Saturday, 25 October 2014

Inside edge

Poverty prism

Wed, 22 Oct 2014

Who said this? ‘What is currently happening in the housing market epitomises our concerns about Britain becoming a permanently divided nation.’

This is not a quote from a housing pressure group or a think-tank or even an article in Inside Housing. Instead it is the verdict in a report published on Monday by an official government body: the Social Mobility and Child Poverty Commission.

The advance headlines ahead of its annual State of the Nation report were about the ‘under-30s being priced out of the UK’ and much of the coverage after that went to the commission’s criticism of Labour’s plans on the minimum wage and its proposal to ban unpaid internships. However, read as a whole the report gives a fresh perspective on problems that are all too familiar to anyone in housing.

That perspective comes from its unusual status as an advisory non-departmental public body with a remit to advise the government and others on child poverty and social mobility. It was established under the last government’s Child Poverty Act 2010, which set binding targets on future governments to eliminate child poverty by 2020.

The coalition’s record on child poverty is mixed so far and how you consider housing makes a big difference. The most commonly used measure, relative poverty (that is, relative to other incomes) before housing costs, improved in the three years to 2012/13 thanks to rising employment and the fact that benefits were stable at a time when real wages were falling. However, progress on this has stalled and high housing costs dragged an extra 1.4 million people into relative poverty after housing costs were taken into account.

The Commission concludes that ‘changes in the housing market are already increasing poverty and are threatening to become a major impediment to social mobility’. The number of children in absolute poverty (unable to afford a basic standard of living) after housing costs has risen by 450,000 since 2009/10. This has been ‘almost entirely driven by an increase in working poverty’ and the Commission says the biggest factor in this is the shift of families with dependent children from owner-occupation to the more expensive private rented sector. The proportion renting privately has doubled in the last ten years.

The report sees four implications in these ‘startling changes in the housing market’:

  • Lower relative living standards for some families, with private renters paying 40 per cent of their average income in rent but mortgage holders paying 20 per cent.
  • A rising proportion of the population not benefitting from record low interest rates
  • Reduced stability for families: in 1999/2000 three-quarters of those with children who were renting had a social tenancy but in 2012/12 less than half did.
  • A delayed transition to adulthood and increased inequality between generations as young people are locked out of ownership and parental help becomes ever more important to getting on to the housing ladder.

The Commission argues that what’s happening in housing challenges ‘the very terms of the debate’ about child poverty and social mobility:

‘Changes in the housing system complicate what social mobility means, with risks that, even if children from less advantaged backgrounds do well at school and find a good job, they will find themselves trapped for the long-term in shared, expensive and insecure private rented accommodation, unable to start a family and worse-off than both their parents and their peers from more advantaged backgrounds.’

And it says the next government must give housing greater priority: ‘The new objective for housing policy should be that it contributes to more social mobility and less child poverty’. There should be action to make longer-term tenancies the norm, boost housing supply and make shared ownership a real option for people who are priced out of the market without assistance from their families. Private renters are missing out on both security and asset accumulation and face support for housing costs becoming detached from actual rents and it’s unclear to the Commission whether the current voluntarist approach is having much impact on longer-term tenancies. 

All of these points will be familiar to people working in housing but they take on a different meaning when put through what the report calls a ‘social mobility prism’. The Commission sees action on housing as one of five key recommendations to meet the ‘2020 challenge’. The others are credible plans for deficit reduction, recoupling earnings and economic growth, boosting growth in the regions and setting out a ten-year ambition for the UK to become a Living Wage country by 2025.

However, to view that through a housing prism, the Living Wage assumes that families with children have access to social housing. That makes it curious that the report does not say more about boosting supply of social housing or protecting what already exists.

As things stand, progress towards the 2020 child poverty target is about to go sharply into reverse. This report only measures progress up to 2012/13. That means it does not reflect all the cuts in benefits and tax credits that applied from April 2013. Publication of the 2013/14 data is currently scheduled for June 2015, a convenient month after the next election.

And we are still only halfway through austerity. The Commission argues:

‘It is hard to see how savings on this scale can be made without seriously affecting the public services that aim to level the social playing field and the income transfers that have propped up families in work and out of work. Yet there seems to be an emerging consensus between the main political parties that fiscal consolidation on this sort of scale will be necessary between 2015 and 2020.’

That is a matter for each of the political parties but:

‘What appears hard to square, however, is their shared desire to reduce poverty and speed up mobility with their eye-wateringly tight fiscal plans. None of the main political parties has made much effort to reconcile the social ends they say they want to achieve with the fiscal means to which each of them is committed. There is a need for more honesty about the implications of planned public spending cuts from all the political parties.’

The report warns that protecting benefits for pensioners will make the cuts far worse for everyone else. With most working-age benefits now rising by just 1 per cent a year (and the Conservatives pledging a freeze to follow that) poverty is set to worsen in the rest of this decade.

Far from eliminating child poverty, experts predict we are now on course for the first decade since records began in which absolute child poverty increased. And a housing system that will become the symbol of a permanently divided nation.

Lyons made

Thu, 16 Oct 2014

The Lyons Review is the most significant report on new housing supply in years but it’s much more convincing on private sector housebuilding than social housing.

Lyons picks up where Barker left off on housing in 2004 (and on planning in 2007) but with two added bits of context. First, we’ve gone backwards in the last ten years: annual output is around half what we needed and the backlog of unmet need is mounting by the day. Second, any solutions have to operate under severe political and financial constraints.

So anyone reading the report whose priority is more social housing will come away disappointed with the recommendations for a future Labour government. There will be no change in the borrowing rules for council housing and no increase in the borrowing caps except for potential swapping between authorities. The case for continuing and increased grant subsidy is accepted but subject to overall constraints on public spending in which social housing will be an unspecified ‘priority’ for more money.

And anyone hoping for a shift in the political obsession with aspiration and ownership rather than homes will already have been disappointed by the advance coverage. The Labour Party’s spin has been all about first-time buyers and ‘homes for locals’ even though they get relatively minor mentions in the report itself.

However, as with the launch setting of Milton Keynes the report offers solid grounds for optimism too. Here at last is consensus on a long-term strategy in place of the short-term gimmicks we’ve seen ever since the financial crisis.

The military overtones in the report’s title – ‘Mobilising across the nation to build the homes our children need’ – are one indication of its comprehensive range. Another is the review’s acceptance that the main aim of the report – how to deliver Labour’s pledge of 200,000 homes a year by 2020 – is only a starting point in meeting need now estimated at 260,000 a year. The recommendations reach well beyond one parliament.

The mobilisation will have to be across all tenures and all types of housing organisation. Here’s the review’s delivery grid of who should be producing the 200,000 homes in England by 2020:


What’s interesting here is that Lyons believes that volume housebuilders can only do so much. They will build half of the 200,000 homes in 2013 and increase output by 50 per cent on 2013 levels. However, the plan involves all the other actors – housing associations and local authorities, small builders, custom builders, private rental developers – at least doubling the number of homes they provide. That 200,000 target may be less than is needed but it will still be extremely challenging.

That’s why the meat of the report is a series of recommendations on wholesale institutional change designed to promote increased supply. At national level there would be:

  • A housing minister restored to attending Cabinet status and supported by a cross-government taskforce, independent advisory Housing Commission and national Housing Observatory.
  • An immediate statement of national targets for housebuilding moving beyond 200,000 and covering the next 20 years plus early publication of a housing and planning white paper and draft Bill
  • A ‘re-tasking’ of the Homes and Communities Agency as a national delivery agency with key roles as the sole agency for disposal of government land and assets and as a development partner and manager of government guarantees. Grant funding responsibilities would transfer to the DCLG and then be consolidated with economic development funds and devolved to city or county region authorities.

At a local level, the report recommends a series of changes on planning, with new powers for the secretary of state to intervene where there is persistent under-delivery, plus a series of new delivery mechanisms including:

  • Groups of local authorities co-operating on strategic housing market plans (these would also be the mechanism for the ‘right to grow’ for authorities that cannot expand at the moment)
  • Giving local authorities new powers and incentives to take a proactive approach to land assembly and development in Housing Growth Areas – either as individual authorities or working with others.
  • Allowing councils to create New Homes Corporations to respond to specific needs across local markets (these would be like urban development corporations but accountable to local communities)
  • Garden cities and garden suburbs brought forward by local communities and backed by a revamp of the New Towns legislation and Treasury guarantees and financial incentives to unlock development and infrastructure.

These changes at national and local government level would be matched by reforms to increase housebuilder capacity including ‘use it or lose it’ measures to ensure planning permissions are implemented, support for small firms and development of the construction skills base.

Crucially, there would be changes to the way the land market operates too. To ensure greater transparency, the Land Registry would open up information on land ownership and housebuilders and others would be required to register land option agreements, transactions and prices.

And many of the new institutional arrangements would be backed up by updated compulsory purchase legislation to unlock development. Where land is designated for a garden city or housing growth area, compensation would be based on current use value plus a premium to ensure a generous return to the landowner but ensuring that the infrastructure can be funded from the land value uplift.

These recommendations represent a growing consensus about the way forward and they come from people right across the housing and housebuilding world. However, political and financial constraints mean that the report is weaker when it moves away from market homes for sale.

Councils would get a key role in facilitating development in their areas, endorsement of innovative ideas like local housing companies and the prospect of limited flexibility on their borrowing caps. But there is but nothing yet that amounts to a rebirth of council housing let alone a change in the borrowing rules.

Housing associations are offered the prospect of new flexibility on how stock transfer homes are valued and potential new freedoms on rents. There would also be discussion of how to mobilise surpluses and headroom across the sector to unlock further investment.

And the report is also timid when it comes to other crucial issues for social housing. The right to buy would be reformed to enable ‘genuine one-for-one replacement’ and the government would assess the distribution of sales receipts as part of that. However, the policy itself would merely be left to an ‘early review’.

As for affordable rent, the report has extensive discussion of the long-term costs and the impact on housing association borrowing. It endorses analysis that bricks and mortar investment offers better value for money than higher spending on housing benefit. However, moving back to social rent would mean higher grant and fewer homes at a time when Lyons wants to double output. The report does not specify the mix of a future development programme and several times talks about ‘social and affordable rent’.  

The aim is to ‘move away from models of affordable housing that are solely grant dependant and shift our approach to public funding based on investment rather than consumption’. That’s a reference to mechanisms such as long-term loans and land but the report concludes:

‘The review recognises that constraints on public spending and debt mean that the scope for increased capital spend is likely to be severely limited in the immediate term. However it is clear that without further capital support there will be a limit to the amount councils and housing associations are able to do to meet the need for affordable homes. This is therefore an issue that government will need to return to in future and should ensure that investment in housing is better reflected as a priority for government in future decisions on public spending.’

Even if Labour wins in 2015 and even if it achieves its target of 200,000 homes by 2020, there is unfinished business. 

Taxing problems

Tue, 14 Oct 2014

Could we invent a worse system of taxing housing than the one we have now?

As modest attempts at reform are made to howls of protest from those who stand to lose out, it’s worth standing back a moment to reflect on what we tax (and why) and what we don’t.

We have an annual tax on the value of all homes but the council tax in England and Scotland is based on property values as they were in 1991 with a top band of just £320,000. The owner or tenant of a modest semi in Wolverhampton can end up paying more than an oligarch with a multi-million pound home in Westminster. The system was designed to narrow the differences between the top and the bottom from the start but failure to uprate it in line with house prices has amplified the distortions.

We have the bedroom tax for social housing tenants on housing benefit who are judged to be under-occupying their homes but people living on their own can still claim a 25 per cent discount from the council tax.

Meanwhile the hundreds of billions of pounds worth of unearned wealth that existing owners have locked up in their homes are exempt from capital gains tax. True, the exemption only applies to principal residences but, as the MPs’ expenses scandal showed, there are all kinds of ways of avoiding it if you have a second home or a buy-to-let investment. The exemption also encourages people to buy more housing than they need given that all other forms of investment are subject to CGT.

Instead we impose stamp duty on the buyers of homes. This is the sort of transaction tax that economists hate because it is effectively a tax on labour mobility. That’s complicated even more by the current slab structure, which means a huge increase in duty on the whole sale once homes are worth above £250,000, £500,000 and so on. However, stamp duty has become a huge earner for the Treasury, with receipts rising forecast at £12.7 billion in 2014/15, and it is hard to avoid now that loopholes on ownership through companies have been closed.

We rightly exempt new homes from VAT but we continue to charge it at 20 per cent on most conversions and renovations of existing homes. This is a major barrier to bringing empty homes back into use and to increasing the space in existing homes.

Then we have section 106 requirements and the community infrastructure levy. These are presented by housebuilders as taxes on new homes but in reality they are imperfect taxes on land value uplift. Cutting ‘red tape’ by cutting the requirement for new homes may make some sites viable at the margin but the aggregate effect is simply to increase profits for housebuilders on land they already own and to increase the price they will pay for land in future.

And what about the windfall profits driven by major projects like Crossrail? Anyone lucky enough to own a home close to a station on a new train line will make substantial gains that are entirely driven by public investment. Under our current system they are also tax-free.

As I’ve blogged before, we can at least console ourselves that we did manage to get rid of the most absurd example of housing taxation of all. Mortgage tax relief, a subsidy that fed directly into increased house prices, was finally abolished in 2000. However, it had survived for more than 30 years after the tax it was relieving (schedule A income tax on the imputed rental value of a home) was abolished.

And what are all these taxes for? Raising money for the Treasury and for local services and community infrastructure are of course important aims. However, they seem to come a long way ahead of promoting a better housing system or reducing house price volatility or fostering local democracy.

However, the debate raging about property tax reforms that are already on the table shows the opposition that any proposal for reform will face.

Labour and Lib Dem plans for a mansion tax on homes worth over £2 million in England have faced a predictable attack from upmarket estate agents but there also seem to be growing doubts from MPs and mayoral candidates worried about the number of people who will be affected in London. The Labour version of the mansion tax involves an annual charge whereas the Lib Dems have been dropping hints about creating extra council tax bands instead. However, we’ve yet to see much detail on who would pay and who would be exempt and the relationship between a mansion tax and inheritance tax and council tax.

In Scotland, meanwhile, the government has just published plans to replace stamp duty with a land and buildings transaction tax. This would replace the slab structure with a marginal and more progressive one that the Scottish government says will mean that 90 per cent of buyers will be better off or no worse off. Given that the change will be revenue neutral, buyers of more expensive homes will pay significantly more.

A furious assault backlash from vested interests peaked in reports this morning that the new tax will hit the ‘squeezed middle’. Estate agents normally exaggerate the value of what they are selling so that tiny flats become bijoux and wrecks ‘would benefit from modernisation’. In this context, the language works the other way around so that four-bed detached homes in Morningside and The Grange (two of the most exclusive parts of Edinburgh) become ‘modest family homes’.

The reform seems set to create a fairer system but it still has the disadvantages inherent in a transaction tax. For more on the issues involved see this blog by Mark Stephens, who argues that the critics are talking rot but the real test will come with the reform of council tax, and this by Ken Gibb, who highlights the precedent that it will set for future devolution.  

Kate Barker’s new book Housing: Where’s the Plan (full review to come soon) includes a great summary of how we’ve arrived at such an imperfect system and an analysis of why the options for reform are so problematic. In particular, she recounts the history of attempts to tax land value uplift and how they have been frustrated by landowners’ ability to sit tight and wait for a change of policy from a new government. Her own favoured solution is to extend capital gains tax to principal residences.

The most comprehensive set of proposals for reform came from the Mirrlees Review for the Institute of Fiscal Studies in 2011. Recommendations included a housing services tax, a land value tax and reform of tax on rented housing to create a level playing field with owner-occupation.

With austerity set to continue for the rest of this decade, no government will be able to ignore housing as a source of new revenue. Squeezing more from the current dysfunctional system may avoid controversy but at the price of distorting our housing system even further. All of the options for reform present their own problems but any of them would be an improvement on what we have now. 

The H word

Thu, 9 Oct 2014

Nick Clegg’s failure to mention housing in his leader’s speech feels like a suitably downbeat conclusion to the final party conference season before the election.

As I blogged earlier in the week, on paper the Lib Dems have the best housing policies of any of the mainstream parties. A target of 300,000 homes a year, a housing investment bank and powers for local authorities to suspend the right to buy will please most people reading this. A succession of MPs, including all three of Clegg’s potential successors, made all the right noises about housing on the conference floor and in countless fringe meetings.

So does it matter that Clegg failed to use the H word? On one level, no: if Clegg had added a paragraph saying how building new homes is a priority and supporting first-time buyers a passion it would have told us nothing more than we already know about the party’s policies. Earlier in the conference, Clegg did make a significant housing announcement with support for ten new garden cities. And in any case both he and the Lib Dems may be obliterated into irrelevance after the election.

On a more basic one, yes it does. This was not just the last party conference season before the election, it was also one in which mentioning or not mentioning something in a leader’s speech took on an extra significance. Ed Miliband forgot to talk about the deficit and it confirmed what many people thought about him and Labour. David Cameron said nothing about climate change and it made everyone remember the phony PR man of Hug a Husky.

I wouldn’t put Clegg – or housing – in the same bracket. However, given what happened at the Labour conference, it seems a reasonable bet that his advisers will have pored over his speech for anything important that was missing.  There were plenty of opportunities for Clegg to make a brief link between housing and the ‘opportunity for everyone’ theme of his speech. Draw your own conclusions.

And not just about the Lib Dems. In blogs in the last couple of weeks I’ve noted a lack of focus from Labour on housing and gimmicks and more cuts from the Conservatives.

At much the same time as Clegg was speaking, Eric Pickles, the Cabinet minister theoretically responsible for housing, was thanking housebuilders ‘for your hard work in getting Britain building again’ and claiming the ‘sharpest increase in private building for 40 years’. That’s certainly an upbeat way of presenting the recovery from the lowest rate of housebuilding in peacetime for 90 years but it doesn’t change the fact that England is still building half the new homes needed.

In a blog yesterday, David Orr of the National Housing Federation summed up his sense of unease and frustration about the conference season as a whole. Housing fringe meetings were packed and 84 Homes for Britain events were held but he concludes that ‘the penny hasn’t dropped’ about the housing crisis and that the general assumption was that we have time when we don’t:

‘The overall sense was that in housing, as well as many other areas, the thing really lacking wasn’t just that critical sense of urgency. It felt like a lack of leadership, not just from those who are the leaders of the parties but from the parties collectively. If we are to end the housing crisis in a generation and if we are to be able to house our children (and what a shameful reality it is that we might not) we need our politicians to do more than be in power. We need them to lead.’

Grainia Long of the Chartered Institute of Housing was more optimistic that housing is being taken seriously and that politicians may finally be giving it the priority it deserves, ‘but I’m still not sure they really grasp the urgency of the situation’.

Perhaps in an election year this is inevitable. All the campaigning about the crisis has increased the salience of housing (or at least of new homes) as an election issue but not by enough to affect the result. Power is what matters.

But what then? The conference season suggests that the best we can hope for is a crisis that gets worse more slowly. At worst, the divide between housing haves and have-nots will continue to grow and so will the deficit in new homes. The effects of this will be felt by individuals, by communities and by the economy as a whole.

Maybe the clue is in the very notion of a conference season and an electoral cycle. In an editorial last weekend, The Observer concluded that our housing problem can be fixed but the politics of reform are toxic:

‘To be credible, politicians need to demonstrate they are willing to pursue reform with deeply unpopular consequences, not to mention a personal financial hit.’

There still seems to be a collective unwillingness to recognise that private housebuilders can only do so much, that the land market needs radical reform and that ‘good’ borrowing for social housing now could produce homes that generate a return and a long-term reduction in the deficit. Or that something as important as housing needs more than a weak sponsoring department with a revolving door for ministers and a semi-detached secretary of state. 

There are politicians in all three main parties who know this. Danny Alexander’s startling revelation at the Lib Dem conference that the Treasury has been considering a role as a direct commissioner of new homes shows that some in the most powerful department in government are thinking along the right lines. So too was Labour when it commissioned the Lyons review of how to get to 200,000 new homes by 2020. Hopefully the party will act on the report’s recommendations when it is finally published.

However, ahead of what looks seems set to be another close election, where are the votes in the H word? The housing crisis requires long-term solutions that have short-term costs and may only pay off once the government of the day has lost power. 

Paper tigers?

Tue, 7 Oct 2014

As so often before the Lib Dems look like going into the next election with the best housing policies. On paper anyway.   

Admittedly the competition is not high given the caution from Labour and divisiveness and hints about the end of grant from the Conservatives. However, the policies emerging from the Lib Dem conference in Glasgow look like they’ve been tested on a focus group consisting of people who care about housing.

This morning the party passed a motion calling for 300,000 homes a year, a new deal for renters, a housing investment bank and new powers for local authorities and housing associations to build plus measures to secure land at lower prices and remove barriers to house price stability. That was promptly amended to include a new power for local authorities to suspend the right to buy.

The rhetoric from Lib Dem MPs was good too. Tim Farron called on the party to have the courage to build more homes: ‘There are plenty of votes in opposing new homes but there are more votes still – and there is honour – in delivering them.’ This morning’s papers were briefed on Nick Clegg’s support for ten new garden cities, including five along a new rail link between Oxford and Cambridge.

Most promisingly of all, in two speeches this morning Vince Cable not only attacked Tory plans for yet more spending cuts and warned of the inequalities caused by the housing crisis but also supported higher government borrowing for infrastructure and housing:

‘When interest rates are so low, borrowing for investment is a no brainer and is nothing to do with deficit reduction. Of course we need to protect the next generation from too much public (as well as private) debt, but the next generation would certainly not thank us for a legacy of underinvestment, over-stretched infrastructure and unaffordable homes.’

With five years of continuing austerity in prospect whoever wins the election, that seems an essential precondition for increased investment in new homes that will reduce spending on housing benefit over the longer term. It’s a policy that senior Labour politicians seemed reluctant to endorse explicitly last month despite previous positive signals.

So far, so good except that there are reasons why I said the Lib Dem policies look the best on paper. The traditional one – that the party has no chance of power and it doesn’t matter what it says – seems less relevant now in spite the current state of the opinion polls.

The new one is what the party has actually done with power. To the obvious charge sheet of colluding with the bedroom tax and collaborating with other welfare reforms, a critic might add rolling over to have its tummy tickled by Grant Shapps. One Lib Dem council leader speaking this morning accused the party of ‘falling in behind a Tory housing minister determined to marginalise social housing’ while a London councillor raised the latest mockery of ‘affordable’ rent. 

Policies like affordable rent, the removal of security of tenure and allowing the discharge of the homelessness duty into an unregulated private rented sector definitely did not feature in the last Lib Dem manifesto and weren’t in the coalition agreement either. And just as Lib Dem ministers seem unable to stop pleading fairness to private tenants as a justification for the unjustifiable bedroom tax, so Tim Farron this morning was unable to resist boasting that the coalition has built more ‘social’ housing than Labour.    

Lib Dem supporters can point to some minor successes on housing policy, a more substantial list of Tory policies they’ve blocked and to the recent sharpening of criticism of their coalition partners. However, the party’s problems date back to decisions taken right at the start of the coalition. Accepting George Osborne’s prescription on the deficit made them prisoners of a long-term economic plan they now say is designed to destroy the welfare state. And traditional Lib Dem enthusiasm for ‘localism’ allowed the Conservatives to undermine national rights for social tenants and homeless people and strengthen the hand of local objectors to new homes.

It seems a reasonable assumption that the party will play its hand better in any future coalition negotiations. However, will policies on housing be red lined or still be pre-determined by bigger decisions elsewhere? Cable’s speech and suggestions by Danny Alexander of a direct Treasury role as a commisioner of housing offer grounds for hope. However, the reports of Clegg’s garden cities this morning says that they would follow construction of the new rail line that ‘would be provided once the structural deficit has been eliminated by 2018’. That seems to accept George Osborne’s timetable: why not start straightaway and fund the rail line from the uplift in development values or from borrowing instead?

And all that is before we get to that target of 300,000 new homes a year. Labour’s Lyons Commission is still wrestling with the problem of how to achieve only 200,000 a year by 2020. The Lib Dems are rightly more ambitious and their policies look good on paper but can they really deliver?  

Starter's orders

Fri, 3 Oct 2014

Given the effort that goes in to honing a conference speech to get the messages exactly right, and the fact that the prime minister was reading from an autocue rather than speaking without notes like Ed Miliband, it seems safe to assume that he meant exactly what he said. Here’s what he told the Conservative conference this week:

‘For those wanting to buy a home, yes – we will help you get on that housing ladder…but only if we take on the vested interests, and build more homes – however hard that is.’

It was part of a section near the start of the speech where he offered his audience a series of choices about taxes, jobs and pensions before he concluded: ‘It’s pretty simple really: a good job, a nice home, more money at the end of the month, a decent education for your children, a safe and secure retirement.’

The equivalent of the housing ‘vested interests’ was ‘only if’ we stick to the long-term economic plan, keep on cutting the deficit and work a bit longer and save a bit more. And Cameron offered a very similar formula for education: ‘but only if we keep taking on everyone who gets in the way of high standards’.

Except that it’s much clearer who he thinks is getting in the way here (teachers and the educational establishment) than with new homes. Just who are the vested interests?

Some clues came later on in the specific section about home ownership:

‘In a country that everyone is proud to call home, you should be able to buy a home – if you’re willing to save. It shouldn’t be some impossible dream. But we inherited a situation where it was. Young people watched Location, Location, Location not as a reality show – but as fantasy.

‘We couldn’t solve this housing crisis without some difficult decisions. The planning system was stuck in the mud – so we reformed it…and last year, nearly a quarter of a million houses were given planning permission. Young people needed massive deposits they just couldn’t afford…so we brought in Help to Buy. Of course there were those who criticised it…usually speaking from the comfort of the home they’d bought years ago. But let’s see what actually happened. They said Help to Buy would just help people in London…but 94% of buyers live outside the capital. They said it would help people with houses already…but four-fifths are first-time buyers. They said it would cause a housing bubble…but as the Bank of England has said, it hasn’t.’

You get the idea. The housing crisis is all the last government’s fault. Even more audaciously, this government has solved it. The ‘vested interests’ seem to be the people who criticised it ‘usually from the comfort of they’d bought years ago’. Never mind the fact that many of the critics of Help to Buy were precisely the priced-out renters that Cameron says he it is helping or the fact that the increase in house prices since it was launched has benefitted sellers rather than buyers. Cameron went on:

‘So here’s our renewed commitment to first-time buyers: if you’re prepared to work and save, we will help you get a place of your own. This conference, we have announced a landmark new Policy. It’s called Starter Homes. We’re going to build 100,000 new homes – and they’ll be 20% cheaper than normal. But here’s the crucial part. Buy-to-let landlords won’t be able to snap them up. Wealthy foreigners won’t be able to buy them. Just first-time buyers under the age of 40. Homes built for you, homes made for you – the Conservative Party, once again, the party of home ownership in our country.’

Given that he says it is the ‘crucial part’, Cameron seems to be implicitly accepting that ‘wealthy foreigners’ and ‘buy-to-let landlords’ are the vested interests stopping first-time buyers getting on to the ladder. That’s a much tougher message than we’ve heard from Conservative politicians before. Before the speech Cameron also said that the scheme will prevent homes being ‘flipped around in a quick sale’, perhaps suggesting that some sort of covenant will be involved.

From the detail we have so far, we know that the starter homes will be sold at 20% less than the market rate and that this will be achieved by building on brownfield land and relaxing requirements on affordable housing and community infrastructure and zero carbon.

So here’s vested interest number two: the bureaucrats who’ve imposed the ‘red tape’ that blocks cheaper homes. This is very much the view of the major housebuilders and the coalition has already granted them billions of pounds worth of concessions while asking for next to nothing in return. The crucial point here is what is meant by brownfield land: contaminated sites that are usually more, rather than less, expensive to develop, or industrial land that would not normally get residential planning permission and will therefore be cheaper? We could end up with cheap boxes built on old industrial estates on the edges of towns and cities or on precious public land so that they are instead of, rather than additional to, existing plans for affordable homes.

Either way it looks like another very nice little earner for the housebuilders that many people would identify as one of the biggest vested interests of all. The very same housebuilders who have relied on advance sales to overseas and buy-to-let investors.

So who else could Cameron mean? In his conference speech two years ago he was much more explicit about this:

‘There are those who say “yes of course we need more housing”…but “no” to every development - and not in my backyard. Look - it’s OK for my generation. Many of us have got on the ladder. But you know the average age that someone buys their first home today, without any help for their parents? 33 years old. We are the party of home ownership - we cannot let this carry on.’

Given that many of the nimbys who are already on the housing ladder are members of his own party and were in the audience, that was quite an important statement. However, seven months out from a general election and with Nick Boles no longer blazing a trail on planning, the language has been toned down in Cameron’s speech this time. The rhetorical commitment to new homes may stil be there but ‘vested interests’ was ambiguous – and deliberately so.

Communities secretary Eric Pickles told the conference earlier in the week that: ‘The thing I’m most proud of – and it’s been the most difficult to deliver – is what we’ve achieved in housing.’

Labour ‘gave us regional spatial strategies, top-down planning, ticky-tacky boxes with no parking or garages, and no room for our kids to play’ and housebuilding at its lowest level in peacetime since the 1920s. The coalition has delivered affordable housing, the reinvigorated Right to Buy, Help to Buy and many more triumphs.

Except of course that the coalition has been in power for more than four years. Housebuilding fell even lower than under Labour and is still barely half what is needed. If any homes look likely to be ticky-tacky boxes it’s the starter homes that will be built under Cameron’s new plan. And for millions of renters a world where everyone ‘should be able to buy a home – if you’re willing to save’ looks as impossible a dream as ever. 

Perhaps the search for vested interests should start with politicians who make premature claims that they have solved the housing crisis. 

Visions and promises

Mon, 29 Sep 2014

As the parties hold their final conferences before the 2015 general election, housing has a high political profile. Here are five themes I’ve noticed so far.

1) Priorities, priorities

‘Building as many homes as we need’ is the fifth of Ed Miliband’s six national goals by 2025. The big questions remain how we achieve that and whether it will be possible without substantial extra investment in new affordable homes. So it was definitely good news that the Labour leader had this to say too: ‘We will also make housing the top priority for additional capital investment in the next parliament.’ However, that can taken at face value or as an indication that it will not be top priority in its initial investment plans.

A 2015 Labour government will be taking power amid continuing austerity and housing will be competing with a range of other Policy areas that may have more priority. The speech by Ed Balls was a case in point. He has previously made clear that Labour will retain the freedom to borrow to invest. However, his job as shadow chancellor is to convince voters that Labour will be financially responsible with ‘tough fiscal rules’:

‘So in our manifesto there will be no proposals for any new spending paid for by additional borrowing. No spending commitments without saying where the money is coming from. Because we will not make promises we cannot keep and cannot afford.’

Balls also said that: ‘The next Labour government will raise the minimum wage, build more homes to get the housing benefit bill down and cap overall spending on social security.’ He will keep the benefit cap ‘but we will make sure it properly reflects local housing costs’.

Lower rents and more social housing can reduce the housing benefit bill, then release money for more investment to bring it down still further. But we still don’t know how far Labour will go in following through on previous signals that it will look to make a radical shift from personal to bricks and mortar subsidies. And the extra money that is being raised from housing – the estimated £1.2 billion a year from the mansion tax – will instead pay for spending commitments on the NHS.

2) The caps still fit

Where does that leave housing? And in particular where does it leave the longstanding campaign for greater borrowing freedom for council housing?  

A succession of comments by shadow ministers at fringe meetings this week makes it pretty clear that Labour will not raise the borrowing caps. As bloggers for Red Brick have been pointing out all week, that will come as a big disappointment to those hoping the party would be more radical.

Shadow chief secretary Chris Leslie said that extra capital funding for housing would make a difference in an ideal world but added:

‘What I can’t do is raise your expectations and promise you that straight after the election there’s will be this splurge in borrowing. That’s not going to happen – we’ve said very clearly that the proposals that we have in our manifesto will not involve additional borrowing.’

And when shadow housing minister Emma Reynolds was urged to lift the borrowing caps by local council leaders she seemed to come up with another reason why not. According to Local Government Chronicle she said: ‘We have to be aware of what the opposition will say and how they will frame that at the next general election.’

And a third reason featured in Inside Housing’s story that the housing review by Sir Michael Lyons will recommend the sharing of borrowing capacity rather than the lifting of the caps. Carl Brown’s report quotes Emma Reynolds as saying:

‘I don’t think that lifting the HRA cap is going to suddenly unleash lots of new homes because frankly there are lots of councils in the country that are nowhere near the cap. Lifting the cap in its entirety is difficult and the borrowing would be on the government balance sheet. Michael is considering what to do within the cap in terms of sharing the headroom.’

3) Waiting for Lyons

Speaking of which, the general expectation was that the Lyons report would be published before or during the conference and provide some real substance on how to get to Labour’s target of 200,000 new homes a year by 2020. Now it is expected later this year. Pessimists see the delay as a worrying sign that Labour will play a cautious hand on housing. Optimists argue that it may just reflect a desire to avoid distracting attention from the party’s key messages for the week. The comment by Emma Reynolds above indicates that work on at least one part of the report is not finished yet.

Policy Exchange is asking whether Britain can ever build 300,000 new homes a year at fringe events at all three main party conferences. That 300,000 figure is Lib Dem policy but we’ve very little so far about how it would be achieved.

4) Two new pledges

The delay on Lyons deprived the conference of much in the way of new policy on housing. However, there were two exceptions to that.

First, Ed Miliband said over the pre-conference weekend that Labour would let councils set up new homes corporations in areas prioritised for development. They would receive government funding and work with housing associations and the private sector. It sounds a good idea that could build on the home zones already planned in London. It’s also good news that Labour wants councils to work with the wider private sector, not just existing housebuilders. However, it left me wondering about how far they will really be council-led. The whole point of previous versions of the development corporation model – the London Docklands Development Corporation and the Olympic Delivery Authority – was that they bypassed local authorities.

Second, one of the national goals promised by Miliband in his leader’s speech directly concerned housing: ‘Our fifth national goal is that by 2025, for the first time in fifty years, this country will be building as many homes as we need. Doubling the number of first time buyers in our country.’

It’s not quite clear from that whether the goal here is to build as many homes as we need or (as was trailed in advance) to double the number of first-time buyers – but neither is as ambitious at it sounds. The existing target of 200,000 homes a year by 2020 is of course still well short of the magic number of 250,000 but even so it will be challenging. Doubling the number of first-time buyers sounds much bolder on the surface but appears to mean 400,000 a year rather than the average of 200,000 seen between 2008 and 2012. However, the number of first-time buyer loans is already on the increase: there were 269,000 in 2013 and we are on course for around 300,000 this year.

5) That were trumped by the Tories

If Labour largely trod water on housing at its conference, the same cannot be said for the Conservatives. All the Saturday headlines (before they changed to defections and sex scandals) were made by David Cameron’s pledge to build 100,000 starter homes for sale to first-time buyers under 40 at a 20 per cent discount. The extension to Help to Buy would work by using cheap brownfield land and by exempting the developments from requirements on affordable housing, community infrastructure and zero carbon.

It all sounds to me like yet another nice little earner for housebuilders and it begs all sorts of questions that I’ll blog about another time. In response, Emma Reynolds pointed to the coalition’s miserable record on housebuilding and cutting investment in affordable homes. She went on: ‘Labour will make the fundamental changes to the market which are urgently needed and will double the number of first-time buyers in the next ten years.’

Whatever the merits of Dave’s Dream Homes, the point here is that the pledge forms part of a clear but divisive Conservative narrative about aspiration and enterprise. Yesterday’s carrot for the inevitable ‘people who work hard, who do the right thing’ is matched by today’s stick of withdrawing benefits for the 18 to 21-year-olds and cutting the benefit cap to £23,000. It’s the same ‘strivers and scroungers’ theme that I blogged about ahead of the Tory conference two years ago.

In contrast, despite some good ideas and hints of more to come, despite all the talk of ‘together’, I still can’t see the vision or the narrative behind Labour’s ‘fundamental changes’ on housing. 


Home nations

Tue, 23 Sep 2014

How do the different nations of the UK compare when it comes to housebuilding and the wider housing market?

An official report out this week reveals a fascinating snapshot of housing across the union that survived last week’s referendum. The housing stock, tenure, housebuilding, house prices and rents are all broken down in a report from the Office for National Statistics (ONS) that is much more comprehensive than its title (Trends in the UK housing market, 2014) implies.

Most of the trends will be familiar to regular readers of Inside Housing but what really struck me is the comparison between the different regions of England, Wales, Scotland and Northern Ireland.

On some measures it’s particularly stark. House prices, for example, are up by 11.4 per cent across the UK as a whole since the peak of the market before the financial crisis. However, that UK average masks huge variations between different nations and regions: prices are down 46.7 per in Northern Ireland, little changed in Scotland and Wales but up 13 per cent in England and 39.7 per cent in London.

Or take housebuilding. This ONS graph for the whole of the UK shows the familiar depressing pattern of slump in the 1970s, brief recoveries in the last 1980s and mid 2000s and then another fall to post-war record lows after the financial crisis. It’s largely the story of private housebuilding’s failure to fill the gap left by the demise of council housing. 


Breaking that down by UK nation, in 2012/13 completions in England were 63 per cent of the peak rate before the financial crisis, 58 per cent in Wales, 55 per cent in Scotland and just 45 per cent in Northern Ireland.

However, the ONS also compares the UK nations in terms of housing completions per thousand of population. As this graph shows, despite showing the biggest fall in house prices and completions since the crash, Northern Ireland still had more than twice as much housebuilding per head as England and Wales and was also way ahead of Scotland.


Wales comes out worst on this comparison (and the Welsh Government’s Housing Supply Task Force acknowledged that the country has a long-term problem and the lowest building rate over the last 30 years in a report published earlier this year). However, here’s where the figures become political. English housing minister Brandon Lewis tweeted this yesterday:


Why could that be? Another Twitter user came up with a theory about international property speculators. Here’s how Lewis responded:


So there we have it: the housing minister thinks it costs more to build in Wales than England. It’s true that housebuilders have complained about regulation in Wales, and that English ministers have bent over backwards to remove so-called red tape but even if you take out the cost of land building costs are about more than just regulation. It’s also true that housing policy is devolved to Wales but housebuilding is driven more by policies on the economy and taxation that are controlled from Westminster.  However, is it possible that it costs more to build in Wales than it should do and that this is what triggers the lower building rate?

Well, not quite. For a true comparison you’d also need to know the rate of household growth compared to the housing stock in each UK nation and take account of factors such as unmet existing need and second and empty homes. However, for this blog I’ll use the same comparison with population as in the ONS graph above but look at the change over time. On this basis, Northern Ireland saw 1.3 completions for every person added to its population in 2012/13 and Scotland saw 1. Wales lagged behind that with 0.66 completions per person added but England languished in last place with a miserable 0.29. For London the rate was just 0.17.

Taking a snapshot of a single year may not offer a true comparison. So here’s a graph based on the same comparison between housebuilding and population growth but over the last 10 years, a period in which the population grew by 7.9 per cent in Englnad, 7.3 per cent in Northern Ireland, 5.1 per cent in Scotland and 4.9 per cent in Wales:

Northern Ireland again does best with very nearly one new home per person added to the population. Scotland is close behind with a rate of 0.81.

Next comes Wales: its 73,000 completions in the last ten years is significantly less than in Northern Ireland despite a much larger population. Overall Wales has only managed 0.5 new homes per person added it its population.

But compare that to England’s rate of just 0.36. The English population has increased by 3.9 million in the last 10 years but just under 1.4 million new homes have been completed. True, that period covers the last government as well as this one but the ratio in 2012/13 was even lower. 

Those 10 years included roughly five of healthy building and five of stagnation. Building rates per person added to the population are significantly worse in all of the UK nations now. As I blogged a few weeks ago, France thinks it has a housebulding crisis when it is still building twice as many homes as the UK.

However, England has done significantly worse than the rest of the UK over the last decade and it is still languishing behind under the coalition. 

If it had built at the same rate in relation to the rise in population over the last 10 years as Northern Ireland, England would now have an extra 2.4 million homes. If it had done as well as Scotland it would have built an extra 1.8 million. Even by matching ‘red tape’ Wales, England would have had an extra 600,000 homes. 

The Indyref and housing

Wed, 17 Sep 2014

What are the implications for housing of the independence referendum in Scotland?

Heather Spurr has already covered what a Yes vote might mean for Scotland itself , in particular on social security and the bedroom tax, grant funding and borrowing, private finance and sustainability. Beyond that though, I wanted to look at what might happen with a No vote too – and also at what either result might mean for England, Wales and Northern Ireland.

In some senses it’s an odd question to be asking at all. Scotland has already decided to abolish the right to buy, made radical changes on homelessness and mitigated the bedroom tax in full. The contrast with housing policy in England could hardly be starker.

But housing is of course about much more than just housing policy. The parameters are set by welfare, tax and economic policy, all of which are controlled from Westminster. The bedroom tax has played a big part in the Yes campaign as a symbol of unfair measures imposed from London and the SNP has also promised to halt the introduction of the universal credit and other welfare reforms. Housing has also played a part in the No campaign, with dire warnings about the prospects of higher mortgage payments and economic woes if Scots vote for independence.

However, all three main UK parties have now promised more devolution to Scotland if it votes No. Enhanced powers over income tax and more control over some aspects of welfare, including housing benefit, look likely.

With all of these issues the detail of the negotiations that follow the vote will be vital. That’s obvious with mortgages and the pound after a Yes vote but the detail will be just as important when it comes to welfare and housing benefit after a No. As Ken Gibb pointed out last month, how do you decide how much money to transfer and how do you cope with the fact that housing benefit is demand-led and the costs could go up or down? Could the universal credit continue in Scotland if there was local control of housing benefit?

And what about the rest of the UK? If Thursday’s vote is Yes, the most obvious impact will be political: Scotland elected 41 Labour MPs and just one Conservative in 2010. Without Scotland, there would have been a Conservative majority government and potentially even greater austerity in 2010 and there are obviously more likely to be Conservative governments in future too. That in turn raises the prospect of a referendum and exit from the EU plus an attempt to get out of obligations on human rights that could have huge implications for housing and homelessness. The political environment for housing could feel very different.

However, even if Scotland votes No on Thursday, there could also be big changes. The prospect of more devolution for Holyrood is already sparking demands from some Conservatives for less Scottish influence at Westminster. Would Scottish MPs lose the right to vote on English-only legislation, which could include both housing and parts of welfare? The UK parties’ promise to maintain the Barnett formula and its perceived generosity towards Scotland is already causing controversy.

And whether the result is Yes or No, there seems widespread agreement that the union cannot stay as it is. Will Wales demand the same powers as Scotland? Will responsibility for housing be transferred to the English regions? Will Northern English cities and their city regions win more power? Will London succeed in its bid for more power and money, including the billions of pounds worth of receipts from stamp duty in the capital? Will housing benefit be devolved to Wales and the English regions and how do we decide who gets how much?

Think tanks have already mapped out some of this territory.  Within the last week Respublica’s Devo Max – Devo Manc has called for new powers for Manchester and IPPR’s Decentralisation Decade for a ten year programme of English decentralisation. I was at an event organised by the Institute of Welsh Affairs on Thursday that showed just how far-reaching the implications for the Indyref could be not just for Wales but for the whole of the UK. What the calls for devolution and decentralisation have in common with the SNP’s call for independence is a feeling that the UK is too dominated by London, Westminster and Whitehall. I wrote a more general piece on the referendum on my other blog here.

One final thing that we could all learn from the referendum is the level of participation: voter registration in Scotland is 97 per cent and the turnout is expected to be over 80 per cent. Everyone can see that the result matters but it’s also thanks to a registration drive to find Scotland’s ‘missing million’ voters and the awareness that every vote counts.

There is a clear housing angle to this for the rest of the UK. As I’ve blogged before, low voter registration means that around 3.8 million private renters were disenfranchised at the last election. Social renters are more likely to be registered because they have more stable homes. However, voter turnout is higher at the top of the class system than at the bottom and among the old than the young. How much more powerful would housing’s voice be if tenants and the badly housed used their vote and the parties knew that their votes mattered?

We will find out the answer to the question ‘should Scotland be an independent country?’ on Friday morning. That’s just the start of many more questions to come.

Mirror image

Tue, 16 Sep 2014

Nobody pretends that reform of housing benefit will be easy but a report out today underlines the scale of the task.

The report by the Chartered Institute of Housing (CIH) does a great job of making the links between policies on housing, welfare and the labour market. The sobering conclusion for the government is that everything it has done so far has only succeeded in reducing the rate of growth of the housing benefit bill rather than reducing it.

So as fast as the government introduces cuts like the bedroom tax the bill keeps rising faster because of inflationary factors built into the system. Between 1997/98 and 2012/13 the total bill rose by 48 per cent in real terms.

The biggest factor in that was rising rents, which not only cost more in themselves but mean more claims including from people in work. The increases have come in the private sector in the wake of deregulation and the decline of home ownership but also in the social sector as a result of stock transfer, private finance and reliance on rents to finance new development.

However, developments in the labour market also mean more people need help with their rent. Zero hours contracts, insecure employment and falling real earnings all mean that housing benefit is subsidising low pay as the number of in-work claims rises.

These trends are nothing new but, as I blogged last month, they have intensified under the coalition. And the conclusion is a stark one for anyone who believes that the solutions lie in welfare reform as such:

‘Overall the rise in HB spending is largely due to housing and labour market restructuring and therefore the policy solutions that will most effectively bring it under control lie in policy areas outside welfare itself (for example, housing and employment). Further restrictions on entitlement may slow the rise in spending in the short-term but do nothing to tackle the causes of welfare dependency and are unlikely to have any significant impact in reversing it.’

Iain Duncan Smith will, of course, beg to disagree. As I blogged a couple of weeks ago, he see the rise of in-work housing benefit claims as evidence of success rather than failure, a reflection of the way his policies are getting people back to work. And he will point to the way the universal credit is designed to ensure that work always pays by reducing the penal rate at which benefits are withdrawn as someone earns extra money. However, the report shows how the inevitable result of reducing the withdrawal rate is to extend the range of incomes over which the withdrawal applies.

So the flagship reform of a government that says it wants to reduce welfare dependency ends up with private renters who are in the top 15 to 20 per cent of earners still on benefit.  A one-earner couple with a child paying the average private rent for a two-bed flat would need a salary in excess of the higher rate tax band to come off universal credit altogether.

In contrast Labour is making the right noises about shifting the balance of investment from benefits to bricks and mortar and has shown some interest in proposals by the IPPR to devolve control of housing benefit to local authorities so that savings can be reinvested in new homes. 

The CIH argues that reforms to tackle the underlying causes of the growth of housing benefit mean reversing long-term trends in tenure and what it calls ‘the creeping conversion of low-cost rented housing into more expensive homes at market and near-market rents’.

Reforms would include a substantial increase in the supply of social rented homes with rents low enough to give tenants a realistic chance of escaping welfare. ‘Affordable’ rent homes would be restricted to people in work and non on the lowest earnings. Landlords would get more flexibility to use the proceeds from market rents and sales to reinvest in social homes but grant would be conditional on rents being genuinely affordable. And the bedroom tax would be scrapped.

However, there would also need to be changes at the heart of government too: a formal tie-in between welfare and housing policy, with the DCLG able to draw on savings made by the reforms agreed with the DWP; and the removal of Treasury restrictions on the use of capital receipts to build replacements for homes sold under the right to buy.

And wider economic reforms would be needed too: a shift away from subsidies for low pay to employer incentives to pay the living wage; social landlords taking a lead by paying the living wage themselves and ensuring their contractors do the same; and greater investment in infrastructure and skills outside London and the South East.

Pretty much the opposite of current policy, in other words. However, the CIH also has a more controversial suggestion: government should consider basing universal credit for private tenants on a proportion of the rent rather than the whole rent. The idea is that if this was accompanied by higher basic allowances for living costs the cost would be the same overall but tenants would have an incentive to move of downsize without being punished as they are under the bedroom tax or benefit cap.   

Many CIH members who helped to draw up the report in workshops around the country feared that this idea could be hijacked as a justification for yet more cuts. Arguably of course, many private tenants already get less than housing benefit than their rent and the proportion will grow as policies like 1 per cent uprating take effect. The CIH warns that future governments should not use the proposal as a Trojan horse to reduce entitlements and would oppose it unless there was a substantial uplift in standard allowances.  

The recommendations amounts to a reversal of more than 20 years of letting housing benefit ‘take the strain’. That will be far from easy but shows how the total bill is being driven upwards by a range of different government policies. For all the rhetoric about welfare reform and ‘making work pay’ that blames claimants for becoming ‘benefit dependent’, future governments need to start by looking in the mirror.

Home front

Thu, 11 Sep 2014

With eight months to go until the general election the battle to influence the manifestos has begun in earnest.

Party conference season begins with Labour on September 21 but organisations from across the housing spectrum have been publishing manifestos of their own in a bid to reach the politicians.

Conservative Home (see my blog here) was early out of the blocks but the influential Tory website has been followed by the Council of Mortgage Lenders (CML) and Confederation of British Industry (CBI) in the last week. The Fabian Society has just published a report last week on the ‘silent majority’ in favour of more social housing. The National Housing Federation (NHF) is set to reveal its election plans at its conference next week.

The Lib Dems have already launched a ‘pre-manifesto’ for 2015 featuring a target of 300,000 new homes, a long-term plan on how to achieve it within a year of the election, ten new garden cities and reform of what they still insist on calling ‘the removal of the spare room subsidy’. Labour has already made commitments on 200,000 homes and garden cities, reform of private renting and abolition of the bedroom tax but all eyes are on the Lyons Review and the leadership’s response.

What seems much less clear (beyond yet more austerity and cuts in welfare) is what the Conservatives will do, with two very different visions on offer for new homes. 

The small ‘l’ liberal, free market vision represented by Nick Boles, Policy Exchange, Conservative Home and perhaps George Osborne sees the economic damage that the housing shortage is causing, especially in London and the South East, and believes that the solution is to sweep away ‘socialist’ planning restrictions. However, there are still considerable differences of opinion on this wing of the party, as this review of Conservative Home’s manifesto by Policy Exchange’s Chris Walker shows. 

ballot box

The small ‘c’ conservative, ‘war on the countryside’ one represented by Eric Pickles, Brandon Lewis and the Daily Telegraph wants to preserve the privileges of existing home owners, especially in London and the South East, under the guise of devolving planning decisions to local communities. There is also a battle over tax, with Tory MPs from the South East calling for the scrapping of stamp duty under £500,000 and a surge in donations to the party from developers opposed to Labour and Lib Dem plans for a mansion tax.

The divisions with the Conservative Party can blur, with different conceptions of localism, for example. However, the tensions between the two have run right through this parliament and especially in the struggle over the National Planning Policy Framework (NPPF) and the battle over the green belt.

The last week has seen some powerful backing for the liberal side of the argument. The CBI argues that ‘housing is not just a social priority – it is a key business issue’. It argues that the last ten years of above-inflation house price increases have cost consumers £4 billion in higher housing and transport costs and it makes the case for 240,000 new homes a year, ten new towns and garden cities by 2025 and reform of planning:

‘Our policies on where we build have changed little since the 1940s and are no longer fit for purpose. many areas within the green belt are not green and pleasant fields but former industrial sites and waste land. we need to question why we are protecting these areas at the expense of meeting our housing needs.’

It argues that their manifestos should contain ‘no red line commitments about land use that would tie the hands of a future government’. The new government itself should ‘give local authorities greater incentive to review the extent and environmental quality of their green belts, with a focus on releasing low environmental quality land, alongside brownfield sites for new homes.’

Last week, the Wolfson Economics Prize on garden cities was won by a proposal for urban extensions to double the size of 40 existing towns and cities over the next 30 years with 86,000 new homes. As David Rudlin of Urbed put it: ‘We propose taking a confident, well-planned bite out of the green belt – rather than nibbling around its edges and annoying every town and village.’

The prize attracted a broad range of entries and it is not political but it is funded by the Conservative peer Lord Wolfson and administered by Policy Exchange. So the speedy response from housing minister Brandon Lewis was interesting. He told the Architects Journal:

‘We do not intend to follow the failed example of top-down eco-towns from the last administration. We are committed to protecting the green belt from development as an important protection against urban sprawl - yesterday’s proposal from Lord Wolfson’s competition is not Government policy and will not be taken up. Instead, we stand ready to work with communities across the country who have ideas for a new generation of garden cities and we have offered support to areas with locally-supported plans that come forward.’

There was some speculation that Lewis may have missed the fact that the urban extensions are meant to be locally led. In fairness, However, there are few greater insults a Conservative could have found than to compare them to Labour’s eco-towns. The LSE’s Professor Henry Overman found the statement by Lewis ‘deeply depressing’ while the New Statesman’s Jonn Elledge asked: ‘What use is a housing minister who doesn’t want to build housing?’

The issue came up again in a different form at Communities and Local Government questions on Monday, the first for Lewis since he was appointed housing minister in July. Tory MP Charlie Elphicke asked him to confirm that the NPPF ‘has provisions that protect the green belt from developers and people…who would like the build all over it. Lewis replied:

‘My hon. Friend is right, and I intend soon to issue additional guidance to reiterate the protection that the national planning policy framework provides to the green belt and other designated areas. That will make it clear that local planners should seek to meet their objectively assessed needs, unless there are specific environmental and other policies in the framework—such as those on the green belt—which indicate that development should be restricted.’

Sadly he was not asked about the Wolfson Prize or the CBI report. However, the message to voters in the mostly Conservative seats that surround London and the cities earmarked to have a bite taken out of their green belt seems pretty clear. Judging from the rest of the session, it seems that the DCLG is now in full election mode. From Eric Pickles on Help to Buy and parking to Lewis on the green belt and the right to buy to Kris Hopkins on the council tax and business rates to Penny Mordaunt on helping coastal communities, you could almost see the clock counting down to May 2015.

What happens in the longer term remains to be seen. Divisions over new housing and planning are not exclusive to the Conservatives. The CBI wants the parties to look to long-term solutions to the housing crisis and avoid manifesto commitments that would tie the hands of a future government. The CML has put forward a set of proposals designed to tackle housing across tenures and age groups. But with just eight months to go until what seems set to be yet another close election the debate continues – between and within the political parties.

The long goodbye

Mon, 8 Sep 2014

Three images spring to mind in the aftermath of Friday’s momentous vote to amend the bedroom tax.

The first is of a bunker deep in the bowels of DWP headquarters Caxton House. Iain Duncan Smith sits at a desk surrounded by a dwindling band of loyalists who still believe in the policy: his ministers Mark Harper and Lord Freud plus a loyal special adviser and perhaps a press officer.

AS IDS raves that nothing has changed (and that the universal credit is on time and on budget) I imagine the others exchanging nervous looks between themselves as they assure him that the removal of the spare room subsidy really is saving £1 million a day and making housing fairer.

It’s not just the defection of the Lib Dems, nor even that of his own minister of state Steve Webb, that counts. The absence of up to 70 backbench Conservatives despite a three-line whip to vote with the government is what will really hurt. One, Angie Bray, even voted for the Affordable Homes Bill. They were clearly not prepared to give up Friday in their constituency for a policy they know is a political liability.

The DWP’s desperation was evident during the debate itself, when Harper informed the House that it estimates the Bill would ‘cost about £1 billion of public expenditure’. He later broke this down into £500 million ‘to repeal the removal of the spare room subsidy plus another £500 million because ‘it fundamentally changes the way housing benefit is calculated, for example it removes deductions from other people in the household’.

No further detail was on offer but the Bill (see the House of Commons Library briefing) does not seek to repeal the bedroom tax or remove extra deductions but to introduce significant exemptions for disabled people and tenants who have no downsizing options (see below). The DWP’s own current estimate of the ‘savings’ from the policy is £373 million (this was repeated in press statements on Friday putting them at ‘£1 million a day). However, this takes no account of the cost of discretionary housing payments let alone the wider costs to the public purse. Is the DWP seriously claiming that amending the bedroom tax will cost at least three times more than it saves? If so, that must mean that not introducing the policy in the first place would have saved around £650 million.

The second image (readers with a sensitive disposition may want to look away now) is of Joe Halewood yodelling naked on top of Nelson’s Column. That’s what the consultant and bedroom tax campaigner says he will do if the Bill makes any difference whatsoever to victims of the policy before the next election.

There are two main reasons why he is so confident he will never have to shed everything apart from an Alpine hat: the length of time it will take the Bill to make it through its remaining parliamentary stages with the election just eight months away; and the fact that it leaves so much of the detail down to secondary legislation to be determined by the secretary of state.

It’s one thing to propose exemptions for disabled people living in properties with adaptations, for people on DLA or PIP who cannot reasonably share a bedroom because of their disability and for people who have not been made ‘a reasonable offer of alternative accommodation’. It is quite another to determine what words like ‘reasonable’, ‘alternative’ and even an ‘offer’ mean. I suspect similar points could be made about any other exemption, which is why it would be far better to repeal the whole policy. George recognises this himself but has to work with what is within the scope of a private member’s bill. As he put it on Friday: ‘The mere fact that someone is poor does not mean they are any less entitled to a stable family home than if they are better-off.’

The bedroom tax is also just part of a much broader programme of welfare reform, much of it just as controversial but still seen by the Conservatives as a vote winner. As more than one Tory pointed out in Friday’s debate, all three main parties are now signed up to the welfare cap, which means they would have to cut something else to pay for the amendments to or repeal of the policy.  

However, the vote does mean that there is a fighting chance that the election will take place with substantial exemptions already in place. Andrew George has succeeded against all the odds (and even, as I blogged in June, his own expectations) in mustering enough support to stop backbench Tories from talking out his Bill and then clearing the first parliamentary hurdle. It may be too late for tenants who have already gone through financial hardship, or been forced to lave their home, but this could (and should) give landlords and local authorities pause for thought when they consider how to treat victims of a policy that parliament now considers manifestly unjust and whose days are clearly numbered.

The third image is one of déjà vu. The exemptions proposed by Andrew George remind me strongly of the ones approved by the House of Lords in January 2012 before the coalition (including the Lib Dems, of course) overturned them by claiming financial privilege. That is no coincidence: it was clear from the outset that the bedroom tax was manifestly unfair.

That’s why the Liberal Democrats cannot get away with claiming that they have changed their minds as a result of new evidence. A few of the party’s MPs (including George himself) have consistently voted against it but the rest have trooped dutifully into the coalition lobby. Even on Friday, the impression of Lib Dem contrition was undermined by the way that party president Tim Farron continued to talk about ‘the spare room subsidy’.

Whatever happens to the policy now, the deeper impact of Friday’s vote will surely be political. This is not just about the two coalition partners voting against each other or the wider battle over welfare reform. Most immediately, the bedroom tax is a huge issue in the Scottish independence referendum, with the Yes campaign using it as a symbol of pernicious policies imposed from Westminster and the No campaign attacking the SNP because only two of its MPs turned up on Friday.

Looking to next year, Labour goes into the general election pledged to repeal what’s become a powerful symbol of coalition heartlessness. The Lib Dems will suffer from coming to their senses too late but have shown they can work with Labour as well as the Conservatives. And the Tories will have to work out whether they really want to join IDS in his bunker.

Beyond belief

Tue, 2 Sep 2014

So is it time to celebrate the rise in housing benefit claims by people in work as a reflection of the government’s success in getting people off benefits?

That was the claim made by Iain Duncan Smith at work and pensions questions yesterday as he answered Labour jibes about the soaring numbers of working households now dependent on state help with their rent.

The work and pensions secretary told Labour’s Emma Lewell-Buck:

‘The figure the hon. Lady did not give is that out-of-work housing benefit claims are falling, and that is because people who were claiming it are now going into work. That means that they are earning more money, which means that the likelihood of their being in poverty is far less. I wonder whether the hon. Lady would like to get up sometime and congratulate us on getting more people back to work and spending less on housing benefit as a result.’

And when his Labour shadow Rachel Reeves challenged him about the rise of in-work poverty he told her she should have been listening to that answer:

‘The reality is that the number of people who are out of work and on housing benefit is falling. The number of those who are in work is rising. Under the last Government, we saw a rise in the number of people who were out of work and having to claim housing benefit.’

IDS has previous when it comes to claims that sound vaguely plausible at first only to evaporate under greater scrutiny. How about the way the benefit cap had made people return to work or the way that falling private sector rents showed that the local housing allowance had distorted the market?

And he had plenty more to worry about yesterday, not least the universal credit and when the Treasury will ever sign off on the business case for it. However, this latest claim fits with the narrative of a major speech he made last month in which he argued that a dysfunctional welfare system and social breakdown have been replaced by welfare reform and the dignity of work. As Alex Marsh blogged at the time, the miraculous power of welfare reform seemed to leave no room for under-employed, low pay Britain.

So what do the DWP’s own statistics have to say? As I blogged last month, the first four years of the coalition saw a 63 per cent rise in housing benefit claims by people in employment, from 651,000 in May 2010 to 1.1 million in May 2014. The housing benefit bill for people in employment has risen from £2.9 billion (14 per cent of the total) to £5.1 billion (21 per cent).

The case made by IDS is that this should be seen as good news. As unemployment falls and the number of people in work reaches new records, the system is helping people to move off benefits and into employment by helping them with their housing costs.

However, has there really been a fall in housing benefit claims by people who are not working? The stats show that the number of passported claims by people on the main three out-of-work benefits (income support and income-based job seekers allowance and employment support allowance) has remained steady over the last four years at around 2.2 million.

Far from supporting IDS’s claim that ‘out-of-work housing benefit claims are falling’, they actually show a slight increase of 13,000 since May 2010. The only significant fall (148,000) over the last four years has been in the number of claims from people on pension credit (guaranteed credit).

The overall number of housing benefit claims has fallen slightly in the last year to just under five million but is still higher than the 4.8 million recorded when the coalition took power. Far from spending less on housing benefit, the total bill is still rising, just not by as much as previous forecasts.

However, those are only the headline numbers and the statistics have significant limitations when it comes to determining who is in employment and who is not. The DWP is well aware of these, as this written answer from Steve Webb in June demonstrates.

The figure for in-work housing benefit claims is only for non-passported claims (people who are not on a means-tested benefit) and the numbers refer to benefit units rather than people. An unknown number of couples may both be working so the total number of people in employment is almost certainly higher than the current 1.1 million.

Meanwhile, an unknown number of people with passported claims may also be working or have a partner who is working. The rules for all three of the main out-of-work benefits allow claimants to do some work. For example, to be eligible for JSA you must be available for work, actively seeking work and working on average less than 16 hours a week. And ESA has rules on ‘permitted work’ of up to a certain number of hours or amount per week.

The numbers involved are ‘small’ and ‘insignificant’, according to the DWP, but the point is that it is impossible to say definitively from these statistics how many people on housing benefit are working and how many are not. See this fact check by Full Fact from 2012 for more detail.

It follows that it’s not possible to say categorically that IDS is wrong. He is right, for example, that ‘under Labour, in-work and out-of-work housing benefit claimant numbers increased’. Equally well, he has no definitive basis for his claim either.

However, if the surge in claims by people in employment since 2010 has come from people who were not working before why has the number of housing benefit claims from people on out-of-work benefits remained so stable over the last four years?

When you look at the combination of stagnant and falling earnings and rising rents, it seems far more likely that the stats reflect the growth of ‘poor work’ and pressure on claimants to take anything that is on offer. The lines between unemployment, employment schemes, under-employment and employment are blurring all the time. And housing benefit is taking the strain over the longer term of the rise of the private rented sector and slow decline of social renting.

Don’t take my word for it. Here’s what the independent Office for Budget Responsibility had to say at the time of the Budget in March:

‘The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth relative to rent inflation. This explanation is supported by DWP data, which suggest that almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.’

This latest IDS welfare miracle looks like yet another mirage but that almost certainly won’t stop the man himself believing in it. 

Hard sell

Tue, 2 Sep 2014

As sales pass 20,000, what’s been the impact of England’s ‘reinviograted’ right to buy so far?

Figures released by the DCLG last week show 20,027 sales since April 2012, when the maximum discount was increased to £75,000. This followed David Cameron’s Conservative Party conference speech in October 2011, when he said the proceeds would be reinvested in new affordable homes.

The government continues to introduce extra sales incentives. These include a new maximum discount for London of £100,000 from April 2013, £100 million to improve access to mortgage finance plus right to buy sales agents, annual inflation uprating of discounts and an increase in the maximum percentage discount on a house. Finally, the Deregulation Bill will reduce the qualifying period from five years as a tenant to three once it completes remaining stages in the Lords and gets Royal Assent.

That’s the context. But what are the numbers? And what about the wider impacts warned about by critics? Here’s an assessment so far:

Sales: Unsurprisingly, given all those incentives, many more tenants have bought their homes. The 2,845 sales in the first quarter was up 31 per cent on a year ago and six times the level seen in April to June 2012/13. However, it was down 16 per cent on the final quarter of 2013/14. Last year saw 11,238 sales, four times higher than in 2011/12 but still well down on pre-recession totals.

London accounted for one in three sales in the first quarter, the highest total since the publication of quarterly stats began in 2006/07, and local authorities in the capital dominated the list of those seeing the highest sales per 1,000 homes.

New homes: The Buy One Build One Free promise turned out to apply only to additional receipts on top of forecast levels once the Treasury has taken its cut and to mean ‘affordable’ rather than social homes. Local authorities have three years to spend the money, and construction takes time, so it’s still relatively early days, but the results so far do not look that encouraging.

The 675 starts on site of new affordable homes in the first quarter of 2014/15 was up more than 10 times on a year ago (though down 25 per cent on the fourth quarter). However, that still means there were 4.2 sales for every new home started. Since the start of the new policy in April 2012, we’ve seen one replacement for every 5.5 sold. The one-for-one pledge looks more like window dressing for the real aim of selling more stock. That impression hardened in June when the government defeated an attempt by Green MP Caroline Lucas to force it to publish a plan to replace homes sold and review the effectiveness of the reduced qualifying period. .

Housing finance: Unsurprisingly, the increased sales and weighting towards London fed through into higher receipts. The £210.8 million in the first quarter was up 61 per cent on a year ago though down on the previous quarter. Since April 2012 receipts total £1.3 billion.

However, local authorities can only spend part of that and there are additional problems with the debt cap, HRA business plans that did not take account of the new policy and a new cap on leaseholder repair bills.  As seen from Islington, most of the £10.2 million receipts over the last quarter (and £22 million over the last year) will disappear into a ‘black hole’.  As seen from Cambridge, the result is a cash crisis, according to executive councillor for housing Kevin Price:

‘Right to Buy receipts retained by the council are now averaging £1 million a quarter. But for every £1 million we get, the council must come up with another £2 million from its own housing budget to replace the homes lost, within three years - or face returning the money to Westminster at a punitive interest rate. This is quite simply unsustainable and puts at risk our other house-building programmes.’

Homelessness: High levels of demand and rising bills for homelessness compound the finance problem. Harrow says it is in the ‘utterly ludicrous’ position of spending £500,000 a year leasing 35 former council homes on rents of up to £350 a week as temporary accommodation for vulnerable tenants. Glen Hearnden, portfolio holder for housing at Harrow Council, says:

‘We lose twice with the government scheme, we lose the property from our stock and then we pay to rent it back. It all adds up to our residents suffering. It feels like we are fighting the fires caused by an overheating housing market whilst the government is stood on our hose pipe.’

However, the knock-on effect is felt by people like Cecilia Bruce-Annan. The mother of three is £2,000 in arrears on her housing association home in Harrow after being hit by the benefit cap. She faces eviction next week but says the council told her that her only option is to move to Stoke-on-Trent because it no longer has enough homes to house its residents. This seems to be the result of a controversial new policy on out-of-borough placements

Fraud: A 2012 study by the Audit Commission found that right to buy fraud was up by 52 per cent on three years before. While most purchases are genuine, the reinvigorated discounts prompted the CIH to issue a guide on how to prevent fraud from tenants who misrepresent their circumstances or tenancy history or who already have another home.

Last week two fraudsters from Sandwell had their appeal against a jail sentence turned down. The two women made two applications to buy a council home claiming they were sisters. In fact they were friends and one had links to several other homes in the Midlands and Scotland. They were jailed for 20 months in June but were trying to get the sentence suspended.

In July, Inside Housing reported that Sandwell had tightened its procedures due to fears of fraud and money laundering. Deputy leader Steve Eling said:

‘Most sales are genuine but there is a growing number which are raising concerns, not just in Sandwell but nationally. The massive discount has made the whole area of right to buy a minefield for councils. Nationally, it has become a golden opportunity for criminals to make easy money as well as laundering dirty money.’

Assisted purchases: The increased discount is not just interesting tenants. The Sunday Times (paywall) reported on the case of one property firm boasting about the ‘easy profits’ to be made from encouraging tenants to buy because ex-council homes are so ‘massively undervalued’. It’s sent leaflets to 60,000 homes including many in Westminster boasting that ‘right to buy tenant moves and scoops £100,000’.

Housing minister Brandon Lewis responded by dubbing critics of the policy ‘enemies of home ownership’ and with a form of words that is at best misleading:

‘The reinvigorated right-to-buy is both increasing housing supply and reducing waiting lists, as every additional home sold is now being replaced with a new affordable home for a new social tenant.’

Housing benefit: Labour councillors in Westminster called for an inquiry after the Sunday Times story, highlighting figures that almost 20 per cent of right to buy sales since 2012 have been to tenants on housing benefit. The council says that the correct figure is that 22 per cent of sales (20 homes) have been to people on housing benefit at the time of application and 11 pent (10) at time of completion.

There is nothing in the legislation to stop people on housing benefit exercising their right to buy and nothing to make them say how they are going to fund the purchase or afford the mortgage payments. The money could have come from a genuine inheritance, for example. As I’ve blogged before, estimates of cost savings in the DCLG’s own impact assessment assumed that 10 per cent of purchasers would be on housing benefit (cut from 15 per cent in a previous draft after discussions with the DWP). Money laundering regulations mean that the source of cash payments has to be verified. Wesminster now refers all right to buy applications from tenants on housing benefit to fraud for checking.

However, given that anyone with savings of more than £16,000 is not eligible for housing benefit, and that housing benefit stops the minute you stop being a tenant, the figures beg all sorts of questions.

Much the same goes for the policy as a whole. Yes, sales are rising and more tenants are becoming home owners. Yes, some new replacement homes are being built. Beyond that the evidence of negative impacts continues to mount.

About time

Mon, 1 Sep 2014

Sellafield. Parental help. Mortgages lasting 40 years. Welcome to housing affordability in the 21st century.

Exhibit one is a survey by the TUC comparing median house prices and earnings in local authority areas across England. It finds that Copeland in Cumbria, home of the Sellafield nuclear reprocessing facility, is the only one that is easily affordable on less than three times earnings. Nowhere in southern England is affordable at less than five times earnings.

Exhibit two is an opinion poll of parents conducted by the National Housing Federation. It finds that 81 per cent of parents are worried about the impact of rising house prices on the next generation, 69 per cent think their children will not be able to buy without their financial support and 25 per cent are already saving for their children’s first home.

Exhibit three is a report in the Independent on Sunday that more first-time buyers are being tempted by mortgages lasting 35 and even 40 years. The good news is that they offer lower monthly repayments than a traditional 25-year mortgage. The bad is that you will pay back far more in total (£403,000 for a £200,000 mortgage over 40 years) and could end up still in debt in retirement.

On one level, these trends are nothing new. The TUC comparison offers a useful affordability yardstick but it is really a false comparison since for many years most people have bought their first home as a couple who are both working. Help from the Bank of Mum and has been around for a while as a result of rising prices and the need for a much higher deposit since 2007. And plenty of owners have mortgaged themselves beyond 65.

All three, like longer mortgage terms and chopping up houses into rabbit-hutch rentals, can be seen as the market reacting to higher prices and finding a way for people to afford them.

However, the ways the market finds will not necessarily be benign: just think of what happened when the banks relaxed their lending criteria before 2007 and packaged up low and high risk loans into securities to sell to each other.

What the TUC survey shows is the impact not just of rising prices but also of earnings that have been stagnant since the start of the financial crisis. That, plus new Mortgage Market Review criteria that mean lenders are (rightly) checking affordability much more carefully, mean it will be even more difficult for average earners to buy. And it has wider economic effects too since those forced to rent and those who manage to scrape enough together to buy will have less to spend on other things.

And what about the long-term implications of the parental help suggested by the NHF poll? Through most of the 20th century rising home ownership was an engine for greater equality of wealth. That has already gone into reverse and it becoming an engine for greater inequality in the 21st century, with ownership increasingly become the preserve of those with family already on the ladder.

There are wider social impacts too. There is already a house price premium in the catchment areas of the best state secondary schools and a report from the Social Mobility and Child Poverty Commission last week showed the extent of Elitist Britain, with top jobs reserved for those who’ve been to public schools and top universities.

The NHF quotes Joseph Rowntree Foundation research from 2012 into housing options for young people in 2020. It forecast that the number of owners aged 18 to 30 would fall from 2.4 million to 1.3 million, with private renters rising from 2.4 million to 3.7 million and those living with their parents rising from 3.2 million to 3.7 million.

I’ve blogged many times before about the decline of home ownership. What looks like a slow death when you look at the headline numbers seems much faster when you look at the fall in the number of households buying with a mortgage and at ownership rates among different age groups. This has huge implications for future policy that we have not even begun to address.

We now have a housing crisis that expresses itself not just in homelessness and a desperate need for social housing but in an anxiety about affordability that stretches right up the income scale. As David Orr of the NHF puts it: ‘We need the government to take action to end the housing crisis within a generation, for the next generation.’

Yet 80 per cent of the parents in the NHF poll do not think that any of the mainstream parties will effectively deal with housing. Will they hear anything better in this year’s party conference season?

There is one piece of good news today. A manifesto launched today by the influential website Conservative Home website puts Homes, Jobs and Savings as its three priorities. The section on ‘Homes for All’ highlights many of the issues I’ve raised above. If the solution is to build more homes at lower prices, it’s interesting that ConHome argues that the problem is not so much planning as speculation:

‘To provide both affordability and quality, we need to freeze out the speculators. In an advanced society there is no such thing as a completely free market in land for development – central and local government will always be involved in its allocation through the planning system.
 We believe that the state should use this power to actively favour home ownership over professional property investment.’

Here’s a flavour of the proposals:

  • A new option for planning authorities to require that homes in a new development only be sold to people intending to live in them
  • New tax policies to favour ownership (phasing out of stamp duty) over property investment (a tax on land banking)
  • An end to all mortgage subsidies such as Help to Buy with government support switched to councils and social landlords to build new homes for sale
  • A long-term switch of housing benefit money from the private rented sector to ‘ownership-enabling social housing’
  • A community-led planning system with local referenda
  • A right to build on suitable publicly owned land for self-builders and housing associations
  • More development at the scale of a street or whole neighbourhood facilitated by enhanced land assembly powers for local authorities plus an auctioning system to allow landowners to sell purchase options on their land
  • New garden city corporations modelled on the London Docklands Development Corporation – again subject to a local referendum but with powers over planning, land purchase and infrastructure.

You can agree or disagree with that. For me, the recognition of the importance of housing and the diagnosis that speculation rather than planning is the problem are both welcome but ‘homes for all’ do not seem to include ones for those locked out of any form of ownership.

However, what’s interesting is that the manifesto is covering much of the same territory as Labour’s Lyons Review. The policy prescriptions will be different (especially on social housing and housing benefit) but at least the major parties are taking the housing crisis seriously at last.

Before all of us have to move to Sellafield, it’s about time. 

Falling short

Thu, 21 Aug 2014

Today’s house building figures show welcome progress but four years after taking power the coalition is still many miles away from matching its bold promises.

The good news is that starts in the second quarter (April to June) of 2014 were up 18 per cent on a year ago. Completions are up 7 per cent on the same basis. The UK as a whole is also identified as the housing market with the fastest growth in starts in 2013 in a report by Deloitte Real Estate

But as everyone is pointing out today the 114,590 homes completed over the last 12 months is still less than half the benchmark of 250,000 that we need to meet demand. Even when the 137,620 starts over the last year feed through into completions we will still be well short.

The 250,000 is a rough extrapolation of the figure that Kate Barker said was needed to stop our house prices rising faster than the European average so it’s hardly surprising that the affordability crisis continues to get worse.

However, these figures also show what has happened under the four years of the coalition and provide a chance to match ministers’ rhetoric with reality.

The time lags involved in construction make it difficult to be precise about direct comparisons between the policies or this government and the last. The coalition took power part way through the second quarter of 2010 and there have now been four years since then. Here’s what’s happened to starts, with the 12-month rolling total for the second quarter of each year highlighted:

The graph shows solid progress over the last year and some support for minsters’ claims that they are ‘getting Britain building’ in the wake of the introduction of Help to Buy. Starts are now 27 per cent above the level when the coalition took power but still well down on pre-recession levels.

However, you can’t live in a start. As the next graph shows, the picture on completions is much flatter:

The total for the last 12 months of 114,590 may be up on a year ago but it is still below the level the coalition inherited from Labour and even below what it was two years ago.

That doesn’t seem much to show for all the time and support poured into housebuilding or for the burgeoning profits of the major housebuilders – or for the bolder promises made by ministers. 

Remember how in opposition the then shadow housing minister Grant Shapps said that he was going to turn us into ‘a nation of homebuilders’ rather than nimbys? That claim was echoed more recently by current housing minister Brandon Lewis when he claimed that a welcome shift in public attitudes to housebuilding means that nimbys have had their day.

Thanks to the cleansing of the Conservative Party website you won’t be able to find the Shapps speech anymore but the key elements are preserved in my blog from October 2009. Rather than top-down Stalinist planning targets, the Tories would trust the people and introduce ‘incentives and planning reforms to build more homes’.

It was a bold – but vague – promise. However, Shapps was much more explicit when he was questioned by the Labour chair of the communities and local governemnt committee in 2010. Clive Betts asked him whether success for the government would be ‘building more homes per year than were being built prior to the recession, and that failure will be building less’. The former housing minister replied: ‘Yes. Building more homes is the gold standard on which we shall be judged.’

As I blogged in January, that looks a distant dream given that there were 177,000 completions in 2007 before the impact of the credit crunch compared to 115,000 in the last 12 months.

The more modest target of building more homes than Labour also looks unattainable – even if you only make a comparison between the 2005 and 2010 Labour government to allow for the exceptional circumstances following the credit crunch in 2007.

Labour presided over 695,820 housing starts between 2005 Q3 and 2010 Q2. The first four years of the coalition have seen 462,050 starts, leaving a shortfall of around 232,000 to make up in the next 12 months.

On completions, the contrast is even starker. The coalition has managed 448,250 in its first four years. That is more than 300,000 short of the 749,970 completions in five years under Labour.

As I blogged yesterday, the example of France (which is building 300,000 homes a year but sees that as a crisis) shows that supply alone may not be the panacea that many believe it to be. However, taking the ubiquitous 250,000 homes a year as a benchmark, we should have seen 2.5 million homes built under both governments between 2005 and 2015. With one year to go, the total currently stands at 1.2 million. 

Crisis? Quelle crise?

Wed, 20 Aug 2014

The French housing market is ‘in meltdown’ after housing starts plunged to the crisis level of double what we are managing in the UK.

President Francois Hollande reconvenes his Cabinet today after returning from holiday with ministers working on a recovery package topped by measures to stimulate the construction industry.

Syria rather than housebuilding may be the reason why David Cameron cut short his holiday in Cornwall but the economic mood here could hardly be more different. House prices are up 10.2 per cent in the last year and ministers claim that their ‘long-term economic plan is getting Britain building again’.

There are no prizes for guessing which of the two countries saw 306,654 housing starts in the year to June and which will be lucky to manage 160,000 over the same period.

It’s true that French starts were down 11% on the previous year and 23% on the year before that (there were just under 400,000 in the year to June 2012). Starts have also hit their lowest level for 16 years.

But contrast that with what’s happened in the UK (which has roughly the same population as France). In 2012/13 we managed a mere 125,460 starts and far from being the worst for 16 years (when we had 200,000 starts) we were still flirting with the lowest output in peacetime since the 1920s.

The latest available figures show that starts in England saw a strong recovery from these lows to 133,650 in 2013/14 (this was hailed as a triumph for Help to Buy) while figures for Scotland, Wales and Northern Ireland are not yet available. However, the UK total seems set to be between 150,000 and 160,000. [EDIT: New figures published on Thursday show 145,000 starts in England, Wales and Northern Ireland - Scotland managed 13,000 the year before]. 

The contrast between the two nations is even greater when you look over a longer period. Over the last five years housing starts in the UK total around 680,000. France has seen 1.8 million. Over the last ten years, we’ve started 1.7 million homes while the French have managed 3.9 million.

However, the sense of crisis in France seems real and the fall in housebuilding is seen as a key reason why the economy as a whole has not seen the recovery prematurely proclaimed by Hollande last year.

As Reuters and Bloomberg report, property developers and building materials firms say a new housing law introduced this year to give extra protection to renters and home buyers is partly to blame. 

Whatever the truth of that, the law offers another fascinating contrast with the UK. There will be caps on letting agent fees, caps on rents in new contracts (to no more than 20 per cent above the median for the area) but also tax breaks for landlords in areas with a housing shortage. Paris is also planning to fine landlords who leave office buildings empty for too long to encourage them to convert them into homes. See reports by Fergus O’Sullivan here and here for more.

Hollande’s recovery package will reportedly include a package tackling taxation, regulatory and financing issues for construction as well as tax breaks for the low paid. It remains to be seen whether that will include the housing law.

Back in the UK, the Conservatives will be eager to highlight Hollande’s struggles and make the comparison with Ed Miliband and Labour’s milder proposal for rental reforms.

However, while all the main parties support an increase in housebuilding, housing starts remain half of the levels that are seen in France as a meltdown. Perception seems to be all when it comes to a crisis.

And perhaps not just for a crisis. If supply alone is a panacea, as is widely believed in the UK, then why have housing costs in France escalated to the point where the government is imposing rent caps?

Comparisons can be difficult (and even within the UK the different indices disagree about prices). However, according to a survey of global prices by The Economist earlier this year, prices in France and Britain look similarly overvalued against both rents and incomes despite their very different build rates. In all but nominal terms, the long-term trends look very similar too. 


Mind the gaps

Mon, 18 Aug 2014

Spot the gaps between rhetoric and reality in the speech by David Cameron about family-friendly policies.

The prime minister spoke on Monday about how he will put families at the centre of new domestic policy-making. He asked three questions on this, none of which are directly housing issues but all of which touch on housing: How can we help families come together? How can we help families stay together? And how can we help troubled families and those children who don’t even have families?

Cameron also promised to introduce a family test as part of the impact assessment of all domestic government policies. That has to be good news even if the government has a track record of ignoring inconvenient evidence from impact assessments. However, it also prompts the obvious question of how existing government policies would fare under the test.

There are two glaring examples in the speech itself. First, there’s a section acknowledging that not everyone conforms to the traditional husband, wife and children model. This at least is progress on previous ‘Broken Britain’ rhetoric even if he still manages to imply that a single parent household is not a proper family:

‘Let’s also be clear that there are some couples for whom splitting up is the right thing in the circumstances, however difficult the decision. In addition, there are also cases of domestic violence where what matters is making sure people are safe, rather than keeping a family together.’

However, what would a family test say about the government’s policies on domestic violence and keeping people safe? Earlier this month, charities warned that refuge provision is at crisis point due to a combination of local authority attitudes, funding cuts and competitive tendering.

Cameron goes on to cite examples of the failures of the past where the family has not been central to policy making:

‘So you get a whole load of policy decisions which take no account of the family and sometimes make these things worse. Whether it’s the benefits system incentivising couples to live apart or penalising those who go out to work - or whether it’s excessive bureaucracy preventing loving couples from adopting children with no family at all.’

Can a benefits system that incentivises couples to live apart by any chance be related to the one with a benefit cap

How would the family test regard a £500 a week cap for a couple that covers not just housing benefit but a whole series of family-friendly benefits including carer’s allowance, child benefit, child tax credit and maternity allowance? And what about the incentive for the couple to split up? A single parent with children has their benefits capped at £500 a week. A single adult whose children don’t live with them is capped at £350 a week. Would further restrictions to the cap make it more family-friendly?

Those are just two examples of the contradictions between Cameron’s rhetoric and the reality of his government’s policies. I could name any number of examples of the impact of austerity on families but here are some more that directly affect housing.

Take the many pernicious effects of the bedroom tax, for example. How about the way it penalises separated parents who want their children to be able to stay overnight? How about the reduction in funding for new family accommodation in England, where 77 per cent of new affordable homes in the next programme will have one or two bedrooms?

How would a family test regard the soaring number of homeless families sent to temporary accommodation outside their locality? Or bedroom caps and the benefit cap that encourage people to move away from family support networks?

Back with Cameron’s three questions, none of this promises to do much to help families come together or keep together. A housing policy combining high house prices and low building does at least do the second but only in the sense that it keeps adult children living at home with their parents for longer than either of them would like. Lack of action on short-term tenancies in the private rented sector keeps families on the move. 

However, the reality gap is perhaps most evident when it comes to the troubled families programme. Cameron hailed the expansion of the programme from 120,000 to 500,000 families that was originally announced in the spending review last year.

It’s now well known (see my blogs here and here) that the 120,000 figure did not originally refer to ‘troubled’ families at all but to research from 2004 on families suffering from multiple deprivation. This was defined as having five or more of these characteristics:

  • No parent in the family in work
  • Family lives in overcrowded housing
  • No parent has any qualifications
  • Mother has mental health problems
  • At least one parent has a long-standing limiting illness, disability or infirmity
  • Family has low income (below 60 per cent of median income)
  • Family cannot afford a number of food and clothing items.

The troubled families programme applied completely different criteria (anti-social behaviour, children not in school, adult on out-of-work benefits and causes high costs to the public purse) and mysteriously came up with precisely the same 120,000 total.

Sleight of hand that turns a measure of deprivation into a measure of the behaviour of people who are poor looks on the face of it more troubling than the families. However, as I argued in my other blogs, a case can still be made for it as a pragmatic way of protecting funding for family intervention work by tailoring it to the prevailing government rhetoric of the time.

But where do the extra 400,000 families come from? Stephen Crossley blogged earlier this month about the government’s repeated refusal to respond to his Freedom of Information requests. The DCLG argued that disclosure could have adverse effects on the policy by giving a potentially inaccurate and misleading impression of the programme, while the Information Commissioner’s Office referred to the danger of ‘lurid headlines’. If that’s the case, nobody seems to have told this morning’s headline writers about ‘500,000 scum families’ who ‘cost £30 billion’.

In the continuing absence of any official explanation of either figure, the best candidate comes from the final report of the Riot Communities and Victims Panel into the 2011 riots. This recommended extending the troubled families programme to 500,000 ‘forgotten families’ to help turn their lives around. The source for that was the same research on multiple deprivation from 2004 and refers to people with three or four of the factors I listed above rather than five.

A family test might conclude that four years of austerity have increased the number of families on low incomes and the numbers attending food banks, leaving them only one factor short of being ‘troubled’. A government impact assessment would no doubt claim that policies like the bedroom tax are tackling overcrowding while welfare reform is getting people back to work.

However, as Zoe Williams argued in The Guardian this morning, the bigger question is a political one: whose fault is poverty? In that context, Cameron’s rhetoric is the reality.

Feeling the pinch

Fri, 15 Aug 2014

Mark Simmonds is not getting much sympathy after claiming that MPs’ expenses make it ‘intolerable’ to live in London but has he also revealed a deeper truth about our housing system?

The MP for Boston and Skegness resigned as a minister on Monday and will leave parliament at the next election after claiming that he can’t find anywhere to rent in the capital on his £35,000 a year housing allowance.  

Simmonds and his family do not exactly sound like they are one of the ‘housing pinched’. These are the 1.6 million households identified in a report by the Resolution Foundation as spending more than 50 per cent of their net household income (after tax and benefits) on their rent or mortgage.

Three things leapt out at me from the report. First, these are the seriously squeezed households, there are 3.9 million who spend more than a third of their disposable income on housing. Second, the numbers would be even higher if interest rates were not at a record low and will be for many people with mortgages once they rise. Third, 990,000 of the ‘housing pinched’ are working households.

The significance of this third point is underlined by figures out this week showing rising employment, falling unemployment but falling average earnings. And, as I blogged on Thursday, this is what lies behind the 63 per cent increase in the number of working households who need housing benefit under the coalition. Iain Duncan Smith claimed this week that his policies are getting people back into work and ending a welfare dependency culture. The truth is rather different.

As the Resoultion Foundation points out:

‘For those “housing pinched” households remaining out of work, entering employment will be the best route to easing housing cost pressures. By contrast, “housing pinched” households who are in work likely represent a more structural challenge.’

So what has any of this got to do with Mark Simmonds? After all, far from feeling the pinch, he earns £89,435 as a minister and pays his wife up to another £25,000 to be his office manager. He already owns a £1.2 million home in his constituency and gets another £35,375 a year housing allowance (£27,875 plus £2,500 for each of his three children) to rent somewhere in London.

As Dawn Foster pointed out earlier this week, there are plenty of homes that he could afford to rent for that (though Brixton and West Norwood will seem like the wrong side of the tracks for a Tory MP) – and that’s without having to dip into any of his salary.

Simmonds himself argues that:

‘If MPs want to get into the business of travelling extensively from Westminster to the outer reaches of London to rent a flat then that’s up to them. But it’s not the lifestyle I want and not the lifestyle I have chosen.’

It seems more than a bit rich for a politician who enthusiastically supports the idea that nobody should get more in benefits than average earnings to complain about getting far more than that in what is effectively housing benefit for MPs.

The bigger point for me though is the system itself. At the height of the expenses scandal, there was outrage that MPs could claim the interest on the mortgage of their second home but then take all of the profit when they sold.

Some of them (including, to his credit, deputy prime minister Nick Clegg) repaid the money. Most (like chancellor George Osborne) seem to have banked it. Simmonds reportedly made more than £500,000 on a house in Putney that he bought for £650,000 in 2001 and then sold for £1.2 million in 2009 with the taxpayer picking up the bill for £2,000 a month in mortgage interest.

The new system introduced in the wake of the expenses scandal will only pay for MPs to rent a second home. It seems a cleaner, more puritanical system but is it really the best one? In the case of Mark Simmonds, it seems to cost half as much again to pay the rent or hotel bill for somewhere he doesn’t want to live as it did to pay his mortgage interest on somewhere he did.

These two inadequate ways of running MPs housing allowances are more than a little reminiscent of the mistakes that have been made in housing policy in general. Where once we gave people mortgage tax relief on a non-existent tax, now we pay billions of pounds in housing benefit to subsidise the property empires of private landlords. And all the while house prices and rents keep escalating: how many London MPs could afford to buy a family home in their constituency on their parliamentary salary plus their £3,760 per year London Area Living Payment?

Why not change the MPs’ expenses system again? The state could pay the mortgage interest rather than the rent on a second home but with the crucial difference that it would also gain a share of the profits when the property is sold. Why not just give them equity loans? If they’re good enough for everyone else under Help to Buy (and do not count as public spending) why not for MPs? It seems crazy to pay more in rent with all the profits going to private landlords. Or why not build them apartments close to parliament in the same way that we build them offices?

Which brings me back to the housing pinched. According to the Resolution Foundation, 830,000 of the working households spending more than 50 per cent of their disposable income on housing have incomes below the national medium. It estimates that they were left with an average income of just £60 a week after paying for their accommodation.

But the housing pinched are just part of a much bigger group of people who are housing squeezed. Housing benefit prevents the problems from getting even worse but only at a current cost of £5.1 billion a year for working households. Perhaps it might just be better to build some more affordable homes? Not to mention homes of all kinds.

Our current system works for landlords and anyone lucky enough to have got on the housing ladder a while ago. From MPs to the working poor, it’s failing just about everyone else. 

To read more about the private rented sector click here.

Housing benefit and the coalition

Thu, 14 Aug 2014

What has happened to housing benefit in the four years since the government inherited a system it claimed was ‘out of control’?

New housing benefit statistics published this week cover the period up to May 2014. They reflect not just successive government cuts but a changing pattern of claims and changing tenure over the last four years. Here are five things that struck me:

1) The housing benefit bill continues to grow despite all of the coalition’s reforms. The May 2014 figures show just under five million claims for an average of £92.69 a week, a total of £24.0 billion. That compares with £20.8 billion in May 2010 (4.8 million claims averaging £84.20 a week).

The coalition never claimed that its reforms would reduce the total bill, just that they would reduce the rate of growth from previous forecasts. The bill has grown by 15.4 per cent over the last four years. However, the annual increase has slowed from 6.2 per cent in 2010/11 to 1.3 per cent in 2013/14.

2) Rents and housing benefit claims. The total bill has risen still risen in the last year (from £23.7 billion in May 2013 to £24.0 billion) despite a fall in the number of claims (they peaked at just under 5.1 million in May 2013). That’s because the average claim has risen by 3.2 per cent.

Successive coalition cuts (LHA bedroom caps, shared room rate, bedroom tax, benefit cap etc) have been based on restricting eligibility for housing benefit to below the level of actual rents. These stats obviously only show housing benefit claimed rather than actual rents or shortfalls against them.

The impact of the cuts on LHA claims seems to show up clearly. The average LHA claim peaked at £115.13 week in April 2011 and fell to a low of £105.88 in February 2013, a fall of 8 per cent over two years. However, LHA claims have since started to rise again and averaged £107.28 in May 2014. That means the average LHA claim has fallen by 5.6 per cent since the coalition came to power. Some of that could be down to the adoption of the LHA in different areas, or perhaps a growth in partial claims by people in work (see below), but the impact of the cuts seems pretty clear (or at least it does on claims, it’s much less clear what’s happened to rents and tenant moves).

Social sector rents increase each year based on an inflation-plus formula that helps to underpin new development. So it’s not surprising that social sector housing benefit claims have increased too. The average claim has risen by 17.5 per cent over the last four years from £72.88 a week to £85.66 - and this is before much impact from affordable rent.

3) Claims by people in work. The number of households who are in employment and receiving housing benefit increased from 650,551 in May 2010 to 1,058,569 in May 2014, an increase of 63 per cent. The housing benefit bill for people in employment has risen from £2.9 billion (14 per cent of the total) to £5.1 billion (21 per cent).

The total number of working claims continues to rise (and will carry on rising, according to the Office for Budget Responsibility) even as the number of claims from unemployed people slowly falls. This is consistent with yesterday’s figures showing rising numbers of people in employment and falling unemployment but it also shows the impact of stagnant and even falling earnings on the housing benefit bill. Despite all the government rhetoric about hardworking families and benefit dependency, the stats show the true cost of the boom in low-paid work or (as Joe Halewood points out) the true cost of the subsidy to low-paying employers.

4) Claims broken down by type of tenant. The pattern of housing benefit claims has also changed over the last four years when you look at them broken down by the type of tenant and landlord. Claims by all types of tenants fell slightly in the last year but over the period as a whole the biggest increase has been in claims by private tenants on the local housing allowance followed by housing association tenants. Claims by council tenants, non-LHA private tenants and private regulated tenants have slowly fallen in line with the continued decline in the number of tenancies.

Within the social sector, this clearly reflects the continued growth of the housing association sector but it could also be the product of higher rents for new development. The increase in private sector claims is the result not just of the continued growth of the sector in the last few years (overtaking social housing in 2012) but of a greater need for help with the rent from families who would once have been housed in the social sector. Both also reflect the stagnation in earnings as rents keep rising.

Finally, take a look at the 2014 total for non-LHA tenants and private regulated tenants. The government keeps arguing that the bedroom tax is fair because the housing benefit of private tenants was already restricted in a similar way under the LHA. This is wrong since the system works differently and it never applied to existing tenants: the stats show that there are still 247,000 who are not on the LHA.

5) The impact of the bedroom tax. The stats reveal that 481,603 households lost an average of £14.90 to the bedroom tax in May 2014: a total of £373.1 million. That compares with 547,341 claims in May 2013, the month after the coalition began what it called removing the ‘spare room subsidy’.

We’ve rightly become used to seeing the bedroom tax as a Northern problem. The North and Midlands of England plus Scotland and Wales have the largest numbers of bedroom tax victims (though Scotland is now mitigating it in full with discretionary housing payments) and the biggest problems with a mismatch of stock.  

However, the south of England has its own bedroom tax problem: the stats show that tenants in London and the South East are suffering the largest reductions in their housing benefit (presumably because they pay higher rents to start with). The top 20 local authorities by size of weekly bedroom tax reduction include not just the predictable central London boroughs but some parts of outer London and well-heeled parts of the Home Counties too:

  1. Wandsworth £24.06
  2. Westminster £22.52
  3. Kensington & Chelsea £22.46
  4. Elmbridge £22.39
  5. Lambeth £22.10
  6. Camden £22.01
  7. Tower Hamlets £21.92
  8. Kingston £21.82
  9. Brent £21.73
  10. Harrow £21.67
  11. Reigate and Banstead £21.66
  12. Islington £21.48
  13. West Berkshire £21.38
  14. Windsor & Maidenhead £21.26
  15. Croydon £21.25
  16. Hammersmith & Fulham £21.15
  17. Spelthorne £21.12
  18. Richmond £21.07
  19. Bromley £21.07
  20. Redbridge £20.91

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