Britain needs lots more council housing

Today's Times article about building more affordable housing illustrates two important things. First, there is consensus within the central government that Britain needs more, lots more. Second, Britain needs more ambition at every level of government involved in delivering new affordable housing. As I argue below, the private sector should not be shy about chipping in to help out.

It's a numbers game: Ms Rayner observes that Britain demolishes or sells 22,000 local council units per annum, builds 11,000 new units, and hence suffers a net loss of 11,000. These numbers are stark. Her ambition is directionally correct: accelerate the delivery of new local council homes to stem the net loss. Laudable but clearly not sufficient.

According to her own department gross new household formation runs to 300,000 families annually and 75% of those households start off as renters. I don't have a good source for those numbers net of death and emigration but I bet Ms Rayner's department does. Either way, I would hazard a guess that the proportion of households that look to their local council for a place to rent will continue to decline if the number of households grows and the number of berths provided by local councils is static.

Here's another perspective on the same problem, which I discuss at greater length in my piece about housing associations.

This chart relates to the 8.5 million rented homes covered by the English Housing Survey but, since England comprises 85% of the population, you can round up to Britain's ten million rented homes without doing damage to my conclusions. On that premise, there are about four or five million socially rented homes, of which local councils account for just under half. Accuracy is not particularly important when the conclusions are this stark. Building an incremental 11,000 local council homes a year is a lot, out of context, and not nearly enough when you step back a bit.

What a Neate idea: Let's talk about ambition: According to the Times article:

Rayner is facing warnings from housing campaigns that 90,000 new social homes a year are needed, but that level is widely seen as unrealistic

Lower down they attribute the 90,000 number to Polly Neate, CEO of Shelter, the social housing think tank. Sadly, the person or persons unknown who regard that target as unrealistic are not named. Doubtless, the Times wishes to protect their sources.

I am not an expert in planning permission and, one man's green belt is another woman's missed opportunity to build. I do, however, have a passing familiarity with the retirement income industry. In round numbers, the defined benefit pensions community has made fixed promises to pay retirement benefits which, in aggregate, exceed £2.5 trillion. On the back of a fag packet, I would put the bill for 90,000 new homes at less than £25 billion. So, if one were silly enough to believe in simplistic solutions, rotating a mere 1% per annum of this pension pot into a monthly income-generating asset would help address a supposedly unrealistic target.

Meanwhile, look at the Mansion House Reforms. Ms Reeves and her predecessors have nudged some pension providers into stating publicly that they would repatriate funds and invest in sensible projects closer to home. What could be closer to home than building more homes? Numbers of the order of 5% of their assets over five years were bandied about. So, erm, 1% per annum might be a sensible number.

Why wait for the government: Is it just me or does anybody else see the symmetry? Young folks need somewhere affordable to live and are willing to pay something every month for decades. Older folks need income every month for longer than people live in retirement. Add to the mix that local councils are close to insolvent. Those factors alone suggest that 90,000 new homes is far from unrealistic and we don't need to wait for Ms Reeves to fund it.

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As ever, #socialhousing begins at home.

Ike Udechuku | Cofounder | CEO | The Pathway Club