17:00 The independent Office for Budget Responsibility has issued yet another update to its estimate of the size of the housing benefit bill. It says housing benefit will cost £6 billion more over the next five years than it estimated at the time of the Budget in March. It puts the cost at £600 million more in 2013/14, rising to £1.8 billion more by 2017/18. According to the OBR’s Economic and Fiscal Outlook:
‘About half of this is explained by an increase in the proportion of employed people who receive housing benefit, based on recent data and detailed modelling, which suggests that growth in renting for this part of the working age population is likely to continue to increase further over the forecast period. Changes in the caseloads for other benefits, particularly ESA, explain the majority of the remaining increase.’
This is the third time in a year that the OBR has increased its estimate of the cost of housing benefit. The March estimate was itself £3.7 billion higher over five years than the one it gave in last year’s Autumn Statement, and that one was £2.8 billion higher than the one at the March 2012 Budget.
What happens next? Though the OBR’s updated cost estimates seem to grow bigger every six months, the Treasury is determined to cap ‘the vast majority’ of housing benefit spending as part of its overall welfare cap. Those rising in-work claims are the result of low wages and high rents, yet only ‘cyclical’ spending like JSA-related housing benefit will be exempted from the cap. Yet more housing benefit cuts to come?
It estimated that 818,600 social tenancies worth £159 billion are ‘expensive’ when judged on this basis: 21.8 per cent of England’s council and housing association stock. Of those 339,000 are council (18.7 per cent) and 479,000 housing association (24.3 per cent).
If you’re assuming this is mainly to do with London, you’re wrong: almost one in three social homes in London are ‘expensive’ but so too are 26 per cent in the East of England, 22 per cent in the South East and 20 per cent in the South West. The least affected region, the North East, still had 15 per cent of properties classed as ‘expensive’.
14:01: Reactions to AS2014 are starting to come in – though not all with weblinks available.
Grainia Long from the CIH welcomed Osborne’s acknowledgment of the principle that councils should be able to borrow more to build homes:
‘But the steps announced today are far too modest and there is a risk that any gains could be offset by the requirement to sell high-value social housing and the expansion of Right to Buy. The finer details will be crucial – it is critical that the overall package results in a net increase in housing investment and new homes. As George Osborne acknowledged, we need to build more homes – we are in the grip of a housing crisis, with millions of people being denied access to a decent home at a price they can afford. Increasing local authority borrowing caps by £7 billion, rather than £300 million, would allow councils to build 75,000 new homes over five years, creating 23,500 jobs and creating £5.6 billion of economic activity.
‘Local authorities already have powers to sell off council housing and it is unclear whether selling off valuable homes is always the best way of doing business – councils may also want to borrow against the value of these properties so they can fund more homes.’
Simon Rubinsohn from the RICS said:
‘If Help to Buy is to remain, Right to Buy extended, and expensive social housing sold off then the Government’s commitment to building houses simply must be extended. The £1bn of loans to unblock housing development across the country will contribute towards housing need and will drive construction jobs. However, we still believe housing is not at the centre of a coordinated property-led growth that supports a balanced regional recovery where all can access the market. The increase in the HRA borrowing cap will only make a very minor dent in the housing deficit.’
He added that it was disappointing that Osborne had ignored calls for reform of stamp duty.
Good point from Rob Beiley of Trowers & Hamlins that I missed. He says that ‘the prospect of tax relief on investment in social enterprises and charities could unlock a significant source of new funding for housing associations’. (Not to mention social enterprises and charities of course).
Liam Bailey of Knight Frank reckons that the move to levy CGT on overseas buyers ‘will have only a marginal impact on demand and pricing’.
Sir Merrick Cockell of the Local Government Association welcomed the move on the borrowing cap. ‘The easing of restrictions on housing investment announced today does not go as far as we would like, but it does show that our call for more local flexibility to drive economic growth has been recognised.’
He also welcomed the change of heart on New Homes Bonus funding. ‘Our concerns about potentially costly changes to the New Homes Bonus have been taken on board in the revised proposals announced today. This is good news for local services which otherwise would have taken an additional £400 million cut.’
In other news, he warned of ‘an upturn in the economy coinciding with a collapse in public services’.
That’s it from me for now. Time for some lunch.
13:44: More detail from those AS2013 background documents:
Housing and planning: This is framed very much in terms of removing barriers to supply. Action includes:
• consulting on measures to improve plan making, including introducing a statutory requirement to put a Local Plan in place
• legislating to treat planning conditions as approved where a planning authority has failed to discharge a condition on time, and using legislative measures to strengthen the requirement for planning authorities to justify conditions that must be discharged before building can start
• consulting on proposals to reduce the number of applications where unnecessary statutory consultations occur and piloting a single point of contact for cases where conflicting advice is provided
• allowing developers to apply directly to the Department for Communities and Local Government (DCLG) where a planning authority makes fewer than 40 per cent of its decisions on time
• carrying out an evaluation of the New Homes Bonus, which will complete at Easter 2014. The government will consult on measures to further improve the incentive provided by the New Homes Bonus, in particular through mechanisms to withhold payments where planning approvals are made on appeal
• consulting on a new 10-unit threshold for section 106 affordable housing contributions.(This is seen as a way to reduce costs for smaller builders).
Unblocking stalled sites: A £1 billion, six-year programme will fund infrastructure ‘to support the delivery of 250,000 homes’. It will begin in 2014/15 with ‘investment decisions on nine specific sites, capable of unlocking 27,000 houses’. (Osborne mentioned Manchester and Leeds in his statement).
Land auctions: Remember them? The government will report on the findings of a feasibility study by Budget 2014.
Right to buy: ‘The government will further support Right to Buy by introducing Right to Buy Agents to help buyers complete their home purchase, and provide £100 million to establish a fund to increase Right to Buy sales, by improving applicants’ access to mortgage finance.’ So that’s £100 million to sell off public assets at a discounted price. Who will the right to buy agents be?
Estate regeneration: The government will explore options for repayable loans to kickstart ‘the regeneration of some of the worst housing estates’.
Right to move: This idea was in the Conservative manifesto and has now emerged as a consultation on ‘options for a right to move for local authority tenants who want to move home for reasons related to employment’. How will it work in practice and will it ever get beyond consultation?
New Homes Bonus: £70 million of it will be pooled within the London Local Enterprise Partnership chaired by the mayor. It won’t be pooled outside London.
Private rented sector guarantee: Extended until December 2016.
Local authority housing: In addition to the moves on borrowing caps and high-value homes, ‘the government will launch a review into the role local authorities play in supporting overall housing supply’.
Discretionary housing payments: The budget has been boosted by £40 million in both 2014/15 and 2015/16. The statement says: ‘This will ensure the pot of DHPs available to support those affected by under-occupancy deductions will not be reduced for the next 2 years, giving councils discretion to make longer term awards.’
Boles Bungs: ‘The government will work with industry, local authorities and other interested parties to develop a pilot for passing a share of the benefits of development directly to individual households.’
Tax: Capital gains tax on future gains made by non-residents disposing of UK residential property will apply from April 2015 with a consultation on how best to implement it published early next year.Problems with implementation are presumably the reason this has not been done before but note that it is only ‘future gains’.
The government will also from April 2014 ‘reduce the capital gains tax private residence relief final period exemption from 36 months to 18 months to reduce the incentive for those with multiple homes to exploit the rules’. Presumably that is to stop people flipping their relief from one home to another.
The definition of ‘high-value social housing’ is not explained anywhere in the documents that I can find. I also cannot find any reference to increased right to buy discounts.
13:16: Here are details that I’ve gleaned so far from the AS2013 background documents:
Welfare cap: We heard earlier that cyclical benefits will not be included but the vast majority of housing benefit will. That seems to mean JSA-passported housing benefit (ie the bit attributable to rising unemployment?) will not be capped but the rest (attributable to rising rents?) will? Still not sure how that fits with the English social rent formula of CPI plus 1%
HRA borrowing limit increase: This will not be until 2015/16 (£150 million) and 2016/17 (£150 million). The extra borrowing will be allocated on a competitive basis and be part of the Local Growth Fund run by Local Enterprise Partnerships. Bids will be prioritised based on value for money and the government will expect partnership working with housing associations or through joint ventures. There also seems a clear expectation they will be backed by asset sales and public land. The AS2013 says the borrowing cap increase plus sales of vacant high-value social housing will support 10,000 additional new homes. However, ‘this additional investment will maintain the Local Growth Fund at £2 billion in 2015-16’ so is something else being cut?
A separate policy costings document includes these assumptions:
• ‘the full additional headroom of £150 million in 2015-16 and £150 million in 2016-17 is taken up and is spent on new affordable housing in these years
• due to a lag between asset sales and new affordable house-building, there is a loss of rental income from the sale of high value vacant stock in early years, but that there is additional rental income, as a result of a net increase in affordable housing in the later years
• new affordable housing is let at affordable rent levels.’
Note there that the sale of vacant high-value housing is part and parcel of the borrowing limit deal and also the expectation of affordable rent. In answer to my own question earlier then, what seems like a major concession to council housing is actually an acceleration of the conversion of social housing to affordable rent.
More to follow shortly
11.56: A few housing highlights so far from George Osborne’s speech:
- Cap on overall welfare spending will include ‘vast majority’ of housing benefit. How does that fit with social rents rising by CPI plus 1 per cent?
- Tax avoidance clampdown targets include capital gains tax on primary residence relief
- CGT on non-UK residents who sell UK property from 2015
- HRA borrowing limit raised by £300 million
- Sell-off of expensive social housing
- ‘Priority right to move’ for social tenants
- £1 billion guarantees for stalled housing developments in Manchester and Leeds
- Unemployed under-21s who refuse training or don’t turn up will lose benefits
- More to expand right to buy
- Big emphasis on supply
- Importance of ‘stable housing market’
More detail to come.
10:40 So what else should we be looking out for? Here are a few more things receiving some advance attention:
Cuts: We already know that Osborne will announce reductions in departmental budgets of £1 billion a year for the next three years. With health, schools, foreign aid, local government, revenue and customs and the security services all protected, the Department for Work and Pensions is said to be one of the departments in the firing line (and perhaps the C bit of the DCLG too?).
Property taxes: We know that Osborne has been considering imposing capital gains tax on overseas property investors, something that would bring the UK into line with the tax regime in many of their home countries. Will he also look at tax on buy to let landlords, who the Intergenerational Foundation estimates are benefitting from tax write-offs worth £5 billion a year? Depending on the detail, there could be a big impact of new private housing development. Might that put Osborne off the idea?
Benefits: We are expecting more detail on Osborne’s cap on welfare spending that will apply after the next election. The Telegraph reported earlier in the week that he will say we can no longer afford a ‘welfare state’ and will have to make do with an ‘affordable state’ instead. The DWP announced details of the housing benefit cut before this one (the 1 per cent cap on LHA except in high rent areas) so will we learn more about the next later?
Stamp duty: A hardy perennial this one but the usual suspects are pressing for cuts to and reform of stamp duty, with most of the lobbying concerning first-time buyers and homes priced between £250,000 and £300,000.
Infrastructure and planning: Inside Housing reports that details are expected to be revealed of those ‘Boles Bungs’ to buy off opponents of new development. Will there be more besides and will Osborne agree with Boris Johnson that housing should count as ‘essential infrastructure’.
Meanwhile – while everyone is paying attention to the Autumn Statement – Iain Duncan Smith has announced ‘the continued safe and secure roll out’ of the universal credit. Translation: the crawl-out’s been delayed again.
09.47: The initial answer to my initial question - will housing be a winner or loser? - seems to be a bit of both.
Pete Apps reported for Inside Housing last night on a deal being negotiated within the coalition that would see the chancellor increase English council housing borrowing limits (the Lib Dem bit) in return for another increase in right to buy discounts (surprisingly enough, the Conservative bit).
An increase in the borrowing caps has backing not just from Labour and the Lib Dems and the Local Government Association but also from London mayor Boris Johnson and Tory authorities like Westminster. So far the Treasury has firmly resisted any such thing so if it happens (and that was still an if last night) it would be a major change of policy and would look like a big win for council housing. However, as Pete reports, any deal would come with strings attached: councils would have to commit to build new homes or improve estates (presumably to stop the money leaking out of housing) and the additional debt capacity would be administered by local enterprise partnerships or the Greater London Authority (how will individual authorities react to having to share their capacity?). Could there be other, more unpalatable strings too: perhaps a requirement to build at and convert relets to affordable rent?
Any increase in the right to buy discount would be the third in 18 months. It was raised to £75,000 in 2012 and to £100,000 in London this year, when the qualifying period was also reduced from five years to three. Any further increase will have serious implications for the business plans of local authorities and housing associations – potentially reducing the capacity that the other part of the deal is meant to increase. It would also make the government’s ‘one for one replacement’ promise look even emptier than it already does.
Would the overall effect of any deal be a rebirth of council housing or an acceleration of the slow death of social housing? Or perhaps both?
Is it too much to imagine David Cameron telling his aides in Downing Street to ‘get rid of all this facts crap’?
The question is prompted by an answer he gave earlier at Prime Minister’s Questions. This was the question from Labour MP Andy McDonald:
‘The Disability Benefits Consortium of over 50 charities has signed a letter to the Secretary of State for Work and Pensions calling for immediate action to exempt disabled people from the bedroom tax. Why on earth do the Prime Minister and his Government refuse to listen?’
‘Obviously, what we have done is to exempt disabled people who need an extra room. This does, I think, come back to a basic issue of fairness, which is this: people in private sector rented accommodation who get housing benefit do not get a subsidy for spare rooms, whereas people in council houses do get a subsidy for spare rooms. That is why it was right to end it, and it is right to end it thinking of the 1.8 million people in our country on housing waiting lists.’
I highlight this not because I am naïve enough to expect ministers in general or the prime minister in particular to answer the questions they are asked (that would clearly be too much). Nor do I necessarily expect the answers to be the whole truth. But is it too much to expect a passing resemblance to the truth? Cameron’s answer in this instance offered two examples of misleading the House of Commons for the price of one.
The question was prompted by a letter to Iain Duncan Smith from the Disability Benefits Consortium (DBC), a coalition of over 50 different charities and other organisations that describes itself as ‘working towards a fair benefits system’.
The letter pointed out that two thirds of households affected by the under-occupation penalty include someone with a disability, 230,000 claim Disability Living Allowance and 100,000 live in specially adapted properties. It went on:
‘We have been deeply frustrated at reports that disabled people and their families are protected from this policy. The stark evidence since the policy was implemented in April clearly shows they are not. It is hitting disabled people who need an extra room for essential home adaptations or equipment which enable them to live independently; seriously or terminally ill people who sleep on hospital beds and cannot share a room with a partner who cares for them and parents caring 24/7 for disabled children who need a room for a care worker to stay in to give them a night off from caring.
‘None of these groups are exempt and our organisations are seeing the devastating impact it is having on those who now face a shortfall in their rent as a result of the changes.’
The DBC argues that discretionary payments are not working, with only a minority of disabled people and carers receiving support, and concluded ‘the government must act now to exempt disabled people and carers from this policy’.
This will not come as news to most people reading this. The impact on disabled people has been a central part of the campaign against the bedroom tax from the beginning and was extensively illustrated in the opposition day debate earlier this month.
But my point is that it should not be news to Cameron and his private office either. This is not just because extensive earlier coverage of the DBC letter on broadcast media will have given them ample time to prepare.
It’s also because Team Cameron has previous form for (in parliamentary parlance) misleading the House over the bedroom tax and disability.
For example one, look to the PMQs of 6 March, 2013. In his first answer, he told Labour’s Derek Twigg that ‘people with severely disabled children are exempt and people who need round-the-clock care are exempt’. Both of those statements were untrue, as this Channel 4 News Factcheck revealed at the time.
Cameron was at it again on 10 July, 2013, when he told Labour’s Alison Seabeck that ‘when it comes to the spare room subsidy, anyone who needs to have a carer sleeping in another bedroom is exempt from it’. As Factcheck again pointed out, there is an exemption for people who need round-the-clock care whose ‘spare’ bedroom is used by carer who lives in or stays overnight. However, it does not apply to people who care for their own partner or spouse who find it impossible to share a room.
Disabled children who are unable to share a room because of their disabilities are now exempt, but that has only just been grudgingly conceded by the DWP after defeat in the courts.
It is very hard to believe that Team Cameron is unaware of these previous examples of miseleading statements from the prime minister about exempting disabled people. It’s almost as though something does not compute, the policy is fair and so they have to be exempt even if they are not.
However, the misleadng answer does not end there. Cameron also stated that ‘people in private sector rented accommodation who get housing benefit do not get a subsidy for spare rooms, whereas people in council houses do get a subsidy for spare rooms’.
As I have blogged before, this comparison with the private rented sector is one of the ‘fairness’ arguments that ministers use most often but it is also wrong. The size criteria work differently under the local housing allowance because of the nature of the stock and the way rents are charged. And, crucially, it did not apply to existing tenants: the exemption question would not have arisen for any of the 420,000 disabled people affected by the bedroom tax because they would not have been penalised in the first place.
Downing Street does say of course that it ‘does not recognise’ the ‘get rid of all the green crap’ quote from earlier in the month. As others have noted, we live in an era of ‘post-truth politics’ so perhaps this is only to be expected. After one of the most brazen examples yet from a serial offender, that really is quite enough of all this ‘facts crap’.
Today’s Draft London Housing Strategy is the boldest attempt yet seen from a Conservative administration to get to grips with the housing crisis. It still does not go remotely far enough.
In his foreword, mayor Boris Johnson says London is facing an ‘epic challenge’ of building more than 42,000 new homes a year, every year, for 25 years. Of these, 15,000 would be affordable and 5,000 for market rent.
That is no exaggeration. As he goes on to say, that is ‘a level of housebuilding unseen in our great city since the 1930s’. To put it in perspective, the average over the last 20 years, at a time when the population was growing rapidly, was 18,000 per year. London has not come close to 42,000 completions a year since the war, even at the peak of the council housing boom in the late 1960s.
In any case, says the strategy:
‘The government has not proposed to reverse greenbelt policy and it seems unlikely that earlier levels of public investment can return any time soon. A new approach to harnessing the investment and effort necessary to increase house building is therefore required.’
Confronting a problem on this scale means the strategy includes some radical and sometimes (for a Conservative administration) surprising solutions. To give three examples, it calls for:
- Reform of the public borrowing rules for council housing – preferably as a separate capital investment activity as applies in the rest of Europe and for housing associations; at a minimum to give English local authorities the same freedom as Scottish ones.
- A London Housing Bank – a discussion paper is due on this next year but funding could come from the public sector and institutional investors for measures such as purchasing market homes off-plan and underwriting Build for Rent activities.
- Shifting from personal to bricks and mortar subsidies – ‘investment in new homes with low rents for those who need them represents better long-term value for tax payers than meeting the high costs of market housing through housing benefit’. The strategy discusses the challenge of coping with the transitional consequences for tenants on benefit with high rents and says this will require ‘an appropriate future capital settlement from central government, alongside appropriate revenue funding to mitigate these transitional costs’.
That is on top of Johnson’s longstanding call for more financial autonomy for London, with the devolution of all property tax including stamp duty. The Treasury has recently agreed this for Wales – so why not London? Part of the argument is that the capital has raised more in stamp duty than the Treasury has put back in affordable housing investment (£17 billion over the last 10 years) but that rather ignores the £50 billion spent on housing benefit in the capital over the same period.
There are some radical ideas on land too, with proposals for new garden suburbs and, within 33 Opportunity Areas, new Housing Zones offering targeted tax incentives, lighter-touch planning and help with land assembly.
Most, if not all, of these ideas would draw support from across the political spectrum, as will the draft strategy’s conception of ‘housing as essential infrastructure’ and the argument that building too few homes is as much of a barrier to growth as inadequate public transport, roads and utilities.
An idea of the scale of the current problem is given by two more stats: the average first-time buyer is now in the top 20 per cent of London’s household income distribution; and there could be a shortfall of 50,000 to 90,000 homes for professionals over the next ten years, which could result in a potential loss of economic output of £15 billion to £35 billion.
However, the draft strategy also has some more contentious proposals when it comes to affordable housing. The net effect – despite an apparent ‘initial new funding of £1 billion’ - seems to be to increase the size of the inverted commas around that word affordable:
- While 60 per cent of the next Affordable Housing Programme will be reserved for Affordable Rent, half of this will be ‘capped at low affordable rents’ prioritised for those in greatest need and low income employment and half will be at ‘discounted rents, set at the lower of up to 80 per cent of market rent or the local housing allowance’. That might seem at first glance like a hint of a return to social rent. In fact, few current Affordable Rent homes come in at 80 per cent of market rent in London (the median for London in the last round was 59 per cent, according to one report) so will this mean higher rents and fewer homes for those in the greatest need? The strategy also says that ‘investment partners should use fixed-term renewable tenancies’ for the capped rents and does not specify their level.
- The Mayor will encourage boroughs to give greater priority to working households in allocations. That is qualified by stressing this ‘should also be balanced with the need to ensure the most vulnerable are looked after’ but that does not sound like a watertight assurance.
- The strategy argues that there are 115,000 of the 786,000 London households who live in affordable housing ‘who could afford to pay more towards their rent’. While it says the Pay to Stay threshold should be increased to the First Steps income limits of £66,000 for smaller and £80,000 for larger households, the DCLG estimates that there are only 34,000 households in social housing in the whole country earning more than £60,000. Does this herald a wider ambition for higher rents lower down the income scale, perhaps through conversion to Affordable Rent?
- Prepare for your assets to be sweated to the max if you are a housing association. Smaller, non-developing associations ‘will be expected to utilise their borrowing capacity’ and the GLA will explore with the social housing regulator how associations in general ‘can be incentivised to fully utilise’ their surpluses. That much is perhaps inevitable but, in addition, ‘all providers will be expected to provide market housing for rent and/or sale alongside their affordable housing offer’ and they will also be ‘strongly encouraged’ to consider targeted disposals or lettings at market rent of ‘selective high-value stock’. Conversions to Affordable Rent will be ‘recalibrated’ to increase the income range on ‘mono-tenure estates’.
- The strategy also talks of the ‘vast development potential of London’s existing affordable housing estates’. There’s nothing wrong with that in theory but is that a signal to prepare for yet more Earl’s Court and Heygate style regeneration rows about gentrification and the displacement of existing residents?
Overall then, the strategy seems to combine some of the best thinking on the role of government in promoting new homes with a continued faith in the marketisation of ‘affordable’ housing.
However, critics argue that even 42,000 homes a year is not enough. Labour’s Tom Copley says independent experts say London needs 60,000 a year and that the strategy’s ‘lack of ambition commits us to a future of unaffordable housing’. London Councils says we need 800,000 homes to be built by 2021. The Green Party’s Darren Johnson says that his namesake ‘boasts about his track record on affordable housing, but he will leave office 50,000 homes short of the number he needed to build’. The Mayor’s strategy will deliver homes for property investors, not Londoners, he says.
For me, all this begs the question of what happens if the Mayor fails to deliver 42,000 homes a year for 25 years and, even if he does, what happens until the new supply comes on stream. Given the history of the last century, and the fact that he is prevented from looking outside London for solutions to the capital’s housing shortage (as happened in the 30s and after the war), that is much more likely to mean when he fails to deliver.
On the demand side of the equation, the strategy denies that overseas and buy-to-let investors are crowding out Londoners from ownership. Failure on supply will merely price even more people out of either owning or renting in the capital and a continued housing shortage will put even more pressure on housing system in general and the private rented sector in particular. The strategy says that the mayor is ‘keen’ to see landlords testing longer tenancies in the private rented sector and that it’s ‘important that there is greater transparency about letting agent fees’. But is the self-regulation of Johnson’s Housing Covenant remotely up to the job?
Legislation published today marks a historic moment for housing in Wales but it has wider significance for the rest of the UK too.
It makes history by becoming Wales’s first Housing Bill since it acquired greater devolved powers. The Housing (Wales) Bill aims to ‘ensure that everyone in Wales is able to access a decent home’ (though ministers behind all Housing Bills everywhere say that). The details are what count and the timing and the context are what create the wider significance. As Carl Sargeant, the Welsh minister for housing and regeneration, puts it: ‘Despite the impact of austerity measures and budget decisions taken by the UK Government, the Welsh Government is determined to improve the supply, quality and standards of housing and the proposals in this Housing Bill are crucial in achieving this.’
Decisions in Westminster on austerity and welfare reform apply to Wales, Scotland and (with some differences) to Northern Ireland as well as England. As the SNP government in Edinburgh prepares to set out its plans for independence next week and the coalition in Belfast considers how to implement welfare reform, here the Labour administration in Cardiff is saying that it can do things differently under devolution. And many of its proposals could well find their way into the housing legislation of a future Labour government in England.
Back with the detail of the Bill, it comes in seven different parts and the first two are probably the ones that will received the most scrutiny: Part 1 sets out requirements for the registration and licensing of landlords and agents operating in the private rented sector; while Part 2 sets out a new approach to homelessness, with a greater emphasis on prevention and a more inclusive approach including greater protection for households with children who are homeless or threatened with homelessness.
The next five parts cover:
- a new statutory duty on local authorities to provide gypsy and traveller sites where need has been identified
- standards for local authority rents, service charges and quality of accommodation. This puts achievement of the Welsh Housing Quality Standard by 2020 by the 11 Welsh councils that retain their housing on a statutory footing
- implementation of self-financing for council housing (already implemented in England but now agreed with the Treasury for Wales)
- measures to boost co-operative housing by allowing fully mutual housing co-operatives to grant assured and assured shorthold tenancies, creating more security for tenants and helping co-operatives obtain finance from lenders.
- allowing local authorities to charge a flat 150 per cent of the standard council tax charge on properties that have been empty for more than 12 months.
All of these measures are designed to contribute to the two main aims of the Bill, ensuring that: people have access to a decent home; and that people at risk of becoming homeless receive the help they need.
Most of the proposals are based on a white paper published in 2012 but there have been some changes following consultation on the detail.
On the private rented sector, the Welsh Government is pressing ahead with plans for mandatory registration and accreditation of both landlords and agents. This will be based on the current voluntary scheme, Landlord Accreditation Wales. However, the license will be valid for five years rather than the three proposed in the white paper (and as applies in Scotland).
This section of the Bill could be a major focus of attention as it makes its way through the Welsh Assembly. Private landlord organisations argue that agents should be licensed first and the spokespeople for all three major opposition parties (Plaid Cymru, Conservatives and Liberal Democrats) have signalled that they are considering their position on the licensing of landlords. As Inside Housing is reporting, with the Assembly split 30-30 between Labour and the other parties, so if all opposition AMs vote against the casting vote will go to the speaker, who has a duty to preserve the status quo.
What happens here could have a bearing on the rest of the Bill, since the homelessness proposals in particular are based on an assumption that the private rented sector will be properly regulated.
On homelessness, the Bill includes a new strengthened duty on local authorities to take reasonable steps to prevent and relieve homelessness. They will also be able to discharge their main homelessness duty into the private rented sector.
The white paper set out ambitious plans for a ‘housing solutions’ approach to homelessness with a much greater emphasis on prevention. In effect the interim duty would be extended beyond priority need groups to cover groups like the single homeless. It also set a target of ending family homelessness by 2019 by removing intentionality within the term of the government.
However, the Welsh Government appears to have rowed back on some of the white paper proposals on prevention and intentionality amid concern from local government about the cost of implementation.
An explanatory memorandum published alongside the Bill says that the main changes compared to the white paper are:
- When someone who is homeless first applies for assistance the local authority will be able to choose whether to carry out an intentionality test in all cases or not at all
- Applicants who are not in priority need will not be entitled to temporary accommodation
- Local authorities will be able to refer people who are unintentionally homeless and in priority need to another authority under the current ‘local connection’ provisions
- The discharge of the full homelessness duty can be through the offer of a social tenancy or a six-month assured shorthold in the private sector (rather than the 12 months without consent and six months with consent proposed in the white paper).
On family homelessness, the white paper had proposed that households with children found to be intentionally homeless should still have the right to the full homelessness duty. The Bill retains this provided it is the first time they have been found to be intentionally homeless within the last five years. In addition, where a household with children is found to be intentionally homeless but is owed a re-housing duty, the local authority will have a duty to co-ordinate a plan to help prevent them becoming homeless in future.
The Welsh Government has decided as a result of consultation to amend the priority need of all former prisoners who are homeless on release from custody. Priority need will now apply where they can demonstrate vulnerability as a result of having been in custody and they have a local connection.
The Bill will be formally introduced in the Assembly tomorrow (Tuesday). Royal Assent could be by summer 2014 if it passes its four legislative stages.
As the bedroom tax celebrates its debut in the Oxford English Dictionary, there is new evidence today that it is creating empty homes rather than removing ‘spare’ bedrooms.
A survey published by Community Housing Cymru (CHC) today suggests that the first six months of the under-occupation penalty have cost more than 1,000 affordable homes in Wales.
Welsh housing associations say they have 727 homes standing empty as a result the policy. Meanwhile 78 per cent have seen an increase in their rent arrears, with over £1 million attributed to the bedroom tax. Some 51 per cent of tenants are paying the shortfall, 37 per cent are part-paying and 12 per cent are not paying at all.
At this rate arrears will reach £2 million by April 2014, which CHC calculates would be enough to service around £40 million of debt that could be used to build 400 new affordable homes. That means that a total loss of more than 1,100 affordable homes at a time when there are 90,000 people on the waiting list.
A survey published yesterday by the Chartered Institute of Housing hints at the scale of the voids problem in England too. Responses from social landlords and strategic housing authorities suggest that a new breed of difficult to let homes is emerging, it says.
Almost two thirds reported falling demand for two and three bedroom flats and three bedroom houses because people who would normally have been allocated them cannot afford to make up the housing benefit shortfall. A similar proportion reported a shortage of smaller homes for downsizers. Half said they were experiencing longer void periods and lost rental income.
With some landlords already allocating larger homes to households who are not affected by the bedroom tax, and that rising number of voids, 44 per cent of applicants said that a lack of capacity to meet demand from the highest priority applicants, including homeless households, was a key concern.
CIH chief executive Grainia Long says the government is missing the point with a consultation on housing allocations that closes on Friday that focuses on prioritising local connections. ‘It is more about inaccurate perceptions of who gets access to social housing than it is about the real issues councils and social landlords are facing,’ she says.
None of this will perhaps come as much of a surprise to those grappling with the problems thrown up by the bedroom tax but it highlights the serious efficiency problems with the policy to go with the concerns about equity that were the main focus of last week’s Commons debate.
Back in Wales, CHC says that just 3 per cent of the 22,000 housing association tenants have managed to downsize so far. While welcoming an extra £20 million of investment in smaller homes by the Welsh Government, it says the policy risks turning tenant against tenant and tenant against landlord.
Chief executive Nick Bennett says the only solution is to ‘take power closer to the people’ by devolving the same control over welfare policy to Wales that Northern Ireland already has. The Silk Commission is due to report to the Welsh Assembly on further devolved powers in the New Year.
That message will strike a chord in Scotland too, with abolition of the bedroom tax a key part of the SNP government’s case for independence.
England has no such options of course. The CIH survey highlights growing tension between welfare reform and allocations policy, with tighter schemes excluding people with no or low housing need from housing registers, precisely the groups who may have accepted hard-to-let homes in the past. Some strategic authorities also worried that housing associations are refusing their nominations, creating particular problems for those with no retained stock but statutory homelessness duties to discharge.
The bedroom tax and its knock-on effects on the housing system look like issues that will not go away. Optimists among landlords believe that neither of the coalition parties will want to go into the next election without defusing it as a political issue and symbol of unfairness. Pessimists are not so sure and predict the impact will only get worse.
The Department for Work and Pensions is still doing its best to claim what it calls the removal of the spare room subsidy is a success. Its spin on statistics published last week showing that the number of households affected fell from 547,000 in May to 523,000 in August is that it is ‘bringing fairness back into the system’.
However, ‘spare room subsidy’ seems unlikely to make it into the dictionary any time soon. ‘Bedroom tax’, on the other hand, was one of the runners-up in the Oxford Dictionaries Word of the Year 2013 alongside ‘twerk’ and ‘binge-watch’. It was only beaten by ‘selfie’. In case anyone starts saying ‘it’s not a tax’, it is now.
Analysis of those stats by the National Housing Federation highlights the North West as the worst hit region of England with 83,000 families affected losing an average of £748 per year. It points out that the figures understate the true scale of the impact since they exclude working families who would have got partial housing benefit before but have now lost their entitlement.
Yesterday’s bedroom tax vote has left me wondering if our political system is capable of righting what is such an obvious wrong.
A Labour motion calling for immediate repeal was defeated by 26 votes – a narrower margin than the government might have expected – while a government amendment effectively saying it is all Labour’s fault passed by 31 votes. Could things have been different?
The debate included some excellent and passionate speeches, some harrowing personal testimony from MPs about their constituents and some outrageous comments from a few Conservatives.
The man responsible for it all – Iain Duncan Smith – was not there, having chosen to attend a European conference on youth unemployment in Paris. An important subject but not the setting you might expect to find one of the cabinet’s most convinced Eurosceptics.
That left it up to Lib Dem work and pensions minister Steve Webb to start the coalition’s defence of the policy. Interestingly, he told local authorities: ‘If they have exhausted, or if they anticipate exhausting, their discretionary housing payments budgets, they can come to the government for a top-up. So far, barely a dozen local authorities have asked for additional funding.’ It remains to be seen of course what that really amounts to, since as with DHPs themselves, there are no guarantees, but it did seem a hint of movement from the government.
But back to that wrong: it becomes more obvious with each passing day that the bedroom tax is resulting in brutal injustices and unintended consequences.Yesterday’s debate had yet more evidence on this and brought up some that were new to me: for example, fathers losing access to their children because they have lost the spare bedroom that is a condition of access.
It is also increasingly obvious that the policy will not achieve its principal aim of saving £480 million, either because tenants move or because costs are transferred from central to local government.
Yet a quick look back to the final Commons debate on the bedroom tax section of the Welfare Reform Bill in February 2012 reveals that there were 14 Liberal Democrat and two Conservative MPs who voted against the government when it reversed Lords amendments that would have softened its impact.
Last night there were only two Lib Dems – Andrew George (my MP, I’m glad to say) and party president Tim Farron – and one Tory – Andrew Percy, who also voted the other way (I think as a means of registering a formal abstention) – who voted against the government.
Why was this? After all, as Farron pointed out on Facebook, he was voting in line with party policy as agreed at its conference in Glasgow only a few weeks ago with virtually no dissent.
Most of the anger from campaigners has been directed at the Lib Dem MPs who abstained rather than voting against. Three of them had even tabled an early day motion earlier in the day calling for substantial changes. I’m not sure it would have been enough to make a difference but why didn’t they join Mr George and Mr Farron?
Here’s where the politics comes in: this was an opposition day debate. As hostile tweets from Labour prospective candidates in Lib Dem seats immediately after the vote indicated all too clearly, one of its main aims was to nail the Lib Dems as responsible for the policy (a point made powerfully by Alex Marsh). Should they have ignored the politics and voted on the policy?
Again, I’m not sure if it would have been enough to make a difference, and it may just be hopelessly naïve, but what would have happened if Labour had tabled a motion calling for substantial concessions instead of immediate repeal?
Say, for example, it had called for exemptions all those who cannot share a bedroom for medical reasons, or for people who cannot move because there is nowhere smaller available. Would more, or even enough, Lib Dems have rebelled on that basis? Perhaps Labour could even have nailed once and for all the government line (and lie) that it is only doing in the social sector what the last government did in the private sector by pressing an amendment that the bedroom tax should only apply to new tenants?
Instead we were left with a failed attempt to repeal the policy that leaves Labour looking pure in its opposition, Lib Dems like Steve Webb clinging to spurious justifications of it and Tories competing to look tougher on welfare than each other. Maybe this is good politics for all concerned but as policy making it looks terrible to me.
The debate had some awful examples of Tory backbenchers claiming wrongly that all disabled people are exempt (they aren’t) and that the policy is exactly the same as for private tenants (it isn’t). We had David Davies calling for ‘feckless fathers’ to be dragged to work ‘in chains if necessary’, Brooks Newmark claiming that finding an extra £14 a week is ‘not a big ask’ and Anne Main arguing that ‘unicorns do not exist, fairies do not exist and…a bedroom tax does not exist’.
There were also some weak Lib Dem contributions. Simon Hughes, for example, asked Mr Webb whether he would look at exempting people waiting for a smaller property to be allocated. He didn’t get an answer on that specific point but still dutifully voted with the government.
Joe Halewood has plenty to say about what he sees as Labour’s failings during the debate on his blog.
However, there were some impressive speeches too from members of all parties that went beyond the predictable point scoring.
From the Labour side, for example, Emily Thornberry raised the wider point of under-occupation. ‘Part of the problem… is empty nesters – elderly people whose families have grown up. If the principle behind the bedroom tax is to free up homes and move people to smaller units, why does it not apply to pensioners?’. She meant that landlords should be speaking to people as they retire and encouraging them to move, not imposing the bedroom tax.
Nick Raynsford raised another unexpected consequence: a 91-year-old constituent in a four-bedroom home who seems unable to downsize because the council has understandably given priority to bedroom tax victims.
Dame Anne Begg pressed the government to extend exemptions to disabled families in specially adapted homes (as she pointed out, Mr Webb is ‘a man who thinks he can change the whole pensions system in Great Britain, yet he is not clever enough to come up with a definition of an adapted home’) and couples who cannot share a bedroom because one or both has a disability. She also made the crucial point about ministers’ assurances on DHPs: ‘the word “discretionary” is the key, because it means that they will not necessarily get the money’.
Karen Buck exposed the weakness of the government’s argument that the bedroom tax will tackle overcrowding, arguing that ‘people are not dry goods that can be put in a container and taken from London to Liverpool or Wales, because that is how the distribution of property suits their needs’.
However, if you have a spare moment, do read Kate Green’s closing speech, which sums up the case against the bedroom tax and its implementation better than anything I’ve heard or read.
From the Lib Dem side, John Hemming was honest enough to concede that Labour’s local housing allowance changes were not retrospective, but argued that the bedroom tax has to be because of the need to save money.
And Andrew George had one of the best descriptions of the policy:
‘The spare room penalty or bedroom tax victimises the most marginalised in our communities, undermines family life, penalises the hard-working low-paid for being prepared to stomach low-paid work, and masks the excessive cost and disruption to the disabled who have to move from expensively adapted homes. It is, in my view, Dickensian in its social divisiveness. It is an immoral policy.’
There were also Conservatives who were prepared to address the policy rather than the politics. Andrew Percy has just told me on Twitter that he thought the Labour motion ‘too political’ and so registered an abstention instead but didn’t agree with all of the government amendment either so didn’t vote on it.
And Jeremy Lefroy agreed with Anne Begg about the need for more flexible exemptions (‘I am sure that the minister is listening’) and argued for a lower rate of deduction than 14 per cent and 25 per cent that could be gradually increased as more appropriate accommodation became available. He went on:
‘This must not result in evictions. Some councils have no-eviction policies, and that is a very commendable approach. I would look for all possible measures to be taken prior to eviction being enforced.’
Uncomfortably for some landlords out there, he also asked the minister to look at how housing associations paying their directors six-figure salaries ‘could themselves contribute to discretionary housing payments’.
The positive thing to come out of all of this is that Labour has pledged to repeal the bedroom tax on its first day in office if it wins the next election. To answer my opening question, that seems the only way the political system can change the policy. In the meantime, there is also that possibility of extra DHPs for councils that apply.
However, for all yesterday’s debate, a policy that a majority of MPs must surely know by now is unjust and unworkable continues today and the day after. That’s politics.
David Cameron’s cheerleading for the successful launch of the Help to Buy mortgage guarantee scheme unwittingly reveals more than he might have intended.
In a statement issued last night, the prime minister said that 2,384 households have put in offers under the controversial scheme and ten have already completed.
The figures come from applications backed by a decision in principle for 95 per cent mortgages by RBS and Lloyds, the semi-state owned banks. The average advance is £155,000 on homes worth £163,000, which Cameron said demonstrated that Help to Buy is supporting responsible lending.
Even better, more than three-quarters of the applicants are first-time buyers and many are in their early 30s, ‘demonstrating that Help to Buy is helping hardworking people realise their home-owning aspirations’.
Cameron is meeting some of them at Downing Street later today (prepare to get heartily sick of pictures of him and other ministers doing the same in the run-up to the next election). He said:
‘The best thing about Help to Buy isn’t the statistics - it’s who is really benefiting. Most Help to Buy applicants are first-time buyers, young and have a roughly average household income. This is all about helping hardworking people get on the first rung of the property ladder - and helping them get on in life.
‘Owning a home is about more than 4 walls to sleep at night. It’s about independence, self-reliance, moving on and moving up. Above all, it’s about aspiration. Help to Buy is helping people realise the dream of home ownership - and it’s a key part of my plan for Britain.’
So far, so good for Cameron and the young buyers that Help to Buy 2 has helped highlighted in the Downing Street press release. Quotes such as ‘a dream come true to us’ and ‘the scheme really does benefit hard working people’ will be music to his ears.
The problem comes with the next bit:
‘Applicants will face average monthly repayments of around £900 and have an annual household income of around £45,000. This means a Help to Buy mortgage represents 24 per cent of borrowers’ gross income, which compares to the historical Council of Mortgage Lenders’ average figure of 24 per cent across the UK.
‘A 2-year fixed rate 95 per cent mortgage for the average house under Help to Buy is also £2,557 cheaper per year, compared to the equivalent mortgage from 2007.’
That sounds good until you look at the actual CML statistics. These do show a time when capital and interest payments took up 24 per cent of first-time buyers’ gross income but this was not the historical average but the peak of unaffordability in 2008.
The figures from before 2005 only show interest payments as a percentage of income but it’s pretty clear that capital and interest has only gone higher than 24 per cent at the peak of the previous housing boom between 1989 and 1991. These figures are also for the UK: those for England are slightly higher.
Neal Hudson of Savills (@resi_analyst on twitter) has a graph on mortgage affordability going back to 1992 here.
That’s important to bear in mind when you come to the Cameron’s second claim: that the two-year fixed rate Help to Buy mortgage for the average house is £2,557 cheaper.
The vast majority of that saving is the result of the Bank of England cutting interest rates to a record low of 0.5 per cent in 2009.
That begs the obvious question of what happens when and if interest rates return to a more normal level. At the end of the two-year fix, that £2,557 or £200 a month saving could easily look like the extra amount that those lucky buyers will have to find.
The Help to Buy feelgood factor is certainly there for Cameron and the Conservatives right now and with a fair wind it may last until May 2015. However, the figures he’s quoting open up three scenarios that look far less rosy:
First, the fact that Help to Buy mortgages seem to be stretching affordability back to the peak of 2007 may mean the scheme has less take-up than they hope once the initial rush slows down. That may be the least bad option because…
Second, any increase in interest rates (as urged by John Major today and promised by the Bank of England if the economy improves) will mean affordability problems for Help to Buyers and anyone who has stretched themselves to get on to the housing ladder. The dangers of rising arrears and repossessions and (if prices fall after the current mini-boom) negative equity will loom large.
Third, any problems like that will make it very difficult for any future government to get out of the business of state-sponsored mortgages, precisely what the critics have warned about all along.
As we wait for the rescue plan, yet more scathing criticism of the universal credit will surprise nobody.
Today’s report from the Public Accounts Committee is a follow-up to September’s critical review by the National Audit Office but the weight of detail only confirms the impression of a project that long ago spun out of control.
Many of the findings from MPs – the lack of management, the fortress mentality, the ‘good news reporting culture – is familiar from the NAO report. But they add more detail and even more criticism on:
- Poor management: in fact, make that ‘extraordinarily poor’ management’ at the top of the DWP with problems only emerging through ad hoc reviews
- Waste: IT ‘write-offs could amount to at least £140 million’ but the precise extent of it is not known because the department has relied so far on ‘supplier self-assessment
- Inadequate financial control: There was a ‘shocking absence of control over suppliers’ with secretaries were signing off multi-million pound invoices
- Inadequate piloting: How much use will the pathfinder really be? It can only cope with the most limited claims, it has limited IT functionality and it lacks identity assurance and anti-fraud components. The MPs say it ‘will provide some useful information, we are sceptical that it will adequately inform the full roll-out of Universal Credit’.
As for the future, the PAC says that:
‘We are not yet convinced that the Department is in a position to present revised plans for approval by ministers, the Cabinet Office and HM Treasury that resolve the problems of developing a secure system that can accommodate large numbers of claimants who have complex and changing circumstances and who will be expected to fulfil certain conditions.’
Publicly at least, the DWP insists that the project is ‘on time and on budget’ for full roll-out by 2017. However, the MPs say that it will not meet its current target of enrolling 184,000 claimants by April 2014 and accelerating the later stages of the programme will create further risks. They conclude:
‘We believe that meeting any specific timetable is less important than delivering the programme successfully. There is still the potential for Universal Credit to deliver significant benefits, but there is no clarity yet on the amount of savings it will achieve.’
That will mean ‘deliverable options’, a ‘clear strategy for IT development’, ‘realistic ambitions on timescales and the amount that can be delivered online’ and a budget for the remainder of the programme and the net benefits it is expected to deliver. All the things, in other words, you might have expected to be in place at start.
The now familiar response from the DWP says that ‘this report doesn’t take into account our new leadership team, or our progress on delivery’. It adds that since it last spoke to the PAC it has launched the universal credit in Hammersmith and that it will expand to further areas this month (without mentioning that this was another delay).
And it concludes: ‘We don’t recognise the write off figure quoted by the committee and expect this to be substantially less. The head of Universal Credit Howard Shiplee has been clear that there is real potential to use much of the existing IT. We will announce our plans for the next phase of UC delivery shortly.’
It’s worth noting that previous responses have insisted that the project is ‘on time’. That ‘we will announce our plans shortly’ sounds like even the DWP has accepted the inevitable.
IDS responded to the NAO’s criticism by appearing to blame senior civil servants including permanent secretary Robert Devereux for the mess. A spokesperson now tells the Financial Times (ominously for anyone familiar with football parlance) that ‘he has every confidence with the team now in place, and that team includes Robert Devereux’.
However, it seems only fair to point to a fresh round of leaks that have emerged since the PAC completed its work. Computer Weekly reported this week that the DWP will decide later this month between two options: scrapping all of the £300 million IT system and starting again; and continuing to use some of the existing IT systems for the pathfinders while developing new systems for the roll-out. ‘Whichever option is chosen, sources suggest it is likely that all the existing IT work will eventually be scrapped,’ it says.
That looks like an amplification of an earlier leak to The Guardian which also said that the government is now considering two options: writing off £119 million of investment so far and starting again with a much more web-based system that would reduce the need for Job Centre staff; and attempting to improve the existing system. A risk assessment criticises both options and says that either way a maximum of 25,000 people (just 0.2 per cent of claimants) will be on the new system by the next election.
All of which will leave not just claimants but anyone with a stake in the new system wondering what on earth is going on and hoping for some clarity, any clarity, as soon as possible. Who knows how much social landlords have invested in extra staff and services on the assumption of a timetable that it now seems the DWP has no chance of meeting? Should the DWP now cover some of their costs? I have not even mentioned direct payment yet.
There is still general support for the project’s aim of delivering a more transparent system for everyone involved. But the longer the mess continues the more it begins to look like a universal debit.
IDS and the DWP must announce a clear and deliverable timetable, with a credible way of achieving the project’s goals, to hope to begin to repay the credit they have wasted.
For all today’s headlines about house prices, the most significant claim in new forecasts out today is that private renting will grow by another million households in the next five years.
That is one of the new forecasts for the housing market issued by Savills today and flows from its assumptions on what will happen to house prices. It comes despite the government’s flagship help to buy policy that aims to create more homeowners.
The property firm forecasts a 25 per cent rise in prices between 2014 to 2018, with the south east and eastern regions seeing the biggest increases. That remains well short of what it sees as ‘bubble’ territory (an increase of more like 40 per cent). So, rather than taking us back to the mid 2000s, it believes the current market is more like 1996 ‘when the last housing market recovery firmly took hold’.
However, if this is 1996, it is not quite as we knew it at the time and this will be a recovery that only benefits some. The legacy of the credit crunch is that high prices have excluded people from owner-occupation and it’s transactions rather than prices that have fallen. ‘The UK housing market is now the preserve only of the wealthiest 50 per cent of households – and only if they have access to sufficient capital to use as a deposit,’ says Yolande Barnes of Savills Research in her introduction.
This is exactly the problem that the government is hoping to tackle with its controversial help to buy 2 mortgage guarantee policy, which produced its first lucky buyer last week. As financial secretary to the Treasury Sajid David told the commons yesterday: ‘The government [is] committed to making the aspiration of homeownership a reality for as many people as possible. That is why we recently announced that participating lenders will be able to offer high loan-to-value mortgages supported by their help to buy mortgage guarantee schemes three months earlier than planned. I was pleased to hear that Lloyds Banking Group recently announced that the first such mortgage was taken out by a first-time buyer in Dartford, Kent.’
The issue is how much impact help to buy 2 will really have. The controversy surrounding it is based on the fear that it could increase demand and prices without doing much about supply. Savills clearly thinks it will have less impact than the government hopes.
When the policy was first announced in March, it said that if the £12 billion of guarantees translated into £130 billion of mortgage lending the scheme had the capacity to enabled 550,000 extra house sales, a 19 per cent increase in overall transactions.
Now it is expecting around 325,000 transactions over the next three years ‘as those buyers with a strong aspiration to build up their housing wealth and the income to do so take advantage of the scheme’.
However, ‘the major beneficiaries of an increase in net mortgage lending are likely to be existing home owners, particularly those with a pot of existing equity’.
Savills forecasts that housing market transactions across the UK will rise from 960,000 in 2013 to 1.11 million in 2014, 1.18 million in 2015 and 1.25 million in 2016 before levelling down to around 1.2 million in 2017 and 2018.
That would in turn mean that Sajid David’s hope of ‘making the aspiration of home ownership a reality for as many as possible’ is unlikely to be fulfilled. Instead, if Savills is correct, the ranks of generation rent will continue to swell by more than 200,000 a year from 4.8 million in the UK in 2013 to 5.8 million in 2018, perhaps 20 per cent of households.
The implications of that would be profound. The housing system is still adjusting to the extraordinary 2 million household growth of private renting over the last decade but it will need to cope with more of the same over the next five years.
An opinion poll commissioned by Savills suggests that a large majority of renters still see the tenure as an intermediate step to owning. Many of them are going to be disappointed.
From the landlord side of the equation, even though buy to let has bounced back strongly from the credit crunch, it may not be enough to cope. Chris Buckles of Savills Research concludes: ‘Meeting this demand will fall to the cash rich investor and the institutions. They could, if they are brave and receive sufficient government support, be on the cusp of revolutionising the provision of private rented housing. This will be critical in the polarised housing market of the next five years.’
All this pressure will feed through into rent inflation too. Savills forecasts that the average rate of increase across the UK will rise from 2 per cent in 2014 to 2.5 per cent in 2015, 4 per cent in 2016 and 5.5 per cent in 2017 and 2018. Rents in London will rise still faster, starting with 3.5 per cent in both 2014 and 2015 and rising to 6 per cent by 2018.
That may be good news for landlords and investors but it is obviously less good for renters. As this blog by the New Policy Institute shows, the cost of living crisis in housing since the credit crunch is all about renters, as people with mortgages have seen their costs fall.
And it has alarming implications for the growing proportion of private tenants who rely on housing benefit to pay their rent. The local housing allowance is due to be uprated by just 1 per cent in 2014/15 and 2015/16 and it could be a target for continuing austerity measures after the next election. The shortfall between their rents and benefits could continue to escalate.
So has what started out as ‘a Rolls Royce idea’ ended up ‘a Reliant Robin policy in practice’?
That’s not me describing the new homes bonus but the words of Conservative MP Stewart Jackson. Now a member of the public accounts committee, he was speaking at an evidence session in June ahead of its report published this morning. He was also a shadow communities minister at the time the bonus became a Conservative flagship policy.
With scepticism like that on the Conservative side it’s little wonder that the PAC has more scathing criticism of the handling of the policy. It follows an embarrassing verdictfor the department of Communities and Local Government delivered by the National Audit Office in March.
Margaret Hodge, the Labour chair of the PAC, says that with £7.5 billion due to be redistributed between councils by 2018/19 to encourage more homes, it’s ‘vital’ that the bonus works: ‘It is therefore disappointing that after more than two years of the scheme being up and running, no evaluation is in place and no credible data is available to show whether the scheme is working or not.
‘So far the areas which have gained most money tend to be the areas where housing need is lowest. The areas that have lost most tend to be those where needs are greatest,’ she adds.
‘The CLG has yet to demonstrate whether the new homes bonus works. Is it helping to create more new homes than would have been built anyway? Is it the best way for the government to use its limited resources to create more homes where they are needed most?’
Questions like this have been asked from the very beginning. As I blogged when the first allocations were made, the policy is less a bonus for building new homes than a penalty for not building them, and it amounts to a mechanism for transferring resources from deprived areas to affluent ones.
The National Audit Office agreed, branding the CLG’s estimate of the potential increase ‘unreliable’ and based on ‘unrealistic’ assumptions that included a ‘substantial arithmetical error’.
So far, it said, ‘the bonus has mainly rewarded home creation that was not incentivised by the bonus’.
Despite the policy being an attempt to use incentives to change the behavior of local authorities and communities to make them more pro-development, the CLG had not even consulted the cabinet office’s behavioural insight team (the nudge unit).
The message from Amyas Morse, the head of the NAO, was that: ‘The department must now urgently carry out its proposed review of the scheme to ensure that it successfully encourages the construction of much-needed new homes.’
That was in March. Seven months later, the PAC is making the same point about urgency: ‘We would have expected the [CLG] to have planned a systematic evaluation from the outset to track its impact on local authorities’ behaviour towards housing development, and the cumulative impact of the [new homes bonus] alongside the [CLG’s] other policies affecting local authority funding. The department has yet to demonstrate that the new homes it is funding through this scheme are in areas of housing need and the its planned evaluation is now urgent.’
That has prompted Sir Bob Kerslake, permanent secretary at the CLG and head of the civil service, to take the unusual step of issuing a statement publicly disagreeing with the committee: ‘I am disappointed by today’s report and have some significant disagreements with its findings. We have made very clear that our review of the new homes bonus is under way and will be completed by Easter 2014 as we have always promised,’ he said.
‘The whole point of the new homes bonus – which the committee fails to recognise – is to recognise housing growth where it occurs, with money going where those homes are needed most. That’s why we’ve committed £1.2 billion over five years towards this scheme, which the National Audit Office themselves found has the potential to deliver up to 100,000 additional homes over 10 years.’
However, arguments like this did not convince PAC members when he put them forward at a meeting in June and an evaluation published a year after the National Audit Office called for one ‘urgently’ will not meet most people’s definition of the word.
And it seems unlikely that the evaluation will be able to offer much convincing evidence of the impact of the bonus even then. The PAC report points out that ‘the department is committed to establishing if the new homes bonus has changed the behaviour of local authorities as part of its evaluation’.
‘However, the [CLG] told us that disentangling the impact of the bonus from other economic factors and other government initiatives, such as help to buy, would be difficult,’ it added.
Similarly, while there has been a positive trend in the number of empty homes being brought back into use, ‘this began before the Bonus was introduced’. The impact remains unclear - though I have seen evidence that the bonus has had a positive impact on the way my local council looks at empty homes.
In the meantime the PAC suggests adjustments such as offering extra incentives for energy-efficient homes rather than a ‘wholesale shake-up’.
By offering incentives to communities, the new homes bonus did introduce an interesting idea into the debate about how to get more homes built. It was also attractive politically as a bottom-up alternative to Labour’s top-down targets.
However, was it ever really a ‘Rolls Royce idea’? Keep them small and incentives probably will not work, make them more attractive enough and eventually they become a questionable use of public money.
Whether the new homes bonus was badly implemented, or impractical in the first place, or both, the debate has already moved on and in help to buy the coalition has a shiny new flagship. No matter how much Sir Bob and the CLG apply the turtle wax between now and easter 2014, they will still have a used Reliant Robin on their hands.
Where does sensible asset management stop and social cleansing begin?
That’s the issue highlighted for me by the sale of ‘Britain’s most expensive council house’ and the protest that followed.
I put that in inverted commas because I’m not sure the building near Borough Market in Southwark was actually being used as a house but what is clear that it was sold at auction for £2.96 million, 30 per cent more than was expected last week.
The council’s case is that it’s better to sell and use the proceeds building 20 new council homes than keep it when it needs £500,000 worth of repair and refurbishment work. ‘I think that’s a no-brainer and most people do apart from the protestors,’ cabinet member for regeneration Fiona Colley told me yesterday.
Put like that, it’s hard to disagree. Social landlords all over the country have to make decisions about the best use of their assets. But there is a continuum involved here. At one end you might have a tower block that will cost more to maintain than it will to knock down and build replacement homes. At the other, you might have Policy Exchange’s proposal for Ending Expensive Social Tenancies. Grant Shapps, the housing minister at the time, considered it ‘blindingly obvious’ and the influential think tank is pushing the idea on twitter again this morning. I didn’t think so much of the idea when I blogged about it at the time.
But what happens with proposals that fall somewhere between those two extremes? The ‘£3 million council house’ is not the only example in Southwark. At Neo Bankside, a swanky new riverside development near Tate Modern, the original plan was that the ‘affordable’ housing contribution would be on site. But Fiona Colley explains: ‘We found that even at 25 per cent, the smallest share, they were only affordable on a household income of £90,000, which is above the income limit to qualify. So we recognised that and took £10 million to fund 170 council homes which to us makes much more sense.’
Again it seems hard to argue that this is more sensible than, for example, this £720,000 ‘affordable’ home that I was alerted to by a commenter on my blog. A 25 per cent share can be yours for £2,444 a month in rent, mortgage and service charges, half the post-tax income of a household on the maximum qualifying income of £80,000.
Yet the protestors in Southwark beg to disagree. Housing Action Southwark and Lambeth argue on the Guardian’s Comment is Free that there is no justification for selling off council houses during a housing crisis.
The occupation is partly a protest against draconian new laws on squatting but also is also happening in the context of the regeneration/gentrification of the wider area. ‘Southwark council has tried to justify the sale by promising to build 20 new council homes with the profits,’ they say, ‘but after the ongoing Heygate estate scandal, it is difficult to take them at their word.’
That is of course a reference to the controversial regeneration of the Heygate estate near the Elephant. Southwark sees it as part of a wider regeneration plan that will bring homes and jobs to the whole area but, as the final few leaseholders get ready to leave by Monday, that’s not the way campaigners see it at all.
The same issues are cropping up all over London (but not just in London) and pitting residents against local authorities and developers. Think Hammersmith & Fulham’s plans for Earl’s Court and two nearby council estates or Lambeth’s sell-off of short-life housing or Newham’s stalled plan to demolish the Carpenters Estate to make way for a new campus for UCL.
You have to draw the line somewhere - but where exactly? The boundaries between regeneration, gentrification and social cleansing lie somewhere between the tower block that’s falling down and the Policy Exchange sell-off plan. As with previous rounds of regeneration, including those that created the estates in the first place, they involve issues of resident involvement and consent, the use of the proceeds for new housing and the conditions for the offer of new homes. These have to be balanced against the interests of the wider community.
So the issues and the boundaries are not new and perhaps it’s only possible to draw the line on a case by case basis. But bigger social and economic processes are at work now: growing inequalities of income and wealth, globalisation, financial pressure on local authorities, welfare reform and the escalating cost of housing. What would the outcome be if the battle of Coin Street were fought again today?
The routine is familiar by now: researchers question government policy, government rubbishes researchers.
Where McVey embarrassed herself on the World at One, Penning had definitely got out of bed on the wrong side before he arrived in the Today programme studio. That was compounded when presenter Justin Webb introduced him as Mark rather than Mike. ‘Let’s start as we mean to carry on, shall we?’ he harrumphed before attacking ‘the BBC and The Guardian’ for being the only media outlets to report the story.
The interview went downhill from there. ‘Let’s report the facts, not flawed data,’ he said, but seemed unsure quite what the facts were. And he then blundered into an on-air row with Webb in the following exchange:
Penning: ‘It’s a fair policy and it’s much too early for the BBC and the institute to be writing this off.’
Webb: ‘It’s ridiculous to say the BBC is writing this off, we’re merely reporting what they did.’
Penning: ‘Why did you accept what they reported? Because we gave you the information last night that it wasn’t factually correct.’
Webb: ‘We’re not accepting it. We just had an interview with the woman in charge and asked her questions about it. That’s how you report things. We’re not accepting it by reporting it, you know perfectly well we’re not.’
That I think provides a clue to Penning’s initial annoyance. The DWP had obviously been trying – and failing – to kill the story last night. Its line was that 16,500 claimants ‘potentially affected by the cap’ have been helped into work across the country (since April 2012) and so it’s working. The department is of course a paragon of statistical rectitude when it comes to the cap.
Penning’s other point was that: ‘I don’t understand why we are looking at something so early on in one very restricted London area, which just happens to be Labour-controlled, which is said not to be working.’
In fact the CIH research looks in detail at the impact in Haringey, one of the four London boroughs where the cap was first introduced. Among the findings:
- Only 74 of the 747 households affected by the cap were known to have moved into work, while 11 had increased their hours by enough to avoid it
- Half those affected were claiming discretionary housing payments to help pay their rent, shunting the costs from central government to councils (as Haringey leader Claire Kober points out). Around £60,000 has been saved from the benefit bill but expenditure on discretionary housing payments (DHPs) totals £960,000 so far.
- The mass evictions that were feared have not yet materialised – though the report warns ‘they are visible on the horizon’. Claimants have relied on DHPs so far but this will be unsustainable in the long term.
- A small number of households have faced severe consequences. These include women unable to leave abusive partners, children in danger of being taken into care and pre-emptive evictions of some private tenants.
The CIH concludes that the cap is ‘struggling to meet its aims’ of saving money and encouraging people into work. True, 11 per cent of households have moved into work but that does not seem much to show for the resources thrown into Haringey and the other pilot areas.
But all of this assumes of course that work and savings really are the main objectives of a policy that has always been intensely political. Opinion polls show that public support for the policy remains high. A survey for the DWP published earlier this month shows strong public support for the cap on just about every count, even though people believe it is unfair to people in high-rent areas.
I’ve written many times before about the way that the benefit cap’s arbitrary notion of ‘fairness’ breaks down once you look beyond the headline figure of £26,000 a year. This starts of course with the flawed use of earnings rather than income to set the level of the cap but it goes beyond that to the way that the cap operates independently of decisions already taken elsewhere in the system.
And so where there are already caps on the maximum housing benefit payable in each area, the overall cap operates well below that level. It is only DHPs that are making up for the rent shortfalls in Haringey.
Where councils accept a duty to homeless people and house them in temporary accommodation, the cap decides it will not pay the rents for it. This applies to 43 per cent of the capped households in Haringey.
And where the benefits system has rules on in what circumstances lone parents are expected to work that depend on the age of the child and the availability of affordable childcare, the benefit cap cuts the income of all those not working. Six out of ten of the households capped in Haringey had children below school age and the availability and affordability of childcare were major barriers to work.
But the benefit cap is a policy that operates independently of such considerations and in a world that exists beyond the facts. That’s why research and researchers have to be rubbished.
The line-up of the band may change but the ministerial song remains the same at the Communities and Local Government department.
Parliamentary questions yesterday brought the first chance to see new boys Kris Hopkins and Stephen Williams perform alongside Nick Boles, Brandon Lewis and the ageing star Eric Pickles. After poor Mark Prisk was told he had to ‘step aside for a younger generation’ only to find that his replacement was just a year younger, I can’t help thinking of them as a boy band (the two female CLG ministers are both in the Lords).
Hopkins is of course the newly junior housing minister, though he told an Inside Housing reception last night that he does not ‘give a toss’ about this status so long as some homes get built. He also said that the appointment feels like ‘coming home’.
The housing brief certainly seems more of a collective effort now. The real focus of the songs is all about home ownership and Help to Buy and responsibility for that goes right to the top of the record label at 10 and 11 Downing Street.
And yet on key housing announcements on homes for locals, custom build and private renting last week it was Pickles who took the limelight. That left the housing minister to mark new legal powers against social tenancy cheats and help for military families to get on the housing ladder.
The housing spotlight moved between ministers in the Commons yesterday too. First up was Hopkins for some supportive questions about Help to Buy. He revealed that RBS had 10,000 inquiries in the first four working days and made a direct pitch to northern fans by pointing out:
‘I agree that at the moment there is a huge media focus on London and the south-east. As a northern MP, I know that if we remove London and the south-east from the national figure of 3.8% for price rises, we get 2.1% for our part of the country, but several other parts have seen no increase at all, so we need to stick up for the Blackpools, Burnleys and Bradfords as well.’
To more hostile Labour questions he boasted that the government had ‘delivered 334,000 houses so far, 84,000 of which are affordable homes’ and he neatly avoided expressing an opinion on ‘use it or lose it’ powers against landloarding developers (Labour policy but also backed by Boris Johnson in London).
But as the gig moved from advance to topical questions, Hopkins only got to answer one more, applauding ‘as a former soldier’ the sentiment behind a question about boosting home ownership among members of the armed forces.
In contrast, the other new boy, the Lib Dem Stephen Williams, got far more time in the spotlight. Officially his wide-ranging brief includes empty homes and other housing-related issues such as localism and the building regulations and he duly took a solo spot on localism at advance questions on localism.
However, it was more of a surprise to see him rather than Hopkins take the lead on the government’s defence of the bedroom tax. Questioned by Labour’s Cathy Jamieson about adapted homes for older people, Williams sang the old coalition hit ‘Discretionary Housing Payments’. When she followed that up by asking for an assurance that people will not be forced out of their homes when they have a disability, he carefully failed to answer the question.
And it was Williams, not Hopkins, who got the first parliamentary exchange with the new shadow housing minister Emma Reynolds. When more than half of those affected by the bedroom tax are disabled, and nine out of ten of those who are not receiving DHPs are having to ‘choose between heating or eating’, she asked:
‘Does the Minister advise them to put on another jumper, skip a meal, or move to a non-adapted property that then has to be adapted at huge cost to the taxpayer?’
‘I would not presume to advise an individual at all; each individual must make up their own mind about how they will adapt to a change in circumstances. I advise local authorities, housing associations and local advice bureaux to work holistically with each tenant affected by the policy, and to consider what advice and support can be given so that they can transition to the new arrangements.’
Transition to the new arrangements? That sounds like Williams had stolen a line from the DWP songbook and he was also up next to ask another round of hostile bedroom tax questions. When Labour’s Pamela Nash asked whether he would advise people who cannot downsize to move into the private rented sector and send the housing benefit bill up not down, he replied:
‘Clearly, the implementation of this policy will take a while, and each tenant must weigh up their own circumstances and consider how they adapt. As I said previously, I expect local authorities to work with all housing providers in an area, including the private sector—in my constituency more people rent in the private sector than in the public sector—and consider the best use of stock and what assistance is most appropriate for the individual.’
This sounds like a new emphasis to me on addressing under-occupation and over-crowding across both tenures (and perhaps an implicit recognition that redistribution within the social sector is not working). He followed up with similar points to Meg Hillier (‘I expect local authorities, including Hackney, to look across all housing providers in the area and consider best use of the stock’) and Lyn Brown (‘We are spending huge amounts supporting people in overcrowded conditions, and across the private and public sectors we are not making best use of the housing stock available’).
The problem is of course that rents and the housing benefit bill are both higher in the private sector. This was a point made at the end of topical questions when Labour’s Lillian Greenwood said that tenants in Nottingham forced to downsize from a two-bed social home to a one-bed private one can expect to pay £24.83 extra in rent. She was directly addressing Pickles when she asked ‘the bedroom tax is a costly mess; why does he not scrap it?’ but it was Williams who got up to answer:
‘We do not scrap it because we need to save money right across government. One of the major problems of implementing this policy is the lack of house building— [Interruption.] I know that the hon. Lady is from the 2010 intake and that Labour Members of that intake like to think that 2010 is year zero, but during the 13 years when some of her colleagues were in power, not enough affordable housing was built. That is the problem.’
It was an old hit rolled out from the back catalogue as an encore. The line-up may change, and Williams may be the third Lib Dem member of the band in three and a half years, but blaming it all on the last government is still the Best Song Ever.
Government action on private renting looked a distant prospect when it brusquely rejected plans for light-touch regulation as ‘red tape’ in 2010.
So today’s statement by Eric Pickles announcing a package of measures to give private tenants a better deal is evidence that even the Conservatives have woken up to the fact that they are a growing part of the electorate and testament to the efforts of campaigners over the last three-and-a-half years.
Following up an announcement made – significantly – during the Conservative Party conference, the communities secretary says ‘we recognise there is more to do to support a vibrant private rented sector’.
The package is a balancing act between
- Giving tenants the know-how to demand longer-term tenancies, stable rents, better quality accommodation, avoid hidden fees when renting a home and demand better standards
- Proportionate regulation: ‘Excessive red tape – such as compulsory landlord registration fees or rent controls – would reduce investment, restrict choice for tenants and ultimately drive up costs for tenants’
- Supporting ‘law-abiding, decent landlords’ against tenants who intentionally do not pay or damage property
- Taking action against ‘the small number of rogue landlords’ to stop tenants getting ripped off
- Ensuring tenants have the confidence to take action ‘without fear of eviction or harassment’
Mr Pickles does not exactly seem the obvious choice for a balancing act and, before anyone gets too excited, ‘demand’ in this context seems to mean ‘ask’ rather than ‘have a right to’. There is no suggestion that I can find that his plans to outlaw the retaliatory eviction that is too often the fate of tenants who complain or try to enforce their rights.
The package also does not seem to include the one thing demanded by landlords, reputable agents and tenants: licensing of letting agents. The Royal Institue of Chartered Surveyors says today that the redress proposal does not go far enough and is calling for a consistent national regulation scheme for agents.
Instead a code of practice will set out what landlords, letting agents and property managers must do and make clear it is their responsibility to maintain the property to an acceptable standard.
There will be a review of how to ensure that homes are safe and healthy for tenants and the government will consider requiring landlords to repay rent where serious hazards are found and extending local authorities’ powers to recoup housing benefit paid for sub-standard property.
A tenants charter will explain how tenants can ‘ask’ for longer tenancies and promote transparency of letting agents’ fees to help stop unreasonable and unfair charges. A model tenancy agreement will be developed by 2014 to set out the rights and responsibilities of tenants and landlords.
However, there is also a nod to landlords with a pledge to work to identify ‘any improvements that can be made to the eviction process’ if a tenant stops paying the rent and give them more confidence to offer longer tenancies.
Finally, the government will organise a mortgage lenders summit to discuss the restrictions set by most buy-to-let lenders on landlords agreeing to longer tenancies.
Much of the groundwork for today’s statement was done by the all-party communities and local government committee in a report published in July. The government’s response is also published today. Committee chair Clive Betts has welcomed the package but says the failure to clampdown on cowboy agents is ‘regrettable’.
As a package it is not going to satisfy many tenants’ groups and it does not go nearly as far as the policies emerging from Labour’s policy review, which start with licensing of letting agents and could include indexing rents.
I also suspect the detail is going to raise all kinds of questions. Off the top of my head, what are ‘optional but standard’ clauses in tenancy agreements? How will break clauses and rent reviews work in longer tenancies? Is a compulsory redress scheme for agents really going to protect tenancies, even if complaints must be investigated by someone independent? Why, when a quarter of those Pickles (invevitably) describes as ‘hardworking’ private tenants are in work but need housing benefit to pay the rent is there no mention of welfare reform?
Nevertheless it does represent quite a shift from the early days of the coalition. Back in June 2010 Grant Shapps was promising landlords that ‘the government has no plans to introduce any [my emphasis] further regulations’.
There also seems to be more than a nod to the proposal for a stable rental contract developed by Shelter last year. On Shelter’s policy blog, Robbie de Santos calls the Tory conference announcement ‘a small step and yet a big moment’ but suggests that a stronger nudge will be required to shift a market of 9 million renters and 1.5 million landlords. That sounds about right.
And we are now set for a fascinating contrast between the nations of the UK in their approach to regulation of private renting. As England tries to tread a minimalist path, Wales is about to introduce legislation based on the proposals that Shapps rejected in 2010. North of the border, where letting agent fees are already banned, Shelter Scotland is pressing the government to introduce greater security of tenure.
The bedroom tax is turning out to have as many alternate realities as it has names.
Whether you call it that or the under-occupation penalty or the social sector size criteria or even ending the spare room subsidy, the everyday reality is shown very well in a TV documentary on BBC Wales. If you have the time between now and 11 o’clock tonight (when it expires on iplayer) to watch ‘What cost a spare room in Wales?’ it’s well worth the effort.
The uncomfortable reality (uncomfortable for ministers at least) came in a report from the University of York that says the policy may end up saving at least a third less than the government claims.
The hyper-reality came in two extraordinary appearances yesterday by newly promoted work and pensions minister Esther McVey on the World at One and later at parliamentary questions.
And there’s even the unreality of a brief flurry on twitter just now about Nick Clegg’s supposed announcement of an independent review of the policy, which turns out to be just a reference to the evaluation that the government committed itself in the final stages of the Welfare Reform Act. The legal reality is of course still developing through tribunal cases and the Court of Appeal.
The documentary follows three victims of the bedroom tax in Blaenavon and the staff from Bron Afon Community Housing trying to help them. Then it adds an extra twist when David Davies, the Conservative MP for Monmouth and chair of the Welsh Affairs Committee, tells them why he thinks it’s fair.
If Wales has a greater percentage of social tenants affected by the bedroom tax than anywhere else in the UK, then Blaenavon has special problems of its own. The chances of downsizing within the town are slim at best and moving anywhere else means moving miles away from friends and family. Meanwhile voids are increasing on larger homes that nobody wants.
Natalie, whose bedrooms are spare because her three kids live with her mum Molly during the week, only escapes eviction when Molly agrees to pay £47 a week to cover the shortfall on her rent plus her arrears. Amy and Lloyd had to take a two-bed flat because they couldn’t find a one-bed in their home town but the cost is pushing them to the limit. Gail was working until recently but has gone into arrears for the first time because of the penalty on the two bedrooms in her house that have been empty since her children left home.
David Davies tells them face to face why he supports the policy but seems to waver as he hears the story. He bluntly tells Lloyd he should get a job or go to London. He tells Molly he can see that it’s more of a problem in rural areas and Wales than it is in cities.
But he clearly has the most sympathy for Gail. ‘Ministers are maybe a bit reluctant to admit this but there will be unintended consequences and some people will lose out who don’t deserve to lose out,’ he tells her. ‘But they’re not going to reverse the whole thing or change it because there’s a bigger picture.’
The bigger picture, with a brief nod to ‘hardworking people’, is presumably saving money – but what if it doesn’t?
That’s the question posed in my second reality, the one raised by Rebecca Tunstall from York’s Centre for Housing Policy in a report for Riverside, Affinity Sutton, Gentoo and Wigan and Leigh Housing. The press release is on Riverside’s website here.
The report uses real data for the first five months of the policy for 127,000 homes in England and applies it to the model used by the DWP in its impact assessments to estimate that it will deliver £480 million of savings in 2013/14.
Read the full report for the details but the key findings are that flaws in the model mean the DWP underestimated:
- the number of people underoccupying by one bedroom who would move
- the proportion of those affected who would move into the private rented sector
- the proportion of homes vacated that would be relet to existing social tenants.
And that means the DWP could have overestimated the total savings by between £160 million (33 per cent) and £186 million (39 per cent). If you add the £65 million in discretionary housing payments set aside for this year even more of the ‘savings’ disappear.
The report is careful to stress that it does not claim to be a fully representative sample but the implications are clear. Especially when these figures take no account of the extra costs faced by landlords and local authorities for adaptations for disabled tenants who move, rising rent arrears and re-let times, rent collection and tenancy support, lost ability to build new homes and the knock-on effects on homelessness, health, education, advice and social services.
And so to the hyperreality of Esther McVey. For openers, she was involved in one of the most remarkable radio interviews I’ve head this year on yesterday’s World at One.
She claimed the findings were ‘skewed’ and ‘not credible’ because the housing associations involved are ‘net gainers’ with a stake in getting the answers they wanted. That was quite a claim. Quite apart from ignoring the academic rigour behind the report and questioning the good name of those involved, an earlier report involving three of the four landlords who commissioned this one was quoted approvingly in the DWP’s own impact assessment in 2012.
As it seemed increasingly more likely that McVey (and perhaps not her officials either) had not actually read the report, she repeatedly refused to say which conclusions she disagreed with. Putting yourself in the position where your interviewer keeps asking the same question that you don’t answer is never a good idea for politicians. McVey was reduced to spluttering that ‘you’ve got to give credence to our credibility’. It was cringe comedy gold.
But it turned out that this was only the start of the hyper-reality. At yesterday’s work and pensions questions the opening bedroom tax skirmishes involved Iain Duncan Smith and (yet again) the UN special rapporteur Raquel Rolnik. He told Nick Raynsford it was all Labour’s fault: ‘Instead of little gimmicks with people from Brazil, they would be better off apologising for the mess they left us in in the first place.’
Not content with that, he then backed up Lord Freud by blaming ‘housing associations and others’ for ‘continuing to build houses that are not required when there is a demand for single bedroom accommodation.’ Never mind, of course, that they are building what they are committed to under the Affordable Homes Programme and that Affordable Rent will increase the housing benefit bill.
Then it was back to McVey and, just to bring things full circle, she was responding to a question from a Welsh MP. Huw Irranca-Davies said rent arrears were rising for associations in his Ogmore constituency:
‘They have a desperate scarcity of one and two-bedroom properties to rent, and yet they have three-bedroom properties lying empty. Is this just a necessary but painful adjustment to the Secretary of State’s benefit and bedroom tax changes?’
McVey’s answer may surprise a few people:
‘The hon. Gentleman is quite right—we have to get the stock right: the fact that there are three-bedroom houses and why in the last three years they have not been modified into one and two-bedroom houses. Those questions have to be asked. That is what we have to do: get the stock right and support people as best we can.’
So it turns out the solution has been staring us in the face all along: knock down bedroom walls. Ignore for a moment the implications for landlords’ business plans. Forget those DWP warnings about reclassification. Leave aside the fact that any ‘savings’ will simply become reduced rental income and increased costs for conversions. Blank out that it’s meant to be freeing up homes for overcrowded families. It’s all starting to make sense now.
I still don’t fully understand the downgrading of the housing portfolio in the reshuffle this week but here’s my attempt to make sense of it.
As Stuart Macdonald points out in Inside Housing this week, the contrast could hardly be starker between the Conservatives’ switch from minister of state Mark Prisk to parliamentary under-secretary Kris Hopkins and Labour’s restoration of shadow housing minister Emma Reynolds to ‘attending cabinet’ status.
Similar points are made by Isabel Hardman and Hannah Fearn in the Telegraph and Guardian and, significantly, by Paul Goodman, the former Conservative MP and editor of the influential Conservative Home website. ‘This isn’t some trivial piece of Whitehall arcana, but a suggestive development with political implications,’ he says.
He goes on: ‘It is certainly an odd signal to send at a time when housing is a crucial political battleground, when Ed Miliband is fighting for its possession, and the government is making such a push with help to buy.’
When Mark Prisk revealed that he was standing down the obvious move for the government seemed to be to promote Nick Boles, the parliamentary under-secretary for planning, to minister of state for housing and planning. Nick Raynsford combined the two roles quite happily under the last Labour government and it would certainly have enabled Mr Boles to widen the Conservatives’ appeal to young voters who need homes. Did the leadership instead come to the conclusion that they could not afford to antagonise the Telegraph-reading, property-owning, countryside-loving wing of the party?
This leaves the Communities and Local Government department in the distinctly odd position of having half a senior minister of state (Baroness Warsi, shared with the Foreign Office) and five parliamentary under-secretaries (Mr Hopkins and Mr Boles plus Brandon Lewis, Baroness Stowell and the Lib Dem Stephen Williams). Contrast that, for example, with the Department for Work and Pensions, which has three ministers of state and one under-secretary.
As for the housing minister job, this is the second time it has been downgraded under the coalition (attending cabinet status fell by the wayside when Mark Prisk took over from Grant Shapps). Mr Hopkins is also the third coalition minister in three-and-a-half years to follow the nine Labour ones in 13 years that Mr Shapps rightly used to complain about.
In one sense the rapid turnover can be seen as the inevitable outcome of party leaders trying to keep ambitious back-benchers happy. On the Labour side, the job may have been upgraded again, but in the process the experience and knowledge of Jack Dromey has been lost just as the party begins to set out its new policies. Everyone in housing may complain that no sooner has a minister or shadow got to grips with the portfolio than they are moved on but that seems to count for little compared to other considerations – and may even be seen as a way of preventing ministers from being captured by ‘producer interests’.
Real power over housing of course remains where it always has and always will (the Treasury) and real influence lies with the department that spends most of the ‘housing’ budget (the DWP). However, what happens to the housing portfolio still sends a message. There is a sense that the coalition regards social housing as ‘mission accomplished’ after the wave of reforms introduced under Shapps. If all the focus seemed to be on delivery under Mr Prisk, that has now been sidelined in the rush to introduce help to buy. That may come with the prime ministerial seal of approval but it is less about tackling the housing crisis than using it to reap the benefits at the next election. As Martin Wolf argues forcefully in the Financial Times today, ‘the political genius of the scheme is that it appears to help hapless victims, while in fact helping the usual suspects’.
And so we all go through the ritual of ‘welcoming’ the new housing minister yet again. The good news on Kris Hopkins is that he does know about housing. As portfolio-holder at Bradford City Council he oversaw what was at the time the largest English stock transfer and went on the become leader and chair of the regional housing board for Yorkshire & Humber. ‘A genuinely likeable and committed man,’ is the verdict of one person who worked closely with him at the time (though Nadine Dorries of course begs to differ).
The suspicion that Mr Prisk lost his job because of his lack of media visibility is confirmed in another blog on Conservative Home by Harry Phibbs. ‘The objection to Mark Prisk…was not to do with any objection to the substance of Mr Prisk’s work but his reluctance to undertake media interviews,’ he says. ‘I suppose in the run up to the next general election getting the message across is rather important.’
On this front, Mr Hopkins has got off to a flying start. He spent his first afternoon visiting a house building site in Northampton accompanied by David Cameron and boasting that help to buy has ‘captured the imagination’ of the public.
Yesterday he hailed the ’10,000 home owners created through the right to buy’ as new figures showed 2,149 council and housing association sales in the last three months to go with the 8,000 in the year to April. ‘For years the right to buy was allowed to wither on the vine, with ever-decreasing discounts leaving the prospect of homeownership out of reach for far too many social tenants,’ he said. ‘But our reinvigorated scheme has changed that, with increased discounts helping more than 10,000 new homeowners onto the property ladder.’
If that turn of phrase sounded vaguely reminiscent of a certain predecessor, his next move was possibly Shappseque in its brilliance. He took to Twitter to claim: ‘House building is now at a 10-year high. And house builders will gain further confidence from the very positive response to #helptobuy.’
The brazen cheek behind that (the 10-year high is a reference to a sentiment index of purchasing managers that help to buy has sent into overdrive, whereas actual house building is of course still flatlining) was evidence that the new minister is learning fast.
But he is still a junior minister. In footballing parlance, housing has gone from making the play-offs for promotion to the premiership to relegation to league one in the space of three seasons. From Watford or Nottingham Forest to, say, Bradford City, currently five points behind the leaders in the third tier of English football.
It’s under attack from all sides but the strongest arguments for help to buy 2 are the ones that ministers cannot mention.
No matter how much David Cameron, George Osborne and the new junior housing minister go on about aspiration and opportunity, the critics refuse to go away. In just the latest example, the all-party Treasury select committee scorns government assurances to repeat its earlier warning that the controversial scheme will boost house prices and be politically impossible for future administrations to exit.
Here’s my analysis of the stated – and unstated – arguments made by ministers:
1) There’s nothing wrong with 95 per cent mortgages. This boils down to an assumption that if anything is dysfunctional it’s the mortgage market not the housing market. That presupposes that mortgage market deregulation and the rise of 95 per cent loans were not themselves factors in the last bubble. According to the Council of Mortgage Lenders, the median advance for a first-time buyer was 84 to 88 per cent between 1974 and 1981, rose to around 95 per cent through most of the 1980s and 90s, then fell back to 87 to 90 per cent between 1999 and 2007 before slumping to 75 per cent in 2009. The median is currently 82 per cent but it is possible for first-time buyers to find a 95 per cent mortgage without help to buy – see, for example, these save to buy deals available from Nationwide.
Low deposit deals remain expensive compared to those available to people with more money to put down but it looks like help to buy 2 will not change that much if the Treasury charges lenders a commercial rate of 90 basis points on the entire cost of the loan for the guarantees on a 95 per cent mortgage. Will rates of 5 or even 5.5 per cent, plus restrictions on affordability and people with a poor credit record, limit demand along with the benefits claimed by government and the risks feared by critics?
2) House prices are not too high. At the Conservative Party conference last week, ministers were quick to highlight prices in places like Nelson and Wigan rather than London and the south east while carefully not explaining why it is necessary for homes worth up to £600,000 to be eligible and for the previous income limit of £60,000 a year to be scrapped. Much depends on which house price index you believe. Asked by Evan Davis on the Today programme why house prices are so high (6.7 times earnings in England against a historic norm of 3.5), Treasury chief secretary Danny Alexander said: ‘Actually I’m not sure it’s right to say house prices are so high’ but it became clear that he really meant mortgage repayments are not so high (because of record low interest rates). As for fears that help to buy 2 will trigger a stampede of applications and a new bubble (but see 1 above), the government seems so unconcerned that the launch press release says that ‘banks are braced for a flood of interest from the public’.
3) It could still boost supply even though it is not linked to new homes. As David Cameron put it this morning:
‘Moves such as Help to Buy will also encourage housebuilding. If potential buyers can’t buy, builders won’t build - so this is an important part of unlocking the market.’
Unlike the first phase of help to buy, and unlike new buy, the help to buy mortgage guarantees are available for existing as well as new homes. That’s the basis of the most obvious objection: that it will simply boost demand without doing anything about supply. As Brian Green of Brickonomics has pointed out, there is a long-term relationship between transactions and private home completions: roughly one home is built for every 10 homes sold. If Savills is correct in its estimate that help to buy will add an extra 550,000 sales over the next three years, that implies an extra 55,000 new homes as a result. An increase of around 20 per cent on current private sector completions is not to be sneezed at but it seems very poor targeting of £12 billion of guarantees. As Paul Smee, director general of CML, points out: ‘The homes need to be there for people to buy, as well as the finance to buy them.’
4) It will help first-time buyers in particular. George Osborne said in his ministerial statement this morning:
‘The government is committed to supporting people who aspire to become homeowners. Since the financial crisis, increased deposit requirements and falling equity values have left many hardworking households unable to get onto the housing ladder or trapped in homes unsuited to their aspirations and needs. This has particularly impacted first-time buyers, who have found it increasingly difficult to purchase their own home.’
Listening to that, you’d think that Help to Buy 2 was only for first-time buyers, when in fact it’s available to everyone except buy to let landlords and second home owners (but see 6 below). If it means more loans at higher loan to values (see 1 above) that should help some people but many first-timers interviewed in the national media say they believe they had better get in quick before prices rise.
More significantly it should at least allow first-time buyers to compete on more equal terms with buy-to-let landlords. Buy to let effectively works by allowing landlords to borrow against the future incomes of their tenants, many of them the reluctant renters that help to buy is meant to be helping. However, landlords enjoy two other advantages that make their repayments cheaper: interest-only mortgages and funding for lending. Launched last year, this scheme is much less well known than help to buy but it has significantly reduced interest rates for landlords and buyers with significant deposits. Although it is meant to help small businesses, its real impact is indicated by its nickname: funding for landlords. Will one government subsidy counterbalance another?
5) It should help second steppers, freeing up a key part of the market. The plight of people who succeeded in becoming first-time buyers only to find that they cannot afford to move is widely seen as a key factor holding back the market as a whole. Help them to move, the argument runs, and it will free up properties for new first-timers. According to the latest survey by Lloyds Bank, their position has improved over the last year and they now have an average of 13 per cent of the average value of a second stepper home. However, the group of second steppers who arguably most need help – those with a poor mortgage arrears or credit record – will not be eligible for help to buy 2.
6) Second homeowners and buy to let landlords will not be able to benefit. The scheme rules make clear that the loan guaranteed cannot be a buy to let mortgage and loans will cease to be eligible for the scheme if the borrower grants a tenancy or lease to someone else. In addition, Help to Buy 2 borrowers will have to sign a declaration that they do not have an interest in any other property and that none of the additional funds will be used to buy an interest in other property. In addition the loan cannot be a buy-to-let mortgage. However, there are exemptions for service personnel posted elsewhere, for people renting out their home as part of mortgage forebearance or because they have to move for employment reasons, and where there is a family bereavement or relationship breakdown. All of those sound perfectly sensible but how many help to buy homes will end up being rented out?
So all six of the stated reasons for help to buy 2 have some things going for them but, to varying extents, more against. That leaves two more arguments that are probably the strongest as far as the government is concerned but which for obvious reasons go unstated:
7) It will provide an economic stimulus and Treasury windfall. Boosting housing market transactions is a good way of getting the economy as a whole moving because of all they furniture and white goods movers will need to buy for their new home. The government will make money directly from rising stamp duty receipts and indirectly from up to £1.2 billion in help to buy fees (as Robert Peston pointed out this morning, though the government says it is not meant to make a profit) and from increases in the value of the government’s holdings in RBS and Lloyds as the housing market picks up. A stimulus financed by government borrowing may have been out of the question but one financed by borrowing by other people guaranteed by the government is a completely different matter. And, with any luck, it will all be happening in time for spring 2015 when…
8) It should be worth lots of extra votes at the next election. Mr Cameron and Mr Osborne have made great play of the link between help to buy and their narrative of ‘a land of opportunity’ and the older Tory theme of ‘home owning democracy’. Most people will not benefit but grateful first-time buyers who got on the ladder and existing owners who see the value of their home rise could generate vital votes at the next election. As for the dire warnings about boom and bust and what happens when the scheme ends in 2016, who cares? (But see 1 above).
So farewell then, Mark Prisk. You didn’t say very much. Which was nice.
That, with apologies to EJ Thribb, seems to be the initial reaction to the departure of the man that Inside Housing dubbed The Invisible Mr Prisk.
The man himself said on Twitter that he had ‘been asked to step aside from housing for a younger generation’. Given he’s a year younger than me, I can sympathise on that and tweeting a picture of himself without a hard hat was definitely one of the more stylish gestures by a sacked minister today.
Looking back at his 398 days in his job, Mr Prisk will be remembered mainly for the spending review (continued grant programme and rental certainty, very good; end of rent convergence and re-let thumbscrews, not so good) and for some progress made on build to rent and unfreezing stalled sites.
Despite those achievements his future has looked shaky for a while. Over the last few months it’s been noticeable how many announcements that were theoretically part of his brief were made by other people, culminating in Eric Pickles proposing a tenants’ charter for families in the private rented sector last week.
Above all, though, Mr Prisk was defined by who he was not. In Grant Shapps he succeeded a politician who could tweet as he did interviews as he announced new initiatives and created alter egos and all of them before breakfast.
That may in part explain the generous tributes from David Orr of the National Housing Federation and Grainia Long of the Chartered Institute of Housing. Being ‘rational, thoughtful and interested in housing’ and having a ’commendable focus on delivery’ were not enough to save his job.
That ‘focus on delivery’ was my big hope when Not-Shapps took the job in September 2012. However, Mr Prisk’s mere 158 mentions in Inside Housing in the 13 months since is a poor return for any politician in the main media outlet covering his brief. Grant Shapps had over 1,000 in his two-and-a-half years. Does that show that journalists (and bloggers) are shallow creatures or that Mr Prisk lacked a vital instinct for self-promotion?
In terms of actual delivery, the numbers look like a case of return to sender so far. Housing completions plumbed new depths on his watch, and the housing shortage continued to grow, although there are indications of improvements to come.
Mr Prisk didn’t just suffer by comparison with Mr Shapps of course. If you had asked a random group of people last week who was housing minister, the majority would have looked at you blankly, but I’m guessing more would have said Nick Boles than his colleague.
The planning minister is the one who has made all the running on housing as a political issue, winning wide praise for the way he has taken on the nimbys and argued the case for new homes. Little wonder that many people were hoping that he will take a beefed-up role as minister for housing and planning.
Above all, of course, whoever it’s done by, the job of housing minister counts for little when the Department for Work and Pensions sets so many of the parameters and the Treasury and George Osborne control both the purse strings and the politics of the brief.
The reshuffle comes a day before tomorrow’s launch of Help to Buy 2. Combine that with a parallel Labour reshuffle seeing the apparent departure of Liam Byrne as shadow work and pensions secretary, and the wider politics of housing is entering a new phase.
As for housing minister, the real danger of the farewell to Mr Prisk (and to junior minister Don Foster) is that it risks a return to the revolving door nature of the job for which Mr Shapps rightly criticised Labour. (And on which point it’s just been confirmed that Emma Reynolds is replacing Jack Dromey as shadow housing minister).
Ed Miliband’s conference speech was much vaguer about housing than the advance briefing but it still sounds like good news.
The Labour leader said that ‘we’ll have an aim that at the end of the parliament Britain will be building 200,000 homes a year, more than at any time in a generation’.
He said that in 2010 there were a million too few homes in Britain but that the shortfall would rise to 2 million – the equivalent of five cities the size of Birmingham – by 2020 if we carry on as we are.
He warned land-hoarding developers they would have to ‘use the land or lose the land’. That prompted loud applause in the hall but it is already generating ‘Red Ed is back’ headlines outside it.
He promised local communities a new ‘right to grow’ without obstruction from neighbouring authorities. Best of all, he pledged that a Labour government would identify sites for new towns and garden cities.
And, in case anyone had forgotten since Friday night, he promised that ‘I’ll be the prime minister who repeals the bedroom tax’. That was the line that prompted an immediate attack from Conservative Party chairman Grant Shapps about a million spare bedrooms but it is still an important turning of the tide in the political debate on benefits.
But that’s where what Mr Miliband actually said finishes and interpretation begins. Take that 200,000 pledge. For a start, if he really meant Britain that is a very modest pledge indeed: the last time there were more than 200,000 homes built was five years, not a generation, ago. He also seems to have forgotten that Westminster does not control housing policy in Scotland and Wales except indirectly through UK policy on the economy and welfare.
So I’ll assume that he really meant England and that the niceties of devolution did not fit with his theme of ‘that’s how we make Britain better than this’.
The last time there were more than 200,000 completions in England was 1988/89, which does fit with that ‘a generation ago’. It would be almost double the 107,000 in 2012/13 so it’s significant but it still seems some way short of the ‘million homes in the next parliament’ pledge that Labour was rumoured to be considering ahead of the conference. It is also still less than is required to meet demand and it will have taken 13 years to get back to pre-credit crunch levels of building.
As Carl Brown has been reporting, shadow housing minister Jack Dromey revealed more on ‘the right to grow’ at a fringe meeting yesterday while shadow communities secretary Hilary Benn had more details on ‘use it or lose it’ in his speech this morning.
He explained that: ‘When communities have given planning permission they should be able to say to developers, “we have given you the go ahead so please get on and build the homes you said would. And if you don’t then we will charge you, and if you still don’t, we will sell the land on to someone else who will”.’
There was more detail in this morning’s preview of Mr Miliband’s speech in The Guardian. Patrick Wintour reported that the Labour leader would appoint local government finance expert Sir Michael Lyons to lead a commission looking into the obstacles to new building and enable an incoming government to draw up housing reform legislation quickly.
‘The Lyons housing commission will look to see how little-used existing compulsory purchase orders – which require owners to sell – can be strengthened by making them less legalistic and time-consuming.’ he said.
‘It will also examine how to give local authorities proper compulsory purchase powers so that they can buy, assemble and grant planning permission on land that is being hoarded and is holding back development.’
It would also set out detailed plans to establish new towns and garden cities including financial incentives and freedoms for local authorities, such as the ability to retain the increase in business rates for 30 years to invest in infrastructure and services.
That is good news for anyone like me who believes that new towns and compulsory purchase of land are prerequisites for building enough homes. It also sounds like some serious thought has gone into how to get to that 200,000 figure. Better a modest but achievable target than one dreamt up out of thin air.
That said, new towns will take time even if the planning starts on Labour’s first day in office. Given that the most likely location for them will be Conservative-held seats in the south east, they will face some ferocious opposition. How much of a contribution will they really be making after five years?
Labour will also be taking power just as help to buy 2 begins to wind down. If those predicting a house price bubble are correct then it could burst at exactly the wrong time, sending private house building into reverse.
That only emphasises the point that the numbers will only be achieved with a big contribution from the public sector. England has not seen 200,000 a year on a consistent basis since the early 1980s and the end of the council house building programme.
So it was disappointing not to see an explicit commitment from Mr Miliband or (yesterday) Ed Balls to changing the public borrowing rules for council housing. Mr Benn promised in his speech this morning that ‘a Labour government will help councils to build more affordable homes by reforming the housing revenue account’ but hasn’t that already happened? There may be an overwhelming desire in the party to change the rules and build social housing but is the leadership yet ready?
In his speech, Mr Balls said that we need to secure stronger growth and invest for the future: ‘That is why we have consistently said, it is why the IMF has said, bring forward £10 billion of infrastructure investment right now, build 400,000 affordable houses over the next two years, create half a million jobs and thousands of apprenticeships. That is the way to secure an economy that works for all and is built to last.’
However, I read that as him saying what the coalition should do now – not committing himself to it in 2015. Perhaps we’ll hear more later this week but we’ll probably have to await the outcome of his zero-based spending review for the detail.
It’s worth noting that the Liberal Democrats committed themselves to a target of 300,000 homes a year last week. However, after the leadership successfully opposed an amendment on lifting borrowing caps completely, party policy is now merely to allow councils to pool them, so it is far from clear how they would achieve it.
Someone sharper-eyed than me spotted that The Independent’s preview of the speech talked of boosting the number of new homes ‘from 87,000 to 200,000’ by 2020. That 87,000 is the current total of private completions – so would any social housing be on top of that? We don’t currently have enough detail to say but that would be a much bigger deal. Without council housing, England has only achieved 200,000 completions three times since the war: 1964, 1967 and 1968.
That, coincidentally, was the last time that a Labour government came to power with a serious house building target and it went on to demonstrate the risks of getting too obsessed with the numbers game to the exclusion of other considerations. There seems little danger of that with a much more modest target for 2020.
While gaps remain in the detail, and there are still questions to be answered, the very good news is that housing is back as a top priority for Labour.
As everyone focuses on the bedroom tax, there is worrying evidence today of the impact of another part of the benefits system on vulnerable homeless people.
Tougher benefits sanctions were introduced in October 2012 for people on job seeker’s allowance. The period that benefit can be stopped increased from between one and 26 weeks to four weeks and three years. Changes for those on employment support allowance followed in December 2012.
The changes are part of steadily escalating conditionality requirements, including the claimant commitment that will be introduced in 100 job centres a month from October as part of the government’s conviction that ‘looking for work should be a full time job’.
Claimants can be sanctioned for offences including ailing to attend a job interview or to participate in the work programme and refusing an employment or training scheme or leaving one voluntarily or through misconduct. The idea is that the sanctions will change people’s behaviour and make them more likely to find employment.
However, research out today Homeless Link finds that the new regime is disproportionately affecting homeless people: 31 per cent of those on JSA had been sanctioned compared to just 3 per cent of claimants overall.
The report said: ‘While the intention of sanctions is to incentivise claimants into work, our research shows that this is not happening for homeless people. Instead, sanctions are effectively punishing vulnerable people – who are trying to engage with finding work – for making mistakes. This is a high cost to pay for people who are least able to manage.’
The consequences can be extreme. The report found that some sanctioned homeless people are turning to petty crime while some are suffering increased anxiety that worsens existing mental health issues. Others are going into food poverty. When I tweeted about this yesterday, I was also told of young homeless people who have been sanctioned and ended up in hospital being treated for malnutrition.
As one service provider told Homeless Link: ‘We are working with some very vulnerable people at the outset and sanctions take people to another level of vulnerability.’
The housing consequences can be serious too despite the fact that claimants who are sanctioned are meant to continue receiving housing benefit. The report said that in practice homeless claimants do not know to notify the local authority of their circumstances and ended up losing their housing benefit too.
All but one of the 45 service providers who responded to the Homeless Link survey said that homeless people were falling into rent arrears as a result and 23 said that clients had been evicted because of sanctions.
Homelessness organisations face a loss of rental income and of service charge income too, with impacts on organisational income and on the workload of support workers.
If the findings are alarming enough for homeless people suffering from sanctions and the organisations trying to help them, they should also be deeply worrying for the Department for Work and Pensions because they suggest that sanctions are failing in their principal aim of incentivising people into work.
Among the recommendations, the report says that the DWP should take more account of the difficulties faced by people with complex needs and that guidance should make provision for exemptions or special terms for homeless people who need more support. Meanwhile clearer and more consistent information would help prevent people losing housing benefit as well as sanctioned benefits.
For homelessness service providers, the message is to give more encouragement and support to clients to inform Job Centre Plus of their circumstances and to make them aware of their responsibilities.
But is there an unspoken message for housing as a whole too? Beyond the bedroom tax, other less visible cuts in housing benefit continue to rise, especially for younger people, and homelessness is on the increase. And it’s not just cuts in housing benefit that can lead to consequences such as rent arrears and evictions. If and when the universal credit starts, with payment of the housing element direct to the claimant, any cut in any benefit will be mean potential rent arrears. This report highlights yet again the importance of maintaining direct payment for vulnerable claimants and having effective procedures in place.
While universal credit itself may not be seen for a while beyond a limited roll-out in a few job centres at a time, associated elements of the new system including a steadily tighter conditionality regime are still being introduced at the same time. Ten pilots on in-work conditionality, where up to a million working claimants could be sanctioned for not working enough hours, begin next month.