Are housing associations part of the public sector? This is a question that the statisticians at the ONS have agonised over in recent years. It is not just a matter of technical classification. The issue is of significance in the Government’s efforts to boost home ownership. The 2015 Conservative Manifesto proposed a right to buy for housing association tenants. But the associations then argued they were independent charities and should not be forced to sell their property. There were then some feeble efforts at voluntary “pilot” schemes with modest discounts and taxpayer reimbursements.
Boris Johnson is now seeking to revive the idea but the same tension applies. Michael Gove, the Levelling Up, Housing and Communities Secretary, has been put in charge of the policy but he shows little sign of agreeing with it. In April he gave a speech to Shelter suggesting there was already too much “tilting” towards home-ownership in housing association schemes and that, instead, the number for social rent should be increased. Politicians are fond of making declarations celebrating social housing, calling for the “stigma” to end and so on. But what of the views of the council tenants and housing association tenants themselves? Are they appreciative of their subsidised municipal serfdom? Mostly not. 55 per cent would rather own a property given a choice; only 16 per cent disagreed.
Gove is being despatched to negotiate with the housing associations. But given the stance he has already taken, I fear he will go “naked into conference chamber” – to quote one of his predecessors, Nye Bevan.
However, if the Government does take a robust stance with the housing associations, it should be to give them a choice. They can go back to their roots as independent charities. Then they can make their own decisions on selling or renting property, who to accommodate and on what terms. The state would cease to impose obligations on them. But nor would it provide subsidies – either direct or via Section 106 property deals. They can’t expect to have it both ways. It’s rather like the University Vice Chancellors suckling at the taxpayer’s teet but then being most indignant when their pay is scrutinised.
If some housing associations choose the path of independence it would be welcome. Lifting bureaucracy could allow for greater compassion and innovation. Octavia Hill was a pioneer with her work providing housing for the poor in the 1830s. Among her core beliefs was that this provision should be managed and funded independently of the state. This social reformer warned presciently that “municipal socialism” would mean indiscriminate demolition and the destruction of communities. In 1869 she declared: “Where a man persistently refuses to exert himself, external help is worse than useless”; a powerful critique of what a century and a bit later would be called the “dependency culture.”
Charitable status would still mean certain constraints applied. Indeed they should be applied more rigorously. For instance, it is high time that housing associations as well as councils stopped clinging on to expensive properties. As Policy Exchange has said:
“There is a strong case that housing associations’ charitable status carries a responsibility to use scarce resources appropriately. Charity trustees are legally obliged to invest sensibly.”
The law needs to be tightened to put the matter beyond doubt. It is absurd that one family can hit the jackpot and be allocated a housing association property worth millions of pounds. Proceeds from selling “high value” social properties are sometimes linked to the right to buy. (The Sunday Times reports Gove objecting to this.) But it would make sense for those sales to happen anyway.
Anyway, there could be an alternative path for housing associations to sign up as agencies of the state. They could be put on an approved register and be funded by the state and accommodate those allocated to them by the state. One of the obligations would be that their tenants would have the right to buy.
For right to buy to have much impact, the discounts, for all social housing, would need to be sharply increased. Under the existing scheme for council tenants, the maximum discount is £116,200 in London or £87,200 across the rest of England. But average property prices in London are over £700,000. In England generally, the average is over £300,000. There should also be a “right to shared ownership” – with tenants given a small equity stake for free provided they take on responsibility for repairs.
There should be a requirement for replacement properties to be built. But there is no justification for this imposing an additional cost on the taxpayer. Councils and housing associations should build on surplus land that they own (such as empty garages.) About two thirds of the cost of new homes is the land – the construction is only a third. It would also be possible to include a mix of market housing in the development to ensure viability. Plus there are the proceeds from the sale of high value vacant social properties. Plus, of course, even with very large discounts, the right to buy proceeds would still be significant.
It is imperative for a formula to be agreed which does not rely on taxpayer subsidy for replacement building. Firstly, because that would severely ration the number of sales that could be funded – given the state of the public finances.
Secondly, it would introduce a valid grievance among millions renting privately who would like to buy, but can’t afford to. Why should their taxes pay for it? By contrast, the alternative approach I have outlined would also increase the supply of housing coming on to sale on the open market. So it would help the private renters wanting to buy too.
Martin Luther King said:
“You know, whenever Pharaoh wanted to prolong the period of slavery in Egypt, he had a favourite formula for doing it. What was that? He kept the slaves fighting among themselves. But whenever the slaves get together, something happens in Pharaoh’s court, and he cannot hold the slaves in slavery. When the slaves get together, that’s the beginning of getting out of slavery. Now let us maintain unity.”
Unity is needed to reach the promised land of home ownership. There is no need for a housing association right to buy to do private renters any harm. But the Government’s current plans risks doing so.