Monday, 20 October 2014

Capital crisis

From: Inside edge

The scale of the housing crisis facing London is hitting home with both Londoners and their political leaders.

In an opinion poll in the Evening Standard published today, half of people in the city say they fear being driven out of their neighbourhood by the cost of housing and six out of ten say there is a crisis in their area.

At one end of the housing scale, soaring demand from global investors is threatening to push house prices even further out of reach of ordinary Londoners. According to a report yesterday from the Home Builders Federation, it now takes the average first-time buyer 24 years to raise a deposit in London.

At the other end, homelessness continues to rise. A report on housing homeless people in London that went to the Leaders’ Committee of London Councils earlier warns that on a pretty conservative estimate of supply and demand the city faces a housing deficit of 221,700 homes by 2020 if nothing changes.

Up to now private rented temporary accommodation paid for by housing benefit has been the increasingly threadbare safety net for London’s councils and homeless families. However, boroughs like Newham and Croydon have been at the forefront of those insisting that they will be forced to place their homeless families outside the capital even though this breaches government guidance on suitability.

Meanwhile, Westminster is among those placing more and more families with children in bed and breakfast beyond the six weeks placement rule. A BBC London report last week said that the council is paying hotel bills of up to £12,000 a month for some families. The government claims this is ‘unacceptable’, Westminster says it is facing an ‘unprecedented’ problem, but, according to the report, was paying £350 a night for a hotel for one family who received £700 a week in housing benefit until it was capped.

While the weakening of the homelessness legislation is giving councils more and families fewer options, things will get even worse when the next round of housing benefit cuts hits in just 48 days’ time. The London Councils report says that the supply of temporary accommodation has already fallen by 20 per cent in the last 18 months as landlords withdraw from the market due to caps on local housing allowance and that the decline will accelerate as welfare reform is rolled out over the next 18 months.

The household benefit cap will have more impact in London than anywhere else but will now be piloted first in Croydon, Haringey, Enfield and Bromley in April before being introduced nationally in September. The delay announced before Christmas – ‘without any prior consultation or advice’, according to the London councils report – is already creating problems of its own, with the four boroughs warning they will face additional costs and unfair competition with other councils where there is not yet a cap. As Carl Brown reported two weeks ago, the four are warning that their entire budget for discretionary housing payments will be exhausted by the time the cap is introduced anywhere else.

Representatives from London local government met housing minister Mark Prisk and officials from the CLG before Christmas and put forward a series of proposals to tackle the bed and breakfast and homelessness crisis. Prisk reminded them of both the six-week rule and their obligations to place homeless families as near as possible to their home borough and not out of London. The councils warned of ‘a sustained increase in the level of homeless presentations and acceptances over the next year’ that will be exacerbated by the cap and the shortage of private rented properties available below LHA levels.

In the short term London Councils is pressing for measures to mitigate the impact of the cuts and additional transitional support and flexibility. However, it says a longer-term housing investment strategy covering public land, the powers of the mayor and boroughs and the balance between investment and housing benefit is needed to meet the scale of the challenge. Specifically, it says that the government should lift caps on housing revenue account borrowing to allow the boroughs to deliver 54,000 affordable homes and give tax relief to private landlords coming into the temporary accommodation market.

Those ideas have support not just from boroughs controlled by all parties but from Boris Johnson too. The Conservative mayor is pressing the government to allow him to keep the receipts from stamp duty in the capital as part of a 25-year plan to build a million homes. He wowed guests at the Chartered Institute of Housing’s presidential dinner last week with a speech telling them that: ‘What is needed now is a radically different approach which optimises City Hall’s role, unlocks the potential of the capital’s boroughs, allows developers including housing associations to up their game and creates a stable supply of land for housing. Above all, London needs a stable funding stream which will support and accelerate its housing and infrastructure delivery.’

It all sounds promising. However, all three of those longer-term solutions will require agreement from the Treasury. Lifting the caps and tax relief have both been suggested – and rejected - many times before. The third would require the transfer of stamp duty receipts estimated at £1.3 billion a year by Johnson. However, if the Treasury ever succeeds in generating any growth in the economy and activity in the housing market, the receipts could easily be worth much more than that. Either way, the move would raise all kinds of issues about the tax and spending relationship between the capital and the rest of the country. 

Meanwhile Johnson’s critics point to his ‘dire’ past record of promising much and delivering little. ‘He is building fewer homes and the ones that are being built are more expensive,’ Len Duvall, leader of the Labour group on the London Assembly said in a Guardian article yesterday. ‘London’s housing crisis just gets worse and worse. Johnson is either out of touch with the realities of the crisis or is deliberately seeking to make housing more expensive.’ Labour is calling for more action to help London’s 800,000 private renting households including projects to research a capital-wide lettings agency and London Living Rent.

The political divisions over housing are evident at borough level too, with Labour councils like Islington determined to maintain social housing even as Tory ones like Hammersmith & Fulham, birthplace of Conservative housing reform, target the ‘Bridget Jones’ generation of young professionals.

The first step to tackling a crisis is acknowledging that one exists. On that level, at least London’s politicians are starting to get their act together and do something to alleviate the supply crisis even if they lack the power to do anything about demand. It’s far harder to find a solution that covers the housing needs of more than just the upwardly mobile and the signs are that things are going to continue to get worse for homeless Londoners and people who need genuinely affordable homes.

Readers' comments (3)

  • Chris

    Will the Tories still conclude it just that those complaining because they cannot afford a home should move to somewhere that they can and so make way for those with the means to live in such areas instead.

    The baying hounds enjoyed such when they thought this meant benefit claimants - even if it did mean there would be nobody left in the city to make it run and stay clean, after all they could always bus in workfare plebs to do the essentials. Those hounds are not quite so cocky now that they realise that it is their homes, and their family and friends homes that are unaffordable and nobody is going to help them, other than to join the social cleansing wagons 'going east' toward the smoking chimneys (accept Shapps is against incineration plants, well in his back yard at least!)

    If only they had listened when it was explained to them that attacking the poorest would worsen everyone's future - but still they will not hear.

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  • Non intentional Homelessness caused by unavoidable rent arrears = acceptance of duty = temp accommodation costing more than the cost of otherwise giving enough HB to sustain original tenancy + all the disruption to the households life and immeasurable damage to health happiness and sanity = an extremely ill thought through policy!

    We - the sector - foresaw this at least two years ago when the changes were announced and the new affordable rent tenure was mooted....

    The private rented sector cannot cope with the demand and no longer needs to accept households on full HB when they can get full market rent from enough who can afford without support (or whose landlords do not know that their tenants get a top up)...

    None of these consequences are a surprise but how do we get the ear of those in a position to change before this is all too *jolly well* late!?

    This is not me expressing a party political view - just a sane one!

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  • Is it not the case that the AR of "up to 80% of market rent" applies only to new SRS tenancies?

    Ergo vast majority still have the sub 50% of market rate rents - with majority of such rents being well below LHA/HB levels - assuming there is no "under occupancy".

    Yesterday's HBF report was fundamentally spin to benefit housebuilders.

    Specifically it used a model of a single buyer - which has been outdated for some decades - and made arbitrary assumption of savings being only a third of discretionary net income.

    In practice - simple arithmetic shows that - for those who earn enough to service an 80% Repayment Mortgage (IOM no longer available) plus household bills - the 20% deposit can be saved in 3 years or less - if living with parents.

    Those who are seriously aspiring FTBs - should (if having to rent) be in cheapest bedsits - simply to expedite savings goal.

    In wider context - I assume London means Greater London - rather than simply central London - and there are many cheap housing areas on the periphery.

    There is no capital city in the developed world with cheap housing - so we should hardly be surprised that London has an issue. We can either seek to address that issue - or continue paying an unconscienable amount of cash to enable certain sectors of the population to inhabit the capital - when those with far higher earned incomes in many cases would never even consider seeking to live there.

    It would be far cheaper to subsidise season tickets for those with jobs in the capital, than to fund whole families to live close to central London.

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