1. Governance
November 9, 2015updated 26 Apr 2022 8:31am

Five thoughts on Michael Gove's "sell prisons, build houses" plan

By Jonn Elledge

Britain’s government doesn’t generally believe it’s the state’s job to build houses – at least, not for the likes of you and me. But there is one part of the population it’s decided to provide with shiny new digs.

This morning justice secretary Michael Gove announced plans to modernise the prison estate, by building nine new prisons. Between them, these will house 10,000 prisoners.

That’s one half of the plan: the other is to close a series of crumbling Victorian jails in city centres, and to sell their sites for housing. Because old buildings cost a fortune to run, the programme should be self-funding. Better than self-funding, actually: the government claims it’ll save £80m a year.

Here are five thoughts on the plan.

1) It’s good news for the housing market.

The first of the prisons to be sold will be HMP Reading, whose residents included Oscar Wilde, and which closed in 2013.

The government is being a bit cagey about which prisons will follow. But there’s speculation that they could include prisons in the inner cities of Manchester, Birmingham, and Leeds; and several (Brixton, Pentonville, Wandsworth) in London.

Look at a map of the capital’s prisons, and it’s not hard to see why:

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That’s some expensive real estate those prisons are sat on: central, accessible, close to tube stations… Any homes built there would cost a fortune. The land required to build replacement prisons far from the madding crowd, by contrast, wouldn’t.

So it isn’t just the savings on the maintenance budget that make this a good deal for the government: it’ll make a few bob playing the land market, too.

2) It isn’t that good for the housing market.

The plan is meant to create 3,000 homes. (Whether this would mean converting the prisons – Oxford’s former prison is now a posh hotel – or knocking them down and building something new isn’t exactly clear.)

That, er, isn’t that many homes. Every little helps, but that’s something like 1 per cent of one year’s worth of demand.

In other words, it’s little more than a rounding error. It’s good news – but let’s not pretend it’s going to make a substantial impact on the market.

3) It’s bad for prisoners’ families.

It’s quite easy to get to, say, HMP Brixton. It’s in zone 2, it’s not too far from the tube, there are umpteen buses past the front gates… Basically, anywhere within an hour of London will be comfortably under two hours from Brixton Prison.

It’ll be rather harder to get to a replacement prison in, say, rural Sussex. It’s unlikely to be that close to a station. You probably need a car.

That’s going to be a pain in the backside for anyone hoping to visit a family member who’s inside. It’ll probably be more expensive, too. You may have limited sympathy with anyone who finds themselves facing this situation, but let’s not pretend there’s no downside here.

4) The state could probably get a better deal here.

Today’s announcement suggests that the government will not be building the homes itself: instead, it’ll just sell the land to a housebuilding firm and let them get on with it.

There are some advantages to doing things this way round: it releases money sooner rather than later; it reduces the risk of a downturn in the housing market (LOL) wrecking the financial basis of the plan.

But there are some downsides, too.  Relying on private developers will almost certainly mean less social housing. The government won’t benefit from any future increase in land or house prices, either. And it means the government is giving up a lucrative and reliable source of revenues – rent on government-owned housing – because it doesn’t think this is the sort of thing that governments should do.

Which makes me think…

5) Government accounting methods are really, really stupid.

There are two sides to a balance sheet. One shows liabilities. One shows assets. The British government, in its determination to reform public services and slash the deficit, spends a lot of time worrying about the former – but it seems bizarrely disinterested in the latter.

You’d think that a government would be quite keen to increase its holdings of city centre housing, so that the taxpayer could benefit from both price inflation and rents.

And yet, no. Apparently, building and owning housing is no longer seen as a job for the state – even when it’d be profitable, even when building housing is the entire point of the exercise. The government is so obsessed with its liabilities, it’s entirely ignoring its assets.

The result of all this is that the only people for whom the British government will be building new homes any time soon are its prisoners.

Jonn Elledge is the editor of CityMetric. He is on Twitter, far too much, as @JonnElledge.

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