Bonuses for houses?

On the face of it, this sounds like a good idea:  Councils in England offered new homes bonus (BBC). Housebuilding, particularly in the public-rented sector, has been too low for many years now, which may be fine for inflating the house prices for people who own a home, but is pretty lousy for those who don’t own one and can’t afford to buy. However, there are some flaws with this idea.

Firstly, it’s a new bonus to councils to build houses, but it’s not new money. So it will be taking money already allocated to helping councils build new houses, and diverting it to other councils. The net result is not much change – and perhaps fewer new builds if this bonus costs more per house than the existing schemes do.

Secondly, Six years’ of council tax per home (about £9,000 for a Band D) is not really a lot of money to a council. It costs roughly £50-100,000 to buy land and build a home (depending on the size and type), and the real issue for most councils is that they just don’t the money for building hundreds of homes and the Treasury is heavily against them borrowing it. The idea that the bonus would be able to be spent on things like new libraries or pools is a nice one, but it would take a lot of houses to be built to be able to afford that kind of thing. A thousand bonuses would bring in up to £9M for capital spending, which would still not be enough to provide a pool or library, and if there are councils out there who have the resources to build 1,000 homes (at a cost of £50-100M), couldn’t they just build a few less and do the library/pool themselves? It seems a bit incongruous to me.

And lastly, it actually provides what I see as an unhelpful bit of fuel to the ‘council housing is subsidised’ side of the argument. It would be better to make it easier for councils to be able to build homes and rent them out with their own resources, than to tell everyone that there’s a government subsidy (which is probably actually being funded from money creamed off council rent receipts for the national pot in the first place, and so is not a ‘subsidy’ for council housing at all).

I really think that we need to get away from the idea that council housing is just for the poor. That creates ghettos and stigma, and it belies the fact that the original idea for council and housing association rented accommodation was that they were available to all kinds of people, that it’s actually better for estates to have a mixture of people living in them, including people with full time employment even (shudder) some with middle-class professions.

The right to buy (along with very generous discounts and the associated propaganda) started this, as people who could afford to removed stock from the public pool, and as a result of councils not being allowed to use the (reduced) receipts to replace housing, forced a change of approach from a ‘queue’ waiting list to systems which only allocated on the basis of dire need.

The other recent idea from the Tories of a fixed tenure for tenants reinforces the stereotype, and has its own drawbacks. We all know that there are problems with means tested benefits in that they can act as a disincentive to people on them to improve their situation. If you lose benefits when you get a job, so you end up no better off, why get a job? Now, this can be resolved by using a ‘taper’ so that people don’t lose benefits or tax credits on a pound-for-pound basis. But if a council house is means tested, and every five or ten years your situation is reviewed, that could well mean people thinking to themselves “why get a job, if it means we lose the house?” There are also questions such as how you deal with a recent widow in a large house coming up to the end of her tenure and being forced to move out because her home is ‘too big’. It may be utilitarian as far as society is concerned, but when it comes to real people and how they act and feel, these policies are verging on the sociopathic.

Councils in England offered new homes bonus

Posted in Politics. Tags: , . 2 Comments »

2 Responses to “Bonuses for houses?”

  1. Skuds Says:

    My understanding of the scheme is a bit different to yours, though I admit that I only read the BBC News story which is not full of detail.

    I interpreted it as a bonus for houses built within an authority’s area, regadless of who built them. This would change the economics quite a bit: councils wouldn’t need to weigh up a £100k building bill against a £9K bonus – just the cost of approving a planning permission.

    Interesting because it would encourage councils to allow more housing – when all the South East Tory councils have been complaining about being forced to allocate more space for housing.

    Not sure it does anything to encourage affordable housing though. The councils would get a bigger bonus for allowing bigger houses in a higher band.

    Also there is the suggestion that these bonuses would come out of the general pot for LA settlement grants. Don’t know what that would mean. The areas of high demand like the SE could buld loads of houses and empty the pot, leaving less to go round, leading to lower grants in the Labour areas? Or the SE areas could find themselves with a grant lowered becasue they don’t need so much – having had their building bonuses.

    But I might be wrong about it all and maybe your interpretation is right.

    Either way, councils *could* get a bit of a rebate from building council houses which means they could then charge lower rents. And then, as Wayne’s World has it, monkeys could fly out of my butt…

  2. Danivon Says:

    Hey, it’s a proposal from the Coalition. It could mean anything, and Cameron might veto it while a Tory minister is defending it live on TV.

    So either interpretation could be right. If it’s yours, it’s even worse – it means that council tenants are essentially subsidising the building of private housing indirectly. Because you know that developers will just cut the amounts that they pay in Section 106 agreements…

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