Why would we want to subsidise affordable housing in the private sector?

In the FT today:

The Scottish government is scrapping a flagship housing scheme designed to help buyers into affordable housing, blaming the Treasury for forcing it into deep budget cuts. As well as hindering first time buyers looking to get on to the housing ladder, the scrapping of the scheme is likely to inflame already fraught tensions between Westminster and the devolved government in Scotland.

I haven’t researched the topic so this post may be more of a starter for those of you better-informed but, I’d have thought it better to spend funds on subsidising public sector affordable housing and keeping it available at affordable rents. I’m reminded of the loss of sheltered housing for the elderly, often now occupied by the young and paying high rents for the privilege. My mum, 90, lives in a row of such where most neighbours are under 60.

Scotland is doing relatively better in the provision of affordable homes:

From Housing Statistics for Scotland Quarterly Update published by the Scottish Government:

Between 2007/08 and 2017/18, the annual average supply of affordable housing per head of population in Scotland has been 13.4 homes per 10,000 population, higher than England (9.5 homes per 10,000 population), Wales (7.6 homes per 10,000 population), and Northern Ireland (10.2homes per 10,000 population). In 2018/19 the figures were 17.5 homes per 10,000 population in Scotland, 10.2 in England, and 8.2 in Wales.

Scotland is making good progress toward its target of 50 000 affordable homes by May 2021 with 25 000 (50%) already delivered.

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I don’t know, however, what proportion is in the public sector.

27 thoughts on “Why would we want to subsidise affordable housing in the private sector?

  1. The use of the term “housing ‘ladder'” has become normalised in the media and political discourse. It accepts implicitly that people should want to buy increasingly larger and expensive houses. It normalises the paradigm that a house is just an ‘asset’ not a place to live. This is coupled with the myth that this asset continually grows in value.

    My wife and I have lived in the same flat for 46 years. We are told it is now worth more than 50 times what we paid for it! Of course if we ‘realise’ this ‘asset’, we will have to find somewhere else to live and the price of such a new ‘asset’, will be around 50 times what the price of what this ‘asset’ was 46 years ago.

    The housing ‘ladder’ is a Ponzi scheme.

    Liked by 7 people

  2. Time for a wider lens in my opinion.

    The Tories sold off the public sector housing stock. Obviously the best houses in the best areas sold fastest.
    I grew up in a council house as did most of the people I knew. This was the situation for most Scots. It was still HOME.

    The Labour/LibDem Scottish Government built 6 houses (SIX) in one year. I think those were in Shetland.

    The current Devolution settlement means a fixed budget and negligible borrowing powers. The councils come under the same budget restrictions. What can we do with what we have.

    The performance in Scotland is once again being measured using the tramlines imposed by the Union.

    We are allocated a spend share of 4Billion Pounds a year on Defence ( Ireland is a fraction of this). We are allocated 4Billion pounds a year for interest charges for money spent in England….you all know the list.

    We are debating how we share out the crumbs dropping from the Westminster table. Rush to this spinning plate and 3 others will start to wobble (for those who remember that act)

    Step back from the trees and see the Wood.

    Liked by 5 people

  3. Unfortunately in the UK the markets for both land and housing are a market controlled by the UK state. Minimise supply and maximise demand is the theme.

    Liked by 3 people

  4. Gov can raise cash through the issue of gilts which I understand only cost around 1%/annum to service probably secured over 20 30 or 50 years. Up until very recently gov was paying av 3% on gilts. Readers of Richard Murphy’s site will know that through Quantitave Easing and the creation of money out of thin air at the Bank of England the 3% gilts were bought back out of the market and replaced with the 1% ones. So UK gov is now only paying approx 1/30th the rate of interest it was last year. What magic can be performed to raise money for anything you like if you are a sovereign country with your own currency. SNP please take note.

    Liked by 5 people

      Sorry. The interest issue rate for these gilts is 0.1% ! See Richard’s video for explanation.
      Gov could quite easily raise money to solve our housing problems but chooses not to do so. If you think about it an increase in the supply of housing would create a reduction in the value of that housing and that is not the Neoliberal way.


      Liked by 4 people

  5. Percentage of Council houses sold off.
    By the time Margaret Thatcher left office in 1990 it was 67%. 1.5 million council houses were sold by 1990, by 1995 it was 2.1 million and as a result of the Right to Buy the Treasury received £28 billion.

    The U.K. Treasury gained greatly from the sale of Council stock.

    I wonder what contribution the Treasury would make today?

    Liked by 6 people

  6. For perspective, this is from a National Audit Office (NAO) report in 2019 on the ‘Help to Buy’ scheme in England:

    Click to access Help-to-Buy-Equity-Loan-scheme-progress-review.pdf

    “31% is the proportion of buyers in England who said they could have bought a property they wanted without the support of the scheme (measured between June 2015 and March 2017)” So additionality has been limited.

    An evaluation of the scheme found that: “19% of buyers have previously owned a property and are using the scheme to buy, on average, more expensive properties than first-time buyers using the scheme.”

    “The scheme has supported five of the six largest developers in England
    to increase the overall number of properties they sell year on year, thereby contributing to increases in their annual profits.”

    The NAO report adds: “In October 2018, the Autumn Budget included an announcement that, from April 2021, the new scheme would be targeted towards those who need more help into home ownership. The new scheme will be restricted to first-time buyers. … The Department also intends these changes to reduce overall demand for the scheme in its final two years, preparing the housing sector for its end.”

    And finally, from the NAO, notably: “The (Westminster) government has indicated that it will wean the property market off the scheme.”

    There is an evaluation of the shared equity schemes in Scotland which I’ll comment on later. The sunshine beckons for now.

    Liked by 3 people

  7. Those with an interest in learning more about housing and the role it plays in enabling a healthy society and a sustainable environment, could do a lot worse than checking out “Affordable Housing as a Sustainability Strategy: Policy Implications for Canadian Cities”.


  8. “The problem lies at the very roots of the development system,” says Pete Jefferys, policy manager at housing charity Shelter. “Land is traded several times over before it gets to the housebuilder, then the flats are marketed and sold off-plan, and sometimes sold again and again before they’re even built. You end up with this speculative feeding frenzy of spiralling values, years before there’s even a house on the site.”

    Once a developer gets their hands on the land, they’re often not in any rush to build. A Guardian investigation on “land banking” in 2015 revealed that the UK’s biggest housebuilders are sitting on 600,000 plots of land with planning permission; that’s four times the total number of homes built last year. Berkeley, Barratt, Persimmon and Taylor Wimpey (the four biggest companies in the industry) accounted for more than 450,000 of the plots – while paying out more than £1.5bn to their shareholders.


    Liked by 2 people

    1. Could this be prevented in Scotland if we had an annual Land Value Tax? Though I do not pretend to completely understand it, this seems like a good idea to me and I wish the Scottish Government would seiuously look into doing this.


  9. And on Stockhom..

    “Stockholm has been dealing with a shortage dating back as early as the 1960s due to a massive migration to the suburbs, reported the New York Times. The director of the Stockholm Beauty Council Henrik Nerlund explained that while this exodus put Stockholm’s apartment building construction to a halt for some time, the deeper issue now lies with Sweden’s rent control laws.

    Rents are kept below the market value, so many lease keepers refuse to give their spaces up, regardless of whether or not they are occupied by tenants. This has created a shortage of available apartment rentals, which shows through Stockholm’s waiting list of over 650,000 names. To put that in perspective, Stockholm has a population less than roughly one million, so more than half of its residents are waiting for an apartment. Translation: The crisis is real.”

    There is a solution.


    Liked by 2 people

  10. Sustainable housing strategies are largely dependent on the nature of “mixity” of tenure types, i.e. the proportion of properties built for public and private ownership. Given Britain has been under the lash of the Radical Right since Thatcher, it isn’t particularly surprising there is a chronic housing shortage. Westminster’s London centered Ponzie scheme that passes for a national development strategy, will only lead to greater social inequality. So Scots will only self-harm themselves by allowing Westminster to continue treating as like livestock.

    Those who’d like to find out more could do a lot worse than checking out “Creating and sustaining mixed income communities A good practice guide”, published for the Joseph Rowntree Foundation
    by the Chartered Institute of Housing.

    Liked by 2 people

  11. Last one today, I promise.
    On the same theme as these articles concerning other things that society desperately need Richard Murphy has also stated another interesting nugget that seems to have been missed by most:-
    UK gov could borrow £40,000 by issuing gilts for that amount and pay 0.1% per annum to the holder of these guilts. That would amount to paying £40 per annum over that term. ( who wouldn’t want a mortgage on these terms?)
    Consider if the gov decided to employ a nurse or other essential worker with that money. That person would probably be paying around £15,000 per annum to the gov in taxes etc. So for an expenditure of £40 per annum the gov has created an income for itself for the foreseeable future of £15,000 per annum. You won’t see this simple logic in the MSM or on the BBC. I wonder why?
    Gilts are the most secure form of investment and are always oversubscribed.

    Liked by 1 person

  12. On the ending of the Help to Buy (HtB) scheme in Scotland, I note that an online petition (with a trivial target for signatures!) has been launched to have this decision reversed. I wonder if Scottish Tory and/or Scottish Labour press briefings on the issue are being drafted for use by BBC Scotland: scope for an ‘SNP bad’ here surely!

    For background, there are a number of Scottish Government schemes set up to help home buyers. The Government’s website explains that just one of these schemes, the ‘Help to Buy (Scotland) Affordable New Build’ scheme will close on 5 February 2021.

    This HtB scheme has been controversial for some time. The Ferret back in December, 2017 noted: “Experts, housing charities and Green MSP Andy Wightman, who also chairs the cross-party group on housing at Holyrood, say that the Scottish Government should end the controversial scheme in the next Scottish budget.”

    And there is recent evaluation evidence from June 2020 entitled ‘Evaluation of Scottish Government Shared Equity Schemes”. It presents findings on three shared equity home ownership schemes: (i) Help to Buy (Scotland) (HtB); (ii) New Supply Shared Equity (NSSE); and (iii) Open Market Shared Equity (OMSE).

    We learn from the report that NSSE and OMSE were introduced to improve equity of access for lower-income households who had been disadvantaged by sustained house price inflation in the run up to the introduction of the schemes. HtB was more specifically focused at supporting the recovery of the new house building industry, by addressing the ‘deposit barrier’ faced by borrowers who were no longer able to access high loan to value lending due to the sharp increase in risk aversion amongst lenders following the 2008 crisis. (I understand that mortgage market conditions have changed.)

    The evaluation examined ‘demand-side additionality’ generated by each of the three schemes I.e. what percentage of the buyers would have been UNABLE to acquire their property without the support of the scheme they accessed. The levels and differences in additionality are notable:

    20% of HtB buyers have been additional (around 3,000 buyers).
    39% of NSSE buyers have been additional (around 1,850 buyers).
    47% of OMSE buyers have been additional (around 6,000 buyers).

    So the HtB – the scheme being discontinued – has had by far the lowest net additional impact. However, the report notes that a large majority of non-additional buyers across the three shared equity schemes reported that the schemes allowed them to buy a property sooner than they could otherwise have done (HtB: 82%, OMSE: 89%, NSSE: 73%).

    The evaluation also examines ‘supply-side additionality’ i.e. what proportion of the new build home sales would NOT have occurred without government intervention. It focuses on the HtB. It finds that just 5% of all new build sales (around 3,000) from 2013/14 to 2018/19 were ‘additional’ as a result of HtB.

    The implications of this evaluation are clear: “there is a stronger case for continuation of NSSE and OMSE than HtB, in terms of the additionality produced by the three schemes”. The report adds: “This is also reflected in stakeholder views which pointed to a potentially substantial group of Scottish households who are likely to continue to require assistance to access home ownership, but recognised scope for assistance to be more targeted to those most in need.”

    Based on this evidence, the SG is ending the scheme with by far the lowest net additional impact!

    Source: https://www.gov.scot/publications/evaluation-scottish-government-shared-equity-schemes/

    Liked by 1 person

    1. Thanks Stewart, things are not quite as black and white as they appear, and the BBC etc do report the B&W of issues in full blazing biased colour.

      I had a German friend who lived in Edinburgh for a while when her husband was employed here. They rented a small flat. They could not understand the emphasis put on ‘owning’ a home in the UK. Not sure if it’s still the case, but in Germany, young people do not ‘buy’ properties, they rent. Several reasons, they don’t want the ‘burden of a mortgage hanging around their necks’, and being tied to that one place, and, it’s too expensive. However to rent is much less expensive, and tenants rights are paramount, owners have to give a years notice to get someone out of a rented house/flat. When people are older, having earned and saved (!) money they then can buy if they want, and that’s the system, the whole notion of ‘owning’ a home for younger people especially is or was at least, just not part of their society. It makes much more sense, but like I say that was quite a few years ago.


  13. The Scottish Gov stopped the sell off of council houses. The Scottish Gov is committed to build or renovate 6,000 houses a year for five years. For affordable rent. (30,000). 17,000 houses a year are built by private house builders.

    50,000 people die in Scotland each year. Houses are sold.

    Within less than five years there will be enough homes for everyone.

    There are enough houses already but some are empty or not in the areas where people want to live.

    Liked by 1 person

    1. Not forgetting Scotland is awash with land, far too much privately ‘owned’ ie much of it stolen. A huge ‘estate’ in the highlands(?) has just been ‘snapped up’ for the bargain price of £7+MILLION, looks like no one can find out who bought it because it’s kept secret far as I read. A uige piece of Scotland’s land, ‘owned’ by god knows who, it’s so wrong the people who will have control over that land can remain anon actually.
      I am totally in favour of major land reform, compulsory purchase and repurposing much of it, some for affordable housing, some for farming and crofting, and for serious nature preservation. A tland tax and second ‘home’ tax must be imposed post idependence!
      Scotland’s eco system is actually being destroyed due to grouse shooting and hunting, as well as the rich murdering our beautiful mountain hares, though I think ScotGov have just passed a bill to protect Scotand’s mountain hares. No more draining our peat bogs to plant acid causing trees so English rich, including the royals could literally evade paying tax, (1980’s) massive carbon sink peat bogs were destroyed and who paid to restore it? The EU and ScotGov. Worryingly, that restoration (at Caithness) project has now ended and with no World Heritage Status protection because the EngGov flatly refuse to ‘approve’ that, who is to say the 10 metre deep bog won’t be destroyed for profit again…

      Been watching a fabulous YouTube Channel called, ‘Scottish Mudlarking’ a couple who live in Fife and go in search of artifacts, old sea glass etc and they do a bit of rural/urban exploring, the history side of things is fascinating. It has given me a new perspective on the area, Fife is really nice, coastal and inland, and boy was it industrially productive not least because of it’s easy access to the sea via many smaller ports to export the goods produced! If anyone is keen do check them out…quite new to YouTube and totally relaxing and informative to watch as well. They need subscribers, free to follow them and watch of course…Scotland is amazing.


  14. Alasdair nailed it on the first post, and all subsequently added weight to it.
    Thatcher’s pitch was “own your own home” but she knew damned well by driving up demand and reducing council housing stock the market would exploit the gap such that rentiers, estate agents and financiers of debt would become the principal beneficiaries and dictate progress.
    It’s been a bit like the PFI sale, look at the idea not the outcome, and ffs don’t mention it to Never Hurry, Anal or the Monocle who promoted the rip-off even if genetically indisposed to shame.
    House building costs having NOT dramatically escalated but land cost have, that is London driven as it protects their donors.

    Until we are free from the constraints of London’s fiddling for the benefit of financiers we cannot reverse the multiple injustices of Scotland, but we can expect a long legal fight to recover land unless jurisdiction changes.
    Frankly the sooner we do so and the more draconian the measures are imposed, the sooner this farce can end.


  15. John, while I appreciate the point you are making about your mother’s housing situation and the loss of sheltered housing for the elderly, can I say as an 84 year old, that I am very glad that I live on a street with mixed age groups.
    For example, when I first moved here, over 30 years ago, I used to clear my own front path and pavement of snow and carried this on in front of the flats of older neighbours. I am now very grateful, especially during the recent frosty spell, to have younger neighbours who now do the same for me.


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