Thursday, 02 October 2014

Inside edge

Help to rent

Wed, 6 Nov 2013

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.

Bonus culture

Thu, 31 Oct 2013

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. 

Drawing the line

Wed, 30 Oct 2013

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?

Beyond facts

Wed, 23 Oct 2013

The routine is familiar by now: researchers question government policy, government rubbishes researchers.

Last week it was the University of York, the bedroom tax and Esther McVey, today it’s the Chartered Institute of Housing, the benefit cap and Mike Penning but the gist was the same.

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. 

One direction

Tue, 22 Oct 2013

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?’

Williams responded:

‘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. 

Balancing act

Thu, 17 Oct 2013

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

To read more about the private rented sector click here.

Getting real

Tue, 15 Oct 2013

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.

On the sidelines

Fri, 11 Oct 2013

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. 

Who buys it?

Wed, 9 Oct 2013

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). 

Return to sender

Mon, 7 Oct 2013

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). 

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