Seven things the Lyons review offers housing

The review is important in its own right as one of the most significant political reports on housing in the last ten years. However, it also gives us a much more detailed impression of what life will be like under a Labour government in the second half of this decade to add to the outlines of what we can expect under the Conservatives.

Here are seven more talking points that Lyons has created:

1) A national priority

The way forward: The review boldly states that ‘the government must provide long-term political leadership by making housing a national priority’. Housing will be championed by the prime minister, chancellor, communities secretary and ‘housing minister attending Cabinet’ plus a cross-departmental task force and other advisory bodies. Funding will be devolved to city and county regions.

The worry: The housing minister had ‘attending Cabinet status’ at the end of the last Labour government, a period when we were still under-achieving on new homes. If housing really is that much of a national priority, why not give it full Cabinet and departmental status? Once housing funding streams are consolidated into the economic development fund devolved to city and county regions, where is the guarantee they will actually spend it on housing?

The real test will come if (when?) there is a downturn in private housebuilding (perhaps when interest rates rise). One of the most important recommendations in the report is that: ‘Government in 2015 should provide confidence that in future, counter-cyclical demand side measures will be implemented when needed’. One of the biggest housebuilders, Bellway, said last week that 200,000 homes will be impossible without additional government investment in affordable homes.

2) Avoiding change for the sake of it

The way forward:

The report argues that the government should avoid the short-lived initiatives that have plagued housing Policy in the past and use primary legislation sparingly. That’s all good but there are also recommendations to reverse coalition tinkering: changing the definition of ‘affordable’ in the NPPF back to one that refers back to incomes; reversing the exemption from the zero carbon standard for small housing developments; and scrapping the proposed minimum threshold for affordable housing section 106;

The worry: Some of this runs counter to the review’s emphasis on supporting small builders. And what about two other coalition changes? The evidence so far indicates that the New Homes Bonus is a mechanism for transferring funds from North to South for homes that would have been built anyway and that the ‘reinvigorated’ right to buy is not producing anything like one for one replacement. Why timidly call for a review of them rather than be bold and scrap them too?

3) Are locals ready to be led?

The way forward

: Plans for new housing will be ‘locally led’ but there would be new powers for the secretary of state to intervene. As things stand, a fifth of local authorities have still not even published a local plan let alone adopted one. The review proposes a range of measures to speed things up strategic housing market plans across administrative boundaries and a ‘right to grow’ into neighbouring authorities.

The worry: Some local authorities – think Milton Keynes, where the report was launched – are already promoting new homes. Others are doing the minimum possible. Action to ‘empower local communities to make their own decisions’ sounds great but what if that decision is ‘no thanks’? The local/national issue is already a problem under the existing system but could ‘the right to grow’ turn into political guerrilla warfare? How will South East councils feel about meeting London’s housing need? For a preview of that, see the way that Eric Pickles is already proclaiming the Labour threat to the green belt. 

4) Can local authorities cope?

The way forward: Local authorities would ‘play a much more energetic role’ in leading housing development and will have greater powers to act through housing growth areas, new homes corporations on land assembly and infrastructure. Where councils do not have the expertise they should share it between them.

The worry: ‘A strong leadership role from local government to intervene where the market does not provide by itself and a more energetic and active role in assembling land and driving development through partnership to deliver the type, number and quality of homes their communities need’ sounds great in theory. In practice though, local authority services have already been cut to the bone and more austerity is on the way. If councils are already struggling to deliver statutory responsibilities like adult social care, what will be left for planning and housing?

5) Borrowed time

The way forward: The report tells us that ‘as a nation we only consistently built 200,000 homes or more at times in the past when local authorities were building a good number of them’. It goes through the convincing arguments for allowing local authorities to borrow to invest for switching back from benefitsto bricks and mortar. It does not follow through with any recommendations, although it’s not the Lyons Review’s fault that Ed Balls has ruled out extra borrowing for housing investment.

The worry: Labour’s caution is evidently driven by fear of giving ammunition to the Conservatives. However, different forms of borrowing are everywhere in the report. There will be Help to Build loan guarantees for small builders, loan guarantees for housing associations, equity loans for private landlords and equity investments of public land. It seems it is ok for councils to raise bonds for housing companies outside of the HRA. There are recommendations on ‘active management of the overall council housing borrowing headroom by the Treasury’ and an assessment of ‘the distribution of the receipts from right to buy’. As with existing policies like Help to Buy, any form of borrowing seems to be ok so long as it does not actually count as borrowing.

6) Mobilising housing associations

The way forward: Lyons says the government ‘will need to work actively’ with associations to mobilise surpluses and borrowing headroom on the balance sheets. This applies especially to the largest ones in London and the South East to leverage them to parts of the country where there isn’t the same ‘capacity and willingness to invest’. Nick Duxbury reports on this in more detail here. Lyons also proposes a ‘re-tasking’ of the Homes and Communities Agency. Responsibility for investment will transfer to the DCLG and then down to city and county regions, as the HCA becomes an investment aggregator and enabler for development in much the same way as the old English Partnerships.

The worry: This sort of talk, and mention of opportunities for mergers, has led to concerns at the National Housing Federation about housing association independence. As Alex Marsh argues, if the government takes intervention too far it could ultimately find that associations’ borrowing will be reclassified as public borrowing and if it pushes risk too far it could be storing up big problems for the future. The review considered moving regulation away from the HCA too but concluded that would ‘risk delay and uncertainty’. However, does an agency whose main focus would be commercial make for the best regulator of social housing? And what about the interests of tenants?

7) The future of social housing

The way forward: There is an unresolved dilemma at the heart of the report. While there is extensive discussion of the problems that affordable rent poses for landlord borrowing capacity, tenantaffordability and the housing benefit bill, higher rents mean more homes for the same public subsidy. Lyons envisages that output by councils and housing associations will double by 2020 compared with 2013. With investment limited despite that vague promise of housing being ‘a priority’, will a Labour government really choose fewer homes with lower rents over more homes with higher rents? 

The worry: Labour’s caution on borrowing and investment and the target of 200,000 by 2020 indicate to me that we will see a development of what we have now rather than a break with it. When that’s combined with the Universal credit, the end of direct payment and continuing austerity, what does that mean for the most vulnerable tenants and those who most need social housing? The tensions between landlords’ commercial focus and social mission can only intensify and the temptation to go for better-off tenants paying higher rents can only grow. That’s precisely why investment has to be a priority.