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Government / Local politics

Spending Review: Here's why chancellor George Osborne is handing £2.3bn to housing developers

There was rather a lot of housing stuff in chancellor George Osborne’s autumn statement this afternoon – so much, in fact, that it’s going to take rather a long time to work out exactly what it all means. 

At first glance, bits of it look good: the National Landlords Association put out a press release headlined “If the chancellor wants to wipe out Buy To Let why doesn’t he just say so?” which is pretty heart warming stuff.

Bits of it look bad. The obsession with social rent while subsidising first time buyers, presumably on the grounds that it’s the sort of bribe that might persuade them to vote Tory, seems all but guaranteed to inflate the housing bubble yet further.

And bits of it are almost certainly rehashes of previous announcements. The 400,000 starter homes we’re promised by the end of this parliament seem suspiciously familiar (and are, anyway, meaningless if they’re not additional to the homes we’re already building).

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On the whole, there’s nothing here to suggest that this will magically end the housing crisis. Earlier today, campaign group Priced Out produced this graph, based on OBR figures, which shows that prices are still expected to keep rising faster than wages for years yet, so basically we’re all doomed:

Image: Priced Out/OBR.

So while we’re all pondering that, let’s talk about land remediation. 

I was in Wolverhampton yesterday, talking to the city’s council bosses. (It’s the first move in my new campaign to spend more time outside the London media bubble, so if you have a city you’d like to show off then get any touch.)


Wolverhampton’s housing shortage is small, compared to those in places like London or Oxford – but it’s there nonetheless, and the city is hoping to get another 10,000 homes built over the next few years. In a city with a population of just 250,000 that’s not an insignificant number.

At first glance that target doesn’t look too difficult to meet: if there’s one thing Wolverhampton has, it’s brownfield land. But there’s a problem: much of the spare land in the city previously played host to a variety of factories. Before anyone can live on it, it needs “remediation” – literally, cleaning of chemical pollutants and so forth.

That’s an expensive business, so left to their own devices, property developers generally won’t do it. This is a big reason why a lot of land in cities that’d be perfect for development goes entirely undeveloped: it just isn’t profitable enough to make it worth the builders’ while.

In Wolverhampton they’re hoping to get round this by using a chunk of money from the West Midlands’ devolution deal to fund land remediation; but not everywhere has such a deal coming down to the tracks to help with these things.

Luckily, Britain has a visionary strategic basically-a-genius-isn’t-he-really thinker like George Osborne on hand. Here’s the Financial Times on today’s Spending Review:

A further £2.3bn will be used to subsidise the construction of 200,000 starter homes — properties for sale to first-time buyers at a 20 per cent discount to their market value. Buyers will be able to sell the homes on for their full value after five years.

The government first launched starter homes at the beginning of the year but had not previously committed public funding to them. The cash will help regenerate brownfield sites, such as ex-industrial or contaminated land, to make them economically viable for development.

This sounds at first like it amounts to giving already rich housing developers a bung in the hope it’ll bribe them to do their job and actually build some bloody houses. And in many ways, well, it is that.

But it’s probably a good thing, nonetheless. The government has subsidised land remediation before, in places like London’s Docklands and the 2012 Olympic Park, and those areas have both been pretty successful. Subsidising land clean up will bring back into use dilapidated bits of cities that are currently just rotting.

And by increasing the supply of land, it might actually stand a hope of increasing the supply of housing too. As unpalatable as the idea of subsidising rich developers might sound, it might actually be a good thing anyway.

The one slight concern about this £2.3bn fund is that it’s ever so slightly familiar. George Osborne also promised to build 400,000 new starter homes before the election, too. At that time, he was talking about a £1bn fund to “unlock brownfield land”. 

 

How big do you reckon the fund would need to be for us to build enough houses to actually end the housing crisis? Place your bets.

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