Help for Landowners: Tory housing policy is a handout to developers

David Cameron will today announce plans to extend the government's "starter home" policy to 200,000 new discounted homes.

The policy appears superficially attractive. New homes will be offered at a 20% discount, saving the average first-time buyer £43,000. However, this significant saving comes at a much wider cost.

In return for offering the discount, developers no longer have to pay for the new infrastructure to support this new housing, including schools, hospitals, roads and flood defences. This infrastructure still needs to be paid for of course, it's just that developers are no longer the ones paying for it.

Developers will also be stripped of the need to sign section 106 agreements. These agreements oblige developers to either provide new affordable homes, school places or other contributions to the local area.

Again, these new services will still need to be paid for, it's just that developers will no longer be the ones paying for them. So instead of landowners and developers paying for new affordable homes and school places out of their profits, the cost will fall entirely on local councils and taxpayers.

The exact scale of the subsidy to developers is unclear. Asked about the policy on Sky News yesterday, Conservative chairman Grant Shapps was unable or unwilling to explain how the 20% discount would be paid for and who by. It's quite possible that he simply didn't know the answer to the question. It's also possible that the truth – that this amounts to a significant handout to landowners from taxpayers – isn't electorally palatable.

Under the proposals, developers will also be stripped of the requirement to make developments zero carbon. This will have the dubious benefit of allowing developers to build less energy efficient and poorer quality homes.  Whichever way you look at it, this amounts to yet another windfall for developers.

Indeed the closer you look at the policy, the clearer it becomes that this is a straight up transfer of wealth from the public sector to the private and from local people to landowners, rather than a genuine attempt to provide new homes.

None of this should come as any surprise. A poll by Comres found that more than 80% of Conservative councillors thought their local areas were already overdeveloped or fine as they were. There are also sitting Conservative MPs all over the country who are campaigning as the candidates best-placed to stop the building of new homes in their area. This is reflected in the numbers. The current government is the worst on record for the number of newbuilds, while the proportion of people who can afford to own their own home continues to decline.

But while the Conservative party is the party of existing homeowners it is also the party of landowners. Developers have been among the leading donors to the Conservative party in recent years. It is squaring this circle, between Conservative-voting homeowners who don't want new developments and Conservative-funding developers who do, which Tory housing policy is designed to address.

It is for these reasons that Tory housing policies are unlikely to substantially increase the supply or affordability of new homes. Like Help to Buy, which merely increased the demand for new houses without increasing the supply, the Tories' latest housing policy does almost nothing to solve the fundamental problems in Britain's housing market.