Tim Farron MP: Building homes as a public service

Opposing Ed Miliband’s 'simplistic attack' on house builders, Tim Farron MP calls for the Government to provide better incentives for the house-building industry. Building homes should be a public service. It’s as essential as building roads, schools, hospitals and railways. It affects our economic and social health, our growth, our life chances and our environment. We should fight for the provision of adequate housing as passionately as we fight for the NHS. Yet we are desperately short of house builders. The volume house builders know this. The reason they dismiss targets of building even 200,000 homes a year as “wild” is because they know they can’t do it. Volume house builders have averaged only 130,000 homes a year since the 1950s. We’ve needed around 240,000 homes a year for at least the last ten years just to meet new demand. And that’s without addressing the historical backlog, never mind future growth. But of course house builders are subject to the same economic pressures as everyone else. We knew this in 2007, before the crash. Labour’s Calcutt review admitted it: “Housebuilders are not in the business of serving the public interest, except incidentally. Their primary concern is to deliver profits for their investors”. When a crash comes, the small and middle sized builders go bankrupt in the absence of demand. The volume builders consolidate. But even without boom and bust, there are systemic problems with our house-building industry which we need to sort out. There are too few people commissioning homes, there are not enough companies to choose from to build those homes, and we don’t have enough skilled workers to construct them. Not to mention a shortage of building materials, a lack of innovation and diversity in design and construction, and the fact that all of this will take time to change and scale up. Unlike Ed Miliband I am not going to launch a simplistic attack on the housebuilders who remain. They are acting rationally in a landscape where they have weak incentives - and next to no leadership from the Conservatives - to deliver the kind of homes which are a public good: green homes, truly affordable homes. But that does not mean that simply providing support to the same traditional players, in the same way, will solve the housing crisis. We need to create 21st Century builders who want to build as a public service, and will innovate to make the most of every pound, tying up welfare and the needs of an aging population with housing provision. Thankfully, we do not have to start entirely from scratch. Councils have built in the past, and our work in Government has freed them to build again. But it can’t end there. Councils and Housing Associations are calling for greater powers to fulfil their social aims. They know that the fundamental answer to the acute housing needs of those on the waiting list is to build more homes. They need more powers to become developers themselves. There are immediate measures we could take to enable housing associations to alleviate this crisis, if only there were a political consensus. We need to give them more control over their businesses on the condition that any surplus is ploughed straight back into securing more effective housing outcomes for their tenants. That’s what Vince Cable and I called for at Lib Dem party conference. There is a significant measure which we could deliver, in Government, now, that would build good quality affordable homes at no public cost. I’ve been calling for a fair valuation of all their stock. A quirk of Government guidance means that stock transferred in bulk from councils is valued at 30-45% of what the property is actually worth, rather than 60%. If we corrected this anomaly, which affects 1.3m properties, housing associations would be able secure more private money and could thereby build homes at no cost to the public purse. Analysis of five housing associations illustrates that this could double their borrowing capacity at a stroke. Of course we need to ensure that, as housing associations borrow more, our regulation and safeguards can protect this growing market from financial risk. And we need to be clear that housing associations are independent organisations – not Government bodies. But the way to resolve these problems is by committing to long term action, not by flirting with short term policy gimmicks. There is a clear need for a different housing supply system, made up of diverse players, that builds to provide a public service. Government needs to get the incentives right for this industry – everyone from community land trusts to self-builders. Councils which drag their heels must realise that day is up. Housing associations that want to build but can’t must be released to. Without this new wave of builders, we will not solve the housing crisis.