How would Corbyn’s million-home programme actually work?

‘Mugwump’ or not, Jeremy Corbyn will continue to be cast over the coming weeks as a slippery pair of hands in which to place our collective trust. The monotone playlist of ‘strong and stable leadership’ sound bites will continue to percolate into the minds of a partially interested public. But what do we actually know of Corbyn’s policies which he so often strains to focus on in interviews?

Among the headline-grabbers of nationalising the railways, providing free school meals to all children and the idea of increasing taxes on the rich (those on more than c.£70,000) is the programme to build a million homes in five years. Half of these would be ‘council homes.’

Ever since the public sector stopped building housing during the 1980s, analysts have insisted repeatedly that the private sector is either incapable or unwilling to plug the supply gap. A giant national programme of housebuilding at affordable rent levels would of course be welcome by those, particularly the young, who on average need 48% of their income to afford a 1-bed flat (57% in London). However how would this policy work in practice? What funding vehicles would need to be set up to finance this vast ambitious programme?

Corbyn’s housing plan admits to these homes being commissioned by a ‘combination’ of local authorities, housing associations and developers. In reality this would mean either a large subsidy being paid out to developers or stringent 50% affordable housing targets being imposed on the construction industry. As it stands, training up local authorities to establish funding programmes and attract skills to build at this scale is an objective rather than a reality. Ambitious targets however, are of course be welcome given the lukewarm nature of present public policy towards the provision of affordable housing.

Corbyn’s target refers only to ‘council housing’ with no specifics on tenure type or where these homes might be built. ‘Social rent’ is the most accurate definition for what most of the electorate refer to as ‘council’ housing, which is priced at between 30-50% of market rates. In 2015, local authorities in England built under 3,000 units of this tenure, illustrating the vast gap to reach Corbyn’s target. Councils are, after all, far removed entities from what they were in the 1970s and now are set up often with more sophisticated ALMOs in order to finance the development of council land for both private sale and affordable housing.

This proposed policy is tied into a more general mega-fund created through a so-called National Investment Bank. Corbyn proposes borrowing £15bn a year to service the construction of 200,000 homes, the principle being that that one-third of this would be partially recouped through taxation of the construction industry.

A National Investment Bank could support new build housing projects with low interest rates, both by councils and developers as long as tough new conditions were met on the proportion of genuinely affordable housing built. For every £1 spent on housing construction an extra £2.09 is generated in the economy.

Allowing councils to borrow more to develop long term income streams is  not something confined to a misty-eyed Socialism of the past. It is an active policy of some of the more progressive and financially able local authorities in this country. A recent article in the Financial Times revealed that local authorities are increasingly investing in commercial property with the aim of creating profits to meet the shortfall in social services funding. Councils are able to do this through the Public Works Loan Board, often at 100% of the property value to buy up shopping centres, warehouses or office space. Surely the much lower risk option of borrowing to build new, social housing to create a long-term stable income stream should also be extended to councils in the same way?

A slightly more individualistic set of policy-making might include a more substantial support for smaller scale developments, particularly for emerging sectors such as custom build and the financial incentives for struggling SME contractors to diversify the market. Such proposals may also provide a healthy political balance to ease the monotone nature of public policy dependent simply on heavy borrowing.

In summary, while it remains understandably vague,  Corbyn’s original 2015 document on housing provides very little on the surface to disagree with and in essence is merely fast-tracking the current trajectory of housing delivery. It would even be reasonable to suggest that the principles of these policies will be repackaged and sold in any governments’ future housing policies in that they represent, in broad terms, basic common sense.

Further information:

Corbyn’s Housing Paper (Aug 2015)

Paper by John Healey MP on local Labour council housing innovations > here


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