4 February 2004

Speech by the Chief Secretary to the Treasury, Paul Boateng MP, to the Chartered Institute of Housing

Opening words

1. As you know, a stable and flexible housing market is essential not only to a healthy and productive economy…it also matters because housing – and it’s quality and location – affects a person’s lifestyle, job prospects, health, family life and their participation in society.

2. Over half a century ago, Beveridge said, “Want is only one of five giants on the road to reconstruction …the others are Disease, Ignorance, Squalor and Idleness”. It is still true today, that these ‘evils’ are both complex and interconnected…. It is still – sadly – true that for too many people, how you live depends a great deal on where you live.

3. And so housing needs to exist alongside sound investment in public services, such as health, education, transport, and social care. Together they must work to create the infrastructure of a sustainable community that is able to meet the varied needs of its residents.

4. Tonight, I would like to outline exactly why housing is so critical to fulfilling the Government’s wider social and economic objectives. By doing so, I will touch on some of the problems the sector faces, and what we are doing to address these problems.

Expanding economic & employment opportunities

5. Housing is a key aspect of building an economy that is flexible and capable of competing at the global level. It is also critical to expanding economic and employment opportunities – and to building a society where everyone has the chance to benefit from our rising prosperity.

6. The availability of housing, its location, and the mechanisms for enabling individuals to access it, can all have a direct impact on a person’s ability to gain employment and to match their skills to appropriate jobs. Not only do people need to be able to live within a reasonable traveling distance of their jobs, they also need to be able to move in order to access better employment opportunities when they arise.

7. And current evidence suggests that while increased labour mobility can make a significant contribution to increasing employment, it can make an even greater impact on improving productivity.

8. Yes, despite its importance, labour mobility in the UK is low in comparison with the US and most other northern European countries. And within the UK, movement in the social housing sector is low compared to private renting, and migration between our regions is at similar levels to owner-occupation. This is a real concern when forty-five per cent of social tenants are workless households.

9. Housing also impacts on a person’s economic opportunities through the effects that inadequate and inappropriate housing can have on the health and educational levels of vulnerable households…and the ways in which it can exacerbate social exclusion.

10. Indeed, it was health concerns that first drove local and central government to intervene in housing over 150 years ago…unfortunately many of these welfare concerns are still with us today: We still have about 900,000 non-decent social homes, and conditions in the private sector have not been much better. Some of the poorest members of our society continue to endure unacceptable living conditions, often in damp or poorly insulated properties that they can ill-afford to heat.

Maintaining a stable macroeconomic framework

11. Despite the obvious centrality that housing has to our welfare and to creating opportunities and prosperity it has for too long been relegated to the footnotes of public policy. The challenge for us – a reforming government – has been to change this.

12. Over many decades the UK has persistently under invested in housing. In fact, since 1960, the UK has invested a lower proportion of its national income in housing than any other EU country.

13. House building in the UK is now down to levels last seen in the 1920s. If the current rate of new build and housing renewal in the UK continues, then a property built today is going to have to last for well over a thousand years before it can expect to be replaced.

14. Partly because of this long-term under supply of housing, the UK has one of the strongest trends in real house prices in Europe. And that upward trend in house prices has, itself, made the desire to get on the housing ladder grow ever stronger: Owner occupation is now both the tenure of choice and a source of financial saving. This has profound economic implications, nationally and regionally.

15. Our liberal financial markets allow households to borrow on their housing gains – a factor which has helped to sustain the UK economy during the current global slow-down. This equity withdrawal creates a strong link between housing, consumption and the wider economy.

16. Yet our high level of mortgage debt is often more reliant on variable interest rates than other countries – which tend to have a higher proportion of debt at fixed interest rates. And this greater exposure to variable rates contributes to making the UK housing market much more volatile, which itself adds a potential volatility to the wider economy.

17. So this Government is facing a unique combination of low levels of investment coupled with high levels of owner occupation, high house price volatility and regional divergences. To add further pressure, demographic trends suggest that as the population expands another 3.8 million more homes may be needed by 2021.

What the Government is doing

18. However, the Government is rising to this considerable challenge. Successive Spending Reviews have approved substantive real increases in public sector investment in housing. By 2005-06 it will have more than doubled compared to 1997-98. Indeed, the sector is now enjoying the longest period of uninterrupted growth in public investment for at least 25 years.

19. And in February last year, the Deputy Prime Minister set out the Government’s new approach to creating and maintaining sustainable communities in a growing and changing economy – with £22 billion pounds being invested over the next three years. This new strategy places key housing, planning and regeneration policies in the context of wider requirements for sustainable communities including jobs, quality public services, transport, a safe and healthy local environment, and sound local government.

20. And we have recognised that greater investment must be accompanied by significant policy and structural reforms if we are to increase the supply of affordable housing and promote stability in the wider economy.

21. New Regional Housing Boards have brought housing investment within a single regional pot and are ensuring better coordination of housing delivery with planning and wider regional economic strategies. Joined up regional decision-making is essential if we are to ensure that the supply of housing does not become an unnecessary constraint to regional economic development, and that growth is delivered in a sustainable way.

22. And so I am particularly pleased that the Chartered Institute of Housing has been working with the Housing Boards in order to spread best practice on developing Regional Housing Strategies.

23. Last year also saw the creation of a single housing inspectorate to ensure we can achieve consistently high standards across the social housing sector.

24. And the sector itself has embarked on important reforms to establish a fairer system of rents, and choice-based letting policies in order to promote a more customer-focused approach.

25. Fundamental reforms to unlock land and private development are also underway. The Planning Bill, currently before Parliament, contains a wide range of measures designed to improve the speed, predictability and certainty of the planning system.

26. But we know we still have further to go. Kate Barker’s review of the constraints to housing supply has clarified the very real social and economic costs that flow from our low level of housebuilding.

27. The report has estimated that if house-building rates had been higher – and had UK house prices risen in line with the European average – then the UK would have been £8 billion better off. And for individuals the cost can be even starker…the numbers of families in London that have to be housed in temporary accommodation has more than doubled in the last 5 years.

28. The review is now taking forward its analysis and I know we all look forward to seeing Kate’s final report and recommendations, which will be published alongside this year’s Budget.

29. Also eagerly awaited will be the conclusions of the 2004 Spending Review this summer. I spoke earlier about the turnaround in investment this Government has made. We will not want to reverse the progress we have made, but the tight fiscal position means that the 2004 review will be focusing very hard on ensuring that the taxpayers’ investment is used as efficiently and effectively as possible.

30. The sector has benefited from billions of pounds of public investment over the years. We need to ensure that this investment is supporting the delivery of the Government’s objectives, and that tenants actually see the benefits. That means delivering decent homes; providing excellent, customer-focused services to tenants; and continually striving to improve and make every pound count.

Closing words

31. And to achieve all of this, we need to work together – and to understand the constraints we both face. Addressing the chronic problems in our housing market is a challenge for the Government, but for the sector too.

32. Indeed we appreciate the many ways in which the sector has already helped us…. In particular I know that the Chartered Institute of Housing does a great deal – from encouraging key players to share best practice and by passing on the experience and views of its members to Government, to organising courses and events.

33. This is all immensely valuable work. Thank you.