Political implications and future outlook

Sky News, The full story first Burnham is promising to make housing more affordable, and this is why How does a banana trigger a CIA backed coup Do airPods herald the arrival of a new global order? What do LED lights say about the future of humanity H I'mt Conway and in each episode of my new podcast Stuff Matters, I take an object, crack it open, and reveal the world shaping forces hidden inside. This is economics told through the things we think we understand. Search Stuff Matters on your podcast app to listen and follow That's why the Gvernment is putting such an effort on building the number of homes that we need in this country. The Government is on track to deliver its manifesto commitment of a million new homes. It's time to build one and point a half million new homes across the country. Successive Pime Misters have tried and failed to build enough homes to meet ever growing demand Most recently, the Labour government set a target of building one point five million homes by twenty thirty, a pledge it's expected to miss by well over a third. High energy and labour costs, strict planning regulations and depleted social housing stock have all contributed to demand outstripping supply. But Andy Verham claims he will make things better Working with local areas, number ten North will oversee biggest cououncil house building program since the post warar However, this isn't the first time we've heard Bld pledges that I never met I'm Mari Aurora, and joining me is David Byers, Dputy proroperty Editor at The Times and the Sunday Times. David, thanks so much for being with us. We're talking about housing, of course, one of the kind of pillars of a society. So we had this big speech from Andy Burnham. He said he was going to build all these social houses First of all, just talk us through what were some of these commitments from Andy Burnham? So Andy Burnham has said as a fundamental part of his philosophy that he wants to create the biggest generation of council houses since the Second World War. He reasons ultimately that the current definition of affordable rent, which is the quoted of the developments so meant to build with every project is fundamentally broke. It's basically ineffective because that means that properties can be eighty percent of local market rent. which basically is still too expensive for most people. So he says instead, the government should commit to building five hundred thousand bespoke homes for social rent by twenty thirty And for reference, just sixty five thousand affordable homes were completed in England in twenty twenty four to twenty five. It's a massively ambitious program He's called for what he says is forty billion pounds worth of investment to make that work. Whether or not that's separate to the government's current pledged thirty nine billion social and affordable Homes budget, we will wait and see But that's basically the nub of it. I mean, Savil who I spoke to about it said, it would be the most significant jump we've seen at any point in the last fifteen years for social housing if it worked. The pledge is bold, I feel like we've been here before. I feel like we've heard these pledges before. onene point five million homes we heard from Kirstama just a couple of years ago. It looks like they're not going to hit that target, nowhere near. So how achievable, deliverable, realistic are Andy Burnham's pledges. I think we need to talk about the one point five million do for a start because the government is going to miss that by such a spectacular degree. and this is all homes, not just affordable homes So the government said one point five million in England by the end of twenty thirty. In fact, what the government is going to manage, according to Savles is about eight hundred thirty seven thousand. So they're going to miss the target by six hundred sixty two thousand and the number is actually shrinking each year. Now why is that? And this is one of the big problems that Andy Burnham is going to have to come across. Soaring building costs mean that developers are reluctant to build. So they're up twenty percent in four years. That's because of the problem of importing goods across various broken supply chains because of the Russian invasion of Ukraine, because of the Iran warar. And house prices have only risen four point five percent in that time. So building costs are accelerating over house prices, which is important because it's not worth builders building things unless they can sell properties for roughly the same increase that they've spent building it. Plus, on top of that, Britain has its lowest number of builders since nineteen ninety eight, and this is thanks to another policy we've been hearing about recently, which is Brexit, ten year anniversary, massive exodus of Etern European construction workers, and there's also a long term issue with recruitment and retention So the big issue he's going to have in building anything at all of any significance is the same issue that Kir Starmer has had, which is that builders can't build four thousand building firms became insolvent in the year to February. C course broadly was the issue of affordability that a lot of people can't actually afford to buy regular mainstream homes as well. So what can the government actually do to kind of support smaller organizisations stop them potentially going out of business, for instance. The developers themselves have made repeated calls to the government. First of all, they have said that they want the restoration of a scheme called Help to Buy, which is a scheme that basically offered government loans to first time buyers and around about three hundred fifty thousand of them. received those loans between twenty thirteen and twenty twenty three. The government loaned twenty four billion of taxpayers' money Now developers like that idea because it means that more first time buyers can afford their properties. It means greater certainty for their investors when they build construction projects that people will buy them. The only problem with that scheme is and this is why Repeatedly, the treasury has refused to relaunch it, is that it drove up price of new builds. So of course developers love this because it was nicknamed to sell from the point view developers. the other thing. other builders have called for is basically the removal of VAT and building materials. Now this sounds a little bit techy, but basically whenever anyone carries out a retrofit or refurbishment project, effectively builders pay VAT on it. they also pay when they're buying items as well. So twenty percent on materials and labor and for retrofit refurbishment projects And the government They want tax bkes basically to make things more affordable as as building costs sow. This is another slightly intractable problem though, because VAT is incredibly lucrative for the treasury, brought one hundred seventy one billion receipts, which is fifteen percent of whole of the government's revenue in the last financial year. So again, Hy Berham may not be wanting to change that either. The other thing is he can write a nice letter to mister Trump telling him to stop with all this Iran war stuff and if the straight of bomerers opens, then construction costs will get cheaper. Well, this is what I was going to mention. I mean the cost of not just labour but energy is part of the reason it is so expensive to build houses. And I suppose the question is how much power does the government actually have to bring down energy costs that would then knock on and reduce building costs? Yeah, this is a real issue. And the other big issue as well as that is this issue of retention and recruitment. I went to a builder training school recently and it was really interesting. They were telling me that something like twenty five percent of all builders now are fifty five or over And obviously for people over fifty five, you might say, well, I'm not old. I can still do the job. It probably puts them about ten years from retirement. So you're going to see a huge swhe of builders retireing So there has to be recruitment and retention as well by building firms. and At the moment, a huge number of college building courses, something like forty to fifty percent of people who graduate from those courses go on and work in human resources or something So There's a really problematic issue within the construction sector at the moment, really intractable, really difficult and that is going to make building the homes the government wants difficult and perhaps One point five million homes, that pledge was a bit of a gimmick and wasn't realizable Why have so many prrime ministers failed to meet their housing aims? That's a very good question I think the cost of building has been a problem I think the planning system which Fundamentally disrupted developers for years and years has been a problem speak to people in the build to rent sector, American builders who say that they can't get any investors because the investors are looking at a ten year delay before being able to complete their projects. because of our ludicrous planning system so they don't invest. And I think that's a fundamental problem. And the other issue is the fact that wages have 've been out, stripp by inflation for a long time. Affordability has dropped and dropped and dropped Average home now costs something like Seven or eight times people's earnings So Long term problems with affordability in the planning system and the construction sector made it an absolute nightmare to take to governments, these structural reforms Let's go back to Andy Burnon for a second. He has talked about this big social housing building scheme he wants it to enforce How's you gonna pay for it? Because of course, the money's got to come from somewhere. Is this going to come from borrowing, for instance? It's very difficult to see how he's going to be able to pay for it. I suppose he might answer that if you built more social housing or housing the people afford then the benefits bill gets measurably cheaper. I mean Really interesting statistic that the government currently spends roughly as much on housing benefits in a single year ty eight billion as it plans to spend on building new social homes over an entire decade and housing benefits obviously are paid people to sustain them in homes they can't afford J Just to clarify, the reason people say that that would reduce the spending from the government is because if you weren't needing to pay people housing benefit, that would save you money. But the only reason you are paying people housing benefit is because the housing is so unaffordable in the first place, and therefore, if it is affordable, you don't need to pay them housing benefit in the first place. That's the logic, right Exactly. And the other thing I think that obviously One thing that could be done to try and bringing revenue to the government is continuue to boost the housing market because in doing so, what you're doing is stimulating various parts of the economy from interiors firs to removal firms, to construction firms and bringing in more stamp duty as well. So if you stimulate the economy, if more people are buying homes, if you go for growth, then ultimately stamp duty take, which is very lucrative will also come in. So again the economy motors, more tax comes in, you can afford to do this, but it's an enormous programm And I'm a little bit skeptical as to whether he's going to be able to do it. There is another scheme that he has, another key policy. He wants to get rid of stamp duty, and he wants to also get rid of council tax and replace both of them with what is known as proportional property tax which is basically where you pay every year a tiny amount of your home's value instead of council tax, instead of stamp duty which is a rebalancing thing because at the moment, for various reasons, people in the Southeast pay too little council tax Bearing in mind the size and value of their homes versus the north and be rebalanced But again, that's not going to generate an enormous windfall for a long time, and they'd have to do a massive revaluation of all homes which hasn't been done since nineteen ninety one And the other issue with that, I suppose, and this is probably one of the reasons many people haven't done it is you will probably upset a lot of people in London and the Southeast who, as you say, in relation to their property value, pay less cououncil tax and suddenly people in London, especially who are labour voters generally, their canncil tax would go up. It will. And in fact one good example, a six hundred seventy two thousand pound terracist house in Putney would have a bill increase of more than one thousand five hundred yeah under that scheme On a positive note, it would remove the upfront cost of stamp duty, which which many property experts have said for a long time is holding the market back. F time buyers have had their stamp duty discount cut last year. So it would help them get on the ladder And it would also end that sort of ludicrous fact that we are paying council tax on properties from nineteen ninety one valuations But on the other hand, it would be enormous expensive and laborious revaluation and the South would not like it at all. and the Green Party would probably love it, bearing in mind labour hemorrhaging votes to the left. So It's a tricky one. and That I suppose it brings us back to all of these things when Andy Berham and Labour MPs were standing there taking selfies in Westminster They perhaps forgot that you've got all of these big structural issues and once the honeymoon's over, he's got to deal with all the same stuff the previous government dealt with. How does a banana trigger a CIA backed coup Two airPods herald the arrival of a new global order LED lights say about the future of humanity I'mt Conway. and in each episode of my new podcast, Stuff Matters, I take an object, crack it open, and reveal the world shaping forces hidden inside This is economics told through the things we think we understand. Search Stuff Matters on your podcast app to listen and follow. This is just me with my political hat on for a moment I worry that actually you'll end up in a situation where if you start to increase those taxes on London and the Southeast, for instance, you will get potentially parties like the Conservative Party saying, well why would you disincentivize people who are potentially wanting to save up a house or save up for a more expensive house, why should they be punished just because they've decided to save up more cash? I can hear it coming from Kemy Baby Kock already Yeah. And another thing the consonservatives are saying the consonservatives, by the way, have also pledged to abolish stamp duty altogether, but they haven't come up with any viable alternative policy to fill their black hole yet. But one other question being asked is, If you've just bought a home and then you have to start paying proroportional property tax at nero point four eight percent, or indeed ner point nine six percent if you're a second homeowner You've paid double taxation because you've already paid the stamp duty bill and now you're paying proportional property tax are you're going beayingouble to get a stamp duty refund if you bought a home a year before But yeah, the policy comes in, so a lot of it depends on the detail of any reforms. But because of the revaluation, it almost certainly won't happen until the next Parliament anyway because it's so complicated. Could you see any possible unintended consequences of the Andy Berham pledge on social housing? I'm thinking about the Rnter's Rights Act, for instance, that people have said unintended consequences have been things like a lack of housing supply on the market because of landlords selling up? O the landlords selling up point is a very good point and landlords on subject to the Retors's Rights Act have long been complaining they're going to be selling off because of highest stamp duty, because of higher tax burdens and now because of the Rnter's Rights Act Interestingly recently, we received some data from Zoop which showed that interest in housing, as in interest from buyers in housing in the most affordable areas is now plummeting. So it's gone down by thirty percent in a year in the West Midlands, for example twenty percent of you in the northeast And that's always been the reverse, but these statistics suggest interest in housing in the poorest areas is plummeting. And the reason I think for that is because landlords have stopped taking an interest in buying in those areas. Landlords are no longer investing on the scale that they previously did If landlords divest in big numbers, then you've got a bit of a problem and landlords have often said they might landlords feel very badly taxed and very badly affected. So yeah, I mean The Rentter's Rights Act has been broadly welcomed by tenants of course and has given tenants much more security and tenure. but I think there is a danger of landlords selling up if they're put under greater and greater pressure for sure. What does this all tell us about Andy Burnham's policy agenda when it comes to things like how much of this is going to be a key defining cornerstone of his premiership were he to become prrime minister? Let's not forget he's not actually the prrime mininister yet. What does it show us about his agenda and his ambitions? a good game. I think it has to be a key corers don't policy, because I think People's frustrated aspirations when it comes to home buying and people's struggles with the cost of living crisis are absolutely fundamental to labour's electoral prospects. You've seen on a broader level when it comes to potential labour voters seeing wages outstripped for years and years by inflation now who haven't got a hope in hell of getting on the property ladder and who have found mortgage costs becoming more expensive. ronic affordability problems, you know, ultimately there has to be moves to make housing more affordable and more plentiful if Labour wants any chance of winning the next election, really. The Conservatives have no costing behind their abolition of the stamp duty pledge, but it's a very potent one because Barriers to home ownership are so great And stamp duty prevents people upsizing and because they can't upsize, people can't downsize because there are no buyers for their properties. So it gums up the whole market It's a massive issue and it comes down to those developers who at the moment are building