Welsh Tory Housing Policies - Do they add up?

It's obvious we need more housing, but are recent Welsh Conservative proposals the
right way forward? Or at an even more basic level, do their numbers add up?
(Pic : BBC Wales)

The Welsh Government's long awaited for Housing Bill was formally introduced to the National Assembly today (it's separate from the proposed Renting Homes Bill), and I'll take a closer look at that later this week.

Though last week, the Welsh Conservatives - via Shadow Housing Minister, Mark Isherwood (Con, North Wales) - launched their own outline policy proposals, entitled A Vision for Welsh Housing (pdf).

The Three Main Proposals

1. – Increase House Building

It's said every £1 spent on construction boosts the economy by £1.70.The Welsh Conservatives want to increase the current ~4,900 homes built per year to 14,000 per year, based on (often controversial) local authority housing need assessments.

Local councils set quotas for affordable housing within each development, and the Welsh Conservatives believe these quotas hinder the viability of large developments. So, they propose viability assessments from house builders themselves should be the overriding consideration, with the number of affordable homes per development based on commercial viability, not a "catch-all target".

In addition, they propose the creation of a Welsh Housing Commission to develop "evidence-based ideas", with membership that includes private house builders, private landlords and housing associations. They also want to nurture more construction talent in schools and colleges for obvious reasons.

2. – "Right to Buy" reforms

The headline policy is to ring-fence funds raised from "Right to Buy" sales in order to build a replacement social home for every home sold – termed "one for one". They point to England, where £367million was raised from just under 6,000 sales in 2012-13.

The Welsh Conservatives also want to prevent "Right to Buy" homes being sold quickly or turned into buy-to-lets. They'll do that by forcing a repayment of some of the "Right to Buy" discount a seller receives depending on how long they lived in the property.

3. – Bring empty homes back into use

Any home left unoccupied for more than 6 months is legally classified as "empty".

It's long been Welsh Government policy to bring abandoned properties – estimates suggest between 22,000-33,500 of them in Wales – back into use. The Welsh Government currently aim to being 5,000 back into use by 2016 via their Houses into Homes scheme, which offers interest-free loans to renovate empty properties.

The Conservatives propose something similar to a UK Government scheme in England, where a proportion of empty homes funding is paid directly to social landlords and community housing groups.

Also, the Welsh Government currently intend to levy higher council tax rates on second and empty homes left vacant for up to one year (which is part of the Housing Bill) – the Welsh Conservatives would increase that to two years to give owners more breathing room.

The Reaction

It's fair to say the reaction to the proposals has been lukewarm.

On the positive side, it was partially welcomed by Community Housing Cymru (CHC), with BBC Wales reporting CHC agreed with a lot of the content, and the ambition to increase housing supply, but noted that UK Government policies (such as the "Bedroom Tax") have reduced rental income for housing associations and seen an increase in empty properties. It looks like house builders have also broadly welcomed the proposals too.

Plaid Cymru and the Welsh Government haven't honoured it with a formal response yet (unless, in the case of the latter, you consider the Housing Bill itself a response), though the policy proposals are due to be debated in the Assembly tomorrow.

Peter Black AM (Lib Dem, South Wales West) described it as, "Big on ambition, short on detail and full of holes." Meanwhile, Welsh Labour's backbench spokesperson for Everything, Mike Hedges AM (Lab, Swansea East), is quoted as saying there were "not enough details in these proposal to take them seriously".

I'm inclined to agree with them.

Does it add up?

There's nothing fundamentally wrong with policies that encourage home-ownership and increase housing supply (both private and social), and I agree with it perhaps for the same reasons as the Welsh Conservatives - it promotes personal responsibility, is often a decent investment and facilitates an all around sense of prosperity and well-being.

Meanwhile, the creation of a Welsh Housing Commission is a step up from, or complement to, the existing construction sector panel.

However, policy approaches are beginning to sound like a stuck record, led by supply-side thinking (house builders, developers and landlords) while neglecting the demand-side (tenants, communities and buyers). Things like shared equity and mortgage guarantees, for example, seem a way to prop house prices up - a form of renting with a large down-payment - rather than a serious attempt to make homes more affordable.
Here's an idea. Why don't we start building cheaper homes, full stop? Here's some examples. Here's some more.

14,000 homes built per year seems a laughable number considering even – by the Welsh Conservatives' own figures (Annex A)– at peak strength the construction industry built 10-11,000 homes per year.

8,000-9,000 per year might be a more realistic target, which would still be double the current housebuilding rate, though largely dependant on a significant Welsh economic recovery.

Please tell me the Welsh Conservatives don't believe property should drive economic growth? Haven't they learned anything from the last ten years?

Most demand will be for affordable housing (from first time buyers, people moving from the rental sector, and those priced out in rural Wales) and one and two bedroom homes for purchase and rent (for the increase in numbers of single people, people in social housing affected by the "Bedroom Tax" and down-sizing pensioners).

An affordable home is generally defined as being priced at three to four times household income. In Wales (average salary given as £24,076 p9), that would be around £72-96,000 for a single person, and £144-193,000 for a couple - presuming both earned the average salary or more.

Take a look at any planning application for a big housing development. House builders seem keen to build three and four bedroom executive homes that sell for £180-200,000+ – even in the valleys.

There's a market mismatch. People who need a one or two bedroom home don't have any option but to buy a more expensive three or four bedroom one. And of course house builders will say, "We don't want a 40% affordable housing quota,"because it reduces space for the money-makers.Regulatory cuts will see more estates of stupidly-overpriced cuckoo clock houses built in places like Tonyrefail because it's cheaper to build there than Cardiff.

House builders know poorer local authorities will bend over backwards to get more higher-rate council taxpayers living within their borders. It's awful policy. It could cause an Irish-style housing bubble if house price optimism keeps trumping common sense, and that's before mentioning wider planning and "sustainability" issues like transport and overbuilding in unsuitable areas.

The Welsh Tory proposals - in the absence of a detailed assessment - hint at two
social houses needing to be sold under "Right to Buy"  to pay for one replacement.
(Pic : Gwalia Housing)

On the specifics of their "Right to Buy" proposals (or "Right to Acquire" for non-local authority social housing tenants), firstly, if there were a rush of "Right to Buy" sales, it would cause a reduction in social housing until replacements are built. So there would need to be significant numbers of social homes built before any "Right to Buy" reforms can come into effect to prevent making short-term housing shortages even worse.

On costings, the numbers given in this Welsh Government statement (£3.8million for 35 social houses), imply each "Right to Buy" home would need to raise between £100-110,000 to enable a one-for-one replacement. That presumably includes associated costs like land, access, S106 agreements and utilities (and we're talking one and two bedroom homes, larger homes would cost more).

Based on the English "Right to Buy" figures the Welsh Conservatives provided (£367million from 5,944 dwelling sales - p24), "Right to Buy" raised £61,742 per home - but remember discounts are larger and house prices are generally higher in England. And only 844 replacements have been bought or are under construction so far - "One for Seven".

Any funding gap would either need to be filled from the Welsh Government's housing budget (which I'd imagine wouldn't be ring-fenced or boosted by any Conservative government), from housing associations' own capital funds or borrowing.


Next, the maximum "Right to Buy" discount in Wales is up to £16,000.

The Welsh Conservatives would probably have to keep that £16,000 cap. They'll be unable to raise the discount to English levels (up to £75,000 in many areas outside London) otherwise sale income would be even less, and there would be even less money to build a one-for-one replacement.

So it's likely that at least two social homes would need to be sold to build one replacement. "One for Two" doesn't sound like a good deal. If the Welsh Tories have better figures to back up their policy, they need to produce them – as early as tomorrow's debate, I'd say - because the ship's sinking beneath the waves.

And what is it with Welsh parties not publishing details when announcing policies?

UPDATE : 22/11/2013 - During the debate, Mark Isherwood did provide general figures, but it appears nothing relating to the one-for-one policy. The only "concrete" figures came from Peter Black and Carl Sargeant, and they both concur that the sums for a one-for-one replacement of social homes simply don't add up. "Basic maths" in Carl's own words.