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“Expensive” homes – and mixed communities Matthew Warburton - 28/08/2012

BarbicanA lot of media attention was given last week to a report from Policy Exchange proposing that "expensive" social housing is sold off as it becomes vacant and the receipts used to fund the building of, it is claimed, 80 to 170,000 additional homes a year.  The report estimates that around 20 per cent of social homes are worth more than the regional median house price and argues that these ought to be sold.

There is a kernel of good sense in this report.  Councils and housing associations own some properties which, because of their size or location, are worth a lot of money.  They ought to consider whether it makes better sense to keep all of them tenanted or to sell them and use the proceeds to build new homes in cheaper areas.  But this sensible point is surrounded by an analysis and recommendations which are much less easy to support.   

The report is entitled "Ending expensive social tenancies" and refers throughout to "expensive" social housing.  This is likely to convey to the ordinary reader that the properties under discussion were expensively acquired, or expensive to manage and maintain, or attract high rents and therefore high housing benefit payments.  None of these is necessarily so. 

What the report really means is that the gap between the social rent they receive and the market rent they might attract is large.  They are expensive in terms of the opportunity cost of keeping them on social tenancies - an economist's sense of expensive. 

What this argument is really saying is that the policy goal of mixed communities is getting more expensive to sustain because of the combined impact of gentrification and house price inflation, which has already put areas out of the reach of first time buyers.  But do we really want to allow this process to put the same areas out of the reach of social tenants, too? 

Selling high value homes may provide enough for additional replacements, but councils will want to strike a balance between the benefits of additional housing and sustaining mixed communities where they exist.  Much will depend on local geography - it is hard to think of a clearer example of where councils should be left to decide what works best without government interference.  So the report's recommendation that the government compel councils to sell high value homes should be strenuously resisted.     

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