It’s time to remortgage - put rents to use on a new wave of council house building
Housing has moved rapidly up the political agenda over the past year or so. And it’s about time too.
The problems in the housing system are now hard to ignore. Council waiting lists continue to grow as more and more people find themselves in need. More home owners are finding it hard to afford their mortgages. Private rents are spiralling ever higher, especially in our cities. And only those with wealthy parents are now able to buy a home for the first time; the average age of a first-time buyer is almost 40.
The lack of housing creates complex social problems. The solution however is simpler; we need to build a lot more homes.
But we won’t manage that quickly unless we free councils to build once again at scale. Labour in government started the job, allowing councils to keep their rents and control their own council housing, free of Treasury prescription. Councils in 2011 built over 3,000 homes, up from 200-300 a year before 2009. That’s just a fraction of what they could do.
The next step is to allow councils to invest to build the next generation of homes. Councils have the best finances to get building again right away. Our private developers failed to build enough homes even during boom times. Now they are encumbered with debt and still suffering the effects of the financial crisis.
Councils in contrast have almost paid off the mortgage on the country’s 1.7m council homes. Councils borrowed money to build their original stock of homes. They’ve now paid most of it back with the average debt outstanding on each council home being about £17,000. Many councils over the coming years will build up big surpluses as they continue to collect the rent on these homes, but don’t have loans left to repay. It’s time to remortgage and put these rents to use on a new wave of council housing. That means giving councils the freedom to borrow and invest - to act like any business or housing association would.
One report estimates that councils could invest £7bn in new housing over the next five years if freed right now from unnecessary restrictions. That equates to 60,000 extra affordable homes, on top of those being built by housing associations and private developers.
If we’re going to build a home for everyone who needs one, we’ve got to let councils use public resources to the full. The country in tough economic times can no longer afford the dogma that says the public sector shouldn’t build homes.