The Guardianrevealed on Wednesday that Michael Gove’s Department for Levelling Up, Housing and Communities (DLUHC) has handed £1.9 billion back to the Treasury.
That figure, which is around a third of its entire housing budget, encompasses £255 million meant for affordable housing and £245 million to fund building safety works.
It’s bad news for the government’s long-running target of building 300,000 homes a year. Ministers are yet to get close to that particular manifesto promise from 2019.
A DLUHC spokesperson said money on housing is in “multi-year funding programmes” and suggested the cash could be spent in future years “depending on demand and the wider economic climate”.
But once the money is returned to the Treasury there is no guarantee that the cash will be spent on housing in future, especially as Chancellor Jeremy Hunt is looking to cut spending across the economy.
Here are some suggestions on what the £1.9bn could be spent on instead.
You’d be hard-pushed to find anyone who doesn’t think building more genuinely affordable social homes is the solution to the current housing crisis.
John Perry, Chartered Institute of Housing’s policy advisor, said DLUHC has handed back £255m that could have been enough to finance 5,000 new social rent homes.
“With record numbers in temporary accommodation, the social housing sector urgently needs more funding to build new social rented homes,” said Perry. “We urge the government to put that back into the affordable homes programme so they can be built soon.”
Part of the problem is the economic turmoil is affecting the construction industry badly with rising costs for housebuilders.
“Some of this underspend reflects the pressures on the wider industry that has slowed down delivery of new homes,” said Stephen Teagle, chair of the Housing Forum.
2. Provide mortgage relief
The government has been reluctant to provide relief for people struggling to pay rising mortgage costs and instead has introduced a mortgage charter to urge providers to help people struggling to pay.
If £1.9bn is going spare, that trial could be scaled up to include almost 99,000 people – enough to cover the population of Nuneaton in Warwickshire.
4. Allow housing providers to buy homes off private landlords
Part of the problem for DLUHC is it’s not a great time for developers to build new homes: house prices are falling so they can’t sell them for as much money and construction costs are higher due to rising labour costs and materials.
It doesn’t have to lead to falling housing supply and rising prices though. Currently there is an acquisition cap on the government’s affordable homes programme that stops housing providers from acquiring existing housing in favour of building new ones.
The 10% cap should be lifted if the government is struggling to deliver new homes, according to Alex Diner, senior researcher at the New Economics Foundation (NEF).
“If developers won’t build while house prices slump, government should divert resources to encourage social landlords to buy and renovate homes from private landlords instead. As a first step, the government should scrap the cap that prevents councils and housing associations from doing this at scale,” said Diner.
5. Give communities the power to build instead
If major housing providers aren’t building enough homes at scale, giving community-led groups more purchasing power to make affordable homes available is an option.
NEF’s Diner said: “Ministers should repurpose this underspend as part of a package to empower councils and community-led housing groups to purchase homes from landlords in deprived, low value areas. This would provide sound value for money for taxpayers, regenerating left behind communities by creating jobs, investment and injecting pride of place.”
6. Up public sector pay rises
If DLUHC’s £1.9bn is going back to the Treasury, where else could it make a dent?
Chancellor Jeremy Hunt is hoping to find £2bn in savings to fund 6% public sector pay rises, according to the FT.
DLUHC’s cash could mean fair pay for nurses, teachers and other public sector workers.
But the UK’s progress on tackling climate change has been slow and experts warned the UK was “no longer a global climate leader” last month.
There is also an ongoing building safety crisis which ministers have struggled to get to grips with since the Grenfell Tower disaster in 2017. Scores of buildings remain unsafe.
Housing consultant Toby Lloyd said: “If they won’t spend the money on new homes, there are plenty of other things that it could usefully help with – like removing unsafe cladding, regenerating run-down neighbourhoods, or retrofitting homes to be more energy efficient.
“But the Treasury obsession with increasing the number of new homes – much needed though they are – means they refuse to allow this money, which has already been allocated, to be spent on regeneration or retrofit. The Treasury needs to drop the control freakery and allow smarter investment in the new and improved homes the country is crying out for.”
LHA rates were raised back in April 2020 but have been frozen since, while rents have continued to surge to record highs.
With an estimated housing benefit bill of around £23.4bn, the Treasury may well be reluctant to raise LHA at a time when the country is facing economic challenges.
But the reality is that future housing shortages mean rents are only going to rise further. A £1.9bn contribution to help families cope would be welcomed.
10. Buy Arsenal football club and nationalise it
If all else fails, the government could also put their money behind Arsenal.
The North London side is worth £1.75bn, according to Forbes, so the government could take over with cash to spare. That would be extra incentive for Arsenal fanatic Keir Starmer to come out on top in next year’s general election.
After all, the Gunners did lose out to state-backed Manchester City in last season’s Premier League title race.
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