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Good afternoon and welcome to this week’s Home Front. In the past week, Chancellor Rachel Reeves has been looking for the growth that Britain’s economy urgently needs.
As the saying goes, in the end, there is only one thing that can keep political parties in office once they’ve won an election: “The economy, stupid”.
Sadly, for Labour, throughout January, Reeves’ department has been subjected to a downpour of grim economic data – a slight decline in GDP, stagnant services output, falling production figures and persistent concerns about inflation which has only decreased slightly.
In fairness to Reeves, much of this was on the cards when Labour won the election. However, regardless of that fact, it’s now her job to fix it.
Last week at Davos – a meeting of millionaires in the Swiss Alps – Reeves seemed to have snapped into action. She didn’t quite manage to stop talking about her perception of the previous government’s responsibility for the problems in her inbox but she did start punchily pointing people towards Labour’s solutions in a bid to gain the confidence of global financial markets as well as voters back here in Britain.
But, is Reeves looking for the robust, long-term and sustainable economic growth she needs in all the wrong places?
Speaking to Bloomberg in Davos, Reeves positioned herself as a pro-building YIMBY and made it clear that building infrastructure is a core part of her growth plan.
“The problem with the last government was that there was always somebody who said ‘we want to grow the economy but we don’t like that investment’,” she said. “We don’t like that wind farm…we don’t like those pylons…we don’t like that airport…we don’t want that housing near us. The answer can’t always be no.”
But, what if these infrastructure projects won’t be enough to deliver long-term, sustainable growth?
Building things – particularly homes – is generally thought to be good for the economy. A mass housebuilding drive from Labour – that’s the 1.5m new homes the party has promised – would not only create jobs, it would also stimulate the financial services industry by – in theory, at least – increasing the demand for new mortgages.
Reeves knows this, that’s why she is trying to make space in existing regulations for mortgage lenders to give first-time buyers with smaller deposits loans (as reported in last week’s newsletter).
However, such a housing growth strategy is as limited as it is riddled with pitfalls. Let me explain why.
Last week, I was lucky enough to chair a lecture given by Professor Josh Ryan-Collins at UCL.
Josh is an economist with research expertise in money and banking, the economics of land and housing and sustainable finance. He is also a senior policy fellow with the UK Ministry of Housing Communities and Local Government advising on housing affordability issues and is a council member of the Progressive Economy Forum (PEF) think-tank.
The lecture was based on a piece of research Josh was commissioned to pull together by none other than the former Conservative Housing Secretary, Michael Gove. Its subject was how we solve the housing crisis without causing house prices to spike, deepening affordability problems.
In his lecture, Josh pointed out that building new homes is unlikely to reduce house prices by much more than 2 per cent overall. That means it won’t ease the affordability crisis in a major way.
So, building and increasing supply might stimulate the demand for new homes in the medium term and create jobs in construction in the short term.
In the long term it could see first-time buyers and people who need to upsize still grappling with enormous loans which run for longer and longer.
Reeves can take on the Nimbys and push ahead on major infrastructure projects, she can make sure deputy prime minister Angela Rayner’s Housing Department gets its flagship new towns across the country, but it won’t be a silver bullet for Britain’s economic woes.
This particular plan for growth also won’t do anything immediately to ease Britain’s growing homelessness crisis.
Data from the National Housing Federation (NHF) shared exclusively with Home Front reveals why it’s vital that Reeves takes this problem into account in her growth push.
According to the NHF’s analysis of the government’s latest affordable housing and homelessness statistics, the number of newly homeless households outnumbers the number of new socially rented homes by seven to one.
That means that people are becoming homeless and requiring local government assistance faster than we are building new affordable homes for them to live in.
The Government’s figures show that 65,000 households were accepted by their local council as homeless last year (2023/24) including 34,200 families with children – this equates to 178 households and 94 families every day.
By contrast, only 8,747 new socially rented homes were built in the same period – equivalent to just 24 per day.
Indeed, the number of new socially rented homes built per year has fallen by 75 per cent since 2010.
Homeless households are being housed in emergency accommodation, including hostels with shared facilities and B+Bs. Temporary accommodation is often of poor quality, unsuitable for families and leased from the private sector at great cost to the public purse. English councils spent a record £2.3bn on temporary accommodation between 2023/24, an increase of 29 per cent compared to the previous year.
According to NHF research, we need to build around 90,000 socially rented homes each year to meet current demand. The last time we had investment at the scale needed to tackle the current shortage was in 1953 when the government spent the equivalent of £11.35bn a year on building social housing.
With Rachel Reeves’ Spring Spending Review just around the corner, reviewing investment in public housebuilding would make sense. Indeed, it could be the missing piece of her growth puzzle.
Not only would building social housing reduce the homelessness bill in the long term, but it would also create jobs – not only in construction but in housing management – and, above all, it would guarantee cash-strapped councils with income via rents. If that’s not enough, it would also reduce the economic instability of those exposed to homelessness.
If Reeves is serious about growing Britain’s economy, she needs to do more than boost private mortgage lending. The Tories tried that in the 2010s and it’s one of the reasons we’re in such a mess with high house prices. Following in their footsteps might help Labour get to the next election intact, but if they win again there, they’ll be faced with many of the same conundrums unless they think long-term now.
If this newsletter hasn’t convinced Rachel Reeves that investing in social housing and a sustainable housing market is a smart play, she should take a look at some interesting new polling from Ipsos which has been published today.
The Ipsos Housing Monitor is a new 30-country study looking at how people perceive their own and their country’s housing situation.
It has found that most people do not think rising house prices are “a good thing”.
Only 19 per cent of respondents say they think rising house prices are a good thing for them personally, while 57 per cent disagreed with this statement entirely. Even among those who own their property outright this only rises to 23 per cent.
So, there you have it. People think Reeves should grow the economy. Not house prices.
And, finally, the latest data is out linking unexpected child deaths to the often poor conditions experienced by homeless families in temporary accommodation.
They make for heartbreaking reading.
The All Party Parliamentary Group (APPG) for Households in Temporary Accommodation has found that out of the 3,605 child deaths in England, 80 have died while living in temporary accommodation.
These numbers were obtained from the National Child Mortality Database between 1st October 2023 and 30th September 2024, accounting for 3 per cent of the total number of child deaths during this period.
This data is reasonably new, the APPG only began to collect the numbers a few years ago. So, we may never know how many children have died while living in emergency accommodation because of homelessness. However, we do know that the total number of child deaths which can be linked to temporary accommodation has risen every year since the APPG started to look into this.
That’s an upwards trajectory nobody wants to see.
Ask me anything
This week’s question is from a reader who wants to know whether the Renters’ Rights Bill could have any unintended consequences for the cost of renting.
“Part of the bill involves preventing agents and landlords from accepting offers over the advertised price. What do you think the likely immediate consequences of this are going to be?” they asked.
In short, the obvious answer here is that landlords will no longer be allowed to encourage bidding wars between prospective tenants.
In the immediate aftermath of this bill becoming law, it’s possible that advertised rents will rise because landlords and agents are no longer allowed to encourage people to outbid each other for homes.
However, in the end, the government hopes this will stabilise the private renting market.
What the actual outcome will be, we shall have to see.
This question was submitted as part of a live Reddit special Ask Me Anything that I took part in last week. See all of my responses here.
Send in your questions to: @Victoria_Spratt, on X, formerly Twitter, @vicky.spratt on Instagram or via email [email protected].
Vicky’s pick
Last week, I was lucky enough to receive a hard copy of Shon Faye’s new book Love in Exile. I read a proof of this brilliant meditation on love in the modern world earlier this year. The final copy doesn’t disappoint; this book is full of heart and wisdom.
Love in Exile will be published by Penguin’s Allen Lane in February.
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