Inside edge

QE for housing

Wed, 8 Feb 2012

The Bank of England seems set to announce another round of quantitative easing on Thursday. Is that good news or bad news for housing - and is it time to consider an alternative?

QE is presented as the Bank’s only option for stimulating the economy given that it has already cut interest rates to a record low of 0.5 per cent. To simplify massively, it creates liquidity by creating money to buy assets like government bonds. The institutions holding the bonds then have new money in their accounts, which they use to buy other bonds and shares. The net effect is to reduce long-term interest rates and stimulate the economy.

The scheme boosts asset prices and increases inflation but that is seen to be a price worth paying for getting the economy out of the hole it fell into after the collapse of Lehman Brothers. The Bank released £200 billion of QE in 2009 and 2010 and another £75 billion in October. Following figures last week showing  a big fall in the money supply it is set to do more on Thursday.

But what about the effect on housing? QE is generally credited with putting a floor under house prices, which is good news if you already own a home but very bad news if you are struggling to get on to the housing ladder and paying a high rent. House prices, remember, are already propped up by ultra low interest rates that have reduced mortgage payments by thousands of pounds for anyone who can raise a deposit.

The problems don’t stop there. According to the Bank’s own analysis QE has increased the rate of inflation by between 0.75 and 1.5 percentage points. That has led to direct increases in rents for social tenants because they are linked to a formula of RPI inflation plus 0.5 per cent. If QE had never happened, landlords around the country would not need to be imposing such large rent increases at a time when their tenants are already suffering from falling incomes.

So what’s the alternative? It’s one I’ve mentioned before that is slowly gaining some traction. What if quantitative easing could be used to invest in new homes rather than buy financial assets?

Instead of government bonds, the Bank could buy bonds in a public interest company with a remit to build homes for future sale to the private or social sectors. A public interest company would be at arm’s length from the government and therefore not caught by restrictions on public borrowing. remit not to hold

A £50 billion scheme could potentially finance 500,000 homes, create 20,000 jobs and generate £10 billion for the Treasury in taxes generated and benefits saved without taking account of the knock-on effects for the wider economy. Rents on the homes could pay any interest in the short term and in the longer term the sales proceeds could go back to the Bank.

The scheme could be tied into some of the innovations in housing finance being developed by social landlords. It could generate the type and scale of stock that institutional investors say they need before they take the plunge into the private rented sector and be a way for the government to de-risk private rented investment without using public money. It’s surely also a good way of using the precious resource of public land.

The obvious objections seem to be more ones of mind-set than substance. A backdoor scheme for increased borrowing? Not if all the money was repaid on the sale of the properties and it generated a healthy return for the taxpayer in the meantime.  Wrongful use of a scheme intended purely for financial instruments? It may be difficult for the Bank to move outside its financial comfort zone but it would still be buying financial instruments and this would give the Bank a more varied range of assets to sell when the time comes to unwind QE.

Above all, perhaps, there seems no chance of the government achieving its ambition of using housing as a key part of its growth strategy without an extra weapon like this at its disposal. Brian Green argues on his Brickonomics blog that the scheme could be just the ‘big bazooka’ that Grant Shapps needs to stand a chance of meeting the target against which he said he wanted to be judged: building more homes than Labour. He also has more detail about how a public interest company might work and roles for the Bank, Treasury and HCA.

Without something like QE for housing, we seem stuck with housing completions at half the level needed to meet demand (even in 2016 Savills is predicting just 125,000). With it, and with the right approach to land assembly and managing the construction programme, we stand a chance of building the homes and delivering the growth we need.

The scheme has just won the backing of one of the leading trade bodies in the construction industry. The Construction Products Association, which represents the firms that make the materials and products that go into new homes, says it will be writing to the Chancellor to point out the advantages. Time for housing organisations to do the same?

The details would need to be worked up by people with more financial expertise than me. It’s possible that there is a fundamental flaw that I have missed. But doesn’t a QE that builds homes and creates jobs sound a hell of a lot better than a QE that boosts house prices and raises rents?

Small mercies

Thu, 2 Feb 2012

Yesterday’s events in the House of Commons have left me looking for some good news among the bad.

As if the reversal of the Lords amendments on the benefit cap and the bedroom tax were not enough to depress all those who have campaigned against them, the government has now claimed financial privilege to kill off any further debate on the Welfare Reform Bill.

On the housing clauses, David Orr has condemned the ‘economically suspect and socially divisive’ policy. On the wider Bill, campaigner Sue Marsh has angrily accused the government of lying and betrayal.

So what are my two bits of good news? I don’t mean the usual mix of discretionary housing payments and reviews that were a feature of last year’s housing benefit cuts and seem to have been enough to buy off enough Lib Dem opposition yesterday.

On the cap, the good news is the nine-month grace period for anyone who loses their job. That is three months more than the period sought by Lord Best in an amendment that he withdrew in the Lords last week and it should help limit the number of families who risk losing first their job and then their home.

Work and pensions minister Chris Grayling explained yesterday: ‘We will not penalise those who are in work and doing the right thing. We will put in place a nine-month grace period for those who have been in work for the previous 12 months and lose their job through no fault of their own. We have always intended to make this measure, and I am happy to make that clear to the House today.’

Questions remain. It’s easy to see how the grace period will apply to people in continuous full-time work but what happens to people who can’t get enough hours to be exempt from the cap (16? 23?) and do people who’ve lost one job and then found another still get the grace period? However, nine months is still better than six and considerably better than nothing.

My second piece of good news is on the bedroom tax, though admittedly this is scraping the barrel a bit. Despite the defeat, it’s worth noting that there were not just 14 Lib Dem MPs who rebelled against the coalition but two Conservatives as well.

It’s maybe no coincidence that both of them have strong connections with social housing. Gordon Henderson, MP for Sittingbourne and Sheppey, grew up on a council estate, while Andrew Percy, MP for Brigg and Goole, was previously a councillor representing the estate where his father grew up and his grandmother still lived.

This is not the first time that Andrew Percy has rebelled on a housing issue. During the third reading debate on the Localism Bill last year, he voted against the government on scrapping security of tenure on the grounds that we were talking about ‘homes’ and ‘not merely a facility that belongs to the council’.

He made a similar point yesterday: ‘I am sure that the ministers understand this, but I plead with them to take account of the fact that houses are not only public assets; they are also people’s homes, and people have an attachment to them. This is not a simple matter to resolve, even though we should encourage an end to under-occupancy.’

In the scheme of things it’s a very small compensation that the housing message has got through to at least some government MPs and that not all of them (to quote work and pensions minister Maria Miller) regard claimants and tenants as ‘these people’. But it’s still good to see. 

Taking the strain

Mon, 30 Jan 2012

Today is the 21st anniversary of perhaps the most significant statement in the recent history of housing.

On 30 January 1991 the then housing minister Sir George Young was asked in parliament what the government was going to do about unaffordable rents. ‘Housing benefit will underpin market rents - we have made that absolutely clear,’ he said. ‘If people cannot afford to pay that market rent, housing benefit will take the strain.’

Housing benefit has indeed taken the strain ever since - of deregulation and soaring rents in the private rented sector and private finance and stock transfer in the social sector. In the process the annual bill has risen from £6bn to £22bn and it has come to underpin not just rents but the entire delivery of affordable housing too. 

But for how much longer? Today, 21 years to the day since Sir George made that statement, a group of housing associations is warning that welfare reform by the DWP could make the housing plans of the DCLG unworkable.

The Consortium of Associations in the South East (CASE) represents nine different landlords providing affordable homes. Their report examines the unintended consequences of three different elements of the Welfare Reform Bill: the under-occupation penalty, direct payment of housing benefit to tenants and the household benefit cap. All three sound superficially sensible until you examine the detail and the implications.

Most of the arguments will be familiar to anyone reading this but in a week that sees the government pledge to reverse House of Lords defeats on under-occupation and the cap when the Bill returns to the Commons it’s worth a re-cap.

On the under-occupation penalty, there may be good reasons why a bedroom is not ‘spare’ and why a landlord has deliberately chosen to reduce child density on a particular estate. 

But it’s the sheer numbers of people affected - 670,000 households  - that are maybe of the greatest concern. 

CASE members say it will simply be unworkable unless introduction is phased from April 2013. There are not enough one-bedroom properties for under-occupying tenants to move to and they would have to spend the next two years on the crazy strategy of building nothing but one-bed flats to make it work. The turnover rate of tenancies is half what would be required to meet the deadline and arrears are bound to increase. 

On direct payments, the associations warn of significantly higher arrears and administrative costs.

They say that once the household benefit cap is in place all four-bedroom properties in the South East built for Affordable Rent will become unaffordable. And they are already reviewing whether to continue building three-bed homes that already threaten the cap and will exceed it if the cap does not rise with inflation. Financial considerations driven by the cap will override any local strategic tenancy policies.

However, the implications of the three measures go well beyond that and will directly impact on associations’ ability to finance and build new homes. They conclude that direct payments and the under-occupation penalty will result will cut new build capacity by 12 per cent and that this could get even worse if lenders react to perceived extra risk by increasing the cost of borrowing. Capacity would fall by 11 per cent for a 0.2 per cent increase in borrowing costs and 28 per cent for a 0.2 per cent drop. 

‘As CLG embarks on a programme to increase housing supply, its sister department - DWP - is preparing to implement a policy that is certain to do the opposite,’ they say.

On under-occupation, the associations want the government to stick with the Lords amendment tenants with only one ‘spare’ bedroom and to phase in the cut for everyone else. On the cap, they want a relaxation for larger properties and a commitment to index it for inflation. On direct payments, they say that none of the concessions announced so far will work and that the plan should just be scrapped.

Hopefully the government is listening to at least some of that and CLG ministers have been making the same arguments to their DWP colleagues that Eric Pickles made in his leaked letter last year.

Or has the idea first proposed by Sir George Young 21 years ago today now itself collapsed under the strain?

Dunce’s cap

Mon, 30 Jan 2012

If history repeats itself, first as tragedy and then as farce, then the politicians seem intent on doing both at the same time with the benefit cap.

This weekend work and pensions secretary Iain Duncan Smith and his Labour shadow Liam Byrne compete with each other to demonstrate either complete ignorance of their brief or a cynical disregard for the facts. Or both.

Byrne kicked off on Saturday by accusing the Conservatives of ‘playing politics’ with the benefits cap. In piece for the Conservative-supporting Daily Telegraph – no hint of playing politics there - he set out Labour’s case for agreeing to the need for a cap in principle but adapting the system with a series of regional caps that could take account of differing housing costs.

He argued: ‘Most of the benefits paid under the cap are for housing. But these are far higher in places like London than in other areas. While all that £500 a week might get you in central London is a one-bedroom apartment, in Rotherham, Yorkshire it would get you a six-bedroom house. How can a “one-size-fits-all” cap be fair to working people in both London and Rotherham?’

All very reasonable, you might think. Except that housing benefit rates are already not just regionalised but localised in broad rental market areas and as anyone who reads Inside Housing knows only too well there are bedroom-size caps on what anyone can receive. The maximum for a one-bedroom flat anywhere in the country is not £500 a week but £250 a week. 

So Byrne was talking nonsense (and not for the first time) about a cap that is being imposed on top of a housing benefit system that has already been reformed. But he is not the only one.

On Sunday, Iain Duncan Smith appeared on the Andrew Marr Show and said that the government will look to reverse all its defeats in the Lords when the Welfare Reform Bill comes back to the Commons. You can watch from about 45 minutes in on iPlayer but you may want to move any heavy objects out of throwing range of your computer first.

Pressed by Marr about the cap and the Labour plan, IDS said: ‘The overall level is critical because we’ve got some people living in London in some cases in flats that are costing over £100,000 a year in rent. I know that’s at the extreme but that’s the kind of nonsense we got into under the last government. So it’s important we settle the London issue.’

That line about people on £100,000 a year has been trotted out again and again. The amount paid to the landlords of five families in London has been a devastatingly effective weapon in the debate on welfare reform. 

Except of course that the bedroom caps that IDS himself introduced mean that the maximum that anyone can now receive in housing benefit is £400 a week or £20,800 a year.

In fairness, Byrne did a rather better job of explaining Labour’s position on Murnaghan on Sky on Sunday and IDS did signal that there would be concessions when the Bill returns to the Commons this week. ‘I’ve always been clear from when I made the speech at third reading that we will be looking at transitional measures and where there are people falling out of work we will be looking at grace periods,’ he said.

However, with even some Labour MPs arguing that the cap should be set lower than £26,000, the debate continues to take place in ignorance or disregard of the facts. Little wonder that there is overwhelming public support for the apparently fair proposition that nobody should receive more on benefit than the average amount earned by someone in work. Even as the Lords were voting to exclude child benefit from the cap last week, Lib Dem peer Lord Kirkwood was virtually alone in declaring that he opposed the cap in principle because it distorts the whole basis of the benefit system.

As I’ve argued before, the apparently simple logic for ‘fairness’ that has built a seemingly unstoppable momentum behind the cap is deeply flawed. For starters, that ‘hard-working family’ earning £26,000 a year may well also be receiving thousands of pounds in housing benefit, child benefit, working tax credit and tax credit.

If you still disagree, you might want to read this brilliant blog by Declan Gaffney first about the ‘bait-and-switch’ tactics employed by ministers: the seemingly pragmatic principle that is based on a rigged comparison. Or take a look at this blog by Alex Marsh on the way that ministers have framed the narrative behind the cap by creating division and sowing dischord.

Gaffney argues that ‘the only truly honest proponents of the benefit cap are those who are too ignorant or too far out of the loop to be party to the backroom consensus: the only truly honest critics are those who refuse to say they support it in principle’. 

That backroom consensus sees that the political impetus behind the cap is so strong that it is better to accept false arguments in a pragmatic bid to prevent some of the most arbitrary impacts of the cap. ‘But there are costs attached to this strategy, in terms of the quality of political debate and more generally in the endorsement it gives to a big untruth about the social security system and those who are relying on it. On balance, I think the latter considerations should win out. A little dishonesty only helps if you’ve already decided to go along with the big lie.’

Marsh notes the way the argument has been framed by setting claimants against ‘hard working families’ while ignoring the fact that poverty is dynamic and people’s circumstances change. ‘Yesterday they were the “hard working families” that politicians are so concerned about and so in favour of. Then their luck changed. They haven’t suddenly become benefit-scrounging pondlife overnight. Yet the government proposes to penalise many of them further for their misfortune by rendering them unable to afford to stay in their homes.’

The consequences of all this will be felt not just by claimants and hard-working families and not just in the welfare system. More later on the impact of welfare reform on housing and a report out today from the CASE group of housing associations. 

Winners and losers

Tue, 24 Jan 2012

Who has most to celebrate from last night’s defeat for the government on welfare reform?

The obvious answer is families with children who, thanks to the bishops, Labour peers and a significant rebellion by Lib Dem peers in the Lords last night, will see their child benefit exempted from the £26,000 household benefit cap.

But anyone watching David Cameron’s PM Direct appearance in front of workers at ASDA on BBC News yesterday (watch from 4.35 in if you missed it) might come to a very different conclusion.

‘Are you happy that your taxes are going towards families where no-one is working and they’re earning more than £26,000 in benefits?’ Cameron asked them. ‘Is that fair? No. I don’t think it’s fair either and that’s why it’s right to have a welfare cap.’

Cameron was clearly loving the chance to talk to ‘hard-working families who do the right thing and pay their taxes’. He was comfortable in the knowledge that the cap has 76 per cent support in opinion polls and must also be loving the fact that his Lib Dem coalition partners are split down the middle and the Labour opposition are squirming with discomfort.

As Gary Gibbon put it on Channel 4 News, the defeat is more likely to have ministers ‘popping the champagne corks’ at another chance to demonstrate they are on the side of ‘fairness’ and ‘hard-working taxpayers’ than bemoaning a defeat that they look certain to reverse in the House of Commons.

I’m guessing that a majority of you reading this here, possibly more than 76 per cent, can see the problems with all of this. Not just the dozen that I blogged about yesterday but the very obvious one raised by David Cameron’s appearance.

Because the truth is that as a hard-working taxpayer myself I rather resent the fact that ASDA does not pay many (most?) of its staff enough to live on without receiving tax credits and housing benefit from the state.

The profits, dividends and top salaries of managers at its parent company Walmart are effectively subsidised out of my (and your) pockets. Meanwhile, should any of the 5,000 people who get the new jobs announced yesterday have their hours cut to less than 16 hours a week, they will be caught by the benefit cap.

By far the fairest way to deal with the cap would have been to exclude housing costs altogether. Housing benefit is already capped, after all. As Joe Halewood points out on his blog 75 per cent of the 170,000 new claimants since the election are in work. And that’s before you get to arguments about rent levels.

That’s not going to happen now. Instead we are left with a cap on income that is set at the level of the average take-home earnings of someone in work. That sounds simple but fair. But it does not reflect the extra income someone in work will get on top of that from tax credits, housing benefit and child benefit (an average of another £6,000 or so). And it does not cover everyone: there are exemptions from the cap for people on disability living allowance (DLA), war widows and widowers and people working more than 16 hours a week. Both the level and the scope of the cap are, in other words, subjective choices by the government not objective expressions of fairness.

Arguments like those were being put in the Lords yesterday but they have fallen on deaf ears among the electorate as a whole. The cap, which began life in a conference speech by George Osborne and was reportedly opposed even by Duncan Smith at first, has been a devastatingly effective political weapon that has enabled the government to portray itself as on the side of ‘fairness’ and completely wrong-footed the opposition.

That was summed up for me by the way that Duncan Smith was able to quote the support of a vicar yesterday. ‘Interestingly, I have just had an e-mail from a vicar, who wondered why the bishops fail to recognise that he is paid only £22,000 a year. He wonders why they are getting excited about £26,000 being a poverty-level figure.’ The vicar was, of course, conveniently ignoring the fact that his housing is paid for by his employer.

Attention now switches to the transitional arrangements for the cap and here at least there were enough signs of movement for Lord Best to withdraw his amendments on a 26-week grace period and an exemption for temporary accommodation costs pending further announcements from the minister.

Doubts by the dozen

Mon, 23 Jan 2012

As peers prepare for the key debate on the household benefit cap the policy is still begging as many questions as answers.

Ministers appear to have won the battle for public opinion over the principle of having a cap with 76 per cent of voters backing the idea in an opinion poll over the weekend.

However, the battle will be over the details. Labour has said it will not vote against the cap itself but will try to amend the Bill so that extra costs do not fall on council tax payers. Several Lib Dem peers including former party leader Lord Ashdown have said they cannot support the cap as proposed. And Lord Best will be prominent among crossbenchers pressing for changes.

Extra fuel for the fire came in a revised impact assessment published by the Department for Work and Pensions (DWP) this morning. This admitted that 75,000 families will be affected – 25,000 more than in the first version published last year. They will lose an average of £83 a week each - £10 less than before. And the government will save more than previously estimated (£330m in 2014/15 rather than £275m).

Other new details are that more than 1,000 families will be affected in each of 17 London boroughs plus Birmingham and that 5,000 families receiving carer’s allowance will be affected.

However, in many other ways, the key doubts about the policy remain the same. Here are my top 12. The first nine are updated versions of questions raised in committee stage debates in the Commons by either Lib Dem or Labour MPs that I blogged about last year. The other three come from previous comments on my blog and subsequent developments. I stand ready to be corrected but I’ve not seen answers to any of these points yet. 

1. It may not save much money overall. The new estimate is for cost savings of £330m in 2014/15 but Lib Dem MP Jenny Willott claimed last year that the DCLG estimates that it will increase homelessness by 20,000 people, costing £300m in emergency housing. This was subsequently confirmed in the leaked Pickles letter.
2. It may not increase work incentives. Labour’s Karen Buck and Lib Dem Ian Swales both argued that it will incentivise people to move from high-cost housing areas to lower-cost ones where there are fewer jobs.
3. It contradicts the aims of the Universal Credit to make it easier into work or work more or less hours without suffering a big drop in income. ‘It creates cliff edges and makes a temporary period of unemployment a catastrophe,’ said Buck last year.
4. Even if it does incentivise work, many of the families affected are people the state does not expect to work or who are too sick to work.
5. It could penalise people in work who lose hours and cease to qualify for working tax credit and their exemption from the cap.
6. It will encourage couples to split up. In the very opposite of a family-friendly policy, a couple’s income will be capped at £500 a week but if they split up into two single households they will each get a maximum of £500 a week if there are children or £350 a week if there are no children.
7. It will penalise families with children. Willott said it would hit hard-working families who suddenly lost their job and could not pay their rent. Even two-child families in London face losing a third of their housing benefit. It will push more children into poverty just as the universal credit promises to lift them out of it. The new impact assessment says 90,000 families with 200,000 children will be affected
8. It will have a damaging impact on social tenants and landlords. In the committee stage debates MP said that 70% of the 50,000 families affected will be in social housing (or 35,000). The new impact assessment puts this at 40 per cent of 75,000 (or 30,000). The inevitable rent arrears will threaten homelessness for tenants and damage the finances of landlords.
9. It contradicts other housing policies like affordable rent - housing associations building homes at up to 80% market rents will find their existing client group will be unable to afford them. There is already anecdotal evidence of associations eliminating larger homes from their schemes.
10. It threatens to undermine the economics of refuges and other forms of temporary accommodation. Women fleeing domestic violence will not have their rent paid in full and the consequences of refuges closing or becoming too expensive do not bear thinking about.
11. It raises exactly the same issues as the cut to child benefit for higher rate taxpayers that is reportedly the subject of a rethink in government: cliff edges where people risk losing out above a threshold and incentives to split up and form two separate households.
12. The ‘fairness’ argument for the cap being set at £26,000 as the take-home pay of the average working household sounds simple – and it seems to be convincing the voters. But it doesn’t include the in-work benefits that those average working households will also receive. And it doesn’t reflect the real world of how high housing costs can turn that into living on 62p a day – as Tim Leunig explains only too well.

Ministers do not seem in much of a mood for compromise if Iain Duncan Smith’s interview on Today this morning was anything to go by (the work and pensions secretary managing to redefine homelessness as ‘about children sharing rooms’.)

However, there were also possible hints of transitional help and it will be interesting to hear more this afternoon when peers debate the key amendments seeking to exclude child benefit from the cap and introduce a 26-week grace period.

Peers showed in the second reading debate last September that they are looking for much more from the government. Let’s hope they get at least some of it. 

The other Bill

Fri, 20 Jan 2012

As we gear up for more battles over the Welfare Reform Bill in the House of Lords, it’s worth remembering it’s not the only controversial Bill currently before their lordships that will have a big effect on housing.

Among a range of measures designed to cut costs, the Legal Aid Bill will limit legal aid in housing cases to cases involving homelessness or imminent loss of home and serious disrepair that poses a serious risk to life and remove most benefits work from the scope of the scheme. (Any lawyers out there feel free to correct this summary). 

So far the housing aspects have not received as much attention as they should, which is perhaps not surprising when you consider the potential impact of restrictions of legal aid in family cases on victims of domestic violence and a rebellion by Conservative peers including Lord Tebbit against cuts in legal aid in cases of medical negligence. 

On Wednesday the implications became much clearer (to me anyway) when the Lords debated the housing aspects at the committee stage.  The ministerial villain may be different (former Labour and SDP MP Lord McNally) but the rest of the cast is similar to the one that will feature in the report stage debate on the Welfare Reform Bill on Monday.

Opponents of the Bill successfully teased out the way that its tightly drawn definitions of who will be entitled to legal aid under the new system risk excluding large numbers of people with serious housing problems without necessarily saving anything like the amount the government claims. 

One big problem, said Lib Dem peer Lord Shipley, is that means that ‘although the government have said that the loss of the home will continue to be prioritised for legal aid funding, the Bill will in fact prevent advisors from resolving benefits problems that lead to eviction proceedings’.

Despite clear evidence that early intervention to resolve benefits issues can stop evictions, he went on:

‘The danger is that the exclusion of benefits work from legal aid will tie the hands of advisers who are trying to prevent homelessness and will lead to many more unresolved cases filling the county courts. The courts will have more adjourned hearings and will ultimately have to make more possession orders because there is no one to resolve the benefits issue. This could result in higher costs to the taxpayer as a consequence.’

A second problem is the drafting of the Bill to ensure that squatters cannot get legal aid to fight the loss of their home also means that anyone legally defined as a ‘trespasser’ cannot get help either. That could potentially affect all sub-tenants, tenants of landlords who are in default on their mortgages and joint tenants whose relationship breaks down.

Next out of the blocks was crossbencher Lord (Richard) Best, the hero of the successful Lords rebellion against the bedroom tax before Christmas. The private rented sector has no regulator or ombudsman, he pointed out, which put tenants in a completely different position to customers of utilities or the banks. ‘If tenants are in dispute with their landlords, the only way of obtaining redress may well be to go to court,’ he said.

Problem number three is therefore that disreputable landlords will see that any threats of legal action from their tenants were empty threats unless the case concerned the imminent loss of their home. He went on:

Time to grow up

Thu, 19 Jan 2012

Within the next month official figures will confirm that there are now more private rented than social rented homes in England. This will be hailed as a triumph for the market.

In strictly numerical terms it is. When private renting was deregulated with the introduction of assured shorthold tenancies in 1988 there were 1.8m homes in the sector.

By March 2010 (the most recent figure currently available) there were 3.9m and, with each of the last four years seeing growth of over 200,000, the March 2011 total will almost certainly be over 4m. 

In contrast, the social sector shrank from 4.7m in 1988 to 4.3m in 2000 to 4.0m in March 2011. And home ownership has fallen for each of the last four years.

Whether you attribute all this to lack of investment in social housing, high house prices, restricted mortgage lending or the creation of buy to let (in 1996), the transformation is little short of remarkable. And it reverses the seemingly irreversible trend from private renting to social renting seen in the 1960s (in 1961 there were 3.2m social rented homes and 4.7m private rented, by 1971 there were 4.6m social and 3.2m private).

But the real question - and this is my third key question for 2012 - is what happens next. The government’s answer so far is nothing. Nothing should be allowed to interfere with such a market success story. 

One of its first acts when it came to power was to reject the modest proposals for regulation put forward by the Rugg Review as ‘red tape’. As Grant Shapps put it at the time:

‘With the vast majority of England’s three million private tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords.’

In November the housing strategy said that:

‘The Government is committed to supporting growth and innovation by avoiding unnecessary regulatory burdens on landlords. But we are also looking at measures to deal with rogue landlords and encouraging local authorities to make full use of the robust powers they already have to tackle dangerous and poorly maintained homes.’

Yet there are growing calls from reform - and not just from the quarters you might expect.

Over Christmas The Economist, normally an advocate of deregulation in everything, argued that:

‘When demand outstrips supply against a background of profound housing need, tough action is required.’ 

Visiting a family living in a rented garage in Newham, it dismissed the usual arguments against regulation (free markets work better, self-regulation works better, tenants are as bad as landlords) and concluded: 

‘Seen from inside the Hamids’ mouldy garage, these arguments are not persuasive.’

In London as a whole, regulation of private renting has emerged as a key issue in the mayoral election campaign. Ken Livingstone has pledged to ‘campaign for’ a form of rent control. Boris Johnson has attacked that idea but he is also pledging a single badge of accreditation for all landlords, letting agents and management agents. 

Meanwhile the Lib Dem half of the coalition does not seem as satisfied with things as they are as the Conservative half. Richard Kemp, co-chair of the Lib Dem housing policy group, says that:

‘The key new area that I want the Party to tackle is the whole area of private landlords. Some have complained that this will drive a wedge between us and the free market, no holds barred section of the coalition. If that is the case bring it on!’

He goes on:

‘I believe that no-one should be allowed to let a property unless that property has been inspected and that inspection is regularly updated. I believe that to be a landlord individuals or companies must either be registered or have to let solely through registered lettings agencies.

‘Some will say that this is a restriction on fair trade. I believe that it is a restriction of unfair trade. Out of desperation hundreds of thousands of people are living in squalid conditions which are funded by the tax payer through housing benefit. Some of the key supporters of such registration are good landlords who have to compete on price with modern day Rachmans and who get tarred with the brush of “racketeer”.’

So regulation of the private rented sector is an issue that is not going to go away. Getting the system right, and avoiding an over-prescriptive one that would kill off the growing signs of interest in the sector from institutional investors, will not be easy and cannot happen in isolation of wider reform of the housing system.

However, good landlords and letting agents have nothing to fear from sensitive regulation and know that it will work their their advantage by driving out competitors who cut corners to undercut them. 

Because the truth is that the explosive growth of private renting over the last decade is evidence not of market success but of market failure: the failure of a rental market in which millions of tenants can only afford their rent thanks to billions of pounds a year in housing benefit; the failure of  housing and mortgage markets that have priced hundreds of thousands of younger people out of owner-occupation;  the failure of the current system to protect tenants from rogue landlords and agents; and the failure of six- and 12-month tenancies to be remotely adequate for the 1m families with children (an increase of 77 per cent in the last two years) now living in private rented accommodation.

The deregulated system invented 24 years ago has run its course. Much like the 20-somethings stuck living at home with their parents because of the state of the housing and rental markets must be getting sick of being told, it’s time it grew up and took some responsibility. 

Double standards

Wed, 11 Jan 2012

Two men with double barrelled names admit their guilt. One gets ridicule and a caution and says sorry to his family. The other?

The other gets 11 months and knows that by the time he gets out his family may have been evicted. No prizes for guessing that the first man is Antony Worrall Thompson and that the second is Daniel Sartain-Clarke. 

Earlier this week, the 60-year-old celebrity chef admitted to shoplifting from Tescos on five separate occasions over Christmas. He accepted a police caution and promised to seek treatment after sneaking out blocks or cheese, onions and bottles of wine without paying. 

Cue viral jokes on the internet plus lots of tweets and blogs highlighting the contrastingly harsh treatment of looters in last summer’s riots (the man who got six months for stealing £3.50 worth of water, for example) and even a Daily Mail web debate about whether the middle classes get off lightly. 

Yesterday 18-year-old Daniel Sartain-Clarke was sentenced to 11 months in a young offender’s institute for his part in last year’s looting. He pleaded guilty to a charge of burglary at his local Curry’s. 

The Daily Mail suggests somewhat confusingly that he both broke into the store and was discovered by police in the stockroom two hours after it was broken into by others. The BBC and others report the comments of the judge following evidence about his background that: ‘You are a committed Christian and an aid worker. I have reams of references attesting to you. You are a helper and a doer. This is as out of character as it’s possible to imagine.’

The contrast between the two cases would be debatable even if it was just confined to the criminal justice system and the difference between theft and burglary - but it’s what will happen next that really distinguishes them.

Worrall Thompson told the Express yesterday that he is back in his rented High Wycombe home crying himself to sleep. ‘I feel very guilty and want to know why I’ve done this,’ he said. ‘This has all been so humiliating but it’s a punishment I have to take on the chin. My wife, Jay, has been fantastic. She picked me up from the police station and we stayed up late into the night talking and trying to work out why I did it.’ His children knew and had been very supportive.

Sartain-Clarke has been at a bail hostel 100 miles away from home for the last few months. And as he begins his sentence, his mother Maite de la Calva and eight-year-old sister are facing eviction from their rented Wandsworth council home. 

As Inside Housing reports, the council appears determined to press ahead with the next stage of the eviction process after issuing a notice seeking possession in August. ‘His actions that night were a clear and unequivocal breach of our tenancy conditions and as a result we will now be moving on to the next stage of the legal process.’ said a spokesman. 

The family are being represented by the human rights group Liberty, which accuses the council of ‘shameless self-promotion’.  As lawyer Emma Norton put it in October: ‘Ms de la Calva has committed no crime and if she lived in a mortgaged house she would not face such bullying.  Whether in a mansion or a flat everyone should be equal before the law.’

However, Liberty also notes: ‘It is one of the standard terms of a Wandsworth tenancy agreement that the tenant, lodgers, friends, relatives, visitors and any other person living at the property refrain from doing anything which interferes with the “convenience” of other people living in Wandsworth. The Housing Act 1985 also suggests a basis for eviction where the tenant or a person living in or visiting her household has been convicted of an indictable offence.’

The Financial Times report of the illegal subletting consultation this morning says the government has admitted that no council has yet taken up its call to evict rioters and that Wandsworth is the only one that has pursued someone publicly. It also quotes Wandsworth as saying it will give the mother a chance to ‘tell her side of the story’ before a final decision is taken.

Hopefully those are signs of a climbdown to come. If not, it will be up to the courts to decide whether the arguments made for an eviction (nuisance in the neighbourhood, setting an example, or just a breach of the tenancy conditions) can justify what will be both a double punishment and a collective punishment. And that will leave the rest of us wondering whether collective punishment can ever teach the sense of individual responsibility we were told was so lacking in the wake of the riots. 

The problem of rent

Thu, 5 Jan 2012

The second of my blogs on five key housing issues for 2012 looks at the debate about the Beveridge report taking place in seeming ignorance of what it actually said.

The 70th anniversary is not till December but politicians are already claiming it as justification for their welfare reforms. Shadow work and pensions secretary Liam Byrne was first out of the traps for Labour with a briefing to the Mail on Sunday which reported that that Labour leader Ed Miliband intends to get tough on ‘scroungers’ and that Byrne thinks Beveridge would ‘turn in his grave’ at the thought of billions in benefits going to ‘lifelong spongers’.  

The piece quoted a source close to Byrne as saying: ‘When Beveridge wrote his report, the main idea was that you only got paid by the state if you paid in first. He would never have agreed with anyone choosing to spend a lifetime on benefits. Idleness was one of his “giant evils”. The benefits system has expanded in a way that Beveridge would never have foreseen, such as the new evil of benefits dependency. He would be turning in his grave if he knew we spend £20 billion a year on housing benefits.’

On Tuesday, Byrne wrote a piece for The Guardian that makes the same point from a different angle. ‘Beveridge’s system was built on the idea of full employment,’ he said. ‘For him, “idleness” was an evil every bit as insidious as disease or squalor. So he would have been horrified at the long-term unemployment breaking out all over Britain, with over a million young people without work, and appalled at the spiralling cost of benefits. He would scarcely have believed housing benefit alone is costing the UK over £20 billion a year. That is simply too high.’

Byrne did not mention the words ‘scroungers’ or ‘spongers’ and attacked government plans to scrap disability benefits that people have paid in for. ‘But beyond this, “something for something” means reward for those who are desperately trying to do the right thing, saving for the future and trying to build a stable, secure home. Right now, these families are offered too little reward and incentive – in social housing and long-term savings – for the kind of behaviour that is the bedrock of a decent society.’

On its front page, The Guardian reported that he was arguing that ‘the ballooning of the system has provided support that is unearned, and mislaid the original ideal of providing help to those that contribute’ and that the three key flaws in the current welfare state are ‘the spiralling housing benefit budget, benefits for long-term unemployment, and the lack of proper incentives to reward responsible long-term savers’.

All of this has not surprisingly provoked a strong reaction on the Left - one that Byrne might actually welcome as reinforcing his message to the mainstream. For a flavour of the reaction in the blogosphere, go here, here and here and for more comment in The Guardian go here. 

My own reaction - especially when it came to the point about housing benefit - was that Beveridge said nothing of the sort and it sent me back to the history books to check.

To give him his due, Byrne does point out that Beveridge detested the term ‘welfare state’ (he preferred ‘social security state’) but his interpretation seems otherwise wide of the mark. 

Here’s what Beveridge actually said about rents: ‘The attempt to fix rates of insurance benefit and pension on a scientific basis with regard to subsistence needs has brought to notice a serious difficulty in doing so in the conditions of modern Britain. This is the problem of rent. In this as in other respects, the framing of a satisfactory scheme of social security depends on the solution of other problems of economic and social organisation.’

The ‘problem of rent’ was the way that there were so many variations between regions that it was impossible to design a flat-rate benefit to accommodate them all.

Beveridge published his report in the context of private sector rent control and subsidised council housing. By ‘the solution of other problems of economic and social organisation’ he meant not just full employment - which he assumed as one of the conditions for the success of his report alongside a national health service and family allowances - but a post-war programme of council house building too.

He was a Liberal but not a wet one (he favoured training camps for ‘malingerers’). He took a narrow brief about making a survey of ‘existing national schemes of social insurance schemes of social insurance and allied services, including workmen’s compensation, and to make recommendations’ and turned it into a radical plan for slaying the five giants of want, disease, ignorance, squalor and idleness.

In the process, incidentally, and helped by the fact that it was published in December 1942 within weeks of the victory at El Alamein that marked the turning point of the war, it sold 630,000 copies and 92 per cent of the population were aware of his recommendations. 

So Beveridge would indeed be turning in his grave if he knew we were spending £20 billion a year on housing benefits - but not on the grounds that this was reinforcing ‘idleness’ and scrounging but that it was demonstrating crass stupidity and waste by successive governments of both parties and ignorance by those attempting to claim his mantle.

The reasons why the bill is £20 billion are that housing benefit has been made to take the strain of inadequate social housing investment and rising social and private rents over the last 35 years, because the claimant count has risen over the last three because of the recession and because millions of people are on pensions and wages too low to be able to afford to pay their rent without assistance.

Far from reinforcing idleness, housing benefit is actually essential to helping people into work. Cuts to it will increase want rather than reduce idleness.

There were problems with the Beveridge plan and the way it was implemented and lots more strains that emerged as the structure of society changed in subsequent decades but pretending that you can deal with ‘the problem of rent’ by wishing it away or blaming it on fecklessness was not one of them.

The year of reckoning

Mon, 2 Jan 2012

I’m kicking off my blog with five key questions for 2012. There is only one place to begin.

Two days into the new year and already it’s clear that 2011 was merely a dress rehearsal for the changes to come.

Last year was dominated by battles over a welter of legislation and cuts that will dramatically transform the prospects of anyone living in or looking for rented housing. 2012 sees those changes start to take effect across the country.

Chartered Institute of Housing research reported in The Guardian today concentrating on just two of the changes makes the point only too clearly.

The CIH estimates that bedroom caps (starting yesterday for existing claimants) and 30th percentile (from April) restrictions will make 800,000 private rented homes unaffordable for anyone on the local housing allowance.

As this map shows, the effects will be greatest in inner London. In Westminster 20,700 homes will disappear, leaving 8,700 families on LHA chasing just 3,200 homes.

But the effects ripple out to supposedly more affordable Outer London, with 5,500 homes disappearing in Croydon and 16,900 families chasing 9,600 homes and 5,400 going in Newham to leave 14,400 families after 7,800 homes.

And this is not just an issue for London or even the South East. In Birmingham, 34,500 families will be left chasing 23,300 homes, in Liverpool 21,000 families will be after 12,000 homes and in Glasgow 14,800 will be competing for 13,600 homes.

In total 1.3m private tenants around the country are facing a choice between cutting spending on other essentials, going into rent arrears or moving to a cheaper home or a cheaper area. Or perhaps between staying where the work is and making up the rent shortfall or moving to where there are fewer jobs and having the rent paid in full.

That in turn will have a knock-on effect on cheaper areas that the CIH warns are at risk of becoming benefit ghettoes. Interim chief executive Grainia Long warns that the whole of the South East has only a few low-cost places like Margate and Hastings that could face increased social problems and a breakdown in community cohesion.

The Department for Work and Pensions counters that ‘early indications are that people are not moving out of cities in their droves to cheaper rural areas’ and that ‘for the vast majority of areas except the most expensive parts of inner and central London, at least 30 per cent of all private rented properties will be affordable’.

However, note the careful choice of words employed there - I’m not sure anyone has ever suggested people would move in droves to rural areas, more that they would be uprooted to cheaper urban ones.

And this study reflects only two of the cuts that start to bite this year. From yesterday, the age threshold for the shared accommodation rate was extended from 25 to 35. The DWP estimates that 62,500 people will lose an average of £41 per week as a result. As Crisis points out, that will almost double the number of people on the shared rate and force tens of thousands of people in self-contained homes to look for shared accommodation that will be in short supply in most areas and simply not available in some.

Exactly how all this will pan out remains to be seen. Some tenants and landlords will adapt and find ways to cope. Perhaps much of the problem will be hidden in overcrowded homes and yet more rented sheds and garages. But it’s hard to believe that these cuts will not add to an already growing problem of homelessness and lead to escalating pressure on public services in areas that become benefit ghettoes.

And all this will be happening at the same time as last year’s cuts in housing investment reduce the supply of affordable homes, unemployment is rising, household incomes are falling and changes in the Localism Bill allow local authorities to discharge their homelessness duty into a private rented sector with thousands more tenants than there are homes.

So 2012 will be the year of reckoning - with more cuts to come in 2013.

Another fine mess

Wed, 21 Dec 2011

Should we now write off any prospect of a solution to the new homes crisis for the rest of this parliament?

Despite a ‘warm welcome’ from planning minister Greg Clark, today’s report on the National Planning Policy Framework (NPPF) by an all-party committee of MPs calls for a rethink of several fundamental principles. 

In particular, the Communities and Local Government committee wants the government to remove the default ‘yes’ to development from the document  and to launch a second consultation on a rewritten version.

The default ‘yes’ would only have applied in cases where there was no local plan and it was therefore the key to tackling anti-development or feet-dragging local authorities. The second consultation is something that ministers have repeatedly denied was a possibility.

The committee does also say that  ‘it is it is reasonable and practical for the NPPF to have as an overarching principle a presumption in favour of sustainable development’ but only if it is clear that sustainability is to be judged on environmental and social grounds as well as economic ones.

Put that alongside calls for the reinstatement of ‘brownfield first’ and ‘town centres first’ policies, and little wonder that the National Trust and Daily Telegraph are hailing the report as a vindication of their campaign against the NPPF while Labour’s Hilary Benn seems unable to resist climbing on the bandwagon. 

Little wonder too that developers and housebuilders are calling on ministers to ‘stand firm’. They can probably live with ‘brownfield first’ but argue that the default ‘yes’ is essential when more than half of local authorities still have no local plan seven years after being legally obliged to produce one. And they will worry that a second consultation will open the door to a more fundamental rewrite and further delay.

Clark’s rose-tinted response to such a critical report makes no sense until you consider the possibility that this is him preparing the ground for u-turn or three. For example, he will ‘carefully consider’ the committee’s new definition of ‘sustainable development’. 

The prospect of watering down the NPPF and delaying its implementation will do little to tackle the continuing shortage of new homes. The Home Builders Federation published figures today showing another 10 per cent fall in approvals, meaning that the planning permissions coming through the system are half what is required to meet demand.

But could the committee be rescuing us from an even bigger mess?  The MPs consider that going ahead with the document as drafted would be fraught with problems. 

They argue: ‘The Government has set great store by the brevity and simplicity of the NPPF, but in its current form the draft NPPF does not necessarily achieve clarity by virtue of its brevity. There are many examples of inconsistent drafting which need addressing. The significant gaps in planning policy and guidance could lead to a huge expansion in the size of local plans as local authorities attempt to plug the gap. 

‘There is a danger that, far from speeding up the planning process, in the short term the NPPF will slow it down by introducing ambiguity where previously there was detailed guidance—”planning by appeal” could be the outcome.’ 

They also argue the NPPF should keep the current definition of affordable housing (a cost low enough for households to afford in the context of local incomes and local house prices) rather than define it as housing where eligibility is determined with regard to local incomes and house prices. 

These are crucial points and would be welcome improvements to the final document. Getting the NPPF right does not amount to the vindication claimed by the Telegraph.

However, the problem is that the government’s approach to planning in general and its speedy scrapping of the old Labour system in particular only ever made sense it it could get a new system in place quickly. That now looks less likely - and so does the prospect of more new homes any time soon. 

What's missing?

Tue, 20 Dec 2011

So has the FSA done enough to guard against a future mortgage crisis without being so heavy-handed that it makes it impossible for many people to get one now?

The reaction from lenders to yesterday’s much-delayed Mortgage Market Review certainly suggests so. The Council of Mortgage Lenders (CML), which said previous drafts would have a ‘damaging and disproportional effect’ on consumers and lenders, said the FSA had come up with something ‘far more workable and proportionate’.

The Building Societies Association (BSA) said the original plans had risked locking credit-worthy borrowers out of the market and imprisoned many existing borrowers in their current homes and loans. It welcomed transitional arrangements that would allow people on self-certified loans (which made up more than half of the market in 2007) to re-mortgage to a more standard loan.

The package seems designed to stop the lending (and borrowing) abuses of the past. The three main proposals are:

Lenders will have to carry out affordability assessments and only make loans where there is a reasonable expectations that borrowers can pay them back without relying on future house price rises.The assessments should allow for the possibility that interest rates might rise in future and borrowers should not enter contracts on the assumptions that initial low rates will last forever.Interest-only mortgages should be assessed on a repayment basis unless there is a believable strategy for repaying out of capital resources that does not rely on future house price rises.

It’s not exactly rocket science to make lenders check borrowers can actually afford their mortgage before giving them one, but the system should protect consumers by banning self-certified loans and stopping them being caught out by interest rate rises. According to the FSA, it would mean 2.5 per cent of current borrowers would not get a mortgage and that 11.3 per cent of borrowers in the boom of 2005-2007 would not have got one. 

That certainly sounds powerful - though not as draconian as the earlier draft that housing organisations claimed would stop 2.2m of the 11m current mortgage holders from getting a loan at all. 

However, I can’t help but think something is missing here. Partly, that comes from a feeling that regulators tend to fight the last crisis rather than the next one.

I’m old enough to remember lenders resisting restrictions on loan to value ratios in the wake of the repossessions crisis of the early 1990s by arguing that their new, sophisticated credit scoring techniques made them unnecessary - and look where that got us.  In the same way, measures to protect consumers against what happened in the boom and bust of the noughties will not necessarily help in the one to come in the 2020s. 

Mostly, though, it comes from what’s missing from the review itself. Earlier drafts were not just about protecting consumers but about extending the reach of regulation to cover buy to let and second charge lending for the first time. Second charge lending is where borrowers take out a second loan on top of their original mortgage. 

Yesterday’s final version says that in the first draft in 2009 ‘we explained that a key risk to achieving the overall aims of the MMR is the ability of firms and consumers to “game” our changes; seeking to avoid the stricter standards applying to first-charge lending by accessing other forms of credit, such as second charge and buy-to-let’.

However, while the government has said it intends to transfer regulation of second charge lending to the FSA, the MMR goes on: ‘This transfer has been delayed until a decision is taken on the wider transfer of consumer credit. This means that any transfer will not take place until at least April 2014 or beyond.’ Translation: it may not happen. 

As for buy to let: ‘Whether we regulate buy-to-let lending remains a decision for government.’ Translation: it is not going to happen. 

If that does not exactly fill me with confidence, buried on p200 of the final version is an admission that the FSA is worried too: ‘We are currently seeing anecdotal evidence of buy-to-let mortgages being used by borrowers who would otherwise be denied an owner-occupied mortgage. We remain concerned that this problem may be exacerbated with the implementation of our responsible lending proposals.’ 

Market stalls

Tue, 13 Dec 2011

Fascinating and contrasting moves on housing this week from two of the most important politicians in London.

First, Stephen Greenhalgh announces he is standing down as the Conservative leader of Hammersmith & Fulham leader and hoping to pioneer a new neighbourhood budget for the White City Opportunity Area. 

Then Ken Livingstone reveals another two planks in his platform as Labour candidate for Mayor of London: a campaign for a London living rent; and a London-wide lettings agency. He explains more in a piece for Inside Housing here. 

Both are interesting in their own right. Greenhalgh is not just an influential council leader but one of the theorists behind much Conservative market-based housing policy thanks to his co-authorship of the Localis pamphlet Principles for Social Housing Reform in 2009. He became the pantomine villain of that year’s Labour party conference. 

And Livingstone clearly believes housing can be a powerful weapon in his campaign to regain the mayoralty from Boris Johnson and his questionable claims about affordable housing.Put them together though and you have starkly contrasting visions of the future of housing both in the capital and in the nation as a whole.

The White City Opportunity Area is a huge regeneration project that includes industrial land north of the Westfield shopping centre, the old BBC television centre and a potential new university campus as well as council estates. It’s the second most deprived neighbourhood in the borough and a far cry from the well-heeled Town ward that Greenhalgh represents.

More than half of the housing is social rented compared to just under a third in the borough as a whole.The housing strategy promises ‘no net loss of social rented housing in the area’ though the intention seems to be to break up the estates into more mixed residential areas. Hammersmith & Fulham’s statement on Greenhalgh’s departure refers to £70m - or £17,000 per household - being spent in the area per year. 

Greenhalgh says: ‘I do not think the people of White City are getting value for money out of that £70 million, nor do I think are wider taxpayers. I want to focus that money on getting much better outcomes for people living there and ensuring that the neighbourhood is fully involved in how that money is spent.’

What better testing ground could he find for the belief stated in the Localis pamphlet that ‘council estates have become the very things that they were designed to replace – social ghettos – trapping their residents in a vicious circle of dependency’?

Today’s statement by Ken Livingstone is an attempt to open up a new front in the battle with Johnson, this time focussing on the squeezed middle of hundreds of thousands of Londoners who do not qualify for social housing and cannot afford to buy. So he will establish a campaign for a London Living Rent - a benchmark that people should pay no more than a third of their income on rent.

In more than half of London boroughs Londoners are paying on average over 50 per cent of their incomes. We should be doing everything we can to get that number down. Many people in reasonably well-paid jobs are seeing their incomes absorbed into their housing costs.

Learning from the success of the London Living Wage in arguing, cajoling, intervening and collaborating, the Living Rent Campaign will be a new way of making City Hall work for ordinary Londoners.

That would be backed up with a new London-wide lettings agency that ‘will put good tenants in touch with good landlords across the spectrum of private renting so that both can benefit from security of tenure and reduce the costs of letting’.

It would work with councils, landlords and tenants to develop a strategy to tackle rogue landlords, drive up standards and cut unscrupulous letting agents out of the market.It’s good to see a major politician from any party look to tackle what’s happening in the private rented sector but it’s not at all clear how the Living Rent plan would work. Johnson’s camp told the BBC that the mayor has no powers to introduce it and that in any case it would lead to fewer homes being built and disinvestment by landlords but he’s clearly felt moved to respond with his own plan to accredit 100,000 London landlords by 2016.  

However, Livingstone is promising to ‘campaign for’ a Living Rent - not actually introduce one. Just as Greenhalgh will be putting his theory that council housing breeds deprivation to the test with market-based solutions, so Livingstone’s pledge is a first, tentative challenge to the view that the market can be left to its own devices. 

Renting rip-off

Thu, 8 Dec 2011

I see Grant Shapps is having another go at housing associations about transparency. He might be better off shining a light on the murky world of letting agents.

There’s another timely reminder of the state of a sector that risks giving estate agents a good reputation out this morning. A report from the Resolution Foundation finds that tenants are being ripped off with significant upfront costs, variable fees and a lack of transparency around charges.

In a mystery shopping exercise conducted in three cities, researchers found that all agents were charging tenants administrative fees ranging from £95 to £375. On top of that half were charging for putting an extra person on the tenancy agreement, a third were charging tenancy renewal fees, half charged a check-out fee and some charged holding fees, check-in fees and credit and reference check fees.

Total upfront costs including a deposit, fees and rent in advance for a one-bed flat ranged from £1,028 in Manchester to £2,166 in London.

Yet only two of the letting agents displayed the costs of renting on their websites and many renters only discovered charges after they had decided to rent a property.

The research covers a relatively small sample of agents but this is far from the first time that abuses have been highlighted. In 2009, Citizens Advice found that 94 per cent of agents were charging fees on top of what they already charge landlords. Some were charging a modest £25 while others were charging almost £700.

At the time, the Labour government had just published a green paper calling for statutory regulation of the industry and the reputable firms in the industry, represented by the Association of Residential Letting Agents (ARLA), had just launched their own bid to clean up the sector.

However, the regulation plans proposed as part of the Rugg review were one of the first things scrapped by Grant Shapps as ‘red tape’ when he became housing minister last year. ‘With the vast majority of England’s three million private tenants happy with the service they receive, I am satisfied that the current system strikes the right balance between the rights and responsibilities of tenants and landlords,’ he said.

The decision was criticised not just by Citizens Advice but also by ARLA. ‘A great fear is that a lot of agents who were looking at tidying up their practices will now feel they can run amok and add to the poor reputation we have at the moment,’ said its operations manager at the time. ARLA has has pressed ahead with a licensing scheme for its own members

The Resolution Federation argues that letting agents should be regulated to the same level as estate agents so that unscrupulous firms can be banned. It says all agents should be signed up to an ombudsman service to give effective redress to tenants and they should have to display all charges on their website and in adverts.

On the last official statistics the private rented sector had grown to 3.3m or 16 per cent of households in 2009/10. By now it is almost certainly bigger than the social rented sector and many people estimate it could grow to almost a quarter of households by the end of the decade.

Yet concern has continued to grow too about the way that unscrupulous letting agents are ripping off not just tenants but landlords too.

How much longer before the government shines a light where it is really needed?

Empty promises

Wed, 7 Dec 2011

So is The Great British Property Scandal a fantastic exposé or a dangerous over-simplification? Or both?

I’m talking here about the documentary at the centre of Channel 4’s season of programmes this week rather than the season itself which is doing a great job of highlighting some key housing issues. 

The season began with an excellent second instalment of John Snow’s Landlords from Hell on Monday. And it continues tonight with Phil’s Empty Homes Homes Giveaway (Mr Spencer has a piece for Inside Housing here) and on the next two Thursdays with Kevin’s Grand Design (what happened when Mr McCloud put his own project where his mouth is).

But the centrepiece of the whole thing is George Clarke’s two-part documentary on empty homes that went out on Monday night and last night.

Fantastic exposé? Clarke, the architect and presenter of Restoration Man, is passionate about the waste of leaving homes empty in the middle of a housing crisis.

The passion came out loud and clear as he filmed streets of boarded-up houses and interviewed people desperate for homes.

He’s channelling it into a campaign to do something about it: a change in the law to give communities and individuals the power to turn abandoned properties back into homes; and access to low-cost loan funds for the conversion work. It has 58,000 signatures so far.

And he’s on to something with his support for grassroots action on the housing shortage. It’s more than past time we had a new generation of housing activists and housing organisations and it’s vital that the funding that is available gets used in the most effective way.

Dangerous over-simplification? As well as praise and signatures, the programme has attracted some criticism too for arguing that empty homes will be enough on their own to solve the housing crisis.

Little wonder that George Clarke’s arguments seemed to go down so well at the Conservative conference, when empty homes (like brownfield land) can be used as convenient cover for nimbyism. Watch last night’s episode for a transparently staged meeting with David Cameron. 

As my fellow IH blogger Colin Wiles argues, the housing shortage cannot be ‘solved’ without building new homes on greenfield land.

Any argument that obscures that fundamental point risks making things worse. And my guess is that most people who watched last night’s programme will come away thinking that empty homes are the solution – rather than part of the solution.

George Clarke has been careful to make that point in print but in the broadbrush world of TV it did not come across. In the programme he attacked cuts in capital investment and right to buy in one breath and said the government did not seem to get that it was all about supply, then added: ‘But before we start building more new homes we’ve got to tackle the number of empties.’

Similarly, although he mentioned the fact that 88 per cent of empty homes are privately owned, the implications of that were not explored.

While the government is keen on anything that lets communities take over council-owned property, it’s been steadily reasserting private property rights (for example by more legislation against squatting and restricting the use of empty dwelling management orders). 

It’s hard to see how those 88 per cent of empties can be brought back into use without much greater incentives – or much greater penalties – for those private owners. The Lib Dem-inspired council tax changes that are out to consultation might be a start.

Nor did the programme look at the complex arguments about the housing market renewal areas where most of it was filmed: was it the renewal programme that caused the empties or the cancellation of the programme halfway through?

The renewal areas themselves were born out of the widespread idea when the Labour government was elected in 1997 that the key housing issue was low demand. That in turn was heavily influenced by the fact that the key ministers had constituencies in the North West, Yorkshire and North East.

In renewal areas, the theory was that you could create sustainable communities by demolishing some homes to save the rest. In social housing, the problem was seen as the condition of the existing stock, not the construction of new homes.  

‘Low demand’ helped blind Labour ministers until it was far too late to the rapid emergence of the exact opposite as the housing boom took off in the 2000s. 

It would be a tragedy if a campaign to bring empty homes back into use distracted attention from the even greater need for new homes now. Just as it would be if the overwhelming case for new homes drowned out the one for grassroots action on empties.

We desperately need both.

Asking the questions

Tue, 6 Dec 2011

Housing was under scrutiny in the House of Commons and on prime time TV yesterday and the comparison did not flatter the mother of parliaments.

In the Commons, it was CLG questions and the first chance for MPs to question housing minister Grant Shapps about the housing strategy and his handling of the fall-out from the 97% fall in the number of affordable homes.

All last week the main contenders had been talking up the fight: the Labour contender Jack Dromey with a series of barbs about the 454 homes and warming up with a Guardian Q&A ; the coalition champion Shapps releasing a robust open letter over the weekend.

Come Monday 2.30 and they were stripped for action. Parliamentary questions are actually more like tag team wrestling than boxing since MPs take it in turn to have a go at the ministers and it was Labour’s Rushanara Ali who made the first move.

The first question is always something general and Shapps flipped it back easily enough. ‘Housing starts over the six quarters since the Government were formed are up 24% when compared with the previous six quarters under the previous Government.’

Nonsense, said Ali. ‘The actual figures were a 7% decrease in housing starts, a 6% fall in net supply in the past year and a 99% fall in affordable housing in the past six months.’

Shapps replied: ‘We can all play with figures, but I would have thought that the only accurate indication -.’ At this point Hansard says [Interruption], which I imagine was rather like the bit in wrestling where the crowd boo the pantomone villain. The minister went on: ‘Well, I would have thought that the actual indication on which everyone in the House could agree would mean taking the period since we have been in power and comparing it with the same period beforehand. If we do so, we discover that housing starts are up by almost one quarter, which of course is in stark contrast with the record under the previous administration, when the number of affordable homes reduced by 200,000.’

The intensity rose when the former Labour champion Nick Raynsford stepped into the ring. ‘The minister says that he wants to compare the period in which the current government have been in power with an equivalent period under the previous government, but he seems to be under an illusion that the current government came to power on 1 April 2010. They did not. Will he now stop trying to take credit for housing that was built during the period of the previous, Labour government and show respect for statistical honesty and truth, which we in this House regard as important? ‘

That was more like it. But Shapps flipped himself off the ropes with: ‘If the right hon. Gentleman, as a distinguished former housing minister, is asking me to stop including four weeks, he has his wish.’ [Hmmm. The coalition actually started on 12 May and he was not appointed until the next day].

And then it was the Labour champion’s turn. The government’s own figures showed new homes down 6%, homelessness up 10% and a catastrophic 99% fall in affordable house building, said Dromey. ‘So few new homes have been built that the Housing Minister could visit them all in the next six weeks. Does he accept that this is a direct consequence of the Chancellor of the Exchequer’s £4 billion cut in housing investment, and that this sorry record of failure demonstrates that the Government’s housing policy, like their economic policies, are hurting, not working?’

It will not surprise you to learn that Shapps did not accept that - or that he used his tried and tested put-down that Dromey is the sixth Labour housing minister or shadow he has faced across the despatch box. He replied that: ‘Actually the figures for those in temporary accommodation are down by 4%, and that homelessness is at its lowest level for 28 of the past 30 years.’

Even in a stats fest, that last one sounded a bit weak, but Shapps had more: ‘On the specifics of the numbers, I know that he is keen to twist official statistics to try to represent whatever he wants to show, but the truth is that I could not possibly visit 92 different providers, which I can now reveal to the House have agreed to build 70,000 units at a cost of £1.4 billion. That is far in excess of anything delivered by the previous administration. I know that he has not been in the job for long, but many of his predecessors are on the opposition back benches, so he could consult them and ask how we ended up with 200,000 fewer homes.’

That was better - especially the patronising put-down. There was still time for a quick replay of that ‘28 out of the past 30 years’ stat in a question on homelessness (I imagine it will get another airing when the latest homelessness stats are published on Thursday) and a rematch between Shapps and Dromey’s predecessor Alison Seabeck about like-for-like replacements under the right to buy.

And there was also a chance for Eric Pickles (who would willingly wrestle him?) to praise a recent book by Labour’s David Lammy.

‘In recommending the book, I would draw members’ attentions to the insightful point that “Labour’s greatest dereliction of duty in government was social housing.” I am sure we can all agree on that.’

But if this is really the best that parliament can offer thank goodness for Channel 4. If you missed them last night, the second part of Jon Snow’s Landlords from Hell and the first part of George Clarke’s Great British Property Scandal are well worth making the time to watch.

I imagine some local authorities and housing associations will be crying foul this morning about some TV over-simplification and there was some interesting division of opinion on twitter.

However, both programmes shone a light on issues that would otherwise go largely unnoticed outside the housing world. And there is more to come from the Property Scandal season tonight, tomorrow and Thursday - and National Empty Homes Week continues too.

Writing on the wall

Wed, 30 Nov 2011

Put the Autumn Statement and the housing strategy together and we’re left with a mystery.

Put simply it’s this, if housing is so important that it merits a strategy of its own, why was there nothing more in George Osborne’s statement a week later than the end of the stamp duty holiday for first-time buyers?

Because, as the National Housing Federation points out, investment in housing is easily the best way to deliver the ‘biggest bang for the taxpayers’ buck’.

The NHF argues that a public investment of £1bn could be matched by £8bn from housing associations to build 66,000 shared ownership homes, create 400,000 jobs and save the taxpayer £700m in job seeker’s allowance into the bargain.

It might have added that housing schemes could be ‘shovel ready’ far quicker than the other infrastructure projects that the government wants pension funds to finance (they won’t be ready to start until 2013/14).

So you have something that’s ready to go quicker, is more labour-intensive (though a good case can be made that housing repair and maintenance or energy efficiency or empty homes work would create even more jobs) and yet does not merit anything beyond what was in the strategy last week. 

As I blogged earlier this month, the government could have been even more radical with a quantitative housing scheme funded by buying bonds in a public interest company that could fund construction of new homes for future sale to the social and private sectors.  Even a modest programme would deliver jobs and growth. 

But the government does not appear to see housing as ‘infrastructure’ and appears to be leaving growth to an untried arrangement with pension funds to deliver a list of big road and rail schemes that make handy soundbites.

Instead you can already see the writing on the wall for the next spending review. The detail of the Autumn Statement reveals that the squeeze on public sector gross investment will continue to fall into the next spending review period. Brian Green has more on the construction funding gap on his Brickonomics blog. 

Perhaps the solution to the mystery is that unspecified further spending cuts are looming to go with the two extra years or public sector real terms pay cuts because the recession is costing more than the Chancellor thought? 

To give just one example, the independent Office for Budget Responsibility says that a higher claimant count means that housing benefit will cost £1.9bn more over the next five years than it was forecasting in March this year (£200m this year rising to £600m by 2015/16).

What price more housing benefit cuts to come? And what price the next affordable homes programme - if there is one? 

Perhaps it’s not such a mystery after all. 

Stamping out abuse

Tue, 29 Nov 2011

As he gears up for the Autumn Statement, George Osborne is facing the usual pleas for more stamp duty concessions at the bottom end of the market. He’d be better off concentrating on evasion at the top end.

Reports over the weekend estimated that one in three buyers of homes worth more than £1m are evading the 5 per cent rate of stamp duty and that the avoidance could be costing the taxpayer up to £1bn a year. 

According to the Mail, most of the transactions involve Central London properties that are seen by the super-rich as a safe haven for investment - and now, it seems, as a tax haven too. 

And it’s not just stamp duty. The Observer reported that only nine of the 60 apartments in the exclusive One Hyde Park development are registered for the council tax.

Both scams appear to involve buying the property through offshore companies that are out of reach of the UK taxman and the hapless local authority. According to the Mail, ownership of all of the homes in up-market Cornwall Terrace in North London has been transferred to a company registered in the Isle of Man. 

What Rinat Akhmetov and Tamara Ecclestone get up to may seem to belong to a different planet but the flood of investment into London property is a major reason why house prices and rents in the capital remain so high and unaffordable for the rest of the capital’s inhabitants - and by extension why the housing benefit bill is so high for the taxpayer. 

The evasion is said to have got worst since the introduction of the 5 per cent rate on £1m homes in April. However, there is also believed to be widespread evasion further down the scale. 

Could the government be doing more to stop it? Osborne signalled a clampdown in the Budget in March and may try and do more today but the super-rich and their accountants have been lighter on their feet than HM Revenue and Customs so far. 

The new 5 per cent rate was meant to pay for the the stamp duty holiday for first-time buyers on homes worth between £125,000 and £250,000 and the usual suspects are calling for this to be extended beyond March 2012. 

The CML points out that only 13 per cent of the £4bn raised from stamp duty in 2010/11 came from properties worth £250,000 so a longer holiday would not make much difference. The fall in the yield from £6.7bn in 2007/08 is mainly down to a slump in transactions.

However, that £4bn yield last year reveals the true impact of the evasion - if that estimate of £1bn on homes worth over £1m is anywhere near accurate. So perhaps Osborne could look at two more radical reforms. 

First, he could look at the ‘slab’ structure of stamp duty which means that a huge increase in tax is triggered once the price of the house reaches the £250,000, £500,000 and £1m thresholds. The duty on a home worth £249,999 is £2,499 but on £250,000 it is £7,500. On £999,999 it is £40,000 but on £1m it is £50,000. Threshholds like that create a huge incentive for evasion.

Second, he could order a much more serious crackdown on evasion through offshore companies - and a complete review of the taxation of UK property owned by foreign nationals and non-doms. For starters, any property owned by an offshore company is not a home but an investment and it should be taxed like one. 

EDIT 17:25: Today’s Autumn Statement confirms that the stamp duty holiday for first-time buyers will end as planned in March. Research to be published soon will apparently show that ‘the stamp duty land tax relief for first time buyers has been ineffective in increasing the number of first time buyers entering the market’. And the housing strategy provides ‘more effective measures which provide better value for money”

That rather begs the question of why the government went ahead in the first place with something that has turned out to be a waste of money.

Meanwhile the mortgage indemnity fund which was the main feature of the strategy has been attacked by the free market think-tank the Adam Smith Institute as ‘immoral’.

‘Using taxpayers’ money to underwrite 95% mortgages is immoral – it will draw people into home ownership who will be unable to afford their loans when interest rates eventually rise again,’ it says. ‘And it risks setting off the same sub-prime events that got us into this pickle in the first place.’

As for the massive tax evasion at the other end of the stamp duty scale, the Autumn Statement had nothing to add. 

The difference a day makes

Wed, 23 Nov 2011

When Grant Shapps and David Cameron told us on Monday that ‘builders aren’t building’ I hadn’t realised that they meant it quite so literally.

I thought I’d said my piece about the housing strategy but I just can’t resist the latest development (or lack of it).

Everyone was expecting a fall in affordable housing starts as Labour’s programme ran down and affordable rent got going but hands up who expected a fall of 97 per cent?

Yet that’s exactly what happened according to Homes and Communities Agency (HCA) statistics released yesterday with so little fanfare that nobody noticed until Éoin Clarke posted this blog.

The figures are so extraordinary that they made me wonder more than once if they were a hoax. Between April and September 2010 there were 13,626 affordable home starts. Between April and September 2011 there were just 454. That’s not a misprint: 454 (259 for social rent and 195 for low-cost home ownership).

The HCA explains that the figures were impacted by the closure of three Labour programmes (the NAHP, Local Authority New Build and Kickstart) and that the new Affordable Homes Programme will deliver starts on site in the second half of 2011/12. In other words, I’m guessing part of what we’re seeing is the effect of delays in signing Affordable Rent contracts. 

Yes, there are all the usual caveats about the stats on starts and completions - exactly the sort that have led to claim and counter-claim from Jack Dromey and Grant Shapps over the last few days. Yes, starts will pick up in the second half of the year (even though they will not really deserve the tag “affordable”).

But a fall of 97 per cent?

Is it just coincidence that these figures were released the day after that ‘radical and ambitious’ housing strategy? That the pre-release access list for the HCA statistics includes several people at the DCLG including the special adviser to Eric Pickles (under Cabinet Office rules pre-release means a maximum of 24 hours before)? That a figure that would have been quoted again and again in Monday’s news coverage only emerged 24 hours later? 

I frankly don’t know. But I do note that all of this came a day after Grant Shapps found himself on the House of Commons naughty step over the way that details of the strategy were revealed in the media before parliament was informed. The issue was raised not just by Labour’s Hilary Benn but by Tory MP Peter Bone as well. 

Shapps blamed the leaks on ‘third parties’ who had been given advance copies. ‘We always encourage them not to send out details of what is inside the documents, but unfortunately we are not always successful,’ he said.

But the speaker John Bercow told him that despite the tendency in cases like this for there to be ‘smirking on the Front Bench’ this was ‘not a satisfactory excuse’ for a minister. ‘It is not good enough - it is a rank discourtesy to the House of Commons and an abuse of parliament. That is the reality.’

The question that now arises is this: if some information was leaked before the launch of the strategy, was other information delayed until after it?