeringly since the 1980s, and many believe that encouraging them into local housing markets could go a long way in delivering on demand.

The panel discussion at the launch of the Power Behind the Home report was lively and brought interesting insights into the housing market from different perspectives: all were broadly supportive of the report’s findings.

James Cartlidge, MP for South Suffolk and Chair of the APPG for Housing and Planning, spoke about how he felt that the current Right to Buy policy needs to be updated, and that the government is right to be moving away from a focus on home ownership to looking at a range of tenure types. Niall Bolger, Chief Executive of Sutton Council, agreed with the recommendations for greater devolution of housing powers to local authorities, and that councils must be incentivised to build more housing if the crises are to be solved: local authorities should be allowed to retain a higher portion of right-to-buy receipts, and they should be allowed to take on more debt than currently allowed to invest in new housing.

Ruth Cadbury MP, newly appointed Shadow Minister for Housing, spoke of how there needed to be more joined up thinking between local authorities regionally – many have big ambitions for housing development, but are hampered by neighbouring areas who do not.

Councillor Rock Fielding-Mellon, Cabinet Member for Housing, Property, and Regeneration in Kensington and Chelsea, highlighted how his borough exemplifies the way that national housing policies don’t always work at a local level. ‘Affordable rent’ or ‘Starter homes’, set at 80% of the market rate, are still extremely unaffordable when average house prices in Kensington and Chelsea are well over £1 million. As he has written elsewhere, he sees too many impediments from central government that prevent local authorities from meeting their residents’ needs.

The report and the panellists made the arguments compelling, and we found ourselves nodding along with many other audience members to the points being made. While we still think there are many ways in which central Government can aid the housing market and get more homes built, it would be difficult to deny the central thesis of this report that definitions of demand and affordability vary greatly from place to place, and therefore so do the solutions.

Given that housing supply and demand is one of the biggest and most prominent issues currently facing the country – something that is likely to remain unchanged for a quite a while – it could be worth, at the very least, considering and consulting further on a new localised approach.

If you are interested in a more detailed briefing and to hear more about our Local Government Practice, please contact David Park (Partner) at david@nudgefactory.co.uk

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