Just JM: Housing - give us a break

6 October 2009

It wasn’t the house price difference that bothered me but the condition of my new home, described in a book on Richmond as a fine example of restored Edwardian architecture in a conservation area of the town.

Well, it may have looked beautiful but the bricks were soft, the rafters were rotting under the slates and the cellar, formerly the coal hole, flooded with sewage after a downpour. The location, however, was everything, so when I sold up I didn’t lose any money. The big surprise is that it is still standing over a quarter of a century later.

It is that property that got me thinking about urban renewal. It should be demolished and rebuilt but it is one of six, so that would be tricky. Moreover, there must be hundreds of thousands of properties around the country also due for the bulldozer but they’re owner-occupied and there’s no framework to achieve a replacement.

With such thoughts in mind I once calculated that it would take around 400 years to replace the UK housing stock – a figure that I’ll have to extend by another 50 years or so, given the current rate of house building.
It is also a figure that is overlooked when the Browns of this world start talking green with ambitions to build carbon neutral homes and think that three million new homes by 2020 is a realistic vision. It is unrealistic both in terms of the number of homes that are required and in terms of the ability of the country to deliver, seeing as UK Limited is sans land, sans will and sans money.

Obviously the government’s coffers are bare and demand from the owner-occupied sector won’t be enough to stimulate house building, so how are we to replace our ageing housing stock and provide new homes for a population that is not only growing but fragmenting into an ever larger number of households?

Social housing isn’t delivering (between 1988 and 2006, social rented stock declined in size by 18% thanks to right-to-buy and a slow-down in house building) and while private rental has grown as a tenure from less than 10% in 1991 to around 14% to day, it isn’t doing much to stimulate new build and the supply of buy-to-let mortgages to aspiring landlords has all but dried up as a result of the credit crisis.

A solution, within the private rental sector, might be to reintroduce a 1980s style system of tax breaks for institutions or business landlords. That’s a proposal which has been put forward by LSL Property Services who wants to see a return of Business Expansion Schemes (BES).

This, the company recently reminded me, was a package of tax incentives for small to medium sized enterprises that was launched in 1986 and helped inject money into the private rented sector.

It was used to turn around years of neglect and the Housing Act 1988 enhanced the parameters of the scheme further as the BES was used as a vehicle for banks, building societies, investors, property companies and property funds to acquire portfolios.

The BES was a huge success. LSL has collated the figures: “In the first three years of its existence (1988-1991), it raised some £400m (approximately £1,346.4m in today’s money) – mostly through institutional investors. The total made available for housing investment was some £3,300m - £8,349.6m in 2009 money.”

Extrapolating from all the figures LSL Property Services believes that with similar investment via a new BES, approximately 600,000 homes could be built by 2031.

That won’t rebuild the housing stock but it might save a million people living in tents or squeezing three households to a home, Soviet Union style, so Mr Brown, when it comes to housing give us a break – a tax break!