Affordable Housing

Lord Haskel Excerpts

Thursday 25th June 2015 Lords Chamber

[Lord Haskel (Lab)]

My Lords, a common way of measuring our standard of living is to look at household expenditure. When I got married in 1962, the average household spent 24% of its income on food; today, that figure is 9%. We used to spend 11% of our income on clothing; today, it is 6%. On recreation and culture, we used to spend 7% of our income but we now spend 11%. We are better off. We also travel more: we used to spend 9% of our income on travelling; now, it is 14%.

But much of that progress and increased standard of living is thrown away by the fact that in 1962 we spent 13% of our income on housing, whereas today that figure is 26%. This is why the cost of housing is holding down our standard of living. Put in these terms, surely the purpose of our economic policy should be to put this imbalance right, as recommended by my noble friend Lord Whitty, instead of continuously compensating for it.

Noble Lords have mentioned right to buy and help to buy, and these are meant to satisfy our aspiration to be home owners. In fact, generally all they do is transfer public money to the fortunate few, and there is no guarantee that they will be the home owners. This is not responding to the fundamental social need to provide housing, as the noble Lord, Lord Best, explained.

I hesitate to talk economics in the presence of my noble friend Lord Desai, but why do the Government not understand that subsidising something in short supply merely increases the price? If there is a shortage of bread and you give each hungry person £1 to buy it, unless you increase the supply, the price will shoot up. And, yes, economists have worked out that for every pound spent on subsidising housing, the cost goes up by 77p. That is why a house which cost two and a half times the average income in 1963 now costs five times the average income. It is why it makes more sense to use the money to fund social housing. Not only does it cost less but more people will be housed and it will help to overcome the social costs mentioned by my noble friend Lord Whitty in his excellent opening speech.

Some £24 billion is paid in rent subsidies—one-quarter of our budget deficit. As has been pointed out, paying this subsidises landlords and employers, while it does nothing to increase the housing supply. This arrangement also encourages the wrong kind of economic growth: a housing boom. Instead of subsidising low pay with housing benefit, why do the Government not address this by encouraging firms to be more productive so that they can pay a living wage? Surely that makes sense.

Of course, planning policy is central to this, and both Kate Barker and the Lyons commission spoke a great deal of sense about it. As they pointed out, developer incentives keep land prices rising, especially land with planning permission, and this becomes an incentive to hold on to the land as it rises in value, rather than build on it. The sensible suggestion by Labour to do something about this unused building land was to tax it. This was labelled by the Conservatives as Stalinist. How would the Minister describe the proposed expropriation of social housing: as Leninist, Trotskyist, or what?

This crazy mix of competing policies which push up prices has been identified as one of the biggest threats to our economic growth, and not only in London. Wherever the economy improves, house prices go up. It then becomes more difficult to hire skilled staff and that threatens investment. As housing becomes unaffordable, so services suffer and businesses go elsewhere. The position in London is particularly serious. The GLA says that London needs 42,000 new homes a year, but last year only half that number were constructed.

The right to buy has been criticised by many noble Lords because nobody believes that the homes sold will be replaced, and they are right. Since 2008, London has financed 43,220 subsidised homes, but the net increase during this time has been just 13,585.

Another important factor affecting London is the corrupt funds flowing into London property. In spite of government promises about transparency, a whole industry is dedicated to laundering money by anonymously acquiring properties through companies registered in secrecy jurisdictions. According to Transparency International, one-third of all foreign companies holding inner-London property are incorporated in the British Virgin Islands. Much inner-London property is not even offered to UK citizens any more. Not only does this kind of money laundering raise housing costs in London; it is a major contributor to global poverty. Some justify this through the “trickle down” theory, but rising inequality shows that this is just wrong.

I started by speaking about household expenditure in the 1960s. I also remember a political consensus at that time: a consensus to provide decent housing for everybody. Is there no way in which we could come together again and agree that housing is not a traded commodity which is holding back our standard of living but a public good that can raise it?