17:00 The independent Office for Budget Responsibility has issued yet another update to its estimate of the size of the housing benefit bill. It says housing benefit will cost £6 billion more over the next five years than it estimated at the time of the Budget in March. It puts the cost at £600 million more in 2013/14, rising to £1.8 billion more by 2017/18. According to the OBR’s Economic and Fiscal Outlook:
‘About half of this is explained by an increase in the proportion of employed people who receive housing benefit, based on recent data and detailed modelling, which suggests that growth in renting for this part of the working age population is likely to continue to increase further over the forecast period. Changes in the caseloads for other benefits, particularly ESA, explain the majority of the remaining increase.’
This is the third time in a year that the OBR has increased its estimate of the cost of housing benefit. The March estimate was itself £3.7 billion higher over five years than the one it gave in last year’s Autumn Statement, and that one was £2.8 billion higher than the one at the March 2012 Budget.
What happens next? Though the OBR’s updated cost estimates seem to grow bigger every six months, the Treasury is determined to cap ‘the vast majority’ of housing benefit spending as part of its overall welfare cap. Those rising in-work claims are the result of low wages and high rents, yet only ‘cyclical’ spending like JSA-related housing benefit will be exempted from the cap. Yet more housing benefit cuts to come?
It estimated that 818,600 social tenancies worth £159 billion are ‘expensive’ when judged on this basis: 21.8 per cent of England’s council and housing association stock. Of those 339,000 are council (18.7 per cent) and 479,000 housing association (24.3 per cent).
If you’re assuming this is mainly to do with London, you’re wrong: almost one in three social homes in London are ‘expensive’ but so too are 26 per cent in the East of England, 22 per cent in the South East and 20 per cent in the South West. The least affected region, the North East, still had 15 per cent of properties classed as ‘expensive’.
14:01: Reactions to AS2014 are starting to come in – though not all with weblinks available.
Grainia Long from the CIH welcomed Osborne’s acknowledgment of the principle that councils should be able to borrow more to build homes:
‘But the steps announced today are far too modest and there is a risk that any gains could be offset by the requirement to sell high-value social housing and the expansion of Right to Buy. The finer details will be crucial – it is critical that the overall package results in a net increase in housing investment and new homes. As George Osborne acknowledged, we need to build more homes – we are in the grip of a housing crisis, with millions of people being denied access to a decent home at a price they can afford. Increasing local authority borrowing caps by £7 billion, rather than £300 million, would allow councils to build 75,000 new homes over five years, creating 23,500 jobs and creating £5.6 billion of economic activity.
‘Local authorities already have powers to sell off council housing and it is unclear whether selling off valuable homes is always the best way of doing business – councils may also want to borrow against the value of these properties so they can fund more homes.’
Simon Rubinsohn from the RICS said:
‘If Help to Buy is to remain, Right to Buy extended, and expensive social housing sold off then the Government’s commitment to building houses simply must be extended. The £1bn of loans to unblock housing development across the country will contribute towards housing need and will drive construction jobs. However, we still believe housing is not at the centre of a coordinated property-led growth that supports a balanced regional recovery where all can access the market. The increase in the HRA borrowing cap will only make a very minor dent in the housing deficit.’
He added that it was disappointing that Osborne had ignored calls for reform of stamp duty.
Good point from Rob Beiley of Trowers & Hamlins that I missed. He says that ‘the prospect of tax relief on investment in social enterprises and charities could unlock a significant source of new funding for housing associations’. (Not to mention social enterprises and charities of course).
Liam Bailey of Knight Frank reckons that the move to levy CGT on overseas buyers ‘will have only a marginal impact on demand and pricing’.
Sir Merrick Cockell of the Local Government Association welcomed the move on the borrowing cap. ‘The easing of restrictions on housing investment announced today does not go as far as we would like, but it does show that our call for more local flexibility to drive economic growth has been recognised.’
He also welcomed the change of heart on New Homes Bonus funding. ‘Our concerns about potentially costly changes to the New Homes Bonus have been taken on board in the revised proposals announced today. This is good news for local services which otherwise would have taken an additional £400 million cut.’
In other news, he warned of ‘an upturn in the economy coinciding with a collapse in public services’.
That’s it from me for now. Time for some lunch.
13:44: More detail from those AS2013 background documents:
Housing and planning: This is framed very much in terms of removing barriers to supply. Action includes:
• consulting on measures to improve plan making, including introducing a statutory requirement to put a Local Plan in place
• legislating to treat planning conditions as approved where a planning authority has failed to discharge a condition on time, and using legislative measures to strengthen the requirement for planning authorities to justify conditions that must be discharged before building can start
• consulting on proposals to reduce the number of applications where unnecessary statutory consultations occur and piloting a single point of contact for cases where conflicting advice is provided
• allowing developers to apply directly to the Department for Communities and Local Government (DCLG) where a planning authority makes fewer than 40 per cent of its decisions on time
• carrying out an evaluation of the New Homes Bonus, which will complete at Easter 2014. The government will consult on measures to further improve the incentive provided by the New Homes Bonus, in particular through mechanisms to withhold payments where planning approvals are made on appeal
• consulting on a new 10-unit threshold for section 106 affordable housing contributions.(This is seen as a way to reduce costs for smaller builders).
Unblocking stalled sites: A £1 billion, six-year programme will fund infrastructure ‘to support the delivery of 250,000 homes’. It will begin in 2014/15 with ‘investment decisions on nine specific sites, capable of unlocking 27,000 houses’. (Osborne mentioned Manchester and Leeds in his statement).
Land auctions: Remember them? The government will report on the findings of a feasibility study by Budget 2014.
Right to buy: ‘The government will further support Right to Buy by introducing Right to Buy Agents to help buyers complete their home purchase, and provide £100 million to establish a fund to increase Right to Buy sales, by improving applicants’ access to mortgage finance.’ So that’s £100 million to sell off public assets at a discounted price. Who will the right to buy agents be?
Estate regeneration: The government will explore options for repayable loans to kickstart ‘the regeneration of some of the worst housing estates’.
Right to move: This idea was in the Conservative manifesto and has now emerged as a consultation on ‘options for a right to move for local authority tenants who want to move home for reasons related to employment’. How will it work in practice and will it ever get beyond consultation?
New Homes Bonus: £70 million of it will be pooled within the London Local Enterprise Partnership chaired by the mayor. It won’t be pooled outside London.
Private rented sector guarantee: Extended until December 2016.
Local authority housing: In addition to the moves on borrowing caps and high-value homes, ‘the government will launch a review into the role local authorities play in supporting overall housing supply’.
Discretionary housing payments: The budget has been boosted by £40 million in both 2014/15 and 2015/16. The statement says: ‘This will ensure the pot of DHPs available to support those affected by under-occupancy deductions will not be reduced for the next 2 years, giving councils discretion to make longer term awards.’
Boles Bungs: ‘The government will work with industry, local authorities and other interested parties to develop a pilot for passing a share of the benefits of development directly to individual households.’
Tax: Capital gains tax on future gains made by non-residents disposing of UK residential property will apply from April 2015 with a consultation on how best to implement it published early next year.Problems with implementation are presumably the reason this has not been done before but note that it is only ‘future gains’.
The government will also from April 2014 ‘reduce the capital gains tax private residence relief final period exemption from 36 months to 18 months to reduce the incentive for those with multiple homes to exploit the rules’. Presumably that is to stop people flipping their relief from one home to another.
The definition of ‘high-value social housing’ is not explained anywhere in the documents that I can find. I also cannot find any reference to increased right to buy discounts.
13:16: Here are details that I’ve gleaned so far from the AS2013 background documents:
Welfare cap: We heard earlier that cyclical benefits will not be included but the vast majority of housing benefit will. That seems to mean JSA-passported housing benefit (ie the bit attributable to rising unemployment?) will not be capped but the rest (attributable to rising rents?) will? Still not sure how that fits with the English social rent formula of CPI plus 1%
HRA borrowing limit increase: This will not be until 2015/16 (£150 million) and 2016/17 (£150 million). The extra borrowing will be allocated on a competitive basis and be part of the Local Growth Fund run by Local Enterprise Partnerships. Bids will be prioritised based on value for money and the government will expect partnership working with housing associations or through joint ventures. There also seems a clear expectation they will be backed by asset sales and public land. The AS2013 says the borrowing cap increase plus sales of vacant high-value social housing will support 10,000 additional new homes. However, ‘this additional investment will maintain the Local Growth Fund at £2 billion in 2015-16’ so is something else being cut?
A separate policy costings document includes these assumptions:
• ‘the full additional headroom of £150 million in 2015-16 and £150 million in 2016-17 is taken up and is spent on new affordable housing in these years
• due to a lag between asset sales and new affordable house-building, there is a loss of rental income from the sale of high value vacant stock in early years, but that there is additional rental income, as a result of a net increase in affordable housing in the later years
• new affordable housing is let at affordable rent levels.’
Note there that the sale of vacant high-value housing is part and parcel of the borrowing limit deal and also the expectation of affordable rent. In answer to my own question earlier then, what seems like a major concession to council housing is actually an acceleration of the conversion of social housing to affordable rent.
More to follow shortly
11.56: A few housing highlights so far from George Osborne’s speech:
- Cap on overall welfare spending will include ‘vast majority’ of housing benefit. How does that fit with social rents rising by CPI plus 1 per cent?
- Tax avoidance clampdown targets include capital gains tax on primary residence relief
- CGT on non-UK residents who sell UK property from 2015
- HRA borrowing limit raised by £300 million
- Sell-off of expensive social housing
- ‘Priority right to move’ for social tenants
- £1 billion guarantees for stalled housing developments in Manchester and Leeds
- Unemployed under-21s who refuse training or don’t turn up will lose benefits
- More to expand right to buy
- Big emphasis on supply
- Importance of ‘stable housing market’
More detail to come.
10:40 So what else should we be looking out for? Here are a few more things receiving some advance attention:
Cuts: We already know that Osborne will announce reductions in departmental budgets of £1 billion a year for the next three years. With health, schools, foreign aid, local government, revenue and customs and the security services all protected, the Department for Work and Pensions is said to be one of the departments in the firing line (and perhaps the C bit of the DCLG too?).
Property taxes: We know that Osborne has been considering imposing capital gains tax on overseas property investors, something that would bring the UK into line with the tax regime in many of their home countries. Will he also look at tax on buy to let landlords, who the Intergenerational Foundation estimates are benefitting from tax write-offs worth £5 billion a year? Depending on the detail, there could be a big impact of new private housing development. Might that put Osborne off the idea?
Benefits: We are expecting more detail on Osborne’s cap on welfare spending that will apply after the next election. The Telegraph reported earlier in the week that he will say we can no longer afford a ‘welfare state’ and will have to make do with an ‘affordable state’ instead. The DWP announced details of the housing benefit cut before this one (the 1 per cent cap on LHA except in high rent areas) so will we learn more about the next later?
Stamp duty: A hardy perennial this one but the usual suspects are pressing for cuts to and reform of stamp duty, with most of the lobbying concerning first-time buyers and homes priced between £250,000 and £300,000.
Infrastructure and planning: Inside Housing reports that details are expected to be revealed of those ‘Boles Bungs’ to buy off opponents of new development. Will there be more besides and will Osborne agree with Boris Johnson that housing should count as ‘essential infrastructure’.
Meanwhile – while everyone is paying attention to the Autumn Statement – Iain Duncan Smith has announced ‘the continued safe and secure roll out’ of the universal credit. Translation: the crawl-out’s been delayed again.
09.47: The initial answer to my initial question - will housing be a winner or loser? - seems to be a bit of both.
Pete Apps reported for Inside Housing last night on a deal being negotiated within the coalition that would see the chancellor increase English council housing borrowing limits (the Lib Dem bit) in return for another increase in right to buy discounts (surprisingly enough, the Conservative bit).
An increase in the borrowing caps has backing not just from Labour and the Lib Dems and the Local Government Association but also from London mayor Boris Johnson and Tory authorities like Westminster. So far the Treasury has firmly resisted any such thing so if it happens (and that was still an if last night) it would be a major change of policy and would look like a big win for council housing. However, as Pete reports, any deal would come with strings attached: councils would have to commit to build new homes or improve estates (presumably to stop the money leaking out of housing) and the additional debt capacity would be administered by local enterprise partnerships or the Greater London Authority (how will individual authorities react to having to share their capacity?). Could there be other, more unpalatable strings too: perhaps a requirement to build at and convert relets to affordable rent?
Any increase in the right to buy discount would be the third in 18 months. It was raised to £75,000 in 2012 and to £100,000 in London this year, when the qualifying period was also reduced from five years to three. Any further increase will have serious implications for the business plans of local authorities and housing associations – potentially reducing the capacity that the other part of the deal is meant to increase. It would also make the government’s ‘one for one replacement’ promise look even emptier than it already does.
Would the overall effect of any deal be a rebirth of council housing or an acceleration of the slow death of social housing? Or perhaps both?
Is it too much to imagine David Cameron telling his aides in Downing Street to ‘get rid of all this facts crap’?
The question is prompted by an answer he gave earlier at Prime Minister’s Questions. This was the question from Labour MP Andy McDonald:
‘The Disability Benefits Consortium of over 50 charities has signed a letter to the Secretary of State for Work and Pensions calling for immediate action to exempt disabled people from the bedroom tax. Why on earth do the Prime Minister and his Government refuse to listen?’
‘Obviously, what we have done is to exempt disabled people who need an extra room. This does, I think, come back to a basic issue of fairness, which is this: people in private sector rented accommodation who get housing benefit do not get a subsidy for spare rooms, whereas people in council houses do get a subsidy for spare rooms. That is why it was right to end it, and it is right to end it thinking of the 1.8 million people in our country on housing waiting lists.’
I highlight this not because I am naïve enough to expect ministers in general or the prime minister in particular to answer the questions they are asked (that would clearly be too much). Nor do I necessarily expect the answers to be the whole truth. But is it too much to expect a passing resemblance to the truth? Cameron’s answer in this instance offered two examples of misleading the House of Commons for the price of one.
The question was prompted by a letter to Iain Duncan Smith from the Disability Benefits Consortium (DBC), a coalition of over 50 different charities and other organisations that describes itself as ‘working towards a fair benefits system’.
The letter pointed out that two thirds of households affected by the under-occupation penalty include someone with a disability, 230,000 claim Disability Living Allowance and 100,000 live in specially adapted properties. It went on:
‘We have been deeply frustrated at reports that disabled people and their families are protected from this policy. The stark evidence since the policy was implemented in April clearly shows they are not. It is hitting disabled people who need an extra room for essential home adaptations or equipment which enable them to live independently; seriously or terminally ill people who sleep on hospital beds and cannot share a room with a partner who cares for them and parents caring 24/7 for disabled children who need a room for a care worker to stay in to give them a night off from caring.
‘None of these groups are exempt and our organisations are seeing the devastating impact it is having on those who now face a shortfall in their rent as a result of the changes.’
The DBC argues that discretionary payments are not working, with only a minority of disabled people and carers receiving support, and concluded ‘the government must act now to exempt disabled people and carers from this policy’.
This will not come as news to most people reading this. The impact on disabled people has been a central part of the campaign against the bedroom tax from the beginning and was extensively illustrated in the opposition day debate earlier this month.
But my point is that it should not be news to Cameron and his private office either. This is not just because extensive earlier coverage of the DBC letter on broadcast media will have given them ample time to prepare.
It’s also because Team Cameron has previous form for (in parliamentary parlance) misleading the House over the bedroom tax and disability.
For example one, look to the PMQs of 6 March, 2013. In his first answer, he told Labour’s Derek Twigg that ‘people with severely disabled children are exempt and people who need round-the-clock care are exempt’. Both of those statements were untrue, as this Channel 4 News Factcheck revealed at the time.
Cameron was at it again on 10 July, 2013, when he told Labour’s Alison Seabeck that ‘when it comes to the spare room subsidy, anyone who needs to have a carer sleeping in another bedroom is exempt from it’. As Factcheck again pointed out, there is an exemption for people who need round-the-clock care whose ‘spare’ bedroom is used by carer who lives in or stays overnight. However, it does not apply to people who care for their own partner or spouse who find it impossible to share a room.
Disabled children who are unable to share a room because of their disabilities are now exempt, but that has only just been grudgingly conceded by the DWP after defeat in the courts.
It is very hard to believe that Team Cameron is unaware of these previous examples of miseleading statements from the prime minister about exempting disabled people. It’s almost as though something does not compute, the policy is fair and so they have to be exempt even if they are not.
However, the misleadng answer does not end there. Cameron also stated that ‘people in private sector rented accommodation who get housing benefit do not get a subsidy for spare rooms, whereas people in council houses do get a subsidy for spare rooms’.
As I have blogged before, this comparison with the private rented sector is one of the ‘fairness’ arguments that ministers use most often but it is also wrong. The size criteria work differently under the local housing allowance because of the nature of the stock and the way rents are charged. And, crucially, it did not apply to existing tenants: the exemption question would not have arisen for any of the 420,000 disabled people affected by the bedroom tax because they would not have been penalised in the first place.
Downing Street does say of course that it ‘does not recognise’ the ‘get rid of all the green crap’ quote from earlier in the month. As others have noted, we live in an era of ‘post-truth politics’ so perhaps this is only to be expected. After one of the most brazen examples yet from a serial offender, that really is quite enough of all this ‘facts crap’.
Today’s Draft London Housing Strategy is the boldest attempt yet seen from a Conservative administration to get to grips with the housing crisis. It still does not go remotely far enough.
In his foreword, mayor Boris Johnson says London is facing an ‘epic challenge’ of building more than 42,000 new homes a year, every year, for 25 years. Of these, 15,000 would be affordable and 5,000 for market rent.
That is no exaggeration. As he goes on to say, that is ‘a level of housebuilding unseen in our great city since the 1930s’. To put it in perspective, the average over the last 20 years, at a time when the population was growing rapidly, was 18,000 per year. London has not come close to 42,000 completions a year since the war, even at the peak of the council housing boom in the late 1960s.
In any case, says the strategy:
‘The government has not proposed to reverse greenbelt policy and it seems unlikely that earlier levels of public investment can return any time soon. A new approach to harnessing the investment and effort necessary to increase house building is therefore required.’
Confronting a problem on this scale means the strategy includes some radical and sometimes (for a Conservative administration) surprising solutions. To give three examples, it calls for:
- Reform of the public borrowing rules for council housing – preferably as a separate capital investment activity as applies in the rest of Europe and for housing associations; at a minimum to give English local authorities the same freedom as Scottish ones.
- A London Housing Bank – a discussion paper is due on this next year but funding could come from the public sector and institutional investors for measures such as purchasing market homes off-plan and underwriting Build for Rent activities.
- Shifting from personal to bricks and mortar subsidies – ‘investment in new homes with low rents for those who need them represents better long-term value for tax payers than meeting the high costs of market housing through housing benefit’. The strategy discusses the challenge of coping with the transitional consequences for tenants on benefit with high rents and says this will require ‘an appropriate future capital settlement from central government, alongside appropriate revenue funding to mitigate these transitional costs’.
That is on top of Johnson’s longstanding call for more financial autonomy for London, with the devolution of all property tax including stamp duty. The Treasury has recently agreed this for Wales – so why not London? Part of the argument is that the capital has raised more in stamp duty than the Treasury has put back in affordable housing investment (£17 billion over the last 10 years) but that rather ignores the £50 billion spent on housing benefit in the capital over the same period.
There are some radical ideas on land too, with proposals for new garden suburbs and, within 33 Opportunity Areas, new Housing Zones offering targeted tax incentives, lighter-touch planning and help with land assembly.
Most, if not all, of these ideas would draw support from across the political spectrum, as will the draft strategy’s conception of ‘housing as essential infrastructure’ and the argument that building too few homes is as much of a barrier to growth as inadequate public transport, roads and utilities.
An idea of the scale of the current problem is given by two more stats: the average first-time buyer is now in the top 20 per cent of London’s household income distribution; and there could be a shortfall of 50,000 to 90,000 homes for professionals over the next ten years, which could result in a potential loss of economic output of £15 billion to £35 billion.
However, the draft strategy also has some more contentious proposals when it comes to affordable housing. The net effect – despite an apparent ‘initial new funding of £1 billion’ - seems to be to increase the size of the inverted commas around that word affordable:
- While 60 per cent of the next Affordable Housing Programme will be reserved for Affordable Rent, half of this will be ‘capped at low affordable rents’ prioritised for those in greatest need and low income employment and half will be at ‘discounted rents, set at the lower of up to 80 per cent of market rent or the local housing allowance’. That might seem at first glance like a hint of a return to social rent. In fact, few current Affordable Rent homes come in at 80 per cent of market rent in London (the median for London in the last round was 59 per cent, according to one report) so will this mean higher rents and fewer homes for those in the greatest need? The strategy also says that ‘investment partners should use fixed-term renewable tenancies’ for the capped rents and does not specify their level.
- The Mayor will encourage boroughs to give greater priority to working households in allocations. That is qualified by stressing this ‘should also be balanced with the need to ensure the most vulnerable are looked after’ but that does not sound like a watertight assurance.
- The strategy argues that there are 115,000 of the 786,000 London households who live in affordable housing ‘who could afford to pay more towards their rent’. While it says the Pay to Stay threshold should be increased to the First Steps income limits of £66,000 for smaller and £80,000 for larger households, the DCLG estimates that there are only 34,000 households in social housing in the whole country earning more than £60,000. Does this herald a wider ambition for higher rents lower down the income scale, perhaps through conversion to Affordable Rent?
- Prepare for your assets to be sweated to the max if you are a housing association. Smaller, non-developing associations ‘will be expected to utilise their borrowing capacity’ and the GLA will explore with the social housing regulator how associations in general ‘can be incentivised to fully utilise’ their surpluses. That much is perhaps inevitable but, in addition, ‘all providers will be expected to provide market housing for rent and/or sale alongside their affordable housing offer’ and they will also be ‘strongly encouraged’ to consider targeted disposals or lettings at market rent of ‘selective high-value stock’. Conversions to Affordable Rent will be ‘recalibrated’ to increase the income range on ‘mono-tenure estates’.
- The strategy also talks of the ‘vast development potential of London’s existing affordable housing estates’. There’s nothing wrong with that in theory but is that a signal to prepare for yet more Earl’s Court and Heygate style regeneration rows about gentrification and the displacement of existing residents?
Overall then, the strategy seems to combine some of the best thinking on the role of government in promoting new homes with a continued faith in the marketisation of ‘affordable’ housing.
However, critics argue that even 42,000 homes a year is not enough. Labour’s Tom Copley says independent experts say London needs 60,000 a year and that the strategy’s ‘lack of ambition commits us to a future of unaffordable housing’. London Councils says we need 800,000 homes to be built by 2021. The Green Party’s Darren Johnson says that his namesake ‘boasts about his track record on affordable housing, but he will leave office 50,000 homes short of the number he needed to build’. The Mayor’s strategy will deliver homes for property investors, not Londoners, he says.
For me, all this begs the question of what happens if the Mayor fails to deliver 42,000 homes a year for 25 years and, even if he does, what happens until the new supply comes on stream. Given the history of the last century, and the fact that he is prevented from looking outside London for solutions to the capital’s housing shortage (as happened in the 30s and after the war), that is much more likely to mean when he fails to deliver.
On the demand side of the equation, the strategy denies that overseas and buy-to-let investors are crowding out Londoners from ownership. Failure on supply will merely price even more people out of either owning or renting in the capital and a continued housing shortage will put even more pressure on housing system in general and the private rented sector in particular. The strategy says that the mayor is ‘keen’ to see landlords testing longer tenancies in the private rented sector and that it’s ‘important that there is greater transparency about letting agent fees’. But is the self-regulation of Johnson’s Housing Covenant remotely up to the job?
Legislation published today marks a historic moment for housing in Wales but it has wider significance for the rest of the UK too.
It makes history by becoming Wales’s first Housing Bill since it acquired greater devolved powers. The Housing (Wales) Bill aims to ‘ensure that everyone in Wales is able to access a decent home’ (though ministers behind all Housing Bills everywhere say that). The details are what count and the timing and the context are what create the wider significance. As Carl Sargeant, the Welsh minister for housing and regeneration, puts it: ‘Despite the impact of austerity measures and budget decisions taken by the UK Government, the Welsh Government is determined to improve the supply, quality and standards of housing and the proposals in this Housing Bill are crucial in achieving this.’
Decisions in Westminster on austerity and welfare reform apply to Wales, Scotland and (with some differences) to Northern Ireland as well as England. As the SNP government in Edinburgh prepares to set out its plans for independence next week and the coalition in Belfast considers how to implement welfare reform, here the Labour administration in Cardiff is saying that it can do things differently under devolution. And many of its proposals could well find their way into the housing legislation of a future Labour government in England.
Back with the detail of the Bill, it comes in seven different parts and the first two are probably the ones that will received the most scrutiny: Part 1 sets out requirements for the registration and licensing of landlords and agents operating in the private rented sector; while Part 2 sets out a new approach to homelessness, with a greater emphasis on prevention and a more inclusive approach including greater protection for households with children who are homeless or threatened with homelessness.
The next five parts cover:
- a new statutory duty on local authorities to provide gypsy and traveller sites where need has been identified
- standards for local authority rents, service charges and quality of accommodation. This puts achievement of the Welsh Housing Quality Standard by 2020 by the 11 Welsh councils that retain their housing on a statutory footing
- implementation of self-financing for council housing (already implemented in England but now agreed with the Treasury for Wales)
- measures to boost co-operative housing by allowing fully mutual housing co-operatives to grant assured and assured shorthold tenancies, creating more security for tenants and helping co-operatives obtain finance from lenders.
- allowing local authorities to charge a flat 150 per cent of the standard council tax charge on properties that have been empty for more than 12 months.
All of these measures are designed to contribute to the two main aims of the Bill, ensuring that: people have access to a decent home; and that people at risk of becoming homeless receive the help they need.
Most of the proposals are based on a white paper published in 2012 but there have been some changes following consultation on the detail.
On the private rented sector, the Welsh Government is pressing ahead with plans for mandatory registration and accreditation of both landlords and agents. This will be based on the current voluntary scheme, Landlord Accreditation Wales. However, the license will be valid for five years rather than the three proposed in the white paper (and as applies in Scotland).
This section of the Bill could be a major focus of attention as it makes its way through the Welsh Assembly. Private landlord organisations argue that agents should be licensed first and the spokespeople for all three major opposition parties (Plaid Cymru, Conservatives and Liberal Democrats) have signalled that they are considering their position on the licensing of landlords. As Inside Housing is reporting, with the Assembly split 30-30 between Labour and the other parties, so if all opposition AMs vote against the casting vote will go to the speaker, who has a duty to preserve the status quo.
What happens here could have a bearing on the rest of the Bill, since the homelessness proposals in particular are based on an assumption that the private rented sector will be properly regulated.
On homelessness, the Bill includes a new strengthened duty on local authorities to take reasonable steps to prevent and relieve homelessness. They will also be able to discharge their main homelessness duty into the private rented sector.
The white paper set out ambitious plans for a ‘housing solutions’ approach to homelessness with a much greater emphasis on prevention. In effect the interim duty would be extended beyond priority need groups to cover groups like the single homeless. It also set a target of ending family homelessness by 2019 by removing intentionality within the term of the government.
However, the Welsh Government appears to have rowed back on some of the white paper proposals on prevention and intentionality amid concern from local government about the cost of implementation.
An explanatory memorandum published alongside the Bill says that the main changes compared to the white paper are:
- When someone who is homeless first applies for assistance the local authority will be able to choose whether to carry out an intentionality test in all cases or not at all
- Applicants who are not in priority need will not be entitled to temporary accommodation
- Local authorities will be able to refer people who are unintentionally homeless and in priority need to another authority under the current ‘local connection’ provisions
- The discharge of the full homelessness duty can be through the offer of a social tenancy or a six-month assured shorthold in the private sector (rather than the 12 months without consent and six months with consent proposed in the white paper).
On family homelessness, the white paper had proposed that households with children found to be intentionally homeless should still have the right to the full homelessness duty. The Bill retains this provided it is the first time they have been found to be intentionally homeless within the last five years. In addition, where a household with children is found to be intentionally homeless but is owed a re-housing duty, the local authority will have a duty to co-ordinate a plan to help prevent them becoming homeless in future.
The Welsh Government has decided as a result of consultation to amend the priority need of all former prisoners who are homeless on release from custody. Priority need will now apply where they can demonstrate vulnerability as a result of having been in custody and they have a local connection.
The Bill will be formally introduced in the Assembly tomorrow (Tuesday). Royal Assent could be by summer 2014 if it passes its four legislative stages.
As the bedroom tax celebrates its debut in the Oxford English Dictionary, there is new evidence today that it is creating empty homes rather than removing ‘spare’ bedrooms.
A survey published by Community Housing Cymru (CHC) today suggests that the first six months of the under-occupation penalty have cost more than 1,000 affordable homes in Wales.
Welsh housing associations say they have 727 homes standing empty as a result the policy. Meanwhile 78 per cent have seen an increase in their rent arrears, with over £1 million attributed to the bedroom tax. Some 51 per cent of tenants are paying the shortfall, 37 per cent are part-paying and 12 per cent are not paying at all.
At this rate arrears will reach £2 million by April 2014, which CHC calculates would be enough to service around £40 million of debt that could be used to build 400 new affordable homes. That means that a total loss of more than 1,100 affordable homes at a time when there are 90,000 people on the waiting list.
A survey published yesterday by the Chartered Institute of Housing hints at the scale of the voids problem in England too. Responses from social landlords and strategic housing authorities suggest that a new breed of difficult to let homes is emerging, it says.
Almost two thirds reported falling demand for two and three bedroom flats and three bedroom houses because people who would normally have been allocated them cannot afford to make up the housing benefit shortfall. A similar proportion reported a shortage of smaller homes for downsizers. Half said they were experiencing longer void periods and lost rental income.
With some landlords already allocating larger homes to households who are not affected by the bedroom tax, and that rising number of voids, 44 per cent of applicants said that a lack of capacity to meet demand from the highest priority applicants, including homeless households, was a key concern.
CIH chief executive Grainia Long says the government is missing the point with a consultation on housing allocations that closes on Friday that focuses on prioritising local connections. ‘It is more about inaccurate perceptions of who gets access to social housing than it is about the real issues councils and social landlords are facing,’ she says.
None of this will perhaps come as much of a surprise to those grappling with the problems thrown up by the bedroom tax but it highlights the serious efficiency problems with the policy to go with the concerns about equity that were the main focus of last week’s Commons debate.
Back in Wales, CHC says that just 3 per cent of the 22,000 housing association tenants have managed to downsize so far. While welcoming an extra £20 million of investment in smaller homes by the Welsh Government, it says the policy risks turning tenant against tenant and tenant against landlord.
Chief executive Nick Bennett says the only solution is to ‘take power closer to the people’ by devolving the same control over welfare policy to Wales that Northern Ireland already has. The Silk Commission is due to report to the Welsh Assembly on further devolved powers in the New Year.
That message will strike a chord in Scotland too, with abolition of the bedroom tax a key part of the SNP government’s case for independence.
England has no such options of course. The CIH survey highlights growing tension between welfare reform and allocations policy, with tighter schemes excluding people with no or low housing need from housing registers, precisely the groups who may have accepted hard-to-let homes in the past. Some strategic authorities also worried that housing associations are refusing their nominations, creating particular problems for those with no retained stock but statutory homelessness duties to discharge.
The bedroom tax and its knock-on effects on the housing system look like issues that will not go away. Optimists among landlords believe that neither of the coalition parties will want to go into the next election without defusing it as a political issue and symbol of unfairness. Pessimists are not so sure and predict the impact will only get worse.
The Department for Work and Pensions is still doing its best to claim what it calls the removal of the spare room subsidy is a success. Its spin on statistics published last week showing that the number of households affected fell from 547,000 in May to 523,000 in August is that it is ‘bringing fairness back into the system’.
However, ‘spare room subsidy’ seems unlikely to make it into the dictionary any time soon. ‘Bedroom tax’, on the other hand, was one of the runners-up in the Oxford Dictionaries Word of the Year 2013 alongside ‘twerk’ and ‘binge-watch’. It was only beaten by ‘selfie’. In case anyone starts saying ‘it’s not a tax’, it is now.
Analysis of those stats by the National Housing Federation highlights the North West as the worst hit region of England with 83,000 families affected losing an average of £748 per year. It points out that the figures understate the true scale of the impact since they exclude working families who would have got partial housing benefit before but have now lost their entitlement.
Yesterday’s bedroom tax vote has left me wondering if our political system is capable of righting what is such an obvious wrong.
A Labour motion calling for immediate repeal was defeated by 26 votes – a narrower margin than the government might have expected – while a government amendment effectively saying it is all Labour’s fault passed by 31 votes. Could things have been different?
The debate included some excellent and passionate speeches, some harrowing personal testimony from MPs about their constituents and some outrageous comments from a few Conservatives.
The man responsible for it all – Iain Duncan Smith – was not there, having chosen to attend a European conference on youth unemployment in Paris. An important subject but not the setting you might expect to find one of the cabinet’s most convinced Eurosceptics.
That left it up to Lib Dem work and pensions minister Steve Webb to start the coalition’s defence of the policy. Interestingly, he told local authorities: ‘If they have exhausted, or if they anticipate exhausting, their discretionary housing payments budgets, they can come to the government for a top-up. So far, barely a dozen local authorities have asked for additional funding.’ It remains to be seen of course what that really amounts to, since as with DHPs themselves, there are no guarantees, but it did seem a hint of movement from the government.
But back to that wrong: it becomes more obvious with each passing day that the bedroom tax is resulting in brutal injustices and unintended consequences.Yesterday’s debate had yet more evidence on this and brought up some that were new to me: for example, fathers losing access to their children because they have lost the spare bedroom that is a condition of access.
It is also increasingly obvious that the policy will not achieve its principal aim of saving £480 million, either because tenants move or because costs are transferred from central to local government.
Yet a quick look back to the final Commons debate on the bedroom tax section of the Welfare Reform Bill in February 2012 reveals that there were 14 Liberal Democrat and two Conservative MPs who voted against the government when it reversed Lords amendments that would have softened its impact.
Last night there were only two Lib Dems – Andrew George (my MP, I’m glad to say) and party president Tim Farron – and one Tory – Andrew Percy, who also voted the other way (I think as a means of registering a formal abstention) – who voted against the government.
Why was this? After all, as Farron pointed out on Facebook, he was voting in line with party policy as agreed at its conference in Glasgow only a few weeks ago with virtually no dissent.
Most of the anger from campaigners has been directed at the Lib Dem MPs who abstained rather than voting against. Three of them had even tabled an early day motion earlier in the day calling for substantial changes. I’m not sure it would have been enough to make a difference but why didn’t they join Mr George and Mr Farron?
Here’s where the politics comes in: this was an opposition day debate. As hostile tweets from Labour prospective candidates in Lib Dem seats immediately after the vote indicated all too clearly, one of its main aims was to nail the Lib Dems as responsible for the policy (a point made powerfully by Alex Marsh). Should they have ignored the politics and voted on the policy?
Again, I’m not sure if it would have been enough to make a difference, and it may just be hopelessly naïve, but what would have happened if Labour had tabled a motion calling for substantial concessions instead of immediate repeal?
Say, for example, it had called for exemptions all those who cannot share a bedroom for medical reasons, or for people who cannot move because there is nowhere smaller available. Would more, or even enough, Lib Dems have rebelled on that basis? Perhaps Labour could even have nailed once and for all the government line (and lie) that it is only doing in the social sector what the last government did in the private sector by pressing an amendment that the bedroom tax should only apply to new tenants?
Instead we were left with a failed attempt to repeal the policy that leaves Labour looking pure in its opposition, Lib Dems like Steve Webb clinging to spurious justifications of it and Tories competing to look tougher on welfare than each other. Maybe this is good politics for all concerned but as policy making it looks terrible to me.
The debate had some awful examples of Tory backbenchers claiming wrongly that all disabled people are exempt (they aren’t) and that the policy is exactly the same as for private tenants (it isn’t). We had David Davies calling for ‘feckless fathers’ to be dragged to work ‘in chains if necessary’, Brooks Newmark claiming that finding an extra £14 a week is ‘not a big ask’ and Anne Main arguing that ‘unicorns do not exist, fairies do not exist and…a bedroom tax does not exist’.
There were also some weak Lib Dem contributions. Simon Hughes, for example, asked Mr Webb whether he would look at exempting people waiting for a smaller property to be allocated. He didn’t get an answer on that specific point but still dutifully voted with the government.
Joe Halewood has plenty to say about what he sees as Labour’s failings during the debate on his blog.
However, there were some impressive speeches too from members of all parties that went beyond the predictable point scoring.
From the Labour side, for example, Emily Thornberry raised the wider point of under-occupation. ‘Part of the problem… is empty nesters – elderly people whose families have grown up. If the principle behind the bedroom tax is to free up homes and move people to smaller units, why does it not apply to pensioners?’. She meant that landlords should be speaking to people as they retire and encouraging them to move, not imposing the bedroom tax.
Nick Raynsford raised another unexpected consequence: a 91-year-old constituent in a four-bedroom home who seems unable to downsize because the council has understandably given priority to bedroom tax victims.
Dame Anne Begg pressed the government to extend exemptions to disabled families in specially adapted homes (as she pointed out, Mr Webb is ‘a man who thinks he can change the whole pensions system in Great Britain, yet he is not clever enough to come up with a definition of an adapted home’) and couples who cannot share a bedroom because one or both has a disability. She also made the crucial point about ministers’ assurances on DHPs: ‘the word “discretionary” is the key, because it means that they will not necessarily get the money’.
Karen Buck exposed the weakness of the government’s argument that the bedroom tax will tackle overcrowding, arguing that ‘people are not dry goods that can be put in a container and taken from London to Liverpool or Wales, because that is how the distribution of property suits their needs’.
However, if you have a spare moment, do read Kate Green’s closing speech, which sums up the case against the bedroom tax and its implementation better than anything I’ve heard or read.
From the Lib Dem side, John Hemming was honest enough to concede that Labour’s local housing allowance changes were not retrospective, but argued that the bedroom tax has to be because of the need to save money.
And Andrew George had one of the best descriptions of the policy:
‘The spare room penalty or bedroom tax victimises the most marginalised in our communities, undermines family life, penalises the hard-working low-paid for being prepared to stomach low-paid work, and masks the excessive cost and disruption to the disabled who have to move from expensively adapted homes. It is, in my view, Dickensian in its social divisiveness. It is an immoral policy.’
There were also Conservatives who were prepared to address the policy rather than the politics. Andrew Percy has just told me on Twitter that he thought the Labour motion ‘too political’ and so registered an abstention instead but didn’t agree with all of the government amendment either so didn’t vote on it.
And Jeremy Lefroy agreed with Anne Begg about the need for more flexible exemptions (‘I am sure that the minister is listening’) and argued for a lower rate of deduction than 14 per cent and 25 per cent that could be gradually increased as more appropriate accommodation became available. He went on:
‘This must not result in evictions. Some councils have no-eviction policies, and that is a very commendable approach. I would look for all possible measures to be taken prior to eviction being enforced.’
Uncomfortably for some landlords out there, he also asked the minister to look at how housing associations paying their directors six-figure salaries ‘could themselves contribute to discretionary housing payments’.
The positive thing to come out of all of this is that Labour has pledged to repeal the bedroom tax on its first day in office if it wins the next election. To answer my opening question, that seems the only way the political system can change the policy. In the meantime, there is also that possibility of extra DHPs for councils that apply.
However, for all yesterday’s debate, a policy that a majority of MPs must surely know by now is unjust and unworkable continues today and the day after. That’s politics.
David Cameron’s cheerleading for the successful launch of the Help to Buy mortgage guarantee scheme unwittingly reveals more than he might have intended.
In a statement issued last night, the prime minister said that 2,384 households have put in offers under the controversial scheme and ten have already completed.
The figures come from applications backed by a decision in principle for 95 per cent mortgages by RBS and Lloyds, the semi-state owned banks. The average advance is £155,000 on homes worth £163,000, which Cameron said demonstrated that Help to Buy is supporting responsible lending.
Even better, more than three-quarters of the applicants are first-time buyers and many are in their early 30s, ‘demonstrating that Help to Buy is helping hardworking people realise their home-owning aspirations’.
Cameron is meeting some of them at Downing Street later today (prepare to get heartily sick of pictures of him and other ministers doing the same in the run-up to the next election). He said:
‘The best thing about Help to Buy isn’t the statistics - it’s who is really benefiting. Most Help to Buy applicants are first-time buyers, young and have a roughly average household income. This is all about helping hardworking people get on the first rung of the property ladder - and helping them get on in life.
‘Owning a home is about more than 4 walls to sleep at night. It’s about independence, self-reliance, moving on and moving up. Above all, it’s about aspiration. Help to Buy is helping people realise the dream of home ownership - and it’s a key part of my plan for Britain.’
So far, so good for Cameron and the young buyers that Help to Buy 2 has helped highlighted in the Downing Street press release. Quotes such as ‘a dream come true to us’ and ‘the scheme really does benefit hard working people’ will be music to his ears.
The problem comes with the next bit:
‘Applicants will face average monthly repayments of around £900 and have an annual household income of around £45,000. This means a Help to Buy mortgage represents 24 per cent of borrowers’ gross income, which compares to the historical Council of Mortgage Lenders’ average figure of 24 per cent across the UK.
‘A 2-year fixed rate 95 per cent mortgage for the average house under Help to Buy is also £2,557 cheaper per year, compared to the equivalent mortgage from 2007.’
That sounds good until you look at the actual CML statistics. These do show a time when capital and interest payments took up 24 per cent of first-time buyers’ gross income but this was not the historical average but the peak of unaffordability in 2008.
The figures from before 2005 only show interest payments as a percentage of income but it’s pretty clear that capital and interest has only gone higher than 24 per cent at the peak of the previous housing boom between 1989 and 1991. These figures are also for the UK: those for England are slightly higher.
Neal Hudson of Savills (@resi_analyst on twitter) has a graph on mortgage affordability going back to 1992 here.
That’s important to bear in mind when you come to the Cameron’s second claim: that the two-year fixed rate Help to Buy mortgage for the average house is £2,557 cheaper.
The vast majority of that saving is the result of the Bank of England cutting interest rates to a record low of 0.5 per cent in 2009.
That begs the obvious question of what happens when and if interest rates return to a more normal level. At the end of the two-year fix, that £2,557 or £200 a month saving could easily look like the extra amount that those lucky buyers will have to find.
The Help to Buy feelgood factor is certainly there for Cameron and the Conservatives right now and with a fair wind it may last until May 2015. However, the figures he’s quoting open up three scenarios that look far less rosy:
First, the fact that Help to Buy mortgages seem to be stretching affordability back to the peak of 2007 may mean the scheme has less take-up than they hope once the initial rush slows down. That may be the least bad option because…
Second, any increase in interest rates (as urged by John Major today and promised by the Bank of England if the economy improves) will mean affordability problems for Help to Buyers and anyone who has stretched themselves to get on to the housing ladder. The dangers of rising arrears and repossessions and (if prices fall after the current mini-boom) negative equity will loom large.
Third, any problems like that will make it very difficult for any future government to get out of the business of state-sponsored mortgages, precisely what the critics have warned about all along.
As we wait for the rescue plan, yet more scathing criticism of the universal credit will surprise nobody.
Today’s report from the Public Accounts Committee is a follow-up to September’s critical review by the National Audit Office but the weight of detail only confirms the impression of a project that long ago spun out of control.
Many of the findings from MPs – the lack of management, the fortress mentality, the ‘good news reporting culture – is familiar from the NAO report. But they add more detail and even more criticism on:
- Poor management: in fact, make that ‘extraordinarily poor’ management’ at the top of the DWP with problems only emerging through ad hoc reviews
- Waste: IT ‘write-offs could amount to at least £140 million’ but the precise extent of it is not known because the department has relied so far on ‘supplier self-assessment
- Inadequate financial control: There was a ‘shocking absence of control over suppliers’ with secretaries were signing off multi-million pound invoices
- Inadequate piloting: How much use will the pathfinder really be? It can only cope with the most limited claims, it has limited IT functionality and it lacks identity assurance and anti-fraud components. The MPs say it ‘will provide some useful information, we are sceptical that it will adequately inform the full roll-out of Universal Credit’.
As for the future, the PAC says that:
‘We are not yet convinced that the Department is in a position to present revised plans for approval by ministers, the Cabinet Office and HM Treasury that resolve the problems of developing a secure system that can accommodate large numbers of claimants who have complex and changing circumstances and who will be expected to fulfil certain conditions.’
Publicly at least, the DWP insists that the project is ‘on time and on budget’ for full roll-out by 2017. However, the MPs say that it will not meet its current target of enrolling 184,000 claimants by April 2014 and accelerating the later stages of the programme will create further risks. They conclude:
‘We believe that meeting any specific timetable is less important than delivering the programme successfully. There is still the potential for Universal Credit to deliver significant benefits, but there is no clarity yet on the amount of savings it will achieve.’
That will mean ‘deliverable options’, a ‘clear strategy for IT development’, ‘realistic ambitions on timescales and the amount that can be delivered online’ and a budget for the remainder of the programme and the net benefits it is expected to deliver. All the things, in other words, you might have expected to be in place at start.
The now familiar response from the DWP says that ‘this report doesn’t take into account our new leadership team, or our progress on delivery’. It adds that since it last spoke to the PAC it has launched the universal credit in Hammersmith and that it will expand to further areas this month (without mentioning that this was another delay).
And it concludes: ‘We don’t recognise the write off figure quoted by the committee and expect this to be substantially less. The head of Universal Credit Howard Shiplee has been clear that there is real potential to use much of the existing IT. We will announce our plans for the next phase of UC delivery shortly.’
It’s worth noting that previous responses have insisted that the project is ‘on time’. That ‘we will announce our plans shortly’ sounds like even the DWP has accepted the inevitable.
IDS responded to the NAO’s criticism by appearing to blame senior civil servants including permanent secretary Robert Devereux for the mess. A spokesperson now tells the Financial Times (ominously for anyone familiar with football parlance) that ‘he has every confidence with the team now in place, and that team includes Robert Devereux’.
However, it seems only fair to point to a fresh round of leaks that have emerged since the PAC completed its work. Computer Weekly reported this week that the DWP will decide later this month between two options: scrapping all of the £300 million IT system and starting again; and continuing to use some of the existing IT systems for the pathfinders while developing new systems for the roll-out. ‘Whichever option is chosen, sources suggest it is likely that all the existing IT work will eventually be scrapped,’ it says.
That looks like an amplification of an earlier leak to The Guardian which also said that the government is now considering two options: writing off £119 million of investment so far and starting again with a much more web-based system that would reduce the need for Job Centre staff; and attempting to improve the existing system. A risk assessment criticises both options and says that either way a maximum of 25,000 people (just 0.2 per cent of claimants) will be on the new system by the next election.
All of which will leave not just claimants but anyone with a stake in the new system wondering what on earth is going on and hoping for some clarity, any clarity, as soon as possible. Who knows how much social landlords have invested in extra staff and services on the assumption of a timetable that it now seems the DWP has no chance of meeting? Should the DWP now cover some of their costs? I have not even mentioned direct payment yet.
There is still general support for the project’s aim of delivering a more transparent system for everyone involved. But the longer the mess continues the more it begins to look like a universal debit.
IDS and the DWP must announce a clear and deliverable timetable, with a credible way of achieving the project’s goals, to hope to begin to repay the credit they have wasted.
For all today’s headlines about house prices, the most significant claim in new forecasts out today is that private renting will grow by another million households in the next five years.
That is one of the new forecasts for the housing market issued by Savills today and flows from its assumptions on what will happen to house prices. It comes despite the government’s flagship help to buy policy that aims to create more homeowners.
The property firm forecasts a 25 per cent rise in prices between 2014 to 2018, with the south east and eastern regions seeing the biggest increases. That remains well short of what it sees as ‘bubble’ territory (an increase of more like 40 per cent). So, rather than taking us back to the mid 2000s, it believes the current market is more like 1996 ‘when the last housing market recovery firmly took hold’.
However, if this is 1996, it is not quite as we knew it at the time and this will be a recovery that only benefits some. The legacy of the credit crunch is that high prices have excluded people from owner-occupation and it’s transactions rather than prices that have fallen. ‘The UK housing market is now the preserve only of the wealthiest 50 per cent of households – and only if they have access to sufficient capital to use as a deposit,’ says Yolande Barnes of Savills Research in her introduction.
This is exactly the problem that the government is hoping to tackle with its controversial help to buy 2 mortgage guarantee policy, which produced its first lucky buyer last week. As financial secretary to the Treasury Sajid David told the commons yesterday: ‘The government [is] committed to making the aspiration of homeownership a reality for as many people as possible. That is why we recently announced that participating lenders will be able to offer high loan-to-value mortgages supported by their help to buy mortgage guarantee schemes three months earlier than planned. I was pleased to hear that Lloyds Banking Group recently announced that the first such mortgage was taken out by a first-time buyer in Dartford, Kent.’
The issue is how much impact help to buy 2 will really have. The controversy surrounding it is based on the fear that it could increase demand and prices without doing much about supply. Savills clearly thinks it will have less impact than the government hopes.
When the policy was first announced in March, it said that if the £12 billion of guarantees translated into £130 billion of mortgage lending the scheme had the capacity to enabled 550,000 extra house sales, a 19 per cent increase in overall transactions.
Now it is expecting around 325,000 transactions over the next three years ‘as those buyers with a strong aspiration to build up their housing wealth and the income to do so take advantage of the scheme’.
However, ‘the major beneficiaries of an increase in net mortgage lending are likely to be existing home owners, particularly those with a pot of existing equity’.
Savills forecasts that housing market transactions across the UK will rise from 960,000 in 2013 to 1.11 million in 2014, 1.18 million in 2015 and 1.25 million in 2016 before levelling down to around 1.2 million in 2017 and 2018.
That would in turn mean that Sajid David’s hope of ‘making the aspiration of home ownership a reality for as many as possible’ is unlikely to be fulfilled. Instead, if Savills is correct, the ranks of generation rent will continue to swell by more than 200,000 a year from 4.8 million in the UK in 2013 to 5.8 million in 2018, perhaps 20 per cent of households.
The implications of that would be profound. The housing system is still adjusting to the extraordinary 2 million household growth of private renting over the last decade but it will need to cope with more of the same over the next five years.
An opinion poll commissioned by Savills suggests that a large majority of renters still see the tenure as an intermediate step to owning. Many of them are going to be disappointed.
From the landlord side of the equation, even though buy to let has bounced back strongly from the credit crunch, it may not be enough to cope. Chris Buckles of Savills Research concludes: ‘Meeting this demand will fall to the cash rich investor and the institutions. They could, if they are brave and receive sufficient government support, be on the cusp of revolutionising the provision of private rented housing. This will be critical in the polarised housing market of the next five years.’
All this pressure will feed through into rent inflation too. Savills forecasts that the average rate of increase across the UK will rise from 2 per cent in 2014 to 2.5 per cent in 2015, 4 per cent in 2016 and 5.5 per cent in 2017 and 2018. Rents in London will rise still faster, starting with 3.5 per cent in both 2014 and 2015 and rising to 6 per cent by 2018.
That may be good news for landlords and investors but it is obviously less good for renters. As this blog by the New Policy Institute shows, the cost of living crisis in housing since the credit crunch is all about renters, as people with mortgages have seen their costs fall.
And it has alarming implications for the growing proportion of private tenants who rely on housing benefit to pay their rent. The local housing allowance is due to be uprated by just 1 per cent in 2014/15 and 2015/16 and it could be a target for continuing austerity measures after the next election. The shortfall between their rents and benefits could continue to escalate.
So has what started out as ‘a Rolls Royce idea’ ended up ‘a Reliant Robin policy in practice’?
That’s not me describing the new homes bonus but the words of Conservative MP Stewart Jackson. Now a member of the public accounts committee, he was speaking at an evidence session in June ahead of its report published this morning. He was also a shadow communities minister at the time the bonus became a Conservative flagship policy.
With scepticism like that on the Conservative side it’s little wonder that the PAC has more scathing criticism of the handling of the policy. It follows an embarrassing verdictfor the department of Communities and Local Government delivered by the National Audit Office in March.
Margaret Hodge, the Labour chair of the PAC, says that with £7.5 billion due to be redistributed between councils by 2018/19 to encourage more homes, it’s ‘vital’ that the bonus works: ‘It is therefore disappointing that after more than two years of the scheme being up and running, no evaluation is in place and no credible data is available to show whether the scheme is working or not.
‘So far the areas which have gained most money tend to be the areas where housing need is lowest. The areas that have lost most tend to be those where needs are greatest,’ she adds.
‘The CLG has yet to demonstrate whether the new homes bonus works. Is it helping to create more new homes than would have been built anyway? Is it the best way for the government to use its limited resources to create more homes where they are needed most?’
Questions like this have been asked from the very beginning. As I blogged when the first allocations were made, the policy is less a bonus for building new homes than a penalty for not building them, and it amounts to a mechanism for transferring resources from deprived areas to affluent ones.
The National Audit Office agreed, branding the CLG’s estimate of the potential increase ‘unreliable’ and based on ‘unrealistic’ assumptions that included a ‘substantial arithmetical error’.
So far, it said, ‘the bonus has mainly rewarded home creation that was not incentivised by the bonus’.
Despite the policy being an attempt to use incentives to change the behavior of local authorities and communities to make them more pro-development, the CLG had not even consulted the cabinet office’s behavioural insight team (the nudge unit).
The message from Amyas Morse, the head of the NAO, was that: ‘The department must now urgently carry out its proposed review of the scheme to ensure that it successfully encourages the construction of much-needed new homes.’
That was in March. Seven months later, the PAC is making the same point about urgency: ‘We would have expected the [CLG] to have planned a systematic evaluation from the outset to track its impact on local authorities’ behaviour towards housing development, and the cumulative impact of the [new homes bonus] alongside the [CLG’s] other policies affecting local authority funding. The department has yet to demonstrate that the new homes it is funding through this scheme are in areas of housing need and the its planned evaluation is now urgent.’
That has prompted Sir Bob Kerslake, permanent secretary at the CLG and head of the civil service, to take the unusual step of issuing a statement publicly disagreeing with the committee: ‘I am disappointed by today’s report and have some significant disagreements with its findings. We have made very clear that our review of the new homes bonus is under way and will be completed by Easter 2014 as we have always promised,’ he said.
‘The whole point of the new homes bonus – which the committee fails to recognise – is to recognise housing growth where it occurs, with money going where those homes are needed most. That’s why we’ve committed £1.2 billion over five years towards this scheme, which the National Audit Office themselves found has the potential to deliver up to 100,000 additional homes over 10 years.’
However, arguments like this did not convince PAC members when he put them forward at a meeting in June and an evaluation published a year after the National Audit Office called for one ‘urgently’ will not meet most people’s definition of the word.
And it seems unlikely that the evaluation will be able to offer much convincing evidence of the impact of the bonus even then. The PAC report points out that ‘the department is committed to establishing if the new homes bonus has changed the behaviour of local authorities as part of its evaluation’.
‘However, the [CLG] told us that disentangling the impact of the bonus from other economic factors and other government initiatives, such as help to buy, would be difficult,’ it added.
Similarly, while there has been a positive trend in the number of empty homes being brought back into use, ‘this began before the Bonus was introduced’. The impact remains unclear - though I have seen evidence that the bonus has had a positive impact on the way my local council looks at empty homes.
In the meantime the PAC suggests adjustments such as offering extra incentives for energy-efficient homes rather than a ‘wholesale shake-up’.
By offering incentives to communities, the new homes bonus did introduce an interesting idea into the debate about how to get more homes built. It was also attractive politically as a bottom-up alternative to Labour’s top-down targets.
However, was it ever really a ‘Rolls Royce idea’? Keep them small and incentives probably will not work, make them more attractive enough and eventually they become a questionable use of public money.
Whether the new homes bonus was badly implemented, or impractical in the first place, or both, the debate has already moved on and in help to buy the coalition has a shiny new flagship. No matter how much Sir Bob and the CLG apply the turtle wax between now and easter 2014, they will still have a used Reliant Robin on their hands.
Where does sensible asset management stop and social cleansing begin?
That’s the issue highlighted for me by the sale of ‘Britain’s most expensive council house’ and the protest that followed.
I put that in inverted commas because I’m not sure the building near Borough Market in Southwark was actually being used as a house but what is clear that it was sold at auction for £2.96 million, 30 per cent more than was expected last week.
The council’s case is that it’s better to sell and use the proceeds building 20 new council homes than keep it when it needs £500,000 worth of repair and refurbishment work. ‘I think that’s a no-brainer and most people do apart from the protestors,’ cabinet member for regeneration Fiona Colley told me yesterday.
Put like that, it’s hard to disagree. Social landlords all over the country have to make decisions about the best use of their assets. But there is a continuum involved here. At one end you might have a tower block that will cost more to maintain than it will to knock down and build replacement homes. At the other, you might have Policy Exchange’s proposal for Ending Expensive Social Tenancies. Grant Shapps, the housing minister at the time, considered it ‘blindingly obvious’ and the influential think tank is pushing the idea on twitter again this morning. I didn’t think so much of the idea when I blogged about it at the time.
But what happens with proposals that fall somewhere between those two extremes? The ‘£3 million council house’ is not the only example in Southwark. At Neo Bankside, a swanky new riverside development near Tate Modern, the original plan was that the ‘affordable’ housing contribution would be on site. But Fiona Colley explains: ‘We found that even at 25 per cent, the smallest share, they were only affordable on a household income of £90,000, which is above the income limit to qualify. So we recognised that and took £10 million to fund 170 council homes which to us makes much more sense.’
Again it seems hard to argue that this is more sensible than, for example, this £720,000 ‘affordable’ home that I was alerted to by a commenter on my blog. A 25 per cent share can be yours for £2,444 a month in rent, mortgage and service charges, half the post-tax income of a household on the maximum qualifying income of £80,000.
Yet the protestors in Southwark beg to disagree. Housing Action Southwark and Lambeth argue on the Guardian’s Comment is Free that there is no justification for selling off council houses during a housing crisis.
The occupation is partly a protest against draconian new laws on squatting but also is also happening in the context of the regeneration/gentrification of the wider area. ‘Southwark council has tried to justify the sale by promising to build 20 new council homes with the profits,’ they say, ‘but after the ongoing Heygate estate scandal, it is difficult to take them at their word.’
That is of course a reference to the controversial regeneration of the Heygate estate near the Elephant. Southwark sees it as part of a wider regeneration plan that will bring homes and jobs to the whole area but, as the final few leaseholders get ready to leave by Monday, that’s not the way campaigners see it at all.
The same issues are cropping up all over London (but not just in London) and pitting residents against local authorities and developers. Think Hammersmith & Fulham’s plans for Earl’s Court and two nearby council estates or Lambeth’s sell-off of short-life housing or Newham’s stalled plan to demolish the Carpenters Estate to make way for a new campus for UCL.
You have to draw the line somewhere - but where exactly? The boundaries between regeneration, gentrification and social cleansing lie somewhere between the tower block that’s falling down and the Policy Exchange sell-off plan. As with previous rounds of regeneration, including those that created the estates in the first place, they involve issues of resident involvement and consent, the use of the proceeds for new housing and the conditions for the offer of new homes. These have to be balanced against the interests of the wider community.
So the issues and the boundaries are not new and perhaps it’s only possible to draw the line on a case by case basis. But bigger social and economic processes are at work now: growing inequalities of income and wealth, globalisation, financial pressure on local authorities, welfare reform and the escalating cost of housing. What would the outcome be if the battle of Coin Street were fought again today?
The routine is familiar by now: researchers question government policy, government rubbishes researchers.
Where McVey embarrassed herself on the World at One, Penning had definitely got out of bed on the wrong side before he arrived in the Today programme studio. That was compounded when presenter Justin Webb introduced him as Mark rather than Mike. ‘Let’s start as we mean to carry on, shall we?’ he harrumphed before attacking ‘the BBC and The Guardian’ for being the only media outlets to report the story.
The interview went downhill from there. ‘Let’s report the facts, not flawed data,’ he said, but seemed unsure quite what the facts were. And he then blundered into an on-air row with Webb in the following exchange:
Penning: ‘It’s a fair policy and it’s much too early for the BBC and the institute to be writing this off.’
Webb: ‘It’s ridiculous to say the BBC is writing this off, we’re merely reporting what they did.’
Penning: ‘Why did you accept what they reported? Because we gave you the information last night that it wasn’t factually correct.’
Webb: ‘We’re not accepting it. We just had an interview with the woman in charge and asked her questions about it. That’s how you report things. We’re not accepting it by reporting it, you know perfectly well we’re not.’
That I think provides a clue to Penning’s initial annoyance. The DWP had obviously been trying – and failing – to kill the story last night. Its line was that 16,500 claimants ‘potentially affected by the cap’ have been helped into work across the country (since April 2012) and so it’s working. The department is of course a paragon of statistical rectitude when it comes to the cap.
Penning’s other point was that: ‘I don’t understand why we are looking at something so early on in one very restricted London area, which just happens to be Labour-controlled, which is said not to be working.’
In fact the CIH research looks in detail at the impact in Haringey, one of the four London boroughs where the cap was first introduced. Among the findings:
- Only 74 of the 747 households affected by the cap were known to have moved into work, while 11 had increased their hours by enough to avoid it
- Half those affected were claiming discretionary housing payments to help pay their rent, shunting the costs from central government to councils (as Haringey leader Claire Kober points out). Around £60,000 has been saved from the benefit bill but expenditure on discretionary housing payments (DHPs) totals £960,000 so far.
- The mass evictions that were feared have not yet materialised – though the report warns ‘they are visible on the horizon’. Claimants have relied on DHPs so far but this will be unsustainable in the long term.
- A small number of households have faced severe consequences. These include women unable to leave abusive partners, children in danger of being taken into care and pre-emptive evictions of some private tenants.
The CIH concludes that the cap is ‘struggling to meet its aims’ of saving money and encouraging people into work. True, 11 per cent of households have moved into work but that does not seem much to show for the resources thrown into Haringey and the other pilot areas.
But all of this assumes of course that work and savings really are the main objectives of a policy that has always been intensely political. Opinion polls show that public support for the policy remains high. A survey for the DWP published earlier this month shows strong public support for the cap on just about every count, even though people believe it is unfair to people in high-rent areas.
I’ve written many times before about the way that the benefit cap’s arbitrary notion of ‘fairness’ breaks down once you look beyond the headline figure of £26,000 a year. This starts of course with the flawed use of earnings rather than income to set the level of the cap but it goes beyond that to the way that the cap operates independently of decisions already taken elsewhere in the system.
And so where there are already caps on the maximum housing benefit payable in each area, the overall cap operates well below that level. It is only DHPs that are making up for the rent shortfalls in Haringey.
Where councils accept a duty to homeless people and house them in temporary accommodation, the cap decides it will not pay the rents for it. This applies to 43 per cent of the capped households in Haringey.
And where the benefits system has rules on in what circumstances lone parents are expected to work that depend on the age of the child and the availability of affordable childcare, the benefit cap cuts the income of all those not working. Six out of ten of the households capped in Haringey had children below school age and the availability and affordability of childcare were major barriers to work.
But the benefit cap is a policy that operates independently of such considerations and in a world that exists beyond the facts. That’s why research and researchers have to be rubbished.
The line-up of the band may change but the ministerial song remains the same at the Communities and Local Government department.
Parliamentary questions yesterday brought the first chance to see new boys Kris Hopkins and Stephen Williams perform alongside Nick Boles, Brandon Lewis and the ageing star Eric Pickles. After poor Mark Prisk was told he had to ‘step aside for a younger generation’ only to find that his replacement was just a year younger, I can’t help thinking of them as a boy band (the two female CLG ministers are both in the Lords).
Hopkins is of course the newly junior housing minister, though he told an Inside Housing reception last night that he does not ‘give a toss’ about this status so long as some homes get built. He also said that the appointment feels like ‘coming home’.
The housing brief certainly seems more of a collective effort now. The real focus of the songs is all about home ownership and Help to Buy and responsibility for that goes right to the top of the record label at 10 and 11 Downing Street.
And yet on key housing announcements on homes for locals, custom build and private renting last week it was Pickles who took the limelight. That left the housing minister to mark new legal powers against social tenancy cheats and help for military families to get on the housing ladder.
The housing spotlight moved between ministers in the Commons yesterday too. First up was Hopkins for some supportive questions about Help to Buy. He revealed that RBS had 10,000 inquiries in the first four working days and made a direct pitch to northern fans by pointing out:
‘I agree that at the moment there is a huge media focus on London and the south-east. As a northern MP, I know that if we remove London and the south-east from the national figure of 3.8% for price rises, we get 2.1% for our part of the country, but several other parts have seen no increase at all, so we need to stick up for the Blackpools, Burnleys and Bradfords as well.’
To more hostile Labour questions he boasted that the government had ‘delivered 334,000 houses so far, 84,000 of which are affordable homes’ and he neatly avoided expressing an opinion on ‘use it or lose it’ powers against landloarding developers (Labour policy but also backed by Boris Johnson in London).
But as the gig moved from advance to topical questions, Hopkins only got to answer one more, applauding ‘as a former soldier’ the sentiment behind a question about boosting home ownership among members of the armed forces.
In contrast, the other new boy, the Lib Dem Stephen Williams, got far more time in the spotlight. Officially his wide-ranging brief includes empty homes and other housing-related issues such as localism and the building regulations and he duly took a solo spot on localism at advance questions on localism.
However, it was more of a surprise to see him rather than Hopkins take the lead on the government’s defence of the bedroom tax. Questioned by Labour’s Cathy Jamieson about adapted homes for older people, Williams sang the old coalition hit ‘Discretionary Housing Payments’. When she followed that up by asking for an assurance that people will not be forced out of their homes when they have a disability, he carefully failed to answer the question.
And it was Williams, not Hopkins, who got the first parliamentary exchange with the new shadow housing minister Emma Reynolds. When more than half of those affected by the bedroom tax are disabled, and nine out of ten of those who are not receiving DHPs are having to ‘choose between heating or eating’, she asked:
‘Does the Minister advise them to put on another jumper, skip a meal, or move to a non-adapted property that then has to be adapted at huge cost to the taxpayer?’
‘I would not presume to advise an individual at all; each individual must make up their own mind about how they will adapt to a change in circumstances. I advise local authorities, housing associations and local advice bureaux to work holistically with each tenant affected by the policy, and to consider what advice and support can be given so that they can transition to the new arrangements.’
Transition to the new arrangements? That sounds like Williams had stolen a line from the DWP songbook and he was also up next to ask another round of hostile bedroom tax questions. When Labour’s Pamela Nash asked whether he would advise people who cannot downsize to move into the private rented sector and send the housing benefit bill up not down, he replied:
‘Clearly, the implementation of this policy will take a while, and each tenant must weigh up their own circumstances and consider how they adapt. As I said previously, I expect local authorities to work with all housing providers in an area, including the private sector—in my constituency more people rent in the private sector than in the public sector—and consider the best use of stock and what assistance is most appropriate for the individual.’
This sounds like a new emphasis to me on addressing under-occupation and over-crowding across both tenures (and perhaps an implicit recognition that redistribution within the social sector is not working). He followed up with similar points to Meg Hillier (‘I expect local authorities, including Hackney, to look across all housing providers in the area and consider best use of the stock’) and Lyn Brown (‘We are spending huge amounts supporting people in overcrowded conditions, and across the private and public sectors we are not making best use of the housing stock available’).
The problem is of course that rents and the housing benefit bill are both higher in the private sector. This was a point made at the end of topical questions when Labour’s Lillian Greenwood said that tenants in Nottingham forced to downsize from a two-bed social home to a one-bed private one can expect to pay £24.83 extra in rent. She was directly addressing Pickles when she asked ‘the bedroom tax is a costly mess; why does he not scrap it?’ but it was Williams who got up to answer:
‘We do not scrap it because we need to save money right across government. One of the major problems of implementing this policy is the lack of house building— [Interruption.] I know that the hon. Lady is from the 2010 intake and that Labour Members of that intake like to think that 2010 is year zero, but during the 13 years when some of her colleagues were in power, not enough affordable housing was built. That is the problem.’
It was an old hit rolled out from the back catalogue as an encore. The line-up may change, and Williams may be the third Lib Dem member of the band in three and a half years, but blaming it all on the last government is still the Best Song Ever.
Government action on private renting looked a distant prospect when it brusquely rejected plans for light-touch regulation as ‘red tape’ in 2010.
So today’s statement by Eric Pickles announcing a package of measures to give private tenants a better deal is evidence that even the Conservatives have woken up to the fact that they are a growing part of the electorate and testament to the efforts of campaigners over the last three-and-a-half years.
Following up an announcement made – significantly – during the Conservative Party conference, the communities secretary says ‘we recognise there is more to do to support a vibrant private rented sector’.
The package is a balancing act between
- Giving tenants the know-how to demand longer-term tenancies, stable rents, better quality accommodation, avoid hidden fees when renting a home and demand better standards
- Proportionate regulation: ‘Excessive red tape – such as compulsory landlord registration fees or rent controls – would reduce investment, restrict choice for tenants and ultimately drive up costs for tenants’
- Supporting ‘law-abiding, decent landlords’ against tenants who intentionally do not pay or damage property
- Taking action against ‘the small number of rogue landlords’ to stop tenants getting ripped off
- Ensuring tenants have the confidence to take action ‘without fear of eviction or harassment’
Mr Pickles does not exactly seem the obvious choice for a balancing act and, before anyone gets too excited, ‘demand’ in this context seems to mean ‘ask’ rather than ‘have a right to’. There is no suggestion that I can find that his plans to outlaw the retaliatory eviction that is too often the fate of tenants who complain or try to enforce their rights.
The package also does not seem to include the one thing demanded by landlords, reputable agents and tenants: licensing of letting agents. The Royal Institue of Chartered Surveyors says today that the redress proposal does not go far enough and is calling for a consistent national regulation scheme for agents.
Instead a code of practice will set out what landlords, letting agents and property managers must do and make clear it is their responsibility to maintain the property to an acceptable standard.
There will be a review of how to ensure that homes are safe and healthy for tenants and the government will consider requiring landlords to repay rent where serious hazards are found and extending local authorities’ powers to recoup housing benefit paid for sub-standard property.
A tenants charter will explain how tenants can ‘ask’ for longer tenancies and promote transparency of letting agents’ fees to help stop unreasonable and unfair charges. A model tenancy agreement will be developed by 2014 to set out the rights and responsibilities of tenants and landlords.
However, there is also a nod to landlords with a pledge to work to identify ‘any improvements that can be made to the eviction process’ if a tenant stops paying the rent and give them more confidence to offer longer tenancies.
Finally, the government will organise a mortgage lenders summit to discuss the restrictions set by most buy-to-let lenders on landlords agreeing to longer tenancies.
Much of the groundwork for today’s statement was done by the all-party communities and local government committee in a report published in July. The government’s response is also published today. Committee chair Clive Betts has welcomed the package but says the failure to clampdown on cowboy agents is ‘regrettable’.
As a package it is not going to satisfy many tenants’ groups and it does not go nearly as far as the policies emerging from Labour’s policy review, which start with licensing of letting agents and could include indexing rents.
I also suspect the detail is going to raise all kinds of questions. Off the top of my head, what are ‘optional but standard’ clauses in tenancy agreements? How will break clauses and rent reviews work in longer tenancies? Is a compulsory redress scheme for agents really going to protect tenancies, even if complaints must be investigated by someone independent? Why, when a quarter of those Pickles (invevitably) describes as ‘hardworking’ private tenants are in work but need housing benefit to pay the rent is there no mention of welfare reform?
Nevertheless it does represent quite a shift from the early days of the coalition. Back in June 2010 Grant Shapps was promising landlords that ‘the government has no plans to introduce any [my emphasis] further regulations’.
There also seems to be more than a nod to the proposal for a stable rental contract developed by Shelter last year. On Shelter’s policy blog, Robbie de Santos calls the Tory conference announcement ‘a small step and yet a big moment’ but suggests that a stronger nudge will be required to shift a market of 9 million renters and 1.5 million landlords. That sounds about right.
And we are now set for a fascinating contrast between the nations of the UK in their approach to regulation of private renting. As England tries to tread a minimalist path, Wales is about to introduce legislation based on the proposals that Shapps rejected in 2010. North of the border, where letting agent fees are already banned, Shelter Scotland is pressing the government to introduce greater security of tenure.
The bedroom tax is turning out to have as many alternate realities as it has names.
Whether you call it that or the under-occupation penalty or the social sector size criteria or even ending the spare room subsidy, the everyday reality is shown very well in a TV documentary on BBC Wales. If you have the time between now and 11 o’clock tonight (when it expires on iplayer) to watch ‘What cost a spare room in Wales?’ it’s well worth the effort.
The uncomfortable reality (uncomfortable for ministers at least) came in a report from the University of York that says the policy may end up saving at least a third less than the government claims.
The hyper-reality came in two extraordinary appearances yesterday by newly promoted work and pensions minister Esther McVey on the World at One and later at parliamentary questions.
And there’s even the unreality of a brief flurry on twitter just now about Nick Clegg’s supposed announcement of an independent review of the policy, which turns out to be just a reference to the evaluation that the government committed itself in the final stages of the Welfare Reform Act. The legal reality is of course still developing through tribunal cases and the Court of Appeal.
The documentary follows three victims of the bedroom tax in Blaenavon and the staff from Bron Afon Community Housing trying to help them. Then it adds an extra twist when David Davies, the Conservative MP for Monmouth and chair of the Welsh Affairs Committee, tells them why he thinks it’s fair.
If Wales has a greater percentage of social tenants affected by the bedroom tax than anywhere else in the UK, then Blaenavon has special problems of its own. The chances of downsizing within the town are slim at best and moving anywhere else means moving miles away from friends and family. Meanwhile voids are increasing on larger homes that nobody wants.
Natalie, whose bedrooms are spare because her three kids live with her mum Molly during the week, only escapes eviction when Molly agrees to pay £47 a week to cover the shortfall on her rent plus her arrears. Amy and Lloyd had to take a two-bed flat because they couldn’t find a one-bed in their home town but the cost is pushing them to the limit. Gail was working until recently but has gone into arrears for the first time because of the penalty on the two bedrooms in her house that have been empty since her children left home.
David Davies tells them face to face why he supports the policy but seems to waver as he hears the story. He bluntly tells Lloyd he should get a job or go to London. He tells Molly he can see that it’s more of a problem in rural areas and Wales than it is in cities.
But he clearly has the most sympathy for Gail. ‘Ministers are maybe a bit reluctant to admit this but there will be unintended consequences and some people will lose out who don’t deserve to lose out,’ he tells her. ‘But they’re not going to reverse the whole thing or change it because there’s a bigger picture.’
The bigger picture, with a brief nod to ‘hardworking people’, is presumably saving money – but what if it doesn’t?
That’s the question posed in my second reality, the one raised by Rebecca Tunstall from York’s Centre for Housing Policy in a report for Riverside, Affinity Sutton, Gentoo and Wigan and Leigh Housing. The press release is on Riverside’s website here.
The report uses real data for the first five months of the policy for 127,000 homes in England and applies it to the model used by the DWP in its impact assessments to estimate that it will deliver £480 million of savings in 2013/14.
Read the full report for the details but the key findings are that flaws in the model mean the DWP underestimated:
- the number of people underoccupying by one bedroom who would move
- the proportion of those affected who would move into the private rented sector
- the proportion of homes vacated that would be relet to existing social tenants.
And that means the DWP could have overestimated the total savings by between £160 million (33 per cent) and £186 million (39 per cent). If you add the £65 million in discretionary housing payments set aside for this year even more of the ‘savings’ disappear.
The report is careful to stress that it does not claim to be a fully representative sample but the implications are clear. Especially when these figures take no account of the extra costs faced by landlords and local authorities for adaptations for disabled tenants who move, rising rent arrears and re-let times, rent collection and tenancy support, lost ability to build new homes and the knock-on effects on homelessness, health, education, advice and social services.
And so to the hyperreality of Esther McVey. For openers, she was involved in one of the most remarkable radio interviews I’ve head this year on yesterday’s World at One.
She claimed the findings were ‘skewed’ and ‘not credible’ because the housing associations involved are ‘net gainers’ with a stake in getting the answers they wanted. That was quite a claim. Quite apart from ignoring the academic rigour behind the report and questioning the good name of those involved, an earlier report involving three of the four landlords who commissioned this one was quoted approvingly in the DWP’s own impact assessment in 2012.
As it seemed increasingly more likely that McVey (and perhaps not her officials either) had not actually read the report, she repeatedly refused to say which conclusions she disagreed with. Putting yourself in the position where your interviewer keeps asking the same question that you don’t answer is never a good idea for politicians. McVey was reduced to spluttering that ‘you’ve got to give credence to our credibility’. It was cringe comedy gold.
But it turned out that this was only the start of the hyper-reality. At yesterday’s work and pensions questions the opening bedroom tax skirmishes involved Iain Duncan Smith and (yet again) the UN special rapporteur Raquel Rolnik. He told Nick Raynsford it was all Labour’s fault: ‘Instead of little gimmicks with people from Brazil, they would be better off apologising for the mess they left us in in the first place.’
Not content with that, he then backed up Lord Freud by blaming ‘housing associations and others’ for ‘continuing to build houses that are not required when there is a demand for single bedroom accommodation.’ Never mind, of course, that they are building what they are committed to under the Affordable Homes Programme and that Affordable Rent will increase the housing benefit bill.
Then it was back to McVey and, just to bring things full circle, she was responding to a question from a Welsh MP. Huw Irranca-Davies said rent arrears were rising for associations in his Ogmore constituency:
‘They have a desperate scarcity of one and two-bedroom properties to rent, and yet they have three-bedroom properties lying empty. Is this just a necessary but painful adjustment to the Secretary of State’s benefit and bedroom tax changes?’
McVey’s answer may surprise a few people:
‘The hon. Gentleman is quite right—we have to get the stock right: the fact that there are three-bedroom houses and why in the last three years they have not been modified into one and two-bedroom houses. Those questions have to be asked. That is what we have to do: get the stock right and support people as best we can.’
So it turns out the solution has been staring us in the face all along: knock down bedroom walls. Ignore for a moment the implications for landlords’ business plans. Forget those DWP warnings about reclassification. Leave aside the fact that any ‘savings’ will simply become reduced rental income and increased costs for conversions. Blank out that it’s meant to be freeing up homes for overcrowded families. It’s all starting to make sense now.
I still don’t fully understand the downgrading of the housing portfolio in the reshuffle this week but here’s my attempt to make sense of it.
As Stuart Macdonald points out in Inside Housing this week, the contrast could hardly be starker between the Conservatives’ switch from minister of state Mark Prisk to parliamentary under-secretary Kris Hopkins and Labour’s restoration of shadow housing minister Emma Reynolds to ‘attending cabinet’ status.
Similar points are made by Isabel Hardman and Hannah Fearn in the Telegraph and Guardian and, significantly, by Paul Goodman, the former Conservative MP and editor of the influential Conservative Home website. ‘This isn’t some trivial piece of Whitehall arcana, but a suggestive development with political implications,’ he says.
He goes on: ‘It is certainly an odd signal to send at a time when housing is a crucial political battleground, when Ed Miliband is fighting for its possession, and the government is making such a push with help to buy.’
When Mark Prisk revealed that he was standing down the obvious move for the government seemed to be to promote Nick Boles, the parliamentary under-secretary for planning, to minister of state for housing and planning. Nick Raynsford combined the two roles quite happily under the last Labour government and it would certainly have enabled Mr Boles to widen the Conservatives’ appeal to young voters who need homes. Did the leadership instead come to the conclusion that they could not afford to antagonise the Telegraph-reading, property-owning, countryside-loving wing of the party?
This leaves the Communities and Local Government department in the distinctly odd position of having half a senior minister of state (Baroness Warsi, shared with the Foreign Office) and five parliamentary under-secretaries (Mr Hopkins and Mr Boles plus Brandon Lewis, Baroness Stowell and the Lib Dem Stephen Williams). Contrast that, for example, with the Department for Work and Pensions, which has three ministers of state and one under-secretary.
As for the housing minister job, this is the second time it has been downgraded under the coalition (attending cabinet status fell by the wayside when Mark Prisk took over from Grant Shapps). Mr Hopkins is also the third coalition minister in three-and-a-half years to follow the nine Labour ones in 13 years that Mr Shapps rightly used to complain about.
In one sense the rapid turnover can be seen as the inevitable outcome of party leaders trying to keep ambitious back-benchers happy. On the Labour side, the job may have been upgraded again, but in the process the experience and knowledge of Jack Dromey has been lost just as the party begins to set out its new policies. Everyone in housing may complain that no sooner has a minister or shadow got to grips with the portfolio than they are moved on but that seems to count for little compared to other considerations – and may even be seen as a way of preventing ministers from being captured by ‘producer interests’.
Real power over housing of course remains where it always has and always will (the Treasury) and real influence lies with the department that spends most of the ‘housing’ budget (the DWP). However, what happens to the housing portfolio still sends a message. There is a sense that the coalition regards social housing as ‘mission accomplished’ after the wave of reforms introduced under Shapps. If all the focus seemed to be on delivery under Mr Prisk, that has now been sidelined in the rush to introduce help to buy. That may come with the prime ministerial seal of approval but it is less about tackling the housing crisis than using it to reap the benefits at the next election. As Martin Wolf argues forcefully in the Financial Times today, ‘the political genius of the scheme is that it appears to help hapless victims, while in fact helping the usual suspects’.
And so we all go through the ritual of ‘welcoming’ the new housing minister yet again. The good news on Kris Hopkins is that he does know about housing. As portfolio-holder at Bradford City Council he oversaw what was at the time the largest English stock transfer and went on the become leader and chair of the regional housing board for Yorkshire & Humber. ‘A genuinely likeable and committed man,’ is the verdict of one person who worked closely with him at the time (though Nadine Dorries of course begs to differ).
The suspicion that Mr Prisk lost his job because of his lack of media visibility is confirmed in another blog on Conservative Home by Harry Phibbs. ‘The objection to Mark Prisk…was not to do with any objection to the substance of Mr Prisk’s work but his reluctance to undertake media interviews,’ he says. ‘I suppose in the run up to the next general election getting the message across is rather important.’
On this front, Mr Hopkins has got off to a flying start. He spent his first afternoon visiting a house building site in Northampton accompanied by David Cameron and boasting that help to buy has ‘captured the imagination’ of the public.
Yesterday he hailed the ’10,000 home owners created through the right to buy’ as new figures showed 2,149 council and housing association sales in the last three months to go with the 8,000 in the year to April. ‘For years the right to buy was allowed to wither on the vine, with ever-decreasing discounts leaving the prospect of homeownership out of reach for far too many social tenants,’ he said. ‘But our reinvigorated scheme has changed that, with increased discounts helping more than 10,000 new homeowners onto the property ladder.’
If that turn of phrase sounded vaguely reminiscent of a certain predecessor, his next move was possibly Shappseque in its brilliance. He took to Twitter to claim: ‘House building is now at a 10-year high. And house builders will gain further confidence from the very positive response to #helptobuy.’
The brazen cheek behind that (the 10-year high is a reference to a sentiment index of purchasing managers that help to buy has sent into overdrive, whereas actual house building is of course still flatlining) was evidence that the new minister is learning fast.
But he is still a junior minister. In footballing parlance, housing has gone from making the play-offs for promotion to the premiership to relegation to league one in the space of three seasons. From Watford or Nottingham Forest to, say, Bradford City, currently five points behind the leaders in the third tier of English football.
It’s under attack from all sides but the strongest arguments for help to buy 2 are the ones that ministers cannot mention.
No matter how much David Cameron, George Osborne and the new junior housing minister go on about aspiration and opportunity, the critics refuse to go away. In just the latest example, the all-party Treasury select committee scorns government assurances to repeat its earlier warning that the controversial scheme will boost house prices and be politically impossible for future administrations to exit.
Here’s my analysis of the stated – and unstated – arguments made by ministers:
1) There’s nothing wrong with 95 per cent mortgages. This boils down to an assumption that if anything is dysfunctional it’s the mortgage market not the housing market. That presupposes that mortgage market deregulation and the rise of 95 per cent loans were not themselves factors in the last bubble. According to the Council of Mortgage Lenders, the median advance for a first-time buyer was 84 to 88 per cent between 1974 and 1981, rose to around 95 per cent through most of the 1980s and 90s, then fell back to 87 to 90 per cent between 1999 and 2007 before slumping to 75 per cent in 2009. The median is currently 82 per cent but it is possible for first-time buyers to find a 95 per cent mortgage without help to buy – see, for example, these save to buy deals available from Nationwide.
Low deposit deals remain expensive compared to those available to people with more money to put down but it looks like help to buy 2 will not change that much if the Treasury charges lenders a commercial rate of 90 basis points on the entire cost of the loan for the guarantees on a 95 per cent mortgage. Will rates of 5 or even 5.5 per cent, plus restrictions on affordability and people with a poor credit record, limit demand along with the benefits claimed by government and the risks feared by critics?
2) House prices are not too high. At the Conservative Party conference last week, ministers were quick to highlight prices in places like Nelson and Wigan rather than London and the south east while carefully not explaining why it is necessary for homes worth up to £600,000 to be eligible and for the previous income limit of £60,000 a year to be scrapped. Much depends on which house price index you believe. Asked by Evan Davis on the Today programme why house prices are so high (6.7 times earnings in England against a historic norm of 3.5), Treasury chief secretary Danny Alexander said: ‘Actually I’m not sure it’s right to say house prices are so high’ but it became clear that he really meant mortgage repayments are not so high (because of record low interest rates). As for fears that help to buy 2 will trigger a stampede of applications and a new bubble (but see 1 above), the government seems so unconcerned that the launch press release says that ‘banks are braced for a flood of interest from the public’.
3) It could still boost supply even though it is not linked to new homes. As David Cameron put it this morning:
‘Moves such as Help to Buy will also encourage housebuilding. If potential buyers can’t buy, builders won’t build - so this is an important part of unlocking the market.’
Unlike the first phase of help to buy, and unlike new buy, the help to buy mortgage guarantees are available for existing as well as new homes. That’s the basis of the most obvious objection: that it will simply boost demand without doing anything about supply. As Brian Green of Brickonomics has pointed out, there is a long-term relationship between transactions and private home completions: roughly one home is built for every 10 homes sold. If Savills is correct in its estimate that help to buy will add an extra 550,000 sales over the next three years, that implies an extra 55,000 new homes as a result. An increase of around 20 per cent on current private sector completions is not to be sneezed at but it seems very poor targeting of £12 billion of guarantees. As Paul Smee, director general of CML, points out: ‘The homes need to be there for people to buy, as well as the finance to buy them.’
4) It will help first-time buyers in particular. George Osborne said in his ministerial statement this morning:
‘The government is committed to supporting people who aspire to become homeowners. Since the financial crisis, increased deposit requirements and falling equity values have left many hardworking households unable to get onto the housing ladder or trapped in homes unsuited to their aspirations and needs. This has particularly impacted first-time buyers, who have found it increasingly difficult to purchase their own home.’
Listening to that, you’d think that Help to Buy 2 was only for first-time buyers, when in fact it’s available to everyone except buy to let landlords and second home owners (but see 6 below). If it means more loans at higher loan to values (see 1 above) that should help some people but many first-timers interviewed in the national media say they believe they had better get in quick before prices rise.
More significantly it should at least allow first-time buyers to compete on more equal terms with buy-to-let landlords. Buy to let effectively works by allowing landlords to borrow against the future incomes of their tenants, many of them the reluctant renters that help to buy is meant to be helping. However, landlords enjoy two other advantages that make their repayments cheaper: interest-only mortgages and funding for lending. Launched last year, this scheme is much less well known than help to buy but it has significantly reduced interest rates for landlords and buyers with significant deposits. Although it is meant to help small businesses, its real impact is indicated by its nickname: funding for landlords. Will one government subsidy counterbalance another?
5) It should help second steppers, freeing up a key part of the market. The plight of people who succeeded in becoming first-time buyers only to find that they cannot afford to move is widely seen as a key factor holding back the market as a whole. Help them to move, the argument runs, and it will free up properties for new first-timers. According to the latest survey by Lloyds Bank, their position has improved over the last year and they now have an average of 13 per cent of the average value of a second stepper home. However, the group of second steppers who arguably most need help – those with a poor mortgage arrears or credit record – will not be eligible for help to buy 2.
6) Second homeowners and buy to let landlords will not be able to benefit. The scheme rules make clear that the loan guaranteed cannot be a buy to let mortgage and loans will cease to be eligible for the scheme if the borrower grants a tenancy or lease to someone else. In addition, Help to Buy 2 borrowers will have to sign a declaration that they do not have an interest in any other property and that none of the additional funds will be used to buy an interest in other property. In addition the loan cannot be a buy-to-let mortgage. However, there are exemptions for service personnel posted elsewhere, for people renting out their home as part of mortgage forebearance or because they have to move for employment reasons, and where there is a family bereavement or relationship breakdown. All of those sound perfectly sensible but how many help to buy homes will end up being rented out?
So all six of the stated reasons for help to buy 2 have some things going for them but, to varying extents, more against. That leaves two more arguments that are probably the strongest as far as the government is concerned but which for obvious reasons go unstated:
7) It will provide an economic stimulus and Treasury windfall. Boosting housing market transactions is a good way of getting the economy as a whole moving because of all they furniture and white goods movers will need to buy for their new home. The government will make money directly from rising stamp duty receipts and indirectly from up to £1.2 billion in help to buy fees (as Robert Peston pointed out this morning, though the government says it is not meant to make a profit) and from increases in the value of the government’s holdings in RBS and Lloyds as the housing market picks up. A stimulus financed by government borrowing may have been out of the question but one financed by borrowing by other people guaranteed by the government is a completely different matter. And, with any luck, it will all be happening in time for spring 2015 when…
8) It should be worth lots of extra votes at the next election. Mr Cameron and Mr Osborne have made great play of the link between help to buy and their narrative of ‘a land of opportunity’ and the older Tory theme of ‘home owning democracy’. Most people will not benefit but grateful first-time buyers who got on the ladder and existing owners who see the value of their home rise could generate vital votes at the next election. As for the dire warnings about boom and bust and what happens when the scheme ends in 2016, who cares? (But see 1 above).
So farewell then, Mark Prisk. You didn’t say very much. Which was nice.
That, with apologies to EJ Thribb, seems to be the initial reaction to the departure of the man that Inside Housing dubbed The Invisible Mr Prisk.
The man himself said on Twitter that he had ‘been asked to step aside from housing for a younger generation’. Given he’s a year younger than me, I can sympathise on that and tweeting a picture of himself without a hard hat was definitely one of the more stylish gestures by a sacked minister today.
Looking back at his 398 days in his job, Mr Prisk will be remembered mainly for the spending review (continued grant programme and rental certainty, very good; end of rent convergence and re-let thumbscrews, not so good) and for some progress made on build to rent and unfreezing stalled sites.
Despite those achievements his future has looked shaky for a while. Over the last few months it’s been noticeable how many announcements that were theoretically part of his brief were made by other people, culminating in Eric Pickles proposing a tenants’ charter for families in the private rented sector last week.
Above all, though, Mr Prisk was defined by who he was not. In Grant Shapps he succeeded a politician who could tweet as he did interviews as he announced new initiatives and created alter egos and all of them before breakfast.
That may in part explain the generous tributes from David Orr of the National Housing Federation and Grainia Long of the Chartered Institute of Housing. Being ‘rational, thoughtful and interested in housing’ and having a ’commendable focus on delivery’ were not enough to save his job.
That ‘focus on delivery’ was my big hope when Not-Shapps took the job in September 2012. However, Mr Prisk’s mere 158 mentions in Inside Housing in the 13 months since is a poor return for any politician in the main media outlet covering his brief. Grant Shapps had over 1,000 in his two-and-a-half years. Does that show that journalists (and bloggers) are shallow creatures or that Mr Prisk lacked a vital instinct for self-promotion?
In terms of actual delivery, the numbers look like a case of return to sender so far. Housing completions plumbed new depths on his watch, and the housing shortage continued to grow, although there are indications of improvements to come.
Mr Prisk didn’t just suffer by comparison with Mr Shapps of course. If you had asked a random group of people last week who was housing minister, the majority would have looked at you blankly, but I’m guessing more would have said Nick Boles than his colleague.
The planning minister is the one who has made all the running on housing as a political issue, winning wide praise for the way he has taken on the nimbys and argued the case for new homes. Little wonder that many people were hoping that he will take a beefed-up role as minister for housing and planning.
Above all, of course, whoever it’s done by, the job of housing minister counts for little when the Department for Work and Pensions sets so many of the parameters and the Treasury and George Osborne control both the purse strings and the politics of the brief.
The reshuffle comes a day before tomorrow’s launch of Help to Buy 2. Combine that with a parallel Labour reshuffle seeing the apparent departure of Liam Byrne as shadow work and pensions secretary, and the wider politics of housing is entering a new phase.
As for housing minister, the real danger of the farewell to Mr Prisk (and to junior minister Don Foster) is that it risks a return to the revolving door nature of the job for which Mr Shapps rightly criticised Labour. (And on which point it’s just been confirmed that Emma Reynolds is replacing Jack Dromey as shadow housing minister).
Ed Miliband’s conference speech was much vaguer about housing than the advance briefing but it still sounds like good news.
The Labour leader said that ‘we’ll have an aim that at the end of the parliament Britain will be building 200,000 homes a year, more than at any time in a generation’.
He said that in 2010 there were a million too few homes in Britain but that the shortfall would rise to 2 million – the equivalent of five cities the size of Birmingham – by 2020 if we carry on as we are.
He warned land-hoarding developers they would have to ‘use the land or lose the land’. That prompted loud applause in the hall but it is already generating ‘Red Ed is back’ headlines outside it.
He promised local communities a new ‘right to grow’ without obstruction from neighbouring authorities. Best of all, he pledged that a Labour government would identify sites for new towns and garden cities.
And, in case anyone had forgotten since Friday night, he promised that ‘I’ll be the prime minister who repeals the bedroom tax’. That was the line that prompted an immediate attack from Conservative Party chairman Grant Shapps about a million spare bedrooms but it is still an important turning of the tide in the political debate on benefits.
But that’s where what Mr Miliband actually said finishes and interpretation begins. Take that 200,000 pledge. For a start, if he really meant Britain that is a very modest pledge indeed: the last time there were more than 200,000 homes built was five years, not a generation, ago. He also seems to have forgotten that Westminster does not control housing policy in Scotland and Wales except indirectly through UK policy on the economy and welfare.
So I’ll assume that he really meant England and that the niceties of devolution did not fit with his theme of ‘that’s how we make Britain better than this’.
The last time there were more than 200,000 completions in England was 1988/89, which does fit with that ‘a generation ago’. It would be almost double the 107,000 in 2012/13 so it’s significant but it still seems some way short of the ‘million homes in the next parliament’ pledge that Labour was rumoured to be considering ahead of the conference. It is also still less than is required to meet demand and it will have taken 13 years to get back to pre-credit crunch levels of building.
As Carl Brown has been reporting, shadow housing minister Jack Dromey revealed more on ‘the right to grow’ at a fringe meeting yesterday while shadow communities secretary Hilary Benn had more details on ‘use it or lose it’ in his speech this morning.
He explained that: ‘When communities have given planning permission they should be able to say to developers, “we have given you the go ahead so please get on and build the homes you said would. And if you don’t then we will charge you, and if you still don’t, we will sell the land on to someone else who will”.’
There was more detail in this morning’s preview of Mr Miliband’s speech in The Guardian. Patrick Wintour reported that the Labour leader would appoint local government finance expert Sir Michael Lyons to lead a commission looking into the obstacles to new building and enable an incoming government to draw up housing reform legislation quickly.
‘The Lyons housing commission will look to see how little-used existing compulsory purchase orders – which require owners to sell – can be strengthened by making them less legalistic and time-consuming.’ he said.
‘It will also examine how to give local authorities proper compulsory purchase powers so that they can buy, assemble and grant planning permission on land that is being hoarded and is holding back development.’
It would also set out detailed plans to establish new towns and garden cities including financial incentives and freedoms for local authorities, such as the ability to retain the increase in business rates for 30 years to invest in infrastructure and services.
That is good news for anyone like me who believes that new towns and compulsory purchase of land are prerequisites for building enough homes. It also sounds like some serious thought has gone into how to get to that 200,000 figure. Better a modest but achievable target than one dreamt up out of thin air.
That said, new towns will take time even if the planning starts on Labour’s first day in office. Given that the most likely location for them will be Conservative-held seats in the south east, they will face some ferocious opposition. How much of a contribution will they really be making after five years?
Labour will also be taking power just as help to buy 2 begins to wind down. If those predicting a house price bubble are correct then it could burst at exactly the wrong time, sending private house building into reverse.
That only emphasises the point that the numbers will only be achieved with a big contribution from the public sector. England has not seen 200,000 a year on a consistent basis since the early 1980s and the end of the council house building programme.
So it was disappointing not to see an explicit commitment from Mr Miliband or (yesterday) Ed Balls to changing the public borrowing rules for council housing. Mr Benn promised in his speech this morning that ‘a Labour government will help councils to build more affordable homes by reforming the housing revenue account’ but hasn’t that already happened? There may be an overwhelming desire in the party to change the rules and build social housing but is the leadership yet ready?
In his speech, Mr Balls said that we need to secure stronger growth and invest for the future: ‘That is why we have consistently said, it is why the IMF has said, bring forward £10 billion of infrastructure investment right now, build 400,000 affordable houses over the next two years, create half a million jobs and thousands of apprenticeships. That is the way to secure an economy that works for all and is built to last.’
However, I read that as him saying what the coalition should do now – not committing himself to it in 2015. Perhaps we’ll hear more later this week but we’ll probably have to await the outcome of his zero-based spending review for the detail.
It’s worth noting that the Liberal Democrats committed themselves to a target of 300,000 homes a year last week. However, after the leadership successfully opposed an amendment on lifting borrowing caps completely, party policy is now merely to allow councils to pool them, so it is far from clear how they would achieve it.
Someone sharper-eyed than me spotted that The Independent’s preview of the speech talked of boosting the number of new homes ‘from 87,000 to 200,000’ by 2020. That 87,000 is the current total of private completions – so would any social housing be on top of that? We don’t currently have enough detail to say but that would be a much bigger deal. Without council housing, England has only achieved 200,000 completions three times since the war: 1964, 1967 and 1968.
That, coincidentally, was the last time that a Labour government came to power with a serious house building target and it went on to demonstrate the risks of getting too obsessed with the numbers game to the exclusion of other considerations. There seems little danger of that with a much more modest target for 2020.
While gaps remain in the detail, and there are still questions to be answered, the very good news is that housing is back as a top priority for Labour.
As everyone focuses on the bedroom tax, there is worrying evidence today of the impact of another part of the benefits system on vulnerable homeless people.
Tougher benefits sanctions were introduced in October 2012 for people on job seeker’s allowance. The period that benefit can be stopped increased from between one and 26 weeks to four weeks and three years. Changes for those on employment support allowance followed in December 2012.
The changes are part of steadily escalating conditionality requirements, including the claimant commitment that will be introduced in 100 job centres a month from October as part of the government’s conviction that ‘looking for work should be a full time job’.
Claimants can be sanctioned for offences including ailing to attend a job interview or to participate in the work programme and refusing an employment or training scheme or leaving one voluntarily or through misconduct. The idea is that the sanctions will change people’s behaviour and make them more likely to find employment.
However, research out today Homeless Link finds that the new regime is disproportionately affecting homeless people: 31 per cent of those on JSA had been sanctioned compared to just 3 per cent of claimants overall.
The report said: ‘While the intention of sanctions is to incentivise claimants into work, our research shows that this is not happening for homeless people. Instead, sanctions are effectively punishing vulnerable people – who are trying to engage with finding work – for making mistakes. This is a high cost to pay for people who are least able to manage.’
The consequences can be extreme. The report found that some sanctioned homeless people are turning to petty crime while some are suffering increased anxiety that worsens existing mental health issues. Others are going into food poverty. When I tweeted about this yesterday, I was also told of young homeless people who have been sanctioned and ended up in hospital being treated for malnutrition.
As one service provider told Homeless Link: ‘We are working with some very vulnerable people at the outset and sanctions take people to another level of vulnerability.’
The housing consequences can be serious too despite the fact that claimants who are sanctioned are meant to continue receiving housing benefit. The report said that in practice homeless claimants do not know to notify the local authority of their circumstances and ended up losing their housing benefit too.
All but one of the 45 service providers who responded to the Homeless Link survey said that homeless people were falling into rent arrears as a result and 23 said that clients had been evicted because of sanctions.
Homelessness organisations face a loss of rental income and of service charge income too, with impacts on organisational income and on the workload of support workers.
If the findings are alarming enough for homeless people suffering from sanctions and the organisations trying to help them, they should also be deeply worrying for the Department for Work and Pensions because they suggest that sanctions are failing in their principal aim of incentivising people into work.
Among the recommendations, the report says that the DWP should take more account of the difficulties faced by people with complex needs and that guidance should make provision for exemptions or special terms for homeless people who need more support. Meanwhile clearer and more consistent information would help prevent people losing housing benefit as well as sanctioned benefits.
For homelessness service providers, the message is to give more encouragement and support to clients to inform Job Centre Plus of their circumstances and to make them aware of their responsibilities.
But is there an unspoken message for housing as a whole too? Beyond the bedroom tax, other less visible cuts in housing benefit continue to rise, especially for younger people, and homelessness is on the increase. And it’s not just cuts in housing benefit that can lead to consequences such as rent arrears and evictions. If and when the universal credit starts, with payment of the housing element direct to the claimant, any cut in any benefit will be mean potential rent arrears. This report highlights yet again the importance of maintaining direct payment for vulnerable claimants and having effective procedures in place.
While universal credit itself may not be seen for a while beyond a limited roll-out in a few job centres at a time, associated elements of the new system including a steadily tighter conditionality regime are still being introduced at the same time. Ten pilots on in-work conditionality, where up to a million working claimants could be sanctioned for not working enough hours, begin next month.
What price homes for Londoners when new developments are marketed first to overseas investors with a promise that there will be ‘no social housing’?
As The Standard reported yesterday, the ‘fully private’ flats at Capital Towers near the Olympic Park go on sale in Malaysia this weekend in what it dubs a ‘no riff raff row’.
That example comes from a report out today by Darren Johnson, a Green Party London Assembly member, who claims that a third of all buyers of new homes are from overseas and that two-thirds go to investors rather than occupiers.
He accuses mayor Boris Johnson of actively encouraging a process that leads to increasing concentration of housing wealth, a severe social housing shortage and the unnecessary demolition of existing stock and a lifetime of insecure renting for most Londoners.
The exact stats on overseas investment are disputed and can depend on whether you are talking about central London or the whole of the capital. However, there seems little doubt that off-plan sales overseas are an increasingly important way of funding new development.
Developers and estate agents argue that it is precisely this investment that makes schemes viable and enables them to fund contributions to affordable housing. In effect, the new build market in London is now a highly successful export market.
However, it’s a funny kind of export that stays in the same place. As Darren Johnson points out, it means that the mayor’s drive to increase supply is simultaneously increasing demand. Many of the new ‘homes’ become buy-to-leave investments or second homes for the international elite.
The report cites other developments including the Belzier building near Old Street, where only a third of properties had residents on the electoral roll and paying council tax, and regeneration schemes in Earl’s Court and Elephant and Castle that will see former council estates demolished and replaced with luxury developments with a minimal ‘affordable’ component.
These are not isolated examples. A year ago this week, in his first act as the new housing minister, Mark Prisk made a fact-finding mission to the Saffron Square development in Croydon and praised the way that the developer had been able to renegotiate the affordable housing requirement to make the scheme viable. Strangely he did not mention the marketing brochure aimed at Far Eastern investors that boasted that ‘the development does not contain ANY rented affordable housing and only includes 36 “shared ownership” units within the scheme’.
Last week I blogged about One Commercial Street, the venue for George Osborne’s speech proclaiming that the economy is ‘turning a corner’. He hammered home that message against the backdrop of a scheme where work stalled in 2008 under Labour and restarted in 2012 under the coalition. What he did not mention was that 40 per cent of the private apartments were sold to Far Eastern investors before being marketed in Britain. And while the scheme does at least include 70 affordable flats they will be accessed via a separate entrance tucked discreetly away around the corner to allow owners and investors ‘the exclusive use of the impressively stylish entrance lobby’.
Earlier this week, an investigation by the Bureau of Investigative Journalism showed how developers are using viability assessments on schemes all over the country to water down their contributions to affordable housing. In London, of course, Boris Johnson faces a legal challenge from eight boroughs over his attempts to force them to accept ‘affordable’ rather than social rents. A report by London Councils last week estimated that the capital needs 800,000 new homes over the next eight years and is currently on course to deliver just 250,000.
The radical alternative approach put forward by Darren Johnson includes controls and taxes on overseas investors and second home owners and a tax on all land values. Councils, housing associations and co-ops would get the money and powers to build genuinely affordable housing for themselves rather than rely on the private market. And private tenants would get stabilising rent controls and new protections.
Policies like that will be anathema to Messrs Osborne, Prisk and (Boris) Johnson. As things stand, though, London seems stuck in a situation where developments are only viable if a proportion of homes are sold for export, affordable housing can only be built by making it unaffordable and the housing shortage keeps getting steadily worse.
See this week’s Inside Housing for a roundtable discussion on the London housing crisis.
Whether it’s the UN, the Lib Dem conference or tribunals in Fife, the cracks in the bedroom ceiling are growing by the day.
As Pete Apps reports for Inside Housing, only two members of the junior coalition party voted against a grassroots motion at the conference in Glasgow yesterday calling for an immediate evaluation of the controversial policy.
The motion condemned the policy that Lib Dem MPs were instructed to call the ‘spare room subsidy’ for ‘discriminating against the most vulnerable in society’. Richard Kemp, former leader of Liverpool Council, called it ‘reprehensible and evil’ and Baroness Shirley Williams, probably the party’s senior figure, called it a ‘big mistake’.
A separate poll of party members by the website Lib Dem Voice found that 53 per cent were opposed. That’s a lower proportion than at the Glasgow conference though the comments suggest that a number of them support the principle of the policy while deploring the implementation. While that might seem like a classic example of Lib Dem middle-of-the-roadery, that perhaps suggests that minds are changed when confronted with the reality that the policy is impossible to implement fairly within any reasonable timescale.
Conservative supporters of the policy will now presumably dismiss this week’s motion of ‘those people from Glasgow’ as easily as they rejected last week’s preliminary findings of ‘that woman from Brazil’ Raquel Rolnik. A motion at the Lib Dem conference is unlikely to worry IDS too much but the pressure is still growing at a political level.
Attention now turns to next week’s Labour conference in Brighton. Labour has been performing contortions over the issue for several weeks. Some reports confidently predict that Ed Miliband will commit to scrapping the bedroom tax in his conference speech but in others party sources are playing down a suggestion from Scottish welfare spokesperson Jackie Baillie over the weekend that we can ‘expect an announcement relatively soon’.
Away from politics, the cracks are now appearing in the legal system. Tenants have now been successful in four out of five First Tier Tribunal cases in Fife. These cover cases where rooms were held to be too small to count as a bedroom and cases where there is a ‘well established alternative’ use which means they are not a bedroom. Joe Halewood has chronicled the detail and the implications extensively on his blog and in his latest post argues that the decisions could be even better news for landlords and councils than for tenants. Paul Lewis also has more details on his blog.
Rulings by First Tier Tribunals are not legally binding on those elsewhere. However, they seem consistent with the QC’s opinion obtained by Glasgow Advice Agency that I blogged about in February. As Giles Peaker comments at Nearly Legal, it’s hard to see how other tribunals could not take it on themselves ‘to decide what isn’t a bedroom, given the absence of any definition in law’. He also highlights the ‘high-risk problems’ facing the DWP as it considers fresh guidance in the light of the rulings.
Away from politics and the law, the effects of the bedroom tax continue to play out in unpredictable ways. In the last few days, the Daily Record has reported on tenants in Glasgow banned from downsizing until they pay off their arrears and The Sentinel has covered rising voids in Stoke as tenants are forced into smaller and more expensive private rented homes As columns like this one by Simon Faulkner in the Grimsby Telegraph and this brilliant one by Ian Bell in The Herald show, the implications and contradictions of the policy are now well understood in the mainstream media.
If the government thought that the furore over the bedroom tax would start to die down once it was implemented in April, or after a quiet summer, it will clearly have to think again. It will take more than a fresh coat of paint or a new strip of wallpaper to cover up those cracks in the bedroom ceiling.
Silly? Naïve? Bonkers? Proposals by the RICS for managing house price inflation are getting about as warm a welcome in the property industry as the UN got at Conservative HQ.
Some of the reactions are just as self-interested too since an end to house price volatility would be good news for people who want to buy but very bad news for some of those queuing up to say the whole idea is crazy. While some critics point with good reason to the practical difficulties of implementing the idea, others seem personally offended by the very idea of putting a stop to the house price gravy train.
The proposal follows a wider-ranging report on housing in June by an independent commission set up by the RICS and chaired by incoming president Michael Newey, the chief executive of Broadland Housing Group. That concluded that: ‘High house prices, complemented with high levels of housing unaffordability, are the greatest signs of market failure.’.
The proposal is that house price inflation of 5 per cent should trigger action by the Bank of England, which currently has no explicit policy on asset prices and house prices to go with its target on inflation. Rather than increase interest rates, it should use macroprudential tools such as caps on the term of a mortgage, loan to value or loan to income caps and changing banks’ capital requirements. These would act like ‘speed bumps’ for the market and also help prevent inflationary expectations.
This is not the first time that ideas like this have been put forward. A range of options were put forward in early drafts of the Mortgage Market Review before it was watered down. Mark Carney told MPs yesterday that the Bank would consider loan to value ratios and ‘more intensive supervision’ of the banks to rein in mortgage lending. And caps on the term of a mortgage were used in Canada when he ran the central bank there.
Ken Gibb has an excellent discussion of the policy options and difficulties on his blog, where he makes the case for going further with real house price stability, matching general price inflation over the longer term.
The RICS stresses that it is not wedded the 5 per cent limit but chose it to reflect 3 per cent average annual wage growth seen since 1998 plus a 2 per cent premium to reflect the impact of the shortage of new supply.
To give some idea of the potential gains from that I took a quick look at the Halifax house price index. The average UK house price was £72,000 in 1998. If it had risen by 5 per cent a year, it would now be around £142,000. Instead the average is now £167,000 and that is after a substantial correction following the credit crunch. Homes would still be expensive but still more within reach.
But my choice of the Halifax index and 1998 reveals some of the practical difficulties with the idea. A range of other indices and starting points could be used with very different results.
Above all, there is that UK average. What is the use of a 5 per cent national cap if prices are rising 10 per cent a year in London and standing still elsewhere? The RICS acknowledges that regional caps may be needed but there would be practical difficulties with them too.
On the implementation side, tackling house price inflation through action on mortgages would do nothing to deal with cash buyers or buyers from overseas, who account for sizeable proportions of the market. It would not necessarily do anything about buy to let, which is not financed through conventional mortgages. And the example of Canada may not be quite such a good one to cite given that its house prices seem even more over-valued than ours.
Those are formidable difficulties, as the RICS acknowledges, but does that mean it is not worth discussing the plan, as the critics imply? Those who argue that this would be interfering in the free market have to face the fact that it has not worked out so well so far, that it is currently operating in the entirely artificial conditions of 0.5 per cent base rates, and that the government is already interfering in the opposite direction through Funding for Lending and Help to Buy.
Those who argue that the whole idea is crazy when the real issue is supply have an obvious point that was covered in some detail in the first RICS report. However, as I argued on my other blog yesterday, there is no immediate prospect within the current housebuilding system of supply increasing to the levels needed. A report out today from London Councils argues that 809,000 new homes will be needed in the capital between now and 2021 to meet new demand and the backlog of housing need. On current projections we will only build 250,000. New supply is vital but concentrating on supply alone risks exacerbating the problems we already face. It has to make sense to look at demand too and to find ways to stop house prices escalating ever further out of reach, especially in London.
Finally, if you haven’t already, I urge you to brighten up your day by reading Jeremy Warner’s column on the RICS in the Telegraph. He makes the supply argument very powerfully and argues that ‘as silly suggestions go, they don’t come much sillier than the RICS’s proposed 5 per cent house price gap’. This being the Telegraph, he also has to have a go at planning minister Nick Boles for his latest ‘war on the countryside’ speech (this time an alleged all-out offensive on our national parks).
Then he brings the silliness full circle by quoting an exchange on twitter in which Boles claims that he only does it to wind up Simon Jenkins, the nimby-in-chief at the National Trust. Except for one thing: all along he had been speaking to the excellent (but not entirely genuine) @GeneralBoles.
Just when you were beginning to miss him, Grant Shapps is back with a bang and a complaint to the United Nations about that ‘woman from Brazil’.
The Conservative Party chairman brought an international twist to his old housing stomping ground in a Today programme interview that pitted him against Raquel Rolnik, the UN’s special rapporteur on adequate housing. Readers will need no reminding that in a preliminary statement following a two-week visit to the UK she is calling for the bedroom tax to be suspended immediately and fully re-evaluated.
Shapps described it as ‘an absolute disgrace’ and accused Rolnik of having an ‘agenda’. He went on:
‘It is completely wrong and an abuse of the process for somebody to come over, to fail to meet with government ministers, to fail to meet with the department responsible, to produce a press release two weeks after coming, even though the report is not due out until next spring, and even to fail to refer to the policy properly throughout the report. That is why I am writing to the secretary general today to ask for an apology and an investigation as to how this came about.’
Earlier, a DWP spokesperson had joined in the attack on the UN envoy with a statement that: ‘It is surprising to see these conclusions being drawn from anecdotal evidence and conversations after a handful of meetings, instead of actual hard research and data.’ Coming from the department headed by Iain ‘I believe I am right’ Duncan Smith that was quite a claim.
At a press conference this morning, Rolnik said it was ‘absolutely not true she had come with an agenda and that ‘this was an official visit – I was invited by the UK government and it was organized by the UK government’. It’s since emerged that Rolnik did meet Shapps’s former boss, communities secretary Eric Pickles, as well as officials from the DWP and three other UK government departments, the Welsh, Scottish and Northern Irish governments, plus numerous other government agencies, local authorities, housing associations and charities, lawyers and academics. For a flavour of some of the discussion, see Ken Gibb’s blog here and for more of the context see Grainia Long’s blog for Inside Housing here.
Rolnik’s full statement is a fascinating read that reveals the high opinion the rest of the world has about housing in the UK:
‘The United Kingdom has much to be proud of in the provision of affordable housing. It has had a history of ensuring that low-income households are not obliged to cope with insecure tenure and poor housing conditions, and can be well-housed. Some of the policies and practices that have played a role in providing social housing include the construction and further regeneration of a large social housing stock as well as a welfare system which covers housing as part of a social safety net. These can serve as an inspiration to other parts of the world.
She was assessing the UK’s performance under international human rights law and specifically the International Covenant on Economic, Cultural and Social Rights. The UK ratified this in 1976 and accepted obligations ‘to take steps to ensure and sustain the progressive realization of the right to adequate housing, making use of the maximum of its available resources’. In addition, governments cannot ‘move backward without offering a strict, evidence-based justification of the need to take such measures and without having weighted various alternatives’ and must protect the most vulnerable members of society. As such that would appear to make the inadequacies of Brazil’s record on housing cited by Shapps irrelevant in a UK or UN context.
In a statement covering a whole range of housing issues and government policies, Rolnik found ‘signs of retrogression in the enjoyment of the right to adequate housing’ and says ‘it is not clear that every effort has been made to protect the most vulnerable’.
She found ‘the so-called bedroom tax, or the spare bedroom under-occupancy penalty’ to be ‘especially worrisome’:
‘In only a few months of its implementation the serious impacts on very vulnerable people have already been felt and the fear of future impacts are a source of great stress and anxiety. Of the many testimonies I have heard, let me say that I have been deeply touched by persons with physical and mental disabilities who have felt targeted instead of protected; of the grandmothers who are carers of their children and grandchildren but are now feeling they are forced to move away from their life-long homes due to a spare bedroom or to run the risk of facing arrears; of the single parents who will not have space for their children when they come to visit; of the many people who are increasingly having to choose between food and paying the penalty. Those who are impacted by this policy were not necessarily the most vulnerable a few months ago, but they were on the margins, facing fragility and housing stress, with little extra income to respond to this situation and already barely coping with their expenses.’
None of that will be news to anyone with a passing knowledge of the issues but such a verdict from a UN official, let alone one from Brazil, was bound to be a red rag to the Conservative half of the coalition. As I understand it, the UN Covenant is not enforceable in UK law but her report will undoubtedly be drawn to the attention of judges considering bedroom tax cases and it will only add to Tory suspicion of anything that includes those pesky ‘human rights’
However, before Shapps seals the envelope on his letter of complaint to UN secretary general Ban Ki-Moon he might want to read Rolnik’s statement in full. She has two other recommendations apart from the one about suspending the bedroom tax.
First, ‘I would recommend that the government puts in place a system of regulation for the private rent sector, including clear criteria about affordability, access to information and security of tenure’. Which housing minister was it, I wonder, who rejected any idea of PRS regulation as ‘red tape’?
Second, ‘I would encourage a renewal of the government’s commitment to significantly increasing the social housing stock and a more balanced public funding for the stimulation of supply of social and affordable housing which responds to the needs.’ Shapps had already protested about his ‘170,000 affordable homes’ in the Today interview but it sounds very much like she was familiar with the nuances behind that number.
Housing and philanthropy seemed to go together naturally in the 19th century. Can they do it again in the 21st?
An interesting report out today from the Smith Institute, New Philanthropy Institute and Peabody Trust sets out to answer that question and in the process asks some more of its own about what the relationship should be between the state, housing providers and the private sector.
Peabody is of course one of the prime examples of Victorian philanthropy. American banker George Peabody donated a total of £500,000 (the equivalent of £40 million now) to ‘ameliorate the condition of the poor and needy’ in London. Thanks to careful management of its money, requiring a return of 3 per cent on its capital, it developed into an organisation with 20,000 properties housing 55,000 people.
Yet, as I blogged in celebration of Peabody’s 150th anniversary last year, that begs the question of why there are no equivalents today. Inequality is back to levels last seen in the 1920s and the super-rich grow ever more super and richer. So why is there no contemporary equivalent of Peabody or William Sutton or Octavia Hill? Why is there no Richard Branson Trust or Fred Goodwin Model Dwellings Society? The last major housing development funded by a philanthropist was Silver Edge, a model village in Essex founded by window magnate Francis Crittall – and that was in 1925.
The obvious answer – but not the only one - is that the state took over. The philanthropists were squeezed out as council housing took off in the 20th century. Things may be different now, with new provision dominated by housing associations as social businesses, but philanthropists are still reluctant to fund things they consider government’s responsibility. It’s certainly not hard to imagine a future government using any charitable windfall as an excuse to cut public grant still further.
New Philanthropy Capital also argues that funders are nervous to take on housing because they see the issue as too big and the cost of making a difference as prohibitively high. Homes and land simply cost too much.
From a housing point of view this is not necessarily a bad thing. Peter Malpass argues that Victorian philanthropy never succeeded in generating enough money to achieve decent standards at affordable rents. ‘The question asked in this pamphlet is: “Can we rebuild the relationship between philanthropy and affordable housing?” And my answer is “I sincerely hope not”!’ writes Lord Best, chair of Hanover Housing. He argues that housing traded the old relationship for one with the state. That had its downsides but ‘it has led to a massive increase in the size and importance of non-profit housing providers’.
However, he says philanthropy can still have a role, perhaps in funding new, smaller specialist or co-operative housing bodies or in ‘mission-related investment’ in particular projects.
David Orr of the National Housing Federation argues that housing associations have transformed the philanthropy of the past into a new kind of ‘entrepreneurial philanthropy’ with commercial activities supporting their core social purpose. However, he still sees space for philanthropists in backing supported housing and perhaps in donating land and room for new approaches such as crowdfunding and social impact bonds and for philanthropy targeted at schemes where it can have the most impact.
Examples such as the Real Lettings Property Fund, set up by homelessness charity Broadway with funding from many different foundations, and Golden Lane Housing, set up by Mencap with the first retail bond issued by a national charity, show what can be achieved through social investment.
Meanwhile five charitable investors find the Community Land Trust pilot fund operated by the Charities Aid Foundation’s Venturesome fund. The idea is to support the CLT model by providing access to finance, building 150 affordable homes in the process and demonstrating to commercial funds that the idea can work.
So if we seem unlikely to return to the days of the Victorian philanthropists any time soon (or hope that we’re not) there still seems plenty of room for new relationships between philanthropy and housing to develop. The report argues that the NHF and and New Philanthropy Capital could work on a memorandum of understanding and an organising framework for a new partnership between housing and philanthropy.
But you don’t have to go back nearly as far as George Peabody to find examples of what can happen with a little money and determination. This year sees the 50th anniversary of two organisations that started out with one house apiece and grew into two of our biggest housing associations: London & Quadrant and Notting Hill Housing. For good measure, Rev Bruce Kenrick, who is said to have started Notting Hill with a soiled 10s (50p) note, went on to found Shelter three years later. Not philanthropy in its traditional Victorian sense, perhaps, but examples of people getting togther to solve problems in the spirit of their times.
Yes to Homes is a campaign message that seems to be gaining support but it also begs some obvious questions about what comes next.
As David Orr explained on his blog, the National Housing Federation wanted last week to be a grassroots campaign to mobilise local support and sees it as ‘an opportunity to turn up the volume and ensure our politicians hear the clamour’. The simple message to local councillors of all parties is that ‘your vote and their seats depend on them saying Yes to Homes’, which has to be a good move given that the voices of objectors to new housing are too often the only ones they hear.
At a national level the signs are promising too. Planning minister Nick Boles, shadow housing minister Jack Dromey and Lib Dem president Tim Farron all said Yes to Homes on behalf of their parties in blogs for the campaign website.
That is perhaps reflecting housing’s new importance in the opinion polls. Ben Marshall of Ipsos MORI writes in a guest post for Shelter’s policy blog that housing is now rated as an important issue by 14 per cent of voters. That may not sound like much but that is the highest rating since 2008 and it puts housing only just behind education and law and order and ahead of pensions and benefits and inflation and prices.
Meanwhile the case for housing supply is being backed not just by the usual suspects in the left and centre but also by a range of different groups on the right. In just the latest example, the Adam Smith Institute, the free market thinktank, attacked Help to Buy as a demand-side intervention in a supply-side problem. So far, so good but the question is what comes next. As I blogged last month, Eric Pickles and other ministers are very quick to choose the most flattering statistics on the supply of new homes while conveniently ignoring the fact that completions are still down on a year ago and even on the total when the coalition took power.
Recent results and trading statements by major housebuilders do suggest that they are at last increasing production rather than simply rebuilding their profit margins. The Home Builders Federation unsurprisingly takes a much rosier view of Help to Buy and promised housing minister Mark Prisk last week that ‘we will build more’.
However, we are still only building half the homes we need and, as the DCLG acknowledges, even if housebuilders increase their output by 4.5 per cent a year it will take until 2022 to get back to 2007 levels. Given past history that is an optimistic assumption and in the meantime we will have fallen another 500,000 homes behind the level needed to meet demand.
In that context Yes to Homes has to be about investment as well as planning. As David Orr says in his blog, the transport lobby has been far more successful than housing in making its case: ‘Politicians pay attention to what their electors say – and they don’t hear enough of us telling them they have to say yes to building more homes.’
And that in turn begs the question of what kind of homes we are saying yes to. If you read their Yes to Homes blogs carefully it becomes clear that the three party representatives answer that question in completely different ways.
For Nick Boles, it is all about freeing up the planning system and extending the home owning democracy. ‘The desire to provide a secure home for yourself and your family is one of the most fundamental human urges,’ he says. ‘People love their homes, take pride in them, invest in them. If you know that you are likely to stay in your home for some time, you are more likely to meet your neighbours, support local community groups and get involved in local schools.’ Not much room for that kind of involvement if you have an insecure private let or one of the coalition’s new fixed-term social tenancies.
For Jack Dromey ‘putting housing centre stage’ is about building more homes and creating a secure and affordable private rented sector. And he repeats a line quoted by shadow Treasury ministers Ed Balls and Rachel Reeves last week: if the £10 billion boost to infrastructure recommended by the IMF was invested in housing, the government could build 400,000 affordable homes.
For Tim Farron, ‘the housing debate isn’t about buildings, it’s about people’ and ‘too much emphasis is put on the concept that building affordable homes is like a mathematical formula dictated by central government, when it shouldn’t be’. There are things national government can do, such as a plan to build 25,000 new council houses, but the housing crisis has to be tackled locally with councillors working with local people.
Those three very different ways of saying ‘Yes to Homes’ confirm the obvious point that the next stage in the campaign could be rather more difficult. As Ben Marshall points out:
‘The challenge remains to frame and articulate housing as the kind of mass issue that gets high profile coverage in an election campaign. This is likely to involve engaging the electorally more powerful owner and mortgagee groups (as well as mobilising renters) and using a local slant in the style of “Bank of Mum and Dad” and “Yes to Homes”. Housing’s stock does appear to be on the rise. Current political, media and public interest is an opportunity and something to build on, and it will be interesting to see what is made of housing at the upcoming party conferences.’
However, as we gear up for the conference season starting with the Lib Dems next week, perhaps the most significant thing in the three blogs is the way that Boles makes a party political case for more homes:
‘The Conservative Party wins elections when it backs people’s ambitions to create a good life for themselves and their families. It loses them when it defends the privileges of a comfortable elite. As the next election approaches, David Cameron is clear that the Conservative Party should be saying Yes to Homes.’
Considering that ‘comfortable elite’ include many Conservative voters, that really is quite a statement even if more nimby-friendly voices within the party balance out Boles. There is still a long way to go but it is clearly no longer enough for politicians to say ‘next question’ when asked to say ‘Yes to Homes’.
Take your pick of today’s official criticisms of the universal credit. It was over-ambitious and high risk, it had no clear plan and it has offered poor value for money.
Has the National Audit Office (NA0) ever delivered a more damning verdict on a key government policy than the one it has just published?
Think of just about every rumour you’ve heard about the IT system, every assumption about the chaos behind the scenes and every time you reacted sceptically to DWP assurances that the latest changes to the timetable were all part of the original plan, and you will find them all in the report published today.
What you won’t find is anything on the issues of most pressing concern to housing organisations such as the introduction of direct payment to tenants and the measures the DWP is introducing to minimise the impact on landlords’ finances. But that’s only because there are so many problems with the underlying systems that it’s still unclear when that will happen on any significant scale.
Based on this report, further delays look inevitable despite those familiar assurances from the DWP that it is committed to delivering on time and on budget. The universal credit is still adjusting to the ‘reset’ insisted on by the Cabinet Office between February and May and Howard Shiplee, the fifth ‘senior responsible owner’ in charge of the project in a year, completes his 100-day planning period at the end of this month. The DWP will not have approval for further spending until after November, when it asks the Treasury to approve a new business case.
According to the original plan the new system was meant to be introduced for all new out-of-work claims from October. They would be followed by all new in-work claims from April 2014 and all migrating benefit claims by October 2017. Instead next month will merely see another six pathfinder sites added to the four already running on a very limited basis handling the simplest claims.
The NAO says ‘it is likely that universal credit will not be able to take all new claims and provide the full planned service until at least December 2014’. The reset team considered scenarios including ‘complete migration later than October 2017’ and the senior responsible owner is currently ‘looking at different options for timing of full roll-out’. The NAO comments that ‘to keep to the 2017 completion date, the department would have to migrate a large volume of claimants within a short time frame’, which hardly sounds like a vote of confidence.
Many of the problems go back right to the start of the project when the DWP adopted that ambitious timetable. The NAO says that: ‘The department was unable to explain to us how it originally decided on October 2013 or how it evaluated the feasibility of roll-out by this basis. The ambitious timetable created pressure on the department to act quickly and meant that it needed to manage progress tightly.’
It does not comment further but one clue is that the traditional ‘Waterfall’ approach to programme management, where IT projects are developed in sequential steps, would have been much slower and only allowed roll-out in April 2015. Is it too much to imagine that a month before the general election was seen as bad timing?
The DWP instead used a different approach where processes and systems are developed at the same time as defining policy requirements. This ‘Agile’ approach seems to be a perfectly respectable way of running IT projects but the DWP was unfamiliar with the methodology and no government project of this size had used it before.
By January 2012 the DWP was introducing Agile 2.0 in an attempt to integrate the two approaches. The result seems to be a complete mess where short-term systems were developed separately and with limited functionality for the pathfinders and the DWP ‘does not yet know the extent to which its new IT systems will support national roll-out’.
The current system cannot identify potentially fraudulent claims and without that in place the department will be unable to deliver the savings it promised. Under the pathfinder system, claimants cannot register changes in circumstances online and the work has to be done manually instead, adding to costs.
In May, the DWP identified a need to write off £34 million (17 per cent) of its new IT assets but the waste could go much further than that. The reports also says that the DWP currently estimates that its IT assets are worth just 53 per cent (£162 million) of the £303 million it has invested in universal credit systems so far and remedial work could increase the budget still further.
The reset team recommended that the DWP should replace ‘digital by default’, a key principle of the universal credit, with ‘digital as appropriate’. This is something the DWP consistently denied at the time but the NAO says it is now reviewing which activities should be conducted online.
Things might have been better with adequate management systems in place. Instead the opposite happened, right down to invoices being paid without checks on whether the services had been delivered. The report says that:
‘Given the tight timetable, unfamiliar programme management approach and lack of a detailed operating model, it was critical that the department should have good progress information and effective controls. In practice the department did not have any adequate measures of progress.’
The NAO identifies weaknesses including:
- Lack of transparency and challenge. There was a ‘fortress mentality’ in the programme team and a ‘good news’ reporting culture that ‘limited open discussion of risks’. (This is a criticism that might just as easily be made of the whole DWP and its repeated claims that everything is on track.)
- Inadequate financial control including poorly managed and documented financial governance and insufficient review of contractor performance before making payment.
- Ineffective departmental oversight. The DWP never had a detailed plan or management information and so could never measure progress effectively.
- Failure to address recommendations from assurance reviews.
The report concludes that ‘at this early stage of the universal credit programme the department has not achieved value for money’. It is still possible that it may achieve its aims with ‘considerable benefits for society’ but ‘to do so the department will need to learn from its early mistakes’.
The NAO says the DWP must produce a realistic plan with clear programme objectives linked to policy design and service requirements. It should use a management approach that allows policy experts, operational teams and systems developers to work together. And it should establish effective governance processes and structure and tighten financial management.
All of which sound like fairly basic things that should have been in place right from the beginning rather than be recommended a month before the original roll-out date.
Much now depends on Howard Shiplee, the former construction director of the 2012 Olympics who was brought in to lead the project at the end of March. In a piece for the Telegraph on Monday he candidly admitted the ‘missteps’ and ‘bad luck’ that have dogged progress so far. If he can put things right he will deserve a medal all to himself.
However, the points raised by the NAO are all to do with the implementation of the universal credit rather than how it will operate once it is up and running. I’ve blogged before many times about the serious concerns raised in many different quarters about what happens once it is up and running. These cover not just the implications of digital by default and direct payment but monthly payment and payment to a single member of the household and the awful precedent of the chaos that followed major administrative changes to housing benefit in the 1980s.
All of that is yet to come.
Shared ownership seems an obvious solution to the housing problems of people on low and middle incomes – so why does it remain on the margins?
A report out this week from Shelter looks at perceptions of and problems with the part rent-part buy tenure and ways that it could be reformed to take it into the mainstream.
In the process, it makes a pretty convincing case that the piecemeal, alphabet soup of government ownership schemes has done little to make housing more affordable for the squeezed middle and more to create confusion about the options available. In particular, it shows how shared ownership could make more homes in more places more affordable for more people than either version of Help to Buy. The report finds that almost eight out of 10 low to middle income families could not afford a family home with a 95 per cent Help to Buy mortgage.
So what are the problems with shared ownership? According to Shelter, one is scale: there are now 174,000 shared owners in England, just 0.8 per cent of all households, and not many of them have moved up to full ownership. And every time the government creates a new scheme, the eligibility rules change, creating confusion for prospective buyers and extra work for lenders.
Another is the way the market works. Buying and selling a shared ownership home is much more complicated, and finding information and getting a mortgage can be harder, than for conventional ownership.
A third is that because shared ownership focuses on new build it brings with it many of the same problems: the 10 per cent new build premium means you get less for your money and you can quickly go into negative equity; and new build economics can put a squeeze on space.
The report argues that the housing options for low to middle income families will not improve on their own and that the market will not fix itself. Unless the government acts, more and more of them will be forced into insecure private rented accommodation. Instead:
‘A bigger, better shared ownership market could provide these families with the balance of affordability, flexibility and stability that they need in their home. But it cannot be done by halves. A functional middle market needs scale to work like a proper market and move from being a rationed, niche part of housing in England. Shared ownership needs a bold, long-term commitment from policy-markets to make this happen.’
The scale could come from the case made by business secretary Vince Cable for one per cent of GDP to be spent on direct capital investment in house building. A £12 billion budget would be enough for 600,000 homes at £20,000 per home, a grant rate that Shelter argues would give providers the flexibility to offer lower initial shares for sale (as low as 12 per cent).
Much of the confusion could be swept away by having one scheme with clear eligibility rules and a buying and selling process that emulates the mainstream market more closely. Increasing the size of the sector could enable homes to be sold back into a larger secondary market that is less restricted than the current one.
Problems with new build could be tackled by making criteria for setting headline values and a requirement to meet sensible space standards a condition of getting grant.
The report has much to commend it but, as the title (Towards a mainstream shared ownership market) implies, it is just a beginning.
Media reports like this of shared owners’ problems with rising rents, repair bills and service charges and complaints about inflexible contract terms suggest that providers have some way to go with improving the consumer experience. Are those issues that can be ironed out or do they suggest a more fundamental problem?
The legal position of shared owners is another major concern. Do they have the best or the worst of both worlds? In particular, if the provider takes out a possession action for rent arrears, what happens to the tenant/owner’s share in the property? In the best (only?) known case so far (Richardson v Midland Heart), the tenant/owner faced losing all of her original capital outlay of almost £30,000 over £3,000 of rent arrears incurred when she fled her home in fear of violence and her rent was no longer covered by housing benefit. It was apparently only because the housing association offered an ex gratia payment that she got anything back – and even then nowhere near her capital stake in the property at the time. The message to shared owners seems to be that they risk losing everything if they fall into rent arrears but some of the details remain unclear and the case does not seem to have gone to appeal. Clarification of the legal position is surely needed before a major programme of investment. See here and here for more on the case.
A report last year by the Cambridge Centre for Housing and Planning Research for Thames Valley Housing Association and the NHF highlighted problems with the secondhand market for shared ownership homes. It called for action to improve mobility, encourage staircasing and improve the sales process.
And then there is the money. Despite that quote from Vince Cable, the case for massive investment will seem unconvincing to a Treasury that has found £15.5 billion for Help to Buy equity loans and mortgage guarantees without it counting as public borrowing. The investment that is being made by the coalition is going into Affordable Rent at a similar £20,000 per home grant rate.
Finally, even if a future Treasury accepted the case for investment, would it be at a scale big enough to change the market given the desperate need for homes to rent for people on even lower incomes? As the report accepts, both are needed.
But the alternative is to continue with piecemeal ownership schemes that fail to address the housing shortage or improve the options for people on low to middle incomes. The report offers a big housing idea that could have wide political appeal and appears to go with the grain of the housing aspirations of people on low and middle incomes. Staircasing receipts offer a future income stream to providers. And for those politicians prepared to look beyond the next election the report has a long-term warning about the costs of doing nothing and letting the private rented sector (or Affordable Rent) take even more of the strain.
As I’ve blogged before, the implication of falling ownership and rising private renting is a burgeoning housing benefit bill once renters reach retirement. The report estimates that if just half of today’s Generation Rent never buy a home the housing benefit bill for them alone will be £16 billion a year. Shared ownership could halve rents – and that bill - in retirement and be a key way of shifting subsidy back from benefits to bricks and mortar.
Finally I’ve found somebody who thinks that Help to Buy 2 is a good idea: the private equity owners of Foxtons.
I’m obviously exaggerating for effect here (I was just reminded of Simon Jenkins too for starters) but the London estate agent is famous for three things: its flashy sponsored Mini Coopers; the pushiness of its staff; and the timing of its sale in 2007. The founder of the company sold out to private equity firm BC Partners for £360 million just months before house prices and transactions crashed.
After a rare apology from BC Partners to its investors, and a rocky road to recovery, Foxtons is set to return to the stock market next month with a valuation of up to £500 million. That spectacular turnaround may have a bit to do with some canny financial engineering but, as the Financial Times reports this morning, it has far more to do with the fact that its timing could hardly be better.
London house prices are up 8 per cent in the last year and significantly above their peak. And, as the FT comments:
‘Moreover, the government has introduced a multitude of stimulus measures to underpin a housing market recovery. In doing so, it has reignited investor appetite for the span of businesses with exposure to property. Foxtons’ IPO follows that of rival estate agent Countrywide and housebuilder Crest Nicholson – both of which were over subscribed.’
But what is good news for those firms and their investors in particular and for estate agents and housebuilders in general offers more mixed prospects for the people that are supposedly being helped to buy.
A survey out today from the Intermediary Mortgage Lenders Association (IMLA) finds that lenders and brokers think first-time buyers will be the biggest beneficiaries of Help to Buy but that artificially inflated house prices are the biggest threats to its success.
Lenders already expect a 2.7 per cent increase this year and if that rate was maintained for the duration of Help to Buy, house prices would rise 11 per cent to pass their 2007 peak by the end of 2016.
That is a national average of course and first-time buyers in Foxtons’ London heartlands have seen that happen already. However, it could be just the beginning: lenders are worried that the launch of Help to Buy 2 (mortgage guarantees) in January 2014 could send prices even higher.
As Peter Williams, executive director of IMLA points out: ‘There is a clear consensus that first-time buyers stand to benefit most from the second part of Help to Buy. But if house prices continue to rise for the duration of the scheme, then in essence we will be giving with one hand and taking away with the other.’
Help to Buy 2 is available to everyone, not just first-time buyers, and is designed to boost mortgage lending at higher loan to values. In the example quoted in the Treasury’s scheme outline, it would enable someone to buy a £100,000 home with a deposit of £5,000 or 5 per cent. The guarantee bridges the gap between that and the 20 per cent deposit that lenders have typically demanded since the credit crunch.
Lots of the detail remains to be settled in the next few months ahead of the launch. However, the IMLA survey points to the danger that rising house prices will simply wipe out the value of the guarantee and make that deposit harder to save. At best that will benefit some first-timers while leaving others no better off than before; at worst it will trigger a bust to go with the boom that will hurt all of them.
And in the meantime they will be able to look at the homes priced out of their reach in the window of one of 50 new branches owned by Foxtons.
You know the formula by now: take a provocative premise, add three claimants selected to provoke different reactions, stir in the reaction on Twitter, then stand back and watch the viewing figures mount up.
As with How to Get a Council House, Benefits Britain 1949 suffers from all the faults that are seemingly hard-wired into Channel 4 reality shows. The opening episodes showed them both at their worst (see me on How to Get a Council House and Frances Ryan on Benefits Britain 1949) but with time they evolved into something that went beyond the format and the premise.
I’ve just caught up with the second episode of Benefits Britain 1949 and if you haven’t seen it I recommend a viewing in conjunction with the third and final episode of How to Get a Council Housebecause they neatly bookend the whole debate about social housing and its place in the welfare state.
I use the term ‘welfare state’ advisedly for two reasons: first, its supposed inventor William Beveridge hated the term because of its ‘Santa Claus state’ connotations; second, it seems that whenever TV (here or by John Humphrys) uses the term it comes complete with the baggage of ‘scrounger’ connotations. The language used matters.
The premise of Benefits Britain 1949 is that present day claimants agree to live under the rules that were applied 64 years ago, The results (and especially the benefit levels uprated for inflation) usually come as a shock.
I’m not sure how accurate the results are and would be interested to see the calculations behind the uprating and some of the more questionable assertions such as ‘housing single mothers costs £4 billion a year’. However, I think I spotted two or maybe three definite mistakes in the programme: first, I’d be surprised if there were many integrated ‘labour and welfare’ offices in 1949; second, even if there were they would have said ‘social security’ not ‘welfare’; and third they would definitely not have covered housing allocations made by local councils. Making ‘housing’ part of ‘welfare’ may seem like TV shorthand but it reveals some dangerous underlying assumptions.
That said, the programme revealed some fascinating insights into the post-war system and some about the 2013 version too. As I’ve blogged before, the comprehensive system of social insurance devised by Beveridge and implemented with some changes by the Labour government had many virtues but some blindspots too. It struggled to cope with the needs of married women, single parents and the civilian disabled and never came to grips with how to pay for housing costs. Most importantly, Beveridge assumed that there would be full employment and council housing for all.
That was all too apparent in the treatment of Nichola, a single parent with two young children who was top of the priority list in 2013 but as an unmarried mother was not entitled to anything except discretionary or charitable assistance in 1949. Or Matson, a political refugee from Zimbabwe, was only entitled to minimal help in 1949 and was turned away by the racist landlord of a hostel, but then found happiness through work.
But there was more surprising news for Matt and Heidi and their kids. On the surface they seemed handpicked to play the undeserving claimants: he hadn’t worked for six years and their house and garden were a tip. In the Britain of 1949 that prompted a visit from the ‘rehabilitation officer’ to teach them how to keep their home clean and tidy and avoid losing their tenancy.
These are the kind of stories recalling a more moral and self-reliant welfare state that have prompted approving reviews in papers like the Telegraph because they offer implicit support for Iain Duncan Smith’s reforms. However, poverty and need are never quite so simple or straightforward, and neither are benefit systems designed to alleviate it. Paternalism has its upsides and its downsides and the programme showed both.
That was demonstrated most clearly in the story of Nichola. In 1949, she would have received temporary assistance or perhaps been sent to a hostel for unmarried mothers but she would have faced a real risk of having her children taken into care because she could not house them. The key moment in the programme came when the former benefits officer applying the rules from 1949, Anne Townsend, grudgingly revealed that where there was a genuine bond between mother and children, she could use her discretion to find charitable help. As she left, her austere mask slipped and she started crying. It turned out that her own mother had experienced many of the same problems. By the end of the programme, it turned out that 1949 had one advantage over 2013 for Nichola: wartime assistance with childcare costs was still in operation then and she could afford to work.
Nichola’s story had real echoes for me of the experience of the family at the centre of Ken Loach’s iconic Cathy Come Home. That starts when Reg is injured and loses his job, and he and Cathy are evicted from their home. Let down by an inadequate system of discretionary help, they face up to a life of poverty and homelessness and after living in a succession of hostels, squats and empty houses, their children are taken into care. The outcry that prompted and the campaigning of Shelter led eventually to the landmark legislation of 1977 that gave local authorities an obligation to house homeless families.
The final episode of How to Get a Council House looked on what happens to homeless families now, focusing on Tower Hamlets. An uninformed viewer would have come away puzzled at the title of the programme since it became clear that it should really have been called How to Get a Private Rented Flat at an Extortionate Rent (If You’re Lucky). What had changed since 1949 is not just the shift from mass council housing to the dire shortage revealed in the first episode but also the coalition’s changes to allow the discharge of the homelessness duty into the private rented sector.
The programme had the usual Channel 4 mix of ‘deserving’ (woman fleeing domestic violence), heartbreaking (father caring for son with spina bifida) and ‘undeserving’ (alcoholic who broke the hostel rules) cases. As with previous episodes, it showed housing staff doing a professional job against the odds.
I still have severe reservations about the way that complex issues are given the Channel 4 treatment and, as Abigail Scott-Paul of the Joseph Rowntree Foundation points out, that is part of a much wider debate about ‘poverty porn’ on television. The obvious danger is that programmes like this merely reinforce the media and political message about strivers and scroungers.
But both programmes told another story if you were watching closely enough. The most telling moment in that final episode of How to Get a Council House came when the homelessness officer rang a local private landlord to secure temporary accommodation and was turned down despite offering a fee of more than £2,000 on top of the rent.
That said it all to me (and I hope others) about the true beneficiaries of Benefits Britain 2013.
Plans to ‘end rabbit hutch homes’ made all the headlines but the government’s consultation on new housing standards is about much more – and maybe not even that.
The housing standards review was launched in the wake of the government’s housing and construction red tape challenge, which itself was part of a wider drive to eliminate over-regulation in the economy.
Don Foster duly hailed the results published this week as ‘cutting red tape to help build more affordable homes’. Rules on safety and accessibility would not be changed but the number of housing standards that councils are allowed to apply locally would be reduced from more than 100 to fewer than 10.
Nothing wrong with that, you might think. A patchwork of different requirements in different local areas increases design and construction costs for house builders and that means new homes cost more. Instead the Building Regulations will be backed by nationally agreed standards on issues such as security and accessibility.
If that steam rolls its way through the localist principles that supposedly unite the Conservatives and Liberal Democrats, so be it. After all, the coalition did pretty much the same thing on planning with the national planning policy framework for councils that fail to agree a local plan.
But look a little deeper beneath the surface of the documents published this week and it becomes clear that the issues involved in ‘cutting red tape’ and ‘taking off the bureaucratic handbrake’ are highly complex.
First, as the consultation document acknowledges, the costs and benefits are about far more than just the construction cost of a new home. Any consideration of the standards of new homes has to balance a range of different policy considerations for society as a whole against that headline calculation. Sometimes requirements can vary between regions for good reasons and imposing a national standard can lead to increased costs in some areas.
Second, much of the patchwork of local standards that the coalition now wants to scrap is the direct result of its own actions. According to the consultation: ‘One key driver for the increasing adoption of space standards is the NPPF which requires that local authorities have due regard to the nature of housing development in relation to current and future demand.’
Meanwhile the adoption of higher minimum space standards for affordable housing in London than elsewhere followed the decision to hand the Homes and Communities Agency’s London operations over to the Greater London Authority in 2011.
Third, ‘red tape’ is very much in the eye of the beholder. The consultation that is supposedly reducing it actually proposes a new requirement on developers to provide waste storage for new homes to avoid bins dominating street frontages (reducing ‘bin blight’ is an obsession of Conservative communities secretary Eric Pickles) and raises the possibility of new national space standards (supposedly a victory for the Lib Dem half of the coalition). As ‘red’ tape is swept away, blue and yellow tape seems to be taking its place.
Fourth, those plans to ‘end rabbit hutch houses’ (presumably because ‘hobbit homes’ are Boris Johnson™) are not at all that they appear to be. The section of the consultation paper on space states that the main purpose is to look at the issues in principle and ‘as a result, government does not have a preferred approach on space standards at this time’. However, six pages later the document states that:
‘The government’s preferred approach would be for market led, voluntary mechanisms such as space labelling, in order to meet consumer needs rather than mandatory application of space standards.’
Space labelling is a scheme put forward by house builders to allow consumers to compare different properties more easily but clearly it could work as an alternative or an adjunct to space standards. My guess is that the confusion could be down to the fact that the Conservatives support the house builders but the Lib Dems are refusing to give up on space standards. As the consultation points out: ‘The degree to which space standards should be developed or mandated is hotly contested and views for and against are very polarised.’
The impact assessment sheds further murky light on the space proposals. It does not include space standard impacts ‘because there is no firm proposal at this stage for a specific space element in the proposed nationally described housing standard and the evidence base on the costs and benefits of different standards is still at an early stage’. A preliminary analysis is tacked on to the end of the main statement. Space standards will be the subject of a huge battle over the next few months but supporters will have to overcome the presumption against them in the consultation.
Fifth, the consultation and impact assessment confirm moves to water down previous commitments on the sustainability and energy efficiency of new homes while still using the same terminology. The code for sustainable homes, which was set up to blaze a trail ahead of minimum standards laid down in the Building Regulations is seen as responsible for ‘a proliferation of local design standard requirements’ that have added to costs. It will now be phased out and the impact assessment states that ‘code levels 4, 5 and 6 do not now fit in with, or represent the government’s definition of zero carbon’. The Planning and Energy Act 2008, which allows local authorities to set requirements for on-site renewables, ‘may need to be amended or removed’.
The UK Green Building Council, founded by industry and environmental groups, argues that the proposals ‘fail to provide a vision for sustainable homes’ and exclude key sustainability requirements such as responsible sourcing of materials and ecology. Chief executive Paul King said these omissions plus the demise of the code risk ‘losing a momentum that has transformed the way homes have been built over the last seven years. The government claims its plans will take off the bureaucratic handbrake that holds back housebuilding, but it is in danger of letting key sustainability requirements roll away completely.’
Just as well then that my final point is that the environmental impact will not be as great as it seemed it would be when the UK-GBC was founded in 2007 and output of new homes was around 180,000. Completions are of course currently running at around 110,000 or half the level needed to achieve 250,000 net additions to the stock per year. The impact assessment includes an estimate of housing growth over the next 10 years. Under the (optimistic?) midpoint estimate of 4.5 per cent growth a year it will take until 2022 to get back to 2007 levels.
Communities and Local Government department ministers claim that policies to boost house building such as the elimination of ‘red tape’ proposed in this consultation are working. Their own civil servants estimate that England will fall at least another 500,000 homes behind the level needed to meet demand over the next 10 years.
For all the rhetoric from ministers, house building in England is still running at half the level needed to meet demand.
Earlier this week communities secretary Eric Pickles boasted that house building and new supply were ‘on the up’ and that the government had delivered ‘almost a third of a million additional homes in the last two years’.
He quoted National House Building Council registrations, gross affordable housing supply, net additional dwellings and the number of new homes bonus awards to justify that claim. Every housing statistic you can shake a stick at in other words with just one small exception: the house building figures produced by his own department.
A quick look at the second quarter figures published by the Communities and Local Government department this morning shows that was probably a wise choice. The apparent good news is that starts are up 6 per cent and completions 9 per cent on the previous quarter but that comparison is subject to all kinds of distortions caused by the cold winter disrupting production.
The better news is that the 29,510 starts between April and June is up by a third on the same quarter of 2012. However, that could also be distorted by last year’s extra Jubilee bank holiday and the run-up to the Olympics. And before Mr Pickles boasts about that too much, he might want to look at the total for the April to June 2010 quarter when his government took office: 30,350.
The bad news is that, after a very disappointing January to March quarter, the 27,270 completions between April and June were down both on a year ago and on the quarterly total when the coalition took office.
In the last 12 months there have been a total of 110,000 starts and 107,000 completions. While both have at least limped above 100,000, and starts indicate a modest recovery in the pipeline, they are basically flatlining. For a more detailed look at the numbers, see this post by Brian Green on Brickonomics.
Readers may remember that Grant Shapps became housing minister in 2010 promising to make us ‘a nation of home builders’ and with a ‘gold standard’ of building more homes than Labour. Given that Labour had presided over the lowest annual total of house building in peacetime since the early 1920s it sounded like it should be achievable.
The claim by Mr Pickles of a third of a million homes in two years that I quoted earlier was based on homes qualifying for the new homes bonus. In a report earlier this year, the National Audit Office said that the CLG’s estimate of the increase in house building as a result of the bonus was ‘unreliable’ and based on ‘unrealistic’ assumptions.
The CLG house building statistics show that in the first three years of the coalition there have been 333,000 completions compared to 416,000 in Labour’s last three years. To match the 750,000 completions seen under Labour in the five years between 2005 and 2010, the coalition now needs more than 200,000 completions a year in its last two years, almost double what it has managed so far.
If that sounds completely implausible, the sobering thing is to realise is that this was about the level needed to get to the 240,000 additions a year to the stock target set by Labour in 2007. It hoped for 3 million new homes by 2016 but the recession and falling construction rates mean we could miss that by up to a million.
The target was in turn based on analysis by Kate Barker in a report for the Treasury in 2004 of the level of new supply needed to keep house price inflation under some level of control. As the government stokes up demand through funding for lending and help to buy, we are still falling further and further behind what we need on supply and, as I blogged on Tuesday, prices are on the rise once again.
As the evidence for a housing market recovery mounts by the day, so is the impression that an old-fashioned dose of house price inflation is now seen as a very good thing by the government.
In a survey out this morning, members of the Royal Institution of Chartered Surveyors report that activity is rising around the country and prices are up for the fourth month in a row. Yesterday, the Council of Mortgage Lenders reported that the number of loans to first-time buyers was up 30 per cent on a year ago to its highest level since the credit crunch in 2007. On Friday, CML said buy to let lending topped £5.1 billion in the second quarter of the year, the highest since 2008.
Also, the Communities and Local Government department published figures showing that 10,000 people have registered for a help to buy equity loan in the last four months. Whether by coincidence or design, that was neatly calculated to capitalise on a housing market feel-good factor that was sent into overdrive by last week’s forward guidance from Bank of England governor Mark Carney that interest rates will stay at a record low until unemployment falls below 7 per cent (widely interpreted as meaning until 2016 at least).
This does not yet amount to a new boom: transactions are still well down on the early 2000s and, according to the Halifax, prices rose 4.6 per cent in the year to July, significantly ahead of inflation but well short of the increases seen up to 2007. However, house price inflation is steadily gathering momentum and, as Sunday’s Observer showed, it is well into boom territory in parts of London.
However, all this is happening at a time when wages are falling in real terms and growth in the rest of the economy is weak at best. Can it really be only two and a half years ago that Grant Shapps, then housing minister but now Conservative Party chairman, argued that the government should use policy levers to ensure ‘house price stability’? In a ‘rational’ market, he said, prices would rise by 2 per cent while earnings rose by 4 per cent, so that they fell in real terms over time. He went on:
‘It would foolish to go as far as to say that you can simply end boom and bust but there are policies that can have an impact and they include things like housing supply, the way that mortgages operate and whether there are exterior policies such as the pension raid that can have an impact on where people invest their money.’
As I argued at the time, it was a spot-on analysis but it seemed wishful thinking even in 2011. Things look very different in 2013: the Bank of England’s funding for lending scheme is fuelling a surge in mortgage lending at lower rates while another 63,000 help to buy equity loans are still available.
In the CLG’s statement last night Eric Pickles valiantly attempted to make the case that the new confidence in the market is being matched by successful attempts to boost supply. That is important to defend the government against the accusation that it is merely boosting demand and therefore prices. However, to make that claim, `Mr Pickles has to use National House Building Council registrations rather than his own department’s house building stats and to argue that official stats on new affordable homes from the Homes and Communities Agency and Greater London Authority understate the true figure. Ministers are now using new homes bonus statistics to argue that almost 320,000 additional homes have been provided over the last two years. The press release does come complete with endorsements from the chief executives of Barratt, Persimmon and Taylor Wimpey, but that is not entirely surprising given that their companies are enjoying the benefits of yet more government subsidy with few strings attached.
However, all of this is relatively small beer by comparison with the January 2014 launch of £12 billion of help to buy mortgage guarantees (which are not restricted to new build homes) and with Mark Carney’s pledge on interest rates. As I argued last week, this amounts to official encouragement for a boom in buy to let and it also sends a strong message to anyone looking to buy that they had better do so as soon as possible before prices rise.
The government and the Bank of England still have options if they want to prevent another boom and eventual bust. They could cancel Help to Buy given that confidence has already returned to the market (one of the biggest increases in demand recorded by the RICS was in Wales, which does not yet have any form of help to buy) and that mortgage availability has already improved. As The Economist argues this week, the Bank could restrict funding for lending to loans to small businesses rather than mortgages. And Mr Carney’s low rates pledge did come with a caveat about threats to financial stability.
None of these looks very likely as things stand. The short-term feel-good factor of rising house prices and the boost to the economy from higher transactions ahead of the election look far too tempting to the politicians to worry about the long-term consequences. And Mr Carney, who left a house price boom behind him in Canada, seems surprisingly unconcerned about the dangers of another one here.
Channel 4’s ‘How to get a council house’ broke free of its dodgy title and format last night, butt the same cannot be said for the reaction on Twitter.
The second episode in the series was set in Manchester and followed tenants and staff of Northwards Housing as the bedroom tax loomed earlier this year (watch again here). It gave some real insights into the way the system works and the good job that housing officers do in very difficult circumstances.
As I blogged last week, I thought the first episode also did well at showing the impossible situation in Tower Hamlets, where just 40 properties a week become available as 60 new families join the 24,000 others on the waiting list. But I criticised the trivialising commentary and the lack of any context that might have explained why. Matthew Warburton of the Association of Retained Council Housing was much kinder in his blog here.
Last night, though, the positives far outweighed the negatives. True, the commentary still made my teeth grind with irritating comparisons between council rents and house prices. True, I still wondered whether some of the editing was designed to hit the Shameless stereotypes and stir up the reaction it got on Twitter (the same production company was responsible for Benefit Busters in 2009).
And while there was some attempt to explain the context of the bedroom tax, an uninformed viewer could still have come away with the impression that if the tenant on TV could successfully downsize then so could everyone else. In fact Northwards has 3,000 facing an under-occupation penalty and only 58 of them have moved to date. Another 207 have registered to move but three quarters of them need a scarce one-bed home.
But for all those criticisms, and the way that reality TV techniques like the commentary end up distorting reality, there was a real human story and a genuine documentary that did break through. Council housing and the ‘spare room subsidy’ look very different seen through the eyes of people in desperate need of it and with no choice but to pay it.
Above all, though, it was the professionalism of the housing staff involved that shone through. Where the star of Benefit Busters was the scrounger-haranguing Hayley Taylor, the star last night was Lisa Jenkinson, neighbourhood housing manager at Northwards.
I’m guessing she will have spoken for a lot of people dealing with welfare reform when she told a team meeting:
‘You’re always depressed. You’re no longer doing anything good. I mean you are doing good but you’re not doing good because every door you knock on you’re just giving them bad news. We’ve just met a family where he’s lost his job, benefits are all messed up, wife’s going to lose disability living allowance and now the bedroom tax. What else, what other bad news could I possibly think to give them?’
The last bit of the programme brought some better news for the downsizer I mentioned earlier. Alan, a tenant facing the bedroom tax on his two-bed flat in a tower block, was facing up to the prospect of having to abandon the tenancy and move back to the box room at his parents’ house. Finally, he got a call with the good news of a smaller place. His old flat went to a single male who will not face the bedroom tax because he is working. The spare room will still be spare.
And the final scene saw Lisa Jenkinson again expressing what must be the feelings of many people. ‘I find it quite a frustrating topic to talk about,’ she said. ‘To me personally it doesn’t make sense but we’re left to pick it up and deal with it. But at least someone who’s working’s got a flat… which is good.’
Fair play to the TV producers: that was a perfect ambivalent note on which to end the programme. It also strikes me that picking it up and dealing with it is unfortunately a pretty accurate description of what many people in housing do. The staff of Northwards Housing showed last night that it is a difficult, sometimes impossible, job that can still be done with professionalism and respect for tenants.
If only the same could be said for Twitter. If you do take a dip in the cesspool that is the hashtag #howtogetacouncilhouse make sure you have plenty of hot water and disinfectant handy. Yes, the title of the programme provokes that reaction, but it also reveals the scale of the ignorance and bigotry that is fuelling support for welfare reform and antipathy to ‘scroungers’. Those who believe everyone has a right to a decent home at an affordable price and that this cannot be left to the market alone have an uphill struggle on their hands.
Away from the TV cameras, the work continues, the unintended consequences of the bedroom tax continue to kick in and the housing crisis keeps getting worse. With How to get a council house and ITV’s Tonight earlier in the evening, at least housing has the media spotlight and the chance to get its message across.
Next week’s final episode focuses on the homelessness service in Tower Hamlets.
Mark Carney’s pledge on interest rates can only make buy to let look even more of a one-way bet for landlords and the banks who lent them a cool £5 billion in the second quarter of 2013.
Figures published by the Council of Mortgage Lenders a day after the Bank of England governor made his announcement show a new surge in loans. In the three months from April to June its members made 40,000 gross advances to buy to let landlords worth £5.1 billion. Both are the highest quarterly figures seen since 2008. The number of loans was up 19 per cent and their combined value was up 21 per cent on the previous quarter. Loans were up 19 per cent by volume and 31 per cent by value on a year ago.
Stripping out remortgaging, there were 20,430 loans for house purchase to landlords in the second quarter worth £2.3 billion. These are also the highest levels seen since the third quarter of 2008.
Overall buy to let lending is now running at double the level seen in early 2010, when (at the risk of sounding like a broken record) Fergus and Judith Wilson, the king and queen of buy to let, pronounced that the sector was ‘absolutely dead and will never return’. At the time they were talking about selling their property empire but earlier this year they still owned 1,000 homes and were complaining about London boroughs ‘dumping’ their homeless households in Kent.
To put that turnaround in perspective, buy to let now accounts for 13.3 per cent of all mortgage lending, up from 13.1 per cent in the first quarter of 2013, 12.9 per cent a year ago and just 9.4 per cent in 2007, when the credit crunch was about to hit. There are now almost 1.5 million buy to let mortgages outstanding and they are worth £168 billion, meaning that the total market has broadly doubled since 2006.
Even though conventional mortgage lending has recovered recently and buy to let’s share has grown at a slower rate in the last two years, landlords still look set to be grabbing one in six new mortgages by the end of the decade.
Can that extraordinary growth continue? Everything about current economic policy suggests that it can. New Bank of England governor Mark Carney revealed that interest rates will not rise above their record low 0.5 per cent until unemployment falls below 7 per cent. On current trends that is highly unlikely to happen until at least 2016.
In one sense this only formalises what many economists expected anyway. However, I would suggest that it is likely to give a powerful new impetus to buy to let (and to house prices). This morning’s papers are full of headlines like ‘Interest rates frozen for three years’. That conveys a powerful message to people that now is a very good time to borrow as much as possible – and that the Bank of England will support you.
Even before the Bank’s latest intervention the property website Rightmove was arguing that its Funding for Lending Scheme had created an ‘arbitrage of immediate return’ for buy to let investors. By making £80 bn of loans available to banks at rock bottom rates, the scheme had driven down mortgage rates to as little as 2 per cent at a time when rents were delivering average gross yields of 5.9 per cent. That seemingly guaranteed profit can only increase the temptation for home owners to buy another one to rent or as a holiday let. If they have enough equity in their first home they could even bypass buy to let by remortgaging it to buy another one outright.
The Bank’s new policy can only intensify that effect by sending mortgage rates even lower, reducing still further the miserable sub-inflation returns available to savers and voicing both messages loud and clear in the national media. With what consequences for the housing system?
A documentary about housing on Channel 4 is usually the cue for me to look what else is on TV. This time I watched the programme – and the reaction to it.
Inside my Twitter feed, the debate was about whether How to Get a Council House (watch again here) presented a realistic but depressing portrait of life on the waiting list or trivialised the issues by ignoring the reasons why the wait is so long.
Outside my feed, the racists, kippers and anti-welfarists were in full cry. Search under the hashtag #howtogetacouncilhouse and you will quickly see what I mean: in this world council housing is the preserve of immigrants and scroungers. All of the public prejudices against people on benefits are simply transferred to council tenants.
The programme looked at Tower Hamlets in London, where 24,000 people are on the housing register. The queue is getting longer all the time because for every 40 properties that become available, 60 new people are joining.
The positive side of the programme was that it showed what life is like for the people waiting for a home and the housing officers doing their best to help them in an impossible situation. It will have shown people in some detail how and why people get priority for housing and hopefully dispel some of the myths (though not on Twitter). Perhaps (as reflected in this Telegraph review) it will make people think about why the system operates as it does.
Choice was a key theme. The council operates a choice-based lettings scheme but it made me wonder about the value of informing people that their bid for a flat came 1,058th in priority and of inviting six families to a viewing when three of them have no chance of getting a home. As Colin Cormack from the council said at the end of the programme, ‘for the majority of people in the queue there is no choice whatsoever’.
The negative was the inevitable tendency of the cameras to focus on the cases that will look good on TV but are not necessarily representative. People who get a new home and thank the housing officer do not make for good telly. People who are picky enough to turn down nine offers or insist on a parking space to go with their brand new three-bedroom flat do.
And the programme was also shorn of any context. I’m not sure what the Tower Hamlets waiting list was like when I lived in Bow in the early 80s but the number of people I knew who managed to get a hard-to-let council flat seems a fair indication. If you had told me then that a flat on the Ocean estate would one day be on sale for almost £500,000 I would never have believed you.
There was little or no explanation of what’s changed in the meantime. The only mention of the right to buy came from a neighbour of a tenant waiting for a ground floor flat. It was never explained that the Bengali population of Tower Hamlets (who prompted many of the racist tweets) has been established for decades. The impact of parachuting Canary Wharf into one of the most deprived areas of London was never examined. Above all, there was the irritating way that each property allocated had its market price juxtaposed with what the council rent was without ever asking why market rents are so high.
However, as I was reminded on Twitter earlier, perhaps that is a different programme entirely and certainly not one that would get an audience of 2 million people. I’m reliably informed that episode 2, which features the impact of the bedroom tax in Manchester, will definitely be worth watching next Thursday night.
If you take even a cursory glance at the circumstances of the 10 families involved in the legal challenge to the bedroom tax you’ll be left wondering how discretionary housing payments can possibly resolve their problems.
I read the High Court ruling painfully aware that I lack the legal expertise to interpret the finer points of the European Convention on Human Rights and Public Sector Equality Duty but with enough experience to know that what is lawful is not necessarily the same as what is fair.
The background to the case has already been covered in detail elsewhere. As Inside Housing reports, although the judges said that new measures must be introduced to protect disabled children who need their own room, housing groups were left bitterly disappointed by the dismissal of the other part of the judicial review and lawyers plan to appeal. Read this excellent blog by Kate Webb of Shelter or see statements by the solicitors involved here and here if you haven’t already for the background.
The Department for Work and Pensions (DWP) said that it was ‘pleased to learn that the court has found in our favour and agreed that we have fulfilled our equality duties to disabled people’ but also announced an extra £35 million of in-year discretionary housing payments (DHPs) for what it calls the ‘spare room subsidy’. Given that previous announcements on extra money and concessions have been made under political and media pressure, was this one made with one eye on the appeal (or even a different result)?
The case appeared to turn on whether the DWP’s strategy of relying on DHPs demonstrated that it had acted with sufficient regard to discrimination considerations and was adequate mitigation. The judges accepted the DWP’s argument that it was too difficult to come up with definitions of the degree of disability or adaptation of a property that would justify exemptions for adults. Unlike children who cannot share a bedroom by reason of their disabilities, there was no such ‘discrete group’ of adults. See this blog by Sue Marsh for an alternative take on that.
That leaves most of the 10 families involved in the case relying on discretionary housing payments that are being applied under policies that (as evidence presented by Shelter to the court showed) vary widely between different local authorities.
An annex to the ruling describes their circumstances in some detail:
- Jacqueline Carmichael, a woman with spina bifida who lives in a two-bed flat with her husband who is also her full-time carer. Their housing benefit has been reduced by 14 per cent but they have a six-month DHP to cover the shortfall.
- Richard Rourke, a disabled man in a wheelchair, lives in a three-bed bungalow with his step-daughter, who stays in university accommodation during the week in term time and over some weekends. He sleeps in one bedroom, his daughter in another and he uses the third to store equipment. He is appealing against a 25 per cut in his housing benefit and has requested a DHP that is not yet decided but is accruing arrears in the meantime.
- Melvyn Drage, a man with significant mental health problems and various physical difficulties, lives in a three-bed flat on his own. His conditions are exacerbated by stress and he is very anxious about having to move. He has a six-month DHP covering the shortfall on one bedroom but has rising rent arrears for the other.
- JD and her disabled adult daughter AD live in a specially adapted three-bed property. AD’s twin brother had lived in the house but has now moved out. AD has severe physical disabilities, learning disabilities and visual impairment and needs 24-hour care and is unable to move herself without assistance. After housing benefit was reduced by 14 per cent, JD appealed, but the local authority has deferred consideration of that until the outcome of this case. She has a six-month DHP until the end of September but has been told it is unlikely to continue after that.
The other six cases all involve children and presumably have some grounds for hope that they will be exempted from the bedroom tax given the judges’ comments. However, they too face varying degrees of uncertainty over their DHPs and are also part of the appeal because they still do not know whether they will be entitled to full housing benefit or when any new regulations will be made.
That brief summary reiterates just how much depends on what happens when the existing DHPs run out. This was also very much the case for residents of Aragon Housing Association who I blogged about last week. The crunch time for many people seems to be the end of September, which is when 26-week awards will run out. The ‘urgent appeal’ sought by the bedroom tax lawyers will I assume be heard before then.
But there will still be time to wonder at the logic of the judges who made today’s ruling, who appeared to argue that it was not their job to intervene at the level of principle or of detail. On the one hand, they said that lawyers for the 10 claimants ‘overlook or underestimate the strategic aims of the policy: not only to save public funds, but also to shift the place of social security support in society’. On the other, they said that even though the equality impact assessment of the policy did not address the implications for disabled people, it was not the job of the court to ‘micro-manage’ the policy making process.
All those high earners with social tenancies seem to be slowly melting away ahead of the government’s plan to implement ‘pay to stay’ market rents.
I’m not just talking about the impact of the policy itself and the incentive for tenants to declare an income of £59,999 or even to cut the number of hours they work to get out of paying a market rent for their homes.
Rather I’m talking about the government’s own estimates of the number of high earners. When the policy was first floated at the Conservative Party conference in October 2011, the Telegraph was briefed that there were 6,000 ‘fat cat’ tenants earning more than £100,000 a year.
By the time the government published a consultation paper on the plan in June 2012, it emerged that this was actually the high estimate of the number of households where the household reference person and their partner earn six figures. The low estimate was only 1,000.
Little wonder then that ministers had turned their attention to people a household income of more than £60,000. The consultation paper’s estimates of these slightly svelter cats ranged from 12,000 to 34,000.
And now the numbers have been reduced still further in the summary of responses published by DCLG last week. By combining new data from the 2010/11 English Housing Survey with the two previous surveys, the government now estimates there are now a maximum of 5,000 households earning £100,000 or more.
The estimates for £60,000 earners have also been cut significantly. The low estimate is reduced from 12,000 to 11,000 and the high estimate by 38 per cent from 34,000 to 21,000.
As I’ve blogged before, the reduction to £60,000 introduced more contradictions into a policy that was already riddled with them. However, it’s clear that many people disagree and support for the policy seems greater than for most of the other coalition housing reforms.
According to the summary of responses:
‘Around a quarter of respondents agreed with the principle that very high earners living in taxpayer-subsidised social housing should pay higher rents and were supportive of the proposal, while around one-third said that they agreed in principle but had some practical concerns. Over a third were opposed.’
Leaving aside that loaded use of taxpayer-subsidised (see my earlier blog for arguments on that), that leaves it unclear whether they were talking about a specific income threshold or just the principle but it does indicate reasonable support from social landlords.
This is not the first time that the principle of high earners living in social housing has become an issue. In the 1960s, the People campaigned for years on ‘the scandal of the wealthy tenant living in a council house at a subsidised rent’. However, nothing ever came of it after the Conservative government of the early 1970s used the issue as one of the justifications for a general increase in council rents.
As Inside Housing reports today, the government is proposing that high-earning tenants should be legally obliged to declare their income:
‘We also want to make sure it is the responsibility of those high-income social tenants to ensure they are making a fairer contribution. We intend to seek a legislative opportunity to place the onus on tenants earning over the threshold to declare their income, when parliamentary time allows.’
That sounds less cumbersome (and certainly less expensive) than the alternative of getting landlords to verify the income of all their tenants but it creates all sorts of incentives for tenants to take steps to minimise their earnings – or else just under-declare. And will it really be worth it for landlords to investigate? Details will follow on the potentially thorny issue of what constitutes ‘income’. Either way it seems likely to lead to another reduction in the number of high earners.
Another key issue in the consultation was whether pay to stay should be voluntary for landlords, which would be consistent with localism and the way that other reforms such as fixed-term tenancies have been introduced, or a compulsory national scheme. The wording in the summary of responses is ambiguous on this point:
‘We will take steps towards removing the regulatory controls preventing private registered providers charging market rents to social tenant households on incomes of more than £60,000 per year; and will set out revised rent guidance for local authorities’.
The ultimate justification for pay to stay would of course be if it raised significant extra revenue. The document pledges that ‘all additional income from the policy will be available for reinvestment in affordable housing’.
However, how much extra revenue will we really be talking about from a total of high-earning tenants that seems to be shrinking all the time? One of the biggest logical flaws with the whole policy is that it is ‘unfair’ for high earners to benefit from a subsidised rent but ‘fair’ for the same people to benefit from a subsidised purchase through the right to buy. The logical response of anyone who does face a market rent would surely be to apply for their (newly increased) discount.
That’s not the only way in which the policy contradicts itself. As Steve Hilditch argues on Red Brick, it also leaves social landlords even deeper in the mess that is government policy on rents. With rent convergence abandoned, landlords will be left with a patchwork of social rents, sub-social rents that have not converged, ‘affordable’ rents of up to 80 per cent of market rents and market rents. Surely it’s way past time that rents were based on what tenants can afford rather than set in relation to an unaffordable market where prices and rents are driven by other considerations.
Finally, the £60,000 threshold was apparently chosen because it is in line with the income eligibility limit for schemes like shared ownership. However, higher limits of up to £80,000 already apply for the First Steps programme in London and the government has blown even those out of the water by extending eligibility for Help to Buy to households earning up to £150,000.
Pay to stay has probably already achieved its political purpose in generating headlines about Bob Crow and Frank Dobson. As a housing policy it is at best a contradictory distraction from the real issues.
With the Institute of Directors on one side and Simon Jenkins on the other, where is a safe place to stand?
I blogged about Help to Buy 2 earlier this week the day before the breakfast meeting at which George Osborne would apparently reveal full details of the mortgage guarantee that will be available in January.
Nothing that happened over the coffee and croissants has changed my view about the dangers of increasing demand for housing while doing nothing about supply. The schemes that it replaces are open to criticism too but at least they were targeted at first-time buyers and new-build homes. Help to Buy 2 will available to all buyers and on secondhand properties too – and it extends state support to people on household incomes of up to £150,000. Will it trigger a boom and bust that leaves the government picking up the bill or (perhaps more likely) give future governments a direct stake in propping up house prices?
The Treasury press release following the breakfast came complete with endorsements from the big housebuilders but that is hardly a big surprise given the billions of pounds worth of direct and indirect subsidy they have received over the last five years. Treasury minister Sajid David was particularly unconvincing when he told the Today programme on Tuesday that it was ‘self-evident’ that if you boost demand you also boost supply.
Lenders seemed less convinced. The Council of Mortgage Lenders struck a noticeably neutral tone in its response, setting out criteria for success including that Help to Buy ‘be accompanied by an equivalent government focus on the supply of new housing (not just the supply of credit), to avoid the unwelcome effects that stimulating demand without also increasing supply would create’. The Building Societies Association argued that if the banks had applied the same lending criteria as its members over the last few years there would be no need for Help to Buy.
We now know slightly more details about how the mortgage guarantee will work. Applications will be subject to income verification and stress testing and people with impaired credit will not be eligible. On one level, that should help to ensure that lending is responsible, but on another it could mean that many of the people who most need help will not get it. Borrowers will also have to sign a declaration that the guarantee is not for a buy to let property or second home. This prompted an entertaining exchange on the World at One, when housing minister Mark Prisk insisted there would be no return to the self-certified mortgages of the past and was then forced to deny that the borrower’s declaration that they have ‘no interest in a property anywhere else in the world’ amounts to exactly that.
But we still do not know some crucial details. Lenders will want to see what the Prudential Regulation Authority says about capital relief before deciding whether to take part. They will also be charged a commercial fee if they do but this has not yet been set and the cost will presumably be passed on to borrowers in mortgage fees and/or higher interest rates.
Back with the bigger picture, criticism of Help to Buy continues to come from all sides, including many people who you might think would be natural supporters of the government and George Osborne. The loudest of these was Graeme Leach, chief economist of the Institute of Directors, who supplied the soundbite of the week by saying that ‘the world must have gone mad for us to now be discussing endless taxpayer guarantees for mortgages’. From an IoD perspective Help to Buy goes directly against the need to leave everything to the market: ‘Instead of trying to pump-up prices, the government should focus on relaxing planning laws and reducing local authority charges on developers to make it easier to build more homes.’
That argument has been heard many times before in the debate within the Conservative Party about the NPPF in which free market fundamentalists argue for ‘socialist’ planning to be swept away while the Telegraph, National Trust and CPRE fight any attempt to release more land for new homes. And sure enough the Trust chairman Sir Simon Jenkins rides to the rescue of Help to Buy in today’s Guardian, leaving me feeling stuck between a rock and a hard place.
With a questionable claim that the scheme is somehow Keynesian, our nimby in chief argues that it is better to throw money at the real economy than print it through quantitative easing. Dismissing the case for 250,000 homes a year as a lobbying tool for volume housebuilders, he argues that:
‘Such new building is near irrelevant to the housing market. It is less than 1% of the total stock and under 10% of daily housing transactions. But Osborne’s scheme may at least be pushing up prices. This will not help first-time buyers, let alone the social housing sector, but it should bring to market the half a million homes lying idle in builders’ property banks. That is a good thing. It may even encourage building on marginal sites in cities, where most poor people live.’
Osborne should instead stop ‘dancing to the tune of Barratt and Persimmon’ and subsidise the renovation and renewal of existing homes and development on brownfield land. So far, so semi-plausible, except that you know that this is part of a case against new homes being built anywhere else.
‘Why taxpayers should pump money into boosting house prices is a puzzle buried deep in Britons’ desire to hold and profit from land,’ he argues. ‘It makes no economic sense.’ Better to be like the Scandinavians and Germans who rent and spend on goods and services rather than ploughing their money into ‘inert lifetime investment’.
You might think that sounds like a very good argument against Help to Buy – but you would be wrong. His conclusion is that: ‘At least Osborne is pumping liquidity into something other than bank vaults. He is gambling that a revival in the “sub-prime” mortgage market will boost confidence, gambling that inflationary expectation spurs growth. It is an acknowledged theory.’
The piece struck me as vaguely unhinged until the real agenda struck me. For people like Simon Jenkins, the fact that Help to Buy will boost demand and inflate house prices while doing very little to encourage new supply is most definitely a good thing. Maybe the IoD is not so bad after all.
Every time I think I’ve got my head around the pernicious impacts of the bedroom tax something new emerges to make me think again.
The trigger this time is an excellent report from Aragon Housing Association on the first 100 days of what the government calls the spare room subsidy. But that also sent me back to several conversations I had at the CIH conference in Manchester and reports published while I was on holiday from the National Housing Federation (twice), Chartered Institute of Housing and Convention of Scottish Local Authorities.
Even before that the evidence was accumulating from around the country that the effects are at least as bad, and probably worse, than most people expected or feared. From rent arrears in Newcastle and Ayrshire to fears of more suicides in Birmingham to criticism of the Labour leadership’s stance on the issue in Liverpool, the effects of the bedroom tax continue to be felt emotionally, financially and politically.
Aragon’s study caught my attention because of its dispassionate tone and the way it focuses in on the impacts on one relatively small organisation. It currently believes that 461 of its 6,500 tenants are affected and that they face an average shortfall of £18.01 per week.
As elsewhere, they essentially face a choice between trying to stay in their home and trying to move. Of the first group, 107 are living in specially adapted properties, protected for the moment by 26 weeks of discretionary housing payments.
Of the second, only 41 have managed to move to a smaller property in line with the stated rationale of the policy and bids for two-bed homes under the local choice-based lettings scheme are treble what they were last year.
Rent arrears rose by 9 per cent between the start of the bedroom tax in April and the end of June. However, most tenants had two rent-free weeks at the start of April and the increase since then is 24 per cent. The number of tenants affected by the bedroom tax and in arrears has risen from 187 to 279.
Much of this will be familiar from around the country. But the report also has evidence of some knock-on effects of the bedroom tax that were not widely foreseen even in the welter of parliamentary and press attention over the last few months.
First up, as seen elsewhere, is the increasing difficulty of letting three-bed homes. Most bedroom tax victims are not the large families of media stereotype and cannot afford to pay a rent shortfall for the larger homes that were built as a matter of longstanding policy in the area.
However, the downsizing so far has had unpredictable results (at least they are to me). Under choice-based lettings, three of the three-bed homes had to be relisted because there was no suitable bidder for them. Of the 41 vacated larger properties, 15 have gone to Band 3 (low needs) priority applicants and seven have gone to Band 4 (no needs). Another 15 have gone in mutual exchanges. So much for the government’s argument that the bedroom tax will free up homes for desperately overcrowded families. That does not seem to apply even as close to London as rural Bedfordshire.
Voids of larger homes are an issue around the country. One landlord in the NHF Merseyside report saw its three-bedroom voids double in the first three months of the tax and another estimates each one costs £3,000 in repairs, lost rent and staff costs. As Inside Housing reported two weeks ago, some landlords in the North West and North East are already considering options including demolition of homes – something that would really put the government’s supposed aim of encouraging more efficient use of the housing stock into perspective.
Second, the dilemmas facing someone who decides to look at downsizing into the private rented sector are more acute than I had realised before. It’s clear that in most parts of the country that will mean trading security of tenure and a shortfall for a more expensive six-month tenancy that will cost the government more than it saves through the bedroom tax. However, in Bedfordshire and many other parts of the country it will also mean a shortfall for the tenant because of the way the local housing allowance (LHA) works.
Compare LHA rates and actual rents in the local area, and someone downsizing to a private rented home would face a £16.15 shortfall in Stevenage, £22.66 in Bedford and £29.35 in Milton Keynes. That Bedford shortfall is 15 per cent, which is more than the 14 per cent deduction for under-occupying by one bedroom under the bedroom tax. The net result would therefore cost the tenant more as well as the taxpayer.
Little wonder then that staying put and finding the money somehow looks like the best option for many people. Though Aragon operates relatively close to London, the largest town has 310 jobseekers and just 30 new jobs that became available in the first week of July. It’s also a rural area where, as MPs on the environment committee calling for a rural bedroom tax exemption this week recognised, communities face particular problems.
Like landlords all over the country, Aragon has put in place a whole range of measures to help, including advice on benefits, bills and employment, food parcels and food growing projects, working with a local credit union and IT training courses.
However, as the effects of the bedroom tax continue to work their way through the system the big question for landlords and tenants all over the country is when the next big change will come. At the moment, the impact is being financed by a combination of discretionary housing payments, tenants scrimping and saving and landlords incurring rent arrears.
Sooner or later tenants will have nothing left to scrimp and landlords will be forced to recover those arrears. I spoke to some in Manchester who anticipated their first possession actions this month for people who were already in arrears. It will take until the Autumn for bedroom tax shortfalls to reach the two month arrears threshold that can be the trigger for a Ground 8 claim. What will judges decide? How will local authorities respond to any homelessness applications by evicted tenants? And what will be the political impact of media coverage of evictions?
Sooner or later DHPs will run out and the delayed effects of the bedroom tax will start to play out. In many areas the most vulnerable under-occupiers, including disabled people living in specially adapted properties, are protected for now. Unless more money is found, or there are successful legal challenges, that will not last.
One potential piece of good news is that by October the universal credit will start to apply to some people with new and more generous rules on income from lodgers. What will be the impact of that? And of the combination of the bedroom tax with direct payment and the new accelerated recovery system for arrears revealed by Lord Freud in Manchester? Or his threats against landlords that reclassify their homes?
The pernicious effects of the bedroom tax will continue to play out in predictable and unpredictable ways.
Is it too late to mitigate the impact of the impending disaster that is Help to Buy?
As the government prepares to reveal more details of the mortgage guarantee element of the controversial scheme (probably tomorrow), the evidence is already accumulating of the effect of early impact of Help to Buy plus the boost to mortgages delivered by the Funding for Lending scheme.
Mortgage lending is up, asking prices are up for seven months in a row and reservations under the equity loan part of Help to Buy are up by almost three times on the more limited and targeted FirstBuy scheme that it replaced.
So too are forecasts of what will happen to prices over the next few years. The National Housing Federation warned in a report today that our failure to build enough homes means that the average price of a first-time buyer home could rise by 42 per cent by 2020 and average rents by 46 per cent.
Last week Savills increased its forecast for the increase in house prices up to 2017 from 11. 5 per cent to 18.1 per cent. ‘A combination of low interest rates and stimulus measures means there is capacity for improved price growth over the next three years or so,’ it said.
An increase on that scale would take prices above their 2007 peak by 2015. Although Savills points out that the increase after taking inflation into account would be just 2.3 per cent, that still looks dangerously high at a time when earnings are falling in real terms and mortgage affordability relies on interest rates that must rise sooner or later.
The bump in confidence in the market is being fuelled partly by equity loans and Funding for Lending (which was also meant to be about loans to small businesses but seems to be ending up mostly in mortgages). However, it must also be in anticipation of the launch of the much bigger element of Help to Buy, £12 billion of mortgage guarantees in January 2014.
Buyers under that will have to put up a minimum 5 per cent deposit which will be forfeit first if the boom is followed by a bust. The obvious danger is that the bigger the boom in prices in the meantime, the more the share of the mortgage guaranteed by the state could be at risk in a subsequent bust.
Tomorrow’s announcement could reveal more on many of the details left unclear at the time of the announcement in the Budget, including the fee payable by lenders, the effect on their capital adequacy requirements and the government’s exit strategy at the end of the scheme.
These are important issues but it seems unlikely that the government will change its mind on the most important one: the advisability of having the scheme at all. I’ve never been a great fan of government home ownership schemes but at least the previous ones were too small to do much damage. Help to Buy is bigger both in scale (homes up to £600,000) and scope (extending assistance beyond first-time buyers and new homes).
So it is all too late? Is potentially the biggest housing policy disaster since the double mortgage tax relief debacle of 1988 now inevitable? With almost six months to go there must still be options that will boost housing supply rather than just increase prices.
However, there are problems with most of the alternatives too. The most obvious might seem to be to restrict Help to Buy to new build homes, especially if that could be used as a way of encouraging new entrants into the market. However, the billions of pounds worth of subsidies and deregulation that the government has showered on housebuilders so far have inflated their profits rather than encouraged them to build more homes. Might increased transactions achieve more?
Similarly, restricting the scheme to first-time buyers might just inflate prices in that part of the market. Lowering the £600,000 threshold would definitely be an idea but could also create distortions at lower price points. One possible measure, suggested by Toby Lloyd of Shelter, might be to beef up the law on restrictive covenants to ensure that government help remains targeted on the next generation of buyers who need help as well.
The best option would be to scrap the mortgage guarantee element of Help to Buy on the basis that the mortgage and housing markets already seem to be on the move without it.
However, the chances of that happening seem to be zero. Help to Buy should, as critics point out, be called Help to Sell, but the scheme is really about the wider economy and the government’s electoral prospects.
If it works on the scale suggested, then rising transactions and house moves will feed through into increased spending on household goods, perhaps delivering enough of a boost to the economy as a whole for ministers to be able to claim that the recovery is well under way by the next election in May 2015.
Combine that with the feel-good factor generated by all those first-time buyers helped on to the housing ladder, and all those existing home owners feeling the paper wealth of increased house prices, and you have the real motivation for Help to Buy.
There is still time to address some of the technical issues about Help to Buy, and in particular the need for an exit strategy to stop it developing into permanent government intervention in the housing market. However, the brief interlude in which the government seemed to understand that what we need is house price stability now seems a very long time ago.
So where are the 250,000 homes going to come from? And what are the consequences of not building them?
Almost ten years after the Barker review set that benchmark for housing provision in England to keep house price inflation under control, a new report out from Shelter points out that we are already a million homes behind. If we carry on building at today’s miserable levels the shortfall will rise by another million homes every six and a half years.
In Getting Serious About the Housing Shortage, Matt Griffith and Pete Jefferys argue this would mean accepting a continued fall in home ownership and an ever-rising housing benefit bill while increasing individual and national vulnerability to economic shocks.
The alternative, which they set out in more detail than I’ve seen elsewhere, would involve reforms that go beyond ‘narrowly targeted interventions and short-term gimmicks’.
The report argues that even on a relatively optimistic assumption of increases in private housebuilding, total output will still be almost 100,000 homes short of what is needed by 2017/18.
However, the gap can be made up through a combination of short-term changes and longer-term structural reforms. In the short term these include:
- Direct investment by central government. A programme of £12 billion of investment or 1 per cent of GDP every four years, as advocated by Vince Cable, would deliver 51,000 homes a year.
- Reform of local authority borrowing. Councils could deliver 12,000 homes a year based on prudential accounting or 17,000 with the adoption of European borrowing rules.
- Planning reforms. Commercial to residential property conversions could deliver 10,000 homes a year whole more flexibility on the green belt could deliver 33,000.
In the longer term, measures include developing garden cities and new towns and supporting self-build. Done in combination with community land auctions and greater use of compulsory purchase, these have the potential to deliver another 62,000 homes.
Totted up like that you can see just how much would be required to reach the 250,000 homes threshold – and how powerful the temptation is for governments like this one to tinker round the edges instead and store up even bigger problems for the future.
A key theme of the report is that new players are needed since ‘our current actors cannot, by themselves, make up the housing shortage’.
These could include contractors and smaller builders, reversing the concentration of the housebuilding industry into a handful of major firms that have failed to increase supply despite billions of pounds worth of government support since 2008.
Local authorities – seen as sleeping giants - could play a major role both through their increased borrowing powers and through taking a more proactive role in land assembly, as is common in the Netherlands and Germany.
And new strategic development vehicles, perhaps operating off balance sheet or with private backing, could drive the creation of new towns and garden cities using powers to acquire land at close to existing use values.
Meanwhile government could go much further with schemes to guarantee investment and find ways to promote supply without increasing borrowing (both Help to Buy and Build to Rent do not count as public borrowing).
The report sets out an agenda that could, and should, have been adopted at any time since the financial crisis hit in 2008. There may be little prospect of action under the current government but a new administration after 2015 could be a different matter.
The proposals centre on supply, and there is only brief consideration of demand for housing through tackling under-occupation and the taxation of land. How about promoting growth in regions outside London, which have land available and also have thousands of empty homes? How about, as Savills suggested last week, investing in more student accommodation to free up around 66,000 homes around the country?
For my money too, the report takes rather too much for granted on the capacity of the construction industry to deliver 250,000 homes a year.
Investment in housing looks like a great proposition when every £1 spent generates an additional £2.09 of additional economic output and 92p of it stays in the UK.
However, as Chris Blythe of the Chartered Institute of Building pointed out at the CIH conference last month, construction has an ageing workforce and skills shortages could be a major issue. Meanwhile, in a market dominated by big housebuilders intent on maximising profitability rather than output, materials suppliers have adjusted capacity accordingly.
So there must be a danger that an expanded housing programme would suck in imports of foreign labour and materials. Why not then combine it with an expanded programme of training and apprenticeships to tackle youth unemployment and measures to give materials suppliers the confidence to invest? That way housing could deliver far more than just 250,000 homes a year, however desperately they are needed, and be even more attractive to a future government.
Overall though this is a major report that sets out a clear agenda for tackling a housing crisis that will otherwise just continue to get worse. As Matt Griffith argues on Shelter’s policy blog: ‘These options all involve hard choices and significant changes. Yet the worst option of all would be to do nothing.’
Returning from holiday this morning to hear Iain Duncan Smith mouth half-truths and dodgy stats about benefits on the Today programme it felt like I had never been away.
In an astonishing interview IDS packed in so many questionable claims that it seemed he was determined to establish a decisive lead in the Department for Work and Pensions (DWP) game of dodgy stats bingo.
The idea of the competition is to pack as many misleading claims and figures into a broadcast interview as you can and score one point for each one that goes unchallenged. I have absolutely no evidence of course that such a thing exists but I believe that it may.
This after all is that same standard of evidence that IDS applies himself. Questioned by John Humphrys about the UK Statistics Authority’s refutation of his claim in May that 8,000 people have already returned to work as a result of the cap, he simply asserted: ‘I believe this to be right’.
With faith-based politics like that in action there seems no limit to what he can achieve. Hey presto, claimed IDS, ‘every week something like half a million new jobs are in the job centres’. At that rate there should be no unemployment within a few weeks.
Abracadabra! There is no problem getting affordable housing in London. ‘We believe that there is plenty of accommodation available. A third of all rental accommodation in the private sector is available for those who are on social rents.’ Even allowing for him tripping over his own tongue at the end, that’s quite a claim.
Shazzam! ‘The homelessness figures have hardly moved at all’ in response to the housing benefit cuts so far. In fact, homeless acceptances have risen 34 per cent since the election.
Open sesame! This will stop councils putting people in homes they cannot afford in work – conveniently forgetting that this is exactly what the government is doing with affordable rent.
Behold! Fairness means the old dodgy chestnut of ‘not living, for example, in some cases living in houses costing £50-£100,000 a year in rent’.
When Humphrys quoted figures from Haringey (one of the four pilot areas) showing that in only 4 per cent of capped families had someone found paid employment, IDS fell back on what other people believe.
‘Let’s reverse this argument and put it to you that there are plenty of families out there working and paying their taxes who will be asking this question: ‘why are we arguing about this, why are we having a debate as to whether or not somebody should be earning more than they are on welfare payments not working?’
This shifts the proof from ‘I believe this to be right’ to ‘lots of other people believe it to be right’ and lots of opinion polls about the popularity of the cap would appear to bear this out regardless of the facts. The principle that nobody should earn more out of work than average earnings for someone in work does get wide support, especially among people who cannot conceive how much rents cost in London. Except of course that it a false comparison based on a fictional benefit system. Anyone in work with a high rent or a large family (the two main groups affected by the cap) will also be getting tax credits and housing and other benefits too.
All of which is why the benefit cap and the faith-based politics of IDS are so pernicious. Using the same logic, he could just as easily argue that it is wrong that someone working part-time should apparently get more than someone working full-time, or that the cap should be reduced still further (which is already a serious proposition among some Conservative MPs).
So now we know: 10 years of certainty on rents, five years on grant and who knows how many more years of welfare ‘reform’.
The future has come into much clearer focus this week following the spending round on Wednesday and the investment announcement on Thursday. And, as luck would have it, all of this coincided with the biggest housing conference of the year.
The CPI plus 1 per cent rent formula from 2015/16 is pretty good news for social landlords that had been planning for something less generous. On current levels of inflation it’s actually more than RPI plus 0.5 per cent. However that misses out the +£2 a week bit of the old formula and perhaps that, plus different forecasts of the gap between the two measures, explains why the Treasury also expects to save around £1 billion over the spending round period.
I had to leave Manchester before Mark Prisk delivered the sting in the tail of the good news about the £3.3 billion affordable housing programme from 2015/16: faster disposal and conversion of vacant stock.
The last thing I heard was Lord Freud attempting to reassure providers about the universal credit and struggling to reassure anyone about the bedroom tax. As others have pointed out already, his justification for something that will drive many tenants into the hands of doorstep lenders charging 5,000 per cent was that it is needed to keep interest rates low. He is not the first work and pensions minister to use this dubious argument incidentally – it’s part of a much bigger process and more benefit cuts are to come.
Put all of that together and this was a momentous week for housing. It could also hasten the commercialisation of many housing associations and accelerate the slow death of what we used to call social housing in England.
‘Affordable’ rent now seems to have moved from being a temporary policy to keep the show on the road to a more long-term plan for near-market rents that defines affordability in relation to the market rather than what people can actually afford to pay. As research published by the Joseph Rowntree Foundation today shows, rising rents are part of a much bigger inflationary squeeze on people on low incomes and that is set to get worse.
The new affordable housing programme will apparently deliver 165,000 affordable homes for £2.8 billion of grant. As Pete Jefferys points out on Shelter’s policy blog, that implies an average grant of £17,400, compared to £22,000 under the 2011-2015 programme and £60,000 under the 2008-2011 one.
Treasury chief secretary Danny Alexander hailed it as ‘the biggest public housing programme for over 20 years’. Judged strictly in terms of the number of units, he’s right – is it completely ridiculous to imagine that the starting point was being able to make that claim?
Allowing him some leeway, I’ll ignore the fact that most of the money will come from private finance and delivery will mostly be through housing associations that count as private for public borrowing purposes. However, he over-egged the hype when he also claimed it was ‘the most ambitious and significant investment in affordable housing for a generation’. In fact, in real terms it is not just a cut on the previous spending round but probably the smallest investment since the mid-2000s.
It would seem that the Treasury and DCLG decided to ignore warnings from housing associations that they do not have the capacity for another round of affordable rent. That sounds logical when they have cried wolf many times before over the last 25 years only to fall into line and compete for the cash when it becomes available. However, the fact that the DCLG considered tweaking the rent formula to disadvantage non-developing associations might be seen as evidence that this remains a background concern.
The new programme already appears to include about three times as many affordable rent homes as in the existing one (much of which was social rent inherited from Labour). However, yesterday’s speech from Mark Prisk indicated that the spending round will extend affordable rent even further and faster than before:
‘With all this money and this commitment, there will be expectations about efficiencies. We will need to maximise the value we get out of every taxpayers’ pound… In considering bids for grant, we will expect providers to bring forward ambitious plans for maximising their own financial contribution – and we will expect this to include a rigorous approach to efficiency, along with plans to maximise cross subsidy from your existing stock. We expect providers to take a rigorous approach when looking at every relet and asking how they can use them to build more homes for more families. I expect the result to be a significant change in the number of homes that are either converted to be let at affordable rent or are sold when they become vacant.’
Under the existing programme, relets are limited to around 2 per cent of the existing stock (around 80,000 homes). An increase would mark a significant acceleration of the vanishing act for traditional social housing that I mapped out a year ago.
However, it would also have a much greater impact on the housing benefit bill – and those savings the Treasury is expecting from the rent formula. A recent report by the Future of London found that the proportion of tenants on benefits in affordable rent properties was the same as in traditional social housing. It found that even though rents were nowhere near the 80 per cent of market rent maximum, they were still on average 40 per cent higher than social rents. That means tenants in ‘affordable’ housing are in effect being condemned to the welfare dependency the government claims it is dedicated to defeating.
And the future of welfare will have a profound impact on the policy too. Housing associations will be taking part in affordable rent knowing that they can no longer rely on housing benefit to ‘take the strain’. More and more rents will start to hit the household benefit cap and and housing benefit will also be part of the overall welfare cap that threatens to leave tenants with rising shortfalls year on year. As Matthew Gardiner says in his assessment of the week: ‘you can charge it, but can you collect it?’ could now be the question asked by boards and funders.
Given all that, why take part at all? Why not simply concentrate on development for sale and proper market renting and for working households and use the profits to cross-subsidise their other work? That assumes that this can be squared with the regulator (who they will now have to pay) of course. Just as well then that Julian Ashby made a similar point this week, arguing that social housing could just become a ‘legacy’ for some organisations as they become more commercial.
One potential solution, according to Future of London, would be to make affordable rent a more explicit intermediate tenure for people in low-paid employment, alongside traditional social rents for those on benefits. That sounds logical and it may well be where we are heading. However, given it would be happening alongside a continuing reduction in social rent, it also implies that people on benefits will in reality be corralled into the lowest cost and lowest quality end of the private rented sector.
The government has also rejected the case for more borrowing freedom for council housing. That is a no-brainer that could have delivered tens of thousands more homes and generated growth and jobs much more quickly than the grand infrastructure projects featured in the rest of the Treasury’s Investing in Britain’s Future document.
The Treasury’s hostility to anything that smacks of a return to the past seems to have killed that idea. However, it also seems to have rejected the carefully reasoned arguments put forward by larger housing associations for the freedom to raise their rents and borrow against the income streams to fund more homes. That would still have been unpalatable to some but it would at least have been based on a definition of ‘affordable’ that relates to incomes rather than market rents.
Given that Labour is implying it will stick to the government plans, the spending round has set the ground rules for housing for the next five years at least (though it could at least address the borrowing cap on councils). Despite the good news on the rent formula and future availability of grant, that can only intensify the dilemmas facing housing associations that are already struggling to balance being socially hearted and commercially minded.
16:55 A final thought on that £3 billion for affordabie housing. We won’t know more details until tomorrow when they seem set to be part of the government’s Investing in Britain’s Future announcement. What we do know, though, from the full spending round document, is that the DCLG Communities capital budget will see the second biggest cut across the whole of Whitehall. it will fall 35.6 per cent from £4.7 billion in 2014/15 to £3.1 billion in 2015/16. The smoke and mirrors - and more - will no doubt be revealed tomorrow.
16:30 Although the Lib Dems and Conservatives could not agree on more benefit cuts, that did not stop George Osborne announcing yet more ‘welfare reform’. On top of the long-term cap on benefits including housing benefit, he revealed that new claimants will have to wait seven days before receiving job seekers allowance in future.
Alison Garnham of the Child Poverty Action Group attached that as a ‘foodbanks first’ policy that would hurt families stuck in the low pay, no pay cycle. Once direct payment comes in it also looks like a guaranteed way of generating rent arrears - and/or businsess for payday lenders.
16:15 Back from speaking about blogging to doing the thing itself and we don’t seem much closer to clarity on some of the key spending review issues. Reaction so far is subject to detail that should start to emerge from tomorrow.
As David Orr of the National Housing Federation puts it: ‘The Chancellor has made some broadly positive announcements for housing and health and social care today. But we need the full details of the capital settlement for developing new homes to really understand what impact today’s announcements will have on our ailing housing market.’
And Grainia Long of the CIH said it was unclear whether the spending round passed test it had set that housing should be recognised as an important form of infrastrucutre with detail still to emerge on the £3 billion mentioned by Osborne.
David Orr saw the CPI+1% rent formula as a ‘positive step’ that could help housing associations plan for building more homes but Grainia Long was concerned that it could reduce landlords’ income and therefore their ability to deliver more homes.
Nick Duxbury reports for Inside Housingthat the formula could save the Treasury £540 million a year by 2017/18. the figure comes from policy costings attached to the spending round that say ‘there is expected to be a reduction in local authority current receipts and capital expenditure’.
13:45: Signing out for now to talk about blogging at Manchester 2013 - back here later. Highlights so far are that extra £3 billion for affordable housing (is it new money? grant? guarantees?) and the new CPI plus 1 per cent rent formula (rather than RPI plus 0.5 per cent plus £2 - how will it work, especially with housing benefit included in the welfare cap linked to inflation?). No mention (that I can see so far) of council housing borrowing cap.
13:30 Some highlights from the spending review documents just published here:
‘The Government is today publishing capital allocations for all departments for 2015-16 and will set out shortly how over £100 billion of capital will be invested over the next Parliament in transport, science, schools, housing, broadband and flood defences.
‘The Government is committing to a significant package of capital spending on housing. The Government will set out its approach to affordable housing in Investing in Britain’s Future.This will include giving certainty that social rents will increase by CPI plus 1 per cent a year from 2015-16 to 2024-25.’
13:20 Osborne confirms housing benefit will be included in welfare cap. Will apply from April 2015 set for four years, reflecting inflation but in cash terms. More pain for tenants - and for landlords too?
12:47: Osborne pledges ‘over £3 billion of affordable housing investment’ to balance 10 per cent cut in DCLG’s resource budget. More details to come.
11.55: Interesting quote from Philippa Roe, Conservative leader of Westminster City Council, on council borrowing reported on Andrew Sparrow’s Guardian Live blog:
‘It’s now down to us as local authorities to behave differently when it comes to delivering services, and that covers everything from social finance schemes to early intervention on troubled families. Freeing up restrictions and allowing councils to borrow against their assets is key. That will allow us to build more houses, get more people into work, save money and deliver better public services. The chancellor has an opportunity with the spending round to do exactly this, but he needs to be radical and not let the opportunity slip.’
10:45: Just under two hours to go and here are some of the many key spending review questions for housing:
1) Is housing infrastructure? The good news story coming out of the review will undoubtedly be extra investment in infrastructure (full details of projects tomorrow). However, that tends to mean big-ticket items like roads and rail that deliver easily measured benefits to business while housing tends to be mentioned as an afterthought. How much (if any) housing grant will Osborne retain – and could he even attempt to spin a cut as an investment boost?
2) Where will the cap fall? Osborne is said to be about to spell out the details of how a cap on many working-age benefits will operate. Much of this will be after housing benefit is absorbed into universal credit. Are we set for years of below-inflation and below-rent increases in housing payments to private tenants – and how far will the cap extend to the social sector too?
3) What about rents? Speaking of which, the social sector will be watching closely for signals on the future of ‘affordable’ rent and the government’s renewal or otherwise of the RPI plus 0.5 per cent rent formula. Where will the balance be struck between the needs of landlords for certainty about future revenue and investment, Treasury concerns about rising housing benefit and the needs of tenants whose incomes are set to rise by much less than that? Will the government attempt to squeeze non-developing associations through the formula?
4) What about council borrowing? If Osborne and the coalition are even remotely serious about tackling the affordable housing crisis, they have to set local authorities free. The CIH argues that raising the borrowing cap by £7 billion could generate 75,000 homes in the next five years. Surely nothing can stand in the way of such a no-brainer – or can it?
5) What about London? It’s where the housing crisis is most acute and a certain mayor wants to take control of the capital’s stamp duty and other taxes. The G15 argues a major programme of affordable housing could be funded by discounted land and ring-fenced stamp duty receipts. Will Osborne really hand over the money or put the idea quietly on a Treasury shelf?
8.30: Here are the highlights of the advance speculation in this morning’s media.
Most Whitehall departments face cuts of 8-10 per cent in the review covering 2015/16, according to Nick Robinson of the BBC. Health, schools and overseas aid are protected. Robinson says Osborne will announce more long-term plans to ‘to invest more in Britain’s infrastructure in building roads, railways and housing’ plus more details of a long-term cap on much of benefits spending.
The Financial Times says Osborne will sweeten the £11.5 billion of cuts by promising ‘long-term capital commitments to road, rail, energy, housing and broadband projects’. Capital spending priorities for the next five years will be detailed later, with details of which specific infrastructure projects will be funded to follow on Thursday. While energy infrastructure will be high on the list, George Parker and Elizabeth Rigby say: ‘Housebuilders will also be given a boost as the government outlines details for the next cycle of the affordable homes programme.’ Let’s hope it’s not just housebuilders.
Osborne will unveil details of a consultation on a long-term welfare spending cap, which would cover disability and housing benefits, according to The Guardian. Though the review will only cover 2015/16, Patrick Wintour says Osborne will try to put Labour on the back foot by challenging it to accept the need for more cuts in the two years after that and has more on the politics of that here. As local government looks set to be in the firing line for more cuts, The Guardian says Osborne will set out the size of the single local growth fund while Treasury chief secretary Danny Alexander is expected to reveal details of the extension of community budgets in a bid to save £4 billion by ending duplication of services. A separate ‘good news’ announcement on infrastructure projects will follow on Thursday.
Just to lighten the mood, Andrew Grice in The Independent has experts forecasting that further cuts and tax rises will have to follow after 2015/16 whoever wins the next election, while Allister Heath in the Telegraph says turmoil in the financial markets could torpedo Osborne’s plans before they have even been published.
Elsewhere, the Centre for Cities has a briefing on the single local growth fund asking whether there will devolution or disappointment. The Social Market Foundation has a briefing putting the spending review in the (depressing) context of more austerity to come after 2015/16.
For more on what’s at stake for housing, including rents, council borrowing and more, see Michael Haddon’s feature in last week’s Inside Housing.
A stark warning of the consequences of market failure in the housing system comes from an independent commission today.
The broad-based group set up by the Royal Institution of Chartered Surveyors is chaired by Michael Newey, RICS president elect and chief executive of Broadland Housing Group, and also includes Mark Clare of Barratt, Nick Jopling of Grainger, James Pargeter of Deloitte Real Estate, Paul Tennant of Orbit and Duncan Maclennan of the University of St Andrews.
They argue that: ‘High house prices, complemented with high levels of housing unaffordability are the greatest signs of market failure. This in turn has an adverse effect on labour mobility, commuting, productivity and job creation. This commission recognises the negative impact that a poor housing system has on the wider economy and hopes to see it elevated still higher on government agendas.
In other words, what the commission argues are ‘clear signs of market failure’ include negative externalities that go far beyond housing and require a switch away from the ‘short-termism’ that has characterised policy for the last 50 years.
However, in an illustration of just how difficult it is to break away from a short-term approach, the commission seems to face both ways on current government policies. For example, it manages to ‘welcome’ help to buy as one of several ‘positive initiatives to help the state of housing supply’ and as ‘making a positive impact’ while virtually everyone else has criticised it for boosting demand while doing nothing for supply. And it ‘welcomes the gradual departure from falling house prices across most UK regions’ while warning of ‘signs of the next boom already emanating from faster growth regions’.
There are similar problems with some of the recommendations. For example, the last government considered allowing self-invested private pension schemes (SIPPS) to invest in housing only to drop the idea over fears of a massive new, tax-subsidised boom in buy-to-let. The commission says that this should be restricted to newly developed property, but unlike the build to rent schemes that are specifically for rentals, this could still mean affluent holders of SIPPS pricing out owner-occupiers in the new-build market.
However, those caveats aside, the report offers a compelling analysis of why governments need to tackle housing and some good ideas on how to make policy more effective.
Alongside a call for better policy scrutiny, there is a stark warning to the government about the ‘unintended consequences’ of welfare reform that is all the more powerful for coming from such a broad-based group. ‘The UK government has to recognise that driving down capital subsidies, in the context of changing welfare support for rents, will expose not-for-profit housing providers, who continue to house low-income families, to excessive risk,’ it says. The report calls for the scrapping of the under-occupation penalty in cases where tenants are unlikely to secure another home in the same travel to work area – and especially in smaller communities and rural areas.
More radically, it calls for the right to buy to be replaced with a new portable home ownership discount for tenants that could be integrated with help to Buy. That would represent the end of the Conservatives most iconic (and controversial) housing policy but the commission argues this would preserve low-income homes while giving more choice to people who aspire to buy.
And it makes the case for bricks and mortar subsidies too: ‘Decent housing for poorer households always requires subsidies. The least expensive form of subsidy for low-income housing provision in the long term is often still likely to be a capital subsidy to providers, as rent levels can then be cheaper.’
To help pay for that, the UK administrations should give social landlords at least 15 years of certainty on rent setting to help ensure the attractiveness of the sector for private investors and funders. However, the report warns that has to take account of welfare policy. ‘If rental levels exceed maximum housing revenue subsidies, the element of risk introduced will make the affordable housing sector unattractive to third party investors, as well as putting strain on the collective financial viability of the sector.’
Extra investment would come too from allowing local authorities to use their prudential borrowing capacity to build homes and to introduce additional council tax bands on high-value homes with the extra money ring-fenced for affordable housing.
The report calls for a doubling of targets for the release of public land, backed by assumptions that it will be for residential purposes except where demand should not exist, an that a third of homes will be affordable and that it will be on a pay as you go basis. Land owners in general would be ‘required to use their best endeavours’ to ensure that construction starts within three years.
More controversially, the commission recommends a new ‘affordable rented housing’ planning class for fringe sites on the edge of existing settlements that would not easily get permission for full market activities. The homes would be let at 80 per cent of market rent for at least 15 years before being sold or let at higher rents. It’s an idea that sounds like it has potential to open up more sites but it sounds like a red rag to Simon Jenkins and co.
On private renting, the commission says the government should review tenancy arrangements for longer-term lets ‘that recognise tenants’ interests without reducing landlords’ rights’. If you’re thinking that sounds easier said than done, it proposes a ‘rental covenant’ within section 106 arrangements guaranteeing that homes will be available for rent for a specific period.
There is also a plea to all political parties to ‘make a commitment not to introduce rent controls’ as this would reduce supply. Opinion within the Labour Party has recently been moving in the opposite direction.
On energy efficiency of existing homes, the commission proposes some radical action on VAT, stamp duty, rental levels in social housing and Green Deal interest rates. It also recommends an idea that seems certain to annoy Eric Pickles: that anyone building an extension should be required to improve the standard of the rest of their home to at least EPC level C.
I suspect most people will disagree with some things in this report. However, despite my own earlier caveats, the fact that such a diverse commission can agree on the need for policies ‘to facilitate housing supply of all tenures rather than showing bias to just one or two’ is still real progress.
As average asking prices pass £250,000 for the first time, two-thirds of the under-45s seem to have given up on the idea of ever owning a home.
Two surveys out today underline the point that what’s ‘good news’ for existing owners is exactly the opposite for people struggling to get on to the housing ladder.
Rightmove says that the market in the ‘under-priced’ (its word not mine) South East has ‘lifted off’ with asking prices rising by 14.8 per cent in the first six months of 2013 alone. However, the average increase across England and Wales is 10.4 per cent and the increase is even 5.8 per cent in the least buoyant region, the East Midlands.
If anything like that was repeated across the whole 12 months, 2013 would be appear to be set for a boom unlike anything seen since the credit crunch hit in 2007. True these are asking prices and prices actually achieved are still in the relative doldrums but they indicate that existing owners are reacting predictably to the start of Help to Buy by ramping up their demands.
Contrast that with another survey out today from the Halifax. Its Generation Rent report shows that only 32 per cent of non-owners aged 20-45 have a realistic plan to buy within the next five years. The remaining 68 per cent are split between those who like to buy but don’t think they will ever be able to (36 per cent), those who have given up because they were rejected for a mortgage (2 per cent) and those who don’t want to buy and haven’t tried (29 per cent, up from 23 per cent in 2011).
Deep pessimism about earning enough to buy is one reason for the split: the average mortgage that they think they can afford is £425 a month whereas the amount currently required by the average first-time buyer is £580 a month.
Problems obtaining a mortgage are another: over half of Generation Rent and an even higher proportion of their parents think it is ‘very hard’ or ‘virtually impossible’ to get one.
And Help to Buy does not seem to have changed the mood among buyers as much as it obviously has among sellers: 30 per cent of 20-45 year olds think it and similar schemes will work but 30 per cent believe the opposite.
Surveys like this can usually be taken with a pinch of salt but this one has some worrying implications for the future too. Some 71 per cent of Generation Rent fear that the country is in danger of being divided by social and economic differences between owners and non-owners and 58 per cent think it will create long-term social problems.
Perhaps most alarmingly, 57 per cent in the Generation Rent survey think that without a foothold on the property ladder they will be unable to retire. That perhaps shows a very low awareness of housing benefit and, as I’ve blogged before, the financial consequences of falling ownership will be huge for the Treasury.
That’s just one of the implications for the housing market and for the housing system as a whole.
Some 52 per cent of Generation Rent think Britain will become a nation of renters within the next generation – up from 46 per cent in 2011. And more people think Britain is becoming more like Europe, where renting is the norm.
However, as the report points out, European law means rental agreements are much longer than the six and 12 months contracts that are the norm in the UK. Pressure for reform can only grow.
So too is the evidence that Britain’s housing market has moved beyond dysfunctionality into something even worse. Last week, the National Housing Federation published figures showing that the number of people aged 30-44 has fallen by 9 per cent in rural areas thanks to soaring prices.
Meanwhile the Intermediary Mortgage Lenders Association published a discussion document warning that the regulatory response to the financial crisis has ‘hard wired’ a lower level of ownership into the system. It points out that on current trends only a third of 25-34 year olds will be owners by the end of the decade. That is half the level seen in 1993.
Warning that the regulatory response an imbalance between the regulated mortgage market and the unregulated buy to let, with the continuing availability of interest-only mortgages giving landlords a marked competitive advantage over would-be first-time buyers.
If nothing else will, perhaps the prospect of that soaring benefit bill for pensioners will concentrate government attention on more fundamental and long-term reforms to the whole housing system?
Ed Miliband has ended three decades of political consensus that it’s better to subsidise rents than new homes but changing course will not be easy.
The Labour leader’s speech in Newham this morning is significant in all kinds of ways: for the party’s positioning ahead of the next election; for the implied switch to contributory benefits and ‘something for something’; for tackling low pay; and for the careful use of ‘social security’ to avoid the loaded term ‘welfare’.
Even the setting – Newham Dockside – is significant since it looks very much like an endorsement of the more proactive but harsher approach to benefit claimants adopted by its mayor Sir Robin Wales.
All of those things could have major implications for housing but none so much as the plan to shift spending back from housing benefit to bricks and mortar – the end of ‘letting housing benefit take the strain’ and admitting the failure over decades to build enough homes.
Ed Miliband argues that:
‘We can’t afford to pay billions on ever-rising rents, when we should be building homes to bring down the bill. Thirty years ago for every £100 we spent on housing, £80 was invested in bricks and mortar and £20 was spent on housing benefit. Today, for every £100 we spend on housing, just £5 is invested in bricks and mortar and £95 goes on housing benefit. There’s nothing to be celebrated in that. And as a consequence we are left with a housing benefit bill that goes up higher and higher. For the simple reason, that we have built too few homes in this country and therefore we see higher and higher prices, particularly in the private sector.’
It is a very welcome and long overdue move but, rather like getting toothpaste back into the tube, it will not be simple to achieve the switch. First, although it makes sound financial sense over the long term (see the work by PWC for L&Q quoted in the g15’s spending review submission) it will not deliver savings in the short term given the upfront capital grant required.
Second, unless the switch is carefully handled, it risks creating losers among tenants still dependent on housing benefit to pay their high rents.
Labour seems to have two mechanisms in mind. The first is to get local authorities to negotiate down the cost of rents through bulk purchasing from landlords. Miliband said:
‘At the moment, we expect individual families to negotiate with their landlords. In these circumstances, it is almost inevitable that tenants end up paying over the odds. And so does the taxpayer, in the housing benefit bill. It’s time to tackle this problem at source. So a Labour government would seek a radical devolution to local authorities. And Labour councils in Lewisham, Liverpool, Leeds, Manchester, Sheffield and Birmingham have all come to us and said that if they had power to negotiate on behalf of tenants on housing benefit, they could get far greater savings than the individual on their own. So a Labour government would give councils this power. Bringing the cost of housing benefit down. And what is more, we would let them keep some of the savings they make on the condition that they invested that money in helping build new homes. This is the way we can start to bring about the shift from benefits to building.’
That begs the question of why councils are not doing this already but under the current system they do not have much incentive to do so. The IPPR advocated localising housing benefit as part of a new system of affordable housing grants (the opposite of what is happening under universal credit). It’s not clear whether Labour would go that far but there would have to be some mechanism for verifying the savings and creating the incentive.
The second mechanism would be a cap on structural benefits. This seems to be different from the regional caps on overall benefits that were the subject of advance press speculation and the cap proposed by Iain Duncan Smith on annual managed expenditure (AME). As Miliband put it:
‘The next Labour government will use a three-year cap on structural welfare spending to help control costs. Such a cap will alert the next Labour government to problems coming down the track. And ensure that we make policy to keep the social security budget in limits. Introducing greater discipline, as ministers from across departments will be led to control the big drivers of spending.
‘Structural’ welfare spending means benefits that are not a function of unemployment and the state of the economy. That would appear to include housing benefit. The dots would be joined at last between a rising housing benefit bill and not building enough homes but would the sums stack up over the three years?
In the social sector, an obvious issue is how the cap could be reconciled with social rents rising in line with the RPI plus 0.5 per cent formula that is due for renewal in 2015. If rent levels were capped that would help control housing benefit but it would come at the cost of lower borrowing capacity and lower investment in new homes. Bricks and mortar and personal subsidies can merge with each other in complex ways.
In the private sector, it begs the question of what happens if councils have wrung all they can out of bulk purchasing and rents and the housing benefit bill still keeps on rising. On the Today programme this morning shadow work and pensions secretary Liam Byrne put it this way:
‘The housing benefit bill is going up and up and up. We’re spending 95 per cent of the money we spend on housing on housing benefit and only 5 per cent on building houses. That doesn’t make sense and what a lot of councils are saying to us is if they had more power to regulate and control prices in the private rented sector they could create some savings which we could recycle into building more homes.’
‘The power to regulate and control prices’ certainly made me wake up since it implies the end of another 35 years of political consensus on housing. As Evan Davis asked, did he mean the return of rent control? Byrne replied:
‘I think that might be going a bit far. What I’m saying is that local councils are saying they’ve got lots of ideas of how they can make savings and they’d be prepared to crack on with that if there’s a deal on the table to share in the savings to build more houses. The reason why we’re saying a long-term cap on social security spending makes sense is that it forces you to engage in these long-term reforms.’
‘Might be going a bit far’ does not sound to me like rent control is being ruled out completely (and later on the Today programme Polly Toynbee argued that it was definitely on the table). How else will Labour keep within the cap if rents and housing benefit are still rising unless it wants to land tenants with further shortfalls?
Coalition ministers rarely fail to taunt Labour with the fact that the number of affordable homes fell under the last government.
Conservative housing minister Mark Prisk and Lib Dem junior communities minister Don Foster deployed it yet again at DCLG questions yesterday.
Labour’s Jack Dromey attacked the government’s record on housebuilding and called for a rejection of the ‘economic illiteracy of austerity, which is pushing up the costs of failure through additional borrowing and soaring housing benefit bills’. He asked: ‘Does the housing minister agree that the time has come to invest in badly needed social and affordable homes to rent or buy, creating jobs and apprenticeships, bringing down the costs of failure and getting our economy moving?’
In response Foster was quick to deploy the favourite stat:
‘I think that the whole House will have been somewhat amused by the cheek of the hon. Gentleman, given that under his party’s administration we saw a reduction of 421,000 in the number of affordable homes. This government have introduced measures to reverse that trend, and we hope to announce further measures in the near future.’
Later Mark Prisk also had the number to hand to reply to an attack on Conservative Hammersmith & Fulham council by local Labour MP Andy Slaughter. ‘We are delivering on the completion of 170,000 more affordable homes; the Labour Government presided over the loss of 421,000 homes,’ said the housing minister.
These are just the two latest examples of the way that Tory and Lib Dem ministers alike use the 421,000 figure to attack Labour. With good reason too, since it is a very rare example of a government statistic that is both accurate and has been endorsed by the independent UK Statistics Authority.
Following a complaint from Dromey last year about misuse of statistics by former housing minister Grant Shapps, UKSA chair Andrew Dilnot replied that: ‘Official estimates of net change are available for social rented dwellings, but not for the wider stock of “affordable” housing beyond this category. They show an overall reduction of 421,000 in the stock of homes rented from local authorities and housing associations over the period 1997 to 2010.’
For the record, DCLG dwelling estimates show that there were 4,386,000 council and housing association homes when Labour came to office in 1997 and 3,966,000 when it lost power in 2010 – a fall of 420,000. The reductions were 150,000 in its first term, 268,000 in its second and 3,000 in its third.
On the face of it, then it’s game, set and match to Shapps and Prisk – and also to Foster and his Lib Dem predecessor Andrew Stunell.
But there are good reasons why the 421,000 figure could be a hostage to fortune.
First, will the coalition actually achieve the 170,000 affordable homes quoted by Prisk? Ministers insist they will but the programme has been slow to get off the ground to put it mildly. As the National Audit Office noted last year, more than half of the output is scheduled for the final year of the programme.
Second, as Dilnot pointed out, the 421,000 figure refers to ‘social rented’ rather than ‘affordable’ homes. The coalition’s 170,000 figure does include some social rented (a legacy of previous Labour plans) and some shared ownership homes but 80,000 homes for affordable rent. As I’ve argued before, the new programme also relies on the conversion of up to 80,000 existing social rented properties to affordable rent.
Third, though Labour now admits it did not do enough on new homes, one of the main reasons why the affordable housing stock fell between 1997 and 2010 was that right to buy sales exceeded new starts. Between 1997/98 and 2009/10 600,000 council and housing association homes were sold to tenants. Sales peaked at 84,000 in 2003/04 but after Labour introduced caps on discounts, the numbers fell dramatically and, following the credit crunch, they slumped to just 3,000 a year.
However, elsewhere in yesterday’s DCLG questions Prisk was boasting about the impact of coalition measures to boost right to buy sales:
‘Since we reinvigorated the right to buy last year, sales have more than doubled, to the highest level in six years. We believe it is vital to ensure that all eligible tenants know exactly how to exercise their right, which is why this month we are writing directly to more than 500,000 households right across England.’
Figures released last month show that there were 5,942 sales in 2012/13 – and that the 2,449 sales in the fourth quarter was more than four times the total in the same period of 2011/12. That’s before Prisk’s publicity drive and before measures announced in the Queen’s Speech to reduce the eligibility period from five years to three.
The coalition inherited a council and housing association stock of 3,966,000 in 2010. In its first two years, despite some of the lowest right to buy sales in the last 35 years, the total stock increased by just 27,000 to 3,993,000.
So Prisk is trying to have his cake and eat it too. The main reason for the 421,000 fall under Labour was a policy that he strongly supports. It was around half the fall seen under the Conservatives between 1979 and 1997 when right to buy sales were at their peak.
However, there was also one brighter piece of news in yesterday’s DCLG questions: a hint from Don Foster about the spending review. Asked by Green MP Caroline Lucas whether the government would ‘look again at lifting the current cap on council borrowing for house building’, Foster replied that ‘We are looking at the point the Hon. Lady has raised and an announcement will be made on 26 June.’
That and much more will be required in the review. Otherwise, if the government succeeds in reinvigorating the right to buy as much as Prisk boasts, the social housing stock will continue to shrink under his government just as it has under the last two. Even as the need for it increases exponentially.
So, George Osborne, what about some Help to Build to go with all that Help to Buy?
The chancellor’s multi-billion flagship housing policy is under fire from virtually everyone because they can see what the result will be of stoking up demand while doing nothing about supply.
Now the CIH, NHF and g15 are all calling on Osborne to fund an expansion of affordable housing in the spending review for 2015/16 that will be published later this month. That is what they always do ahead of spending reviews of course, but they are deploying some powerful arguments.
The CIH argues that there is little prospect of private developers building the homes we need. We have only ever built enough homes when the state has played an active role and doing so would deliver wider benefits for the economy: every £1 of spending on construction generates £2.84 of economic activity; and 56p of every £1 invested in housing returns to the Treasury.
The NHF quotes figures from the IPPR showing that for every £1 spent on housing, 95p goes on housing benefit and only 5p on new homes. ‘The simplest and most effective way of redressing the balance and reducing the housing benefit bill is build more affordable homes.’
The g15 cites modelling by L&Q and accountancy firm PwC that looked at three different scenarios for financing affordable housing beyond 2015: a continuation of affordable rent; a return to higher capital grant plus lower social rents; and a move to full market rents with housing benefit taking the strain. The best value option for the taxpayer is higher grant with lower social rents.
The next three weeks will tell whether the government is listening or turning its usual deaf ear to those arguments. Recent history suggests the latter but the arguments are being made with renewed confidence given the growing political importance of housing. When Osborne reveals some of the detail on June 26, it’s worth looking out for six things in particular:
Housing’s place within infrastructure spending. The coalition admits that it cut capital spending too much in its first spending review and seems receptive to arguments made by the CBI and others about the economic impact of big infrastructure projects. Part of the justification for those is the supply-side impact of road and rail schemes on business costs and efficiency. A strong case can be made that new homes do the same, not just in terms of the direct impact on jobs and growth, but the benefits to employers too (see the NHF’s survey showed last week). The spending review will set out plans until 2020/21 ‘for the most economically valuable areas of capital expenditure’. As the NHF argues, that should include housing.
The future of subsidy. For a long time after the 2010 spending review it looked like there might not be one. Many people feared that capital subsidy would disappear altogether in the one to follow. A statement by Grant Shapps at the CIH conference last year (‘In all honesty I find it difficult to imagine a world with no government grant for housing’) was interpreted optimistically by many people but what will his successor Mark Prisk be saying as Osborne reveals the spending review in the middle of this year’s conference? It’s worth noting that virtually all of the new schemes announced by Osborne in the last 12 months, including Help to Buy, have relied on financial wheezes such as government guarantees rather than direct spending.
Meanwhile, if grant does continue, what will it fund: more affordable rent, a return of social rent or low-cost home ownership? The CIH calls for a £2 billion per year programme to deliver 55-65,000 homes a year in a mixture of the three, with a separate funding stream within it reserved for specialist and supported housing at social rent levels. However, it adds that affordable rent is unlikely to be sustainable for long given the rate at which it consumes providers’ financial capacity, and calls for a fundamental review of longer-term funding for sub-market housing.
What happens in London. Mayor Boris Johnson wants to take control of the multi-billion revenue generated in the capital through stamp duty and other taxes and decide how they are spent. The G15 is calling for a capital subsidy funded affordable and social rent programme funded with the money coming from discounted land or from grant that could be financed by ring-fencing stamp duty. It may make sense to use the receipts from taxes on London’s soaring house price to solve the affordability crisis that they have created but will the Treasury really be prepared to give up control? And should it, given that the effects are felt well beyond the capital too?
The future of council housing. It seems like a no-brainer to allow local authorities to borrow more to build affordable homes. The CIH argues that raising housing revenue account (HRA) borrowing caps by an additional £7 billion would allow councils to build 75,000 homes over five years, creating 23,500 jobs and generating £5.6 billion of economic activity. Boris Johnson’s London Finance Commission also called for the caps to be lifted. Given the low levels of existing debt on council housing, that would be easily sustainable within their financial capacity. However, will Osborne and the Treasury really be prepared to go against 35 years of financial orthodoxy that says council housing is bad news and borrowing for it even worse?
What happens to rents. The current rent formula for social housing (rent rises of RPI plus 0.5 per cent +/- £2 a week) expires in 2015. A chancellor looking to cut spending, who has already restricted the increases in other benefits to the lower CPI rate of inflation, might well see that as a target. As the NHF and CIH submissions point out, that would be disastrous for future lending and business and investment plans. The chancellor promised in the Budget to set out a ten-year rental settlement and they say it is vital that this is based on the existing formula, which should be extended until 2025. The G15 calls for: ‘A new settlement on rents which strikes a balance between what people can afford to pay and the need for investment in new homes. For now the current formula should be extended allowing time for discussion about what our residents can afford to pay. Only then should we reset the target rent and move towards it in a way which is fair for residents and viable for housing providers.’
The implications for housing benefit of a cap on AME spending. The cap on annually managed expenditure (AME) announced by Osborne in the Budget may have sounded for a few micro-seconds like a purely technical measure but it is one that could have massive implications for housing. AME accounts for around half of all government expenditure and two thirds of that is social security and tax credits. So, although reports suggest Osborne has ruled out further cuts in working age benefits thanks to opposition from the Lib Dems, the AME cap suggests the opposite. As the CIH points out, that would have implications both for tenants’ wellbeing and landlords’ business plans (Moody’s has already downgraded the credit rating of 29 housing associations because of other welfare reform).
Inside Housing is calling for a long-term commitment to grant funding for affordable homes in the spending review. Support the Grant Britain Homes campaign.