The government would have us believe that one way to help households struggling to gain access to the housing market is to build more social housing. This will also have the benefit, our Keynesian friends tell us, of boosting the economy through a healthy dose of government spending. In consequence, the government has brought forward spending for social housing with the ambition of increasing output in the short term.
Of course, this will do nothing of the sort: the short term doesn’t exist as far as housing production is concerned. It is rare for a housing association to get anything built in less than two years. But in any case, this attempt to kick start the housing market is based on some rather dodgy premises.
First, why should allocating funds to housing associations help the housing market? For most people on housing waiting lists owner occupation is not an alternative and most prospective first-time buyers would not be in priority need and so have no chance of a social tenancy. Therefore, whilst more people might be housed more quickly, this will not have any impact on the housing market.
Second, government grants only fund part of the development of social housing, the rest having to come from private investment. Yet housing associations, like everyone else, are finding it hard to borrow and are increasingly becoming concerned with their high existing debt levels and falling asset values. There could not be a worse time for a housing association to borrow more money.
There is a more fundamental problem, however, with this rush to build. Building more social housing risks creating even more centres of dependency and worklessness. We ought to have learnt by now that social housing is an experiment that has failed to improve the life chances of the poor.
Much better would be to start focusing on the individual needs of households and tailoring housing support accordingly. If we want to bolster the housing market what we need to do is to ensure everyone has access to it, not sit around for a couple of years waiting for housing associations to build more ghettos.