Ozzy's Corner

A view from the Libertarian Left. With no spin


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The New Housing Plan is Flawed

This week the Government announced a series of measures designed to boost the building of new houses. Sadly, but predictably, they completely fail to address the housing crisis facing millions of ordinary working people, especially the young.

One of the proposals is to reduce the number of affordable houses that local authorities often tab onto the planning permission of new housing projects. This will have the consequences of reducing the number of affordable homes built in the real house price hot spots, such as London.  Developers would love to not have to build properties that  are affordable, when instead they will be able to build more homes aimed at the richest in society. The clear profit motive will drive this. Expensive areas will become increasing devoid of anyone but the very wealthy.

A second proposal is to allow the building of house extensions, with little or no planning permission required. This has a number of problems. The people who have the type of property and the equity or finances to do this will not be young people or first-time buyers. The current constraints on mortgage criteria means that once again only the wealthy will have the means to pursue this option. Once their house is larger, its value will rise. The rise in prices will further increase the lack of affordability that is a real barrier to first-time buyers.

First-time buyers are critical. The housing ladder is like a food chain. Fresh buyers need to come into the market at the bottom to get the housing ladder moving. They buyers are seriously constrained by the tighter mortgage criteria commonly in place. How many young people can raise a sum, often need around £ 30,000, to get a deposit together?

Crucially, when are we going to ween ourselves off the idea buying a house is something that must be done, and they must rise in value – that being a good thing? This view has led an asset-bubble that has driven house prices way beyond increases in wages:

In 2001 the average price of a home in England was £121,769, and the average salary was £16,557. In 2011 the price of the average home was £236,518 – an increase of 94% – while wages had risen by just 29% to £21,330, the National Housing Federation said.

http://www.guardian.co.uk/money/2012/aug/17/house-prices-rise-faster-wages

There is a clear need for an expansion of homes for rent in the UK. As social house building has declined sharply in recent years, the private sector has provided an increasing number of homes to rent. There are some terrible private Landlords, providing slum dwelling to the most vulnerable in society. This private sector is highly deregulated, and much the worse for it. A boom in house building at affordable rents would be best performed by either Councils or Housing Associations.

Another source of housing is the refurbishment of empty properties. In November 2011 Homes from Empty Homes reported that 720,000 homes were stood empty. 279,000 had been empty for more than six months. Legislation exists that allows these to be taken in local authority hands, but is barely used. Also, many former industrial or business premises exists, closed and dilapidated. For example, where I live in West Yorkshire, lay a number of old mills that could be converted in literally scores of new flats. This creates homes, jobs and clears up environmental eye sores.

These new homes could be build to high environmental standards, reducing energy consumption – good for the pocket of their tenants and good for the slowing down global warming. Another benefit would be the driving out of slum landlords over time.

The financing of this building boom is important. I have proposed brick bonds in a previous post, based on raising the money from savers.  One could also mention that billions of pounds are being lent to the banks at very low interest rates. It would a worthy use of this money to spend on social housing and affordable home to buy.

It must be remembered that house building creates jobs, from brick layers to apprentices and the whole supply chain, and this brings money into the Treasury. Benefit payments fall. Councils and Housing Associations have capital assets that will create income year after year.

So this week’s proposals on offer are not a solution to the UK’s housing crisis.

So what are they?

I suspect they are no more than a gimmick to make middle-class home owners feel better, and hopefully buy off those votes.

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A Shuffle to the Right

The Cabinet reshuffle has set the tone for the second half of this Parliament, and gives a guide to the shape of the next General Election.

By leaving George Osborne in place, the Prime Minister has set out his stall to stick to an economic approach based on cuts and Austerity. This plan is now set in stone, and the Coalition is firmly chained to it.

The Green credentials of this Government, already looking very shabby, have been firmly cast away. Justine Greening, firmly opposed to a third Heathrow runway, has been removed as Transport Secretary. The Government is already talking about reviewing Airline capacity in the UK, a real insight into their current thinking. The Coalition agreement does include a no third runway clause, but increasingly that whole document is looking as durable as one of Gerald Ratner’s earrings. In addition, the Conservative back-bench rebellion over wind farms have borne fruit. A wind farm sceptic is now the Secretary of State for Environment, Food and Rural Affairs.

David Cameron is shaping his Cabinet to supply the red meat that Tory back-benchers and local activists are demanding. I believe we will see further benefit cuts, more anti-ECHR rhetoric, additional curbs to union rights and range of other policies to keep the Tory faithful cheering. He has realised he cannot win the election on the economy, so a line up of traditional dragons the Tories can slay is being prepared. David know full well he can cut back the public sector, attack benefit claimants and when the left stands up to this, he has created a common enemy. With the media largely behind him providing PR support, it could be an effective strategy.

The Liberal Democrats are in an appalling position. They know they have the power to pull down the Coalition. They also know they are politically dead whenever the General Election happens. David Cameron can push and push, and if they complain too much they will be left with a single-shot revolver on their desk. If they don’t like it, they know what the alternative is. Every time Nick Clegg’s MPs have caved in – the health bill for instance – they become weaker and weaker. They are now pitifully weak.

This shift has serious consequences for Labour. Labour has in effect been shadowing much of the Conservative’s policies. When the Coalition promises Austerity, Labour hasn’t fully rejected it. Labour simply says it would cut a bit less sharply and more fairly. When major cuts to disability benefits are on the cards, Labour says that they do need reform, but they wouldn’t do it quite like that. The timidity in offering a principled alternative is something that Ed Miliband may regret in the future. He has been good tactically, but on the strategic aspects of creating a credible alternative Government in time for the 2015 General Election, he has done much less well. How will Labour handle a media-led campaign against the ECHR, and a new populist attack on benefits? The record to date suggests very passively.

To conclude, this reshuffle is a serious game changer. Labour, the Greens and the Liberal Democrats that haven’t yet turned into invertebrates need to work hard together to challenge what David Cameron wants to offer the country. If they don’t, Britain may be sleep walking into a nightmare.