Sadiq Khan today attacked the Government for its ‘abject failure’ to tackle London’s housing crisis, as it was exposed that a major new £2billion Government housing fund, announced by the Prime Minister in her Conservative party conference speech and confirmed by the Chancellor in the Budget yesterday, is not new money.
The £2billion is, in fact, money diverted from existing housing funding ‘pots’.
Theresa May pledged to invest £2billion to build new affordable housing as the centrepiece of her Conservative Conference speech in Manchester in October, vowing to ‘take personal charge of getting government back into the business of building houses’.
The Chancellor confirmed the funding in the official Budget Red Book, which says: “The Budget confirms the further £2 billion of funding for affordable housing announced in October, including funding for social rented homes”.
However, analysis from the independent Office of Budget Responsibility (OBR) shows that, far from being new money, the £2 billion is actually just a reallocation of previously announced but unspent housing funds – taken from the Accelerated Construction Fund and the Starter Homes Land Fund.
The OBR report says: “The £2 billion of spending announced by the Prime Minister in October has been financed by reducing spending on ‘accelerated construction’ and ‘starter homes’ across the four years from 2017-18 to 2020-21.”
The Mayor of London, Sadiq Khan, said:
“This is the most anti-London Budget in a generation, one which exposes the Government’s abject failure to tackle London’s housing crisis.
“They have failed to match their words with action – it turns out a key pledge from the Prime Minister on housing is just smoke and mirrors and not new money.
“The Government’s current spending on affordable housing in London is still less than half of what it reached in 2010 and less than a fifth of what we really need.”
The Budget Red Book also admits that £8bn – over half of what the Government claims as new financial support for housebuilding in the Budget – in fact comprises guarantees that they “will explore options with industry to create”.
Mayor Sir Steve Bullock, London Councils’ Executive member for housing, said:
“There are more than 50,000 homeless households in temporary accommodation in London and the need for 72,000 new homes a year to meet demand.
“The Chancellor has taken steps to acknowledge the housing crisis in London in the Autumn Budget but he has not gone far enough to empower councils to play their full part in fixing the capital’s broken housing market.”
Notes to editors
- Theresa May announced £2 billion to build new affordable housing at the Conservative Party Conference http://www.bbc.co.uk/news/uk-politics-41502601
- Paragraph 5.23 (p.62) of the Budget Red Book says: “The Budget confirms the further £2 billion of funding for affordable housing announced in October, including funding for social rented homes. This takes the total budget for the Affordable Homes Programme from £7.1 billion to £9.1 billion to 2020‑21”. https://www.gov.uk/government/publications/autumn-budget-2017-documents/autumn-budget-2017. However, the £2 billion is not accounted for in the policy costings within the Budget Red Book (p.28).
- The OBR Budget analysis, paragraph 4.111 (p.148), confirms that the £2bn from the PM in October isn’t new money, but money reallocated from other housing funds – namely, the Accelerated Construction Fund and the Starter Homes Land Fund: “Changes announced to affordable homes programme switch capital spending out of 2017-18 and 2018-19 and into 2019-20 and 2020-21. The £2 billion of spending announced by the Prime Minister in October has been financed by reducing spending on ‘accelerated construction’ and ‘starter homes’ across the four years from 2017-18 to 2020-21.”
- Current government funding for affordable homebuilding in London is approximately £0.5 billion a year - based on a six-year deal to start building 90,000 genuinely affordable homes for £3.15 billion. City Hall modelling suggests this would need to increase to around £2.7bn a year to ensure that half of the 65,000 to be targeted in the draft London Plan are genuinely affordable - more than five times current spending levels.
- Budget Red Book para 5.4 (p.59) states that Government will be “making available £15.3billion of new financial support for housing” - but para 5.22 (p.62) admits that within this “government will explore options with industry to create £8 billion worth of new guarantees to support housebuilding, including SMEs and purpose built rented housing.”