3 days ago
Britain needs more council houses
Britain's doomsters and gloomsters may have other contenders — the cost of living, healthcare, immigration — but the Policy Exchange think tank certainly has a case that 'the housing crisis remains arguably the most acute and intractable socio-economic crisis facing the United Kingdom today'.
It has caused not just a divide between rich and poor but an intergenerational one, with all kinds of deleterious effects: reduced labour mobility, delays starting families, social exclusion. A chronic shortage of houses has left property increasingly unaffordable. As the think tank points out: 'In 1970, the average house in London was four times higher than the average salary.' Today, with prices averaging £510,000, it's 14 times. On top, it's not merely a question of getting on the ladder; rents too have rocketed.
Of course, building more houses would help. Yet since Tony Blair brought in the much-repeated 300,000-a-year target in 2004, guess how many times it's been hit? Answer: precisely none, not by Labour or the Tories. This government is proving no exception.
And even then, what about the mix? A chunk of new housing is meant to be 'affordable', but we're not building enough of that stuff either; it's hardly a priority for private developers. And, as the think tank puts it, the definition — 'no more than 80 per cent of market rates' — is for many 'spurious' too. They can't afford that either.
Hence, its big idea: Building Beautiful Council Houses, the title of a new Policy Exchange report by Ike Ijeh. It advocates 100,000 a year. And yes, 'beautiful' does sound a bit Trumpian, even if the sentiment is valid; new council homes need to be 'high quality' and integrated into local communities, not the sort of thing that creates grim ghettos. Still, isn't there a case for reversing the damage from Margaret Thatcher's 'Right to Buy' — the programme that sold off Britain's council housing stock, which successive governments have failed to replace?
Go back to 1969 and council houses were 28 per cent of the total, a figure down to 6 per cent by 2023. It's a decline that has been accompanied, too, by the hollowing out of local authorities' ability to build new homes: just 2 per cent of the total in 2022, versus nearly 70 per cent in 1954. No one's suggesting going back to that, or 1979's level of council homes: 5.1 million versus 1.5 million today. But building more could boost the whole market.
First, it would stop new homes being the preserve of the big private housebuilders — a crew focused on making a profit out of balancing supply and demand, not hitting government targets for new homes. Second, it could revitalise smaller, local builders, working in partnership with councils. Third, it could push down rents, also giving tenants more scope to save up for a deposit to buy their own home.
Yet how do you pay for it? Well, one result of our dysfunctional market is that Britain now spends £25 billion a year on housing benefit, paid to private landlords — a figure that the think tank reckons will 'balloon' to £70 billion-plus by 2050. Instead of subsidising them, money could be better spent on 'a new generation of council properties', with an obligation to replace each one sold via Right to Buy. On top, a levy on all new infrastructure developments could help finance new council houses.
Sure, there are obstacles to all this. Local authorities don't yet have the funds or skills to build 100,000 new council homes a year — and the big developers will focus on more profitable stuff. People will also argue that if immigration was under control, Britain wouldn't need so many new homes anyway. Still, when it comes to fixing the UK's housing crisis, more council houses should be part of the foundations.
Pit a rottweiler against a chihuahua in a fight and there's typically only one winner. So the big puzzler is how the $130 billion KKR (and its chums from infrastructure firm Stonepeak) managed to get thumped by the £1.25 billion Primary Health Properties in the set-to for Assura.
As Shore Capital analyst Andrew Saunders put it, 'there are not many examples in M&A history where the underdog has come out on top', suggesting it was proof of the old adage that it's more about 'the size of fight in the dog than size of dog in the fight'. He's right, too, to 'congratulate' PHP chairman Harry Hyman and chief executive Mark Davies on their victorious scrap: 63 per cent acceptances for their £1.7 billion cash and shares bid.
They saw KKR was trying to buy rival healthcare property group Assura on the cheap, a bottom-of-the-cycle cash bid at no premium to net asset value. And that investors didn't want out of a sector enjoying political oomph: £29 billion a year extra for the NHS, with a shift to more primary care boosting the value of buildings housing GP surgeries. PHP just needed to give them a convincing reason to stay in.
Yet KKR and its adviser Jefferies also made a huge tactical blunder. They made their bid 'best and final' too early, leaving them zero room for manoeuvre once PHP raised its offer. One result? Friday's desperate attempt to trash it, which required three corrections from the Takeover Panel. It was a sign even they knew their bid was going to the dogs.
A tenfold share price rise since January 2023 would be enough for most chief executives. Not Rolls-Royce's Tufan Erginbilgic. He told the BBC that the company has the 'potential' to be UK No 1, implying a doubling of its £92 billion market cap to AstraZeneca's £177 billion. How come? Rolls's as-yet unproven mini-nukes. Yeah, the market didn't fall for it either. Rolls shares fell by almost 1 per cent.
