Affordable rent may have kicked in at last but affordable housing starts are still down 57 per cent on a year ago. Get set for another row about stats.
It is of course pure coincidence but 24 hours after Jack Dromey and Labour went to the blankets in the housing stats war with Grant Shapps (well, ok, referred him to the UK Statistics Authority) perhaps the most politically sensitive of all figures were published this morning.
Six months ago the Homes and Communities Agency (HCA) published its affordable housing figures, they showed a calamitous 97 per cent fall in starts on the previous year to just 429 between April and September. They were released with no fanfare within 48 hours of the launch of the government’s housing strategy and led to extensive recriminations.
There was no such news background for this morning’s publication of the full year stats – just the opening of the biggest housing conference of the year.
So, at the risk of sparking off another stats row, here are the two very different sides to the story.
In the Grant Shapps corner, affordable housing starts are more than 30 times what were six months ago, up from 429 in April-September 2011 to 15,269 in October to March. That’s mainly thanks to the first 11,130 starts under the affordable rent scheme but starts of social rented homes trebled to 789 and starts for affordable home ownership were almost 20 times higher at 3,278.
In the Jack Dromey corner, total affordable starts for 2011/12 are down by 68 per cent on 2010/11 and social rented starts are down by 97 per cent (yes, that figure again, from 35,690 to 1,048).
The midpoint comparison between October to March 2012 with the same period a year ago leaves total affordable starts down 57 per cent from 35,737 to 15,269. Starts for affordable home ownership are also down by more than half and social rented starts are down, yes, 97 per cent from 26,330 to 789.
All of these figures exclude open market starts delivered under the HCA programme (4,269 in 2011/12 against 8,265 in 2010/11). These are ‘delivered under the Property and Regeneration Programme include some starts and completions which are made available at below market price or rents but do not meet the definition for affordable housing’.
So there’s some support there for the government’s argument that the calamitous fall six months ago was down to a hiatus in the programme as affordable rent got going but not much. Just as the point when investment in housebuilding could be generating the homes and jobs we need it is falling.
The HCA concentrated on the fact that it had met its target for completions. Here rhe figures do not oscillate as wildly but show a similar patter to starts. Total affordable completions were three times higher in October to March than April-September last year at 38,877. There were the first 1,685 affordable rent completions, about four times more for affordable home ownership and more than twice as many for social rent.
Compared with the same period a year ago, total affordable completions were up 7 per cent at 38,877, with social rented starts down slightly.
Taking 2011/12 as a whole, affordable completions were down 7.5 per cent from 55,860 to 51,665 and were down slightly for both social rent and affordable home ownership. Taking total completions under the HCA programme (including open market) were down from 64,277 to 59,451, which was comfortably ahead of its target of 41,000.
So plenty of ammunition there for another stats war there and for the Labour and Conservative news lines. However, whatever, the underlying trend, and whether there is a further recovery in the total numbers this year, the balance of what constitutes ‘affordable’ has shifted decisively away from social renting.
Have we really learned our lessons from our post-war housing mistakes or are we still making some of the same ones?
That was the question running through my mind after watching the brilliant and sometimes heart-rending first episode of The Secret History of Our Streets last night. At the risk of sounding like a broken record, you really should make time to catch it on iPlayer if you missed it.
The series looks at the history of six different areas starting from the moment that Charles Booth produced his famous poverty maps of London in the late 19th century (the LSE has more information on them here). The first episode looked at changes in the streets around Deptford High Street in south London in the first half of the 20th century followed by the grand schemes of the post-war era.
We heard how the London Plan earmarked the working class streets of south and east London for slum clearance, with many people moved to the new towns and estates around and outside the capital and most of the terraces replaced by new estates. For more on Sir Patrick Abercrombie, the man with the plan, and the connection with David Cameron, see my other blog here.
We felt the impact on the close-knit Price family, who had lived in the area for several generations but saw their homes wrongly condemned as ‘slums’ (the programme even produced environmental health reports from the time admitting as much). We saw how most of them were dispersed to the new estates while the tower blocks that sprang up on the sites of their homes rapidly became hard to let.
And we heard from a Lewisham councillor who admitted he was powerless to stop the process and had to try and choose which street to save.
Just to rub it all in, on one of the few streets that survived the bulldozers we saw an estate agent with a cut-glass accent pointing out the period features of a home on the market at £750,000.
It was a brilliant opener to a series co-produced by BBC2 and the Open University (which has much more information on its website) that made great use of the Booth maps and archive photos but like all TV it left me wondering a few things.
Were things really quite as clear-cut as the programme made out? Stories rarely are in my experience and I wonder if the nuances of this one got left on the cutting room floor. For example, the former councillor was rather ambushed when he went back to Deptford High Street. He was critical of what had happened but not really given the chance to explain what he’d done at the time.
Nevertheless The Secret History was a powerful reminder of housing’s (or more accurately planning’s and environmental health’s) original sin: wholesale clearances of districts of London and the replacement of ‘slums’ with ‘modern’ estates on the assumption that the professionals knew better than the people who lived there.
And have we really learned our lesson? For all that community consultation and empowerment there are some who would beg to differ.
Just ask residents of the Welsh Streets in Liverpool or the other housing market renewal areas. Or talk to campaigners fighting to stop the redevelopment of the West Kensington and Gibbs Green estates in west London. Or read Martin Hilditch’s feature for Inside Housing last month on the residents of the Q blocks that are facing demolition in Nottingham.
There’s been a real change in the way the government is talking about housing investment over the last week. Is it just talk or more than that?
Several days out of news and twitter contact have left me catching up with what seems a noticeable change in tone from the Lib Dem side of the government.
Deputy prime minister Nick Clegg kicked things off a week ago in an FT interview in which he put housing and schemes to reduce youth unemployment alongside infrastructure as potential beneficiaries of a ‘massive amplification’ of credit easing schemes.
Another report in the FT yesterday revealed that chief secretary to the Treasury Danny Alexander is looking at ways to make it cheaper for housing associations to borrow more money in the capital markets. The credit easing scheme would apparently involve allowing the Bank of England buy social housing bonds as part of its quantitative easing programme. Gavriel Hollander has some more details for Inside Housing here.
The scheme appears to be as much about forestalling a problem with bank lending (a separate report quotes a senior executive at one of the big lenders as saying that the industry as a whole is losing £500m to £1bn each year on its social housing portfolios) as about new investment but it does open up some intriguing possibilities.
First, the Treasury is expected to launch some proposals on social housing REITs soon. As Nick Duxbury revealed in IH earlier this month, a consortium of 10 housing associations is looking to list a company made up of 10,000 homes on the Alternative Investment Market in September. Whatever you think of mixing social housing and the stock market, this looks like a significant move.
Second, while the credit easing plan may not represent the sort of full-blown quantitative easing for housing that I’ve advocated in the past, it is a nod in the right direction. Until now the assumption has been that Mervyn King, the head of the Bank of England, will not countenance the use of QE outside the financial sector. However, if the Treasury instructs him to buy social housing bonds in a limited programme, the precedent is there to buy bonds for something altogether bigger.
So far, so good but is this just talk? I seem to remember hints about housing investment from Danny Alexander ahead of last year’s party conferences that came to nothing. Is it just the Lib Dems? On Saturday’s Today programme (listen about I:40 in) Conservative backbencher Damian Collins welcomed the idea of more government borrowing to build infrastructure but went out of his way to be dismissive about calls for housing investment.
And isn’t there already an example of government credit easing for housing? Under NewBuy, the government and housebuilders each offer guarantees against mortgages on new-build homes in a bid to make the market less risky for the banks and encourage them to lend. Arguments continue about whether the scheme is working but the banks are still pricing the risk with interest rates of up to 6 per cent. Not much evidence of easing there.
Today sees yet another report warning about the dire state of the housebuilding market. Let’s hope that this really is more than just talk and that the government is finally listening to the overwhelming case for investment in constructon in general and housing in particular.
If you missed Britain’s Hidden Homeless last night it’s well worth making time to catch on iPlayer.
The BBC documentary was presented by Speech Debelle, the Mercury-prize winning rapper with personal experience of what she was talking about. She spent three years sofa surfing and in hostels after falling out with her mum at 19 and wrote the opening song of what went on to be her prize-winning first album while in a hostel.
So this was far more than the standard celeb-fronted BBC3 documentary. You believed her when she said that hidden homelessness is three times bigger than the official figures suggest and that things are worse now than they were for her ten years ago.
Scheduling it against 56Up, the latest incarnation of the original reality TV programme, did not do it any favours but Britain’s Hidden Homeless more than justified itself in that kind of company as it presented four interwoven personal stories on the huge continuum from first staying on a friend’s sofa to sleeping in the park.
Sam, 25, was an unemployed graduate whose mother had to downsize who was running out of sofas. Stephen, 26, had been in and out of homelessness since his mum fell out with his stepdad and had spent seven months sleeping rough. Jordan, 20, had been sofa-surfing and sleeping rough (or as he put it, walking around) for four years after falling out with his family. Nikita, 18, left home at 16 after her recovering alcoholic mother moved in with a new boyfriend and was sleeping on her sister’s sofa.
So there were four personal stories that are probably repeated tens of thousands of times around the country. By definition nobody knows how many hidden homeless there really are but instinct suggests that with every other form of housing problem, from sharing and overcrowding to official homelessness and families in bed and breakfast, on the increase it must be too.
The programme avoided sensationalism and showed the grinding monotony of what it’s like to go from place to place and never having one to call home. It showed the good side of housing too, with the organisations and people prepared to help, and a genuinely moving final scene where Stephen finds a six-month tenancy and the luxury of his own backdoor. And it hinted at the way that cuts in housing benefit and support to those organisations are making things worse.
Above all though it left me wondering what will happen if the welfare-cutting ultras get their way on even more cuts in benefits for the under-25s.
The proposed reduction of the ‘pay to stay’ cap to £60,000 raises introduces yet more contradictions into a policy that was already riddled with them.
Reports on Saturday (most comprehensively by Patrick Wintour in The Guardian) said a consultation paper will be published next month on the idea of charging social housing tenants a market rent once their income rises above a certain level. When the policy was first floated last year, the proposed household income was £100,000 but now Grant Shapps, with the backing of David Cameron, is apparently suggesting £60,000.
There are all kinds of problems and contradictions inherent in the idea (of which more later) but the immediate thing to notice is that this is the government mounting another deployment of what it sees as its most popular policy to date: the household benefit cap. Just as capping benefits to the level of someone on an average income (£26,000 a year) will make the welfare system fairer, so capping household income will make social housing fairer.
Why £60,000? The reports say the consultation paper will propose a range of figures with that being the lowest. According to the FT, No 10 likes this figure because it is the maximum income limit for other support schemes like shared ownership. The papers were briefed a £60,000 threshold would affect 34,000 households and mean their rent could rise by £70 a week or more. A cap set at the previously reported £100,000 is claimed to affect only 6,000 households. Presumably then this would not affect enough people or save enough (the ‘subsidy’ is put at £21.6 million at £100,000 but £122.4 million at £60,000).
So what are the problems with the idea?
First, it’s not at all clear where these figures come from. How many social landlords out there really know how much their tenants earn? Or how their circumstances have changed over time? Or how many people live in a particular property and are working at a particular time. At best this sounds like a guesstimate based on surveys but household income can change rapidly over time as children go out to work or people lose their jobs or people retire.
Second, someone should tell Downing Street about Boris Johnson’s First Steps scheme in London, for which the maximum income limit has just increased to £74,000.
Third, policing this will be a bureaucratic nightmare that threatens to change fundamentally the relationship between tenants and social landlords. Where landlords are not busy checking how many bedrooms their tenants are occupying they will become the income police, obliged to check the earnings of all their tenants at regular intervals.
Fourth, it’s not so long ago that a certain housing minister rejected the ‘pay to stay’ idea when it was put forward as an alternative to removing security of tenure from new tenants with fixed-term tenancies.
Fifth, it almost goes without saying that this would represent yet another breach of the Conservative manifesto promise to ‘respect’ the tenures and rents of social housing tenants and subsequent promises by Shapps that ‘we still have no plans to change the existing or future tenancies for people in social housing today’.
Sixth, the Guardian story includes the frankly incredible claim that ‘social housing has been increasingly taken up as an option by young professionals unable to afford to own their own home’.
Seventh, since this would apply to all social landlords, what does it say about the supposedly independent, non-public status of housing associations? If taxpayer ‘subsidy’ is going to their tenants then surely they are public bodies whose spending and borrowing should count against public totals? The FT report talks more narrowly about ‘council housing’ but if is restricted just to local authority tenants how it is ‘fair’?
I could go on but the list continues down to the most fundamental issue of all for me: who really has their housing subsidised?
Social housing tenants? It’s true that there is an initial subsidy in the form of grant or land or both but council housing nationally is now running at a profit, with tenants’ rents more than repaying the initial costs. None of the cost is paid by council taxpayers. Their rents are only ‘subsidised’ by comparison with market house prices and rents to which social housing is an alternative. On the same argument anyone who bought their home years ago for a fraction of today’s prices is also ‘subsidised’.
Tenants who use the right to buy? The logical response for a family with a household income of £60,000 a year facing a rent increase of £74 a week will be to take a look at Right to Buy 2. The mortgage may well be cheaper than the increased rent and the government has just doubled the maximum discount to £75,000. This is, of course, not a subsidy in any sense and there is no upper income limit.
Home owners? They are surely the ‘strivers’ who are paying for all that ‘subsidy’ – until you stop to think about it. First homes are exempt from capital gains tax and since the 1960s have been free of tax on the imputed rental value. What’s another word for a tax that the government chooses not to impose?
People with a mortgage? In addition to the taxes not imposed on first homes, anyone with a mortgage has benefitted from much lower mortgage rates ever since the Bank of England cut interest rates to a record low 0.5 per cent. If a cut of two percentage points does not sound like much, it amounts to a combined reduction of around £20 billion a year. Effectively it’s a mortgage subsidy that is coming out of the pockets of savers and pensioners who are receiving much lower interest on their money.
First-time buyers? Without a sizeable deposit they will not get the same low rates as existing borrowers and they may not get a mortgage at all, but many get help from the Bank of Mum and Dad. The subsidy advantage of home ownership is transmitting down through the generations.
Buyers of new build homes? No £60,000 income limit here. The government’s NewBuy scheme guarantees 95 per cent mortgages on homes worth up to £500,000, implying that a household with an income of more than £160,000 could benefit.
Buy to let landlords? Unlike home owners, they do pay capital gains tax. However, they can also offset costs like the interest on their mortgage, rental insurance, maintenance, letting agency fees and depreciation against the tax they pay on their rental income.
‘Pay to stay’ was contradictory and problematic enough when the proposed income threshold was £100,000. Reducing it to £60,000 just makes it even more contradictory. On one level, it’s a nakedly political move to capitalise on the popularity of the benefit cap and its supposed ‘fairness’. But on a deeper level it’s hard to avoid the conclusion that this is really about accelerating the Conservative end-game for social housing: reducing it to a residualised rump reserved for the very poorest while leaving everything else to the market.
And, judging by an article over at LibDemVoice that confuses social and affordable rent and the discussion that follows, their coalition partners seem too divided on the policy to stop it.
Grant Shapps has predictably had a go but it’s hard to see the housebuilding figures out today as anything other than awful.
The housing minister tweeted that housing starts in 2011 were up 29 per cent on 2009. Curiously, though, he did not mention the figures that had just been published for the first quarter of 2012.
These showed that total starts were down 11 per cent on the previous three months and 15 per cent on a year ago. Starts by private housebuilders were down 8 per cent and 7 per cent on the same basis.
And starts by housing associations collapsed by 21 per cent compared with October to December 2011 and 40 per cent compared with January to March 2011.
To be charitable, these are only the figures for one quarter and the previous one did show an improvement.
However, they also make it possible for the first time to compare what’s happened in the second year of the coalition compared to the first. By now, surely, all those policies like the new homes bonus and the scrapping of regional strategies ought to be working.
In fact, starts totalled 104,970, a fall of 6 per cent on 2010/11. Again the picture was much worse for housing associations (down 24 per cent) than for private enterprise (down 1 per cent).
It’s true that the starts total is well up on both 2008/09 and 2009/10 and that completions are up this year as a consequence but things do not look good for Shapps or his ‘gold standard’ of building more homes than Labour. He now needs almost 500,000 starts over the next three years to achieve that.
And the figures only reinforce the message in the Housing Report from the Chartered Institute of Housing, National Housing Federation and Shelter this morning that the government is failing on the housing crisis in general and supply in particular.
At best, housebuilding is flat-lining as the effects of Labour’s stimulus run out. Total starts are stuck at around 65 per cent of the level seen before the credit crunch and less than half the level needed to meet demand. Shapps writes on ConservativeHome this morning that ‘the vital phase III of this government is now underway – turning legislation into action’.
If so, the pressure is really on now for the new homes bonus, the NPPF, the right to buy, the public land initiative and all his other initiatives to deliver. And initial reports on the flagship NewBuy programme do not exactly look promising.
Here’s hoping that Grant Shapps found a bit more to do in the Netherlands on Monday than enthuse about self-build and get Kevin McCloud’s autograph.
The housing minister and the Grand Designs presenter were part of a UK housing delegation visiting Europe’s largest self-build project at Almere. There was also an event at the British Embassy aimed at boosting trade and business links.
They were clearly impressed by what’s happening and with good reason. There are more than 800 homes at Almere that people have built for around €50,000 less than the same property would cost in the commercial sector. Imagine something similar in Britain backed with planning reforms and help with finance and what Shapps is saying about the sector doubling in size starts to make sense (even if I wish he wouldn’t keep repeating the same announcements). If, as the minister told us two weeks ago, the future’s bright, it seems the future is orange too.
MPs on the communities and local government committee also became self-build converts after a visit to Almere last year. In their report last week, they recommended that the government should also work with local authorities to pilot volume self-build schemes by allocating sites and taking a flexible approach to planning.
It’s a rare example of all parties enthusiastically backing a housing idea and also one of those times when Shapps deserves some credit but (there’s always a but) my rather unkind opening paragraph was about more than just grabbing your attention and I’m hoping that he found time to talk to the Dutch about a few other things too. Here’s a selection (feel free to correct my less than perfect knowledge of Dutch housing):
First, the self-build site at Almere is just part of a new city that’s been under construction since the 1970s. As far as I can tell, the self-build experiment was in part the result of the credit crunch slowing down conventional development. In between a statistical spat with shadow communities secretary Hilary Benn yesterday, Shapps himself tweeted yesterday that the Almere presentation featured pictures of Ebenezer Howard, the creator of Welwyn Garden City in his constituency. But did he get the point that the Dutch have continued with an idea that we invented and then abandoned after 1979?
As housebuilding in England fails to keep up with demand from new households it’s not hard to see why support for new towns and urban extensions is coming from across a spectrum ranging from the TCPA to Policy Exchange. Almere may seem uniquely Dutch in that is built on land reclaimed from the sea but the wider lesson is that publicly owned land is the key to large-scale development. Are we capable over here of looking beyond the finite stock of land currently owned by the public sector and compulsorily purchasing tracts of land as we did for new towns in the past or trusting local authorities to form joint development companies like the Dutch?
The National Self Build Association put it this way in its evidence to the CLG committee: ‘The biggest challenge with a project like Almere is finding a local authority with the vision and enterprise to give it a go. The other key to the success is the initial land cost; it has to be acquired at something like agricultural values initially. The council then has to invest in the infrastructure—roads, utilities etc—and this usually adds at least £10,000 per plot provided.’
In contrast, it said that over here the HCA was about to release ‘five large sites for group self-build opportunities that should deliver around 70 homes’.
Second, the CLG committee MPs were impressed by BNG, the Dutch municipal bank that is the fourth largest in the country and jointly owned by the Ministry of Finance and municipalities. Lending is restricted to public and semi-public organisations and 52 per cent goes to housing associations. The MPs supported calls for the creation of a national housing investment bank here but Shapps told them he was ‘not convinced by that argument at all. I think the banking system in this country needs to work for all industries and sectors’.
Third, as a report published by the Joseph Rowntree Foundation published in February makes clear, there’s plenty to learn from the Dutch experience of managing the development of new settlements. Maybe they have discovered a thing or two along the way about making them sustainable and successful? At Vathorst in Amersfoort basic principles were set out in one large masterplan but individual blocks have their own character and opposition was overcome by agreeing community benefits like infrastructure before work started. It was BNG, incidentially, that lent €750 million to the joint development company formed by the Amersfoort municipality and five private companies to develop the Vathorst.
Fourth, there’s the Dutch experience of granting financial independence to housing associations in 1995. The MPs heard that Dutch associations now get no government subsidy and fund all new development through a revolving fund generated by the sale of existing and new build properties at market rate. That’s maybe not a million miles away from where we are heading after 2015 but the committee noted a mix of positive points about associations as ‘financially independent and strong performers in a tight housing market’ and negative ones about them straying too far from their core role and taking too many risks (with the largest Dutch association losing £2 billion in a derivatives deal). According to the CLG committee, the Dutch have set up a full parliamentary inquiry into the social housing sector and the outcome needs watching closely.
The lessons to be learned from the Netherlands go way beyond what I have space for here and my limited knowledge. The Almere visit and the enthusiasm for self-build are a good start but even doubling the size of the sector will not solve our housing crisis on its own. Here’s hoping the message about public sector involvement, trusting local authorities, alternative sources of finance, masterplanning, sustainable development and the rest has been heard too.
It’s hard to know whether it’s good news or bad news that there is so little legislation affecting housing in the new parliamentary session.
The Care and Support Bill will have implications for the sector but it’s effectively another delay to the government’s response to the Dilnot Commission’s funding proposals because it’s only a draft bill. See this from Rachael Byrne of Home Group and this from Simon Parker of the New Local Government Network for a flavour of the reaction to that.
Apart from that the Queen’s Speech had nothing on housing. The only piece of legislation from the Communities and Local Government (CLG) department is another draft Bill dealing with the consequences of abolishing the Audit Commission while the Department for Work and Pensions (DWP) will have its hands full with pensions.
All of which is bad news for anyone who expected further action to tackle the housing crisis (reform of the private rented sector anyone?) but probably good news for people still struggling to cope with the consequences of all that legislation in the previous two-year session of parliament.
Grant Shapps yet again hailed ‘some of the biggest social housing reforms for a generation’ in his column for Inside Housing last week and they went way beyond his own departmental responsibilities.
So perhaps a pause in the ‘reforms’ is to be welcomed. Maybe housing organisations already have enough on their plate with affordable rent, changing allocations and the homelessness duty, the law on squatting, cuts to legal aid and the rest. As Kate Hughes put it on her blog last week, just one of the welfare reforms – the bedroom tax – is likely to be the biggest challenge that social housing communications practitioners have ever faced.
If anyone needs a reminder of how much has changed with the Welfare Reform Act, the Localism Act and the Legal Aid and Punishment of Offenders Act, here are two indications of just how much work they will cause on just one of the measures they introduced.
Like the bedroom tax, the household benefit cap is going to be (to put it mildly) a major and growing communications headache as tenants struggle to work out if and how they will be affected. But the portents do not look at all good as the DWP starts sending out a warning letter to those who may be affected.
First, according to a story in today’s Guardian, the letter has already gone out wrongly to 2,000 families with children who will not be affected and councils are reporting that up to one in five of the 67,000 affected households have been wrongly identified.
Second, to make matters even worse, as noticed by Joe Halewood on twitter, the BBC is still reporting – wrongly – on its website that the cap has exemptions for housing benefit, child benefit and child tax credit. In fact all three count towards the cap. Meanwhile, even before the cap has been introduced, there are already calls for the Conservative right for it to be reduced still further.
That’s just one example of the problems to come in the implementation phase of the welfare and housing reforms. However, I’ll still be watching the big picture for signs of movement on the 2013 spending review, preparations for the universal credit and the continuing debate about the role and purpose of social housing.
On the first, the challenge will be to harness the growing consensus among economists about the need for measures to boost growth to make the case that housing is one of the best ways to do it. Is the second a welcome simplification of the system or a computerised disaster in the making or both? And on the third, as I argue on my other blog this week, the challenge is to find new ways to frame the political case for housing at a time when the rhetoric from the Conservatives about ‘strivers’ is becoming ever more hostile towards benefit claimants and people in ‘subsidised’ homes.
Finally, there remains the question of what will happen to the architect of the housing reforms. Will Grant Shapps really stick around and go on and on with initiative after initiative and excuse after excuse for the lack of new homes? Or, with rumours continuing about a government reshuffle, will someone else be there to take the credit (or the blame)?
The maths involved in the CLG committee’s new report on the financing of new housing supply is depressingly simple.
Add newly arising need to cope with population growth (232,000 homes a year on the latest estimate) to the backlog of existing need (1.99 million households in 2009), then take away the completions in 2011 (109,000) and you are left with a huge gap in provision. Even if private housebuilders succeed in increasing their output from last year’s miserable 82,000 to the maximum they managed over the last 20 years of 150,000 (a very big if) the gap will still be huge and the backlog will still be growing.
So it’s little wonder that the committee admits there is ‘no silver bullet’ in its report, that it ‘suggests that potentially radical changes of policy and alternative sources of finance will be needed if housing supply is ever to reach levels of demand’ and that while it welcomes the housing strategy as a start it is sceptical about many of the glib solutions offered by Grant Shapps.
The report follows extensive hearings with witnesses from across the UK housing world and beyond, including a visit to the Netherlands to see if there are lessons to be learned from the Dutch approach to housing. The idea is that bridging the gap will require an increased contribution from all of the familiar sources and some that are unfamiliar too.
On private investment, the government already has a review of the barriers to housing’s version of Waiting for Godot: institutional investment in built to let. Yet while there was backing for the idea from a wide range of witnesses, there was still doubt about what Nick Jopling of Grainger called the three main barriers of ‘scale, suitability of stock and yield’. For all the innovation, for example by Manchester and its pension fund, and all the talk of using public land and waiving section 106 requirements, the yield problem remains. In other words, house prices are too high in relation to achievable rents.
Other options for private investment include institutions backing moves by housing associations into private renting (or even social renting too) and further exploration of ideas for a Housing Investment Fund for housing associations and co-operative housing. Despite scepticism from Shapps, the committee also likes the idea of a Housing Investment Bank.
However, on the private rented sector, the committee heard warnings of ‘large scale disinvestment by landlords’ because returns are too low without capital appreciation (those house prices again). One possible solution might be tax simplification linked to professionalisation of the sector, another might be the British Property Federation’s idea of Housing Zones designated by local authorities with local tax reliefs.
On affordable housing delivery, there’s plenty of scepticism from the committee about whether affordable rent can be sustained beyond 2015 and whether (as Shapps claims) it will really have no impact on the housing benefit bill. Significantly, the committee calls for ‘a rebalancing of subsidy arrangements away from housing benefit can back to bricks and mortar’, which would put the priorities of the last 30 years into reverse.
However, the committee also expresses concern about two other government policies that could threaten affordable housing investment. Plans to give developers the power to force local authorities to reopen section 106 agreements are ‘contrary to the government’s professed commitment to localism’. And as for plans to introduce direct payment of housing benefit to tenants ‘there is a clear risk that these arrangements will have a detrimental effect on providers’ capacity to invest in new housing supply’ and the committee says the government should only proceed ‘when any issues identified by the pilots have been fully resolved’.
On housing associations, the committee is enthusiastic about retail bonds but more sceptical about proposals on historic grant. It notes warnings that writing off the grant could increase borrowing costs and converting it into equity would create a for-profit sector. There is also the Dutch experience of giving associations financial independence from government: a mix of positive points about financial performance and more negative ones about associations straying too far from their core role and the risk taking that resulted in the largest Dutch association losing £2 billion in a derivatives deal.
The committee welcomes housing revenue account (HRA) reform for local authorities but says the government should lift the cap on borrowing and allow the trading of headroom between authorities. Both of these ideas have been rejected by Shapps so far. More radically the committee says the government should look again at reform of the public sector borrowing rules (supported by Conservative Westminster City Council) and at easing restrictions on councils’ use of bond finance (supported by Birmingham City Council, which was Conservative-led until last week).
And the MPs are also highly sceptical about claims by Shapps about the right to buy. ‘We are not convinced that the government will deliver on its plans for “one-for-one” replacement of additional properties sold under the new proposals, especially if the discount cap is set as high as £75,000,’ it says. ‘We are also concerned that the proposals will lead to a reduction in the country’s social housing stock, with social housing being replaced by homes for Affordable Rent.’ Instead it wants ‘like for like’ replacement of social rented homes, with extra government funding if necessary, and says individual local authorities should be able to apply for an exemption from the right to buy where they can demonstrate that housing is limited an d cannot easily be replaced.
On owner-occupation, the committee notes a number of concerns about NewBuy: that it will simply reduce the mortgage finance available elsewhere; that it could lead to negative equity for buyers; and that it excludes smaller builders. There is support for Shapps’s plans for self-build, with the committee noting that something on the scale of the programme it saw in the Netherlands could result in up to 150,000 homes over five years, but that there are still barriers to overcome with lenders and local authorities.
As that quick survey hopefully shows, the committee’s report ranges far and wide over every conceivable way of financing new housing supply (with the exception of quantitative easing for housing). It should be essential reading for anyone involved in all sectors of housing because we are going to need a contribution from all of them to stand even a chance of bridging that supply gap.
The committee argues, probably rightly, that there is no ‘silver bullet’. However, what it does not identify, after collecting together all the ordinary bullets, wooden stakes and strings of garlic on offer is the identity of the vampire. To my mind, the big problem wearing fangs and a black cape is that house prices (and rents) are too high. Financing new housing supply would be an awful lot simpler – and cheaper – if it happened alongside measures to put that creature of the night back in its coffin.
It’s Communities and Local Government questions – so it must time for a barrage of contradictory statistics.
I’ve grown used to the trading of numerical insults every few weeks between coalition and opposition over the last year or so. But would a week in which politics has been dominated by a stat (the 0.2 per cent fall in GDP that means the UK is in a double dip recession) make any difference?
No chance. Not in an election week. The tone was summed up in an exchange about council tax between shadow communities secretary Hilary Benn (‘Labour councils £81 cheaper than Conservative ones for Band D’) and Eric Pickles (‘Tory ones £62 cheaper’) and was repeated over and over again.
First up, was housebuilding, a subject on which both parties pride themselves on the ability to find the most flattering and unflattering comparisons between each other. Faced with 2011’s dismal total of 98,000 housing starts, Grant Shapps simply paired it with the even more dismal figure from the depths of the credit crunch in 2009 to show that they were actually 25 per cent up.
Labour’s Jack Dromey hit back with a reference to the Shapps gold standard. ‘We know from figures released today that house building is down 26 per cent on average compared with what was achieved under a Labour government,’ he said. This is of course a comparison flattering to Labour since it smooths out the effect of the credit crunch. The ‘figures released today’ turned out to be a Labour press release quoting CLG housebuilding stats which Dromey said ‘show the government’s policies are making the housing crisis worse not better’. If that sounds familiar, that’s because he said exactly the same in February.
Shapps hit back with a repetition of the ’25 per cent up on 2009’ stat backed up with some figures that will be of consolation to a construction industry that has just gone into a triple-dip recession: ‘In the same period the value of new housing construction was up 33 per cent and construction orders were up 35 per cent,’ he said.
Will there ever be an end to Shapps and Dromey slapping each other around the head with wet statistics? Perhaps, if the housing minister gets promoted in a mooted reshuffle after the local elections (more on that on my blog here). If not, we seem set to face a never-ending wait for a clear winner to emerge.
Here’s a quick attempt to resolve it. The comparison in the CLG stats between housing starts in the six complete quarters since the election and the six before that currently favours the coalition. However, we are only six quarters into the 20 that would make up a five-year parliament. If the trend of the last six quarters is repeated over the next 14, the coalition will see around 500,000 starts in those five years. Labour managed 672,000 between 2005 and 2010. So, even if the coalition increases output, it will need another 525,000 starts in the next 14 quarters. That’s an average of 37,500 per quarter: 50 per cent more than it has managed in any quarter so far.
However, that was not the end of the statistical battles in the Commons. Attacked by a Labour backbencher over the housing market renewal programme, Shapps claimed that the coalition would build 170,000 affordable rent homes in the next three years and ‘that will be more than were built in 13 years when affordable housing numbers declined under Labour’. Invited by a Tory backbencher to condemn plans for thousands of homes in his constituency imposed by the old regional strategies, he maintained that scrapping the strategies and introducing the new homes bonus would mean ‘more building in the long run’. Invited by another Conservative to praise Boris Johnson’s record in London he argued: ‘It seems very likely that he will have delivered 50,000 homes for affordable rent. It is worth bearing in mind that fewer than that were delivered throughout the entire country under 13 years of Labour.’ Never mind, of course, that the Johnson total relies on homes funded by the last Labour government or that the 13-year total is calculated after right to buy sales that Shapps has pledged to increase.
Finally, no CLG questions would be complete without private rents. Former Labour housing minister John Healey had asked why the million families with children who are renting privately are denied ‘even the basic security of a legal right to a written tenancy agreement’ but that did not prevent Shapps quoting yet more stats (though oddly not what Inside Housing or Shelter or Hometrack say).
‘Pressure in the system caused by more than a decade of building far fewer homes than are required, which has led to rents rising very quickly,’ he said. ‘There are now some signs that rents have started to moderate. The English housing survey shows that rents rose at a slower pace than inflation; LSL Property Services shows falls for the third month in a row; and Professor Michael Ball reports that they fell by a tenth in real terms between 2008 and 2011.’
And Shapps was at it again in his response to a question from Labour’s Stephen Timms about Newham. ‘Immediately that the Newham story was flagged up, we went on just one website to search for properties and we could find within the Newham cap of £15,000 rent a year—not the £21,000 maximum cap—1,000 properties available in Newham or within five miles of it. That is why it is a disgrace that the council was considering sending people halfway across the country.’
Never mind that ‘available’ on the website is not the same as ‘available for let to local housing allowance claimants’. Things would be so much simpler if all you had to do to solve the housing crisis was look on Rightmove.
A small dip in the GDP and suddenly there is an opportunity to put housing back on the agenda.
It was only -0.2 per cent but yesterday’s figures confirm that the economy is in a double dip recession for the first time since the 1970s in a downturn that has already gone on longer than the one in the 1930s.
Even though the figure could easily be revised upwards at some stage, it was mainly due to a 3 per cent contraction in the construction sector. For anyone interested in the detail, Brickonomics points out that it could have been even worse, while the Construction Products Association is forecasting a 22 per cent fall in public housing this year. Yet the grim news seems to have changed the terms of the wider debate about the economy.
In this morning’s newspapers it’s hard to avoid a whole series of calls for change. Here’s Ben Chu in the Independent: ‘It is not just the pace of the deficit reduction that’s worrying some analysts, but the nature of the cuts. While Government current spending (which goes on public-sector wages and welfare) grew last year, Government capital spending (the money used to build new schools, social housing and transport schemes) was slashed by around 13 per cent.’
Jeremy Warner in the Telegraph: ‘When you look at where the axe is falling hardest, it is on government investment – spending on schools, hospitals, roads, bridges, affordable housing, and so on. This is the easiest thing to chop, so that’s where the Coalition has acted first. In fact, this form of state spending should be doubled, tripled or even quadrupled, with the money made up by further cuts in entitlements and bureaucracy.’
Many economists have been making the same points for weeks and months. DeAnne Julius and Vicky Pryce both argued for investment on infrastructure and housing on the Today programme this morning (play clip at 0731) while presenter Evan Davis made the point that he had barely spoken to an economist over the last six months who did not advocate more capital spending and yet that was what exactly had been cut.
Tim Leunig, again in the Telegraph, argues that housebuilding was key to the recovery from the 1930s recession: ‘Every house we build employs the equivalent of 3.5 people for a year. Raising Britain’s house building levels from around 100,000 to (say) 400,000 would create 1 million new jobs in construction.’
Jonathan Portes of the National Institute of Economic and Social Research points out that even the IMF – usually seen as a cheerleader for austerity and structural adjustment - wants us ‘to spend more on infrastructure (and housing) and increase welfare benefits for poor people (who will spend them), and pay with it by taxing the rich (those with a lower “marginal propensity to consume”).’
Even my quick rant about the need for a Plan B based on housebuilding on my other blog last night found me somehow sneaking into New Economist’s list of seven things to read about the double dip alongside luminaries such as Paul Krugman and Stephanie Flanders.
What I take from all that is that people are ready to listen to the case for housing in a way that they haven’t been at any time during the last two years in which the debate has been dominated by austerity and the need to bring down the deficit. Combine that with all the coverage this week about Newham and Stoke and the housing benefit cuts (featured on the Today programme again this morning) and the way that housing is really starting to make waves in the London mayoral race, and a real opportunity has opened up for housing ahead of the 2013 spending review.
That will not be easy. Many people believe that the current affordable housing programme will be the last. And convincing a government wedded to an austerity plan that included cutting housing investment by 60 per cent is just one of the obstacles that need to be overcome.
For months the business lobby headed by the CBI has been arguing for an essentially housing-free programme of investment in infrastructure. A programme published by the Social Market Foundation for a £50 billion programme of capital investment funded by ‘growth-friendly cuts’ only mentions housing once.
Meanwhile, the government remains wedded to the idea that it can boost housebuilding by relying on the big housebuilders and giving them what they want on planning, regulation, affordable housing and anything else. As I’ve argued many times before, this is a fallacy since the big firms are explicitly committed to a strategy of increasing their margins by tight control of costs and careful management of how many homes they build.
To counter those arguments, first the sector could make the case that housing can deliver growth and jobs quicker and more cost-effectively than other forms of investment (only repair and maintenance scores better whereas big road and rail schemes take years and do not employ many people). Second, it could argue that the government needs to look to other players like housing associations and local authorities and reform housebuilding (see this report by the IPPR). Third, it could make a more radical case about the income stream and savings in housing benefit that rented homes deliver and argue for reform of the borrowing rules or even a new form of quantitative easing for housing.
In an age in which the housing minister can boast that he does not read Inside Housing, I would not want to overstate my case, but there is a chink of light nevertheless.
Stoke? Hull? Newham? Croydon? Westminster? Housing benefit cuts are a story in search of a location.
What I mean by that is that the story that dominated this morning’s Today programme could have been about just about any borough in London and any city in the north and midlands. We all know that sooner or later there will be real faces to put to the victims of the housing benefit cuts and real places where the problems will emerge. Up to now, though, and with several of the more draconian cuts still to come, we’ve had largely anecdotal evidence.
So Newham’s letter to a housing association in Stoke was always likely to be big news. Add in the elements that Newham is the Olympic borough and that its mayor Sir Robin Wales has a history of rows with government and controversial statements on affordable housing and you have a story that is irresistible.
That much was clear from the bare bones of the story reported on the BBC website earlier. Newham was asking Brighter Futures Housing Association to take up to 500 families on housing benefit and on its waiting list that it can no longer afford to house and offering to lease homes at a premium to local rents. It was being ‘forced to look further afield for alternative supply’ because rents locally were overheating because of the ‘onset of the Olympic Games and the buoyant young professionals market’.
Gill Brown, chief executive of the housing association, begged to differ (how could she do otherwise as head of an organisation named Brighter Futures?). ‘I think there is a real issue of social cleansing going on,’ she said. ‘We are very anxious about this letter which we believe signals the start of a movement which could see thousands of needy people dumped in Stoke with no proper plan for their support or their welfare.’
More emerged in Today programme appearances by Wales and housing minister Grant Shapps later. According to Wales, Newham sent letters to 1,179 organisations. Recipients include landlords across the North West, North East and Midlands and the largest one in the constituency of chancellor George Osborne (which binned it, or else we might have had the irony of the victims of his cuts turning up in his well-heeled corner of Cheshire).
According to Shapps, rents are ‘actually, at the moment, falling’. Cue a double take from just about everyone and disbelief for anyone in touch with the London market. Most of his responses consisted of the same tired lines: housing benefit being unfair to ‘hardworking’ families (ignoring the fact that 93 per cent of new claimants since the election are working), a ‘huge’ discretionary fund and that the leaked letter from his boss Eric Pickles warning of the effect of the cuts is old and out of date. He also accused Wales of ‘playing politics’ in election season and claimed a search on Rightmove revealed 1,000 homes available at below the housing benefit cap. Initial calls by The Guardian suggest many of these will not take tenants on housing benefit.
What was new to me was his reference to changes on the discharge of the homelessness duty into the private rented sector and guidance on his plans to ‘that they must take into account the welfare of the tenants in doing so, which includes for example not packing up and sending them off to Stoke’. Have I missed it, or has this guidance not been published yet.
As Labour’s Karen Buck said in an earlier interview, the shocking thing is that Newham was meant to be part of the solution to London’s housing problems (as one of the places with cheaper rents) but now it seemed to be another one of the problems. And Robin Wales argued that it was pressure from boroughs like Westminster exporting their own homeless families that was forcing Newham to do the same.
One blog offers barely enough scope to scratch the surface of a story like this and its implications. However, I would point to at least three other factors that are at play here:
- Sir Robin Wales has previous on these issues with controversial views on giving housing priority to people who are working. See, for example, this interview with Nick Duxbury from last year in which he argues ‘don’t come and show us that you’re poor you’re not working and the most needy’.
- Newham is at least attempting to inform people in other areas about what it is doing – as opposed to moving people out by stealth like other London boroughs. It is also attempting to do something about the housing crisis with radical plans on licensing and private sector leasing.
- Over the last few years Newham has also been one of the London authorities with the most homeless families in temporary accommodation waiting for a permanent home. The Localism Act gives it the power to discharge the homelessness duty into the private rented sector. How much of this is about housing benefit cuts and how much about the discharge of the duty and cuts in funding for temporary accommodation specifically? The letter says specifically that: ‘The Localism Act will give local authorities the power to discharge duty into the private sector and as such the council is looking to find affordable accommodation in areas of low demand, for suitable families.’
- Stoke has plenty of problems of its own. A report by Brendan Nevin and Philip Leather for the Northern Area Social Housing Forum in February highlighted a whole series of problems including ‘stark choices for housing benefit claimants’ and a collapse in market activity in disadvantaged areas. This highlights an issue that many have warned about all along: that cuts in housing benefit only encourage people to move (or to be moved) to cheaper areas with fewer jobs. This editorial in The Sentinel makes the point very well:
‘Stoke-on-Trent has a proud history of welcoming outsiders and finding a place for everyone in the city. But as our city seeks to re-build communities ruptured by the decline of traditional industries and create stable neighbourhoods, an unplanned influx of Olympic exiles will do us little good. The 2012 games are bringing huge riches into London. The least those boroughs could do is look after their poor and needy. We look forward to welcoming the flame from Stratford – but not east London’s exiles.’
This story is not going to go away. Newham and Stoke are just the start. For more on this story see my other blog here.
The London mayoral race is throwing up some interesting new ideas on how to tackle the housing crisis in the capital – but will they make any difference?
Thanks to the voting system (the supplementary vote, which gives people two votes in order of preference), the race is not just about Boris Johnson and Ken Livingstone, even if one of them will eventually become the mayor (see part one of my blog here). And, thanks to the mayor’s new powers over investment and land, housing policy features heavily in the manifestos of many of the other candidates too.
For the Lib Dems Brian Paddick is promising not just 360,000 homes of all types over the next decade but also to work to ensure that half of new homes affordable. A bit like Livingstone, he also wants to establish a new ‘living rent’ standard, with ‘the goal that Londoners should pay no more than one-third of their take-home pay on rent costs’. He would set a benchmark guideline that half of homes should be affordable, with the detail left to boroughs. He would create a London Housing Company as a vehicle to assemble public land and match it with private investment and give smaller housing associations the chance to raise loan capital through a London Housing Bond supported by City Hall.
In the private rented sector, he would promote ‘the effective registration of private landlords’ by using existing powers for the selective licensing of all private rented housing in specific areas, as pioneered by Newham. Finally, in an interesting indication of Lib Dem thinking on a national coalition policy, ‘until national laws are changed’ he would encourage landlords to offer longer minimum tenancies, especially those landlords being used to discharge councils’ homeless rehousing duties’.
For the Greens, Jenny Jones signals the importance of housing in the subtitle of her manifesto (‘Our vision for a more equal, healthy and affordable London’). She pledges to build at least 15,000 ‘genuinely affordable’ homes per year, of which 40 per cent would be family-sized. She would calculate an annual London Affordable Rent for the average household while using public land to keep rents at or below that cap. A London Mutual Housing Company would help councils, housing associations and co-operatives to assemble sites for development and there would be a ‘much more concerted’ programme of public compulsory purchase. She would set up a clearing house to offer publicly-owned derelict land to community land trusts. And there are specific green pledges on energy efficiency, fuel poverty and empty homes.
Action in the private rented sector would include lobbying for ‘smart reforms’ to bring down rents and the introduction of a default five-year tenancy. She would create a new ethical lettings agency and work with boroughs on ‘blanket licensing for landlords’. In the longer term she promised to campaign for more radical reforms including land value taxation and a ban on foreign investors.
The independent Siobhan Benita makes housing a to priority with a pledge to create Homes for London as a new department at City Hall (a key part of Shelter’s campaign of the same name). Even more intriguingly she proposes the creation of a new ‘fixed-price housing market’ where Londoners would be able to buy or rent at half of commercial rents. The GLA would gift land for development but on a leasehold basis so that it retains ultimate ownership. Any homes built on it would have to be sold into a regulated, secondary market under the control of Homes for London.
Buyers would have to be London residents with the winners drawn by ballot. Anyone wishing to sell would have to offer it back into the fixed-price market at the original price plus an annual uplift agreed by Homes for London. Anyone wishing to rent would have to charge a regulated rent expressed as a fixed proportion of the fixed price value. Social landlords would also be able to buy the properties on the same basis but the right to buy would be a right in the regulated rather than commercial market. Her target would be 80,000 fixed-price homes by the end her mayoralty.
Put it all together and there is no shortage of ideas about what the new mayor should do on housing. There is also a growing consensus about the need to push to the limit of the mayor’s powers and beyond and to do something radical about affordability and housing supply. If you happen to be a London voter (I’m not) today is the last day to register to vote.
The big question is whether all of that new thinking will make much difference to the result. For one thing, all the attention from the candidates does not seem to be generating much interest in the mainstream media. According to the FT’s Westminster blog, Ken Livingstone complained at a lunch yesterday that only one journalist attended the launch of his housing manifesto.
For another, the one mainstream candidate who seems to be offering nothing more than the current status quo on housing (excluding UKIP and the BNP who don’t have much to offer either) is the one currently leading in the polls: Boris Johnson.
How much of a role will housing play in the election for the politician with the second most say over housing in England?
It’s easy to dismiss the London mayoral election as the Boris v Ken show, a contest between two big personalities and the current and former mayors. That’s understandable in view of media coverage dominated by who paid how much tax, what Boris called Ken in that lift and the people in that election broadcast that made Ken cry. However, that risks obscuring some fascinating ways in which housing is emerging as an issue in the election and some interesting new ideas from the candidates.
For starters, housing organisations are engaging with this election in a way that it’s hard to remember for years. That’s hardly surprising when the new mayor will have significant new powers over London’s housebuilding budget and a significant landbank in addition to their existing powers over planning.
Shelter led the way with homesforlondon.org.uk, a dedicated website aimed at making housing as much of a priority for London as transport already is under Transport for London. The National Housing Federation (NHF) has published a poll today revealing that four out of five London parents are worried that their children will be priced out of living in the capital and its own manifesto. And a coalition of organisations called Family Friendly London has released another poll showing that more affordable housing is the top priority for families with children and that 140,000 of them are still undecided.
Despite all that, housing barely featured as an issue in an Evening Standard mayoral election debate held before Easter until it was raised by hecklers right at the end. It’s hard to find on Boris Johnson’s website until you look more closely at his manifesto on Growing the London Economy.
On housing at least, Johnson seems to be presenting himself almost as the opposition candidate despite being the incumbent. His key claim is that he has delivered and secured new powers where Ken Livingstone was ‘not trusted by his own party to run housing’. That’s a theme hammered home in a Guardian piece by Conservative London Assembly member Andrew Boff today.
Johnson says he persuaded the coalition government to give him control of the HCA’s £3 billion investment programme for London plus control of 530 ha of land and also intervened to ensure that the NewBuy guarantee scheme covers flats as well as houses. He claims he has already delivered 52,000 new affordable homes and is on course to deliver 100,000 by 2015. In contrast, he says Livingstone promised a 50 per cent target for social housing in new planning applications but only delivered 32 per cent.
In social housing, Johnson pledges new higher space and design standards including a ‘significant proportion of family-sized housing’, another round of his First Steps home ownership programme and to explore ‘rent to save’ schemes that enable people to build up a deposit. On the private rented sector, Johnson promises a London Rental Standard and a single acceditation body for the capital. He also says he will ‘campaign against’ the rent control that Livingstone says he will campaign for on the grounds that it has reduced supply in the past – when neither has the power to do anything beyond campaigning at this stage.
In contrast, Ken Livingstone makes the London housing crisis a central feature of his campaign. His two key manifesto pledges are to drive down costs and drive up standards across all tenures and to build more new homes by making maximum use of land controlled by the Mayor and ‘enforcing tough planning regulations so that private developments reflect the needs of all Londoners, not just the very wealthy’. Supporters argue that Johnson’s record on new homes so far is mostly the result of Livingstone’s efforts because of time lags In construction. The key stat for Steve Hilditch of Red Brick is 56: the number of affordable housing starts in the first six months of 2011/12, the first year where development was the result of the policies of Johnson and Grant Shapps rather than Livingstone and Gordon Brown.
On housing supply, Livingstone says he achieved 32,000 new homes in his final year in office but that construction has ‘fallen through the floor’ under Johnson while relaxations in planning rules mean that only half of new homes are affordable to people on average incomes. He will also:
- release GLA land on a shared equity basis to housing associations and other developers ‘so London taxpayers get their money back’.
- work with London boroughs looking to build new council houses, with developers to remove barriers to new schemes and with pension funds to encourage them to invest.
- re-establish affordable home targets for all boroughs and will expect 50 per cent of new homes to be affordable ‘and will move as rapidly as possible towards ensuring that at least one third of new homes are for social rent’ with targets for family homes too.
- use the Mayor’s planning powers to block private development schemes that involve the loss of social rented or affordable housing.
In the private rented sector, he is promising a London Lettings Agency to free landlords and tenants from unregulated private letting agents. Only landlords will that sign up to a new Tenants’ Charter setting out minimum standards of what tenants can expect will be eligible to be listed via the new agency. Livingstone will also push for a London-wide landlord registration scheme, campaign for a London Living Rent and lobby for better regulation of the sector.
So Livingstone too is running as the opposition candidate (which he is), opposed not just to Johnson and his record but to the national coalition government too (with pledges like a campaign against the housing benefit cuts).
The two different stances could well indicate the shape of the next general election campaign too, with Labour bidding to run against the coalition’s record, the Conservatives playing up the problems they inherited from Labour for all they are worth and an argument in between about who really delivered. That is one that has already been rehearsed several times in the debate over the affordable rent programme.
Judging by the opinion polls so far, Johnson’s strategy of turning the election into a choice between ‘Boris’ and ‘Ken’ rather than between two different sets of policies seems to be working (look for that to be repeated in Dave v Ed). He may be far more vulnerable if Livingstone succeeds in using issues like housing against him.
However, unlike the general election, the race for London mayor will use the supplementary vote, which allows voters to vote for someone other than the main two candidates but still give a second preference to Livingstone or Johnson. As I’ll be explaining in part two of this blog, those other candidates have some interesting things to say about housing too.
Twice before governments have attempted to force through improvements to the energy efficiency of existing homes and then backed down. Now the backlash is building again.
In both 2002 and 2006 the plan was to amend Part L of the Building Regulations so that home owners building an extension or replacing the windows or the boiler would also have to address the efficiency of the rest of the house. Both times vested interests and political cowardice killed the idea off.
Six years on and a consultation has just finished on a similar idea – but with three crucial differences. First, it’s being proposed by the coalition, not Labour. Second, the backlash is exposing Conservative and Lib Dem divisions. Third, and perhaps most importantly, a link to the Green Deal provides a way to spread the cost of the work for owners who cannot afford to pay for it up-front.
The relevant part of the consultation launched by the Lib Dem communities minister Andrew Stunell at the end of January (regulations on consequential improvements for domestic extensions) finished on March 27. The government’s preferred timetable is for the change on ‘consequential improvements’ to come into force in October so that it can be linked to the introduction of the Green Deal and give householders a way to invest in energy efficiency and pay for it from the resulting savings as a charge on their energy bill.
The case in favour of the policy is clear. A quarter of the UK’s carbon emissions coming from existing homes, so action is essential if we are to stand any chance of meeting our international obligations to cut them. If the government is correct that ‘the measures will pay for themselves in fuel savings’ through the Green Deal then who has a problem with that?
The papers are against it on a ‘home is your castle’ platform. For Christopher Booker, the EU-hating Mail columnist, the idea amounts to a ‘green tax’ that will mean a ‘red tape nightmare for home owners’. However, he also broadens the attack to include the Green Deal in general and plans to require landlords to improve the energy efficiency of any home they want to rent in particular.
On the Today programme Tim Yeo said he sympathised with the aim but that the way forward was to make people enthusiastic about energy saving. Compulsion might not be the best way to do this.
But other Conservative backbenchers seem to have made a more nakedly political calculation. The Green Deal was all the idea of Lib Dem Chris Huhne, the Part L consultation is piloted by Lib Dem Andrew Stunell. Tory MPs like the one quoted by Sky News think this is not just a ‘daft idea’ but a Lib Dem one to boot.
Even more worrying for defenders of the idea is the criticism of compulsion coming from organisations such as Consumer Focus and Which quoted in the Mail story and signs that the government is struggling to convince people that energy efficiency really will pay for itself from savings in fuel bills.
In speech in February (thanks to @melstarrs on twitter for the link), Andrew Stunell was adamant that the consequential improvements policy will go ahead and that the government will resist the u-turns of the past. ‘It’s the grand old Duke of York of building regulations policy,’ he said. ‘But this time we’re going to do it.
Let’s hope he’s not compelled to get to the top of the hill and march back down again. Let’s hope that Conservative MPs remember that it was not a Lib Dem or a junior minister who promised this would be ‘the greenest government ever’.
First it was a revolution, then a reboot. Now it is a relaunch and a revamp.
The language has shifted considerably since David Cameron made the right to buy a key part of the ‘housing revolution’ he pledged in his Conservative conference speech in October.
Last month the policy was styled as a ‘reboot’. This month it’s so 21st century it’s even got it’s own Facebook page. The good news for the government is that it has 225 likes and news of happy council house buyers Mr and Mrs Watkins from Whitburn, South Tyneside. The bad news is that mixed in with some enthusiastic comments are a series of negative comments questioning the ‘back of a fag packet calculations’ and who is going to lend the money. Oh, and the fact that the Watkinses are actually £1 million lottery winners.
The reception was just as mixed in the national media. Yesterday brought dutiful advance headlines but the news editors’ hearts did not seem in it, possibly because they knew that the announcement had been made three times already (at the Tory conference, in the consultation before Christmas and last month). Those that do cover it today are on the look out for a fresh angle. ‘Mortgage fears cloud right-to-buy relaunch,’ reports the FT, quoting Hometrack calculations that only a small proportion of tenants will be able to get a loan.
On TV, the repeat announcement seemed to be ignored by both the BBC News at Ten and Newsnight last night. Channel 4 News did cover the pictures of Cameron and Shapps having tea with tenants in Wandsworth but rather cruelly juxtaposed with archive footage of Mrs Thatcher having tea with the original right-to-buy family. Not so much 21st century revolution as 1980s rehash.
Even Ravi Govindia, the Conservative leader of Wandsworth Council who has seemed so on-message with other government policies such as evicting the families of rioters, seemed equivocal when questioned by Michael Crick about one-for-one replacement on more expensive rents.
‘The tenants will have to pay more but that is in fact going to be the case for all new social lettings including ones that are existing lettings,’ he attempted to explain, ‘so that when they are recycled into new lettings they will be under the new regime that the government has come up with.’
It was hardly a ringing endorsement and Crick interjected: ‘Sounds like bad news for your tenants.
’Govindia responded: ‘Not necessarily because I think the key issue in London is to find proper and decent housing. For those who can’t afford the rent, housing benefit will be able to support them through that.’
Whether Iain Duncan Smith will agree remains to be seen. Right to Buy 2 is effectively Affordable Rent 2 and despite tortuous attempts in the impact assessment to prove that it offers value for money the calculations on housing benefit were less than convincing.
The government is clearly hoping that a bit of the Thatcher stardust will rub off now. ‘I want many more people to achieve the dream of home ownership,’ said Cameron, donning his gold lamé suit. ‘In the 80s, Right to Buy helped millions of people living in council housing achieve their aspiration of owning their own home. It gave something back to families who worked hard, paid their rent and played by the rules.’
Never knowingly out-clichéd, Shapps added: ‘This country was built on aspiration: men and women who looked to the future and resolved to make a better life for themselves and their families. But years of punitive limitations on the level of discounts under Right to Buy have sabotaged the aspirations of hardworking council tenants who want to take their first step on the property ladder. This government wants to help everyone achieve their aspirations - so I’m delighted to announce that from today these miserly restrictions on discounts are history.’
If it really were a revolution the right to buy would have been extended to the one million housing association tenants who are currently excluded from the scheme (as advocated by David Davis and Frank Field in January and as once promised by the Conservatives). As Shapps and Cameron know that would have caused all kinds of problems, so they have settled for a milder version that still raises doubts about how many tenants will be able to buy without co-purchasers, whether one-for-one replacement is really possible and how much damage it will cause to self-financing.
Whether you call it a revamp, a relaunch, a reinvigoration or even a resurrection, those doubts are not going to go away.
Can anyone seriously imagine the bankers and super-rich of today following the example of George Peabody?
Today is the 150th anniversary of the announcement in The Times that the American banker was donating £150,000 to form the Peabody Trust ‘to ameliorate the condition of the poor and needy’ in London.
He went on to top that up to £500,000 before his death in 1869, which is the equivalent of several hundred million pounds today. As The Times said: ‘He abandons a sum which is a fortune in itself, in order that the poor of that vast, dirty, ill-built, ill-kept city which the wealthier classes never see shall have among them one great range of dwellings provided with the necessaries of comfort.’
Nobody who works in housing or who walks around the streets of London will need much reminding that Peabody went on to become one of England’s largest housing associations. It now owns 20,000 homes with 55,000 residents.
However, this was just one example of George Peabody’s philanthropy – he gave away $9 million in gifts and legacies and in the United States is better known for his funding of education, with schools and libraries and museums and his home town in Massachusetts that was renamed after him.
Peabody Trust was also just one of the first wave of what we now call housing associations. However, the difference was that donation. Many of the other semi-charitable dwellings companies formed at around the same time were designed to offer returns to investors. And such model housing often carried with it a political agenda of tackling crime and unrest or a moral one of controlling the behaviour of their residents or a policy of only housing the ‘respectable poor’.
The efforts of bankers like Samuel Lewis and Sir Sydney Waterlow and business tycoons like William Sutton and the Earl of Iveagh led to the creation of tens of thousands of homes, especially in London. Even though it took action by local authorities to tackle the housing problems of the mass of the population, even though their motives were sometimes loaded when seen through modern eyes, they made a real contribution.
Last year’s BBC documentary by Ian Hislop, When Bankers Were Good, gave a fascinating insight into the thinking of George Peabody and other 19th century philanthropists.
And yet for all the generous business contributions to charities like Shelter where are the 21st century equivalents? Bill Gates and his foundation perhaps? But in housing there is no Bernie Ecclestone Trust, no Sir Philip Green Model Dwellings Company and no Sir Richard Branson Industrial Improvement Society. Footballers are more likely to benefit from the beneficence of foreign tycoons than homeless people.
As for the bankers, they are still celebrating the complete opposite of philanthropy and counting the money they made from trading in sub-prime mortgages and billions of pounds worth of taxpayer-funded bail-outs.
Has anyone watched the video for ill Manors yet? Or heard the song on the radio? If not, you should.
If you need enlightening, ill Manors is the new single from the rap and soul star Plan B that is officially released next Monday ahead of a film of the same name that is due out soon.
The reason it’s relevant here is because it’s about kids who are ‘Council Housed and Violent’ or rather kids who are labelled as chavs by a media and respectable society that gets surprised when they then act like it. And so it’s also about the summer riots and looting and the problems that have not gone away and how they might be tackled.
I’ve blogged before about the way that the media and TV negatively stereotypes council estates and the people that live on them. To illustrate the point, just see the portrayal of the Farmead Estate in recent episodes of Casualty. ill Manors turns that representation on its head in a way that is shocking and is meant to be shocking but also in ways that make you think. Many people are not going to like it and some probably will hate it, but you should watch.
Anyway, enough from me. Here’s the official video (by the director of Top Boy).
But before you make your mind up, listen to this interview with Plan B on Radio 1Xtra, where he explains the intentions behind it.
I’m guessing opinions on this are going to split on similar lines to opinions on the events of last summer: criminality by a feral youth that just needs a strong police response or an expression of anger by a group that feels ignored and marginalised by the rest of society or varying combinations of the two. Or as Plan B puts it in the song: ‘There’s no such thing as broken Britain, we’re just broke in Britain’.
We’ve been here before, of course, when Ghost Town was the sound track to the riots of the early 1980s, but this feels very different and something important for everyone to understand. That applies especially to 50-somethings like me and to everyone who works in social housing, so that initiatives like Inside Housing’s Riot Report can be built on and make a difference. As Plan B puts it: ‘Let me make my point first, let me raise the issue, then if anybody wants to talk to me about how we can change these things I’m ready.’
Otherwise, as Iain Duncan Smith put it last summer, the inner city will come calling again.
So George Osborne will come down ‘like a ton of bricks’ on people who avoid stamp duty by buying homes through offshore companies. What took so long?
The chancellor confirmed in TV interviews over the weekend that the loophole beloved of celebrities, rock stars and the global super-rich will be closed in the Budget on Wednesday.
The loophole relies on the difference between the rate of stamp duty on property purchases paid by companies (0.5 per cent if they are registered in the UK, nothing if they are a trust or company registered offshore) and individuals (4 per cent on homes above £500,000, 5 per cent above £1 million).
Reports in the weekend paper speculate that avoidance could now be worth more up to £1 billion. According to the Mail on Sunday, 95,000 homes are owned offshore by people like Mick Jagger, Bob Geldof, Ringo Star and steel tycoon Lakshmi Mittal. The Sunday Times found that rich home owners have registered £200 billion of property in 122 different locations over the last 12 years and that more than 23,000 homes are owned by companies registered in the Isle of Man alone. For every home worth £1 million in offshore ownership, the taxpayer is losing out on £20,000 worth of stamp duty.
However, the details of Osborne’s clampdown remain to be seen. Will it just be on offshore companies or on UK companies too? Will it only apply to future sales or will there be full retrospective action? Anything other than that hardly qualifies as acting ‘extremely aggressively’ and ‘coming down like a ton of bricks’ but if it was easy to trace what has happened to UK property owned by companies in the British Virgin Islands and Guernsey and the number of times ownership has been transferred (or laundered) it would sort of defeat the object of offshore tax havens.
Either way, it seems ridiculously overdue. As long ago as 2007, contenders for the Labour leadership were calling for the loophole to be closed and it seems highly unlikely that Treasury and HMRC officials were not aware of it long before that. An explosion of evasion/avoidance was inevitable when the new 5 per cent rate for homes worth over £1 million was introduced in 2010 but by last year it was spreading further down the income scale via a new breed of specialist tax company. That ton of bricks has taken an incredibly long time to fall.
However, the issues involved with overseas and offshore ownership of UK homes are about more than just stamp duty avoidance. Take a look at any of the estate agent surveys of ‘prime’ central London property (mainly Kensington and Westminster but beginning to spread beyond that) over the last few years and you will find a market dominated by overseas buyers. The think-tank IPPR argues that London properties have become a sort of global reserve currency for the wealthy elite. The amount of foreign capital flowing into prime London property rose 71 per cent to £5.2 billion in 2011 – a sum the IPPR estimates is a quarter of all the money spent in the 14 inner London boroughs.
Without wanting to overstate it, this has an effect on the entire London market as billionaires price out millionaires, millionaires price out the merely rich and the process feeds all the way down the income scale to priced-out first-time buyers, ripped-off private renters and forced-out housing benefit claimants. Some time ago London house prices stopped being set according to what people working in London could afford and became a global investment market. This trend was exacerbated by the financial crisis, with the fall in the value of the pound making London much more affordable to overseas buyers and financial and political volatility around the world making London increasingly attractive as a safe (and tax-free) haven. And there are no statistics on overseas investment in non-prime London property.
An upcoming report from the IPPR on the London housing market groups the overseas investors into three categories: European and American buyers looking for homes to live or invest in; buyers from outside the OECD (led by Russians) looking for properties worth over £2 million as a hedge against potential problems at home; and yield-based investors from the Far East looking for new-build property they can rent out and sell at a profit later.
Aside from using offshore companies to evade stamp duty, the report says the overseas buyers benefit from a tax and regulatory regime is highly favourable compared with other countries. The Czech Republic, Switzerland and Denmark, for example, all have strict controls on foreign nationals buying residential property where we have none. A report by Taxand, a tax advisor on international real estate investment, looked at tax on residential sales and rents in 29 different countries. The UK had the lowest tax on sale of flats, the second lowest on residential sales (behind Malaysia) and the second lowest on residential rents (behind Cyprus).
The stamp duty clampdown will go some way to helping with that but it is not the only tax advantage to overseas buyers. For example, in contrast to the USA, Australia, Canada, Cyprus, Hungary, Iceland, Ireland and Spain, the UK charges overseas owners and property-owning vehicles no capital gains tax.
The IPPR wants any revenue raised from increasing tax on overseas owners to be ring-fenced for housing in the areas worst affected and is also calling for a new additional holding tax on overseas buyers of property worth over £2 million. If investors pay 1 to 2 per cent fees on stock market funds, why not make them pay the same on their residential investments? It sounds a bit like a mansion tax but one targeted on the overseas buyers who are treating London homes as an investment market and helping to drive prices and rents out of reach of everyone else.
Earlier this month, Italians took over from Russians as the leading buyers of prime London property. The motivation for the splurge seems to be desire to get their money out of the country in the wake of the Euro crisis but it may come to an end as a result of austerity measures being introduced by the Italian government. These involve not just the reintroduction of a tax on first homes but a new, higher tax on second homes within Italy and overseas. Ironically, Italian owners of UK property will be paying a mansion tax (set at 0.81 per cent a year on the value of second homes abroad) but to the Italian government, not ours.
It’s way past time that the UK government tackled the issue of the tax treatment of overseas buyers of UK homes. However, this is only one small step. The suspicion must be that it is also a headline-grabbing measure designed to distract attention from the fact that George Osborne is not going to introduce a mansion tax on Wednesday and is going to cut the 50p rate of income tax.
I’m never quite sure about those ‘buy one, get one free’ offers in the supermarket. So can I really believe in ‘buy one, build one free’?
My local Shapps & Cameron hyperstore is offering me a ‘rebooted’ right to buy. Is it like it sounds - a desperate attempt of a 21st century marketeer to rebrand a tired old product from the 1980s as something exciting and new - or is there something in it?
Before I go loading up my car with pies I’ll never eat and bananas that will go off before I munch my way through them, in this case I already know there are some big catches. The ‘terms and conditions may apply’ in small print below this particular offer includes the fact that this is more ‘buy one, build a bit of one free’ provided I put up free land and borrow a lot more. If I want it to be affordable rather than ‘affordable’ I’ll have to do even more. And it could play havoc with my sums on self-financing.
But, hey, beggars can’t be choosers and these supermarket promotions look like running out soon. I’ve cashed in my clubcard points from last year’s ‘affordable’ range and there are few signs of any other special offers from Shapps & Cameron. Certainly till 2015 and probably beyond. Isn’t BOBOF better than nothing?
So far, reactions have been mixed. The CIH supports anything that will boost investment but said there were ‘both pluses and minuses’ in the announcement. The LGA wanted areas to be able to determine their own discounts, criticised the centralised way the system was being implemented and warned that ‘some areas in need of affordable homes may actually be left with fewer’. The NHF also warned that receipts in low-value areas may not be enough for replacements.
I’ve been looking at more of the small print after noting the rather curious way that Shapps answered a question in parliament on Monday. His former Labour shadow Alison Seabeck asked him to clarify. ‘He spoke today of replacement on a one for one basis. Does that mean he does not mean like-for-like replacement in the same area?’
Any supermarket customer service person would have been proud of the evasive and non-committal answer from Shapps. ‘Where local authorities can provide the new homes in the same area, we will certainly look to keep the money locally and build in the area,’ he said.
Back to that small print. It was always clear from the original consultation published on December 22 that BOBOF will only apply to homes sold ‘above current predicted levels’. And the Inside Housing feature by Gavriel Hollander in January revealed the depth of the scepticism on the ground.
It’s clear the changes go beyond just tweaking the government’s preferred option of the existing discount rate with a £50,000 cap to the existing discount rate with a £75,000 cap. That’s important in itself of course and on the face of it makes one for one replacement even harder.
The official explanation in the new impact assessment (IA2) is that: ‘It was considered to best meet the policy objectives, in particular the potential to increase take-up of right to buy whilst at the same time ensuring that receipts would be sufficient to enable one of one replacement with affordable rent properties. The £75,000 cash cap also limits the potential for large windfall gains that an “uncapped policy” would lack. The 30-year net present value under this approach is positive and the policy option results in significant economic benefits.’
However, there is an interesting change to the way that this option is evaluated. IA1 said that the implied average net sale receipt after paying local authority debt would be £55,500. It went on: ‘This would be sufficient for one for one replacement without the need for conversions beyond the current Spending Review period, but we estimate that there could be a small funding gap within the current Spending Review period under this policy option.’
IA2 also predicts an average net sale receipt of £55,500 but goes on: ‘Under our central assumptions we estimate that this would be sufficient for one for one replacement without the need for conversions within and beyond the current Spending Review period.’ I’ve asked the DCLG why the ‘small funding gap’ has disappeared and am waiting to hear back.
The sums have also changed on the assumed costs. The net present value of the £75k option after 30 years has reduced from £21,100 to £19,800 per home while after 60 years it has reduced from £100 to -£700. The explanation for this appears to lie in two changed assumptions about housing benefit.
First, like virtually everyone apart from Joe Halewood, the DCLG had missed the freeze in local housing allowance rates announced by the DWP for 2012/13 in IA1. IA2 corrects this by reducing the LHA rent inflation assumption from 3.7 per cent to 2.0 per cent for this year. That will presumably reduce the housing benefit saving from people on LHA moving in to the replacement homes.
Second, IA1 had assumed that many of those exercising the right to buy would be on partial housing benefit and estimated this would be the equivalent of 15 per cent of them on full housing benefit. Following discussions with the DWP that has been changed to 10 per cent. This reduces the housing benefit saving that comes from these tenants becoming RTB owners.
On the central assumption, IA1 estimated that the housing benefit impact per unit would be +£3,000 over the three-year spending review period and +£600 on 30-year net present value but -£12,300 on 60-year net present value. IA2 revises those figures significantly so that there is a positive impact of +£2,100 per unit over the spending review but a negative impact of -£3,100 over 30 years and -£16,100 over 60.
Another significant change, presumably after lobbying from the NHF about public-private status, is that there is explicit statement in IA2 that ‘housing associations are independent organisations and we cannot therefore mandate the use of any receipts from right to buy sales that they retain, including for one for one replacement’. The government expects that receipts will be recycled in practice but a proposal in IA1 to ‘incentivise’ developing associations to do so through the affordable housing programme seem to have been dropped.
However, there are all sorts of issues not covered in the impact assessment. All of the comparisons are with an alternative of keeping the sold-off home in the social rented sector. Little wonder the comparison looks favourable, when the alternative does not include any residual long-term value for the home. And are the BOBOF homes really additional when all the free land would probably have been used for new homes anyway?
Strangest of all, in what is meant to be an impact assessment, there is no attempt to estimate the number of people who will buy (which may depend not just on individual tenants but perhaps their families too). Or when they will do it – there is no time limit so some people who can buy may prefer to wait until after the recession. Or how long the likely purchasers have been tenants – and therefore how much discount they will get. Or where they will do it, because the sums will stack up very differently between high and low value areas and between authorities with headroom to borrow under self-financing and those with little scope to borrow.
Perhaps, in fairness, the vague answer from Shapps on Monday reflects some of those uncertainties. Some authorities may be able to build a replacement home in the same area but others will not and wouldn’t it be better for housing as a whole if their receipts are recycled elsewhere?
Back in the Shapps & Cameron store, the managers are hoping that the £75,000 headline offer and BOBOF will be enough to tempt the punters. But they don’t really know because nobody really knows.
Only one thing really seems certain. Love it or hate it, Right to Buy 2 looks like being the only special offer around for some time to come.