Monday, 01 September 2014

Inside edge

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 because. 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. 

Hard sell

Thu, 28 Aug 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.

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

Working it out

Tue, 5 Aug 2014

As Labour and the Conservatives renew hostilities about the housing benefit bill, which of them will do something about it?

In the latest round of Labour’s The Choice summer offensive, shadow work and pensions secretary Rachel Reeves released figures from the House of Commons Library showing that the total bill is set to rise to £27 billion by 2018/19.

Within that, she highlighted the soaring number of claims by people in work from 617,000 at the last election to 962,000 now and 1.2 million by 2018/19. That doubling in working claims will cost a total of £12.9 billion or £488 for every household in Britain between 2010/11 and 2018/19.

As for the politics behind this, Patrick Wintour argues in The Guardian that the speech is part of a Labour effort to convince voters that the benefits bill relates to people in work as well as the unemployed. Reeves will say that:

‘The number of working people claiming housing benefit is set to double because the Tory government has failed to tackle low pay, insecure work and the cost-of-living crisis. That’s meant thousands more people have been forced to rely on housing benefit to make ends meet.’

The Conservative response, reported by Matthew Holehouse in the Telegraph, is that Labour is ‘being hypocritical’ because it has opposed all of the coalition’s attempts to cut the bill. According to welfare minister Mark Harper:

‘We inherited an out-of-control housing benefit system from Labour that created a culture of dependency. But Labour haven’t learnt their lesson. They voted against our housing benefit cap, they voted against our overall cap on benefits and they still plan to borrow and spend more by restoring the spare room subsidy – landing future generations with more debt than they can ever hope to repay.’

A coalition aide says that the rise in working claims is actually the result of the success of its policies in getting people into work. ‘Far better that people are in work, paying taxes and contributing in part to their rents, than languishing on out-of-work benefits,’ she says.

However, none of this should come as much surprise to anyone familiar with the long-term trends under both parties. DWP figures show that the housing benefit bill almost doubled in real terms in the six years after the Conservatives decided to let it ‘take the strain’ of higher rents in 1991. The bill stabilised in the first ten years of Labour government after 1997 but then rose by 25 per cent in real terms in the wake of the global financial crisis.

Since 2010, the coalition has reduced the rate of growth (11 per cent up to 2014/15) rather than cut the total bill. For example, the DWP continues to claim in today’s papers that the bedroom tax will save the original £480 million when its own latest figures say more like £350 million (itself a questionable figure which takes no account of discretionary housing payments or the costs transferred to local authorities and social landlords).

The Office for Budget Responsibility published forecasts up alongside the Budget in March showing that the total bill will reach £26.9 billion by 2018.19. As I blogged at the time, it said that ‘the largest driver of the rise in spending has been caseload growth in the private rented sector’ and that the proportion going to private tenants/landlords would rise from 30 per cent in 2007/08 to 40 per cent in 2008/09. It went on:

‘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.’

In other words, the DWP’s own data directly contradicts DWP ministers’ statements about the housing benefit bill being ‘out of control’ and the result of a ‘culture of dependency’. Instead it will continue to rise despite all the cuts so far and those yet to come including 1 per cent uprating of private sector claims.

That is the more or less inevitable result of low pay, casualised work, reliance on a deregulated private rented sector, the shift to affordable rent and the inflation-busting formula for increases in social rents.

Advance reports of Reeves’s speech suggest that she will promise to ‘raise the minimum wage, introduce living wage contracts and get 200,000 homes built a year by 2020 to tackle the housing benefit bill and ensure working people can make ends meet’.

Rising wages will help cut the housing benefit bill for people in work as may longer-term private tenancies with predictable rent rises but beyond that much will depend on how many of those 200,000 homes are at genuinely affordable rents. The rhetoric on this from shadow housing minister Emma Reynolds in a speech last week sounded promising even if there are no commitments yet:

‘It’s economic madness that 95 pence in every pound of Government spending on housing goes on benefits and only 5 pence goes on building homes. The Government thinks the opposite. That’s why it cut the Affordable Homes Programme by an eye-watering 60 per cent. They said they could deliver affordable homes on the cheap. But in fact, it was just a cheap trick. The Government’s notion of affordability, at 80 per cent of market rent, is costing tenants and taxpayers more. It is crucial that councils and housing associations build more genuinely affordable homes.’

Back with the Conservatives, chancellor George Osborne appeared on the Today programme this morning to pledge his enthusiastic support for a plan to invest in new train lines in the north of England. Leaving aside the fact that he has not actually committed any money, he argued that it was good to invest in infrastructure but bad to spend money on benefits. The trouble is that he doesn’t seem to get the same case for investing in new homes to spend less on housing benefit. 

Osborne has already committed to another £12 billion of cuts in benefits after the next election and it’s hard to think that housing benefit will escape – or that Labour will not face some uncomfortable choices. 

Going the extra mile

Tue, 5 Aug 2014

How far should the government go to buy off local opposition to new garden cities?

Deputy prime minister Nick Clegg said over the weekend that ministers would consider options including council tax reductions and house price guarantees to ensure that local communities do not lose out. He told the BBC’s Countryfile programme (watch from about eight minutes in): ‘What I’m saying is we’re actively looking at things like that to show that we will go the extra mile to allay those concerns of people who feel that their property, or the price of their home, might be affected. We don’t want people to lose out.’

He went on: ‘We could maybe give deductions on their council tax for the period of time during which the garden city is being built. We could possibly also say to those homes where they think the price of their home will be affected, we will guarantee the price of their home by buying it, if you like, up front.’

From a political perspective, these ideas look like an obvious way to minimise opposition to new development. But what about the wider considerations for a country that is only building half the number of homes needed to meet demand? Here a few that spring to mind:

Why the implicit assumption that it’s only local home owners that should have a say? How close would you have to be to be eligible for compensation/bribes? What about the tenants who will be affected? What about the people elsewhere condemned to poor and expensive housing if we fail to build enough homes? What about future generations?

Will bribes to local residents work anyway? The new homes bonus has not turned out to be much of a ‘powerful new incentive’ (though this was offered to councils not individuals). The government’s offer of millions of pounds in incentives to communities that accept fracking led to calls to apply the same principles for new homes.

However, this assumes that opposition to development is motivated by financial considerations alone. Emotional attachment to the countryside and a desire to preserve things as they are may be just as powerful but people may also respond to a well-argued case based on the national interest. A famous study in Switzerland looked at public attitudes to the siting of a potential nuclear waste depository. When people were asked if they would support it if parliament said their area was the best place, 51 per cent said yes. When they were asked if they would approve if parliament offered substantial compensation, support fell to just 25 per cent.

What about the land? The garden cities model works by capturing the uplift in the value of the land between existing use and residential development use. If home owners are to be compensated at the full residential market value, why not land owners too? That would undermine the whole model. 

What about other projects? Clegg went on to say that we already have procedures that apply to big infrastructure schemes. For example, the government will pay market value plus 10 per cent to owners of homes closer than 60m to the proposed HS2 train line. However, there are well-established principles for the compulsory purchase of land and property. Offering enhanced terms to residents near garden cities could have costly implications for all other infrastructure projects - and other housing developments.

All of these considerations came up in the submissions for the Wolfson Economics Prize on garden cities that were shortlisted earlier this year. The contestants were asked ‘how would you deliver a new garden city which is visionary, economically viable and popular?’

As I blogged at the time, the answers to the popularity question were as much about creating a vision for the future community as how to compensate landowners and existing residents. The entries had some very different ideas about compensation too: the proposed premium on existing use value to landowners ranged from ‘slightly enhanced values’ to plus 20 per cent to 20 times the agricultural value.

However, many of the entries also talked about ‘patient investors’, landowners willing to forgo cash now in return for a long-term equity stake in the project. One talked about the way the great estates of London were developed in the 18th and 19th century by retaining the freehold and taking a return over time rather than taking a capital sum at the outset. Others proposed offering existing residents preferential terms to buy shares or bonds in the new community – or even a choice between compensation now or a share in the future proceeds.

Nick Clegg has raised a vital question for the future: how to balance the interests of local home residents against a clear national need for more homes. However, the answers have to be about more than just buying off local opposition.

Back in the present, the chances of any genuine garden cities (beyond reheated versions of existing developments) going ahead under a coalition government that includes Eric Pickles look somewhere between slim and zero.

And housing and planning minister Brandon Lewis did not exactly sound like he was fully behind Clegg’s ideas when he told the BBC that they were ‘an interesting contribution’ to the debate. His description of the bidding process as ‘still open for communities with proposals for ambitious, locally led developments that have the backing of existing residents’ does not exactly sound visionary either.

To read more about garden cities click here.

Welcome shift

Tue, 29 Jul 2014

People seem to be getting the ‘Yes to Homes’ message at last but have the nimbys really had their day?

A survey of public attitudes to new housebuilding published by the DCLG on Saturday reveals a welcome shift when people are asked whether they support or oppose more homes being built in their local area.

New housing and planning minister Brandon Lewis welcomed the results as evidence that nimbyism is on the wane.

Here are the headline findings from the British Social Attitudes survey showing the shift in opinion on this question between 2010 and 2013:

BSA

We seem to have gone from opposing new homes by 46% to 28% to supporting them by 47% to 31%. Within those figures, strong support has doubled from 5% to 11%, while strong opposition has fallen from 15 to 8 per cent.

This is a dramatic – and perhaps surprising – shift in just three years. There are of course big differences in attitudes between different sorts of people. The breakdown for different groups needs to be treated with some caution because of the sample size but there do seem to be changes in some unexpected places:

  • Age: Opposition is strongest among the 35-54s (36%) but the biggest reduction in opposition happened among the over-65s (52 per cent in 2010 to 20 per cent in 2013).
  • Tenure: Opposition is still much stronger among home owners than renters but it has fallen by a similar amount among all tenure groups.
  • Income: People in the highest income quartile are still the most likely to oppose new homes (33%) but that groups has also seen the biggest reduction since 2010 (when it was 49%)
  • Type of area: There is a clear divide between people living in large cities (only 17 per cent oppose new homes in their area) and those living in smaller towns and rural areas. However, opposition fell most in country villages (5% to 21%).

So why the change? In a piece for Saturday’s Telegraph Lewis hails the government’s planning reforms. He claims that the Labour government ‘killed off the local actors in the planning system’ but that local communities are now back in control.

That’s why the government decided to reunite the housing and planning portfolios and that’s why ‘housebuilding is moving in the right direction’. He says: ‘The new planning system puts local people in control, so if they want to build more homes, they will.’

But is this quite the ‘mission accomplished’ that Lewis makes out? Findings that people are more likely to support new homes if the community is involved in planning and local people have more control over what gets built certainly seem to go with the grain of localist thinking (even though it’s never been clear what that really means).

However, this has not yet translated into many more homes on the ground. It’s true that housing starts are moving in the right direction but earlier this month it emerged in leaked documents that officials warned ministers that they are about to fall again. Completions are up too but are running at half the level needed to meet demand.

As Alex Marsh argues on his blog, increased awareness of the housing problems facing the country seems a more likely explanation for the change in attitudes. Some 81 per cent of people agree that there is a shortage of affordable homes to buy and 82% say it’s more difficult to buy than 20 years ago. However, they are cautious about the prospects for change: 55 per cent think that ‘homes will continue to be unaffordable in my local area even if new homes are built’.

These results from the survey also seem more upbeat about new homes than more nuanced results from opinion polling. As Ben Marshall of Ipsos Mori blogged last year for Yes to Homes, 80% of the British public agree that there is a national housing crisis but more disagree than agree that there is a crisis in their local area (49% to 45%). Meanwhile local councillors still think local opposition is the biggest barrier to increasing supply.

Ben argues that the case for new homes still needs to be made locally:

‘Localism is unlikely to deliver the new housing required if the issue isn’t given greater ongoing attention by local politicians, communities and businesses. This is the challenge: housing supply is a strategic, national imperative in the hands, hearts and minds of local people.’

From this perspective it’s worrying that local newspapers don’t seem to have got the message yet that public attitudes are changing. Yes to Homes and other campaigns have generated positive local coverage but stories about plans for new homes are still routinely reported in terms of the reaction of local home owners. The more dramatic this is, the better.

A quick search of local paper stories over the last month bears this out. In Warwickshire there’s ‘fury’, in Hampshire ‘anger’, in Nottinghamshire new homes are ‘controversial’, in Sussex they’ll ‘ruin’ the beauty of the countryside and in Aberdeen they’re ‘diabolical’.

And how far does Brandon Lewis really speak for members of his own party? How about the Tory councillor who says plans for new homes near Coventry will create a ‘social dumping ground’ or the Tory councillor and MP condemning ‘fresh assaults on green spaces’ around Bradford?

Many of the stories quote people saying that they support new homes in their area in principle but oppose these particular plans because of their impact on schools or traffic or because there are brownfield sites nearby that should be built on first. Some of these concerns are genuine but some just seem like a way of saying no without saying ‘not in my backyard’.

The change in public attitudes to new homes revealed in this survey really is welcome news but there is still no room for complacency. 

Closed doors

Mon, 28 Jul 2014

What is it about a ‘poor door’ that causes so much outrage?

The term has captured something on both sides of the Atlantic: first on an exclusive development in New York City last year and then applied to a growing trend in London reported in Saturday’s Guardian.

The London building at the centre of that story – One Commerical Street on the eastern fringes of the City – was the same one that I blogged about last year when it was chosen by chancellor George Osborne as the venue for his speech arguing that the economy was ‘turning the corner’.

The development was midway through construction at the time and 40 per cent of the market homes had already been sold off-plan in the Far East. However, the plans revealed that it would have separate entrances for rich and poor: one at the front for the market housing and the second around the back for the housing association homes. That seemed to me to make it the perfect metaphor for the UK’s unequal recovery.

Only a few weeks before that – unknown to me at the time – very similar news had broken in New York about 40 Riverside Boulevard, a high-rise development that would have separate entrances. These were quickly dubbed a ‘poor door’ and a ‘rich door’.

The two stories became one this week when New York planners approved the scheme. That prompted outrage in the city and a pledge by Democrat mayor Bill de Blasio block similar schemes in future and this was the hook for Hilary Osborne’s Guardian investigation highlighting the fact that the same thing is even more common in London.

It’s interesting that the outrage seems to have been more more intense in New York. Perhaps that’s for historical reasons: America defined itself against a class-ridden Britain symbolised by Upstairs Downstairs and Dickens; one of the ‘self-evident’ truths in the US constitution is that ‘all men are created equal’ (even though it only meant white men); and separate entrances recall the shame of ‘separate but equal’ racial segregation.

It’s also political. Part of de Blasio’s support came from New Yorkers angry about economic inequality and the income levels of ‘the 1 per cent’ who caused the financial crisis. His $41 billion plan to create and preserve 200,000 affordable homes in the next ten years was a key campaign pledge. One mechanism for delivering it is mandatory inclusionary zoning, under which developers are required to provide low and moderate income housing in return for the lifting of restrictions on the height of developments and tax breaks.

Housing policy may work differently in London but the underlying issues are the same and inclusionary zoning does a similar job to the section 106 agreement that created the affordable homes at One Commercial Street.

One argument developers use to justify the separate entrances is that they are a way of ensuring that affordable housing tenants do not have to pay the high service charges for the concierges and other services that go with the ‘rich door’. There may be something in that, although the service charges have to be set against the considerable extra upfront costs of building a development with separate lift shafts. The point left more unspoken is that buyers pay such high prices for luxury apartments precisely because they want them to be exclusive.

The outrage on the left is met by mockery on the right, with the Wall Street Journal portraying the ‘poor door’ controversy as ‘the Dickensian misery of expecting people to pay their bills’. Somewhere between the two is the argument that if a ‘poor door’ is the only way to secure affordable housing then it’s a price worth paying for keeping homes in the centre of the city rather than despatching them to the outskirts.

Segregated development is also nothing new: think back to the 1930s and Oxford had ‘snob walls’ with iron spikes on the top separating private from council housing. A counter-argument could even be made communities are more mixed now than they were in the 1980s. However, that rather ignores the powerful forces that are generating inequality and division.

While inclusionary zoning has a long history in the US, it’s only relatively recently that Section 106 developer contributions have become a key mechanism for delivering affordable housing in the UK. What’s seen here as a tax on new development (which has been considerably relaxed by the coalition) is often seen there as a tax break or subsidy for developers (build affordable homes, gain the right to build new floors full of luxury condos).

What’s changed completely is the wider housing and economic context. Escalating house prices in London and New York have created a housing market in which only the very rich can afford to buy, gentrification has spread to former working class areas and people on low incomes are left with rapidly shrinking pockets of affordable housing. Inadequate subsidies for affordable housing leave new provision ever more dependent on developer contributions and the right to buy and regeneration eat into the existing stock. Meanwhile an increasingly unequal society becomes ever more polarised between the very rich and the very poor.

At One Commercial Street, for example, apartments starting at £500,000 for a studio are only affordable to the top 1 per cent of households (calculate where you stand here). The affordable homes will have gone to around 70 households from perhaps the bottom 10 per cent.

Of those who might have used the non-existent middle door, some will choose to move to the suburbs or out of the city altogether as enclaves of affordable housing disappear. For those who want to remain in the city and do not already own, the meaning of affordability is stretched to breaking point to include $3,000 a month rents in New York and £720,000 shared ownership in London. For those at the bottom who are homeless or too low on the waiting list, some will be forced out of the centre of the city by cuts in housing benefit and some by out of area homelessness discharges.

The ‘poor door’ controversy will make us more sensitive to buildings with separate entrances for rich and poor and hopefully more aware of the need for more new homes. It may generate a wider debate about whether affordable housing requirements should be delivered on or off site. It may even lead some to question whether what amounts to a tax on new development (which may mean more overseas investor buyers) is the best way to subsidise affordable homes.

However, ‘poor doors’ are the result of state intervention to mitigate rather than confront the far greater inadequacies of our housing system and the inequalities built into it. That’s the real outrage.  

Survey story - part two

Thu, 24 Jul 2014

Here’s the second part of my blog on some key themes emerging from the latest English Housing Survey.

Part one looked at changing trends in tenure, the impact of the financial crisis and the true nature of under-occupation. This final part looks at three more trends that caught my eye:

Private renters are not as satisfied at they seem: Whenever groups representing private tenants complain about poor conditions in the sector, landlords and ministers point to evidence from the survey about satisfaction levels. The latest data shows that 84 per cent of private renters were satisfied or very satisfied with their accommodation and 87 per cent were satisfied with their area. These figures are higher than for social renters and not much lower than for owner-occupiers. In addition, when private tenants were asked why their previous tenancy ended, only 7 per cent said it was because they were asked to leave by their landlord or agent. Against that, a private let does not look much like a settled home for many people: 907,000 out of England’s four million private renters had moved within the last year. 

However, as the graph below shows, the results are very different when people are asked if their current tenure is ‘a good way of occupying a home’. Similar proportions of owner-occupiers (93 per cent) and social renters (82 per cent) say yes to this as say they are satisfied with their accommodation or area but the proportion of private renters saying yes slumps to just 52 per cent.

Satisfy

Some 23 per cent of private renters were dissatisfied with their current tenure, a rate four times higher than social renters (6 per cent) and ten times higher than owner-occupiers (2 per cent). Being satisfied with your accommodation or area is not the same thing at all as being satisfied with being a private tenant.

Affordability may not be what you think: It’s tempting to take it as read that social housing is more affordable than private renting and owner-occupation – but if you look at housing costs in relation to incomes a very different picture emerges. On average, owner-occupiers spend 20 per cent of their income on their mortgage in 2012/13, with the proportion increasing to 25 per cent for those who have bought within the last three years and falling to 19 per cent for those who bought three or more years ago. In contrast, social renters spend 30 per cent of their income on rent and private renters 40 per cent.

These figures are for the incomes of the household reference person and their partner (and so are closer to reality than affordability measures than only include a single earner). They are also after housing benefit has been applied: without it, rents would have accounted for 42 per cent of social tenants’ income. However, they are for 2012/13, before most cuts in housing benefit and before most development of new social housing for affordable rent.

Private renters also paid more (£163 a week) in money terms than people with a mortgage (£149 a week) and they will of course be paying that for as long as they rent with no chance of paying off their mortgage after 25 or 30 years. 

Social renters do not conform to TV stereotypes: One reason why the rash of TV programmes like Benefits Street caused so much offence is their insinuations about what social tenants do (or don’t do) all day. It’s true that 65 per cent of social tenants are not working (this figure is for households and refers to the status of the household reference person). It’s also true that this is higher than for private renters (28 per cent) and owner occupiers (38 per cent).

However, a more complex picture emerges from the more detailed breakdown in the survey. Only 10 per cent of social tenants are unemployed, compared with 31 per cent who are retired, 23 per cent who are ‘other inactive’ (permanently sick or disabled or caring for the home or family) and 1 per cent who are students. Where TV programmes imply that social tenants won’t work, the survey shows the much higher proportions who are unable to work.

Meanwhile the 35 per cent of social tenant households who are in work (23 per cent full-time, 12 per cent part-time) are finding it harder to make ends meet and pay the rent. The proportion of council tenants who were working and in receipt of housing benefit almost doubled from 18 per cent in 2008/09 to 34 per cent in 2012/13. The survey says this may reflect lower paid work and more people undertaking part-time work.  

This has important implications at a time when the government sees getting a job as the route out of poverty. Even if most of the unemployed and some of the long-term sick and disabled are successful, cutting tenants’ benefits to incentivise them to find work does not seem like such a simple solution to their financial problems.

You can find more detail on all of this plus much more in the detailed commentary and tables from the English Housing Survey available here. Part one of this blog is here

English Housing Survey part 1

Wed, 23 Jul 2014

It’s time again for a welter of new information about housing in England. Here’s the first of a two-part blog on what caught my eye.

The English Housing Survey also covers stock conditions, energy efficiency and fire safety but this blog concentrates on the story on households. Information from it was first released in February but more followed today. Here are the first three of six themes that seemed significant to me.

The slow death of the property-owning democracy continues

I blogged about the key trends in tenure in February. It wasn’t just about the rise and rise of private renting (it had been clear that it would overtake social renting for some time) but a huge shift within owner-occupation. In 2012/13 the number of outright owners almost overtook the number of mortgaged owners. This is part of a generational shift (baby boomers are slowly paying off their mortgage and few of their kids can get one) that would have horrified Mrs Thatcher when she revived the old Tory idea of the property-owning democracy. Between 2008/09 and 2012/13, the proportion of households aged 25-34 who were private tenants rose from 31%t to 45%.

The financial crisis had a dramatic impact on tenure

Mortgaged ownership has been shrinking for years but the trend seems to have accelerated dramatically as a result of the recession and credit crunch. The survey includes information on recent movers – households who moved into their current home in the last 12 months. In 2012/13 there were 2.3 million of them: 59% moved into the private rented sector, 24 per cent into owner-occupation and 16% into social housing. As the graph shows, a big shift happened in the two years between 2007/08 and 2009/10: the proportion of recent movers who went into owner-occupation dropped from 42% to 20%, while the proportion becoming private renters rose from 43% to 62%.

 

Under-occupation is in the eye of the beholder

The bedroom tax has focussed attention on under-occupation in social housing, with ministers arguing that it desperately needs to be tackled to free up space for overcrowded families. As I’ve blogged before, the English Housing Survey tells a very different story and uses a different measure of under-occupation. The ‘bedroom standard’ is a slightly harsher measure of bedrooms needed than the rules on housing benefit (older children have to share) but has a more generous definition of under-occupation (two bedrooms more than needed rather than one as under the housing benefit rules).

With that caveat, the survey highlights four issues:

  • Owner-occupiers are most likely to under-occupy. Half of all home owners have two bedrooms more than need and another 36 per cent had one bedroom above the standard.
  • Social tenants – the targets for the bedroom tax – are least likely to under-occupy. Only 9.9 per cent had two bedrooms more than the standard and 28.7 per cent had one more. That total of 39 per cent compares to 85 per cent for owners and 51 per cent for private renters.
  • Under-occupation and overcrowding in social housing were both falling before the bedroom tax was introduced in April 2013. Overcrowding fell from 7 per cent in 2010/11 to 6 per cent in 2012/13. The 9.9 per cent under-occupation rate in 2012/13 was down from 10.3 per cent in 2010/11 and 12.1 per cent in 2003/04.
  • More than half of all under-occupiers (3 million out of 5.8 million with two bedrooms more than the standard) are aged over 65. Isn’t this where downsizing initiatives and incentives should be targeted?

I’ll be posting part 2 of this blog later. How satisfied are private renters? Who had the most affordable housing? And do TV shows get it right about social renters? Watch this space fort three more new perspectives from the English Housing Survey. 

A room of their own

Mon, 21 Jul 2014

What does the Lib Dem change of heart mean for the future of the bedroom tax?

It is not quite the u-turn that’s being claimed in some quarters but it is a significant change of direction. It’s not quite the mature change of mind in the light of the evidence that’s being claimed by the Lib Dems either: the evidence has been there from the beginning and the independent evaluation that supposedly triggered the change in policy must have been available at the DWP for weeks before it was sneaked out on Tuesday.

Read Rob Gershon’s great blog for a forensic analysis of Wednesday night’s statement by Treasury chief secretary Danny Alexander and all the previous evidence that he seems somehow to have missed. I’d add only one thing to that: Danny could have asked his dad.

This is of course not the first time that the Lib Dems have withdrawn support from the bedroom tax. In April it turned out that Tim Farron meant the party but not the bit of it that’s in government. This time around the leadership is falling into line with the grassroots to call for specific reforms to the policy.

It’s easy to accuse them of hypocrisy: without Lib Dem support, the bedroom tax could never have been introduced in the first place. And naivety: the bedroom tax is a symbol of the way the Conservatives forced through changes on welfare reform and housing that the Lib Dems were too quick to accept in the early days of the coalition. And it’s probably too late politically, as former Nick Clegg advisor Sean Kemp argues in The Spectator.

However, politicians are allowed to change their mind and it’s not a bad thing when they listen to the evidence. The Lib Dem change of heart is much better late than never and it could yet make a real difference to bedroom tax victims before the next election.

Danny Alexander spelt out more detail in an interview on Channel Four News last night. If you haven’t seen it, do watch again here as it’s interesting on four different levels:



First, it’s cringe-inducing TV of the highest order as Alexander struggles to justify his previous position and evades repeated attempts to get him to say ‘sorry’ until near the end. Alexander’s continued use of ‘the spare room subsidy’ (the name invented by the Conservatives to justify the policy) does not do much to convey contrition.

Second, the new Lib Dem policy seems to be more complex than the original statements made out. It amounts to an admission that discretionary housing payments (DHPs) have not worked and more exemptions are needed.  The interview hints that the party does not mean to exempt all disabled adults (something that might cover two-thirds of all bedroom tax victims) but a much smaller group of ‘people who have a medical need for an additional bedroom’. There would also be a new duty on social landlords to prevent under-occupation, though it’s not clear how that will work.

Alexander did not mention how the suitability of alternative accommodation for downsizers would be decided. This issue was thrown into stark relief in the package before the interview, which featured Wayne Blackburn, a disabled man who has already been forced to downsize into unsuitable accommodation. It’s also worth noting Inside Housing’s story today about rising numbers of out-of-area homelessness discharges: these are happening despite government guidance that ‘suitable’ should mean in the same area.

Third, Alexander still does not seem to understand his own policy. He repeats the discredited government line that Labour brought in ‘this self-same change for people in the private rented sector’. In reality even the Lib Dems’ reformed bedroom tax will be much harsher since the local housing allowance only ever applied to new tenants and operates in a completely different way.

Fourth, he drops some hints about what’s likely to happen next. If the Lib Dems want to reform the bedroom tax before the next election, they could vote for it in the House of Commons or negotiate it behind the scenes with their Conservative coalition partners.

On Commons votes, here’s what he has to say:

Q: If there was a choice in the House of Commons to vote for the policy you now support, will you vote for it?

A: Well, of course… if Liberal Democrats put forward our policy in the House of Commons of course I’ll support that.

Q: What about if Labour do?

A: I think we’d have to look at whatever Labour put forward.

Q: What about if Labour put forward your idea?

A: I think we’d have to look at what Labour put forward on a case by case basis.

Q: This is maddening political games. This is what drives people at home nuts. You can’t answer a straight question about if somebody does what you want you won’t vote for it.

A: You know that isn’t true because Labour would only be putting down a motion like that in order to play political games themselves.

I take this to mean that if Labour calls a vote to scrap the bedroom tax, the Lib Dems will vote against and Labour will use it to paint them as hypocrites. If Labour proposed reforms they might vote in favour, but would Labour want to? However, Lib Dem MP Andrew George, who came top in the ballot for private member’s bills, is drafting legislation that includes wide-ranging bedroom tax reforms. That will come to the Commons on September 5. What will the Lib Dems and Labour do then? Together they have the votes to push through reforms that will help many bedroom tax victims before the next election but only if they put policy before party politics.

On coalition negotiations, Alexander says that ‘it’s right that in the next few months in the run-up to the Autumn Statement that we should argue the case within government, which we will do’.

Q: You could force it through couldn’t you? you could force the Conservatives to deliver this if you want. How far will you take it? You could say you’re not going to get anything else in the Autumn Statement unless you give us this. Are you going to do that?

A: Well, we will make it part of what we’re arguing for as part of that process so you’ll see the results in the Autumn Statement.

Q: So that’s a guarantee that it will be in the Autumn Statement isn’t it?

A: It’s not a guarantee, it’s part of what we’re pushing for in the Autumn Statement and we’ll see how we get on.

So how will the Lib Dems play their hand? Alexander’s answers do not inspire that much confidence but they will get at least two chances to force through their new policy this year. Will they take them?

Shuffling the deck

Wed, 16 Jul 2014

So housing seems to have kept the politicians who should have gone and lost the one who was making a difference.

Speculation ahead of the reshuffle suggested that Eric Pickles and Iain Duncan Smith would leave their posts as part of the cull of middle aged men in the Cabinet. True, some of the stories seemed a bit thin (a woman with a posh accent overheard talking on the phone didn’t seem like much to go on) but I lived in hope. I also looked forward to the DWP press release arguing that it proved that universal credit is ‘on track and on schedule’.

Instead it’s business as usual at the top of their two departments with a shake-up lower down the ministerial scale. After just over nine months in the job, Kris Hopkins is now the former housing minister and is shunted sideways into local government. Brandon Lewis moves from that job and gets a promotion to minister of state for housing and planning. Penny Mordaunt comes in as junior minister responsible for coastal communities.

The good news is that housing is restored to the minister of state status it lost when Hopkins was appointed and that the housing and planning briefs have been reunited. Lewis seems on message about housing issues, recently helped open new council houses in his constituency and is a private landlord. He’s also a protégée of Pickles and co-hosted a local radio programme with his boss when he was leader of Brentwood council.

The bad news is that the revolving door of housing ministers is speeding up again. Hopkins replaced Mark Prisk, who was supposedly sacked for his lack of media profile. He did attract more publicity but mostly by putting his foot in his mouth with ill-advised comments about house prices and landlords evicting tenants. It’s tempting to say that his departure is linked to worry about a leaked report predicting a fall in housing starts ahead of the election but more likely it’s just an indication that who does the job does not matter very much politically.

The very bad news is that Nick Boles has also moved from the DCLG. He told a fringe meeting at the last Conservative conference that ‘if I’m still planning minister after the next election, I want you to shoot me’ and that his ideal job was working in the education department with old Policy Exchange chum Michael Gove. He’s got his wish but only half of it.

However, Boles was like a breath of fresh air at the DCLG and within the Conservative Party. He was prepared to put the case for new homes to sceptical voters and seemed to have license from the leadership to wind up the Daily Telegraph and even more sceptical members of his own party. Somehow I can’t see Brandon Lewis doing anything as brilliant as Boles’s confrontation with Simon Jenkins on Newsnight last year.

His departure could therefore signal a pre-election shift in the balance of power away from modernising Conservatives who see new homes as vital to economic growth in favour of traditional ones who want to resist them at all costs. A quick look around at recent local paper coverage bears out the potential: from Warwickshire Tories calling a site for new homes a ‘social dumping ground’ to Bradford Tories facing ‘assaults on their green spaces’.

The worrying news is that the DCLG is also about to lose Sir Bob Kerslake, who will stop being head of the civil service in the Autumn and retire as permanent secretary in February when he’s 60. Sir Bob was of course previously head of the HCA and many people credit him with protecting the housing programme in 2010 so it’s hard to see his departure as good news for the sector.

Allegra Stretton reported on Newsnight on Monday that he was being sacked for ‘poor performance’ (which seems to be code for resisting civil service reform). If the leak and the timing of an announcement about the civil service at the same time as a political reshuffle seemed remarkable, so does the fact that he was appointed and promoted under the coalition.

The man himself blogged yesterday about his pride in working with ‘brilliant’ people in the job and the ‘big and difficult transformation’ at the DCLG. But he added: ‘Less brilliant have been the ‘noises off’ criticising civil servants and accusing them of being reluctant to change.’

With a departing permanent secretary, yet another new housing minister and the loss of the Boles stardust, things do not look good for the DCLG ahead of the election. Perhaps it’s just as well that Pickles has outsourced policy development to the big housebuilders?

By comparison the DWP seems a model of stability. Out goes Mike Penning and in comes Mark Harper as minister for disabled people (after a period of confusion similar to the one about who was housing minister yesterday afternoon).

Iain Duncan Smith supposedly survived an attempt to remove him in the last reshuffle and now somehow he’s survived yet again. If you haven’t seen it, do read Chris Dillow’s brilliant blog on ‘why idiots succeed’. My money is on reason number one – the wet bed – plus Cameron’s fear of having one of John Major’s ‘bastards’ on the backbenches.

Here’s how Major summed things up last year: ‘IDS is trying to reform benefits. But unless he is lucky or a genius, which last time I looked was not true, he may get things wrong.’

The former prime minister was prescient. As I blogged yesterday, the DWP chose the reshuffle as the perfect day to bury the bad news in an independent evaluation of the bedroom tax that provides powerful new backing for critics of the policy. Only last week, it was embarrassed when Sir Bob Kerslake confirmed that the Treasury has still not signed off the business case for universal credit.

And yet somehow, with his flagship sinking underneath him, the captain sails serenely on.  

In case you missed it

Tue, 15 Jul 2014

Today looks like a very good day for the DWP to sneak out independent research on the impact of the bedroom tax and cuts to the local housing allowance.

While Iain Duncan Smith seems to have survived the Cabinet cull of middle aged men, the two reports offer in-depth scrutiny of two of his most controversial policies. There is as yet no DWP press release or comment but you can find the reports here and here on its website.

This blog will concentrate on the independent evaluation of what the DWP calls the removal of the spare room subsidy. The report by the Cambridge Centre for Housing and Planning Research and Ipsos Mori analyses the effects on and the responses of tenants, landlords, local authorities, voluntary and statutory organisations and advice agencies and lenders.

While this is the interim report and covers only the first eight months of implementation from April to November 2013, it’s also the most comprehensive analysis of the policy yet attempted is published by the department responsible for it. Here are some of the findings that I’m guessing it hopes that the reshuffle will distract you from reading about:

The impact on tenants. Around 80 per cent of those affected are paying some or all of the shortfalls on their rent but only half have paid it in full and 20 per cent had paid nothing in the first six months.

Of those who have paid, 57 per cent say they found the money by cutting back on household essentials and 35 per cent by cutting back on non-essentials.

A third have borrowed money to pay the shortfall. Most of this has come from family and friends (21 per cent) but tenants questioned whether this was sustainable given the low incomes of those they are borrowing from. Another 6 per cent have borrowed from another lender, 3 per cent from a credit card and 3 per cent had taken payday loans.

In total, that means more tenants making up the shortfall have done it through borrowing than by applying for a discretionary housing payment (22 per cent) or looking for a job or better pay or hours (21 per cent)or looking to move (16 per cent).

 Cut

Downsizing. The DWP might have seized on higher than expected figures for successful moves to smaller accommodation: 4.5 per cent of affected tenants had managed to downsize to another social tenancy in the first six months. The report notes that if this trend continued at the same rate for the next two years, over 20 per cent of those affected would have downsized within the social rented sector. A further 1.4 per cent moved into private rented homes in the first six months.

However, this trend may not be all it seems. It is only higher than expected because the DWP’s impact assessment assumed that there would be no significant moves. There were also big differences between areas:

  • landlords with the lowest proportion of tenants affected had seen downsizing rates almost four times higher than those with the highest proportion
  • demand for downsizing has been difficult to meet so far especially in large rural areas and in urban and suburban areas where the standard social rented property is a three-bedroom house
  • financial incentives to downsize offered by landlords are less available in areas most affected by the bedroom tax.

Meanwhile most tenants were reluctant to move away from services, work and support networks and landlords and agencies said most affected tenants would prefer to say put and pay the shortfall.

Discretionary housing payments. The research confirms other indications of gaps in the system and huge variations between different areas:

  • more than half of affected tenants were not aware of DHPs
  • there was widespread concern about disabled people in adapted properties being denied help because their disability benefits were counted as income
  • agencies were worried that some of the most vulnerable, including those with mental health difficulties, are missing out
  • there was widespread concern that the time-limited nature of DHP awards means it is only delaying the real impact of the policy and about the future size of DHP allocations.

The DWP has also just published a good practice guide for local authorities on DHPs.

Employment. Some 18 per cent of affected tenants said they had looked to earn more money as a result of the policy but ‘only modest numbers would appear to have been successful in the first six months’. The vast majority (87 per cent) of those looking for work or better pay have not found them.

Allocations and development. Some 41 per cent of landlords reported difficulties letting larger properties, with the problem greatest in areas most affected by the bedroom tax like Wales and the north of England (60 per cent) and lowest in areas least affected like London. However, the report found no statistically significant increase in national voids figures.

Of the 80 per cent of landlords involved in new development, a third said they had changed the profile of their programme due to the bedroom tax and benefit cap. The main impact has been a reduction in the number of larger homes and increase in one-bedroom flats being built. Many landlords were worried that losses in rental income could reduce their ability to develop in future but their relationship with lenders does not seem to have suffered yet. 

Overcrowding. The DWP has argued that the bedroom tax will help overcrowded families by freeing up larger homes. However, the report found that most local authorities and landlords believe it will have little impact and revisions to the definition of overcrowding as a result of the policy mean it will be difficult to assess the impact anyway.

Knock-on effects. Changing allocations procedures (for example 72 per cent of landlords have increased priority for downsizers) have increased waiting times for smaller homes but made larger homes available to other people on the waiting list. Two-thirds of landlords would consider letting larger homes to people not affected by the bedroom tax (pensioners and working people not on housing benefit).

Agencies working with the single homeless reported difficulties in hostel move-on to social housing because of the shortage of one-bed homes and landlord reluctance to let two-beds to single people.

Arrears and evictions. It was too early to expect much hard evidence on either but the report found widespread concern about ‘the impact of potential future evictions on local services, and on landlord finances as well as on the lives of vulnerable people’. The survey of claimants found 80 per cent were finding it very or fairly difficult to pay the rent and 79 per cent were running out of money very or fairly often (rising to 90 per cent for those in arrears).

Policies again vary hugely between areas. The chief executive of one local authority told the researchers ‘it is not the council’s business to evict people’ but a social landlord in the same area said it would follow usual procedures and ‘take supportive but robust action’.

And the research also reveals that small numbers of evictions have already happened and more could be on the way. The survey shows 45 evictions due solely to bedroom tax in the first seven months including 24 by one landlord. That is a tiny number but the report says that:

‘In terms of the level of arrears required to trigger court action, most landlords interviewed said that they were developing their policy over time. They were anxious not to be in the media for being the first in court for “bedroom tax evictions” and wantedf to give tenants every opportunity to pay. Nevertheless by the autumn a third had already begun the process of issuing formal warning letters and in some cases continuing further in the route to evicting non-payers.’

Ominously too, the report found that while most local authorities would not consider someone with bedroom tax arrears to be intentionally homeless, some said they would look to discharge their homelessness duty into a private tenancy and possibly into shared housing. 

Overall then, the report will increase rather than allay fears about the impact of the bedroom tax. If it had really wanted to, the DWP could have spun a positive story about some of the findings, for example on downsizing or the falling numbers of tenants affected. The response by IDS to the BBC’s story on the study is a nod in this direction but he familiar line about ‘scaremongering’ by critics is looking pretty tired.

Far better then to publish the report on a day when everyone’s attention is focussed elsewhere. 

Chance of a lifetime

Fri, 27 Jun 2014

MPs will get the chance to back major housing reforms including new significant exemptions to the bedroom tax later this year. Will they take it?

Andrew George, the Liberal Democrat MP for St Ives, has what he describes as ‘the chance of a lifetime’ to change things through legislation after coming first in the ballot for private member’s bills. Talking to him yesterday gave me a fascinating but slightly depressing insight into how the system – and party politics – work.

He consulted his constituents on a shortlist of options including housing, a Cornish Assembly and health care standards and after more than 2,000 comments has decided to plump for an Affordable Homes Bill with four key elements:

  • Extension of Help to Buy or a new Affordable Homes Investment Bank to underpin the ‘intermediate’ market (shared equity/shared ownership/mutual housing) to construct a new lower rung on the housing ladder for those who cannot afford full ownership.
  • New exemptions to the bedroom tax for anyone who has lived at an address for more than three years or who lives in a home with disabled adaptations
  • A new Use Class for ‘non-permanent residential use’ to empower local planning authorities to control the number of second homes in their area.
  • Enhanced powers of compulsory purchase for local authorities where developers land bank development sites or fail to use sites for which planning permission has been granted but development has not advanced or where need for affordable homes cannot be met on ‘exception’ sites through community land auctions/trusts.

To give a bit of context, Andrew George is my MP so I know he has a longstanding interest in affordable homes and a particular local one in the pernicious impact of second homes. More recently he’s been named the most rebellious Liberal Democrat MP of this parliament and has voted against the government on issues such as the bedroom tax, NHS reform and tuition fees.

All four of his proposals have the potential to attract cross-party support but there could be issues with all of them too. This is the starting point but not necessarily what the final Bill will look like since he may have to narrow it down to get majority support.

On intermediate housing, he argues that the market has not taken off because lenders are ‘iffy’ about it and people who buy a share struggle to sell. ‘I can’t see why anyone would object to it,’ he told me. ‘The Treasury might be worried about the budgetary implications but the principles can’t be objected to.’ Shared ownership sceptics may disagree but it could be a big improvement to Help to Buy.

Private member’s bills can only amend, rather than repeal, legislation, which is why he’s gone for exemptions to the bedroom tax. ‘The thing I’ve found offensive about it is the implication that because you’re poor you’re less entitled to a stable family home,’ he says. ‘This would significantly neutralise [the bedroom tax] and carve out a large number of cases.’ By my reckoning, his proposals would exempt the majority of those affected. Some 83 per cent of social tenants have lived in their home for more than three years (though that includes pensioners and the proportion of working age will be lower) and some newer tenants will be in specially adapted homes.

On second homes, his proposal could get support from other rural MPs but it does go against the grain of Tory deregulation (as I blogged earlier this week, the Deregulation Bill will liberalise short-term rentals in London). George says he has campaigned on the issue for years but been turned down by housing ministers under both the Conservatives and Labour.

Finally, his proposals on land banking chime with Labour policy but something similar has been proposed by Boris Johnson in London.

So what next? The reason that topping the private member’s bill ballot is the equivalent of winning the lottery for a backbench MP is that parliamentary time is very limited and the winner has the best chance of seeing their Bill become law. It’s not a guarantee though. The last MP who won the ballot and was successful was Labour’s Brian Iddon before the last election with a Bill to protect the rights of tenants of repossessed landlords and he was a member of the largest party and had government backing. MPs promoting Bills have to be prepared to negotiate to win support. 

George had to strike a balance between proposing something small to maximise support and something bigger with a higher risk of not getting it through. ‘I wasn’t going to run with something tame and anodyne,’ he says. ‘This is once in a lifetime chance to advance a cause rather than tinker at the edges.’ 

However, while all of us might hope that law-making at Westminster is a rational process in which proposals are debated and enacted on their merits, the reality is not quite like that. Party politics inevitably intrudes.

Take the bedroom tax, for example. My guess is that it would not survive a genuinely free vote in the Commons in its current form if the right compromise could be found. The all-party Work and Pensions Committee recommended significant exemptions and changes in a report in April. Some Lib Dems and even a few Conservatives have voted against it or abstained at various points.

However, with ministers and their aides expected to vote for government policy or resign, there have never been enough of them to succeed. Labour, meanwhile, has used opposition day debates to call for repeal of the bedroom tax but seemed more intent on pinning the blame on the Tories and Lib Dems at the next election than securing concessions in the meantime.

Too often then the parliamentary system and tribal party politics have seemed to trump changes to what most MPs know is a bad policy. Will it be any different this time? The early signs are not promising. ‘I’ve spoken to the Labour leads and they have indicated that they may not go for my bedroom tax change,’ says George.

From the Conservative side of the House, meanwhile, he’s had dark threats from Eurosceptics with their own agenda. ‘The Tories have threatened to talk my Bill out unless I allow the European Referendum Bill to get in first,’ he says. ‘The only way to prevent that is to get 100 people there on the day and I may struggle to do that.’

Andrew George is currently drafting his Bill and is prepared to narrow it down to the elements that will attract enough votes to pass. Can the Lib Dem rebel succeed? The first debate in the Commons is set for September 5. Watch this space.

Passing the buck

Fri, 27 Jun 2014

George Osborne has spent so long outsourcing responsibility for the housing market to Mark Carney that it’s easy to forget the Bank of England’s actual brief.

Far from controlling house prices, or tackling affordability or making the market less dysfunctional, the Bank’s Financial Policy Committee (FPC) ‘is charged with a primary objective of identifying, monitoring and taking action to remove or reduce systemic risks with a view to protecting and enhancing the resilience of the UK financial system’ and a secondary objective ‘to support the economic policy of the government’.

So the measures the FPC announced today on high loan to income (LTI) mortgages and a slightly strengthened stress test on lending are about preventing future house prices from increasing household debt to a level that poses risks to the financial system rather than tackling current price levels and affordability.

Loans of more than 4.5 times income will be limited to no more than 15 per cent of banks’ total mortgage lending from October. However, given that only about 9 per cent of mortgages (19 per cent in London) are above that level at the moment, that indicates the Bank is reasonably relaxed about increases in high LTI lending and in house prices.

Its central forecast is that house prices will rise by 20 per cent over the next three years but that affordability will be boosted by nominal income growth getting back to an average level of 4 per cent a year. As Capital Economics points out, the new measures seem designed only to kick in if prices rise more than the Bank expects.

As the Carney and the Bank acted, the Treasury announced that no new loans at more than 4.5 times borrowers’ income will be allowed under the Help to Buy mortgage guarantee scheme (HTB2).

Less than 5 per cent of HTB2 mortgages are at more than 4.5 time income so Osborne seems to have gone further than he need have done to satisfy his pledge to apply any proposals made by the Bank to Help to Buy. Was this more of a nod to Help to Buy critics than we might have expected? Or does it beg the question of why this was not the case from the beginning? Until the late 1980s the norm was mortgages at three times a single income or 2.5 times a joint income.  

The immediate reaction on the stock market was a sharp rise in the share price of leading housebuilders so clearly there was relief that the Bank had not taken more robust action.

Shortly after the announcements, Eric Pickles was downplaying concern about house prices at the CIH housing conference in Manchester. ‘I think we’re as far away from a bubble as you could possibly imagine. I think the bubble is in people’s imagination,’ he said. ‘I think that’s one of the reasons why the chancellor gave those powers to the Bank of England.’

Which brings me back to my original point about passing the buck. The Bank’s brief is to remove or reduce systemic risks to the financial system. Mortgages are the biggest asset class for lenders and the biggest element in household debt for borrowers so the risks are clear.

However, house prices are only part of that and arguably only a bubble that popped and led to a recession would be a systemic risk. The Bank seems relaxed about a 20 per cent rise in prices on current levels.

In any case, macro-prudential action on mortgage lending alone would not necessarily control house prices at a time when an increasing proportion of home sales are to cash buyers, overseas buyers and buy to let landlords, none of whom the Bank can influence directly.

According to the Intermediary Mortgage Lenders Association (IMLA) 36 per cent of homes sold in the first quarter of this year were bought entirely with cash, up from 24 per cent in 2007. Total housing demand financed by cash reached an all-time high of 61 per cent.

Meanwhile, 14 per cent of Britain’s outstanding mortgages are buy to let, which is not covered by the FPC’s measures – and in and case 44 per cent of landlord purchases are made without a mortgage.

In summary then, more draconian action by the Bank of England would have little or no effect on perhaps half of house sales but tilt the balance still further in favour of landlords and cash buyers and against first-time buyers.

As for the unaffordability of current house prices – something demonstrated graphically in analysis by Shelter yesterday – that is not the concern of the Bank of England unless it threatens financial stability. This despite the fact that Carney himself could only afford to work in this country because he was given a £250,000 a year housing allowance on top of his basic salary.

Sir John Gieve, the former deputy governor for financial stability at the Bank of England, gave his reaction to today’s announcements on the World at One at lunchtime. His key point was about the need to address the supply and taxation of housing. ‘We’ve under-taxed property and in particular we’ve under-taxed very high value property owned abroad,’ he said.

All of which means that there is only one man who can do something about the housing and affordability crisis: George Osborne. Passing the buck to the Bank of England won’t wash. The buck stops at 11 Downing Street.

Just as I was about to post this blog, I spotted this by Paul Smee, director-general of the Council of Mortgage Lenders, that sums things up perfectly:

This is about financial stability, not housing policy. These are Bank actions to safeguard financial stability and promote economic stability. They are not - and should not be seen as - a proxy for Government housing policy. These are not the tools for other policymakers, tasked with crafting a comprehensive, well-honed housing market strategy.’

Paying the bill

Wed, 25 Jun 2014

Blink and you may have missed it but significant housing legislation you may never have heard of passed its final stages in the Commons on Monday night.

Scant discussion in the housing press (including by me) of the Deregulation Bill is perhaps understandable when you consider that it is huge and it covers everything from the right to buy to outer space*. Several of the clauses involving housing were also not in the original Bill and have been added later.

However, here’s what will become law in England this summer as a result of Monday’s votes (there are other minor changes I don’t have room for):

  • The qualifying period for the right to buy will be reduced from five years to three
  • Local authorities will no longer be able to impose standards for new homes that go beyond the building regulations (mainly on energy efficiency)
  • Legislation banning short-term lets of homes in London will be repealed
  • The secretary of state will no longer have the power to require local authorities to produce housing strategies

The last of these may sound more important than it actually is because as I understand it the power has never actually been used but the other three could have major implications and there were last-minute attempts to amend all of them on Monday night.

The right to buy is obviously the big one for social landlords and tenants and the only one that has attracted the most attention. Effectively it restores the qualifying period to what it was before Labour extended it in 2004. Independent analysis for the Bill committee by the University of York found that it could mean extra 700,000 tenants are eligible for the right to buy. However, it found that a maximum of 56,000 of these are in work and earning enough to be able to buy.

Apart from the straightforward implications of those extra numbers – at a time when the right to buy is being abolished in Scotland, remember – the National Housing Federation raised concerns about the impact of the ‘preserved’ right to buy following stock transfer. Receipts are shared with the local authority but it has no obligation to spend them on new homes. It also wanted a reduction in the discount if the sales receipt does not cover debt secured against the property.

The government does seem to have moved on future transfers. The DCLG has published a stock transfer manual and solicitor-general Oliver Heald said on Monday that ‘the intention is that for transfers completing after 30 September 2014, net proceeds from preserved right-to-buy sales are, within three years, to be used to fund new affordable housing at no greater subsidy cost than under the main affordable homes programme’.

However, Green MP Caroline Lucas failed in an attempt to tighten up the rules on replacement homes. Her amendment would have forced ministers to publish a plan to replace homes sold under the right to buy and review the effectiveness of it within a year of the Bill getting Royal Assent. She argued that:

‘Currently, only one in every seven homes sold through right to buy has been replaced, and I find it astonishing that the Government are so complacent that they are not even monitoring the number of homes replaced following the preserved right to buy. Housing associations say that, in fact, the number is likely to be even less than one in seven. It is inexcusable that Ministers have not even consulted housing associations.’

The second produced an unexpected last-minute concession from the government. The Deregulation Bill prevents local authorities from going beyond the building regulations when they set local energy efficiency requirements as part of its more general review of housing standards. As I’ve blogged before, a good case can be made that the government is simply replacing what it sees as ‘red tape’ with blue and yellow tape but this is what it sees as ‘deregulation’.

However, the Bill risked leaving energy efficiency policy in limbo in the run-up to zero carbon homes and in the wake of the abolition of the Code for Sustainable Homes. It would also prevent local authorities that have not already adopted higher energy standards (as in London, for example) from implementing them.

Labour’s Jonathan Reynolds attempted to fix that on Monday with an amendment stipulating that the deregulation ‘shall not come into force until the secretary of state has laid a Zero Carbon Housing Strategy before both Houses of Parliament’. He argued:

‘If the Government are sincere in backing zero-carbon homes, they have nothing to fear from my amendment—it would make no difference to a Government committed to delivering an ambitious zero-carbon homes policy in 2016.’

The amendment was voted down but after the third reading there was an unexpected intervention by Oliver Letwin, the minister for government policy:

‘We are aware that within that framework, the decision on the commencement date for amendments to the Planning and Energy Act 2008, which restrict the ability of local authorities to impose their own special requirements, must be made in such a way that the ending of those abilities to set special requirements knits properly with the start of the operation of standards for zero-carbon homes and allowable solutions. I hope that will make the hon. Gentleman—and, indeed, my hon. Friends who are concerned about the same question of timing—rest easy. ‘

That appears to allow local authorities to continue with their energy efficiency work in the meantime. However, as I’ve blogged before, it remains to be seen how ‘zero carbon’ new homes will really be after 2016 given the influence of developers on the dilution of the standard and an exemption for ‘small’ sites that could amount to a loophole covering a third or more of new homes.

The section of the Bill on short-term lets in London was presented as a classic piece of deregulation by communities secretary Eric Pickles when he announced the change two weeks ago. It would end ‘outdated rules’ from the 1970s preventing London residents from renting out their own homes on a short-term basis without getting planning permission for a change of use. These ‘archaic’ rules caused controversy during the Olympics and are ‘irregularly’ enforced, he said.

However, the measure faced criticism on Monday night from both Labour and Conservative MPs representing Central London constituencies. The worry is that it could lead to a rash of homes being converted into holiday lets.  Conservative Mark Field complained that it was being rushed through before consultation was finished. Labour’s Karen Buck said that Kensington and Chelsea, Camden and Islington had all expressed strong reservations ‘precisely because of the fear that they will lead to a loss of residential stock in what are already highly stressed neighbourhoods’.

Oliver Heald said the government was working with London boroughs to try to achieve the right balance between freedom for Londoners and protecting housing supply: ‘We would not want that to be undermined. We are trying to ensure that speculators are not able to buy homes meant for Londoners and rent them permanently as short-term lets.’

However, Mark Field came back later to point out that the rules were introduced in 1973 at a time of acute housing shortage to protect the housing stock from being converted into visitor accommodation. He said the change would have significant implications for London’s stock of permanent accommodation and ‘may make it impossible for our local authorities to meet their targets for new homes’:

‘Above all, it threatens to make central London homes, already traded by many people as some sort of global currency, into little more than assets to be exploited for maximum profit.’

And Karen Buck argued that it would make it much more difficult for local authorities to enforce if they had to prove a property was in ‘habitual short-term use’. She said:

‘No one wants enforcement action to be taken against someone who lets their home for a few days or a couple of weeks, or who does a home swap, but there will be unintended consequences in a high-value, high-turnover and high- pressured area such as central London.’

I wonder if this little-noticed change in a little-noticed bill may turn out to be the most significant in the longer term because of the impact of new technology. Websites like offering short-term lets in major cities are booming around the world and allowing residents to turn their spare rooms into cash by renting them out to tourists by the night. It looks like a brilliant and irresistable use of the internet to bring people together. However, it’s not just rooms that are being let but complete homes.

A quick search of the best known site, Airbnb, reveals thousands of short-term lets available in London for a week from next Saturday. Most of these will of course contravene the existing law, though the lets seem to be happening anyway.

However, as I type this there are currently also 732 complete flats or houses in London available to rent next week. Some could be owners or tenants going on holiday themselves but how many are empty, available to rent to tourists but not to Londoners? And how many more will there be when the law is changed? How many other websites will there be? How many homes will be sub-divided into the smallest rooms possible for short-term lets? Who will pay the bill for deregulation?

* At first I thought the second bit was a joke made by a minister because the Bill has so many different elements but it turns out that it really does cover outer space too in a bit about satellites and liability insurance.

 

'We are not a charity'

Tue, 24 Jun 2014

An eloquent argument for social housing came from an unexpected source on Panorama last night.

The programme covered what it called a new housing crisis: homelessness and the private rented sector. The hook for Britain’s Homeless Families was the fact that the number of people being made homeless by private landlords has trebled in the last five years but it also looked at families stuck in temporary accommodation and facing eviction because of the benefit cap.

It began with the case of Vicky, who was forced to leave her home in Kent because she was on housing benefit despite the fact that she had never been in rent arrears and never had a complaint about her. ‘I’m a bit shocked actually,’ she said. ‘If you treated the property well and you paid your rent I couldn’t see what the problem would be.’

When I tell you that she was one of 200 tenants on housing benefit evicted by the same landlord in Kent you will probably guess that the landlord in question is Fergus Wilson. The man dubbed the king of buy to let justified the decision in the blunt language we’ve come to expect. ‘We are in business to make money, we are not a charity.’

His point was that rents are rising faster than housing benefit and that makes claimants too risky (though he’s been quite happy to allow housing benefit to finance his empire up to now). ‘If we went to the other extreme of having 100 per cent people on benefits we would go pop because of the default rates.’

Presenter Richard Bilton asked him: ‘Do you think you have a moral responsibility to these people or is it only profit that matters?’ Wilson replied: ‘Well we’ve had a moral responsibility for a number of years but it’s just reached such a point that we cannot continue.’

A brief interview followed with housing minister Kris Hopkins:

Bilton: ‘Is it acceptable do you think to evict people because they are on benefits?’  

Hopkins: ‘Um, well, in principle, if they’ve done something wrong…’

Bilton: ‘No, their tenancy ends, they’re on benefits, you’re a landlord and you don’t want benefits in your property.’

Hopkins: ‘Well, first of all an individual private business will make commercial decisions and if they actually decide they don’t want somebody on housing benefit in future that’s a perfectly legitimate thing for them to do.’

We then cut back to the case of Vicky and her daughter in Kent. ‘You move into a place and if you’re not expecting to have to move on every few months you start to put down roots and you start to think about the school that your child will go to,’ she said. ‘It just feels so unfair that in this day and age the rug can be pulled out from your feet like this in terms of where you live.’

If you missed Panorama last night, you can watch again here. The programme covered several other cases involving people in different circumstances. I’ve concentrated on the first one because I think it illustrates the problem most clearly: a tenant is evicted because she is on housing benefit; the landlord justifies the decision on the grounds that rents rising faster than benefit rates will inevitably mean arrears that threaten his business; the minister washes his hands of any responsibility by saying it’s a commercial decision.

The thing that stuck me is that all three of them are strictly speaking correct. Vicky is losing her home through no fault of her own. Wilson knows that local housing allowance rates have been cut and are set for years of below-inflation increases. Hopkins is right that there’s nothing to stop landlords doing what they want at the end of a tenancy.

But if you put the three statements together you wonder who is responsible if it’s not the tenant, the landlord or the government. The short-term answer, shown later in the programme, is the local authority and the taxpayer as we pick up the bill for homelessness and temporary accommodation.

Last week’s homelessness statistics showed that 58,250 households are in temporary accommodation (up 16 per cent since the election) including 81,000 children. Of those, 4,480 are in bed and breakfast (up 86 per cent) including 480 families with children who have been there more than the statutory six weeks (up 200 per cent). And 12,430 of the households in temporary accommodation have been sent to another local authority district (up 36 per cent in the last year and 120 per cent since the election).

Getting back to Panorama, the number of households accepted as homeless as the result of the end of an assured shorthold tenancy has trebled from 4,580 in 2009/10 to 13,650 in 2013/14 and has risen by another 14 per cent in the last year. Although the total number is lower than between 1998 and 2004, that takes no account of the way that homelessness prevention work has halved the number of acceptances. Loss of an assured shorthold now accounts for 27 per cent of homeless acceptances compared to 13 per cent ten years ago.

So the longer-term answer is that successive governments are responsible. First, we stop investing in social housing and sell existing stock under the right to buy. Second, we outsource housing provision to private landlords and create the conditions for the sector to expand. Third, we assure landlords and tenants that housing benefit will ‘take the strain’ of higher rents. Fourth, we fail to build enough homes so that house prices and rents rise. Fifth, we decide that housing benefit is too expensive and it will no longer cover the full rent. Sixth, we discover that the solution to homelessness is actually the main cause of homelessness: an assured shorthold tenancy. And on the seventh day we sit back and admire the revolving door we have created.

The world is of course not as simple as Fergus Wilson suggests (or I do in my neat summary). Many landlords regard his media appearances as an embarrassment and many people are working hard to make the system we have work as best it can (Havering’s long-term leasing featured in the programme, for example).

However, when Wilson says that ‘we are in business to make money, we are not a charity’ he not only speaks the truth about private landlords, harsh though it may be, he also spells out why an alternative is so desperately needed. One that’s not in it to make profits and might even be a charity. 

To read more about the private rented sector click here.

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