Labour force: Unpicking Corbyn’s housing policy

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As Labour’s new housing policy begins to take shape under hard-left leader Jeremy Corbyn, how much influence could it have on the Government’s own plans?

Jeremy Corbyn’s election last September to become leader of the Labour Party shocked UK politics to its core. The hard-left MP had been a backbencher and serial rebel for 30 years before he was thrust into the leadership with a landslide victory.

Now his promise to provide a clean break from Ed Miliband’s tenure is filtering through to the beginnings of a housing and mortgage policy.

At the time of writing, SkyBet puts Corbyn’s chances of becoming prime minister after 2020 at 10/1, with his nearest rival, Dan Jarvis – the MP tipped as a future leader – at 20/1. This compares to Conservative MPs Boris Johnson, at 10/3, and Chancellor George Osborne, at 7/2, as well as David Cameron, who has pledged to step down as prime minister before the election, at 6/1.

But an ICM poll published on 14 March put the Tories and Labour neck and neck in the polls at 36 per cent each.

In addition, 232 Labour MPs wield influence in Parliament under Corbyn’s Opposition leadership, which can have a significant impact on the national debate.

So regardless of whether Corbyn ultimately becomes prime minister, it is worth examining how his proposals could alter government policy. Advisers and brokers have only to look at the Chancellor’s U-turns on pension tax relief reform and the creation of a Lifetime Isa to see how quickly government policy can change.

Financial policies

Corbyn’s shadow chancellor, John McDonnell, has similarly promoted the hard left within the Labour Party for 30 years, naming Lenin, Trotsky and Marx among his heroes. He claims to be working to overthrow capitalism and has blasted the banking and financial sectors for their role in the crisis of 2007-08.

Corbyn has promised to break up the UK’s largest banks and has hinted at extensive reform of the sector, focusing more on the role of credit unions. In a speech to the British Chambers of Commerce last month, he called for a new “ecology of finance”, with additional lenders beyond the banks.

“The banking sector has to be reformed,” he said. “Finance must support the economy – not be an extractive industry treating consumers, entrepreneurs and businesses as cash cows.”

Miliband legacy

Corbyn has similarly strong views on the UK housing sector but to date has chosen not to pursue his predecessor’s policies.

While the previous coalition government was in power, former Labour and Opposition leader Ed Miliband ordered a housing review led by Sir Michael Lyons, which reported in early 2015 ahead of the general election. The Lyons Review focused primarily on the structural barriers to building more homes in the UK, and on how to increase the number of properties built to 200,000 a year.

It also explicitly supported the prospect of a growing rented sector – whether social or private – at the expense of homeownership.

The report states: “A bigger-market rented sector will help improve quality and drive down the cost of supply by counteracting the shortage of rented accommodation, particularly in London and other vigorous labour market areas, which has forced up rents very quickly.”

The boost in private renting was intended to be driven by increased institutional investment into the sector from pension funds and other sources. It would also be accompanied by much higher standards for rental properties and extra requirements imposed on landlords.

Under Miliband, Labour backed the national registration of landlords with local councils and the promotion of longer-term tenancies to create greater security for tenants.

Miliband also called for the insertion of maximum rent rises into tenancy agreements to prevent large annual increases. This was dubbed a ‘rent cap’ and was fiercely opposed by mortgage providers and buy-to-let landlords.

Corbyn-mania

When Corbyn agreed to run for the position of new Labour leader, he put housing at the centre of his leadership campaign. Since securing the top job he has continued to discuss the subject at length.

During his campaign he had called for a “state mortgage scheme” to boost homeownership and the creation of a state-backed National Infrastructure Bank to fund the building of new homes. While policy details have been hard to pin down since his elevation, Corbyn has set out general priorities that represent a shift from those of Miliband’s tenure.

First, the UK must build more social housing. This is a break with political orthodoxy held ever since former Conservative prime minister Ma­rgaret Thatcher’s Right to Buy scheme of the 1980s permitted council tenants to buy their homes at a discount.

The current government has expanded Right to Buy to housing associations and social housing although the scheme has been halted in Scotland by the devolved government.

Lentune Mortgage Consultancy managing director Stuart Gregory says: “Labour needs to do something about council housing – not with ‘affordable homes’, which is a copout for many developers looking for profitable projects, but by replacing the council housing stock being lost through the Right to Buy scheme.

“The Government is repeating the mistakes of the 1980s by selling off the council housing without building replacements. I’ve even heard anecdotal evidence of the New Forest district council buying back old council stock at current values, which it had sold off cheaply during the 80s.”

Another of Corbyn’s priorities is scrapping planned reductions to housing benefit, such as the so called bedroom tax that reduces welfare payments based on unoccupied rooms in rented accommodation.

He has also called for caps on rent rises, similar to policies in place in Germany and in some US cities, perhaps by linking rent to earnings.

Finally, Corbyn has stated his aim to reverse the decline in homeownership. This is perhaps his most surprising housing goal, coming from a left-leaning member of the Labour Party, but it is backed by shadow housing minister John Healey, a widely respected MP among both the parliamentary Labour Party and industry.

Healey is an experienced political operator having been a minister in Gordon Brown’s Treasury from 2002–07. He was also housing minister under Brown’s premiership in 2009–10. He left the front bench under Miliband in 2011 to take a break from politics but has returned to his old role under Corbyn with a new lease of life.

Healey’s years of experience have already helped Corbyn’s Labour to build contacts with the mortgage industry. Other areas of the financial and business sectors – such as banks, asset managers and advisers – have struggled to form relationships, but Healey and Treasury minister Seema Malhotra, who served under Ed Balls’ shadow Treasury team, have been important points of contact.

Redfern Review

In February this year, Healey launched an independent review of homeownership, led by Taylor Wimpey chief executive Peter Redfern. The Redfern Review has been tasked with assessing the decline in homeownership and recommending action to address it. It is scheduled to report back in the late summer.

The review is being undertaken by a panel of housing and economics experts, comprising: Terrie Alafat, chief executive of the Chartered Institute of Housing and former director of housing at the Department for Communities and Local Government; Dame Kate Barker, former member of the Bank of England’s Monetary Policy Committee and author of the Barker Review of Housing Supply; Andy Gray, former managing director of mortgages at Barclays and deputy chair of the Council of Mortgage Lenders; and Ian Mulheirn, director of consulting at Oxford Economics and former director of the Social Market Foundation.

Healey says: “Increasing homeownership is Labour’s housing priority.

“The Redfern Review will take a hard look at the causes of the recent decline in homeownership– to help bring fresh ideas to the wider public debate on how to get to grips with this problem.”

Mortgage access

As part of his push towards greater homeownership, Corbyn has focused on the problems of the self-employed in gaining access to mortgages. In his first speech as Labour leader, he announced his intention to support the 4.5 million people classed as self-employed in the UK, by calling for new rights and protections.

The Mortgage Market Review of 2014 introduced far stricter income verification rules for lenders, making it harder for self-employed people in search of a mortgage to prove a regular salary. Specialist lenders have begun to offer solutions but policymakers have become concerned about the impact of more stringent affordability and income checks.

Last month, shadow Wales minister Susan Jones asked economic secretary Harriett Baldwin what measures she was taking to boost the homeownership aspirations of the self-employed.

Baldwin replied: “Decisions around the availability of individual mortgage loans are commercial decisions for lenders, including what evidence is required to validate income. The Government does not seek to intervene in these decisions.”

Under the previous Labour government, frontbench MPs Chukka Umunna and Rachel Reeves held a summit for mortgage lenders and pension providers with the aim of giving the self-employed better access to financial products. While both MPs have since left the front bench due to policy disagreements with the new leader, they remain influential within the party.

However, although Labour under Corbyn would clearly like to see better rights for self-employed mortgage holders, to date the party has proposed few specific measures.

Tory policies

Like Corbyn, but rather less surprisingly, the Conservatives are keen to promote homeownership. Since 2010, both in coalition and after forming a majority government nearly a year ago, they have introduced a series of measures to that effect.

The Help to Buy scheme, set up in 2013, supports lenders that offer 95 per cent mortgages either with a government grant or by insuring lenders through a mortgage indemnity guarantee.

Last November, the Chancellor’s Spending Review included an initiative to boost the use of shared-ownership mortgages and purchases. The new Labour leader is known to joke that he has a shared-ownership mortgage on his Isling­ton home – but it is shared with his wife rather than with a government scheme.

Meanwhile, the recent March Budget delivered a savings bombshell when George Osborne unveiled a new Lifetime Isa, for use in saving either for a pension or, significantly, towards buying a first home.

From April 2017, people under 40 will be able to contribute up to £4,000 a year into the new Isa. The Government will top up those savings by £1 for every £4 saved, up to the age of 50.

Funds can be used to buy a first home, worth up to £450,000, from a year after opening the account, or can be withdrawn from the age of 60 to fund retirement. The savings may be accessed at any time prior to that but the Government’s bonus would have to be returned and a 5 per cent charge would be levied.

To date, Labour has failed to respond to the Lifetime Isa proposal. But Corbyn has pledged to vote against the Government’s Finance Bill in its entirety.

Future influence

With Corbyn still less than a year in to the job, Labour’s housing policy under its new leader continues to emerge. To date, it demonstrates both a shift away from his predecessor’s thinking and a surprising overlap with that of the Conservatives in seeking to increase homeownership.

As the looming Brexit vote raises fears of a threat to housebuilding just when the UK desperately needs new homes, experts will watch with interest to see how much impact, if any, Labour’s new housing policy has on the Government’s own strategy.

Dominik Lipnicki, Director, Your Mortgage Decisions

Dominik LipnickiOn the face of it, housing policy should be an easy win for the Labour Party. Homeownership in the UK is fast becoming an exclusive club for the wealthy. Londoners experience this most acutely, the majority of singles who live and work there having no chance of ever buying a home in the capital. This plays into the hands of Labour leader Jeremy Corbyn and his ‘Fairer Society’ rhetoric.

The priority for a housing policy should be to build homes on a large enough scale to make a genuine impact. Councils should have individual mandatory targets for new housing.

Not all green-belt land is categorised in the same way and much of it should be used for housebuilding. Sadly, councils tend to buckle when local campaign groups protest against plans for new housing sites. A heavier hand from central government is required here.

In addition, the planning system must be simplified and accelerated. The Labour Party should provide precise details on how this would be achieved, far exceeding the vague promises from George Osborne in the 2016 Budget.

But these key issues feel more like Tony Blair’s New Labour than Corbyn’s ‘New Politics’ and we are unlikely to see Corbyn propose anything along these lines. More’s the pity.

Perhaps more up his street would be to encourage longer tenancy agreements, providing stability for people who rent. Current rising rents are very problematic for those aiming to save for a deposit, with the constant threat of big increases thwarting their efforts. In countries such as Germany where long-term rental contracts are more common, tenants know where they stand and can plan ahead.

The other area for Corbyn to look at is mortgages. A Labour government could force lenders to be more proactive with criteria, especially on lending past the standard retirement age and for interest-only. It is often appropriate for borrowers with a young family or starting on a career path to consider an interest-only mortgage, yet this is rarely available. Lending criteria need to evolve to match the modern world, where people live longer, are often self-employed and may work significantly past retirement age.

However, Corbyn should steer clear of populist ideas, such as rent controls. A government should not set private rent levels.

The other easy win for Labour is social housing, which this Conservative government has turned its back on. Corbyn could compel local authorities to sell ‘high-value’ council housing and free up coveted land for property developers. He could also extend the Right to Buy scheme to housing associations. There are people in acute need of housing whom housing associations are powerless to help. This is an area where Corbyn can promote his agenda.

The Labour Party can put up a proper fight with a robust plan for housing. George Osborne’s Lifetime Isa may prove popular with the Facebook generation but there is a lot more ground left to cover. Corbyn should exploit it.

Housing minister carousel

The previous Labour government was renowned for chopping and changing ministers and none more so than housing. The position was demoted from the Cabinet during Gordon Brown’s time as prime minister.

In Labour’s shadow Cabinet, former Labour leader Ed Miliband promoted Emma Reynolds to housing minister attending shadow cabinet, and current leader Jeremy Corbyn has continued the practice with John Healey. Meanwhile, Conservative prime minister David Cameron has further demoted the role of housing minister to under-secretary of state. The Building Societies Association has led calls for housing to be restored to a Cabinet-level position.

The following list highlights the many housing ministers since 2001:

  • 2014–present: Brandon Lewis  (Coalition/Conservative)
  • 2013–14: Kris Hopkins (Coalition)
  • 2012–13: Mark Prisk (Coalition)
  • 2010–12: Grant Shapps (Coalition)
  • 2009–10: John Healey (Labour)
  • 2008–09: Margaret Beckett (Labour)
  • January 2008–October 2008: Caroline Flint (Labour)
  • 2005–08: Yvette Cooper (Labour)
  • 2003–05: Keith Hill (Labour)
  • 2002–03: Jeff Rooker (Labour)
  • 2001–02: Charlie Falconer (Labour)