TODAY might have marked the beginning of the end of the housing crisis. Top housebuilder Taylor Wimpey was due to announce £500m of new investment and housing minister Caroline Flint was poised to reveal details of the government's market rescue package.

Instead things got even worse. Taylor Wimpey was forced to admit that the new investment the markets had expected only two days ago was not coming. 'In the light of current market conditions we have not been able to conclude a satisfactory transaction,' it said in a trading update [go here to download details and its presentation to City analysts]. It also announced the departure of its finance director, a £550m write-down on the value of its landbank and the loss of another 300 jobs. 

The situation is especially shocking since Taylor Wimpey is also a significant presence in the troubled Spanish and US housing markets. It thought it had learned the lessons of the US crash by cutting spending and jobs quickly but plainly even it has been caught out by the speed of the deterioration in conditions here.

Elsewhere in the construction industry, it was more doom and gloom. The RICS said workload in the private housing sector was falling at the fastest rate in the history of a survey that began in 1994. One housebuilding expert predicted that 100,000 jobs will go in the industry this year.

Cue the lifeboats. Flint revealed the bare bones of the market rescue package on the Today programme this morning [go here to listen again - but you'll have to scroll through to an hour and 15 minutes in]. There would be an additional £270m - she admitted this would be reallocated from the existing budget - to buy up unsold homes and there would be flexibility to bid for further rounds of the money on what sounded like an ad hoc basis rather than quarterly. And, as widely trailed last week, Housing Corporation payment terms would be changed so that builders get paid more up front. 

The details just announced here confirm that the £270m is part of the existing £8.4bn Housing Corporation budget for 2008-2011 and brings the total amount of that allocated to £3.6bn. A 'new national clearing house' would be set up so that housebuilders can approach the Corporation with proposals to sell unsold stock to housing associations - building on the £200m already announced (and reallocated from the existing budget). 

There would also be 'increasing flexibility around when providers can bid for funding' from the £8.4bn budget and be able to come up with proposals at any time rather than waiting for the quarterly bidding round. 

The good thing about the package is that flexibility - the room for manoeuvure that it leaves to bring funding forward to buy up unsold land and homes and do more in future. Further details may yet emerge but my instant reaction is that, compared to the housing market rescue package of 1992, this one is still puny. As a reminder, the then Conservative government came up with £577m of new - not reallocated - money for associations to buy up unsold homes. The results were far from perfect but the rough equivalent at today's house prices would be more like £1.5bn. 

The situation in the housebuilding industry now is even worse than it was in 1992. As an illustration, share prices have fallen so low that the government could comfortably afford to nationalise the leading companies (as Daniel Thomas noted in the FT yesterday). Crazy idea or not (and all their land would be publicly owned...hmm), the crisis surely calls for more than shuffling money around here and a bit more flexibility there.

Posted by Jules Birch, July 2

Posted in Finance, Housing associations, Housing market, Housebuilding

IT'S far removed from their key role of providing new affordable homes but housing organisations' work on financial exclusion has just as big an effect on the lives of the communities they serve. So today's announcement by financial secretary Kitty Ussher that the government is to relax the rules on credit unions has the potential to have a major impact.

At the moment credit unions have to prove that their members share a 'common bond', such as living in the same area. But Ussher confirmed that membership criteria will be liberalised and the common bond radically changed so that credit unions can provide their services to a wider range of people.

That could clear the way for more housing associations and possibly other landlords to run their own credit unions. In November, Inside Housing revealed that Riverside Group was carrying out a feasibility study into setting up a credit union for all its tenants and staff in anticipation of the change in the law. 

The legislative reform order announced by Ussher would also make it possible for groups, rather than just individuals, to become members and allow credit  unions to pay interest on members' deposits and charge the market rate for services such as chequebooks and money transfers. There could also be scope for housing groups and tenants to benefit from a change in the rules on cooperatives to remove the limit on risk share capital.

Associations are already involved in organisations like Change and the National Housing Federation is also pushing the financial inclusion agenda. It's early days yet but today's changes appear to open the way for an expansion of financial exclusion work in the poorest communities. Largely abandoned by the banks and prey to the eye-watering interest rates charged by doorstep lenders, they deserve an alternative - especially one that is in their landlords' interests too.

Posted by Jules Birch, June 30

Posted in Finance, Housing associations, Poverty

WITH the housing marketing plummeting and pressure growing on the public finances, today's call by the British Property Federation for new incentives for professional investment in the private rented sector could hardly be better timed.

House prices are falling at their fastest rate since the 1970s, housing transactions are at their lowest since 1978 (according to the RICS today), housebuilders' share prices are falling through the floor and the chances of meeting the government's 3m homes target look on the unlikely side of slim. And yet demand for housing is still growing: cue the next boom when this bust eventually plays out.

In a submission to the government's review of private renting, the BPF wants a package of incentives including widening the definition of affordable housing to include market rentals, special planning treatment for rentail-only developments, changes in stamp duty rules and reform of the structure of real estate investment trusts (REITs) to open them up to residential property.

And it wants a new concentration on what it calls build to let. Its research suggests a need for £100bn of investment over the next 15 years, and with the buy-to-let model dead in the water, it argues that can only come from pension funds and life companies. Giving planning permission for new homes restricting them to rental for a period of years would enable investors to buy property on a big enough scale and at a price linked to its rental rather than owner-occupation value.

It sounds like an idea whose time has come and one that will be attractive to all the political parties. However, there are two big obstacles to achieving it. First, is the growing pressure for increased consumer rights from bodies like Citizens Advice and the Law Commission. Institutions have long regarded calls for reform on issues like retaliatory eviction and length of tenancies with something close to apoplexy. The BPF report shows some signs of movement but it may need to go further.

Second is Treasury suspicion that calls for 'fiscal incentives' are really just a way for sharp-suited property developers to line their pockets at the government's expense - one explanation for the restrictive drafting of the rules on REITs in the first place. The Treasury may still need some convincing before it gives incentives for an expansion on a big enough scale to make a difference. 

Posted by Jules Birch, June 10

Posted in Finance, Planning, Private renting

THIS time last year Bradford & Bingley thought it had spotted a business opportunity. Out would go safe, low-margin business like lending to housing associations. In came a market-leading role in buy to let and an expansion of self-certification mortgages.

This morning came official confirmation that it has all ended in tears in an announcement that wiped another £4bn off banking shares. A trading statement revealed an £8m loss for the first four months of the year, the departure of chief executive Steven Crawshaw for health reasons, the sale of a 23% stake to a private equity company and a restructured rights issue to raise £258m.

The bank sold its £2.2bn housing association loan book to Dexia in November in a move that Crawshaw said 'enables us to improve returns by redirecting our capital and funding resources to take advantage of the significant opportunities that exist in the UK mortgage market today'.

The Belgian bank unsurprisingly saw the deal rather differently, arguing that it would give it an 8% share of a low-risk market and 'the difficult financial markets environment is a source of development and profitability for Dexia'.

By February Dexia's judgement was already looking sounder when B&B revealed a 49% fall in pre-tax profits. Its accounts revealed that buy to let now accounted for 45% of its business thanks to buying £4.3bn worth of loans from Kensington and GMAC-RFC.

In April B&B did a u-turn by announcing plans for a rights issue it had previously denied a need for and this morning it got even worse. The credit impairment charge for the first four months was £36m, compared to £23m for the whole of last year, because of a sharp rise in mortgage arrears and 'a provision of £15m relating to a small number of organised mortgage frauds'. More than 5% of those acquired loans were in arrears of more than three months.

Not quite another Northern Rock, but perhaps it will make other banks think twice about abandoning boring old housing associations. Mr Bradford and Mr Bingley, meanwhile, must be eating the black bowler hats they wore in the former building society's old logo.

Posted by Jules Birch, June 2

Posted in Buy to let, Finance, Housing associations

EVER since Thursday's election the airwaves have been full of government ministers admitting mistakes, feeling our pain and listening to our problems. But there was not much evidence of any of that as housing minister Caroline Flint dead-batted away questions about the government's policy on new homes on the BBC yesterday.

The effects of the credit crunch on social housing at last made it into the national media in a report on yesterday's PM Programme - go here for the story or here to listen again (from about 15 minutes in).  Tom Dacey, chief executive of the Southern Housing Group, said on the programme that five out of seven lenders to social housing were taking on no new business.

And Matthew Wyles, executive director of non-retail at the Nationwide, said the shortage of funds had forced the building society to concentrate on what it was set up to do - lending to home buyers. 'At a time when we have to make hard choices, it's our core mortgage borrowers that will come first in our queue,' he said.

Toss into the mix a report by the Local Government Association that the economic slowdown and credit crunch could mean 2m households on waiting lists by 2010 and the effect of reductions in private sector starts on both the government's 3m homes by 2020 target and the section 106 programme and you have serious problems in the making.

Flint's reaction was to be 'a little bit surprised'. The government had already committed £8.4bn to social housing over the next three years while the Housing Corporation had already identified the £10bn in private finance needed to support it. While it was keeping a very close eye on the situation, it was acting to improve liquidity in the mortgage market and in the long term it was committed to the 3m homes target.

Her long-term forecast was that high employment and low interest rates will underpin the housing targets. 'We're making sure that when the market picks up - and it will pick up - we are in a position to hit the ground running.'

Flint may be right of course. The credit crunch may turn out to be a temporary blip and the market will return to normal - along with the opinion polls perhaps.

If she's wrong, though, all bets are off. Not just for the housing market, not just for the 3m homes target but for the many of the assumptions underpinning housing policy. Not least, following Thursday's election results, which party will be running it at the end of the current affordable housing programme in 2011. And what, following Boris's victory in London and the scrapping of Ken's 50% affordable homes target, will follow it. 

Posted by Jules Birch, May 6 

Posted in Finance, Local government, Social housing, Housebuilding