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The Budget – storing up trouble for the future Matthew Warburton - 21/03/2013

Osbo_300A Budget which included £4.5 billion extra for housing of which only 5% was earmarked for affordable housing gives a pretty clear indication of the government's priorities.

 

Action is, indeed, urgently needed to ease access to home ownership and get the house purchase market flowing again. But the government's policies on rented housing make much less sense, looking ill-thought through and contradictory.

On the one hand containing welfare spending is a key part of the government's top priority of reducing the government deficit; on the other, by failing to act to increase the supply of affordable housing it helps to drive up the benefit bill as the number of low-income tenants forced to rely on private renting increases.

From this standpoint, the Budget's proposals for affordable housing just look perverse. A paltry £225 million for new housing association investment adds up to no more than 15,000 new affordable homes.

And on council housing, the government not only failed to act on council debt caps - a policy no-brainer if ever there was one - but also opted for a further boost to Right to Buy which blows away its argument - always shaky - that sold homes will be replaced on a one-for-one basis. It was clear from the start that in most areas of the country outside London and the South East, the increased discounts meant that net receipts would fall well short of the necessary 30% of the cost of a replacement home.

The government's argument was that this would be compensated by higher receipts in higher price areas such as London, yielding one-for-one replacement in aggregate. If this was ever true it is an argument that cannot be sustained once the maximum discount in London in increased by a further £25,000. It is time for Ministers to own up to the truth that if their plans to boost Right to Buy succeed the result will be a steady erosion of council housing numbers.

What is also worrying about the Right to Buy changes is that they look like a classic case of evidence-free policy-making. The government has published no formal assessment of the effect of the changes it made to the scheme less than a year ago, which leads one to suspect that either no such assessment was made even for private use, or it was not sufficiently robust to stand public scrutiny. Arguably it is still too soon to know the full impact of the changes.

When they were implemented, housing bodies argued for an appraisal of the impact of the reforms after their first year of operation - in other words, after 1 April this year. We should renew that demand and insist that the government defend the changes it has made - both last year and in this week's Budget - in the light of the evidence.

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