Friday, 24 October 2014

Inside edge

Budget 2014 - live blog

Wed, 19 Mar 2014

15:40: Kate Webb of Shelter has just posted a blog about a Budget that provided welcome support for homeowners but laid the groundwork for a future squeeze in support for renters.

The good news for owners and those wanting to get on the ladder comes on SMI, self build and Help to Buy plus a range of other measures I summarised earlier.

The bad news for renters is the welfare cap. Current spending projections are built in but if welfare spending rises faster than expected a future government will have to find savings elsewhere: 

‘Crucially the pressure to bring spending back under the limit of the cap falls entirely on the DWP, rather than, for example, rising housing benefit expenditure triggering action in CLG to increase supply of genuinely affordable housing to reduce the HB bill.’

Even worse, Kate warns that one or more parties may promise in their next election manifesto to reduce the cap, locking cuts into the system without having to set out any detail at the time:

‘Reducing the welfare cap by £12 billion probably sounds abstractedly palatable to the average person on the street. Spelling out that this would entail the complete withdrawal of housing benefit for young families or cuts to benefits that enable disabled people to work may be a harder sell.’ 

Meanwhile Leslie Morphy of Crisis makes a similar point about the dangers implicit in the cap:

‘Though the maths might look solid today, we fear that predicting something as complex as national demand for benefits five years in advance is incredibly risky. If the sums do turn out to be wrong, in four of five years’ time it will cause poverty, misery and homelessness.’

14:40: Some reactions so far. David Orr of the NHF says it’s a missed opportunity:

‘We welcome the Chancellor’s focus on housing and the announcement of a new garden city, but we think the Budget is a missed opportunity. Measures like Help to Buy are likely to stimulate demand for housing but the Budget does not go far enough to boost the supply of homes needed to meet that demand.’

Grainia Long of the CIH welcomes the extra help for small and medium sized housebuilders and some of the other specific measures on garden cities and support for mortgage interest. She concludes:

‘In his Budget speech the Chancellor claimed that the measures he announced would deliver 200,000 new homes, including the 120,000 homes supported by the extension of Help to Buy equity loans. This would be an important step along the road to addressing out housing crisis, but it still leaves us with much to do.’

14:32: Here’s some more detail from the ‘Housing and local growth’ section of the main Budget document:

  • Help to Buy: equity loan scheme – extended to March 2020 to help a further 120,000 households to buy a new-build home.
  • Ebbsfleet Garden City – Government will form an Urban Development Corporation, in consultation with local MPs, councils and residents, to deliver it and support the scheme with up to £200 million of infrastructure funding to kickstart development.
  • Barking Riverside – The government will work with the Greater London Authority (GLA) to develop proposals for extending the Gospel Oak to Barking line to Barking Riverside to unlock up to 11,000 new homes.
  • Brent Cross regeneration scheme – The government will work with the London Borough of Barnet and the GLA to look at proposals for the Brent Cross regeneration scheme, subject to value for money and affordability.
  • Estate regeneration – A £150 million fund to kick start regeneration of social housing estates. This will be repayable loans  and bids will shortly be invited from private sector developers, working with local authorities on estates that might be able to benefit. Following the Autumn Statement, expressions of interest have already been made through the Greater London Authority relating to the Aylesbury Estate, Blackwall Reach and Grahame Park regeneration projects in London.
  • Builders’ Finance Fund – To support SME access to finance, the government will create a £500 million Builders’ Finance Fund. This ‘will provide loans to developers to unlock 15,000 housing units stalled due to difficulty in accessing finance’.
  • Custom build – Consultation on a new Right to Build giving custom builders a right to a plot from councils and test the operation of this approach with vanguard local authorities. The government will also create a £150 million repayable loan scheme to provide up to 10,000 serviced plots, and will look to extend the Help to Buy: equity loan scheme to cover custom build.
  • Strategic Land and Property Review – The Government Property Unit has concluded its Strategic Land and Property Review which has identified scope to release £5 billion from government land and property, creating opportunities for housing and economic development. Departments have already committed to £3.5 billion of that and a further £1.5 billion will be identified. ‘By Autumn Statement 2014 the government will look to quantify its housing and growth ambitions for this new surplus land programme.’
  • Zero carbon homes – ‘At Budget 2013 the government committed to implement ‘zero carbon homes’ from 2016. The government will shortly publish its response to last year’s consultation.’
  • Right to Move – The government will shortly consult on the design of a priority ‘Right to Move’ for social tenants to increase their mobility for work-related reasons. Options will include giving such tenants priority when a new social home becomes available, and setting aside a pool of vacant lets to enable them to move across local authority boundaries.
  • Development benefits – Government-funded staged pilot for passing a share of the benefits of development directly to individual households, including further research and evaluation of the approach.
  • Garden City prospectus – The government will publish a prospectus by Easter 2014 setting out how interested local authorities could develop their own, locally-led proposals for bringing forward new garden cities.
  • More planning reform - including consultation on change of use measures to make it easier to change to residential use, for example from warehpuses and light industry structures.
  • Support for mortgage interest (SMI) scheme to remain at higher £200,000 capital limit until March 2016 at a cost of £90 million - not clear if shorter waiting period of 13 weeks is also being extended.
  • Higher rate 15% stamp duty on homes owned by companies extended to homes worth over £500,000 and  the Annual Tax on Enveloped Dwellings to be extended to homes worth £1-2 million from April 2015 and £500,000-£1 million from April 2016. The original tax on homes worth over £2 million raised five times more than expected in the 2012 Budget because there were ‘significantly more properties above £2 million than expected’.

14:12: Looking at the Budget documents now. Here’s the full list of the benefits and tax credits covered by the welfare cap:


We know from the Autumn Statement that ‘the vast majority’ of housing benefit will be in the cap. Apart from the obvious trap for Labour (repeal the bedroom tax and you have to cut something else) this raises a big question about social rent policy: if rents rise by CPI plus one per cent but the cap rises by CPI, does that means other benefits will have to be cut to make up for it?

13:40: Here’s they key passage on housing from Osborne’s speech:

Mr Deputy Speaker, our country needs to export more – and it also needs to build more.

‘House building is up 23%. But that’s not enough. That’s why we’re making further reforms to our planning system and offering half a billion pounds of finance to small house building firms. It’s why we’re signing city deals across the country to get more built – with a new funding deal this week for Cambridge. And it’s why we’re giving people a new Right to Build their own homes and providing £150 million of finance today to support that.

‘It’s why we’re funding regeneration of some of the urban housing estates that are in the worst condition, and we’re extending the current Support for Mortgage Interest Scheme to 2016.

‘And it’s why we’ve got Help to Buy. We’re extending the Help to Buy equity loan scheme for the rest of the decade, so we get 120,000 new homes built.

‘In the South East where the pressure is greatest we’re going to build new homes in Barking Riverside, regenerate Brent Cross, and build the first new Garden City in almost a hundred years at Ebbsfleet. We’re going to build 15,000 homes there, put in the infrastructure, set up the development corporation and make it happen. I thank my Honourable Friends for Dartford and Gravesham for their tremendous support. And we will be publishing a prospectus on the future of Garden Cities.

Taken all together, the housing policies I announce today will support over 200,000 new homes for families. We’re getting Britain building.’

So that seems to mean that the non-Help to Buy announcements will generate 80,000 homes. It was interesting there was no mention of changes to Help to Buy 2. The Budget documents should help show how much of this is new. 

Elsewhere in the speech, Osborne confirmed that the welfare cap will include housing benefit (it was the first benefit he mentioned) and extended the 15 per cent rate of stamp duty on homes bought through companies. 

10:05: George Osborne is due to start his Budget speech at 12.30. Here are some more pre-Budget articles and blogs that are worth a read in the meantime.

On the housing market, Ken Gibb of Glasgow University asks whether Osborne will cool of fuel the housing market and warns that without a political consensus on housing policy the danger is more political short-termism, chronic under-supply and market volatility. Meanwhile Neal Hudson of Savills looks at what the Bank of England can do to control the market and at the prospects for the Mortgage Market Review in April. If that does not succeed in curbing riskier lending he warns that it may ‘go head-to-head with the government by intervening in the mortgage market later this year’. (Mark Carney warned of the housing-related risks ahead yesterday).

On social housing, David Orr wants ‘more homes please’ and pleads with Osborne to address three barriers that are holding back housing associations: land and improvements in the release of public land; access to finance by reforming restrictions on the way homes are valued; and the extension of guarantees to the refinancing of existing debt. 

And ahead of a Budget that looks like it is set to make you feel sick of hearing the word ‘resilient’, Julia Unwin has a message for Osborne that cost-effective spending in areas like childcare and social housing can not only reduce poverty but also boost the economy.

For a look at the CIH’s Budget submission go here

08:50: Here’s my summary of the housing-related news and speculation ahead of the Budget. More to follow later.

Housing has of course already been at the centre of the pre-Budget spin. George Osborne made two big announcements on morning television on Sunday: Help to Buy 1 – the equity loan scheme – will be extended from 2016 to 2020 in England; and we will also see what’s claimed to be ‘the first new garden city for 100 years’ at Ebbsfleet in Kent.

On the first, it’s worth noting that housebuilders were only asking for the scheme to be tapered off after 2016 rather than extended. The government’s argument is that investing another £6 billion to help 120,000 more households buy a new-build home will provide greater certainty to developers so they can invest in building more homes. Critics warn that it’s a subsidy that will go to many homes that would have been built anyway and that in the long term it will simply inflate land prices. The instant verdict from the City was a £900 million increase in the share prices of the major builders. On the second, the plan for 15,000 new homes in Kent seems to be smaller than plans approved in 2012 and it is hard to see how many of the original garden city principles are being applied.

With those announcements already out of the way, Noble Francis asks whether we have heard it already when it comes to the Budget. It’s possible we’ll hear more on both of them later. However, other speculation centres on:

  • Help to Buy 2. The extension of its less contentious partner be accompanied by changes to the heavily criticised mortgage guarantee scheme? And if they are will they curb it – or extend it?
  • The welfare cap. Osborne is due to reveal more detail of how the cap on non-cyclical spending on benefits and tax credits will operate. The idea is that a future Chancellor will either have to balance cost increases with savings elsewhere or seek parliamentary approval to lift the cap. The big question for housing is of course what that will mean for housing benefit and the housing element of universal credit. We know from the Autumn Statement that ‘the vast majority’ of housing benefit will be covered – only JSA-passported housing benefit will be outside the cap – but how will that interact with other housing policies such as the social housing rent formula? The FT has a bit more on the cap this morning.
  • Stamp duty. There have been unheeded calls for reform ahead of every Budget that I can remember but with the average asking price for a home now having passed the £250,000 threshold at which stamp duty hits 3 per cent, will Osborne finally listen? The FT speculates on a new 2 per cent rate for homes between £250,000 and £300,000 Could we see other changes to property tax?
  • Land auctions. A feasibility study on the scheme to reform incentives for communities to accept development is due to be published.
  • Right to buy: Will Osborne announce Conservative-pleasing increases to discounts? Will the Lib Dems let him or ask for something in return?
  • Borrowing cap: Osborne announced a slight lifting in the cap in the Autumn Statement and the Lib Dems and everyone in housing want him to go further.
  • Tax relief on investment in social enterprises: Osborne is due to reveal more detail and it will be interesting to see what scope the scheme offers for housing. The Guardian has a report explaining a bit more.
  • The Policy Exchange agenda: the Autumn Statement adopted several policies promoted by the think thank including selling high-value social housing. Alex Morton has since joined the No 10 Policy Unit so will we see more? Perhaps the announcement on garden cities already offers evidence of that.
  • Troubled families: many of this morning’s papers report that the scheme will be brought forward for another 40,000 families. 

We’ll have to wait for the Budget speech – or more likely the small print of the Budget documents – to hear more on those points.

Making the move

Thu, 13 Mar 2014

Forced out of area moves are on the increase and they are not just happening in London.

The Oxford Times reports this week on cases of people being offered homes as far away in Cardiff, Cheltenham and Birmingham. The council blames the cuts in housing benefit and the benefit cap that make it impossible to find affordable private rented accommodation but a local solicitor has accused it of dumping people outside the area.

Elysha Britnell, a 22 year old mother of two children, was told she would have to move out of her temporary accommodation in Oxford and accept a home in Birmingham. She says she has no family and friends outside Oxford and has never lived anywhere else and is appealing against the decision:

‘I’m Oxford born and bred. If this appeal fails I’ll be completely homeless. I have got nowhere else to go. Even if I go to Birmingham, I may as well be homeless, because I have nobody there.’

Her solicitor John McNulty blames the changes to the discharge of the homelessness duty introduced under the Localism Act:

‘There was a change in the law which now lets councils dump people. Now they can find people out-of-area placements and just discharge their duty to these people.’  

He explains more of the background in an earlier piece for the Oxford Mail.

Scott Seamons, Oxford City Council’s board member for housing, blamed the cap on housing benefit, told the Oxford Times:

‘Due to cuts in the local housing allowance, it’s become increasingly difficult to place people with private landlords in Oxford. There’s too much choice for landlords, so they’re refusing people on benefits. Our first choice is absolutely to keep people in Oxford. I don’t want to see people being pushed out of the city. We’re doing what we can to build new houses. It’s the only way we’re really going to be able to make a difference.’

Whatever the rights and wrongs of this particular case, stories like this have become depressingly familiar in the wake of the Localism Act and the Welfare Reform Act but this is the first I’ve seen outside London. However, it is perhaps not so surprising that it should be happening in Oxford when you consider that a survey last week found that is the least affordable city in the country.

Within London, it was the furore over Newham’s plans to export its homeless families to Stoke-on-Trent that made all the headlines two years ago. However, even at the time it was only one of many boroughs looking outside the capital.

The benefit cap introduced last year has made things even worse.  Amelia Gentleman reported for The Guardian last week on families priced first out of inner London and now facing having to move out of the capital altogether as a result of the benefit cap. Birmingham, Manchester and Grimsby were mentioned as possible destinations.

There are two separate but connected housing issues involved here. The Newham story involved the location of temporary accommodation to people accepted as homeless. The later stories involve the location of private rented accommodation offered as a permanent discharge of the homelessness duty.

On the first issue, as Inside Housing reported recently, the latest government stats show that almost 12,000 families were placed ‘out of borough’ in another local authority area last year. Boroughs have even been gazumping each other to secure the temporary accommodation that is available.

As the graph below shows, that number of households in temporary accommodation outside their local authority district has doubled since the election. The total of 11,860 families outside their area at the end of 2013 represented one in five of all those in temporary accommodation.

The graph also shows a dip in the number following the introduction of the discharge power in November 2012. However, the number has increased by 32 per cent increase in the year since.

Whatever the reasons for this, at least we know the numbers involved. On the second issue, it’s also possible to get the stats on permanent discharges of the homelessness duty.

In theory, they have to take account of the suitability of the location of the new home and avoid disruption to schooling, employment, medical care and support.

The impact on people who have moved area was illustrated in a report on formerly homeless families in the private rented sector published last month by Shelter and Crisis: there were major impacts on schooling and on support that people received from family and friends. In some cases people were so unhappy they tried to move back to their original area, in others they struggled to find a new school place and in one a mother had still not been able to place her child in school 19 months after she moved.

In practice, while ministers publicly disapproved of out of area placements, one of its own advisors was telling councils how to sidestep the safeguards. The DCLG then denied he was an advisor.

Whatever the truth of that, while austerity and the Welfare Reform Act pile the pressure on councils and claimants, the Localism Act has introduced new flexibilities for those that want to use them. Hammersmith & Fulham has, for example, excluded homeless people from its housing list and its policy has so far survived legal challenge.

It’s also hard to assess how many people have been forced to move from their home area by housing benefit cuts – although in 2012 local housing allowance stats were suggesting significant movement from inner to outer London. 

What does seem clear though is that the problem is growing – and that now it is spreading outside London. 

Buy, buy, bye?

Tue, 11 Mar 2014

As George Osborne prepares for next week’s budget, even the people who’ve benefited are calling for changes to help to buy. But is he listening?

A survey out today finds that most mortgage lenders and brokers now believe that help to buy 2 – the more controversial mortgage guarantee element of the scheme - will be scaled back or scrapped before the official end date of 2016.

Last week, the National Audit Office raised concerns about the affordability and value for money of equity loans offered by new homes under help to buy 1. And the RICS called for help to buy to be regionalised on areas with most economic and housing need and focussed on first-time buyers.

Today’s survey by the Intermediary Mortgage Lenders Association found widespread scepticism that the mortgage guarantee scheme announced by Osborne in his budget a year ago and launched at the Conservative conference in October will survive in its current form.

Some 75 per cent of lenders and 54 per cent of brokers think it will be withdrawn early for remortgages, with a further 8 per cent of lenders and 18 per cent of brokers believing it will be scaled back.

Clear majorities of both lenders and brokers also believe it will be withdrawn early or scaled back for 95 per cent mortgages. And, even though more think it will be retained for new build homes, six out of ten think it will be curtailed there too.

Unsurprisingly, since so many of them require the government to guarantee riskier mortgages, 69 per cent of lenders see artificially inflated house prices as the biggest risk to help to buy. That’s up from 60 per cent when they were asked last July.

That’s the biggest worry too for brokers (57 per cent), closely followed by unattractive pricing (51 per cent).

The stats on house prices bear this out. The graph below shows what has happened over the last two years and in particular since George Osborne announced Help to Buy in his March 2013 budget and brought forward the launch of help to buy 2 at the Conservative conference in October 2013. The impact is shown most dramatically in the Nationwide index: in the space of a year house price inflation has gone from zero to almost 10 per cent. However, a similar pattern is evident if you click along the tabs at the top to see the numbers from the Halifax index and from those of the Land Registry and ONS (which have not yet published figures for February).

More usefully perhaps, help to buy has boosted mortgage lending. The Bank of England said last week that mortgage approvals rose to their highest level for six years in January. One of the stated aims of help to buy 2 was to unblock the market in the high loan to value mortgages that had stalled in the wake of the credit crunch.

With 95 per cent mortgages available outside the scheme from lenders like the Nationwide, it’s hard to gauge the exact impact. However, the next graph shows the recovery in lending to first-time buyers in the last year. The numbers may still be well down on pre-credit crunch levels, let alone pre-boom levels, but they have at least recovered from the slump of the last five years that helped to accelerate the decline of home ownership.

The longer-term worry is of course that people are buying into the market at inflated prices at a time when mortgage rates must eventually rise from their current record lows.

More immediately, as Peter Williams of IMLA points out, the challenge is to restore a sustainable mortgage market without government support at the same time as many other regulatory changes are about to be introduced.

However, it’s hard to disagree with Jeremy Warner when he argues in the Telegraph this morning that we have a housing boom but we shouldn’t expect the government to do much about it:

‘In preparing for next week’s budget, Chancellor George Osborne is unlikely to be much concerned with the long-term consequences of another runaway housing market. Instead, he will be focused like a laser on what might revive his dwindling election prospects.’

But then perhaps it is a mistake to see help to buy 2 as a housing policy at all – or to expect it to continue much beyond May 2015. 

Scrutiny of help to buy equity scheme

Thu, 6 Mar 2014

In the furore over the help to buy mortgage guarantee scheme, its equity loan counterpart has escaped much scrutiny. A report out today changes that.

Help to buy 1 started in April last year. Equity loans worth more than £500 million households were made in the first nine months of the scheme to almost 13,000 households. Another 9,600 loans were in the pipeline. If everything goes to plan over the next two years, 74,000 households will eventually benefit from equity loans worth £3.7 billion.

Today’s report from the National Audit Office (NAO) makes you remember that although it is small by comparison with the £12 billion of mortgage guarantees offered by its more controversial sibling, Help to Buy 1 is significantly bigger than the firstbuy scheme that it replaced.

Amyas Morse, head of the NAO, says that although the scheme is for the most part running smoothly, more worh is needed by the DCLG and the HCA on managing the risks because ‘the scheme’s costs, which come in large part from tying up £3.7 million long term in the housing market, will be substantial’.

Margaret Hodge, chair of the public accounts committee, puts it more robustly:

‘I am shocked that the Department for Communities and Local Government is investing up to £3.7 billion without a clear understanding of how Help to Buy will impact the property market.’ The DCLG will be questioned about the report on April 2.

One worry at the time of the launch, that first-time buyers would lose out because anyone can apply for the new equity loans appears not to have been borne out: 89 per cent of buyers so far were first-time buyers.

But other concerns remain. First is affordability. The speed of the launch meant that more than 200 loans were made to buyers with a deposit of less than 5 per cent.

If you assume that is a teething problem, the thing that leapt out at me from the report was how financially stretched many of the buyers are. The average buyer has a mortgage 3.4 times their household income, which sounds reasonable, but that rises to 4.4 times their income when you include the equity loan.


The mortgage plus the equity loan was more than five times the household income for 30 per cent of buyers and more than four times their income for 49 per cent. And the report points out that ‘lower-income households using the scheme have higher average debt, relative to their income, than higher-income households, which might be expected’.

Second is value for money. Firstbuy started in 2011 and the terms were remarkably similar to those offered under the Labour HomeBuy Direct scheme that the then shadow housing minister Grant Shapps had described as ‘a very expensive flop’ in 2009. (The link is to the bit of the Conservative Party website that has since been sanitised for posterity).

However, in both of those schemes, the equity loan was split equally between the developer and the government. In contrast, all of the Help to Buy 1 loan comes from the government. As far as I’m aware no real justification has ever been offered for this and the NAO report doesn’t discuss it either.

The problems do not stop there. One of the most telling parts of the report for me is the description of the way that the government set out its objectives for the scheme.

According to a business case approved on 27 March, 2013, the objectives were to:

  • Support credit worthy but deposit constrained households to buy a newly built property
  • Increase the supply of new housing
  • Contribute to economic growth.

All of these are laudable aims that could well justify help to buy 1. However, less than a month later, on 22 April, a revised business case ‘changed the first of the scheme’s objectives to maximising take-up, rather than focussing on deposit-constrained households’.

Hmm. ‘The department said that this was because the scheme is designed to support all aspiring buyers rather than address any particular group’s housing need.’

If you’re wondering whether that represents a good use of public money you are not the only one. The NAO report goes on: ‘The objectives do not include any value-for-money criteria, such as maximising the impact per person or per pound spent.’

The financial watchdog does conclude that ‘by enabling people to make purchases more easily, the scheme appears to have boosted developers’ confidence’. I think my confidence might just be boosted if I got the same benefits without having to tie up any of my cash and put it at risk – and if this enabled me to scale back my spending on sales incentives. I might also consider increasing the price of homes sold under help to buy – and there is already a new build premium built into the price of new homes.  

But these are not the kind of quips you get in NAO reports. It merely notes that there is no way of telling how many of the purchasers would have bought a home anyway or how many homes have been built that would not have been built otherwise.

No wonder quantifying the scheme’s contribution will be ‘challenging’. Answers to those kind of questions are crucial if you want to assess the value for money offered by help to buy 1. The DCLG’s evaluation of the scheme’s economic costs range from £16 million to £1.2 billion with a central estimate of £494 million. Costs depend on different assumptions about what will happen to house prices and repossession rates.

It’s perfectly possible of course that rising house prices will mean the value of the original equity loans will increase substantially by the time they are paid back (although the money will be tied up in the meantime).  The government will also make money from a fee charged on the loans after the first five years.

However, even this might not be completely good news. The report says that ‘cash flow will vary from year to year and in some years the impact of this could be unaffordable for the Department’. This ‘long-term commitment with uncertain returns’ creates could affect the ability of the DCLG and HCA to manage their budgets since the result could be a risk of over- or under-spending in any one year if income is higher or lower than expected.

More fundamentally, the NAO says that the balance of costs and benefits means that ‘the scheme will only be value for money in broader economic terms if there are substantial benefits beyond the financial returns from fees and sales of equity shares’.

Yet the DCLG ‘has not quantified robustly the scheme’s economic benefits’ and has not evaluated the impact of previous schemes on the behaviour of buyers and builders. It has only done estimates of how many additional homes might be built: if more than 25 per cent of sales result in an additional home being built then benefits will exceed costs.

Help to buy 1 may of course still turn out to be a success – especially when judged on the amended business case. It does at least target new homes and most of the loans do seem to be going to first-time buyers.

But that is by no means certain – and the report does not discuss the untargeted and much more controversial help to buy 2. 

Five years on

Wed, 5 Mar 2014

On today’s fifth anniversary of record low interest rates all the talk is about how savers have lost out to borrowers. It should also be about renters and owners.

On 5 March, 2009 the Bank of England cut its main interest rate to 0.5 per cent, the lowest in history, and began its associated policy of quantitative easing in a successful attempt to prevent economic collapse.

But the effects continue to be controversial. The campaign group Save Our Savers estimates that savers have lost £117 billion in lost interest over the last five years plus another £209 billion from the way inflation has reduced the spending power of their money.

In contrast, borrowers have gained billions from lower interest rates. SOS’s message resonates because of the perceived unfairness that prudent savers and are paying to extricate us from a crisis caused by excess borrowing.

But what about the housing impact? In a CIH policy essay a few months ago, I did a rough calculation that mortgage borrowers have saved around £30 billion a year as a result of lower mortgage rates, QE and politcies such as Funding for Lending. Those with larger mortgages and with enough equity to remortgage to lower rates will have gained proportionately the most. The impact has also varied considerably between different regions.

Buy to let landlords, who in 2008 seemed set to become prominent victims of the credit crunch, have gained too. Fergus and Judith Wilson, for example, have gone from fearing they would go bust to expanding their property empire over the last five years. This is the reality of the housing market in 2014.

Falling interest rates have also meant fewer repossessions. At one stage the Council of Mortgage Lenders (CML) was forecasting 75,000 families would lose their home in 2009, as many as in the early 1990s crash. As lower rates reduced repayments, repossessions instead peaked at 50,000 and fell to 29,000 last year.

That is still very bad news for the people who did lose their homes and some borrowers remain trapped on high rates and unable to remortgage. However, it’s good news for owners as a whole and fewer repossessions and forced sales also reduced the downwards pressure on house prices.

In nominal terms, according to the Nationwide, the average UK house price fell 18.6 per cent from a peak of £184,131 in 2007 Q3 to a low if £149,709 in the 2009 Q1. They have since recovered to £174,444, just £9,687 or 5.3 per cent.

In real terms (adjusting for RPI inflation), house prices had fallen 25.8 per cent from their peak by the beginning of 2013 but last year’s recovery means they are now 22.3 per cent below their peak level.

However, compare that with what happened in the early 1990s. Prices fell further in both nominal terms (20.2 per cent) and real terms (37.4 per cent) and they also took 13 years to recover their value in real terms.

Of course they were different times and the crashes had different causes but it’s hard not to conclude that record low interest rates put a floor under property prices, benefitting anyone already on the housing ladder at the expense of people who are not.

That view is backed by a study of the distributional effects of low rates and QE by the consultancy McKinsey Global Institute. It concludes:

‘At the end of 2012, house prices may have been as much as 15 percent higher in the United States and the United Kingdom than they otherwise would have been without ultra-low interest rates, as these rates reduce the cost of borrowing. We based this estimate on academic research using historical data that suggest how housing prices rise as interest rates decline. In the United Kingdom, it is plausible that this relationship holds today.’

What’s good news for most people who already own a home is of course bad news for anyone who wants to buy because they will be paying more than they would have been. True, their mortgage rate will be lower too but first-time buyers with lower deposits typically pay a much higher rate than an existing owner with substantial equity.

And that’s only for people who could get a mortgage; many others have been locked out of the market by the more cautious lending criteria adopted by the banks. These are the priced out households who partly account for the astonishing growth of the private rented sector that I highlighted in my blog last week. Since the credit crunch, the number buying with a mortgage has fallen by just over 1 million while the number renting from a private landlord has risen by almost 1.3 million

These trends began long before low interest rates but that they have accelerated over the last five years, leaving priced out renters paying the mortgage of their buy to let landlord while house prices begin to rise again (9.4 per cent in the last year, according to the Nationwide, compared to 0.0 per cent a year ago).

The combination of low interest rates and QE plus the recession have changed the landscape in other ways too. The ‘real terms’ comparison I quoted earlier is a convenient way of discounting for inflation but it is fairly meaningless in a period when earnings have been falling in real terms. That means housing is become more expensive in relation to earnings now where the opposite was happening in the 1990s.

It’s much harder to work out what’s happened to rents since 2009 because there is so much variation between the different indices. LSL’s buy to let index suggests that the average rent in England and Wales is 13 per cent higher than in 2010. However, the experimental index produced by the ONS suggests that rents in England are about 3 per cent higher now than five years ago.

Whatever the size of the increase, it came during a period when house prices and mortgage rates were both falling. This suggests a direct redistribution  from tenants to landlords.

The impact has fallen most heavily on tenants who rely on housing benefit to pay all or part of their rent. Cuts and welfare reforms imposed since 2010 mean that they have either had to stay put and make up a shortfall between their rent and their housing benefit or move to cheaper accommodation. Amelia Gentleman has a story in The Guardian this morning graphically illustrating this point.

And the justification offered by ministers for the cuts and austerity that are set to continue for the rest of this decade brings this whole debate full circle.   

George Osborne told the 2013 Conservative conference:

‘This battle to turn Britain around - it is not even close to being over. We are going to finish what we have started. What I offer is a serious plan for a grown-up country. An economic plan for hardworking people that will create jobs, keep mortgage rates low.’

Low interest rates and QE have redistributed money from renters and people on benefit to owners and landlords. And now, as I’ve blogged before, renters are paying to keep mortgages low

Double shift

Thu, 27 Feb 2014

Figures published today underline yet again the historic change in the way we are housed in England.

Headline results from the English Housing Survey for 2012-13 confirm not just one but two remarkable trends. I’ve highlighted them in a graph below:

The first is the one happening within renting that I first highlighted on this blog in 2011. There are now more private tenants than social tenants for the first time since the early 1960s and the heyday of Rachmanism. Contrary to some reports, this historic shift actually happened in 2011/12 but 2012/13 saw the gap between the two grow as even more of us rented from a private landlord and social housing continued to decline.

The second less noticed one is happening within owner-occupation. As is widely reported today, the overall rate of home ownership fell to 65.2% in 2012/13, its lowest share since 1987. However, that conceals a deeper underlying shift: the number of outright owners almost overtook the number of households buying with a mortgage in 2012/13. On current trends this will happen next year.

The graph below shows the number of households in each form of tenure going back to 1981, the first year for which the split between owning outright and buying with a mortgage is available. Click on the tabs at the top to see what has happened to each of them:

The number of outright owners has seen a steady increase over the last 32 years as more and more of us pay off the mortgage or can afford to do without one in the first place.

The number of people buying with a mortgage is in stark contrast to this. The 1980s and Margaret Thatcher’s property-owning democracy saw mortgaged ownership rise by about half thanks to policies such as the right to buy and the liberalisation of mortgage lending.

Growth continued more slowly into the 1990s and early 2000s but went into reverse after 2003. The general decline of home ownership is usually seen as the result of the credit crunch and global financial crisis but this shows it began much earlier as young first-time buyers were priced out of the market. Mortgaged ownership is now back at levels last seen before 1988.

That same year was both the post-war low point for the private rented sector (just 1.7 million of us were private tenants) and in retrospect the turning point in its fortunes as the government moved to dismantle security of tenure and deregulate rents. Growth was sluggish at first but really took off after the creation of Buy to Let in the late 1990s. The number of private tenants has doubled in the years since then, with many of those outright owners becoming owner-landlords as well.

Finally, we have social renting. In 1981 it was already declining thanks to the right to buy and cuts in investment. A million homes were lost in the 1980s and the sector has continued to decline ever since under governments of both parties as homes are sold off or demolished faster than new ones are built.

These trends are of course all connected. The explanations are for other blogs but include long-term trends in the labour market, the lending market and the taxation of investments as well as the rising inequality noted in Danny Dorling’s new book. The effects are already being felt but a country that had grown used to home ownership as a right and social housing as a safety net is still making the adjustment.

Housing minister Kris Hopkins has responded to the new figures with the usual bluster about Help to Buy and affordable homes and by pointing out quite correctly that they are a year old.

He might also want to note that the number of households buying with a mortgage fell by 513,000 in the first three years of the coalition. The number who are private tenants rose 601,000. The historic shift in housing tenure continues. 

Unequal shares

Tue, 25 Feb 2014

What if our real housing problem is not a lack of a new homes but the distribution of the ones we already have?

That’s the key premise of All that is Solid: the Great Housing Disaster, an intriguing new book published this week by Danny Dorling, professor of human geography at Oxford University. In it he attacks not just the ‘yes to homes’ consensus about the solution to the housing crisis but the actions of just about all the key people involved. Politicians, housebuilders, landlords and property journalists are all seen as part of the problem but housing associations, the CIH and the voluntary sector also come under fire for accepting the status quo.

Dorling’s starting point is an analysis of Census returns of the number of bedrooms in the UK. We may have been building fewer homes in the last 30 years but we have been busily extending the ones we have with more rooms. On this measure we have never been better housed: the 2011 Census revealed that we have more bedrooms per person than ever before and that even in London there are more bedrooms than people.

But if you look at the distribution of those rooms something has changed in the last 30 years. Through most of the 20th century, society became more equal in the way that people were housed. The number of bedrooms enjoyed by the richest 10 per cent of the population fell to three times as many as the poorest 10 per cent in the Census of 1981. Then it began to rise again, reaching 3.7 times in 2001 and accelerating to five times in 2011.

Dorling argues that this is a manifestation of rising inequality and that this is the real cause of the housing crisis rather than a shortage of homes. As the super-rich consume more housing the effects cascade through society as the very rich feel they need more, the rich aspire to have more and so on. Location becomes ever more important as the well-off and the well-housed cluster near good schools and in safe neighbourhoods. One place to live is no longer enough as those who can afford it buy second homes or become landlords.

As he sums it up: ‘Fundamentally it is the linking of housing to social status that allows prices and rents to be increased beyond what the cost of providing the dwelling might be, or beyond what the value of the land might be if it were turned to other purposes.’

To my mind, Dorling asserts the link between inequality and housing more than he proves it and the effects may go even deeper than he makes out. Liberalisation of mortgage lending, the decline of organised labour and the removal of protection for private tenants all took place over the same period. Are they manifestations of rising inequality or something bigger? However, if you doubt that there is a link, have a quick read of Saturday’s Financial Times about the middle class ‘cling-ons’ being pushed out of London and the ‘über-middle class’ who are reshaping Oxford. ‘Middle class’ in FT headline terms means those in the top 10 per cent of earners but even these people are being priced out by those above them.

Dorling links housing directly to the global financial crisis, not just in the UK but in the US, Spain and Ireland, and suggests that as our economy become ever more reliant on the housing market it has become ‘the defining issue of our times’. Yet this is a book with a difference that he says supports none of the usual solutions offered:

‘Solutions such as home-building, which look as if they might solve some of our present woes, may not be the panacea many imagine if we continue to allow a few to get richer and richer through exploitation of what the housing system has become. Building more may result in the wealthy owning even more homes, more families renting some of those homes, but more being empty at any one time and in greater future inequality, unless we address rising inequalities in how housing is shared out.’

And so Dorling’s solutions are very different too. ‘We have already built enough homes,’ he argues. ‘We have far more bedrooms than we have ever had before. But a few have been taking more than their fair share, increasingly so ever since 1980; and very recently they have been taking far more again with each year that has passed since the crash.’

He argues those at the top of society harm the rest, by evicting the poorest from their homes, penalising people for their spare bedrooms and impoverishing middle earners through high rents and mortgages. We will need to build more homes if more people come to the UK than leave (as has happened in the last few years) but his other solutions are all focussed on housing inequality. They include:

  • Extending current council tax bands to Band Z with a view to transforming it into a national land and property tax
  • Giving people with mortgages a ‘right to sell’ and become tenants rather than be repossessed
  • The reintroduction of rent controls with local housing allowance rates used as the maximum fair rent in an area
  • Decriminalisation of squatting
  • Recognition that housing is central to environmental sustainability so that, when we build, we build for the long term.

Dorling argues that it will take another housing market crisis for these sort of solutions to be seriously considered – but that another crisis is what is on the way. ‘The vested interests in British housing are stoking up the embers of the last crash to create a new crisis. But a crisis is as good a time as any to get out house in order.’

This is a book that sometimes shows signs of being written in haste. Housing nerds will spot some errors and questionable assertions, at times I found the structure confusing and repetitive and he is more dismissive of the case for new homes in the book than he was in TV and radio interviews linked to its publication.

A bigger problem for me is that if rising inequality really is at the heart of the housing crisis then surely action on housing alone will not be enough to solve it. Just for starters, we would also need radical reform of the labour market, the financial system and the dominance of London in the UK economy. Dorling discusses all of these points and more in the book yet his conclusions are about housing alone. 

However, as his media appearances over the last week show, All that is Solid is being published at a time when more and more of us sense that business as usual will not provide the answers to the housing crisis that are so desperately needed. It’s well worth a read. 

All that is Solid: the Great Housing Disaster, by Danny Dorling, is published by Allen Lane, RRP £20


Pickled homes

Thu, 20 Feb 2014

To hear ministers talk, we are in the middle of a housebuilding boom. Official figures released today beg to differ.

According to the DCLG housebuilding statistics for the fourth quarter of 2013, starts and completions in England were both down 1 per cent on the third quarter. These are only the figures for one quarter but they don’t seem to be in the script. 

While starts for the year as a whole were up 23 per cent on 2012 at 122,800, completions were down 5 per cent at 109,480. True, those starts will soon turn into new homes but this hardly feels like a giant step towards the promised land of 250,000 additional homes a year.

And it doesn’t exactly tally with upbeat statements from ministers either. Here’s Eric Pickles in hyperbolic mood on today’s figures:

‘This government is fixing the broken housing market we inherited in 2010. Last year, we built the most homes since 2007, and even the appalling weather conditions this winter have not stopped our hardy builders from getting the job done.’

Sorry, Eric, but that’s simply not true. Homes built are completions and both private housebuilders and housing associations completed fewer homes in 2013 than in 2012. Total completions were also down on 2008, 2009 and 2011. As for the appalling weather, most of that has been in the past two months, not the end of last year.

David Cameron was more cautious at prime minister’s questions last week:

‘Housing starts are up from the dreadful situation we were left by the previous Government. We are now investing huge amounts into affordable housing. I make no apology for the fact that it is right to deal with the demand side on housing, as well as the supply side. Programmes such as Help to Buy are helping to get builders building, because builders will not build unless they believe that buyers are able to buy. We are fixing this problem and house building is rising.’

The rise in starts in 2013 provides modest support for Cameron’s case: the year did indeed see the highest level since 2007 and starts are up since the start of this Government. However, six years after the start of the financial crisis in 2007, starts would have to rise by another 50 per cent to match the figure achieved then.

Much of the current optimism seems based on sentiment surveys and anecdotal evidence of shortages of bricks and blocks. Two weeks ago, for example, the Markit/CIPS index showed that ‘housing activity growth was the highest in a decade and remains the fastest improving area of construction’.

However, as Brian Green of Brickonomics points out, there is a big difference between what people think is happening and actual activity on the ground. The surge in activity seen in mid-2013 may be more the result of housebuilders catching up from a slow start and restocking their production pipeline.

To put all of this in perspective, if starts continue to rise at the rate seen in 2013, we will get back to 2007 levels by the end of 2016 and get to around the level needed to hit the magic 250,000 by 2018. Completions would take a bit longer to feed through but we might get there by the end of the decade.

However, a five-year period of such sustained growth would be unprecedented in housebuilding history. Given continuing austerity, most of the growth would have to come from the private sector. But what will happen when the taps of Help to Buy are turned off at the end of 2016, or if interest rates rise after that? Can enough people afford to buy new homes at current prices and who will build them if prices fall?

Today’s figures may show an encouraging revival in housebuilding but it is happening from a very low base. We are still a very long way from the ‘gold standard’ set by Grant Shapps of building more homes than Labour, let alone his dream of making us ‘a nation of homebuilders’.

Rent squeeze

Wed, 19 Feb 2014

Why is there so little debate about the fact that social housing rents are set to rise so much faster than prices and earnings?

Figures out this week from the ONS show that CPI inflation rose 1.9 per cent in the year to January and average earnings rose just 1.1 per cent in 2013. Earnings have now been falling in real terms since 2010, the longest period for at least 50 years.

And yet all around the country social landlords are preparing to increase their rents by at least twice the rate of inflation, and many times more than earnings, according to recent surveys by Inside Housing.  

Housing associations are planning an average increase of 3.7 per cent, with some using extra flexibility to charge up to 4.8 per cent more. Only one said it was raising rents by less than the maximum.

Among local authorities the average increase will be 5.16 per cent, rising to a peak of 7.22 per cent in Welwyn & Hatfield, constituency of former Conservative Party chairman and former housing minister Grant Shapps.

These increases are partly down to longstanding government policy and partly down to an abrupt change in the rent-setting formula. Until 2015, social rents in England can rise by RPI inflation plus 0.5 per cent plus an extra £2 a week for those landlords who are not yet charging target rents. In a change announced last year, rents can rise at CPI inflation plus 1 per cent from 2015.  

Rent increases for this April are set according to the RPI figure for last September of 2.7 per cent. However, 2014/15 is also the last year that landlords can use their extra £2 per week flexibility, which has prompted those much bigger increases to fill holes in their business plans. Some even seem to be ignoring the rent increase limits.

Landlords argue that these increases are vital to maintaining development programmes and community activities and to the viability of their business plans. The sudden change in formula has had a particular impact on those who had not yet achieved target rents.

Since most tenants are on housing benefit that means most (but not all) of the increased bill will be picked up by the Department for Work and Pensions (DWP). That’s one reason for the lack of debate, even if it runs directly against what the DWP claims to be doing about controlling the housing benefit bill and reducing benefit dependency. 

However, what about tenants who are working? If the increase in average earnings is only 1.1 per cent, the minimum wage did at least rise by 1.9 per cent last year and even George Osborne says he want to see it rise by more than inflation in future. However, thanks to government pay policy, average earnings of public sector workers rose by just 0.5 per cent last year.

The extra that working tenants will have to find will obviously vary from property to property, region to region and landlord to landlord. As an indication, the average housing association rent in England in 2013 was £88.98, so a 3.7 per cent increase would be £3.29 a week.

Depending on how much they are paid and their circumstances, families with someone in work will also be entitled to tax credits, child benefit and partial housing benefit. However, in-work benefits like tax credits and council tax support have been cut and that rent increase could still eat into a limited budget. Remember too that their rent has been going up by more than inflation for years and more than their earnings since at least 2010 and that the squeeze on low income families is set to continue.

And the rent increase has implications for the bedroom tax too: those deductions of 14 per cent for one ‘spare’ room and 25 per cent come off the eligible rent. The bigger the increase, the more people on partial housing benefit will ‘float off’ any entitlement, and the more people on full housing benefit will lose. The difference between 14 per cent of £88.98 and £92.27 (£46p a week) may not sound like much but only if your budget has not already been squeezed to nothing and your other benefits are not restricted to an increase of just 1 per cent from April. The National Housing Federation revealed last week that two-thirds of tenants affected by the bedroom tax are already in arrears.

At a local level, these sort of issues are being debated. In Cambridge, for example, the Liberal Democrat mayor had to use his casting vote to force through a 5.76 per cent rent increase after tenants and Labour councillors voted for a smaller amount.

Meanwhile Nottingham City Homes says it has no choice but to apply an above-inflation increase but is consulting with tenants on two different options: a 5.47 per cent increase for all tenants; or increases of 4.68 per cent for ‘responsible’ tenants with a £100 credit at Christmas but 7.5 per cent for ‘irresponsible’ tenants. Being ‘irresponsible’ in this context might mean failing to look after your garden, failing to stick to an agreement to pay your rent arrears or committing crime or anti-social behaviour in your neighbourhood. That will clearly generate a debate all of its own.

However, to go back to my original question, the bigger questions about increases in social rents do not often get asked at a national level. Contrast that to the time devoted to talking about a few high-earning tenants. Housing finance requires tenants to pay more and we seem to have become so used to this that we rarely stop to ask why or whether it’s such a good idea.

If austerity and the continuing squeeze on wages and living standards do not give some pause for thought, then what about the prospect of more cuts in housing benefit in future? Increases in the local housing allowance for private tenants are already restricted to just 1 per cent a year (with some relief for high-demand areas). Applying the same to the social sector would play so much havoc with landlords’ finances and run so completely against established government policy that it seems hard to imagine. But would you rule it out? 

Tough times for rough sleepers

Thu, 13 Feb 2014

In a grim few years for housing and homelessness No Second Night Out stands out as a rare bright spot.

The idea behind the scheme, which was extended to 20 areas outside London in 2011, is that the longer someone sleeps rough the greater the risk that they will become trapped on the streets and vulnerable to crime, drug or alcohol issues or mental or physical health problems. No Second Night Out (NSNO) aims to help people off the streets as quickly as possible and ensure that they do not return.

Nobody could hope to be completely successful with that but a report out today from Homeless Link suggests that progress in the 20 areas has still been impressive: 67 per cent of the rough sleepers they worked with were taken off the streets after their first night; and 78 per cent of those did not return once they had been helped.

The 20 areas cover 69 local authorities from Cornwall to Newcastle and between them they account for 38 per cent of rough sleeping outside London. The result is broadly comparable to the one achieved in the capital, where 86 per cent of rough sleepers helped by NSNO services did not sleep rough again.

Finance for the NSNO services outside London comes from the £20 million Homelessness Transition Fund (HTF), provided by the DCLG and administered by Homeless Link, and from local authorities and charities. The 20 areas helped 2,546 rough sleepers over a period of six months plus another 1,498 at risk of rough sleeping. Compared to London, there were more women (17 per cent), under-25s (20 per cent) and UK nationals (75 per cent).

If the results are impressive, the report also identifies some worries. Concern about entrenched rough sleepers emerged across the survey. The biggest obstacle to progress was seen as getting all partners to agree.

And, above all, a big problem is looming in just 13 months’ time: all funding from the Homelessness Transition Fund (HTF) ends in March 2015.

Homeless Link says there is a real risk that all the good work done so far will be undone by lack of funding and is calling on the government and councils across England to protect investment in NSNO services.

And that in turn raises an even bigger issue. As I blogged in December, the government has helped to introduce a better methodology for counting rough sleeping and it has protected central funding for specific services like homelessness prevention. 

However, that ignores what has happened elsewhere, especially with cuts to Supporting People and funding direct from local authorities. The Homelessness Monitor 2013 published by Crisis and the Joseph Rowntree Foundation included concern that cuts in Supporting People funding have weakened the support available and led to more rough sleeping.

While housing minister Kris Hopkins can boast in the NSNO press release about the £470 million the government has invested over four years, that has to be put in the context of cuts in local authority and voluntary services that are happening all over the country. Not to mention cuts in housing benefit from which the government still can’t find a way to protect supported housing.

To take just one example, Nottinghamshire County Council was in the forefront of the first wave of cuts in Supporting People funding and now it wants to cut even more. As Patrick Butler reported for The Guardian yesterday, local housing association Framework is warning this will result in almost all homelessness and housing support services in the county closing down.

Among the services that would close, according to Framework, are all emergency accommodation, all specialist supported housing for people with drug and alcohol problems and people leaving prison, all supported move-on accommodation and almost all the support services that assist vulnerable people in their own homes.

No Second Night Out seems to be a genuine bright spot but against a backdrop as bleak as this is that so surprising? 

Seen and heard

Tue, 11 Feb 2014

Five things struck me watching the Dispatches documentary on the bedroom tax on Channel 4 last night.

First, it’s impossible for anyone to cover all the issues and angles in half an hour. That’s not a criticism of Channel 4 at all, more a comment on the complexity of the implications of the bedroom tax and the way that the effects vary around the country. I must have written thousands of words on the subject over the last two years and invariably have to cut something important or leave an angle untouched.

It sounds like lots of material ended up on the cutting room floor for last night’s programme too but, within the time allowed, it did a very good job of presenting the issue from the point of view of under-occupying tenants, social landlords and local authorities. We heard from Iain Sim of Coast and Country Housing on its 150 per cent increase in voids since April 2013 and a couple who were both in wheelchairs who face the bedroom tax on the ‘spare’ room in their specially adapted flat yet were denied a discretionary housing payment. The programme was also balanced enough to include two overcrowded families who have benefitted from larger homes being freed up.

Second, the policy is unravelling from the ground up. The programme included the leader of a Labour council openly admitting it is doing the minimum possible within the law when people appeal against benefit decisions. And it also featured Mike Bird, the Conservative leader of Walsall council, warning his party colleagues that the bedroom tax will have a disastrous effect at the ballot box. This may not mean anything when Labour MP Ian Lavery presents his ten-minute rule bill tomorrow, but along with anecdotal evidence that Conservative backbenchers have woken up to the implications of the policy, it still seems significant.

Third, tenants should be appealing wherever they can and landlords should be helping them. Joe Halewood, who has pushed this line consistently, appeared near the end of the programme explaining the pre-1996 mistake to a group of tenants in Liverpool. On his Speye blog over the weekend he argued that the bedroom tax is dead in the wake of tribunal decisions in Bolton and Monmouthshire. Whether or not that’s the case - and Giles Peaker of the Nearly Legal blog has a different interpretation of the same two decisions – remains to be seen but it does seem clear that tribunals are prepared to treat arguments about room size and room use sympathetically in the absence of any government definition of a bedroom.

Fourth, government MPs themselves seem to be losing faith in the policy. If the Tory on Walsall council felt like a lone voice on the programme, I wonder what he made of the interview with one of his national party colleagues at the end. The government could have put up a minister to speak for it but instead we got Harriet Baldwin, a parliamentary private secretary (PPS) at the DWP. By the time the programme appeared, Baldwin had moved from the DWP to become an assistant chief whip.

As a member of the work and pensions select committee from 2010 and 2012, she will have heard the evidence ahead of implementation but last night she seemed almost semi-detached. Asked how many people are affected by the pre-1996 exemption, she said:

‘I have not heard a definitive figure but I believe it is about 1 per cent of the total people affected and I’ve heard a figure of about 5,000.’

Interviewer: How can the government put out a policy with such an obvious loophole still in place?

‘There’s apparently 1,000 pages of guidance and no one had spotted this loophole for many years. What we’re going to try and do is make sure that we clarify that legislation, that we simplify the guidance because it’s just not practical is it for civil servants to have to cope with 1,000 pages of guidance.’

Interviewer: It may not be practical but when you make a policy the public expect you to have gone through all the relevant guidance whether it’s 1,000 pages or not. Why is that not happening?

‘Well of course the policy intention is that everyone be reviewing exactly how much accommodation is needed in a particular social home. So there was never any intention to exempt a particular group of people. But I gather that there are some people who’ve perhaps been continuously in the same property for 17 years and no one had spotted for many years that there was this particular page in this 1,000 pages of guidance.’

Esther McVey would have blustered her way through the interview. Baldwin did at least try to answer the question and she makes a fair point that nobody else had spotted the blunder. I’m also assuming that the interview took place before the DWP made regulations to close the loophole from 3 March. However, for me her use of words and phrases like ‘apparently’, and ‘I have not heard’ and ‘I believe’ spoke volumes about the way that faith in the policy seems to be draining away even within the government.

Which brings me to my fifth and final point. When it wants to, Channel 4 can make programmes that illuminate the real issues about welfare reform rather than stereotype the people affected. Benefits Street, which followed an hour later, may have improved since the opening episode but it represents the second kind. I wrote about that yesterday for my other blog here.

Crisis talk

Wed, 5 Feb 2014

It was the housing shortage rather than the housing crisis that he said would last for 10 years but it was still a surprisingly frank admission from George Osborne.

This was the key quote from the chancellor yesterday that was the basis of the stories in this morning’s papers:

‘I imagine if we were all assembled again in 10 years’ time we’d still be talking about the challenge of making sure that our housing supply kept up with housing demand and we’re all legislators here and we all have a responsibility to the next generation.’

He also made possibly his strongest statement yet on the need for new homes:

‘I don’t pretend this problem is going to be solved in a couple of months or a few years. It is a big challenge for our country – we have got to build more homes and we’ve got to create an acceptable political and social climate where people will want to see homes built so that their children have the prospect of living near where they grew up.’

It’s certainly hard to disagree with a statement that could have been scripted by the Yes to Homes campaign. Perhaps it was the setting that made Osborne think so long term: he was being questioned by members of a House of Lords economic affairs committee whose members include Lord Lawson, the chancellor in charge at the start of the housing crisis in the late 1980s.

But as Isabel Hardman notes on her Spectator blog (which also has audio of the hearing yesterday), that raises political tensions within the government: while Osborne and the Treasury think planning reform has not gone far enough, there is little prospect of anything more happening before the 2015 election.

However, even 10 years may be an under-estimate. The Home Builders Federation, whose members admittedly have a vested interest, argues that England needs to see 250,000 homes a year for 20 years to solve the crisis.

But do ministers yet accept there is a crisis? Osborne didn’t actually use word yesterday: his argument is that there was a failure of the housing system rather than the housing market and that Help to Buy is addressing it. But he also found time to blur the affordable/social distinction to boast that 'we have a large social housing programme underway' [thanks to @Simplicitly for reminding me of this]. And, from his first TV interview on, housing minister Kris Hopkins has denied that there is a housing crisis.

In an opinion poll last week though, 82 per cent of Londoners begged to differ. In a poll commissioned by London Councils 27 per cent said that the affordability of housing was the most important issue facing the capital, compared to 23 per cent saying housing, 14 per cent crime and 10 per cent immigration. It’s hosting a meeting on how to meet London’s housing need tonight.

For me the deeper point is that, desperately needed as they are, new homes can only offer a long-term solution. Things need to happen in the short and medium term too but that does seem to be increasingly recognised by Labour and the Conservatives, who each now have an independent commission looking at future policy. 

An indication of a new urgency in the debate on housing came in a report by the think tank Civitas on Monday proposing to ban non-EU citizens from buying residential property unless it adds to the housing stock.

The idea is borrowed from Australia, where overseas purchasers are banned from buying established homes and have to apply to a Foreign Investment Review Board to buy a new one. There are doubts that this works even in Australia but it is still significant to see a free-market think tank calling for state intervention.

Rights row

Tue, 4 Feb 2014

Seeing ourselves as others see us can be an uncomfortable experience and so it is proving for ministers responding to United Nations special rapporteur Raquel Rolnik.

Her preliminary report in September called for the abolition of the bedroom tax and prompted a furious row with Conservative party chairman and former housing minister Grant Shapps. Now his ‘woman from Brazil’ is back with a final report that uses the approved Conservative term ‘removal of the spare room subsidy’ but still recommends that it ‘should be suspended immediately and be fully re-evaluated in light of the evidence of its negative impacts on the right to adequate housing and general well-being of many vulnerable individuals and households’. You can read the full report here [downloads Word doc].

The government has had over four months to decide how to respond to the final report so it is perhaps telling that it can’t quite decide how. The official DCLG response from housing minister Kris Hopkins is that Rolnik ‘has failed to correct a number of inaccuracies that have been repeatedly been made clear, meaning her recommendations are of very limited relevance’.

Yet he also pops up to tell The Guardian that it is ‘a misleading Marxist diatribe’. And the DWP demonstrates its ability with pots and kettles by describing the report as ‘based on anecdotal evidence and the conclusion was clearly written before any actual research was completed’.

But the final report is about far more than the bedroom tax. It judges the UK’s record to the right to adequate housing under a succession of UN conventions and covenants on social and human rights that our government has signed since 1951. It analyses the current housing situation and its impact on specific groups including people with low incomes, the homeless, the disabled and sick, young people and Gypsies and Travellers though its recommendations are not binding on the UK government.

However, the crucial point is that the starting point for the analysis is the UK’s previous exemplary image on housing and human rights. The conclusions and recommendations start with these two paragraphs:

‘The Special Rapporteur commends the United Kingdom for its history of ensuring that low- and middle-income households have access to adequate housing and have been protected from insecure tenure forms and poor housing conditions. People in the United Kingdom have a deeply anchored trust in their right to housing, regardless of income or other status.

‘Some of the policies and practices that played a role in ensuring access to affordable and well-located housing, facilitating enjoyment of the benefits of mixed neighborhoods in urban centres, and embedding housing in the social safety net serve as inspiration around the world. The Special Rapporteur praises the priority given to social and affordable housing by various Governments over time, including through  public funding for specific housing-related policies.’

The International Covenant on Economic, Cultural and Social Rights, which we ratified in 1976, establishes ‘the principle of progressive realization in the right to adequate housing’. It commits member states to take special care ‘to avoid unjustified retrogressive measures’ and ‘examine themselves against their own legislation and policies’.

This is the context for the recommendations that follow on policies that Raquel Rolnik considers are ‘retrogressive’. These cover the policies of successive governments since 1976, not just this one.

She also recommends that the UK government should:

  • Assess and evaluate the impact of welfare reform on the most vulnerable people, including whether the costs of implementation may outweigh the savings and whether there are alternative ways to achieve the same objectives
  • Extend and expand grants and subsidies for social housing ‘as these have been essential in responding to the housing need of the most vulnerable’
  • Ensure that current measures to release public land favour social and affordable housing
  • Consider planning measures for the immediate development of land, ‘build or lose’ safeguards and priority for affordable housing
  • Put in place target measures to increase the supply of housing in the private market
  • Increase regulation in the private rented sector, including minimum length of contracts, restraints on rent increases and strict limits on eviction.
  • Promote measures to reduce discrimination against Gypsies and Travellers and to protect the right to adequate housing for migrants and Roma.
  • Address persistent inequalities in housing in North Belfast.

So this report is about far more than just the bedroom tax, or even what you call it: it challenges many of the key changes in UK housing policy made since the late 1970s as well as questioning some current government policies and highlighting areas of discrimination. For anyone looking at housing in terms of social and human rights, these are obvious points. But tor Conservatives suspicious of anything that even mentions human rights, this is clearly enough to make it a Marxist diatribe.

Ironically, on the same day the Special Rapporteur confirmed her call for the immediate suspension of the bedroom tax, one part of the UK revealed that it wants to go as far as it can towards that within its existing powers.

Northern Ireland, of course, has still not implemented the policy and it seems likely that it will not apply to existing tenants when it does. Now Scotland’s deputy first minister Nicola Sturgeon is calling on Lord Freud to lift the cap on discretionary housing payments so that Holyrood can add an extra £15 million. That would bring the total budget to £50 million, which would be enough to cover all of the losses suffered by the 76,000 Scottish households who are having their ‘spare room subsidy’ removed (though I can’t see how it will make up for other housing benefit cuts too).

Which brings me back to the quote at the beginning of this blog. ‘To see ourselves as others see us’ is a quote from the English translation of the ending of ‘To a Louse: On Seeing One on a Lady’s Bonnet at Church’ by Scotland’s national poet Robert Burns. The whole verse seems strangely apt:

‘And would some Power the small gift give us

To see ourselves as others see us!

It would from many a blunder free us,
And foolish notion:
What airs in dress and gait would leave us,

And even devotion!’

More is less

Wed, 29 Jan 2014

There are at least three contrasting and sometimes conflicting imperatives at the heart of the prospectus for the Affordable Homes Programme published this week.

The first (let’s call it the HCA one) is a pragmatic desire to do more with less in difficult circumstances. The second (the political one) is the imperative of big numbers to be able to quote in press releases and in parliament. The third (the ideological one) is a determination to exploit these circumstances to accelerate the slow death of social housing. Amid the tensions between these three aims several vital issues are barely addressed or else ducked completely. 

A quick read of the introduction by housing minister Kris Hopkins illustrates all of these points and more. He boasts that £3.3 billion plus £20 billion in private investment will ‘support the delivery of 165,000 additional affordable homes’. That’s on top of ‘the already strong track record of this Government, with over 170,000 affordable homes built over the last three years’. Leaving aside the fact that there will – probably – be 170,000 but they won’t be finished till 2015, these are nice big numbers to deploy at every opportunity along with the one about the biggest housing programme for 20 years.

But his next statement really made me think:

‘Every penny of public money must be spent wisely, to deliver the most benefit for our citizens. That is why we overhauled the model for funding affordable housing in the current programme. As a result, we now get more than twice as many homes from each pound of public money we spend on grant, compared to the 2008-2011 programme.’

The last bit may be true but is ‘every penny of public money’ really being spent wisely when everyone knows that there is a long-term price to be paid for Affordable Rent that will get higher the more it is used? Money saved on grant now by the DCLG will have to be paid out by the DWP in future to cover the housing benefit bill on the higher rents.

It was far from clear even in the DCLG’s own impact assessment of Affordable Rent 1 that it offered the best value for money over the long term. Questions were also raised by both the National Audit Office and the Public Accounts Committee about the 2011-15 programme, even though less than half of it consists of Affordable Rent homes and only a limited number of conversions of re-lets were envisaged. They have still not been answered before the 2015-18 programme of 165,000 homes mostly for Affordable Rent plus accelerated conversions and disposals. The detail has no doubt been discussed with the DWP but, given that the programme only starts after the next election and the bill will only be paid over the long term, you wonder how hard the point was pressed.

‘Value for money’ is mentioned 44 times in the document but not defined anywhere. ‘Housing benefit’ gets only five mentions and three of those are in an annexed letter from 2011. The only consideration that I can find of the long-term costs and benefits comes in a paragraph on ‘meeting local needs’. Local authorities will be able to give their views on the programme but:

‘For the purposes of this programme, it is not expected that local authority priorities will include a preference for social rent over Affordable Rent the intention of the programme is to provide new Affordable Rent homes (and, where appropriate, affordable home ownership homes). In general, Government policy does not support the argument that only rents at or close to social rent levels are capable of meeting local needs, particularly when support for housing costs through Housing Benefit and Universal Credit is taken into account.’

Housing benefit will, in other words, continue to ‘take the strain’ even though, as DWP ministers never cease to remind us, it is also ‘out of control’.

Then there is the whole issue of what counts as ‘affordable’. The word is mentioned more than 200 times but is not defined anywhere except by the assumption that anything that is up to 80 per cent of market levels must therefore be ‘affordable’. But affordable for who? For the DCLG in terms of minimising the capital grant required up front for the maximum number of homes? Tick. For the tenants? Nobody seems very interested. For the DWP’s housing benefit budget? Who cares?

Affordable Rent 2 is quantifiably different to what went before. What in 2010 was a short-term fix has become a wholesale shift from social to ‘affordable’ without any public debate about the rents that tenants can actually afford. The requirement on conversions of re-lets seems to have been fairly easy to ignore in the first round but social landlords wanting grant funding in the 2015-18 programme will have to demonstrate ‘value for money’ not just in their bids to build new homes but also in their conversion of re-lets to Affordable Rent and their plans to sell off high-value stock.

The Greater London Authority’s version of the programme published before Christmas recognised some of these tensions by allowing for some ‘capped rent’ homes in areas where Affordable Rent would be too expensive. The HCA prospectus covers the rest of the country and does not have to deal with the same extremes as in the capital but it offers little alternative to Affordable Rent or affordable home ownership. There are additional measures to prevent local authorities from blocking Affordable Rent in their areas. Even on the smaller homes intended for bedroom tax downsizers ‘providers, supported by the relevant local authorities, will have to make a strong case to demonstrate why Affordable Rent would not be a viable alternative’, leaving open the possibility that a new smaller home could actually be more expensive. And localities where there is little difference between social rents and 80 per cent of market rents will not escape either: they will be expected to convert re-lets to shared ownership.

In an excellent blog this week Colin Wiles urges housing providers to ‘just say no’ to the new regime and refuse to bid. I hope many of them will do just that: in some ways, the prospectus points in this direction by saying that it expects a proportion of the homes to be delivered without grant. That being the case, why not act independently without the strings?

However, recent history shows that each time housing associations have been presented with a chance to say ‘no’ to new conditions for grant funding enough have said ‘yes please, where do we sign?’ to allow it to go ahead. That was what happened with the introduction of private finance in the first place, with each successive reduction in the grant rate and with the first round of affordable rent, which ended up being over-subscribed despite quite widespread doubts expressed in advance by anonymous chief executives.

Which brings me back to those three contrasting and conflicting aims. From a pragmatic point of view, the best associations have become more business-like and efficient, delivering more for less, so why not make the rest of the sector follow suit? Why shouldn’t organisations that receive public money have a duty to manage their assets as efficiently as possible? Shorn of the newspeak title of ‘Affordable Rent’, there is a pragmatic case to be made for delivering new homes at higher rents to maximise output. This seems to a trend across the developed world and SNP Scotland and Labour Wales both have schemes that include homes at closer to market rents.

But these are additions to, not replacements for, a social housing programme and they do not involve converting or selling off what already exists. In England politics and ideology have trumped pragmatism and policy in the rush to implement Affordable Rent for new homes and for whole swathes of the existing stock. Using the assets created in the past to invest wisely for the future is one thing. Cashing in the ‘value for money’ generated in the past to create a future that will not be ‘affordable’ is quite another. When it comes to Affordable Rent 2, more is less. 

Taking the pledge

Mon, 27 Jan 2014

The weekend’s big speech by Ed Balls looks like significant news for housing under a future Labour government – and not just for the obvious reasons.

The national headlines from the shadow chancellor’s speech to the Fabian conference were taken by his pledge to restore the 50p rate of tax and subsequent accusations that Labour is therefore anti-business. The undoubtedly good news for housing was that it will be ‘a central priority’ if Labour wins power in 2015.

But it was Balls’s message about ‘fiscal discipline’ that was more interesting to me:

‘We won’t be able to reverse all the spending cuts and tax rises that the Tories have pushed through. We will have to govern with less money, which means the next Labour government will have to make cuts too. No responsible Opposition can make detailed commitments and difficult judgments about what will happen in two or three years time without knowing the state of the economy and public finances that we will inherit.

‘But we know we will face difficult choices. The government’s day-to-day spending totals for 2015/16 will be our starting point. There will be no more borrowing for day-to-day spending. Any changes to the current spending plans for that year will be fully-funded and set out in advance in our manifesto.’

On the fact of it, that sounds horribly reminiscent of Tony Blair and Gordon Brown’s pledge to stick to Conservative spending plans for the first two years of the Labour government after the 1997 general election. While that was effective politically in signalling New Labour’s determination to break with the party’s tax and spend image, the results were disastrous for housing investment because the Tories had already penciled in deep cuts for 1997/98 and 1998/99. Never mind two years, investment in new homes did not match the level Labour had inherited for another seven in real terms. This was the root cause of the failure to invest enough in new homes that the party now acknowledges.

However, the crucial difference this time around is that the pledge by Balls applies to current spending, leaving room for capital investment and for borrowing to finance it.

This was the context for the passage on housing:

‘We need Help to Build, not just Help to Buy. This would help people aspiring to own their own home, create thousands of jobs and apprenticeships and ensure we have a recovery that is built to last. And it is why housing investment will be a central priority for the next Labour government.’

That was immediately followed by:

‘Of course, there is a careful fiscal judgement to be made. I have said that there will be no more borrowing for day to day spending in 2015-16. But consistent with our tough fiscal rules, we will assess the case for extra capital spending to boost growth and jobs and make our economy stronger for the long-term.’

Housing is particularly strongly placed within this financial framework since it is arguably the only sort of capital spending that simultaneously reduces current spending: more new homes at lower rents means a lower housing benefit bill.

Exactly this point was made by Ed Miliband in an article for the Sun on Sunday yesterday in which he said there will be tough controls on social security: ‘But to deal with welfare spending properly, we will need to make big reforms to cut the costs of failure in the system. We will build more homes to get the costs of housing benefit down.’

In effect, the rule on current spending will necessitate a reversal of the trend seen over the last 35 years of subsidising rents rather than bricks and mortar and letting housing benefit take the strain. The prospectus for the latest Affordable Homes Programme published this morning, with its heavy emphasis on conversions to affordable rent and disposals of high-value stock, moves even further in this direction. 

If Labour’s pledge and a reversal in this trend sound like very good news for housing, there’s just the small matter of winning the election first after a campaign in which the other parties will argue that the financial framework will leave the back door open to more Labour borrowing.

And, even if Labour does win in 2015, new homes will take time to build and to start to bring down the housing benefit bill. If 100,000 additional new social rented homes were built with rents £70 a week lower for 100,000 families moving from the private rented sector the saving would be £364 million a year. That would continue year after year but it compares to a total housing benefit bill of £24 billion.

However, that ignores the short-term fiscal benefits from the construction programme. On a fairly conservative assumption that each home built could save the Treasury £20,000 in higher tax revenue and lower benefit payments (each home generates 1.5 construction jobs), those 100,000 homes could deliver a gain of £2 billion.

Elsewhere at the Fabian conference, rent capping emerged as by far the most popular policy at a Dragon’s Den-style session. The idea was also endorsed by frontbencher Sadiq Khan, according to Mark Ferguson of Labour List. However, shadow housing minister Emma Reynolds promptly tweeted that ‘it is not Labour party policy to introduce rent controls’. 

Mixed messages

Thu, 23 Jan 2014

So are private landlords about to pull out of the housing benefit market or not? 

It’s one of the most crucial questions for the future of the housing system but the answer may be more complex than recent publicity suggests.

The alarm was raised when Fergus and Judith Wilson, the King and Queen of buy to let, revealed that they were evicting all of their tenants on benefit. A poll yesterday by the website found that only 18 per cent of landlords currently rent to claimants, down from a third two years ago.

A combination of different factors seems to be at work here, starting with the April 2011 cuts in the local housing allowance, continuing with further cuts such as the overall benefit and culminating in concern about the impact of universal credit and the presumption that the housing element will be paid direct to the tenant rather than the landlord.  The most worrying finding from the poll was that half of those currently letting to claimants said they wouldn’t after the introduction of universal credit.

However, a survey in London by the Residential Landlords Association (RLA) presents a more mixed picture despite the fact that the capital is where many of the housing benefit cuts are having the biggest impact. In contrast to the poll, 36 per cent of landlords say they continue to let to benefit claimants and 63 per cent say their tenants have not fallen into arrears because of the cuts.

In terms of specific changes, 59 per cent say they have not stopped renting to claimants under 35 because of the change to the single room rent but 74 per cent say they are more reluctant to let to claimants because of the benefit cap.

So far, so good for the DWP and its hopes that the private rented sector will absorb the changes but only 9 per cent of RLA members say they have reduced their rents because of the LHA changes and only 6 per cent say they would be willing to drop the rent so their tenants could stay in London. Meanwhile 46 per cent have concern that working age claimants whose benefits are restricted will be driven out of the capital altogether.

This is at odds with the hardline stance taken by the Wilsons across their 1,000-home portfolio in Kent. They say they will refuse to take tenants on housing benefit and have ended the tenancies of 200 existing claimants who should ‘get a job’.

In a series of media interviews over the last month, they have cited many reasons for this decision: principally the non-availability of rent guarantee insurance for claimants but also rising levels of rent arrears, the shortfall between LHA rates and rents, the prospect of direct payment under the universal credit and the availability of alternative Eastern European tenants who are working.

If you haven’t seen them yet, watch Fergus Wilson’s ‘If I’m heartless then all landlords are’ interview with Channel Four News and read his bizarre ‘Fergus calling Dave’ statement to The Guardian. Discussion forums reveal some frustration from other landlords with ‘the story that refuses to die’.

The extensive coverage has certainly raised the media profile of the housing benefit issue but are the Wilsons representative of private landlords as a whole? If the London survey perhaps suggests not, are the more professional landlords who tend to be members of national organisations taking a different attitude to the small buy-to-let investors in the website poll?

Richard Lambert, chief executive officer of the National Landlords Association, says its research shows ‘more and more landlords moving away from renting to tenants claiming benefits’. However, he says it also knows of many landlords who have never had a problem and specialise in the claimant market. ‘They tend to be the more experienced landlords with larger portfolios, who understand how to manage tenancies to ensure stability and minimise the risk of arrears.’

RLA consultant Bill Irvine argues that there is no need for landlords to follow the Wilsons’ lead: demand is high, margins are good and the threat posed by the universal credit is exaggerated. He says the government has already made concessions on direct payment and in any case the national introduction of universal credit will not happen until after the 2015 general election.

In the Commons this week, ministers played down fears of a private renting crisis. Housing minister Kris Hopkins said that ONS showed that rents were rising by 1.1 per cent in England and 1.9 per cent in London, which were both below inflation, and boasted about £2 billion of bids for phase 2 of Build to Rent. Asked by Labour’s John Healey how he would ensure that claimants were able to access the market, he said:

‘The key to making the private rented sector accessible to all is to build more homes for rent. That is why we are investing in the private rented sector through the £1 billion Build to Rent fund and giving £3.5 billion in guarantees to get builders building—and we will deliver 170,000 new affordable homes by 2015 through this process.’

Labour’s Sheila Gilmore tackled communities secretary Eric Pickles over his denial in an earlier debate that landlords were refusing to rent to people on housing benefit. Given the reports about the Wilsons, she asked, would he carry out a proper inquiry? Pickles replied that ‘there are a lot more private landlords than just that particular gentleman, and I do not think he represents anything that speaks of the sector as a whole. The short answer is no.’

Only time will tell if that complacency from Pickles is justified but Hopkins’s response of using stats about affordable homes that are not privately rented does not fill me with great confidence. Neither does his comparison between rents and inflation. At a time when rents are still rising faster than both earnings and the 1 per cent cap on increases in the local housing allowance it is completely irrelevant.

If the action taken by the Wilsons is unrepresentative of the sector as a whole, the caps and cuts are undoubtedly having an impact on landlords as well as tenants. It’s one that will vary around the country according to local market conditions but as demand continues to rise the pressure grows. Housing benefit may have taken the strain for more than 20 years but for how much longer?

Garden griping

Mon, 20 Jan 2014

So Nick would like two, Eric (through clenched teeth) one or two, Emma five and Boris none. It’s time to play the garden cities game.

A quick look at the electoral map of constituencies around London tells you most of what you need to know about the politics involved. You’ll find a sea of Tory blue in the swathe of seats closest to the capital with only Labour Slough, Luton and Oxford and Lib Dem Lewes and Colchester anywhere near to being affected.

It also explains why David Cameron’s interest has waned and a government-commissioned study on new towns has allegedly been blocked. According to the FT, a Downing Street official has even joked that the only possible sites should be Buckingham and Mid Bedfordshire, the seats of Tory outcasts John Bercow and Nadine Dorries.

Add to that mix the curious leak to the Telegraph of the names of two sites supposedly identified that seem almost guaranteed (and maybe intended) to inflame further Conservative opposition. Gerrards Cross is one of the most exclusive and expensive parts of Buckinghamshire, while much of Yalding in Kent was last seen underwater as its residents confronted Dave.

That was part of a story on Saturday that led on a call from Nick Clegg for Cameron to be ‘honest and upfront’ about where the garden cities will be. He says:

‘We cannot make the mistakes of past governments and sit on our hands while a whole generation of people are squeezed out of the housing market. It is our duty to change the story. We must bring decades of indecision and stagnant political will to an end. That is why I am a strong advocate of garden cities, where there is clear local support and private sector appetite. In 2011, our housing strategy committed us to publishing a prospectus for new garden cities and that is exactly what we’ll do.’

All of which was clearly too much for London mayor Boris Johnson, who uses his Telegraph column this morning to accuse the deputy prime minister of planning to ‘plonk colossal new Cleggograds and Cleggopolises’ in Buckinghamshire, Oxfordshire and Berkshire. This of course has nothing to do with his political ambitions beyond the capital.

Away from the coaliton infighting, Labour’s Emma Reynolds continues to quietly and effectively make the case for starting work on five new towns in the next parliament as the Lyons Commission prepares to get down to work on the detail.

Johnson says Clegg has clearly not read his London Plan, ‘a 1,000-page vision for addressing the London housing shortage’. The only garden city needed is the one he wants to build on the site of the closed down Heathrow airport once approval is given for his Boris Island airport hub in the Thames Estuary.

He is right to point out that London’s population was bigger in 1939 than it is now, even though it is growing rapidly. He boasts that making better use of brownfield sites could deliver 47,000 homes a year.

However, the alterations to the London Plan published last week only come up with 42,389 a year against a minimum annual need of 49,000 and a long-term requirement of 60,000. Any of those figures are a massive increase on the miserable average of 18,000 a year achieved over the last 20 years. And, even if he could achieve everything in his plan, much would depend on decisions being made on future airport capacity that are out of his control.

Someone starting from scratch might well build a hub airport east of London, assuming they could solve the technical issues that derailed similar previous plans. However, the Airports Commission made it clear before Christmas that the shortlist is Heathrow and Gatwick plus face-saving ‘further studies’ of the Thames estuary idea

And even if Heathrow could be closed and the £65 billion or so found to build the new airport, how many homes could the site really take? Last year Johnson was saying 100,000 homes and 250,000 people. That has fallen to 200,000 people in this morning’s article.

A future-gazing paper by Graeme Bell for the Town and Country Planning Association imagines the closure of Heathrow and the design of a garden city with a much more modest 14,000 homes for 30,000 people in four garden suburbs and two urban villages.

So whichever way you look at it, London’s housing crisis needs a solution that looks outside as well as inside the capital. It will require building on brownfield land but it seems useless to pretend that it will not also require more controversial policies such as reviewing green belt boundaries, densifying the suburbs and new towns/garden cities.

And whichever way you look at it, the politics look poisonous and the plans look vulnerable to sabotage. However, this is nothing new. When Lewis Silkin, the town and country planning minister in the 1945 Labour government, arrived in Stevenage for a meeting about the first proposed post-war new town he found that the train station signs had been changed to read Silkingrad. According to David Kynaston’s Austerity Britain, he told a hostile public meeting: ‘It’s no good your jeering, it’s going to be done.’ And it was.

Far more vociferous opposition can be expected 70 years on and Silkin’s successors will need a thicker skin and even more determination to build Reynoldsgrad, Cleggopolis and Picklesville while Boris Johnson plays Fantasy Island. 

Hardest word

Tue, 14 Jan 2014

A remarkable thing happened yesterday: Iain Duncan Smith used a five-letter word beginning with S.

Apologising for a mistake is just about the last thing any minister wants to do, but IDS got his chance when Labour’s John Healey asked him at work and pensions questions about the DWP’s bulletin admitting the pre-1996 under-occupation penalty error. Healey quoted the latest survey from the Northern Housing Consortium that ‘nearly half of all frontline housing workers have dealt with someone who has threatened to commit suicide’ largely because of the government’s welfare changes. ‘Will he apologise this afternoon to those people for the concern and chaos that he is causing?’

Duncan Smith replied: ‘I said it all right, and I say it again: the Department is, and I am, absolutely sorry that anybody may have been caught up in this who should not have been.’ So not just an apology but a double ‘sorry’ from both the secretary of state and his department. But before anyone gets too excited, he went on:

‘However, what we were left by the last Government was this: 1,000 pages of complex housing benefit regulations. Under universal credit, they will be reduced to 300 pages and we will simplify them. The reality is that this is a problem of the massive complexity of housing benefit that the last Government left us, with a housing benefit bill that has been rising and that doubled in 10 years on the right hon. Gentleman’s watch.’

So it turns out this was a conditional apology: we’re sorry we didn’t spot the loophole in the regulations but it was actually the last lot’s fault for making them too complicated. That will come as some compensation to the thousands of tenants who’ve been wrongly paying the bedroom tax since April for the stress they’ve been through, to the thousands of other tenants who may have missed out on discretionary housing payments, and to the landlords and local authorities all over Britain for the time and cost involved in rectifying the DWP’s mistake.

Duncan Smith used the same argument earlier when Tory backbencher Bill Wiggin put forward what Healey called a planted question asking him to explain what had happened:

‘Yes, this is a narrow but complicated area dating back to 1996 with the introduction of local reference rent rules. They were intended to offer transitional protection at that time for existing claimants, but they were not in any way time limited. There was another opportunity, in 2008, to change the regulations when the previous Government brought in local housing allowance. They were not adjusted then. This protection had been dormant for 17 years and not used. This is a complex area that we are now resolving, but I have to say that in three different Governments it has missed the attention of Ministers.’

However, that ‘all the others missed it too’ rather ignores the point that previous reforms intentionally gave transitional protection to existing tenants whereas the bedroom tax did not. And the conditional apology is still more than appears on the DWP’s website. Almost a week after it admitted to the error in the HB U1/2014 circular to housing benefit staff, there is still no statement from a minister or user-friendly information for tenants or landlords.

Duncan Smith had a more robust answer later when his Labour shadow Rachel Reeves asked him ‘how many long-term residents have been wrongly paying the bedroom tax since April’ because the government failed to spot the loophole:

‘We have already made it clear that the number is likely to be between 3,000 and 5,000, but we will be clearer about that when the local authorities, which are responsible for collecting the data, come forward with the final facts.’

Reeves said it was a ‘total shambles’ and he did not have a clue whether the number was 5,000 or 40,000. ‘Will the Secretary of State now guarantee that everybody who has been wrongly paying the bedroom tax will be reimbursed, and instead of closing the loophole, will the Government now do the right thing and scrap the bedroom tax?’

IDS: ‘Yet again, what we have from the honourable Lady is a moan about a policy that helps people in difficult circumstances. I said earlier that not once has she come to the Dispatch Box and said that she was concerned about those her party left behind living in overcrowded accommodation. Not once has she mentioned the 1 million on the waiting list or apologised for the fact that building levels for social housing fell to their lowest point since the 20s. Of course we will look after those affected by the policy, but she must make it clear that she supports one of these policies; otherwise, there will be a total cost to the Exchequer. The shambles is on the Opposition’s part.’

Duncan Smith was mixing up two different coalition housing attack lines there with that gibe about social housing falling to its lowest level since the 1920s but his point was clear: if anyone should be saying sorry it’s Labour.

There was still time for one more question from Labour’s Andrew Gwynne about what he called ‘this latest bedroom tax shambles’: ‘Can the Secretary of State clarify whether he will write off, or seek repayment for, discretionary housing payments that have been made to those people who will now receive back payment of housing benefit?’

And Duncan Smith’s answer was worryingly unclear for the tenants affected: ‘I made it clear in my previous answer that I will be coming forward with full details about that, including the number of people affected.’

It was left to junior minister Esther McVey to answer the scheduled questions on the under-occupancy penalty that covered the impact on 60,000 carers in particular. McVey repeated her claim from last year that ‘we have got to have more smaller buildings’ and the familiar line about discretionary housing payments: ‘We have allowed discretion for those people who might need it the most, hence it is called “discretionary”, hence it has been trebled and hence we are supporting these people.’

Elsewhere at work and pensions questions, ministers were asked about problems with a range of other policies including work capability assessments, personal independence payments and, of course, the universal credit.

Asked whether there will be further delays, Duncan Smith insisted that it ‘is set to roll out according the timetable I laid out the other day’ (presumably the one before Christmas that revealed further delays). He also denied reports of a split with the Cabinet Office over his ‘lamentable’ implementation of the policy as ‘farming in and around old e-mails’.

He hit back with some stats of his own in response to a series of friendly questions from Tory MPs. He said local authorities had only spent 40 per cent of their discretionary housing payment budgets in the first half of the year and argued that Labour authorities should get on and spend the money if there was a problem.

And he strongly hinted that the government was considering a further reduction in the benefit cap when Conservative Andrew Bridgen said that £26,000 was higher than the average post-tax income in their constituency:

‘We will keep the policy under review, but the one thing we should celebrate is that we are reforming welfare to ensure that those who need the money get it, and those who do not get back to work.’

The bedroom tax may have a loophole and the roll out of the universal credit may be more of a crawl-out, but IDS remains as unapologetically certain as ever about his historic mission. 

Bald truths

Thu, 9 Jan 2014

Like bald men with a comb, the politicians squabbled yesterday over who has the worst record on housebuilding.

The ghost of Stanley Baldwin occupied the green benches once again as Hilary Benn and Eric Pickles traded stats to show that each other’s governments had built the fewest new homes (in England) since the 1920s.

So where Benn opened the opposition debate with the accusation that ‘in the three years for which he has been in charge, the number of homes completed in England has fallen to its lowest level since Stanley Baldwin was first prime minister’, Pickles countered with ‘when I walked through the door of Eland House the spirit of Stanley Baldwin and those figures met me. That was our baseline—that is what we actually started from.’

And up popped former Lib Dem minister Andrew Stunell with the familiar stat that social housing fell by 421,000 homes under Labour and the more dubious claim (ignoring the affordable/social distinction) that it will rise by 150,000 under the coalition.

As with previous statistical spats involving former housing minister Grant Shapps, there are elements of truth on both sides and enough doubt over time lags and the difference between starts and completions for a comb-over to blur the edges.

For the record, the 13 quarters since the election (taking April-June 2010 as a ‘Labour’ quarter) have seen 354,000 starts in England, compared to 385,000 in the last 13 quarters of the Labour government.

On completions the gap is much bigger (458,000 under Labour to 362,000 under the coalition) but that ignores time lags in construction. Treating 2010 as a Labour year for completions, the comparison is 310,000 in the last 11 quarters of the coalition to 341,000 in the last 11 Labour quarters.

However, both 2010 and the most recent four quarters (to September 2013) saw completions fall to the figure of 107,000 cited in the debate as the lowest since the 1920s.

The figures and responsibility for them can be spun in any number of ways of course. The Labour low was the consequence of the financial crisis but whether you pin the blame for that on the world economy or closer to home depends on your political persuasion. The Tory low is arguably more troubling, since it came after a slow recovery that began in 2009.

Ironically, as Clive Betts pointed out, it’s Shapps himself who comes out worst due to a rash statement he made to the CLG select committee in 2010. Betts asked him whether success for the government would be ‘building more homes per year than were being built prior to the recession, and that failure will be building less’. The former housing minister replied: ‘Yes. Building more homes is the gold standard on which we shall be judged.’ Given that there were 177,000 completions in 2007, that looks a distant dream.

The coalition’s initial remedy was to replace Labour targets with localism and the new homes bonus. If that has failed, then the phase two solutions of planning reform and deregulation for housebuilders and stimulating demand through Help to Buy do seem to be helping to generate a recovery at last. The big question is how sustainable it will be.

However, the debate also focused on Labour’s emerging alternatives, which include new towns, use it or lose it sanctions on landbanks and the right to grow for constrained local authorities. Benn said Labour would ‘use guarantees - the government are currently using guarantees for Help to Buy - for “help to build” for these new towns’.

Pickles attacked the last Labour one’s failure on eco-towns. ‘Not a single house was built,’ he said. ‘Not one. The only thing that eco-towns built was resentment. Labour has simply dusted off and reheated its old policies under a different name.’

However, shadow housing minister Emma Reynolds raised reports earlier in the month that, after supporting the principle of new garden cities, David Cameron has now forbidden ministers to identify any sites for them during this parliament. ‘Some would say that is pouring cold water on the proposal; others might say it is putting it into a deep freeze. Labour, on the other hand, is committed to new towns, which must form part of the solution to the housing crisis.’

Probably wisely, given that Pickles is seen as a strong influence on that, housing minister Kris Hopkins did not respond to that point and concentrated instead on attacking Labour. ‘Even in the boom years, it failed to deliver the required housing. The total build dropped to the lowest number in 100 years. It promoted eco-towns—10 in total—but not one appeared. New Labour at its finest: all spin and absolutely no delivery.’

Just when you thought the debate had moved beyond who has the worst record since the 1920s and started to focus on what’s needed for the 2020s, we were back with the bald man and the comb. 

Benefit baseline

Tue, 7 Jan 2014

The ‘hard truths’ about welfare outlined by George Osborne beg far more questions than answers when it comes to housing.

In a speech yesterday the chancellor set out plans for £12 billion worth of cuts in welfare and £13 billion cuts in departmental budgets in 2016/17 and 2017/18 if the Conservatives win the next election.

And he singled out housing as the target of two specific cuts: housing benefit for the under-25s; and council housing for people earning more than £60,000 a year.

However, a quick look at the detail of those proposals raises real doubt about how much they would really save and what else might be on the Tory agenda.

The first idea has been raised repeatedly by David Cameron and rejected repeatedly by his Liberal Democrat coalition partners. As I’ve blogged before, it brings back memories what happened when another Conservative government cut benefits for young people in 1988.

The Conservative logic is that most young people have to live at home with their parents so it is unfair that some get housing benefit for a place of their own. However, the logic starts to unravel when you look at the detail.

First, more than half of the almost 400,0000 under-25s on housing benefit have children of their own. Should they live with their grandparents?

Second, many people may not have parents to live with, or there may be very good reasons why they left home. That’s why the 1988 changes led to an explosion in the numbers of young people sleeping rough. What would happen to people fleeing domestic violence, or homeless people, or people in supported accommodation or people leaving care?

For those reasons, it is very hard to see how the cut could be implemented without significant exemptions that would dramatically reduce estimated savings of £1.8 billion.

It was interesting that Osborne himself, when asked about the plan after his speech in Birmingham yesterday, talked about the under-21s: ‘Many people cannot afford when aged 19 or 20 to have their own flat - they have to live with their parents.’

Meanwhile, after David Cameron referred to the under-25s in his Conservative conference speech in 2012, the DWP told Inside Housing that it would only apply to future claimants not existing ones:

‘We’re looking at a range of options for future reforms to the welfare system - changing the eligibility criteria for housing benefit is one of these. Any changes would affect future claimants only and we would still ensure that vulnerable people remain protected.’

If the savings from the first measure start to evaporate, those from the second will be minuscule. The pay to stay plan for high-earning households has already been out to consultation and the government has responded to the results. At every stage, its estimate of high earners has dwindled: according to the latest one there are between 11,000 and 21,000 earning more than £60,000. Even that covers all social housing tenants, not just council tenants.

No figure for savings has ever been provided, just an unsourced estimate that ‘on average across England the economic subsidy provided by sub-market rents on social housing is worth an estimated £3,600 per annum’. Even taking this at face value, the maximum amount involved is 21,000 x £3,600 or £76 million a year. But this would not be a saving in housing benefit. It would presumably go to landlords and in theory could support new homes but there would be considerable costs administering the income checks for the system and considerable incentives for people to declare an income below the threshold.

And the ‘savings’ here are such that any remaining high earning households would face a choice between paying a higher rent or doing the right to buy with newly increased discounts by a government which is spending £100 million to publicise them.

So to get to anything like £12 billion the government must have other cuts in mind. Since the Conservatives have ruled out cuts for pensioners, housing benefit is the next biggest budget. The most likely options for people of working age might include yet more uprating at below the level of inflation to follow the 1 per cent for next year and the year after or a reduction in the current overall benefit cap of £26,000.

However, as Kate Webb blogs for Shelter, Osborne has already done the easy cuts and more could mean a complete withdrawal of the safety net for some groups:

‘He says there are no easy options; but does the lack of detail mean there are no realistic cuts left that won’t push the system to breaking point, or that the chancellor doesn’t think the public are ready to be fully confronted with the reality of a broken safety net?’

Little wonder that today’s papers are reporting a split between Osborne and an alarmed work and pensions secretary Iain Duncan Smith.

As for the £13 billion savings in the departmental budgets, it’s hard not to detect a grim message for public housing investment. David Montague of London and Quadrant blogs about the options, including better use of public land and government guarantees, here.

However, the main purpose of Osborne’s speech is political, to set a baseline for public spending and challenge the opposition parties to say whether they agree and, if not, what else they would cut or what taxes they would increase or how much they would borrow.

Nick Clegg has already rejected his ideas as a ‘monumental mistake’ and the Liberal Democrats seem set to go into the election with an alternative proposal on housing: a mansion tax to raise £2 billion.

Labour is refusing to fall into what it sees as an obvious political trap. However, in terms of housing, it must increase the temptation to look for alternative ways of saving money that would fit in with what it is already doing in terms of predistribution and intervention in the private market elsewhere.

An increase in the minimum wage, or introduction of the living wage, would be one way of cutting the housing benefit bill. And if ‘rent stabliisation’ for the private sector was already under discussion it must surely be on the agenda now.

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