Leading Article: Stop rigging the housing market

There are two tests for a housing policy. One is whether it will be electorally popular. The other is whether it will work. No policy today could satisfy both tests. Yesterday's White Paper meets neither.

The Tory right believes the road to popularity is paved with bribes for homeowners. They think a little house price inflation would win back the middle class, and if that means damaging the economy and abandoning their free market principles, so be it. They even want the taxpayer to bail out those in negative equity. Prudent voters would rightly resent that bitterly. In any case, the idea that everyone should own their own home is neither achievable nor desirable.

The Government has not entirely resisted these siren calls. The Chancellor has ruled out further cuts in mortgage interest tax relief in this Parliament. John Gummer promises that there will be another 1.5 million homeowners by 2005 and dreams of 80 per cent of households being homeowners. When in this vein, he seems not to recall that half a million people are still facing repossession of homes they bought with subsidised loans in a disastrous house price boom in the late Eighties. Mr Gummer's latest idea for dragging more people into the home ownership net is to offer a right for housing association tenants to buy their existing homes. This is OK so far as it goes, but it won't deliver many more homeowners and certainly will not help to tackle the central problem in housing policy: the lack of a vigorous private rented sector.

Financial incentives for home ownership inevitably undermine the private rented market, since subsidised mortgages encourage the better off - who could afford to pay rents that would attract landlords - away from renting privately. It is true that the 1988 deregulation of private rents stopped the sector's decline, but it brought into the market only a few hundred thousand more homes. Institutional investors have not been interested mainly because of the gap between the return they would need and what private tenants are willing to pay. The Government now plans to offer new Housing Investment Trusts some tax exemptions, but the measures are too small to make much difference to corporate investors and won't bring about the promised revival.

Most alarming of all, though, is the Government's proposed requirement that councils should allocate housing in ways that "balance specific housing needs against the need to support married couples who take a responsible approach to married life". Beneath this stiff prose can be heard the wailing rhetoric of a dozen ill-judged ministerial speeches. If the clause becomes law, it will ultimately be left to the judges to rule whether it amounts to a duty to discriminate against single parents or homosexuals. It cannot be right that the welfare state is expected to police the private morals of its clients: housing policy should not be about lifestyle prejudices.

What comes across loud and clear from these proposals is that the Conservative Party has not learnt from its mistakes. To recognise the value and satisfaction people can obtain from owning their own homes does not require us to worship at the shrine of universal home ownership. Above all, there is a need for effective ideas to give renewed stimulus to the private rented sector. This does not require a clever set of subsidies for tenants - it simply needs a government with the clarity and determination to stop rigging the market in favour of home ownership.