Anyone who’s read this blog will know that I support the campaign but the launch got me thinking in a deeper way about exactly what we mean by ‘social housing’ and why it is ‘under threat’.
The starting point is of course the way that the coalition has deliberately blurred the distinction between social and affordable rent. Only last week George Osborne’s Mansion House speech and Kris Hopkins’s press release on the latest affordable housing figures provided two classic examples. The latter even managed to mix up the stats on social, affordable and all homes.
On twitter I called it a ‘triple blur’ but Tom Murtha, one of the people behind SHOUT, came up with the much better metaphor of the ‘three-card trick’. I love the way that conjures up images of Osborne and Hopkins as shady operators inviting credulous punters to ‘find the lady’ while keeping a wary eye out for the police. For a more serious analysis of why the distinctions matter, not just in the construction of new homes but in the conversion of existing social rent homes to affordable, see this blog on Red Brick.
However, the blurring did not start with Osborne and Hopkins. In terms of the letter of the law, it could even be argued that they are correct when they mix up ‘social’ and ‘affordable’. The Localism Act follows Part 2 of the Housing and Regeneration Act 2008 in defining social housing as both ‘low cost rental accommodation’ and ‘low cost home ownership accommodation’ that are ‘made available to people whose needs are not adequately served by the commercial housing market’. Low cost rental means at a rent below the market rate. Low cost home ownership means shared ownership or equity percentage arrangements. Strictly speaking then, ‘social housing’ includes not just affordable rent and shared ownership but even the shared equity element of Help to Buy.
Except of course that virtually everyone in housing believes there is a clear distinction between social rent and affordable rent let alone shared ownership and shared equity. Social rents are affordable in relation to incomes whereas affordable rents are merely rents at below market levels and may therefore be completely unaffordable. Social housing tenancies offer the security that turns a house into a home rather than a short-term let.
However, there are and always have been more grey areas. On rents, for example, the earliest council housing was generally only affordable to more affluent workers. The target rent regime is far from perfect: the current formula means that rents are rising faster than earnings and have been for years. There is also huge variation around the country: ‘affordable’ rents are not always ‘unaffordable’ and in some areas private rents are actually lower than social rents.
The crucial point for me is that social rents are set by a formula that includes earnings where affordable rents are merely a reflection of ever more unaffordable house prices and rents in the private sector. In whole swathes of the country, and especially in the South East, they will only be ‘affordable’ to working tenants if they can claim housing benefit.
Does that matter if housing benefit is ‘taking the strain’? For all kinds of reasons, yes it does: work incentives will be blunted; the housing benefit bill will rise at a time when it is already under pressure; inevitable cuts will leave tenants with increasing shortfalls; and the evidence seems pretty clear that it offers worse value for money over the long term.
On tenure, social landlords were using introductory and probationary tenancies for years before the Localism Act allowed them to use flexible tenancies. And security of tenure has only existed since 1981 and was enacted not by a Labour government but by Margaret Thatcher (though it was a bi-partisan policy to implement what was already seen as de facto security because council landlords were publicly accountable bodies).
However, starved of investment and denuded by the right to buy, social housing is very different now than it was then. Alongside a major programme of investment and the removal of restrictions on council borrowing, plus an end to affordable rent, SHOUT also argues that:
- Social rented housing should be viewed as a tenure of equal status to others. It meets needs that other tenures cannot and is a tenure of choice for millions of people. This choice should be acknowledged and supported.
- National and local politicians should be encouraged to take the lead in affirming the positive value and purpose of social rented housing, and challenging the demonisation and stigmatisation of social housing and social housing residents.
Kate Davies addressed some of these points in a recent Guardian Housing piece that condemned the stereotypes but was also dubious about ‘social housing professionals queuing up to express their love of social housing’.
‘I find the demonisation of social tenants obnoxious,’ she said, ‘but I also shudder at this crude promotion of council housing as an idealised workers’ paradise. Let’s be absolutely honest about the facts.’ Her point I think was that we should present social housing as it is rather than reach back nostalgically to the past: celebrate the achievements of aspirational tenants who want to move on while accepting that ‘it provides a safe haven for vulnerable people, and this is the real value of social housing today’.
I found myself agreeing with some of what she said, challenged by some of it but still troubled by the implications of accepting that social housing should be limited to what circumstances have made it. Go right back to the Localis report that influenced the coalition’s housing reforms and you’ll find it advocating social housing only for the most vulnerable and near-market rents for everyone else; go to where the reforms went furthest, in Hammersmith & Fulham, and you’ll find new criteria for the waiting list that are so restricted that it fell to just 700 and Conservative councillors saying that this proves there is no demand for social housing.
Take a look, for example, at the prospectus for the Estate Regeneration Programme published by the DCLG last week. The aim is to redevelop existing estates at a greater density to provide more homes. It sounds a good idea in principle as does replacing tower blocks with terraced streets. The prospectus does also distinguish between ‘social’ and ‘affordable’ housing. However, there are no stipulations as to the split between them and between homes for rent and for sale. As one of the specific objectives is to maximse the output of homes for the minimum amount of public loans available, it’s not hard to see the danger of Hammersmith & Fulham-style regeneration of existing estates with little or no social housing.
It seems naïve to imagine that the clock can be turned back to before the Localism Act and still less to 1979 or 1945. With investment in short supply, it may well be that higher rents and flexible tenancies will be an important part of the housing and regeneration mix. However, they will continue to be regarded with suspicion unless government and landlords make a clear commitment to the future of social renting rather than collude in its slow death. With that commitment to genuine affordability in place, intermediate (definitely not ‘affordable’) rents could come to be seen as an important option for tenants who can afford them just like low-cost ownership is for those who can buy. The new ideas put forward by Generation Rent yesterday could come into play too.
With that, plus the all-party support seen at today’s SHOUT launch, could the way then be clear to reclaim the broader meaning of ‘social housing’? As a range of options to rent and buy a home for the millions of people who the market has failed rather than an A&E department for the poorest and most vulnerable? That really would be something to shout about.
A new manifesto for private renters published today highlights the new thinking on housing emerging ahead of the general election.
This is the first of two manifestos being launched this week by new organisations with different priorities and constituencies to the existing ones. We’ll hear from SHOUT, the campaign for social housing, tomorrow but today it’s the turn of Generation Rent.
And it’s about time. Since the creation of the assured shorthold tenancy and the invention of buy to let, the private rented sector has more than doubled in size. That’s great news for landlords and letting agents but not so great for tenants with minimal security of tenure and consumer rights.
To illustrate my point, here are three recent bits of news. First, take a look at the limp DCLG guide to ‘How to Rent’. Second see the incredible story on Nearly Legal of the ‘the unacceptable face of London landlords’ who turns out to be the Conservative mayor of Barnet.
Third, have a read of last night’s debate in the Commons on the Consumer Rights Bill, which saw the defeat of a Labour attempt to ban letting agent fees to tenants. Business minister Jenny Willott ignored evidence that just such a ban has worked in Scotland without increasing rents and pressed ahead with the coalition’s plans to ensure that fees are transparent.
That gave Labour’s Stella Creasey the chance to repeat one of the most memorable Commons lines about housing during this parliament. Transparency on fees is, she said, ‘a bit like telling someone who is tied to the train tracks what the timetable is for the trains. However, as Willott pointed out, Labour had 13 years in government but failed to act.
The major political parties have at last woken up to the need for action and to the fact that private renters have votes at the next election. Even the coalition has made cautious moves on transparency and redress, while Labour has proposed not just the fees ban but minimum three-year tenancies with limits on rent increases.
Generation Rent goes further in today’s manifesto that it says will make the private rented sector fit for the 21st century. Proposals include:
- The right to a five-year tenancy, with flexibility for the tenant
- A national register of landlords and licensing of letting agents
- Requiring landlords to prove their properties meet decency standards
- Rent increases linked to average earnings
- A right to buy for private tenants (based on the right of first refusal still available to long leaseholders and regulated tenants when their landlord decides to sell).
The manifesto also includes reforms that could be introduced while the legislation is being implemented or if the government insists on maintaining a voluntary approach. These include tax reform to incentivise landlords to offer longer tenancies and a change for longstanding tenancies to get extra notice at the end of a tenancy on top of the existing two months.
Without going into the proposals in detail, reaction from landlords will no doubt be hostile, although the intention is to promote a professionalised sector based on longer tenancies. However, as with the Labour plan for three-year tenancies, there could be obvious loopholes for landlords to exploit, such as a discretionary ground for possession where the landlord or a member of their family wished to occupy their property.
However, Generation Rent’s manifesto is not just about the current plight of renters, it also looks to the future of the housing system and what it calls ‘a permanently affordable private rented sector’.
This amounts to a scaled-up version of the community land trust model with government backing. ‘A secondary market of new private rented homes, built by government and sold to buyers at close to cost price, is one way to produce affordable homes for renters,’ argues the manifesto. The initial affordability would come from requisitioning public land. Buyers would be able to live in the homes themselves or rent them out, but only at a greatly reduced rent to reflect the cheap purchase price.
More detail is set out in a separate paper on Buying out of the bubble: A bubble-free housing market. This proposes £1 billion of state funding (plus private funding) for a first wave of 10,000 homes, with sales receipts funding future waves and prices capped at 110 per cent of the build cost. All homes would be sold leasehold with price inflation capped. Subsequent sales could only be at the regulated value and rental incomes would be capped at a fair proportion of the regulated value. Housing associations and councils could buy the homes for social tenancies, with the right to buy limited to the secondary market.
The manifesto offers three mechanisms for achieving reform:
- A new Landlord and Tenant Act introducing wholesale rather than piecemeal reform
- A new Department of Housing, with a dedicated secretary of state for housing, bringing together oversight of the private rented sector and social housing, but also taking over housing benefit from the DWP and combining the skills, planning and housebuilding functions spread between different departments.]
- A review of how the legal system treats housing cases including consideration of a new housing court of tribunal.
How much of this actually makes it into the policy of the next government does of course remain to be seen. However, the contrast between the debate that Generation Rent is opening up and the one in the House of Commons last night could hardly be starker.
And this is just the start of what will be a big week for housing policy, with SHOUT tomorrow and the IPPR’S Condition of Britain report with new proposals on the welfare state on Thursday.
There was a telling moment at the end of last night’s Radio 4 debate on housing: the sound of complete silence from the audience.
The dead air came in response to a question from presenter Mark Easton asking people at the debate at the London School of Economics (LSE) how many of them think our political leaders are doing their best to solve the housing crisis.
But I am not sure if what sounded like mostly a young audience was tremendously impressed by the answers from the panel either and that may have been down to the way the question was framed in Housing: Where Will We All Live?
The premise was: ‘It’s been identified as the single biggest threat to the British economy: we are simply not building enough homes.’ The debate about ‘why the problem has developed and how best to fix it’ featured deputy London mayor Richard Blakeway, John Stewart of the Home Builders Federation, Rachel Fisher of the National Housing Federation, Paul Cheshire of the LSE and designer Wayne Hemingway.
But the programme began with two members of the audience describing their housing problems. Holly Baxter had moved from a place condemned as uninhabitable to a friend’s airing cupboard to renting a shared house with four other people, all while working full-time. ‘I can’t imagine that ever ending,’ she said. ‘I can’t even imagine renting a two-bed flat.’
Laura McGuiness is a management consultant with a partner also working in the City who have been saving for a deposit for five years. She described being continually outbid by buy to let investors and overseas cash buyers. ‘The homes we bid on all went for £70,000 over the asking price,’ she said. ‘Prices are going up at £10,000 a month.’
The panel were then asked to name their solutions:
- Employer support for rental deposits and more shared ownership (Richard Blakeway)
- Reform planning so housebuilders can deliver 75 per cent of the homes we need (John Stewart)
- Link economic development, job creation and housebuilding with a national plan and think about shared ownership and other models rather than treat ownership as the only model (Rachel Fisher)
- Tackle the ‘manufactured problem’ that the planning system forces us to live on 10 per cent of the land area of England and inflates the prices of homes and land (Paul Cheshire)
- Tackle the way we provide houses and the politics that means ‘all we’re doing is making the 65 per cent [who own] richer and the 35 per cent poorer’ (Wayne Hemingway).
Some of these answers have more going for them than others. All of them addressed the question posed in the debate. However, none of them came close to tackling the issues raised by the two people from the audience.
Even before the programme (recorded on Monday) was broadcast last night, Holly Baxter had expressed her bitter disappointment with the answers on The Guardian’s website:
‘The fact that such a distinguished panel were hopelessly out of touch with the reality of housing left me deflated. I was expecting to hear practical solutions to the housing crisis, and a drive to burst the bubble. Instead, excessive pandering to landlords and an insistence that my experience was anomalous seemed to dominate. But the fact remains that my experience is the norm for people my age.
‘The only person who did speak passionately and sensibly about the issue was the designer Wayne Hemingway. He mentioned the psychological benefits of being able to decorate your home, of being able to choose your own furnishings, of choosing the other people you live with. It was the only acknowledgement I heard all night that the statistics about my generation had human faces behind them.’
The problem lay, I think, less with the panel than the premise of the programme: the assumption that increasing housing supply is the only solution to the crisis. The crisis certainly won’t be solved without increasing supply - and that requires urgent action now - but it will only have an effect over the long term. It will take at least until the end of the decade to get to 250,000 additional homes per year and it could take at least another decade of building at that rate to have an impact on prices.
Even if we can achieve that – a big if given the politics involved - remember that this was only the level that the Barker report said would bring house price increases down to the European average, not actually reduce them and that after 10 years of under-provision we need even more homes now.
The panel had some good ideas, especially from Rachel Fisher and Wayne Hemingway, and a real challenge to the current consensus from Paul Cheshire, but they had little to offer people already experiencing the worst of the housing crisis right now.
And given the narrow framing of the question there was little sense that there might just be other causes of the crisis – the affordability question, the distribution of the homes we already have, housing as an investment market, for example – that require other solutions. The failure of our political class on housing is much more profound than the question made out. No wonder it was met with silence.
Just about everyone agrees that we need to build new garden cities – but that’s the easy bit. What comes next?
I’ve just been looking at the five entries shortlisted last week for the Wolfson Economics Prize. There were 274 other entries, which may be a product of the £250,000 on offer to the winner but also reflects an idea whose time has come (again). There now seems to be a remarkable acceptance right across the political spectrum that garden cities are an important part of the solution to the housing crisis (even though the prize itself is put up by a Conservative peer and administered by Policy Exchange).
But what is a garden city? Should we build new Letchworths or Welwyns in a 21st century fulfilment of Ebenezer Howard’s vision pictured above? Is it a vaguer commitment to sustainable development? Or it is more of a marketing term and a signal of what it is not for Conservatives (a new town or, even worse, an eco-town)?
For the moment at least the third meaning seems prominent. An opinion poll commissioned by the Wolfson Economics Prize found that a remarkable 74 per cent of people think garden cities are a good idea. Even more remarkably 79 per cent of over-65s and 80 per cent of Conservative voters agreed. Lord Wolfson himself has urged his party to ignore opposition to new homes from ‘a very vocal majority’. Chris Walker of Policy Exchange argues that garden cities could be a ‘game changer’ in winning local support. On the Today programme this morning though Nick Clegg lamented the time it had taken him to get Tory support.
Looking through the entries, I was struck by the quality and breadth of ideas on offer (an entry from authors including planning gurus Peter Hall and David Lock and the former chief planner of innovative Freiburg did not even make the shortlist). However, while there was agreement on some issues there was complete disagreement on others. Here are some themes I spotted:
Garden cities can mean very different things. As Barton Willmore points out in its entry, Ebenezer Howard’s original utopian vision was attacked by Jane Jacobs as ‘towns planned by the few for the imagined lifestyles of the many’. It argues that:
‘Looking to the existing Garden Cities, the likes of the TCPA continue to promote large-scale, comprehensive masterplanning. But the places we love and cherish as part of our heritage almost all developed organically, built by a host of players over generations with a masterplan rarely in sight.’
And do they need to be standalone communities at all? Urbed’s entry calls for the creation of a ‘garden city’ of almost 400,000 people by doubling the size of an existing city. It argues:
‘Through this debate we have come to the fundamental conclusion that it is probably impossible to create a Garden City of any scale from scratch in the current economic climate.’
It’s all about the land. Almost all of the entries rely on land value capture and long-term investment and some form of development corporation model. As the entry from Wei Yang & Partners puts it:
‘What distinguishes a garden city from other forms of development is its approach to land value capture for the benefit of the community, community ownership of land and long term stewardship of assets.’
The uplift in the land value from development can therefore be used to fund the infrastructure rather than to line the pockets of landowners. But how much should existing landowners get? Many of the entries talk of ‘patient investors’, landowners willing to forgo a short-term cash receipt for a long-term equity share in the new community. Where the land is bought, all seem to agree on existing use vale plus a premium, but this ranges from ‘slightly enhanced values’ to 20 per cent to 20 times the agricultural value in the different entries.
Urbed’s entry argues that existing use value plus compensation is ‘not seen as politically acceptable’ to the coalition and proposes instead a model based on the great estates that developed London in the 18th and 19th century. ‘The key to their success was the retention of the freehold and the incremental development of the estate to benefit from the increase in value over time rather than taking a capital sum at the outset.’
And the planning. New communities also have to make it through planning and that is much easier said than done. Derwenthorpe took ten years and permission for Owenstown, the co-operative new town proposed in Scotland, was refused in April. The eco towns programme stalled in a series of local rows and David Lock fears garden cities could go the same way unless we use the New Towns Act.
Learning from history. The lessons offered by the new towns seemed to be forgotten under the Thatcher, Major and Blair governments. In times of austerity, realisation has dawned again that Letchworth received no public subsidy and that the new towns repaid their initial public loans many times over.
However, is some of our politics still lagging behind? In its entry, Wei Yang & Partners surveys the history of garden cities, new towns, new settlements and eco towns and concludes:
‘The logical response would be to propose a national plan, the reinstatement of regional bodies charged with plan-making and the return of the new town development corporations to ensure delivery. We believe that this is politically unacceptable: the localism agenda, now embraced by all political parties, has raised expectations on the part of local communities for engagement and a return to central control would be politically unacceptable. Any new initiative must engender the support, or tacit acceptance, of local communities.’
Garden cities are a very long-term solution to the housing crisis. New home completions in Milton Keynes averaged 5,000 a year from 1967 and 1991, then fell to about half that number. Urbed envisages a build rate of 2,800 homes a year for its imaginary city of Uxcester but it also points out that we need to build the equivalent of a Milton Keynes every year in England.
Don’t reply on big housebuilders. Support from small builders and self-builders is a key element of many of the entries. Urbed calls for balanced incremental development with opportunities for them, pointing out that 60 per cent of new homes in France and Italy are built like this and highlighting the way that custom build was pioneered at Almere in Holland. Shelter argues for ‘a town that built itself’ with self-builders making up a significant proportion of the early movers.
Who will live in the new communities? Kathleen Kelly of the Joseph Rowntree Foundation makes the crucial points that the homes need to be both affordable and available to people of all ages.
One entry that did not make the shortlist (by Martin Hewes) argues that older/retired people should form the core pioneer population for the new garden city. Could it therefore also be a mechanism for encouraging under-occupying empty nesters to downsize and free up larger homes in existing communities.
In a report last week, the Town and Country Planning Association argued that 30 per cent of homes should be for social rent and another 30 per cent for shared equity and discounted ownership.
Most of the entries talk about tenure diversity but from what I can see Shelter’s is the only shortlisted entry that breaks it down. Its garden city would have 30 per cent social rent and 7.5 per cent shared ownership as well as market homes sold at a discount.
Follow the train lines. Investment in HS2, Crossrail and East-West Rail (between Oxford and Cambridge) all create opportunities for new communities with good transport links that don’t rely on cars. Wei Yang & Partners identifies an arc from Southampton to Felixstowe and argues that the single location with the greatest potential is at the intersection of HS2 and East-West Rail around Bicester. The idea of a building a new town around an HS2 station midway between London and Birmingham seems so obvious that I once tweeted it myself. I was told that the big problem is that trains need around 100 miles between stations to be high speed rather than spend all their time accelerating and breaking.
Will public support evaporate when a specific location is suggested? Shelter’s entry is the only one to name a specific location: the Hoo Peninsula in north Kent. The location has much going for it, not least the lack of neighbours on three sides and the fact that 90 per cent of the land has a single owner (the Church of England). However, it also means that Shelter has to grapple with issues like flooding and transport in a much more detailed way than the other entries. And that’s before you get to the nightingales issue.
The 74 per cent public approval in the Wolfson poll seems remarkable, even though nimbyism is slowly losing its grip over public opinion. But how much of that 74 per is made up of people who think garden cities mean new homes will be built somewhere other than in their back yard?
Why did that picture of anti-homeless spikes get such prominence on Twitter and in the media over the weekend?
Here is the tweet from Anglican priest Sally Hitchiner that sparked an angry wave of Twitter reaction and follow-up stories in the national press.
What she called studs, but look to many other people like spikes, do indeed send a very negative message. Many people have noted the resemblance to anti-pigeon measures on London buildings. And Katharine Sacks-Jones of Crisis points out that there are just one part of a rough tale for rough sleepers. ‘We will never end homelessness with studs in the pavement - only by tackling the root causes,’ she says.
Yet for all those powerful arguments, anti-homeless urban design is sadly not new or unusual. There have been previous furores in Britain, notably involving Tesco, and there are much worse examples in other cities around the world.
Take a quick look at these anti-homeless barriers beneath an overpass in Chicago or these benches and sculptures in parks and shopping malls in Tokyo (the penguins and dolphins are not as innocent as they seem) and you’ll see what I mean.
Above all, take a few minutes to watch this amazing short video about anti-homeless design in Paris to see the lengths to which companies and the authorities will go to stop anyone sleeping on their benches or window sills or doorways:
The title of the film, The Fakir’s Rest, is a reference to exactly the same sort of spikes that feature at 118 Southwark Bridge Road.
So there must be more going on here than just the appearance of the spikes, the ubiquity of social media and Twitter’s tendency to magnify outrage.
Perhaps it’s because the very word reaches back to a deeper history of homelessness, when spikes were not sharp metal objects concreted into a doorway but the nickname for the vast dormitories for homeless men provided by local authorities. ‘The Spike’ was the title of George Orwell’s first published work in the 1930s and later became a key part of Down and Out in Paris and London. Spikes became the huge DHSS resettlement units that did not close down until more than 50 years later.
However, those spikes in a residential doorway have slightly different connotations in the contemporary world of homelessness in London and of No Second Night Out. The issues are highlighted in the nuanced reaction from Howard Sinclair of St Mungos Broadway to the furore:
‘Each year our teams, in Southwark and elsewhere, help thousands of people off the streets. Part of their role is to prevent people adopting a street lifestyle which, on occasions, means adapting the physical environment to prevent people sleeping rough in a particular location on a regular basis. These “studs” appear a rather brutal way of doing just that. However to undertake such measures without providing the necessary assistance to people who sleep rough is wrong - the aim is to help people move in, not just move on.’
The complex issues are also eloquently explained in this blog by a former outreach worker.
Yet for all that, the anti-homeless spikes still seem to be a symbol of something more, which I think is why they took off on Twitter and in the media.
Could it be that their presence in a residential doorway plays into wider narratives about the housing crisis in London and the proliferation of luxury flats? Or that they tap into our long history of vagrancy and the law and the Vagrancy Act?
Or could it be what the spikes say about our values as a society: the suspicion that what we care about is not so much homelessness itself as the public appearance of homelessness?
Ministers once promised that Britain would lead the world on zero carbon homes. Do we now just lead the world in hot air?
The 2016 target for all new homes to be zero carbon seemed genuinely revolutionary when Gordon Brown and housing minister Yvette Cooper first announced it in 2006. Questions about practicalities and costs were brushed aside as they argued that the target would spark the mass adoption of new technologies, drive down costs and even open up vast new export markets for British firms. As Cooper put it at the time:
‘In 10 years, all new homes should be built at a zero carbon rating. No other country has set that sort of timetable or ambition but I believe that we need to do it to drive the environmental technologies of the future and ensure that we are building the homes of the future.’
Eight years, and six housing ministers, later and today’s Queen’s Speech promises that ‘legislation will allow for the creation of an allowable solutions scheme to enable all new homes to be built to a zero carbon standard’. So far, so good. The Liberal Democrats even reached back to the days of Brown and Cooper with their claim on Monday of ‘Britain to lead world on zero carbon homes’.
In truth of course, the homes will about as ‘zero carbon’ as the speech is the Queen’s own work. Back in 2006, zero meant zero: 100 per cent of all carbon emissions right down to the electricity used to boil the kettle would be reduced on site.
Over time though the definition has been watered down. The nature of the emissions included has been steadily relaxed and more and more of the emissions reduction has been left to ‘allowable solutions’ rather than improvements in the energy performance of the building and on-site renewable energy generation. See Keith Cooper’s feature in Inside Housing last year for some of the detail.
The government will complete this process. The Queen’s Speech itself says that: ‘Legislation will allow for the creation of an allowable solutions scheme to enable all new homes to be built to a zero carbon standard.’
A more detailed briefing says that with the Infrastructure Bill the government remains committed to the zero carbon standard for new homes from 2016 ‘but it is not always technically feasible or cost-effective for house builders to mitigate all emissions on-site’.
The government will set a ‘minimum energy performance standard’ and the document goes on:
‘The remainder of the zero carbon target can be met through cost effective off-site carbon abatement measures – known as “allowable solutions”. These provide an optional, cost-effective and flexible means for house builders to meet the zero carbon homes standard, as an alternative to increased on-site energy efficiency measures or renewable energy (such as solar panels).’
The zero carbon home standard will be set at level 5 of the Code for Sustainable Homes but legislation will allow for developers to build to level 4 as long as they offset through allowable solutions to achieve level 5.
I’ll leave the technical details of this off-site offset to others with more expertise while noting that the Code itself is being scrapped as ‘red tape’. It’s possible to see the changes as yet another concession to the big housebuilders, again without any quid pro quo from them, or as the pragmatic implementation of the original bold aim – or perhaps as both. Even the boldest original version of zero carbon did nothing about the far greater quantity of emissions from existing homes but it’s clear that ‘zero carbon’ new homes means something very different now.
For a measured reaction, see this from Paul King of the UK Green Building Council, a prominent supporter of zero carbon homes:
‘The policy of allowing developers to pay into a fund to offset emissions they cannot reduce is a sound idea in principle, despite its lukewarm reception this week. If implemented properly, this could lead to investment in local, community energy schemes and drive innovation in clean technology. On the other hand, a weak scheme, that generates little investment that has no connection to the housebuilding which is taking place, would be a deeply disappointing outcome.’
However, that is not all the briefing document has to say on zero carbon. It goes on:
‘Small sites, which are most commonly developed by small scale house builders, will be exempt. The definition of a small site will be consulted on shortlfy, and set out in regulation.’
This is a crucial issue, with some reports suggesting that the definition of a ‘small site’ will be fewer than 50 homes. Paul King warns that the Lib Dem side of the coalition is ‘at risk of snatching defeat from the jaws of victory by letting small developments – a large chunk of the housebuilding market - off the hook’.
A much more hostile reaction came from the Sustainable Energy Association, which says today’s announcement ‘leaves zero carbon homes policy in tatters’ and will lock in higher energy bills for decades. It claims the new rules mean that ‘zero carbon’ will only apply to 30 per cent of new homes (70 per cent are in small developments, it says) and will require only a 44 per cent reduction in carbon emissions on 2006 standards.
And before anyone comes away with the idea that the Infrastructure Bill is a green bill, other elements will ‘guarantee long-term investment in the road network’ and ‘support the development of gas and oil from shale and geothermal energy by clarifying and streamlining the underground access regime’. We may be building ‘zero’ carbon new homes but we seem equally intent on fracking maximum carbon underneath them.
There are clearly a range of different environmental, economic and practical considerations that have to be balanced against each other here alongside the politics of eye-catching pledges and maneuvering to meet them and the question of whether the original aim was ever achievable.
However, I wonder what the late and much-missed Mel Starrs would have made of the latest changes. Here’s a blog she wrote in 2011 on ‘the Zero Carbon Homes debacle’ pleading for the phrase to be ditched:
‘If we need to, we can still call 2016 targets “net zero” or more accurately “carbon neutral”, but please can we have the phrase “zero carbon” back so we can use it again for exemplar buildings?’
As it stands, ‘zero carbon’ homes remind me of nothing so much as that other triumph of political sleight of hand: ‘affordable’ homes.
On a first glance at today’s new figures, the help to buy mortgage guarantee scheme is failing to live up to the fears of its critics or the hopes of ministers.
The figures released by the Treasury show 7,313 sales in the first six months of the scheme. Of these, 72 per cent were for homes valued below £250,000 and 80 per cent were to first-time buyers.
Those completions account for around 1.3 per cent of mortgages over the six months so it’s hard to see how the help to buy 2 mortgage guarantee (HTB2) on its own can have contributed much to rising property prices.
And the regional breakdown shows that HTB2 guarantees account for the lowest proportion of mortgage lending in the regions where prices have risen most – London and the South East. Here are the figures:
Scotland accounts for six of the top 10 local authority areas seeing the most HTB2 completions: Glasgow, Edinburgh, Fife, South Lanarkshire, North Lanarkshire and Aberdeen. Leeds, Birmingham and Wigan also make the list, with Bristol the only entry from the south of England.
In contrast, most of the north London boroughs at the epicentre of the house price boom in the capital saw fewer than 10 HTB2 completions each. Brent and Camden saw one each and the tri-boroughs of Hammersmith & Fulham, Kensington & Chelsea and Westminster two apiece.
Worries that the cap of £600,000 would lead to a rash of high-value completions with high-value liabilities for the government do not seem to have been borne out either. There were just 31 completions worth over £500,000 and another 491 between £250,000 and £500,000.
The mean income of households with a guarantee was £49,056, and 60 per cent of households had an income of between £20,000 and £60,000. Judged against the mean property value of £151,597, that means house price: income multiples for HTB2 borrowers are actually lower than in the rest of the market.
So much for the fears – at least so far. In statistical terms, the impact of Help to Buy has been miniscule compared to low interest rates, Funding for Lending, buy to let and all the other factors underpinning and inflating prices. However, as I’ve blogged before, the deeper impact may have been psychological: the prospect of a state guarantee for the market has inflated the expectations of sellers. While HTB2 has helped 5,843 first-time buyers, Priced Out estimates that rising prices have excluded 250,000 would-be buyers from the market over the last year.
Take-up of HTB2 is accelerating – the 2,657 completions in March represents 36 per cent of the total so far – but it is still nowhere near the initial forecasts of 190,000 completions a year. The scheme was meant to guarantee £12.5 billion of mortgages but completions so far total just £153 million.
That may reflect the fact that help to buy mortgages are relatively expensive compared to the rest of the lending market and that prices in much of the South East are already too far out of reach for many first-time buyers.
It may also explain the curiously muted government spin this morning. The last time HTB2 statistics were released they came complete with case studies and personal appearances by David Cameron. The flipside of fears not being realised so far is that HTB2 has not actually helped many people to buy so far either.
Little wonder that Cameron’s press release this morning concentrates on the aggregate figure for both versions of Help to Buy. So far at least, the supposedly smaller HTB equity loan scheme (HTB1) has seen more sales per month than HTB2.
As he brought forward the launch of HTB2 in October 2013 George Osborne supposedly told the Cabinet: ‘Hopefully we will get a little housing boom and everyone will be happy as property values go up.’ So far his plans for May 2015 seem on course without much obvious help from Help to Buy.
David Cameron said this morning that: ‘As Britons, home ownership is in our blood - it’s about aspiration, planning for the future and laying down roots.’
The bigger picture is that home ownership is shrinking faster than he is helping people on to the ladder (see David Boyle’s apocalyptic warning at Hay yesterday). High and rising house prices mean that the patient expecting a blood transfusion is actually being bled dry.
A year on and the evidence is stacking up about the impact of the bedroom tax.
Over and over again we’ve heard from ministers that tenants affected by what they call the removal of the spare room subsidy have choices: they can downsize; or they can take in a lodger; or they can get a job. And the safety net of discretionary housing payments (DHPs) is there to help the most vulnerable.
Over and over again, landlords, tenants and others have argued that it’s not so simple: smaller homes are just not available; jobs are not so easy to come by and may be impossible for many tenants with disabilities; few will want to take a stranger into their home; and DHPs are woefully inadequate to meet the scale of need.
A year on from its introduction evidence is emerging of the impact of the bedroom tax and of the sorts of behavioural change that the DWP found impossible to quantify in its impact assessments.
The headlines were understandably taken by the 58 per cent of tenants who said they had spent less on food or heating and energy since being affected. Even more starkly on the ‘heating or eating’ numbers, tenants with a disability were almost twice as likely (31 per cent) as those without a disability (18 per cent) to say that they have spent less on heating and energy.
The percentage of affected tenants saying that they were in arrears most or all of the time has risen from 6 per cent to 31 per cent since the introduction of the bedroom tax. Among those who reported regularly running out of money, 57 per cent had made up the shortfall by borrowing from families and friends, 25 per cent by going without meals and 19 per cent by reducing their energy bills.
What also really struck me though were the tiny numbers of tenants who had taken the DWP’s choices.
Only 10 per cent had applied for a discretionary housing payment. Even discounting for the fact that these are tenants’ perceptions and some may have been helped by their landlord to apply without realising it, I find that a shockingly low number.
Just 6 per cent had looked for a job but before anyone thinks this is about workshy tenants the report also includes a more detailed analysis comparing the attitudes of tenants affected and unaffected by the bedroom tax. There was virtually no difference in the proportions saying they had looked for a job, taken new training, looked for an additional job or increased their hours. Ipsos Mori concludes:
‘For each of these activities there were no significant differences with non-affected tenants suggesting that the introduction of the size criteria had not resulted in any significant changes in employment behaviours at this stage.’
And only 5 per cent had looked at moving to another social tenancy, the same proportion who had borrowed money from friends or families, not paid their rent arrears and not paid other bills and gone into debt. The option of taking a lodger does not register at all in the polling.
If those answers give the lie to ministers’ complacent statements ahead of implementation, they might also give landlords pause for thought. Why hadn’t more tenants applied for DHPs – did they need more support? And why is there no mention of appealing against housing benefit determinations – as many tenants have successfully done on grounds including room size and use?
A second report on the bedroom tax a year on was published last week by Grand Union Housing. This found that 70 per cent of the 1,070 tenants affected by the bedroom tax in April 2013 were still affected a year later. Of the 317 others, 15 per cent had moved, 8 per cent stopped claiming housing benefit (implying they found work), 3 per cent had gained a new household member and 2 per cent had reached pension age and become exempt. However, some 286 new tenants had joined those affected since April 2013, so the overall numbers have not gone down by much.
Away from those headline numbers, two things leapt out of the report for me. First, on DHPs, it quotes the example of a tenant who applied and got asked why they needed an internet connection. She got help after her landlord intervene but it begs the question of how many others could have been denied on the basis of an internet connection that they already need to look for work and will need to claim the universal credit.
Second, there’s the whole issue of who gets the homes freed up by tenants who move because of the bedroom tax. If they really are going to other tenants who are overcrowded and in housing need, then it might be possible to see a very rough kind of justice at work.
However, the bedroom tax happened at the same time as local authorities were able to change their allocations policies and restrict who can apply to be on the register. The report says that many associations are seeing a drop in demand on three-bed homes because fewer people are being allowed to bid on them.
One association has had to re-advertise three-bed homes because there were no suitable applicants with three-bed need and then take people who qualify for two bedrooms but can afford the larger tenancy without relying on housing benefit. Under-occupation therefore continues but with a different family.
Another has seen 2,000 families removed from the registers by local authorities and is now letting homes to lower priority applicants as a result. One council has only 12 applicants eligible for a three-bed house compared to 400 before the change.
A year on and not many of the impacts of the bedroom tax predicted by ministers seem to have materialised. Many if not most of the fears expressed by critics have been borne out. And the unintended consequences of a pernicious policy keep mounting up.
While UKIP has taken all the election headlines, in housing terms it’s hard to look beyond the Conservative defeat in the party’s flagship council of Hammersmith & Fulham.
The West London borough dubbed ‘David Cameron’s favourite council’ has pursued a radical strategy of cutting the council tax and cutting spending since it won power in 2006.
But it is of course also the birthplace of what I’ve come to think of as the third Conservative housing revolution. If the first was the right to buy and the second private finance for housing associations and deregulation of private renting, the third is about changing the nature of social housing completely.
The manifesto was of course the 2009 report for Localis called Principles for Social Housing Reform. Co-written by former Hammersmith & Fulham leader Stephen Greenhalgh, it argued that:
‘The current social housing is warehousing poverty in the core of our great cities – cities which need to be the very engines of economic growth. With fundamental reform, social housing would continue to be available to those who cannot house themselves and would provide properly for them, but the system would provide a hand up rather than a hand out to people who work hard and play by the rules.’
The report recommended the end of security of tenure and a national allocations framework for social housing, putting all tenants on near-market rents and the end of all capital subsidy for new homes.
Much of that agenda went on to be implemented under the coalition. The Localism Act allowed landlords to introduce fixed-term tenancies and change their allocation policies and subsidy was cut alongside ‘affordable’ rents. This may be a more moderate and voluntary version of the Localis agenda but the links are clear.
Back in West London, the council has used the new freedoms to change its allocations policy and slash its waiting list and favour intermediate rent and home ownership while selling off a proportion of social housing as it becomes vacant. And perhaps most controversially of all it’s pursued a regeneration strategy that includes the demolition of existing council estates like West Kensington and Gibbs Green as part of the Earl’s Court development and the creation of ‘decent neighbourhoods’ of high-priced homes.
Greenhalgh himself has since moved on from Hammersmith & Fulham to become London deputy mayor for policing and crime but the mantle of reform was taken up by Cabinet member for housing Andrew Johnson. As he put it in 2012:
‘We want to incentivise residents to make the most of their lives. Council housing can be a great safety net to help get people back on their feet — but it should be a springboard not a destination. The current system does not promote personal aspiration or provide tenants with any incentive to try to move into home ownership and does not make the best use of the housing we have.’
The idea of social housing as ‘a springboard not a destination’, as a form of A&E for people in temporary difficulty rather than a permanent home for people in need, mirrors the coalition’s wider programme of welfare reform. It’s a prescription that, as many people have blogged many times, amounts to the end of social housing as we’ve known it.
But now the Conservative revolutionaries of Hammersmith & Fulham have lost. Andrew Johnson was among the councillors who lost their seat in yesterday’s election though Conservative Home blogger Harry Phibbs kept his (see his reaction here).
Labour regains control of the council after eight years out of power in which its councillors and local MP Andy Slaughter have campaigned vociferously against the Conservative housing policies.
Three of the five early pledges made by Labour ahead of the election featured housing:
- Save our hospitals. The Conservative council plans to demolish Charing Cross Hospital to build flats for overseas investors. Labour will block this and defend our hospitals.
- Homes for residents, not overseas investors. Conservative councillors approve more new homes for overseas investors than local people. Labour will reverse this and ensure homes are built that residents can afford and support social and private tenants
- Put residents first, not property speculators. The Conservative Council puts property speculators first and ignores residents. Labour will give residents a real say with new powers.
The election was obviously about far more than just housing (see Dave Hill’s blog from Wednesday) but it will be fascinating to see what changes in Hammersmith & Fulham as a result.
Most immediately, what does the Labour victory mean for the residents of the West Kensington and Gibbs Green estates? Only on Wednesday they were appealing to David Cameron to intervene to save their homes. Now they have fresh hope – the scheme got planning permission last month but as Pete Apps reports this morning campaigners are optimistic about plans to transfer ownership of the homes to residents.
How do David Cameron’s claims this morning about home ownership and new housing in his own constituency measure up to scrutiny?
It’s a measure of the growing political importance of housing took top billing in his Today programme interview sandwiched between reaction to the conviction of Abu Hamza and Britain’s relationship with Europe. Listen again here from about 1:30 in.
The interview was notable for me for two things: first an unequivocal claim to the old Tory mantle of the ‘property owning democracy’; and second a denial that Tory councils are nimbys made with specific reference to West Oxfordshire (Cameron’s Witney constituency has the same boundaries).
On the first, Cameron said ‘yes absolutely’ when John Humprhys asked him if he considered the right to own your own home to be ‘a sacred right’. The prime minister went on: ‘It’s a deep, natural human instinct. That’s what Help to Buy is all about and what putting rocket boosters under Right to Buy is all about.’
He was of course speaking in the context of mounting concern about the impact of rising house prices, with comments in the last few days from both Mark Carney and Vince Cable. He also said that he would consider action on Help to Buy if it was recommended by the Bank of England. However, given that he seems relaxed, even chillaxed about the prospects of four more years of rising prices, don’t hold your breath on that one.
But ‘a sacred right’? Cameron was laying claim to the ‘home owning democracy’ mantle of Thatcher, Eden and Skelton but he is presiding over a continuing fall in mortgaged ownership and increase in private renting. What’s happening is looking more and more like a property-owning plutocracy than a democracy.
It’s true that Help to Buy is helping some people on to the housing ladder but rising house prices are excluding many more. The latest ONS house price index out today says prices rose 8 per cent in the UK in the year to March and by 17 per cent in London.
Similarly the Right to Buy is helping more tenants to own their own home but there is not much sign yet of the promised one for one replacement affordable homes (even allowing for the caveat that the pledge only applies to additional sales).
On the second point, Cameron used his own constituency as an example of why Tory councils are not nimbys. ‘We’ve been building in West Oxfordshire more houses than was actually set out under our plan,’ he said. ‘So I don’t accept that all these councils are nimbys.’
To declare a slight interest here, I was born in West Oxfordshire and lived in Woodstock and Bampton until I was seven. Bampton has since becomes famous as the location for Downton Abbey and it is also at the centre of a major row about new homes between developers, planners and local resident groups. This prompted headlines about a ‘nimby revolt’ in the Sunday Times last year and a ‘Downton demo’ in the local paper. The council approved one locally controversial application for 160 homes in March but turned down another for 127 homes in December.
Cameron’s specific claim was that West Oxfordshire has been building more homes than set out in its plan. Presumably that’s based on something but the DCLG housebuilding statistics do not seem to bear him out.
The council’s 2012 draft local plan accepted a need for 5,500 new homes between April 2011 and March 2029 (305 per year). However, is that enough? The latest strategic housing market assessment (SHMA) from Oxfordshire County Council says that the district needs between 635 and 685 new homes a year between 2011 and 2031.
West Oxfordshire is currently in the middle of a consultation on the new local plan with its Cabinet member for planning Cllr Warwick Robinson arguing that the SHMA ‘does not of itself set the housing target’.
However, as the graph below shows, the district’s actual performance on housebuilding is well short of those numbers.
West Oxfordshire saw the completion of just 90 new homes in 2013/14, only 10 of which were affordable. Only 790 homes have been completed in the first four years of the coalition. Looking back to before the credit crunch, completions totalled 610 in 2006/07 but even that was short of the need suggested by the SHMA.
West Oxfordshire also looks less than buoyant on the starts figures. Where DCLG ministers were trumpeting a 31 per cent rise across England last week as evidence that their policies are working, Cameron’s home patch saw a 30 per cent fall from 130 in 2012/13 to 100 in 2013/14.
Whether you look at it from a national perspective or a local one, David Cameron’s claims this morning look well wide of the mark.
The boast from ministers is that Help to Buy really is getting Britain building - but is it enough?
The narrative according to Eric Pickles is that the coalition ‘inherited a situation where builders couldn’t build, buyers couldn’t buy and lenders wouldn’t lend’. Now, thanks to Help to Buy and the reinvigorated Right to Buy, ‘we’re ensuring that anyone who works hard and wants to get on the property ladder will be able to do so’.
Not to be outdone, housing minister Kris Hopkins said the housebuilding figures for the March quarter of 2014 were the result of a ‘massive government effort’ and even took credit for a 23-year high in council house building. And the DCLG press release comes complete with a statement from Stewart Baseley of the Home Builders Federation that the extension of Help to Buy 1 ‘is allowing the industry to plan ahead, rebuild capacity lost in the downturn and deliver the homes the country needs’.
The truth, as ever, is a bit more complicated. The graph below shows what’s happened to starts and completions since the end of 2006. I’ve used quarterly 12-month rolling totals to reflect the trend.
What it shows first is the dramatic impact of the credit crunch, with starts slumping from over 180,000 in 2007 to just 75,000 in mid 2009. A recovery followed in the wake of Labour’s housebuilding schemes. Completions inevitably lag starts and show a delayed and less volatile trend.
In phase one of the completion, starts and completions both proved impervious to all government attempts to kickstart them. Up to the end of 2012 they flatlined and even drifted lower than the levels the coalition had inherited.
A strong recovery in starts began from the end of 2012 and has accelerated through 2013 and the first quarter of 2014. The launch of Help to Buy 1 in April 2013 has to be a factor but it’s difficult to separate out its impact from that of previous schemes such as Funding for Lending and the general recovery in the economy.
So far, so good for Pickles and Hopkins. The surge in starts (the March quarter total is 31 per cent up on a year ago) reflects obvious confidence from housebuilders that they will be able to sell their homes and completions too have at last begun to rise (12 per cent on a year ago, even though the March figure is actually down 3 per cent on the previous quarter).
Look at the graph again though and you’ll see that the recovery so far is actually no stronger than the Labour bounce in 2009 and 2010. Comparing what’s happened under the two governments, the first 15 quarters of the coalition have now seen the completion of around 420,000 homes. However, Labour’s last 15 quarters saw 475,000.
And then compare that to the new homes that are needed to meet demand and keep house price inflation in check. To meet the ubiquitous 250,000 a year target (which may now be an underestimate) the last 15 quarters should have seen completion of more than 900,000 homes. The new homes deficit has therefore grown by another half a million homes under the coalition.
On the assumption that the recovery will continue, the current starts and completions will almost certainly see further increases in the months to come. Savills forecasts that completions could rise to around 167,000 by 2018, which will be back to just below the peak seen before the credit crunch. However, that will still be well short of 250,000.
As I’ve blogged before, the government is helping some people to buy but rising prices are excluding many more from ownership. Figures also out today from the Council of Mortgage Lenders show that the number of first-time buyer mortgages is up 24 on a year ago. However, house purchase loans to buy to let landlords are up 46 per cent.
Far from ‘ensuring that anyone who works hard and wants to get on the property ladder will be able to do so’, the government’s record on housebuilding will send the ladder even further out of reach.
Why do we need social housing? The answer may seem obvious on this website but too often elsewhere the one you’ll get is ‘we don’t’.
It’s a theme I’ve blogged about repeatedly over the last few years as social housing has been eroded from within and overtaken from without by the relentless rise of private renting. As coalition ministers never cease to remind us, the sector shrank by 420,000 in England under the last Labour government, but their own policies are merely accelerating the decline while they blur the distinction between affordable and social.
Former housing minister John Healey summed it up bluntly like this in December: ‘If social housing’s own won’t stand up and speak out loudly, then present policy will prevail by default.’ As my fellow IH blogger Colin Wiles has explained, social housing professionals formed the campaign group SHOUT (Social Housing Under Threat) in response. It’s already made a submission to the Lyons Review arguing that half of Labour’s promised 200,000 homes a year should be social housing. If you’re not already, you can follow the campaign on Facebook and on Twitter.
In the meantime though, relentlessly negative coverage continues on TV. The intro to last night’s flagship 7pm news programme on Channel 4 was its controversial ident of the Aylesbury estate. Channel 4 News would not tolerate distortions like the artificially inserted clothes lines, shopping trolley full of rubbish and Sky dishes but Channel 4 itself continues to resist a campaign by residents to #changetheident and show their alternative more positive version.
Channel 4 is of course also the home of shows like Benefits Street and How to Get a Council House. Three housing professionals in Wales were so annoyed about the second series of HTGACH that they set up the Council Home Chat campaign to counter the stereotypes. If you’re not already, you can follow the campaign on Twitter and read myth-busting blogs by people who live, work and believe in social housing here.
Campaigns defending the principle of social housing and fighting back against negative images of it are in some ways two sides of the same coin. But there is also a deeper battle of ideas that the people who would answer my initial question with ‘we don’t’ think was won long ago. For them social housing is either old-fashioned or politically and morally undesirable or just economically inefficient. It may be a minority view but this is the thinking that lies behind both the slow death of social housing and the negative images on TV and it badly needs debunking.
A good place to start is with the two latest policy essays from the Chartered Institute of Housing from Steve Hilditch and Keith Exford. Between them, and coming from different angles, they make some important points.
As a housing campaigner and editor of the Red Brick blog, Steve’s staunch defence of social housing will come as no surprise. However, he also confronts many of those anti-social housing arguments in explaining how we got from a position of ‘the housing crisis is nearly solved’ at the start of his career in 1976 to a new crisis now. Perhaps above all:
‘We have failed to match the distribution of prices and rents in the housing system to the distribution of incomes. Inequality has grown and so has insecurity: the number of people with very low incomes in the “flexible labour market” with zero-hours contracts, casualised labour, irregular self-employment, and part- time work. The correct housing policy response to these changes is that homes need to be cheaper not more expensive.’
Steve explains what’s gone wrong in housing policy over that period and the rise of the perceived wisdom that social housing tenants are ‘subsidised’ even as the actual subsidy goes to ‘the least efficient and lowest value-for-money sector, private renting’. Along the way he raises questions about the commercialisation of larger housing associations and who social housing should be for. He concludes that: ‘Over the last 35 years it has had the life squeezed slowly out of it by ideology and bad policy. But it can be reinvented. And the benefits of doing so could be great.’
Keith Exford’s essay starts by asking why housing policy in general, and policy on affordability and rents in particular, is such a mess. As chief executive of Affinity Sutton, he quotes the example of one of its estates in Islington where the amount tenants pay varies from an £80 per week ‘fair rent’ to a £290 per week ‘affordable rent’.
But he also makes the point that ‘it is arguably impossible to improve affordability through rent levels alone. If for political and economic reasons we are prepared to countenance low incomes then high housing costs can only be defrayed through subsidising rents.’ And he argues that the ‘obsession in some quarters’ with expanding private renting ignores the fact that British pay rates are too low to make market prices affordable without housing benefit.
With no official government policy on affordability and rents, Affinity Sutton commissioned its own research to help it frame an affordable rent policy. ‘It is already clear that devising a market rent-related rent policy to help those on the lowest incomes is challenging to say the least,’ he says. ‘The “target rent” approach, which takes into account the housing market and lower incomes, may not be perfect but it at least offers a sensible starting point for a more logical approach.’
Other research shows that supply-side subsidy for social rents offer the best long-term deal for tenants, taxpayers and providers. He argues that a mix of social rents, affordable rents and market rents is the way forward in contrast to current policy. And drawing on the IPPR’s work on bricks and mortar subsidies he concludes: ‘Spending 95p of every housing pound on benefit just doesn’t make sense, does it?’
Both essays are worth reading in full. The detail of their argument may differ in some respects but both make the crucial link between housing and the labour market, rents and people’s ability to pay them. What both show, I think, is that the underlying case for social housing is not just as strong as ever but even stronger now than it was in an era of full employment and high wages.
Why do we need social housing? The answers are there. Now people beyond this website need to hear them.
Shocking new figures published by Inside Housing reveal yet again the holes in the safety net provided by discretionary housing payments.
On one level it beggars belief that in the last financial year councils turned down 70,000 requests for help from tenants facing cuts in their housing benefit and returned £9 million of DHP funding to central government.
On another, it’s no surprise that a system devolved to local authorities facing their own budget cuts has experienced problems or that one based on local discretion has varied so much between different areas.
I have two big problems with the system but neither is the one today’s Daily Mirror highlights from IH’s report: the north-south divide in the help given to Westminster and Liverpool. All kinds of government funding is tilted in favour of the well-heeled Conservative south of England but in this case it seems to reflect the fact that DHPs do not just cover the bedroom tax. High-rent areas of London face the biggest impact from the bedroom caps and benefit cap.
My first problem is perhaps an inevitable consequence of a discretionary system. A national benefits system based on rights and entitlement becomes a local one based on value judgments about who deserves help.
Is it a coincidence, for example, that North Lincolnshire spent the lowest proportion of its DHP budget in the country (just 15 per cent) and refused the second highest proportion of claims (63 per cent) when it had a policy of refusing grants to tenants who make the wrong ‘life choices’? As Cllr Rob Waltham, chair of the health and wellbeing committee, told the BBC last year:
‘We all make life choices, whether we go to work, or we can or can’t go to work. What we ask them to do is to reprioritise their spending. If their spending includes satellite television, if it includes smoking then what we say to you is we can’t give you extra taxpayers’ money to support you to continue to make those life choices.’
The data attached to Pete Apps’s Inside Housing story reveals that another two councils in the same county – North East Lincolnshire and West Lindsey – spent the second and third lowest proportions of their DHP budgets.
However, Vale of White Horse in Oxfordshire turned down an even greater proportion of claims (66 per cent) than North Lincolnshire, while East Hampshire took third place with 61 per cent of claims refused.
At the other end of the scale Cheshire West managed to spend all of its DHP allocation plus a bit more and turned down nobody for help. Another three councils – Craven, Stratford on Avon and Derbyshire Dales – turned down less than two per cent of applicants.
In between there is huge variation between different councils which I’m guessing is based not just on their treatment of spending but also income, and in particular whether councils disregard disability benefits or not.
Politics does seem to come into this too. Analysis by Jed Meers for his PhD thesis shows the political make-up of a local authority does makes some difference to its treatment of bedroom tax victims. Conservative councils appear to be spending less per bedroom tax case than Labour ones. However, the picture is complex: councils with no overall control were more generous than Labour ones; and both North Lincolnshire and Cheshire West are Conservative-controlled.
Jed also highlights the fact that many authorities also apply elements of conditionality to DHP awards, such as a commitment to seek work or alternative accommodation or to reduce spending. ‘in appealing to a form of localised knowledge the government have also appealed to some extent to a localised morality and politics,’ he says. To me this bears more than a passing resemblance to the system that existed before the post-war welfare state.
My second problem is not so much with the DHP system itself as with the attitude of senior judges towards it. While many first tier tribunals have found in favour of tenants, both the High Court and Court of Appeal have found for the DWP. Judges ruled that the bedroom tax does discriminate against disabled people but that the secretary of state had justified the discriminatory effect of the policy and their needs were being met through DHPs.
The DWP will no doubt stick to its line that the DHP system is appropriate and designed to respond flexibly to local circumstances. However, these new figures show that what is presented as flexibility from above looks very different from below.
How long the courts will continue to accept the system at face value remains to be seen. Significantly, the all-party work and pensions committee recognised the same inadequacy in a report published last month calling for significant new exemptions from the bedroom tax. The MPs argued that local discretion ‘is resulting in access to DHP funding depending heavily on where a claimant lives’.
Local discretion is of course being turned to national political ends in Scotland. With permission from Westminster, the Scottish Government is using DHPs plus its own resources to mitigate the impact of the bedroom tax in full. While that may not be quite as simple as it sounds (what happens to tenants who need DHPs to make up for other cuts in housing benefit, for example?), will tenants in the rest of the UK continue to face a postcode lottery?
Labour’s bold move on private renting seems to be working as politics. Will it work as policy?
I’ve never been to Venezuela or Vietnam but, with due deference to Grant Shapps’s expertise on their housing systems, I do have a few observations to offer.
The Conservative chairman compared Ed Miliband to Hugo Chavez in a ludicrously overblown reaction to the Labour leader’s speech yesterday. Free market think tanks like the Institute of Economic Affairs and right-wing commentators like Fraser Nelson and Harry Phibbs joined him in condemning Labour’s supposed plans to introduce rent controls.
A quick glance at what Labour is actually proposing reveals that it owes far more to Ireland and Germany than Venezuela and Vietnam:
- A ban on the outrageous fees letting agents charge to tenants, which Labour says will save them an average of £350.
- A default three-year tenancy, from which tenants can give one month’s notice after the first six months
- The rent to be freely negotiated at the start of the tenancy with annual increases after that based on a benchmark such as average market rents.
This demonstrably does not amount to the ‘rent controls’ described by Shapps and the right-wing think tanks. Nor will it necessarily lead to a fall in supply: the private rented sector in Ireland grew rapidly after it introduced very similar four-year tenancies with annual rent reviews based on market rent in 2004. And it’s actually more timid than the policies advocated by German chancellor Angela Merkel in last year’s elections.
As for ‘rent control’ what about the way that the market already operates for the eight million households who currently rent their home in England?
The rents of four million social housing tenants rise by a formula linked to inflation (currently CPI plus 1 per cent). That could definitely be described as rent control but far from restricting new supply it is a vital mechanism underpinning it. Over the last few years social rents have actually risen faster on average than private rents.
In the private sector, there are still a dwindling number of tenants on pre-1989 regulated rents (120,000 in 20087/08, the most recent figure I can find). The Conservative-led coalition has introduced caps on the rents eligible for housing benefit of another 1.6 million private tenants. The bedroom size caps were explicitly designed to reduce the rents charged by private landlords.
So, depending on your point of view, the rents of around 5.7 million tenant households are controlled in some form. ‘Rent control’ has many forms. You could even argue that it applies to the remaining 2.3 million households on assured shorthold tenancies and not on housing benefit. As Duncan Stott pointed out on twitter yesterday, his rent is set and cannot be increased for the duration of his six-month tenancy.
Politically, the row about rents is part of a more fundamental division between the parties about intervention in markets. The Conservatives prefer to subsidise ownership (and boost house prices) through Help to Buy. My guess is that Labour’s new policies will resonate with younger voters who are private tenants. As two indications, see these blogs by Tim Stanley in the Telegraph and Daniel Knowles in The Economist. Neither publication is known for its support for Labour or rejection of free markets, but both are broadly supportive of Labour’s announcement.
It remains to be seen whether this will amount to the big electoral boost for Labour envisaged by its more optimistic supporters – they will have to be registered to vote first – but it does have political appeal. As with capping energy prices, the Conservatives can’t seem to decide where this is Marxism or a gimmick but they may find it is also popular.
But will it work as a policy? On the economics of interventions in rental markets, see this excellent blog by Alex Marsh. On the history, I’m planning a separate blog soon. Here are a few thoughts about the policy issues in the meantime.
It was noticeable that, unlike previous Labour policy documents on private renters, there were no endorsements from people in the property industry. There was even an embarrassing intervention from the RICS denying that is working on the benchmarks that the Labour press release implied would be the basis of rent setting. Hostile reactions from the landlord organisations and letting agents were only to be expected but like the energy companies before them they will come across as self-interested.
The more serious threat is the one to investment. When it came to office in 1997 one of the reasons Labour was careful to say that it had no plans for major changes on private renting was that it feared spooking the institutional investors supposedly considering a move into the sector.
Exactly the same argument is being made now at a time when Build to Let at last shows some signs of getting off the ground. One of the most thoughtful reactions from the industry has come from Ian Fletcher of the British Property Federation:
‘There are many institutions investing in UK housing, or on the cusp of it, that will be feeling extremely nervous this morning. Those who are investing already are very receptive to offering longer tenancies and many are doing so and the Labour Party’s aspiration on that in itself is not objectionable, but the rent control aspect of this announcement makes no sense. Good landlords will be getting a perverse message that if you are providing a premium product the most you can expect is the ‘average’, whilst bad landlords with sub-standard accommodation can find another justification for charging over the odds.’
That is a genuine concern and it will raise fears that Labour could go further in future. However, any damage to confidence has probably already been done. And the counter-argument – that Labour should do nothing for fear of spooking investors – is exactly what has led to the rise of buy to let and insecurity for tenants.
As Ian Fletcher goes on to say, it also means Labour has to be more forthcoming about how its new policies will work. This is the crucial point: any new system will involve a compromise between protecting tenants and allowing the market to operate and the question is where it is struck. The similar policies proposed by Eric Pickles last year signalled that he knows there is a problem but seem unlikely to achieve much because they are voluntary.
In contrast, Labour plans to legislate for the new tenancies and to ban letting agent fees. However, the detail that has emerged so far includes important flexibilities. The three-year tenancy will begin with a six-month probation and the landlord will be able to terminate the contract for reasons such as rent arrears or anti-social behaviour. After that landlords will be able to terminate with two months’ notice on the same grounds or if they want to sell, refurbish or change the use of the property.
However, some shorter-term tenancies will continue. New tenants like students and people on temporary contracts will be able to request shorter lets with the landlord’s agreement. Landlords contractually obliged to offer short tenancies by the terms of their buy-to-let mortgage will be able to continue to offer them if the mortgage was taken out before the start of the new system.
All of these seem sensible provisions that should go some way to allay the fears of landlords and others in the property industry. However, it’s not hard to see that they could also be the basis of some gaping loopholes in the legislation. What would happen, for example, if banks simply refused to change the terms of their buy-to-let mortgages because they want quick possession? What’s to stop a landlord lying about sale or refurbishment plans or not so subtly implying to a new tenant that they should ‘request’ a shorter let.
The politics of this will be fascinating over the next 12 months. If they help Labour win, the devil will be in the policy details.
It’s May 8, 2015. A new government takes office promising that housing will be a priority. But can we be sure they will deliver?
They may have different means in mind but all of the major parties are apparently committed to the same end: Yes to Homes. Whoever wins in a year’s time faces an uphill struggle to boost output from the current miserable levels.
A report published today by Shelter and KPMG sets out a road map for how the new government can get from there to the promised land of 250,000 new homes a year by 2021. It begins with two significant and symbolic acts by the new prime minister on day one - the appointment of the housing minister to the Cabinet and a declaration that building more homes is a ‘national priority’ - and it continues with a programme for the first 50 and 100 days and each year of the new government. The full report is here and a shorter web version here.
Housing is plagued by simplistic solutions. We’re told that the crisis can be resolved if only we liberalise planning, or build new garden cities or bring empty homes back into use. The truth is that, whatever the merits of each of these proposals, none of them will be enough on their own. A silver bullet may be enough to stop a vampire but don’t expect it to solve the housing crisis without liberal doses of garlic, nails to hammer down the coffin and plenty of money, bricks and mortar.
It’s a point that applies in spades to the politics of housing since there’s nothing that politicians love better than simplistic solutions, preferably ones that can be communicated in (sound) bite-sized chunks. Vague promises made during election campaigns and in housing strategies and white papers usually turn out not to count for very much when the election comes round again. And the problem is amplified by the disconnect between the long timescales required for solutions to work and the short ones dictated by the five-year electoral cycle. What politician wants solutions that only reap political dividends for the next government?
The report from Shelter and KPMG does not pretend that tackling the housing shortage will be easy or simple. Real action means tough choices – not the empty ones that feature in political rhetoric but real ones about the policies and resources needed to get more new homes. But the alternative is worse. The headline warning is that house prices could quadruple within 20 years and half of the under-35s could be living with their parents if the new government fails to act.
In a message addressed to David Cameron, Nick Clegg and Ed Miliband, the report warns:
‘If the next government shies away from showing the strong leadership needed, having a home of your own to rent or buy affordably will become a distant dream for an increasing number of people in this country. rents will rise and homelessness will increase.the economic recovery will be held back by high housing costs, an immobile workforce and unstable housing markets.’
The plan is one of the most comprehensive I’ve seen and gets to the heart of some crucial issues that get ignored or glossed over in the rush for simplistic solutions. Here are some that caught my eye:
Land is the crucial issue not planning. The report proposes that planning authorities be given the power to designate New Homes Zones where development will happen with no taxes on the site and on land acquired at closer to existing use value than residential value. The land market should be opened up with far more data on who owns it and the prices they paid for it.
Garden cities are important – but they won’t contribute much in the next five years. The report calls for five of around 30,000 homes each with construction to start within the lifetime of the next parliament. But each will have a development period of 15 years and they will only begin to contribute around 5,000 homes a year by the end of it.
We need a new housebuilding model. Delivery has become ever more concentrated in the hands of a few large housebuilders with little incentive to increase output. The report rightly links that to the residual land value model, under which the price of existing homes dictates the price firms pay for land, increasing the price they pay and reducing quality. It calls for new incentives for small and medium sized builders, including Help to Build guarantees diverted from Help to Buy, and sites in New Homes Zones and garden cities set aside for small developers and custom builders.
Design standards will level the playing field. In contrast to the current rhetoric about cutting ‘red tape’, the report argues that clear national rules on the minimum size of new homes will help developers by giving them confidence that rivals will not be able to bid more for land by squeezing in as many smaller homes as possible.
Investment in affordable housing is crucial. On top of the familiar arguments about the wider economic benefits and returns to the Treasury, the report points out that increased spending will have an immediate impact on the ground. It calls for an extra £1.2 billion a year of public spending matched by private funding and the existing AHP to bring total investment to £15 billion over the next parliament. Half would be for social rent, a quarter for intermediate rent and a quarter for affordable home ownership. The money could come from soaring stamp duty receipts, tackling tax evasion by private landlords and reforming the new homes bonus.
So are new ways to finance house building. The report recommends a Dutch-style Housjng and Infrastructure Bank plus joint venture land deals and institutional investment. One intriguing proposal is a Housing ISA, where depositors would get a state-guaranteed tax-free return and the money would be let out as low cost, long term loans to affordable housing providers.
We need the rebirth of council housing. We’ve never come close to 250,000 homes a year since local authorities were prevented from borrowing after 1979. After bi-partisan moves to loosen the restrictions, the report recommends gradually raising HRA borrowing caps and eventually reforming the borrowing rules on European lines.
Green belts don’t have to stay as they are. That doesn’t mean abolishing them either. The report argues green belt swaps and reviews have huge potential to deliver more homes.
I’m guessing that almost everyone will find some things to quibble with in this report. One of mine would be the implicit assumption that funding for affordable housing can be scaled back once we reach 250,000 homes a year. That was the figure that the Barker report said was needed to bring house price increases back to the European average, not bring them down. Affordability will continue to be a problem.
However, taken as a whole, this is a blueprint (or redprint or yellowprint) for what all the parties say they want to achieve after 2015. Some proposals will appeal to some parties more than others but the fundamental question remains. How serious are they about the housing crisis?
In case you missed it, How to Get a Council House is back – and so is the controversy about TV stereotypes and the hashtag on Twitter.
The second series of the Channel 4 show focuses on the London borough of Tower Hamlets and people affected by the benefit cap (two weeks ago), applying as homeless (last week) and in temporary accommodation (this week).
As with the first series, it’s provoked some strong reactions and it almost feels like we are in two different countries when I look at Twitter.
Outside my Twitter stream, there is a wave of bigotry waiting to be unleashed on anyone who appears on the show at #howtogetacouncilhouse and seemingly complete ignorance about what the housing and homelessness system is trying to achieve.
Inside my stream there is outrage at the programme’s portrayal of the system and the reaction to it. The show has also inspired a rival hashtag #councilhomeschat (and twitter account @Councilhomechat) that is fighting back with positive stories and videos about social housing and the people who live in it. You can sign up to its Thunderclap campaign to counter media stereotypes here and check out the blogs and videos at councilhomeschat.wordpress.com.
In the wake of Skint, Benefits Street and all the other exploitative programmes on Channel 4 and copycats on Channel 5, it’s hard not to sympathise. How to Get a Council House is a crass title for a programme in which very few people ever do get one, but one that seems designed to provoke social media chatter to generate viewing figures.
Yet, as with the first series, I’d argue that HTGACH includes real documentary as well as a dodgy premise and a genuine point that is not the one being made by the jolly commentator. It’s hard not to admire the frontline housing staff doing a job that I couldn’t do in impossible circumstances and wonder about the point they are making about their work. Different editing of the same footage, plus a different title, would have produced a very different programme.
The message coming across loud and clear from Colin Cormack and his team at Tower Hamlets is that a combination of welfare reform and the social change are making the borough a no-go area for people on benefits and low incomes. Despite all the government’s claims to the contrary, we are seeing social cleansing in action (and those are the words of a letting agent in the first programme, not mine or anyone at the council). You have to be watching closely to pick it up because of the way the programme title dictates the angle but it is still there.
So, as with the first series set in Tower Hamlets and Manchester, I find myself in two minds about How to Get a Council House. The negative side kicks in before the programme even starts: before the first episode the controversial C4 ident of the Aylesbury estate complete with inserted litter, graffiti and Sky dishes set the tone. Channel 4 must be well aware of the campaign against it by residents who have produced their own more positive version, so using it in this context smacks either of lazy complacency or of simply sticking two fingers up to its critics.
Then there’s the way the issues are presented. Channel 4 summed up the programme in a tweet last week like this:
The A&E for housing? That may seem like a good description of the homelessness safety net but if this was a real A&E, what about the rest of the hospital? Patients would be on trolleys out into the car park because all the other wards were packed. The phrase caught my attention because it was also used by Julia Unwin of the Joseph Rowntree Foundation in a speech I blogged about last week. She was warning about the consequences of treating housing as something only to be provided at the point of need.
Another problem I have with HTGACH is that it never seriously addresses its title. Somewhere in the six episodes there must have been a chance to look at why virtually no new council houses have been built in the last 30 years or at the number of old ones now owned by private landlords. It’s all too easy for viewers to confuse council housing with temporary accommodation and private flats and to think that housing benefit is going to the tenants rather than to the landlords. Lack of context like this means negative stereotyping can gain ground.
That’s a shame because the raw material for a much better documentary about housing keeps breaking through. The first episode, for example, shows that the social cleansing that the government denies and the out-of-area placements discouraged in official guidance are already happening. The welfare reform officer says bluntly: ‘Nobody who’s benefit dependent and not in a permanent property is going to be able to afford to live in Tower Hamlets. This is going to happen in the next six to 12 months.’ A lettings agent says that: ‘The people with money are pushing the poor out of Tower Hamlets. It’s kind of a cleansing of the poor.’
One single parent is told that she will almost certainly be moved out of the borough (‘it will be a big move, not round the corner’) and sums it up as ‘moving 20 miles away from anything I’ve ever known and bringing up my four kids in isolation. I can’t control my future or my children’s and that boils down to making me feel like a bad mum’. At the last minute she gets offered a new housing association flat in the area. ‘We can leave all the stress behind and start being happy,’ she says, a comment that says everything about why social housing is so desperately needed.
Another single parent is being evicted from her private rented flat because of the benefit cap and eventually gets temporary accommodation in another flat. Ironically, when she is trying to ‘get a council house’ both of the flats look like they are ex-right to buy. Her rent will be £338 a week and her housing benefit after the cap is £217, but DHPs will cover the balance for now.
And the last word in the programme goes to Colin Cormack, who sums things up as:
‘What’s happening is people are renting in the private sector, they have some reliance on housing benefit, welfare reforms are coming in that limit the person’s benefit entitlement, landlords are evicting those families, they come to the council, and the public purse has to pay significantly more to assist that family.’
That’s a pretty devastating summary of the impact of welfare reform and our failure to invest in social housing and it’s all the more powerful for being expressed in an almost matter-of-fact tone by someone on the frontline. Despite my problems with it, HTGACH shows that what we all warned about is happening through the stories of real people. But it also left me wondering whether a viewer who knows little of housing and welfare reform would get all that.
So for me How to Get a Council House is much better than Benefits Street but it still shows how firmly established the negative stereotyping of tenants and people on benefits has become. Channel 4 and its programme makers need to be challenged but is that alone enough? The same attitudes about social housing and the welfare state run right down from Iain Duncan Smith to the bile on twitter. The rest of us need to do a much better job of communicating the positive case for both, why they were created in the first place and why we need them now.
Here’s hoping that the positives outweigh the negatives in tonight’s final episode.
Will the new mortgage rules tilt the playing field even further in favour or the housing haves and against the have-nots?
On the face of it’s hard to argue with the idea that lenders should check whether borrowers can actually afford their mortgage before they make the loan. But is it quite that simple?
After a long consultation, the new Mortgage Market Review (MMR) regime finally came into force on Saturday. The aim is to prevent a repeat of the irresponsible surge in lending seen before 2007. The lax rules then were symbolised by the self-certified mortgage, or liar loan, which is now banned.
However, the change does not herald a return to the old days when lenders would only give mortgages of up to three times earnings for an individual or 2.5 times earnings for a couple. As the BBC’s Andrew Verity showed on Newsnight on Friday (19 minutes in), it could well be possible to borrow more rather than less under the new system: couples can get a loan on a multiple of five or even 5.5 times their joint income.
Instead, borrowers will have to submit to forensic scrutiny of their spending plus a stress test to check that they can afford their repayments if interest rates rise. Again both seem sensible and, if there are fears of a hiatus in the market as a result, a stricter test of affordability ought to help dampen down house price inflation.
But if the MMR could help prevent some of the problems seen before 2007, is it appropriate for the market conditions of 2014? And who will gain and who will lose out as a result?
Affordable for who? The MMR tests affordability in terms of spending as well as income. The logical response for borrowers will be to cut their spending in the three months before they apply (much as they may have to once they start paying the mortgage) but that may not be possible for everyone. Couples with children who are both working cannot suddenly cut their spending on childcare. The impact of that was shown in one bank’s test quoted in The Guardian: a couple with no children each on £35,000 a year would be able to borrow £329,500; the same couple with children would only be able to borrow £205,600 once childcare costs were assessed.
Cash is king. New mortgage rules will have no impact on cash buyers, who now account for over 35 per cent of home sales compared to just over 10 per cent in 2004 and around 25 per cent at the end of 2007. They could now have an even bigger advantage in the market.
Foreign buyers. The argument continues over whether buyers from overseas have inflated the whole London market or just the top end. However, as Sky’s economics editor Ed Conway blogged last week, it could be a mistake to assume that all of them are Russian oligarchs and Saudi princes buying property outright. It’s unclear how many overseas buyers are using overseas mortgages to buy homes in the UK but it is clear that these are not covered by the MMR.
First-time buyers. Existing home owners with a deposit of 25 per cent or more already enjoy far cheaper interest rates than, for example, first-time buyers able to put up 5 or 10 per cent. It’s not hard to predict whose spending lenders will scrutinise more closely. One result could be longer mortgage terms for first-timers, which cut the monthly repayments but obviously cost more over the life of the loan. The MMR does not ban interest-only mortgages but they will be much harder to come by without proof of a means of repaying them.
Changing employment. The self-employed and people on short-term contracts could suffer most from lack of access to home loans. They will not only be unable to get a self-certified mortgage but they will also face far greater scrutiny of their income and expenditure, with lenders likely to demand three years of accounts and HMRC certificates to go with them. There are now 600,000 more self-employed people than there were before the recession and if they are not already on the housing ladder they are going to find it much, much harder to get a mortgage.
More private renting. All of this will reinforce existing trends in housing tenure, with home ownership continuing to fall while the number of private tenants rises. Savills argued over the weekend that the MMR will further erode mortgaged ownership and predicts that another million households will become private renters in the next five years.
More buy to let. What’s bad news for frustrated buyers looks like yet more good news for the landlords whose tenants they will become. As Steve Wilcox pointed out in this year’s UK Housing Review, buy-to-let landlords already enjoy major advantages over first-time buyers: their mortgage costs are cheaper because they use interest-only loans; and they can offset those costs against their tax bill. Housing benefit also guarantees a significant proportion of their rents.
By coincidence, buy to let was 18 years old over the weekend. A report released over the weekend by Paragon Mortgages estimated that landlords have enjoyed an average return of 16.3 per cent a year since 1996. Past returns are of course not necessarily a guide to the future, and Paragon has an interest as a leading lender to landlords, but that is more than double the return available from shares or any other asset class.
There are no prizes for guessing which key part of the mortgage market will not be covered by the MMR or by the forthcoming European mortgage directive. It’s an issue I blogged about when earlier drafts of the MMR were published. It has already led to concern in the industry that people could attempt to evade the new rules by applying for a buy-to-let loan on somewhere they intend to live themselves. There are also predictions that buy-to-let lending will rise as banks look to make up a shortfall against their lending targets caused by the MMR.
However, the more fundamental impact could be felt by the housing system as a whole rather than just the mortgage market. The new rules make it even less likely that young renters, especially those with children, will be able to borrow enough against their income to get on to the housing ladder. Buy to let effectively transfers that borrowing capacity to someone else: the rent they will be forced to pay will become the income stream to repay the mortgage of a buy to let investor. And, as I blogged earlier in the month, the rise in house prices since the launch of Help to Buy means that far more would-be owners have been priced out than have been priced in through the government scheme.
Proper regulation of the mortgage market is essential to avoid a repeat of the crisis of 2008 or even that of 1992. The launch of the new system follows a long consultation aimed at striking the right balance between protecting borrowers and allowing the market to function effectively. However, partial regulation risks merely triggering yet more gains for the housing haves at the expense of the have-nots.
With 13 months left until the general election, how can housing demonstrate its economic, social and political value?
Ruth Davison of the National Housing Federation was in no doubt speaking to the annual conference of the Housing Studies Association in York last week. ‘It’s time to stop researching and start broadcasting,’ she told the assembled academics.
I’m not sure anyone in the audience was ready to go quite that far, but her underlying point was well made. The evidence about the beneficial impact that housing can have across a vast range of fields is out there and the political parties seem at least for the moment prepared to listen. So why not shout about it?
The evidence and the politics both emerged in a debate chaired at the conference on ‘who is best placed to judge the value of housing – the state or the consumer’. It produced some expected and some very unexpected results.
The event brought together Bristol University professor Alex Marsh, Vidhya Alakeson of the Resolution Foundation, CIH president Paul Tennant and Conservative councillor John Moss. To add a bit of context, Alex also writes a must-read housing blog, Vidhya leads the RF’s work on housing which includes recent reports on build to rent and shared ownership, John is a regeneration consultant who co-authored an influential report for Localis that foreshadowed many of the coalition’s housing reforms and Paul is of course also group chief executive of Orbit.
The debate inevitably produced as many questions raised as answers. Value is a slippery word that can mean many different things and the basic question raises others about the role of markets and governments, whether we should subsidise homes or people and the future of social and affordable housing.
Alex Marsh analysed the different ways of looking at value and the conditions under which the state or the consumer is better placed to judge it. With growing evidence that supply subsidies are more efficient over the long term, can we come up with new ways of targeting them such as revolving funds? You can read his contribution on his blog here.
Vidhya Alakeson used the bedroom tax as a particular example of how leaving things to the market doesn’t work and economic incentives for people to move have failed. In the wider market people on low and middle incomes are left with no housing choices in today’s market.
John Moss put the pro-market, pro-welfare reform case. He conceded that the under-occupation penalty was ‘a little crude perhaps’ but had most of the audience wincing as he implied that 30 per cent of under-occupiers are unlawfully subletting and London council flats were full of bankers.
And Paul Tennant put the case for value that goes beyond money alone. ‘Value is how I feel about where I live,’ he said. Government had to recognise how much housing associations were generating from their own resources and the dangers of driving down grant so that people were either priced out of homes or priced in to a poverty trap.
The desperate need for new supply was the common ground between them even though there was disagreement about the means. For Paul Tennant, it’s land rather than planning per se that is the problem, where John Moss sees the post-war planning system as the villain of the piece and put a thoughtful case in favour of the coalition’s reforms and estate regeneration. However, he also spoke strongly in favour not just of new towns and community land trusts but of using compulsory purchase to buy agricultural land at agricultural prices.
Disagreements may continue about many things but when a Conservative makes that argument you begin to think that radical solutions really can be found.
Which is just as well, because the conference also heard a grim warning from Julia Unwin about the dangers of allowing housing to crumble as the fourth pillar of the welfare state.
The chief executive of the Joseph Rowntree Foundation argued that providing housing only at the point of need – using housing as a form of A&E – would not deliver thriving communities let alone help tackle the complex problems of an ageing society.
One of the proudest achievements of the welfare state had been to break the link between squalor and poverty but now we were in danger of reverting back, she argued. The changing nature of work meant that it was no longer a route out of poverty, in contrast to government rhetoric on welfare reform.
And she warned that the 2015 comprehensive spending review could turn out to be even more important than the general election: unless it came up with the right policies all the conditions were there for housing associations to start vacating the territory of housing the poorest.
If that was a sombre closing message, the conference itself showed that housing research seems to be in pretty good health. This blog covers only a couple of the plenary sessions with no space for workshops that featured contributions from across the academic spectrum and around the world and some talented young researchers coming through to join the veterans of the scene.
As Ken Gibb points out, all that attention may in part reflect the scale of the current housing crisis but his blog gives a flavour of the breadth of the research that is going on. The conference programme shows the many different ways of looking at value.
It’s clear that the electorate and therefore the politicians sense there are questions that need to be answered urgently. The temptation to offer simplistic solutions to problems that are complex and inter-related is equally clear: the latest #howtogetacouncilhouse twitterstorm shows how many people think housing is part of the problem.
The continuing challenge – for everyone, not just researchers – is to show the value of housing in providing the answers.
As ever the new UK Housing Review offers a mix of authoritative statistics and some fascinating new insights on housing across all tenures.
Published this week, the 2014 edition of the bible for housing types edited by Steve Wilcox and John Perry mixes a compendium of statistics plus several chapters of expert commentary. It’s also one of the few publications to compare housing in the different nations of the UK. All that’s missing is an index.
Reports elsewhere have highlighted the bias in the mortgage market towards landlords and the threat to the affordable homes programme after 2015 but I’ve picked out three more themes to illustrate the breadth of what’s on offer in the review.
1) If you think we’ve got problems…
This year’s UK Housing Review includes a detailed chapter on the housing situation in Ireland, which author Eddie Lewis likens to ‘the last reel of a disaster movie’.
To UK eyes there are some familiar trends and some very unfamiliar ones and the comparison says much about housing in both countries. Consider, for example, this graph on housebuilding.
Housebuilding in Ireland peaked at 93,000 in 2006 and slumped to just 7,500 last year. But Ireland’s population is 4.5 million against England’s 53 million: if we had built the same number of homes per head completions would have peaked at an incredible 1.1 million. The equivalent of the Irish slump would have been 90,000, which is only a little short of what we are currently building.
That says much about the speculative building boom in Ireland, with completions far outstripping demand, and it also helps explain the 50 per cent slump in house prices there following the boom. However, it also shows just how unresponsive the English housebuilding model is to market conditions.
2) The income gulf between tenures
Once upon a time there was little difference between the incomes of council tenants, private renters and outright owners and even people buying with a mortgage earned less than twice as much. This graph from the review shows how that has changed over the last 40 years.
It shows the incomes of people in other tenures relative to those of council tenants. The introduction of the right to buy explains the growing gap in the 1980s as the proportion of working households declined in the social rented sector.
However, as the review points out, this proportion has not declined any further since 1991 but the gap with private tenants and outright owners continued to grow until 2004 and the gap with homebuyers is still rising.
The graph illustrates not just the rising inequality highlighted by Danny Dorling in his recent book but just how far we are running to stand still or go backwards with ‘affordable’ housing.
3) When is a bubble not a bubble?
The third and final graph taken from the review shows house prices and mortgage costs in relation to individual earnings.
Note how the two were broadly similar in the boom of the late 1980s but have since grown apart thanks to lower interest rates. Mortgage costs were getting close to the peak of the late 1980s during the latest boom but have since fallen back again thanks to record low rates and schemes such as Funding for Lending. In contrast, house prices are back at their 2007 peak.
For Steve Wilcox this is clear evidence that any talk of a housing bubble outside London is nonsense. However, does the gap between the two measures also show the potential problems stored up when interest rates eventually rise again?
So a year in to Help to Buy, who has it helped and what has the impact been so far?
Those are the questions I set out to answer in my feature in this week’s Inside Housing. It concludes that the limited number of Help to Buy transactions seen so far cannot have been enough on their own to account for what’s happened in the market in its first year. What’s been far more significant is the impact on the behaviour of buyers, sellers and housebuilders of a signal from the government that it will do everything it can to generate a housing market recovery. That, combined with a range of other government policies (and non-policies) and the favourable environment of record low interest rates, has duly produced one.
Culture secretary Sajid Javid did not seem to convince many people in the Question Time audience last night that there is no housing bubble. As financial secretary to the Treasury until Wednesday he was intimately involved with Help to Buy so he should be in a position to know. But his ‘inconvenient facts’ about low inflation and prices still being below their 2007 peak prompted incredulity from the rest of the panel. You might expect that from Billy Bragg and Harriet Harman, but the most telling put-down came from advertising boss Sir Martin Sorrell, who pointed out that the fact that prices are rising so quickly at a time of low inflation is more rather than less evidence of a bubble.
However, there is new evidence today the CIH’s annual UK Housing Review that the problems in the housing market go a lot deeper than Help to Buy and have been brewing for much longer than the last year. The average first-time buyer house price has risen by 120 per cent since 2001 while the cost of their average mortgage has risen by 110 per cent. While mortgage payments are more affordable than at the peak of the market in 2007, that is only thanks to record low interest rates: the ratio of the average mortgage advance to incomes is now almost back at peak levels. And remember that 2007 was the peak of one of the biggest bubbles in housing market history (one that did not fully deflate) rather than the benchmark of normality implied by Sajid Javid.
Add the long-term under-provision of new homes, a broken model of housebuilding, a tax system that encourages investment and speculation in housing, the rise of buy to let and London’s global status and you have the much larger backdrop for Help to Buy.
There was much that I had to leave out of my piece in the print version of Inside Housing and lots more that I did not have space to examine in any detail. This blog is an attempt to fill some of those gaps and bring the story up to date with some of the stats published since the article went to press:
- The numbers so far. The first 11 months of Help to Buy 1 (equity loans) saw 16,465 properties bought in England (schemes in Scotland and Wales started later). The first four months of Help to Buy 2 (mortgage guarantees) saw 2,572 completions. Those 19,037 transactions supported by Help to Buy compare to 1.1 million in the market as a whole so they cannot be enough on their own to explain the rise in house prices. In addition, more than three-quarters of them were outside London and the South East, the regions that have seen the strongest price growth. However, house prices are fuelled by expectations for the future as well as current supply and demand and the impact of Help to Buy is about the signals it sends out as well as the deals completed.
- First-time buyers. Around 88 per cent of households who’ve benefitted from Help to Buy have been first-time buyers. Assuming two buyers per household, that’s just over 30,000 people. However, calculations by the Priced Out campaign suggest that the increase in prices since March 2013 had put home ownership beyond the reach of more than 250,000 renters by the end of January. Based on the Office for Budget Responsibility’s forecast for prices and earnings, that figure will be 450,000 by the end of this year. These are national figures that do not take account of huge variation between prices in different regions but even so they beg a very big question about the ‘help’ in Help to Buy.
- Help to Buy 1. The saving grace of the equity loan scheme is that it only applies to new homes. The government has been quick to claim credit for the 23 per cent increase in housing starts seen over the last year even though completions are still flatlining. Help to Buy has supported a much greater proportion of sales of new homes than in the market as a whole. However, the big unanswered questions are how many of them would have been built anyway and how far housebuilders have simply used Help to Buy to scale back their own discounts and sales incentives. The rise in the share prices of the major housebuilders over the last year suggests that the City thinks they will do pretty well put of it.
- The land market. Housebuilders hailed the unexpected extension of Help to Buy 1 from 2016 to the end of the decade as ‘providing certainty for the industry’. The danger is that the only certainty will be rising land prices. The Knight Frank Residential Development Land Index shows that land prices fell slightly in 2012 but rose 7.1 per cent in 2013. We now know that the taxpayer will back new home sales until 2020, giving landowners every reason to hold out for as much as they can get for their sites.
- Help to Buy 2. The mortgage guarantee element of Help to Buy is bigger and far more controversial than Help to Buy 1. It’s been decried for stoking up demand while doing little about supply and for potentially leaving taxpayers on a £12.5 billion hook if it stimulates a boom and then a bust. However, the evidence so far suggests that the impact may be less than feared. Even taking account of the time it took for mortgage lenders to get up and running following the accelerated launch in October, 2,572 sales in four months is a long way from initial estimates of up to 190,000 a year. One reason for that, highlighted by figures from Hometrack, could be that Help to Buy 2 mortgage rates look very expensive by comparison with renting and other ways of buying. Another is that 90 and 95 per cent mortgages are now available outside of Help to Buy.
However, all of this assumes that Help to Buy actually is a housing policy and that the real aims are to help first-time buyers and boost housebuilding rather than existing home owners and the government’s electoral prospects. As Sir Martin Sorrell put it on last night’s Question Time: ‘Help to Buy was a political move. It was done in order to stimulate electoral support because it will be extremely popular. The problem is be careful what you wish for.’