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RADIO 4 CURRENT AFFAIRS ANALYSIS THE ROOF OVER YOUR HEAD TRANSCRIPT OF A RECORDED DOCUMENTARY Presenter: Zareer Masani Producer: Ingrid Hassler Editor: Nicola Meyrick BBC White City 201 Wood Lane London W12 7TS 020 8752 7279 Broadcast Date: 16.08.07 2030-2100 Repeat Date: 19.08.07 2130-2200 CD Number: PLN732/07VT1033LH0 Duration: 27’ 38” Taking part in order of appearance: Martin Weale Director of the National Institute of Economic and Social Research Susan Smith Professor of Geography, Durham University Yvette Cooper MP Secretary of State for Housing Grant Shapps MP Conservative Shadow Housing Minister Stephen Nickell Warden of Nuffield College, Oxford and Chair of the Board of the National Housing and Planning Advice Unit Alan Walter Chair of the National Defend Council Housing Campaign Tim Butler Professor of Human Geography, King’s College London Jonathon Porritt Chair of the UK Sustainable Development Commission MASANI: Are you struggling to get a foot on the ladder of spiralling house prices? Or are you one of the lucky ones with a home worth many times what you paid for it? WEALE: The people who are losing out from house price inflation are typically young people. There are more and more parents who think that their children should look after themselves and don’t want to leave them an inheritance. SMITH: I think the problem is that we’ve become very hooked up with the idea that home-ownership is about possession, it’s about having this something which is absolutely ours to do absolutely anything with. I don’t think you can blame ordinary people for having these attitudes because it’s so engrained into our whole policy framework. MASANI: Economist Martin Weale and geographer Susan Smith. Is the entrenched policy framework to which she referred about to change? Gordon Brown’s new government has made affordable housing a central plank of its policy launch. COOPER: I think the truth is that this country has not built enough homes really for a generation. You know you’ve seen really a 30 per cent increase in the number of households in the last three decades of the 20th century and that’s why we think that it’s so important to increase housing and to face up to the fact that unless we do that, we will see long-term problems with affordability for the future. SHAPPS: I’m very concerned that the emphasis on targets, on numbers will override an emphasis on quality, on building in a sensible way which enables the community to function. MASANI: Grant Shapps, Conservative Shadow spokesman on housing, and before him Housing Minister Yvette Cooper, who launched the Government’s Green Paper last month. Thanks to Margaret Thatcher’s historic sale of council homes in the 1980s, 70 per cent of us now own our own homes. But has the dream turned sour? According to the latest figures, the price of an average British home is now eleven times the average salary. The economist Stephen Nickell, Warden of Nuffield College, Oxford, chairs the Government’s National Housing and Planning Advice Unit. He points to a dangerous gap between haves and have-nots in the housing stakes. NICKELL: Given the fact that house prices are continuing to rise faster than earnings, there will be a proportion of the population who will never be able to get on the ladder in the first place. They will be forced into rented accommodation, but rents themselves will continue to rise as house prices rise and they will find a larger and larger proportion of their incomes going in rent, which of course inhibits their ability to save and therefore they will be unable in the longer term to accumulate wealth at all. MASANI: There’s also a criticism being put forward that the present housing situation results in inter- generational unfairness, that the young are through higher house prices subsidising the profits of the old who are reaping the benefits. NICKELL: Yeah, there’s an element of that. These days people are living longer and longer. That’s the first thing to recognise. Say an individual’s parents die when the individual themselves is in their fifties, and if they’re to get on the housing ladder they’ll have had to try to buy a house from the time in their thirties, so at least twenty years, so they will be taking out a large debt and paying a large mortgage for a considerable time before they in some sense get the benefits of their inheritance. MASANI: Even if you inherit your parents’ home, it’s not likely to be till you’re middle-aged yourself, which means you’ll have to carry the burden of high prices when you’re young and can least afford it. The house-price boom, in effect, is a major transfer of wealth to existing home-owners from first-time buyers and generations yet unborn. Susan Smith, Professor of Geography at Durham University, has been examining this in a recent study for the Economic and Social Research Council. SMITH: We can very clearly see that for the majority, perhaps as many as two in every three home-owners and buyers, people are now not intending to leave all of their wealth to future generations. Old and very old home-owners perhaps still retain that traditional idea. They haven’t got any effective financial tools to allow them to release that equity that they’re sitting on anyway at the moment. This will change, but the younger the cohort you talk to, the less likely they are to be planning to pass on any or all of their housing wealth to the next generation. MASANI: One reason for this is a cultural shift, with younger people more likely to see housing wealth as disposable income they can access and spend. And that worries Martin Weale, Director of the National Institute of Economic and Social Research. WEALE: The house price explosion has given house-owners a lot of extra wealth, so they feel that they have less need to save up for retirement. It’s as though wealth has just come. That means that the economy as a whole is saving less at a time when with an ageing population you might expect it ought to be saving more. So from the economy’s perspective, what it’s likely to mean is that in the future people will be disappointed by their incomes. MASANI: But could one not see housing as a form of investment or saving, indeed a possible pension fund? WEALE: From an individual point of view, it’s perfectly possible and indeed sensible to see housing as a form of saving; that if you buy a house and it increases in price or even if you simply pay off the mortgage, then when you reach retirement you can move to a cheaper house and you have money in hand to spend. So from an individual point of view, it works very much like that. But to the extent that in the economy as a whole land prices are being driven up by essentially more and more people piling into housing, it’s not at all obvious that that makes the country as a whole better off. MASANI: So would it be better economically if people were investing in equity, for instance, rather than in home-ownership? WEALE: There’s an argument that the British economy has become rather unbalanced because the tax incentives certainly encourage people to go in for owner occupation rather than buying shares investing in companies and so on. MASANI: That’s because you pay no tax on the returns from your main home, while you do on stocks and shares. And there’s also a major tax incentive for Buy-To-Let landlords, who can write off their mortgage interest and other costs against the rents they get. Like Martin Weale, Susan Smith at Durham University is concerned about the way that financial institutions are now falling over themselves to offer people housing-based credit . SMITH: In the last five or six years there’s been a huge new range of mortgage products which have allowed people to almost routinely roll money out of housing as well as invest into it as they go along. We do have a problem of repair and maintenance of dwellings across the whole of the UK housing stock, but there’s a tendency for people to be investing a little bit less than they used to back into properties and a little bit more than they used to onto other things. But the key thing is it’s not quite the same reinvesting money to repair the roof or repair the guttering as reinvesting it, for example, in ways that get you the best return on a quick sale. If you look at some of these property programmes, we’re told all the while that spending money on GLAM’s - Gorgeous Lifestyle Accessory Must-Haves like plasma screen televisions, scatter cushions and pastel wallpaper - that they’re all the things that will add value for a quick sale. So even if it looks as if people are reinvesting some of that mortgage equity withdrawal back into their homes, we’ve really got no idea whether it’s making the home better for future generations. MASANI: Is that necessarily a bad thing because arguably that has released resources and stimulated consumer demand, which has benefited the British economy? Is that not a win-win situation? SMITH: Yeah well governments love it and economists are really entertained by it because of course it does allow economies to be boosted even during periods of recession because people can easily access wealth in their homes to spend on the high street. One of the things that I’m most concerned about with it is that in fact a lot of people are now looking to that wealth that they can roll out of their homes to meet quite basic welfare and subsistence needs, so people are looking to housing wealth now to fill functions that were once provided by the institutions of the welfare state. You’re really asking people to put all of their financial eggs into one single basket of their owned home and then they’ve got to rely on that basket to meet a lot of basic needs, and I do think that is problematic. MASANI: So relying on housing wealth alone could be risky if prices fall, as they did in the early ’90s, or if mortgage rates go up as they’re currently doing. It’s a sobering thought that only 10 per cent of homeowners actually own their property outright. But if people rely more on their own housing wealth and less on state benefits, that obviously suits governments anxious to cut back on social spending. That, no doubt, was part of the reason why home- ownership and the self-reliance it encouraged were key elements of the Thatcher revolution. But long before Mrs. Thatcher, owning your home was seen as giving people a real stake in society, so much so that property was the main qualification for the right to vote in Britain until well into the 20th century. But now there are voices challenging our love affair with home-ownership. WALTER: Well, I don’t think it’s in our blood. I mean I think if you open us up, you’re not going to find a home-ownership gene. MASANI: Alan Walter, Chair of the Defend Council Housing Campaign. WALTER: Personally the idea of having a massive millstone of debt around my neck and going to bed worrying about whether I can pay the mortgage, which is the situation that a lot of the people I work with are in, doesn’t have any attractions at all. Having a secure council tenancy I think is an ideal solution. Certainly Government have hyped up home- ownership and they’ve deliberately gone out to stigmatise council housing and suggest that the only people who live on a council estate are those who can’t do any better, it’s housing of last resort; and if you are anybody, you would you know climb your way out of that situation and be a home-owner. And so, yes, you ask people on the street do you want to own a home and lots of people I’m sure would say yes, but it’s not a reality. And I think if Government started to invest in first class public council housing again and created homes that provided decent, affordable, secure and accountable housing, I think actually we could turn that whole home-ownership addiction around and people would be proud about living in public housing again. MASANI: There are currently 4 million people on council waiting-lists, almost half as many as are already in council housing in England alone. Alan Walter makes a plea for returning to the hey-day of municipal socialism, when, as he sees it, council-estates mixed middle and working-class residents in good- neighbourly microcosms of society at large. A tad Utopian, you might think, in today’s climate where council housing, tarred with the brush of sink-estates, holds little appeal for middle class professionals. But there is a good capitalist argument, too, for less reliance on ownership and more on affordable renting. The party that sold us the home- ownership dream now seems to be having second thoughts. Tory Shadow Housing Minister, Grant Shapps. SHAPPS: Home-ownership is falling for the first time right now almost since records began, but actually a lot of people have a rather inclination to want to own their home but actually renting makes a lot of sense in a lot of cases. You get a much more flexible workforce, for example, because people move around more easily than going through the hassle of selling a home with home improvement packs making it even more complex, for example. So there are reasons to go towards renting for flexibility and so on and so forth. MASANI: Despite our relatively flexible workforce, the British property rental market has lagged behind that of most other EU countries. But it’s growing fast, largely thanks to the much-criticised Buy-To-Let sector. And it’s not just lower-income groups who are falling back on renting. Tim Butler, Professor of Geography at King’s College, London, has specialised in the study of the British middle class. BUTLER: One of the ways that we have always defined membership of the middle classes in Britain has been whether or not you own your own home. What of course has been happening in the last ten years, which is fascinating, is the rapid increase again of private rented tenure. And I think one of the things that we have come across in London, analysis of the 2001 Census, is a huge growth of middle class people defined in terms of their occupation who don’t own their own home and who live in private rented accommodation where they have at most six months tenure, where crudely you can say (at least in London) you are making a trade between square footage and access to the centre and home-ownership. Presumably because they can’t afford anything else, not particularly because they want to. MASANI: Is this necessarily a negative thing because many other European countries have always had larger private rented sectors? Is this perhaps a correction towards a more normal situation? BUTLER: Very good question. I remember one of the criticisms that was made of Britain before the private rented sector re-expanded was that people were not able to move jobs flexibly enough in Britain because it was such a clumsy system of buying and selling property that you couldn’t move and find somewhere to rent. I think though that you shouldn’t forget that in Europe - and indeed in much of the United States, cities like New York - being a private tenant, you have many rights of security; that you can’t be thrown out at a whim of a landlord and that many of those have controlled rents and so on and so forth. MASANI: Many of the upwardly mobile professionals Tim Butler has in mind can afford to pay high commercial rents for a London pied-a-terre and also own a more spacious second home elsewhere. But what about those on lower incomes, many of whom may be the key workers we depend on to run our hospitals and schools? Less than a third of the new homes proposed by the Government’s Green Paper are in the category of affordable housing. And there is no mention of better regulation of private landlords or more protection for their tenants. The Government still sees private ownership as the main route forward, though it suggests subsidised shared ownership as a panacea for those who can’t afford to buy outright. Alan Walter of Defend Council Housing. WALTER: It’s a nonsense solution because actually what it involves is people having both a mortgage and also paying rent and being responsible for the repairs and improvements to their home, so actually they’re not getting the best of either world. The realities are that most people stretch to get their foot on the shared ownership ladder and then find that actually they can’t afford to in Government terms “staircase up “. Now this is supposed to be you know a life changing opportunity, but actually most of the people I know who’ve got shared ownership you know their lives aren’t changing at all and they’re paying both a mortgage and rent. I mean the Government originally offered shared ownership on a fifty-fifty basis and then it found that still that was beyond the reach of most people, so it reduced it down to 25 per cent. And I think Ruth Kelly earlier this year was talking about people being able to have a 10 per cent stake in their home. Now a 10 per cent stake in a home, exactly what does this mean? MASANI: Is there any prospect of Gordon Brown, with his Old Labour roots, delivering the kind of council- housing that Alan Walter and his campaign are demanding? The Green Paper is offering local authorities new opportunities to use their revenues from council-home rents and sales to build new homes, something they were restricted from doing by Mrs. Thatcher in the 1980s. But the present Government’s commitment to affordable housing won’t mean a return to large-scale public ownership of it. Yvette Cooper. COOPER: We’re clear we want to see a 50 per cent increase in the level of new social house building over the next three years and that includes increasing house building by housing associations and also increasing house building by councils where it’s value for money for them to do it, particularly on council land as well. Of course the majority of people are now home- owners and the vast majority want to be home-owners. It’s important to recognise that but also to make sure that we provide considerably more social housing, including council housing as well. MASANI: It’s been suggested to us that at present there really isn’t enough incentive for local authorities to build or to authorise building. Do you think more could be done to incentivise them? For instance, I believe in Spain local authorities are allowed to auction planning permissions to the highest bidder and so they have a direct financial stake in new building. COOPER: I do think that more can be done to give local councils incentives and we’re keen to introduce effectively a housing grant, a housing delivery grant for local councils where they’re bringing forward land, where they’re supporting high levels of housing growth. We obviously have a very different planning regime to that in other countries and it’s important to respect the aspects of our planning regime which help protect areas of countryside or you know protect important green spaces, but we do think that more could be done to give councils incentives as well. MASANI: So the Government hopes the financial sweetener it’s proposing will speed up planning permissions from local Town Halls. Jonathon Porritt is Chairman of the Sustainable Development Commission, which advises the Government. He’s concerned that local authorities shouldn’t be encouraged to rush through planning applications with a nod and a wink. PORRITT: There’s nothing wrong in principle with an incentive-based approach of that kind as long as it does not lead to the unintended consequence of local planning authorities being driven by the numbers game and by the carrot of this grant dangled in front of them to the extent that they say fine, let’s whack this application through. So it’s on a flood plain. Well so what, we’ve listened to what the Environment Agency has to say here. They don’t seem to be that concerned about it. Let’s put a tick in that box. So we’ve got an application from a developer for a hundred units here. Pretty poor environmental standards, frankly, not really meeting the targets that are now necessary under the Sustainable Buildings Code, but what the hell. If we get a move on with this, we’ve got another hundred in the bag and that’s another x thousand pounds coming in through our incentive-based grant. If the Government creates a perverse incentive to accelerate planning processes to the detriment of quality and good land allocation, they will be their own worst enemies. So you have to use incentives and grant-based systems of this kind to build in increased efficiency - fine - but not at the expense of the core values that you’re trying to achieve around sustainability, around social inclusion, around planning gain for existing communities and so on. MASANI: The problem with defining sustainability is that the criteria are often subjective. One person’s model of a sustainable, new housing estate, served by enough shops and amenities, can be someone else’s nightmare of planning blight, if it ruins the privacy of their back-garden or pulls in noisy traffic past their front-door. And established home-owners, basking in the feel-good factor of high house prices, tend not to welcome a rash of new building that brings down prices and environmental standards. One problem for the Government in meeting its targets is that most Town Halls in the Home Counties, where house-prices are highest, are Tory-controlled. A case in point is Grant Shapps’s constituency, which includes the 1950s new town of Welwyn Garden City. Mr. Shapps says residents are up in arms about central government trying to impose 10,000 new homes on them, but he denies that’s Nimbyism. SHAPPS: One of the outcomes I think of the Green Paper is that it looks very likely that all of the objective is going to be based around a numbers game, targets - 3 million homes, 240,000 a year, 77,000 affordable a year - and when you get into a targets numbers game like that, you can be certain that the quality of the housing will suffer and the quality of the communities will suffer. And if I think there are any alarm bells that should be ringing from that Green Paper, that would be where you need to look. MASANI: So would you say less is more in that situation? SHAPPS: No, not necessarily at all. The issue is quality is better. A couple of thousand homes have just been built in my constituency. There’s not a single shop, there’s no community centre, there’s no place of worship, there’s no thought gone into how or why this community should ever be in any way cohesive or work together, and I’m frightened that the Green Paper is signalling a lot more of that up and down the country and that would be very, very sad. MASANI: Given opposition of this kind in existing towns, why, you might ask, doesn’t the Government locate more of its new build in less populated areas? One obvious constraint is the Green Belt, which it’s so far promised not to encroach on. Most of us would hate to see the British countryside disappear under concrete. But why is it acceptable to cover green fields with ugly, corrugated-iron farm-hangars, but ban far less intrusive and more aesthetically designed homes? Jonathon Porritt, who once led Friends of the Earth, says it’s time for a more intelligent approach to the Green Belt. PORRITT: Campaigners have decided that this is the line in the sand which they will defend come what may, and any suggestion from Government that they were going to open that up to reconsideration, change the designation or something, would unleash massively vitriolic campaigning pressure from the NGO’s. And you can see in the Housing Green Paper there’s a kind of quid pro quo - we‘ll do everything else we can to open this up, but we’re not going to touch the Green Belt. Now whether that is the right thing to do from a sustainability perspective is a moot point because a lot of the Green Belt is not high quality land. It does not provide high quality environments for people. It is not always as rich in biodiversity as campaigners would have you believe. Now somewhere along the line, we’re going to have to get mature enough in this country to have an intelligent debate about how we should be looking to the Green Belt to play a bigger part in providing multi-functional benefits. The time obviously isn’t right now. The Government’s got a big challenge on its hands. It does not want to screw that up by saying and guess what, we’re going to go for the Green Belt at the same time. So they’ve done a deal, basically. COOPER: There are in some areas campaigns which deliberately whip up hostility to more housing. And I think that is unfortunate because you know if you talk to people, they will often be very worried about where their sons and daughters are going to be able to find an affordable home. Two years ago even, there was a lot more hostility in the national debate and discussions about this and I think the climate has changed because people do recognise how important this is for the future. MASANI: Housing Minister, Yvette Cooper. The Green Paper offers something to everybody, but it’s less clear about who will deliver what and when. Given shortfalls in existing building targets there’s room for scepticism about whether the new, more ambitious targets will ever be met. And even if they are, will that be enough? Stephen Nickell. NICKELL: The much-touted figure you will have heard is that we are going to build 3 million new houses by 2020. If you actually work it out, that is not in fact enough to provide for the increase in the number of households expected by 2020. Households are expected to increase by 223,000 a year on average; and if they increase at that rate until 2020, that comes to more than 3 million. To make a real dent in the affordability problem and basically make housing more affordable to a greater proportion of the population, then they’re going to have to go beyond that. MASANI: So actually what you’re saying is that the kind of targets that the Government has set itself in the Green Paper, even if they were met, would leave us slightly worse off than we are today given the increase in households we actually expect? NICKELL: That’s exactly right, yes. I mean worse off in the sense that housing will become even more expensive. MASANI: That’s a pretty depressing prognosis from the Government’s own chief advisor on affordable housing. It means we’ll be running in order to stand still, and the gap between housing haves and have-nots will continue to grow. The estimated increase in the number of households is based on more people living longer, living alone or in smaller family units. Can supply ever hope to match this spiralling demand? Jonathon Porritt. PORRITT: It would make more sense now to think about ways in which we could discourage the notion that the only route to finding good accommodation is by owning your own home and to improve all sorts of things around rented housing to make much better arrangements in terms of bringing unoccupied housing back into full use. Again, to be fair, the Government has got a bit of that stuff in the Green Paper. They’re looking again at how they might penalise landlords for not making maximum use of the existing housing that they control. But they are very nervous about that. I don’t really think they believe that demand management is part of the big deal and I think that’s probably not sensible because you can’t just press the supply buttons and hope you’ll get an answer at the end of the day, otherwise there’s no end to the growth that we would need. MASANI: In theory, we could tackle demand by progressive taxation of people’s housing wealth, in the hope of encouraging them to move to smaller homes, re-locate away from areas of high prices, or rent instead of buying. But that sort of approach by Government would be hugely unpopular. The British love affair with house buying may not be genetic, but it’s certainly deeply embedded in our culture, with more than 80 per cent of us aspiring to home- ownership according to recent surveys. Unfortunately that’s likely to remain a dream for many who’ve not yet made it into the home-owning club.