This blog has a tendency to be negative at times so I’ve been trying to accentuate the positive ahead of the announcement on housebuilding expected later this week.
The good news is that the government is definitely taking housing seriously. Peter Schofield, director-general of the DCLG, confessed at the CIH conference last month that the Treasury had barely considered housing when it drew up its original plan for growth last year. In the run-up to the growth plan mark 2 and publication of the Montague report on the private rented sector, I’m told that David Cameron has been making the point that ‘all roads lead back to housing’ while Nick Clegg was using housing to rally his party faithful over the weekend at the Social Liberal Forum.
After the draconian spending review and underwhelming housing strategy, it’s taken the coalition just over two years to realise that more - much more - is required. That’s happened considerably quicker than under the last Labour government: acceptance of draconian Conservative cuts in housing investment in its first term; semi-successful promotion of a ‘step change’ in housebuilding delivery in its second term; belated realisation that it had not done remotely enough on affordable housing in the third term.
Considered judgement will have to wait for the substance of this week’s announcement and what follows. As Inside Housing is reporting today, it seems clear that the plan will include a scheme to reduce the cost of borrowing for housing associations. Ministers argue that it is now time to use the government’s hard-won credibility on public borrowing and that it could be possible to guarantee associations borrowing to bring rates down to as little as 20 basis points above gilts. That would be somewhere over 2 per cent rather than the current 4.5 to 5 per cent or more. If it’s not quite the quantitative easing for housing that I’ve been advocating, it does look like a creative idea. The alternative of writing off associations’ historic debt appears to have been ruled out as too complicated and expensive.
Beyond that, I’m told ministers are willing to look at any ideas to get housebuilding moving provided they do not risk undermining that fiscal credibility– and there is a recognition that housing projects are a far better way of delivering growth than large-scale infrastructure projects that take much longer to get off the ground. That looks like a reversal of the presumption in favour of infrastructure with a bit of rhetoric about housebuilding that made up the original plan for growth. When the economy is still shrinking, the argument that 100,000 new homes means 1 per cent growth in the GDP is bound to carry some weight (even if there is also a good case can be made that most of the deficit reduction so far has come from cutting public investment).
The other key announcement to look forward to is publication of the report of the Montague review on the private rented sector. If Sir Adrian and his team can really find a way to attract institutional investment they will have solved a conundrum that has defeated all previous attempts and opened up a major new source of finance for new homes. I understand that one of the key problems is that institutions will want to buy stock of 2,000 homes or more and at the moment there is nobody around to build them. One solution could be to incentivise housebuilders to do so. A leak to Inside Housing last month suggested that the review could recommend changing the definition of affordable housing for planning purposes to include private renting and government loans to promote new large-scale construction.
Another way of boosting housebuilding would be to promote the construction of new towns – or new garden cities as they were carefully branded by David Cameron in a major speech in March. The idea is being pushed not just by the usual suspects like the TCPA but by the influential right-wing think-tank Policy Exchange too. I’m told that work continues to get medium-sized schemes like Northstowe and Ebbsfleet moving but that grander ideas for using compulsory purchase to kickstart new towns on the scale of the post-war programme have been considered but rejected as politically impossible.
My understanding is that even an old faithful from the housing lobby - a change in the public sector borrowing rules - has not been ruled out altogether. The assumption within the housing world may be that the key obstacle is the Treasury but it seems that chancellor George Osborne is agnostic about the idea and there has even been lobbying in favour of it from within Conservative local government. The two barriers are first that the UK Statistics Authority and Office for Budget Responsibility would have to agree to the reclassification and second that even if they did the markets might hear too many echoes of the profligacy of Spanish regional government for comfort.
So there you have it: the case for a bit more positivity about the prospects for more homes. I won’t be shaking off the negative habits of a lifetime, I am worried by the mood music about yet more subsidies for the major housebuilders that have already received billions in subsidies and I’m prepared for some of the over-hyping that accompanied the ‘greatest investment since the Victorian age’ rail plan earlier. But at least there is a positive case to be made.
So is affordable rent value for money? After two hours of scrutiny from MPs we are still not much closer to an answer.
What seems clear is that between them the DCLG, HCA and housing sector have done a pretty good job of making the best of a grim situation up to 2015. What is far from clear is what that means over the next 10, 20 or 30 years.
The influential public accounts committee spent yesterday afternoon questioning experts from the sector plus Sir Bob Kerslake of the DCLG and Pat Ritchie of the HCA. This follows publication of a report by the National Audit Office that, as I blogged last week, left several key questions about the programme unanswered. By my reckoning I now have partial answers to two out of five questions, some more information on another two but an even more confused picture on the fifth.
Is it risky to weight the programme so much towards the end of the spending review period with construction of 45,000 of the 80,000 homes planned to start in the final year? Pat Ritchie said that another 6,500 starts have now been brought forward to earlier years. However, it’s still a concern and I learned a new phrase from David Montague of L&Q and the G15 Group of the largest associations. ‘The big issue we have is the drop dead date in 2015,’ he said. ‘If developments fall a few days after that date there is no funding.’
Is the programme repeatable? David Montague said that the sector as a whole was borrowing £15 billion and was approaching the limits of its gearing covenants and going beyond them would mean renegotiation with lenders. Would that mean re-pricing of existing loans? Sir Bob argued that: ‘We do know there is some headroom available. The key question is what things will look like in the next spending review. No decisions have been made on size, scale, and form of next programme. We do know there is still some capacity in the housing association sector to do more along these lines.’
We learned little more about the things the NAO report failed to mention. There is still no detail on the warning from providers in London may not be able to charge the rents they agreed although David Lunts, executive director of housing and regeneration at the Greater London Authority, said larger homes were being let at lower rents than smaller ones and he did not think that was sustainable in the longer term. There was only one mention of the implications of converting existing homes to affordable rent and none at all of the fact that homes sold under Right to Buy 2 are also supposed to be replaced by affordable rent homes.
On housing benefit costs, it’s still no clearer why the DCLG estimated that the first 56,000 homes will cost just under £10,000 extra each over the next 30 years but that the next 24,000 will cost £35,000. And there is still no estimate of the extra cost of up to another 180,000 conversions and Right to Buy 2 replacements. Sir Bob said that the extra cost of affordable rent worked out at around £45 million a year, which made it a minor concern in the context of a total housing benefit bill of £22 billion a year. That seems to take account of the savings that will be made when tenants in the private rented sector transfer to affordable rent but it’s not clear to me that it includes the extra costs of the homeless families who would have got social rent tenancies but will now go into private ones. There was no clear answer either to questions from Labour’s Meg Hillier about the effect of higher rents on work incentives.
Finally, is affordable rent value for money? This boils down to the difference between upfront capital grant subsidy and continuing revenue subsidy through housing benefit. The NAO report concluded that a hypothetical social rent programme costing the same as affordable rent over 30 years would have delivered 8,200 more homes and £700 million more benefits but, crucially, it would have required grant funding of £4.3 billion rather than the £1.8 billion available. The £1.8 billion would only have delivered 27,000 homes under the previous programmes.
Professor Christine Whitehead of the London School of Economics said there was nothing new about affordable rent. It was merely a continuation of the shift from public to private finance and supply side to demand side subsidy seen over the last 30 years. ‘Most of us thought we would be here ten years ago,’ she said.
David Orr of the National Housing Federation said shifting from capital to revenue subsidy meant less value for money in the longer term. Previous work by the NHF showed that revenue subsidy was more effective for the first seven or eight years but for any longer than that capital subsidy was better. David Montague said his current modelling showed that after seven to 10 years capital subsidy was more effective.
However, when Conservative MP Matthew Hancock raised this point later, Sir Bob Kerslake responded: ‘We’d challenge that particular argument. The NAO report captures that pretty well. If you take it over a 30-year period the old funding model comes out ahead, not by much but it comes out ahead, but if your judgement is that you want to see a housing impact now there is a strong case for reducing capital subsidy and increasing rents.’
If that is the pragmatic argument against capital subsidy, Christine Whitehead put the economic one. ‘It does matter how much the tenancy changes because tenants may not need subsidy over whole time they are there,’ she said. This is the argument that capital subsidy ends up going to tenants who do not need it whereas personal subsidy is targeted at those in need. However, it may need some re-thinking in the light of the introduction of fixed-term five-year tenancies and pay-to-stay rents for higher-earning tenants.
Labour members of the committee seemed impressed by the way the DCLG and HCA had implemented the programme but less so by its long-term implications. When David Orr pointed to the impact of rising rents on the housing benefit bill, committee chair Margaret Hodge referred to it as ‘PFI under another name’. The verdict of Labour member Austin Mitchell was that: ‘Sir Bob has done a wonderful job in producing something out of nowt. But these are hypothetical homes based on a hypothetical idea of what’s affordable. Under this system Cathy is not going to come home, is she?’
However, Conservative members Richard Bacon and Matthew Hancock were more intent on taking things back to first principles. If the market for food and shoes worked and there was equilibrium between demand and supply, asked Bacon, why couldn’t we get equilibrium in the housing market? Christine Whitehead suggested that supply was slow to respond to demand, incomes were unevenly distributed and land prices reflected what richer people would pay for their housing: ‘The market is fundamentally out of kilter’.
Hancock asked if the ‘value for taxpayers’ money’ solution might not be to grant more planning permissions. David Lunts told him there were 200,000 consented plots in London but they were being built out slowly if at all. ‘The structure of the housebuilding industry in this country means they are more interested in delivering margins than volume,’ he said.
Cue an outburst from Bacon. ‘It’s an oligopoly, basically. What you’ve just described is the absence of competition. In conditions of reasonable competition you could not do that, just protect your margins.’
And when Margaret Hodge attempted to draw the session to a close by telling him ‘this is getting a bit theoretical’, he responded: ‘It’s not theoretical at all. It’s the absolute essence of the way the housing market hasn’t worked and why hundreds of thousands of people have nowhere to live. It’s not theoretical at all and we spend billions of pounds of taxpayers’ money on it. We have got representatives here of an industry that’s failed for 30-40 years to deliver enough housing in this country. And you call it theoretical. I’m sorry, it’s not and if you think I’ve got a bee in my bonnet you’re right.’
This diatribe against housebuilders was rather bizarrely delivered to an academic, two senior housing association people and Boris Johnson’s head of housing but it was still a point well made. No one part of the failing housing system can be considered in isolation from the rest and until we find a way to tackle the whole thing the search for value for money seems doomed.
The verdict from the National Audit Office (NAO) on the affordable rent programme is generally positive but it still leaves several key questions unanswered.
The financial watchdog says that the DCLG has ‘so far achieved its policy objective to maximise the number of homes delivered within the available grant funding’. Grant per home was a third of previous levels, the programme was over-subscribed and 80,000 homes are being delivered against an initial target of 56,000.
The NAO concludes that: ‘The Department and the [Homes and Communities] Agency selected a design for the Programme that is projected to maximise benefits and the number of homes delivered within the constraints of the £1.8 billion capital funding available. The launch of the Programme has been successful. Providers have committed to building some 80,000 homes for the £1.8 billion of government investment, approximately 24,000 more homes than first expected. In this respect, the Programme has made a good start.’
So far, so good but the NAO also reveals several risks:
- 18 per cent of contracts had not been signed as at April 2012 (mostly local authorities that needed to confirm their borrowing capacity following HRA reform)
- more than half of the homes are planned for the final year of the programme ‘so slippage would put at risk achievement…of the planned 80,000 homes’
- some providers in London are worried they will not be able to charge the rents they originally agreed
- the DCLG needs to carry out ‘a thorough analysis of the financial position of providers to assess the repeatability’ of the programme after 2015.
In the process, the report reveals details about the programme that I at least have not seen before but it also begs some more questions.
First, it shows just how far the programme is weighted towards the end of the spending review period – and therefore why starts have fallen so much recently. Completions are set to rise from 2,200 last year to 9,800 in 2012/13 to 23,000 in 2013/14 and then 45,000 in 2014/15 (56 per cent of the entire programme). Little wonder that the NAO warns of the risk of slippage. However, has the result also been to delay the construction work beyond the time when it is most needed to give the economy a boost?
Second, the report is clear that continuing with the previous funding model would have ‘offered the highest ratio of benefits to costs and hence the best value for money’ over the 30-year period analysed. This was mainly because housing benefit savings would offset much of the initial capital cost. A hypothetical social rent programme costing the same as affordable rent over 30 years would have delivered 8,200 more homes and £700 million more benefits but, crucially, it would have required grant funding of £4.3 billion rather than the £1.8 billion available. Affordable rent was a pragmatic choice by the DCLG that ‘reflected its aim to do the most it could with the limited amount of capital available to it’ and this option ‘represented the best value for money available within the limited amount of capital available’. The £1.8 billion would only have delivered 27,000 homes under the existing programme.
Third, what about those housing benefit costs? The NAO takes the DCLG’s estimates at face value. The initial impact assessment put the extra housing benefit cost at £550 million but then increased this by another £850 million when it became clear the programme could deliver 80,000 homes rather than 56,000. It is not explained why the first 56,000 homes will apparently cost just under £10,000 each over 30 years whereas the next 24,000 will cost £35,000.
The NAO says providers are planning to charge an average rent of 75 per cent of the market rate (in line with DCLG modelling assumptions) with the 80 per cent rate adopted by only 40 per cent of providers and London providers planning for rents at 65 per cent. Based on analysing HCA information, the NAO says that the average weekly rent will range from around £100 a week in the North East and Yorkshire & the Humber to £182 a week in London. But there is a rider to that: ‘However, it does not have information on rent levels charged across homes of different sizes. As a result, we could not compare actual rent charged under the model and rent levels under previous programmes.’
If that sounds rather less than clear, it’s not just you. The public accounts committee will be examining the report and questioning witnesses on Monday. Committee chair Margaret Hodge told The Guardian this morning: ‘The department has refused to be transparent about just how many tenants will be affected and by how much. My committee will want officials to regularly and transparently update their assessment of the costs and benefits of the programme so that we can hold them to account for the social and financial consequences of their decisions, particularly in light of changes to the welfare system.’
Fourth, is the programme really repeatable? Grant Shapps was clear at the CIH conference in Manchester that he thinks it is. The DCLG is clearly confident that if the original programme was over-subscribed by 100,000 homes then a repeat is more than possible. The NAO notes that housing associations’ operating margins increased from 14.2 per cent in 2009 to 21.4 per cent in 2011. Its own consultation found some associations saying a repeat was not possible and others saying there was sufficient capacity.
However, the report also reveals that this will be about more than just grant (£20,000 per home) and borrowing supported from the new rents (£75,000). Another £46,000 comes from ‘other funding’ (an increase of £12,000 per home on the previous programme). The total scheme cost of £141,000 per home is also £14,000 lower than under the previous programme. So the programme relies more on other funding and a reduction in the total cost per home than it does on grant. Is that repeatable?
Fifth, what about the things the report does not mention? There is no more detail on the warning from providers in London that they may not be able to charge the rents they originally agreed. There is no consideration of the implications of converting up to 80,000 existing social rented homes to affordable rent as well as building new ones. And there is no mention of Right to Buy 2, despite the fact that it will effectively be another round of affordable rent.
Like affordable rent itself, the NAO report is a good start but it is very far from a complete answer to all the questions about the programme. It should be an interesting public accounts committee session in Monday.
It was seconds out, round 27 in the Commons yesterday in the housing stats war but where were the two main contenders?
Communities and local government questions has become a stats slugfest between Grant ‘Slasher’ Shapps in the blue trunks and Jack ‘Jabber’ Dromey in the red but yesterday as the theme music from Rocky began to play there were two new boxers in the spotlight. Given everything that’s been happening outside the ring – new and highly contentious stats on affordable housing and homelessness to argue about and an official complaint from Dromey to the referee – was I the only one in the crowd to feel let down?
The warm-up question came from Conservative backbencher (but social housing rebel) Gordon Henderson. What steps was the minister taking to increase the availability of social housing? A golden opportunity surely for Shapps to deploy one of his new stats: the £19.5 billion that government and the private sector combined will invest in the new affordable housing programme to deliver 170,000 affordable homes etc etc. The answer was duly given but by junior (Lib Dem) housing minister Andrew Stunell rather than the man himself. Stunell went on to bat away questions about affordable housing starts, right to buy replacements and the housing benefit implications of affordable rent. He showed he has learned from the master by switching the comparison to affordable housing completions, pledging that replacements would be ‘a new social or affordable home’ and referring to social rent completions that are the legacy of Labour’s programme but it was not the same somehow.
The absence of the reigning champion was even more keenly felt when Labour’s Chris Williamson asked directly about the 68 per cent fall in affordable housing starts. ‘We have heard the minister tell us that everything is fine and dandy, but nobody believes him. I cannot help wondering if he is modelling himself on Voltaire’s hopelessly optimistic Dr Pangloss or on one of George Orwell’s cynical apparatchiks, or is he just plain incompetent?’
It was a good point complete with not one but two literary references but Stunell’s response was workmanlike rather than inspired: ‘The hon. Gentleman left off the correct response, which is that unlike him, I am supervising the development of more social and affordable homes. It was the Government whom he supported who cut the number of social and affordable homes by more than a quarter of a million. If his Government had performed properly in their period of office, we would not be facing that housing crisis now.’
The non-appearance of Shapps seemed especially curious when the next question was about housing support for members of the armed forces and up popped the man himself with an answer about his new statutory guidance on allocations and a pledge that bereaved spouses as well as reservists and those who were actually serving would get priority in future.
That was followed by more questions about affordable housing starts and another stats battle but Shapps had handed back to Stunell and instead of Dromey we got his boss, shadow communities secretary Hilary Benn. Benn kicked off with a direct reference to Shapps: ‘I’m not surprised that the housing minister has chosen not to answer these questions, given that the House knows he has a bit of a problem when it comes to statistics.’ Could Stunell explain how Shapps had claimed a ‘huge decline in affordable housing starts’ was ‘impressive’ and ‘rapid and dramatic progress’?
Stunell said it was rapid and dramatic progress ‘if someone inherits a situation in which they are going backwards’. Plans were on track and the housing sector had ‘risen to the challenge to deliver’.
Benn hit back with a great line suggesting that he should ask Michael Gove about his answer. ‘I suggest that he seeks the help of the Education Secretary and offers to take one of the new mathematics O-levels. I have a question: “If 49,363 affordable houses were started last year and only 15,698 affordable houses were started this year, should Grant describe this as: a) ‘a massive increase’; or b) ‘a 68% decline’? Please show your detailed workings.” Does the Under-Secretary not understand that every time his right hon. Friend does that, it is not just affordable house building that declines, but his credibility? When is the Secretary of State going to get a grip?’
The principle of parliamentary questions is of course that nobody actually answers them and Stunell picked instead a quote from the referee, the UK Statistics Authority. ‘If I may I shall very briefly quote this: “Official estimates of net change are available for social rented dwellings, but not for the wider stock of ‘affordable’ housing beyond this category. They show an overall reduction of 421,000 in the stock of homes rented from local authorities and housing associations over the period 1997 to 2010.” That seems to me a horrific indictment of Opposition Front Benchers, and what Government Members are doing is repairing some of that damage.’
This was much better even if Benn and Stunell do not immediately strike you as natural pugilists. And, finally, in the last two rounds came the Dromey/Shapps clash we had been waiting for. Dromey went on the attack over housing for the under-25s with:
‘Under Labour, homelessness fell by 70%. Under this Government, 1 million people are out of work; house building is falling; homelessness is rising rapidly; and now there is the proposal to punish young people who leave home to find a job or get an apprenticeship by making them lose their housing benefit and therefore the roof over their head. The measure was described as “absurd” by the YMCA because it will drive up homelessness and close the facilities that support those people. The Minister for Housing and Local Government has said that homelessness is what brought him into politics. Is it not becoming increasingly clear that his legacy will be rapidly rising homelessness and should he not concentrate on not making a bad situation worse, but on building homes, creating jobs and driving down homelessness?’
And Shapps hit back with:
‘From the great passion with which the hon. Gentleman speaks, one would imagine that he had a long-term interest in this issue; in fact, he is the eighth Labour shadow housing Minister whom I have faced. During the time the Opposition have been in place, guess how many Opposition day debates there have been in the Chamber about this important subject? Zero, none—there has not been a single such Opposition day debate. That is because the hon. Gentleman has a very loose relationship with statistics himself. Homelessness is lower than it was in 28 of the last 30 years—and it is less than half the level it was in the 13 years of his Government.’
It was an all too brief taster of the grudge match we had been denied earlier but it’s still not clear why we got boxing by proxy instead. One clue perhaps came in a question about the response from the UK Statistics Authority (UKSA) to Dromey’s complaint. Shapps confirmed that, yes, the UKSA had replied. ‘The hon. Member for Birmingham, Erdington (Jack Dromey) pleaded in his letter for an answer on whether I was right to say that the reduction in affordable homes for rent under Labour was 45,000 or 200,000. I am pleased to say that the UKSA wrote back to both him and me and confirmed that the figures showed an overall reduction of 421,000 homes for social rent during Labour’s time in office—a disgrace, and in stark contrast to the 170,000 that we will be building over the next three years alone.’
In the letter [download here], UK Statistics chair Andrew Dilnot confirms that the stock of homes rose by two million between 1997 and 2010 but that there was ‘an overall reduction of 421,000 in the stock of homes rented from local authorities and housing associations over the period from 1997 to 2010’. Dilnot also confirms that Labour provided 557,000 gross additional affordable homes between 1997 and 2010 – more than the 270,000 from affordable rent and right to buy replacement claimed by Shapps between 2010 and 2015 but over different periods. (I have more on the comparison between Labour and the Conservatives on my other blog here.)
On the other points of the complaint, yes, Shapps had chosen to highlight something other than a 23 per cent rise in rough sleeping but ‘the Statistics Authority recognises that Ministers often want to present such published statistical information in ways that best serve their political objectives’. Yes, on the presentation by Shapps of the figures on housing starts ‘the reference period (2009 instead of 2010) has clearly been carefully chosen, but this is not unusual in the context of a political debate’. As to the cost of building your own home ‘as far as we can establish there are no official statistics on the costs of self-building’.
If all of that seems to err very much on the side of civil service caution, the letter also includes earlier correspondence with Labour’s Nick Raynsford in which Dilnot’s predecessor Sir Michael Scholar said that ‘this is a complex picture, and, as so often in the political debate, the statistics are subject to selective use which has given rise to suggestions that they have been referred to in a misleading way’ and that he would ‘continue to press for a clearer and more systematic public presentation of all the relevant statistic material’.
After that he wrote to the DCLG suggesting a formal assessment of the statistics produced by the HCA and former TSA and Shapps requested this in a letter in March [PDF here]. Dilnot confirms that ‘it is our working assumption that the assessment will be taken forward in September 2012’.
Has that extra bit of scrutiny from the referee taken a little of the heat out of the housing stats grudge match? Only time will tell on that one but nobody is betting against several more rounds yet.
It would be easy to criticise the ideas in David Cameron’s speech on welfare reform as half-baked and impractical. They are both but that is not the main point.
One paragraph is missing from the transcript of the speech he gave in Kent today. This is a reference by Cameron to the way that the last Labour government allegedly ran up ‘a huge income transfer industry that they ran from the Treasury pushing tax credits and benefits around in a bid to try hit the poverty targets they’d set up’. This is marked as ‘political content excised’.
It’s a label that might as well apply to the whole speech, given that it’s a vision of what the welfare system would look like under a Conservative, Liberal Democrat-free government. You don’t have to look very far today to find Lib Dem bloggers calling on Nick Clegg to condemn Cameron’s ideas in the strongest language imaginable’ and Lib Dem think-tanks calling them ‘daft’ and ‘unworkable’. For more on the speech and the reaction, see Inside Housing’s stories here and here.
What Cameron said should not have come as a great surprise to anyone. In April plans leaked of a Downing Street/DWP plan to cut housing benefit for the under-25s (see my blog here) as part of a plan to cut welfare by another £10 billion and in May the Telegraph reported plans for lower regional caps and a crackdown on part-time workers as elements of a programme to save £25 billion (here). That’s all in the context of the downgrading of legally-binding targets to eradicate child poverty (here).
However, while those reports were based on off-the-record briefings from advisors and sources, here is the prime minister and Conservative leader saying the same things in a speech that was not just on the record but widely trailed over the weekend.
The speech makes clear that working-age benefits are the main targets for cuts and is littered with comparisons between ‘hard-working families’ and feckless claimants. There’s the working couple taking home £24,000 and the claimant family with four children claiming £27,000 a year. Never mind that the working couple would receive thousands in child benefit and tax credits if they had children and might well get housing benefit too.
Then there’s the woman who’s just left college and forced to live at home contrasted with the 19-year-old who does not have a job but is sharing with friends and claiming housing benefit. No mention again that housing benefit is also an in-work benefit or that most under-25s have a shortfall between their benefit and their rent.
Then there are the commuters travelling long hours each day because they cannot afford to live in central London who are contrasted with high-earning council tenants paying sub-market rent. The government has of course already published plans to make tenants earning more than £60,000 pay to stay, but Cameron criticises ‘people on salaries of £40, 60, £80,000 paying sub-market rents and living in council houses’. Even so this has apparently ‘sent out some incredibly damaging signals. That it pays not to work. That you are owed something for nothing’.
All of which, says someone who moved effortlessly from Eton to Brasenose College, Oxford to the Conservative Research Department, has created a ‘culture of entitlement’.
The most widely trailed idea is to cut housing benefit for the under-25s, which is said to cost £2 billion a year for 210,000 people. Cameron contrasts that with the plight of three million people aged 20-34 who are forced to live at home because they cannot afford their own place. However, he uses a personal example to back this up that either reveals breathtaking ignorance of the benefits system or breathtaking cynicism:
‘Perversely, the benefits system encourages this process from one generation to the next.
‘If a family living on benefits wants their adult child to stay living at home they are actually penalised – as soon as that child does the right thing and goes out to work.
‘You get what’s called a non-dependent deduction, removing up to £74 off your housing benefit each week.
‘I had a heartrending letter from a lady in my constituency a few weeks ago who said that when her son leaves college next month, her housing benefit will drop significantly, meaning her family may have to split up.
This doesn’t seem right.’
Indeed – until you consider who is responsible for the heartrending letter. The man to blame for penalising the child that ‘does the right thing and goes out to work’ is of course his work and pensions secretary, Iain Duncan Smith, who has just increased the non-dependent deduction and will from next April leave thousands of social housing tenants with a choice between that and the bedroom tax.
Cameron does not spell out exactly how he would cut housing benefit for the under-25s, or mention that it is already restricted to the shared accommodation rate in the private sector or that it goes to people in work as well as out of work, or that eliminating it would amount to telling young people not to get on their bikes and look for work. Nicola Hughes of Shelter has five reasons why she thinks it won’t work here while Tim Leunig of Centre Forum has an intriguing argument that the real losers will be the middle aged here.
However, in addition to all that, there are hints of even more radical reform including:
- Uprating benefits in line with inflation or wages, whichever is lower
- Cutting benefit entitlement for long-term claimants (a less harsh version of Clinton-era welfare reforms in the US that saw caseloads fall by over 50 per cent but also saw the number of people with no safety net at all soar).
- Capping benefit entitlement by region.
- Reducing both the overall benefit cap and the bedroom caps for housing benefit. Cameron quotes the maximum housing benefit figure of £20,000 a year and compares it to being on a salary of £80,000.
- Cutting benefits for large families (‘isn’t it right that we ask whether those in the welfare system are faced with the same kinds of decisions that working people have to wrestle with when they have a child?’)
- Applying any cuts to existing as well as new claimants (‘for now, both stock and flow options should be there on the table’.
At one point he even seems to question the principle behind the universal credit:
‘The argument goes that if you give more welfare money to those who are higher up the income scale as well as those at the bottom then you iron out the perverse incentives that encouraged people not to work, not to save, not to do the right thing.
‘Indeed, that’s part of the thinking behind Universal Credit – it’s about helping more people to escape the poverty trap and get on in life.
‘But anyone thinking we can just keep endlessly pumping money in is wrong.’
The point of course is that without tackling the underlying problems of low wages and high housing costs any policy designed to ‘make work pay’ is doomed to lurch from soaring costs to swingeing cuts.
Cameron says he is not making policy prescriptions, just starting a debate, but he is also setting an agenda. This is about a political calculation of the gains that can be made from pitching pensioners against young people, home owners against tenants, commuter towns against the inner cities and ‘hard-working families’ against benefit claimants. And playing to the Conservative backbenches.
A radical new report out today challenges almost 40 years of orthodoxy about how we subsidise housing - and much more besides.
The think-tank Institute for Public Policy Research (IPPR) says it’s time to reverse the shift from bricks and mortar to personal subsidies that began in the 1970s and get back to building homes rather than subsidising rents.
It’s far from the only big idea in the report, which is part of the IPPR’s fundamental review of housing policy, but it is the most eye-catching. In the current spending review period we are spending £94 billon on housing benefit but only £4.5 billion on building new affordable homes. Is there a better way?
The report argues that after 30 years of ‘pessimism and division’ the housing system is no longer fit for purpose and is getting worse rather than better. Home ownership is out of reach for too many, social housing is being residualised and private renting is unprofessional and insecure.
So far, so uncontroversial but if one measure of being radical is how many vested interests you manage to upset then this report is most definitely radical. If you are a housebuilder, a landowner, a National Trust member or a social housing traditionalist prepare for a few shocks. If you are anyone else prepare to be challenged.
The proposals come under three main headings:
Spreading opportunities for sustainable home ownership
The report argues that the housing system should go with the grain of people’s aspirations. It puts a ‘social case’ for increasing home ownership and argues that any attempts to restrict it ‘would effectively encourage the segregation of our society into those for whom home ownership is deemed appropriate and those for whom it is not’.
However, that’s put in a context of identifying new sources of finance for housing as a whole by creating a national investment bank, encouraging local authority pension funds to invest in housing, imposing new taxes on overseas buyers of homes worth over £2 million and using the proceeds to boost housing investment and changing the borrowing rules for councils.
The report says output of new homes should be boosted by shaking up the development industry and a planning system that gives people ‘in need of new housing effectively no say in the process’. The government should allow failing developers to go to the wall and take over their land banks and insist on rapid build-out and lower profit margins on schemes on public land.
Development should be allowed on low-grade green belt land and landowners would face a land value tax on all undeveloped developable land worth more than £2 million.
At the same time a ‘parallel strategic planning system’ would help deliver a new wave of new towns with land compulsorily purchased at a low multiple of its agricultural value.
Among a range of other proposals on home ownership, the report also endorses the extension of the right to buy to all housing association homes – an idea put forward by David Davis and Frank Field in a paper for the IPPR earlier this year.
Ensuring a better, more balanced deal for those who rent
The aim here is decent and affordable housing for everyone, regardless of tenure. The report argues that private tenants need greater control and increased security but that a combination of a sharp drop in supply and needs-based allocations ‘has led to social housing becoming a force for segregation in our society’.
Recommendations on this include:
- creating a new five-year tenancy for private renting families with children with a five-month notice period
- encouraging new ‘something for something’ deals between private landlords and local government with mandatory licensing schemes and rent stabilisation boards for the mid-market
- giving social landlords more control over allocations to give access to social housing to more people while making greater use of private renting to meet housing needs
- making fixed-term tenancies the norm in social housing with the opportunity to pay higher rent or purchase the property for tenants whose circumstances improve.
Shifting from subsidising rents to building homes
The report argues that localism needs to go much further than the coalition managed in the Localism Act and that public spending needs to be rebalanced from subsidising rents to building homes.
The key proposal here is to give local authorities control of a single ‘affordable housing grant’ combining housing benefit and capital investment. This would obviously involve major changes to the universal credit, with housing costs devolved in total or in part to local level, although the report points out the government is already doing this with council tax benefit.
The grant would last three years and be based on a combination of local population, housing costs and relative deprivation and local authorities would have a statutory duty to improve access to decent, secure and affordable housing on their area. They might start by agreeing deals with private landlords to prevent excessive rent rises to begin the process of shifting resources from benefits to building but would also be able to leverage their enhanced resources with wider borrowing powers.
That’s just a flavour of what has to be one of the most far-reaching reports on housing published in recent years. Much of it is controversial. Is there an over-emphasis on home ownership? Does reducing the segregation between private and social renting have to mean accepting most of the coalition’s social housing reforms or should there be more intervention in private renting? Will a move to greater localism really deliver or will it reduce still further the national safety net for the most vulnerable? Is the big idea about housing benefit really deliverable given the fiendish complexities the report acknowledges?
However, it’s also a rare attempt to look at the housing system as a whole and the way that it relates to the rest of society. While it would be easy to criticise some of the proposals in isolation this is about the system as a whole and the politics of how to change it. It’s impossible to argue with the conclusion that: ‘If, as a country, we are to solve the worsening housing crisis we face, we will have to engage a much wider coalition of support for the change that is needed. Housing must be seen as a matter of broad public concern, not just private interest. We need everyone who is interested in the health of English society to be interested in housing. And we need a candid public conversation about all of its dimensions.’
Everywhere I’ve been in Manchester this week it’s hard to avoid falling into the gap between good intentions and cold reality.
It’s there in the underlying theme of the CIH conference (a decade of sector-led solutions) and attempts to find ways forward under continuing austerity as outside the conference chamber the underlying problems just keep getting worse.
It was there in the differing reactions to the affordable housing figures published as the conference opened. As I forecast yesterday, for Grant Shapps they showed a ‘rapid and dramatic increase’ while for Jack Dromey they were ‘disastrous’. In a sense they were both right: they were an improvement on the numbers six months ago but only because they were so catastrophic. Listen again to this morning’s Today programme for more (at about 8.10).
It was there in the call from Louise Casey for the housing sector to take a lead in the troubled families programme even as she dismissed objections to its dubious origins (more detail on that on my other blog here).
As if all that were not enough, Peter Schofield, the new director-general of the DCLG, was on hand to make it clear that the reality gap is going to be here for some time to come. He candidly admitted that housing had barely been considered in last year’s plan for growth, when he was at the Treasury. Now at least it is on the agenda, but he warned that the next spending review would see even less money and that the sector had to ask itself some hard questions.
His hope, with a bit of help from institutional investors, is that the 2010s could come to be seen as a decade of housebuilding in the same way as the 1930s and 1950s. However, given that we are already 25 per cent into the decade and building is still stuck at the lowest level since the war, the reality gap on this is starting to turn into a chasm.
None of which is to argue against the need for sector-led solutions. After two years of relentless cuts and new legislation, there is now some precious time to think, try to get ahead of the curve and map out how the future might look. The government at least looks open to new ideas (provided they don’t involve spending any money and provided they fit within its political framework). Local authorities and housing associations do at least have more freedom to work with (even though they need more). Institutional investors may at last be taking housing seriously again (though I wish I had £10 for every time I have written that).
However, that still leaves the reality gap. All of this would be daunting enough in a stable environment but all the evidence suggests that the underlying housing crisis is getting worse all the time.
A report out today from the Joseph Rowntree Foundation on the housing crisis facing young people that makes the point only too clearly.
A team from Cardiff University forecasts that the number of home owners aged under 30 will halve to just 1.3 million by 2020. An extra 1.8 million 18 to 30-year olds will be forced into private renting and another 500,000 will have to stay with their parents well into their 30s.
All of which is bad enough, and further confirmation of the depressing situation facing Generation Rent (also revealed in a study by the National Centre for Social Research yesterday).
The really bad news though lies in the knock-on effects of that. Private renting will be taking all of the pressure from declining home ownership and austerity-bound social housing. The influx of young people will mean even fiercer competition for a limited number of tenancies and the report warns of a three-tier market developing between young professionals who can afford the rent at the top, young families struggling to afford it in the middle and a bottom run of 400,000 people who could be excluded completely. As Kathleen Kelly of the JRF points out, ‘we need to avoid turning a housing crisis into a homelessness disaster’.
Sector-led solutions can lead to innovation on the ground and slow the pace at which things get worse. Making things better requires government-led solutions too.
As if on cue Lord Freud is in Manchester today and Grant Shapps tomorrow. Time to enter their reality distortion fields.
Affordable rent may have kicked in at last but affordable housing starts are still down 57 per cent on a year ago. Get set for another row about stats.
It is of course pure coincidence but 24 hours after Jack Dromey and Labour went to the blankets in the housing stats war with Grant Shapps (well, ok, referred him to the UK Statistics Authority) perhaps the most politically sensitive of all figures were published this morning.
Six months ago the Homes and Communities Agency (HCA) published its affordable housing figures, they showed a calamitous 97 per cent fall in starts on the previous year to just 429 between April and September. They were released with no fanfare within 48 hours of the launch of the government’s housing strategy and led to extensive recriminations.
There was no such news background for this morning’s publication of the full year stats – just the opening of the biggest housing conference of the year.
So, at the risk of sparking off another stats row, here are the two very different sides to the story.
In the Grant Shapps corner, affordable housing starts are more than 30 times what were six months ago, up from 429 in April-September 2011 to 15,269 in October to March. That’s mainly thanks to the first 11,130 starts under the affordable rent scheme but starts of social rented homes trebled to 789 and starts for affordable home ownership were almost 20 times higher at 3,278.
In the Jack Dromey corner, total affordable starts for 2011/12 are down by 68 per cent on 2010/11 and social rented starts are down by 97 per cent (yes, that figure again, from 35,690 to 1,048).
The midpoint comparison between October to March 2012 with the same period a year ago leaves total affordable starts down 57 per cent from 35,737 to 15,269. Starts for affordable home ownership are also down by more than half and social rented starts are down, yes, 97 per cent from 26,330 to 789.
All of these figures exclude open market starts delivered under the HCA programme (4,269 in 2011/12 against 8,265 in 2010/11). These are ‘delivered under the Property and Regeneration Programme include some starts and completions which are made available at below market price or rents but do not meet the definition for affordable housing’.
So there’s some support there for the government’s argument that the calamitous fall six months ago was down to a hiatus in the programme as affordable rent got going but not much. Just as the point when investment in housebuilding could be generating the homes and jobs we need it is falling.
The HCA concentrated on the fact that it had met its target for completions. Here rhe figures do not oscillate as wildly but show a similar patter to starts. Total affordable completions were three times higher in October to March than April-September last year at 38,877. There were the first 1,685 affordable rent completions, about four times more for affordable home ownership and more than twice as many for social rent.
Compared with the same period a year ago, total affordable completions were up 7 per cent at 38,877, with social rented starts down slightly.
Taking 2011/12 as a whole, affordable completions were down 7.5 per cent from 55,860 to 51,665 and were down slightly for both social rent and affordable home ownership. Taking total completions under the HCA programme (including open market) were down from 64,277 to 59,451, which was comfortably ahead of its target of 41,000.
So plenty of ammunition there for another stats war there and for the Labour and Conservative news lines. However, whatever, the underlying trend, and whether there is a further recovery in the total numbers this year, the balance of what constitutes ‘affordable’ has shifted decisively away from social renting.
Have we really learned our lessons from our post-war housing mistakes or are we still making some of the same ones?
That was the question running through my mind after watching the brilliant and sometimes heart-rending first episode of The Secret History of Our Streets last night. At the risk of sounding like a broken record, you really should make time to catch it on iPlayer if you missed it.
The series looks at the history of six different areas starting from the moment that Charles Booth produced his famous poverty maps of London in the late 19th century (the LSE has more information on them here). The first episode looked at changes in the streets around Deptford High Street in south London in the first half of the 20th century followed by the grand schemes of the post-war era.
We heard how the London Plan earmarked the working class streets of south and east London for slum clearance, with many people moved to the new towns and estates around and outside the capital and most of the terraces replaced by new estates. For more on Sir Patrick Abercrombie, the man with the plan, and the connection with David Cameron, see my other blog here.
We felt the impact on the close-knit Price family, who had lived in the area for several generations but saw their homes wrongly condemned as ‘slums’ (the programme even produced environmental health reports from the time admitting as much). We saw how most of them were dispersed to the new estates while the tower blocks that sprang up on the sites of their homes rapidly became hard to let.
And we heard from a Lewisham councillor who admitted he was powerless to stop the process and had to try and choose which street to save.
Just to rub it all in, on one of the few streets that survived the bulldozers we saw an estate agent with a cut-glass accent pointing out the period features of a home on the market at £750,000.
It was a brilliant opener to a series co-produced by BBC2 and the Open University (which has much more information on its website) that made great use of the Booth maps and archive photos but like all TV it left me wondering a few things.
Were things really quite as clear-cut as the programme made out? Stories rarely are in my experience and I wonder if the nuances of this one got left on the cutting room floor. For example, the former councillor was rather ambushed when he went back to Deptford High Street. He was critical of what had happened but not really given the chance to explain what he’d done at the time.
Nevertheless The Secret History was a powerful reminder of housing’s (or more accurately planning’s and environmental health’s) original sin: wholesale clearances of districts of London and the replacement of ‘slums’ with ‘modern’ estates on the assumption that the professionals knew better than the people who lived there.
And have we really learned our lesson? For all that community consultation and empowerment there are some who would beg to differ.
Just ask residents of the Welsh Streets in Liverpool or the other housing market renewal areas. Or talk to campaigners fighting to stop the redevelopment of the West Kensington and Gibbs Green estates in west London. Or read Martin Hilditch’s feature for Inside Housing last month on the residents of the Q blocks that are facing demolition in Nottingham.
There’s been a real change in the way the government is talking about housing investment over the last week. Is it just talk or more than that?
Several days out of news and twitter contact have left me catching up with what seems a noticeable change in tone from the Lib Dem side of the government.
Deputy prime minister Nick Clegg kicked things off a week ago in an FT interview in which he put housing and schemes to reduce youth unemployment alongside infrastructure as potential beneficiaries of a ‘massive amplification’ of credit easing schemes.
Another report in the FT yesterday revealed that chief secretary to the Treasury Danny Alexander is looking at ways to make it cheaper for housing associations to borrow more money in the capital markets. The credit easing scheme would apparently involve allowing the Bank of England buy social housing bonds as part of its quantitative easing programme. Gavriel Hollander has some more details for Inside Housing here.
The scheme appears to be as much about forestalling a problem with bank lending (a separate report quotes a senior executive at one of the big lenders as saying that the industry as a whole is losing £500m to £1bn each year on its social housing portfolios) as about new investment but it does open up some intriguing possibilities.
First, the Treasury is expected to launch some proposals on social housing REITs soon. As Nick Duxbury revealed in IH earlier this month, a consortium of 10 housing associations is looking to list a company made up of 10,000 homes on the Alternative Investment Market in September. Whatever you think of mixing social housing and the stock market, this looks like a significant move.
Second, while the credit easing plan may not represent the sort of full-blown quantitative easing for housing that I’ve advocated in the past, it is a nod in the right direction. Until now the assumption has been that Mervyn King, the head of the Bank of England, will not countenance the use of QE outside the financial sector. However, if the Treasury instructs him to buy social housing bonds in a limited programme, the precedent is there to buy bonds for something altogether bigger.
So far, so good but is this just talk? I seem to remember hints about housing investment from Danny Alexander ahead of last year’s party conferences that came to nothing. Is it just the Lib Dems? On Saturday’s Today programme (listen about I:40 in) Conservative backbencher Damian Collins welcomed the idea of more government borrowing to build infrastructure but went out of his way to be dismissive about calls for housing investment.
And isn’t there already an example of government credit easing for housing? Under NewBuy, the government and housebuilders each offer guarantees against mortgages on new-build homes in a bid to make the market less risky for the banks and encourage them to lend. Arguments continue about whether the scheme is working but the banks are still pricing the risk with interest rates of up to 6 per cent. Not much evidence of easing there.
Today sees yet another report warning about the dire state of the housebuilding market. Let’s hope that this really is more than just talk and that the government is finally listening to the overwhelming case for investment in constructon in general and housing in particular.
If you missed Britain’s Hidden Homeless last night it’s well worth making time to catch on iPlayer.
The BBC documentary was presented by Speech Debelle, the Mercury-prize winning rapper with personal experience of what she was talking about. She spent three years sofa surfing and in hostels after falling out with her mum at 19 and wrote the opening song of what went on to be her prize-winning first album while in a hostel.
So this was far more than the standard celeb-fronted BBC3 documentary. You believed her when she said that hidden homelessness is three times bigger than the official figures suggest and that things are worse now than they were for her ten years ago.
Scheduling it against 56Up, the latest incarnation of the original reality TV programme, did not do it any favours but Britain’s Hidden Homeless more than justified itself in that kind of company as it presented four interwoven personal stories on the huge continuum from first staying on a friend’s sofa to sleeping in the park.
Sam, 25, was an unemployed graduate whose mother had to downsize who was running out of sofas. Stephen, 26, had been in and out of homelessness since his mum fell out with his stepdad and had spent seven months sleeping rough. Jordan, 20, had been sofa-surfing and sleeping rough (or as he put it, walking around) for four years after falling out with his family. Nikita, 18, left home at 16 after her recovering alcoholic mother moved in with a new boyfriend and was sleeping on her sister’s sofa.
So there were four personal stories that are probably repeated tens of thousands of times around the country. By definition nobody knows how many hidden homeless there really are but instinct suggests that with every other form of housing problem, from sharing and overcrowding to official homelessness and families in bed and breakfast, on the increase it must be too.
The programme avoided sensationalism and showed the grinding monotony of what it’s like to go from place to place and never having one to call home. It showed the good side of housing too, with the organisations and people prepared to help, and a genuinely moving final scene where Stephen finds a six-month tenancy and the luxury of his own backdoor. And it hinted at the way that cuts in housing benefit and support to those organisations are making things worse.
Above all though it left me wondering what will happen if the welfare-cutting ultras get their way on even more cuts in benefits for the under-25s.
The proposed reduction of the ‘pay to stay’ cap to £60,000 raises introduces yet more contradictions into a policy that was already riddled with them.
Reports on Saturday (most comprehensively by Patrick Wintour in The Guardian) said a consultation paper will be published next month on the idea of charging social housing tenants a market rent once their income rises above a certain level. When the policy was first floated last year, the proposed household income was £100,000 but now Grant Shapps, with the backing of David Cameron, is apparently suggesting £60,000.
There are all kinds of problems and contradictions inherent in the idea (of which more later) but the immediate thing to notice is that this is the government mounting another deployment of what it sees as its most popular policy to date: the household benefit cap. Just as capping benefits to the level of someone on an average income (£26,000 a year) will make the welfare system fairer, so capping household income will make social housing fairer.
Why £60,000? The reports say the consultation paper will propose a range of figures with that being the lowest. According to the FT, No 10 likes this figure because it is the maximum income limit for other support schemes like shared ownership. The papers were briefed a £60,000 threshold would affect 34,000 households and mean their rent could rise by £70 a week or more. A cap set at the previously reported £100,000 is claimed to affect only 6,000 households. Presumably then this would not affect enough people or save enough (the ‘subsidy’ is put at £21.6 million at £100,000 but £122.4 million at £60,000).
So what are the problems with the idea?
First, it’s not at all clear where these figures come from. How many social landlords out there really know how much their tenants earn? Or how their circumstances have changed over time? Or how many people live in a particular property and are working at a particular time. At best this sounds like a guesstimate based on surveys but household income can change rapidly over time as children go out to work or people lose their jobs or people retire.
Second, someone should tell Downing Street about Boris Johnson’s First Steps scheme in London, for which the maximum income limit has just increased to £74,000.
Third, policing this will be a bureaucratic nightmare that threatens to change fundamentally the relationship between tenants and social landlords. Where landlords are not busy checking how many bedrooms their tenants are occupying they will become the income police, obliged to check the earnings of all their tenants at regular intervals.
Fourth, it’s not so long ago that a certain housing minister rejected the ‘pay to stay’ idea when it was put forward as an alternative to removing security of tenure from new tenants with fixed-term tenancies.
Fifth, it almost goes without saying that this would represent yet another breach of the Conservative manifesto promise to ‘respect’ the tenures and rents of social housing tenants and subsequent promises by Shapps that ‘we still have no plans to change the existing or future tenancies for people in social housing today’.
Sixth, the Guardian story includes the frankly incredible claim that ‘social housing has been increasingly taken up as an option by young professionals unable to afford to own their own home’.
Seventh, since this would apply to all social landlords, what does it say about the supposedly independent, non-public status of housing associations? If taxpayer ‘subsidy’ is going to their tenants then surely they are public bodies whose spending and borrowing should count against public totals? The FT report talks more narrowly about ‘council housing’ but if is restricted just to local authority tenants how it is ‘fair’?
I could go on but the list continues down to the most fundamental issue of all for me: who really has their housing subsidised?
Social housing tenants? It’s true that there is an initial subsidy in the form of grant or land or both but council housing nationally is now running at a profit, with tenants’ rents more than repaying the initial costs. None of the cost is paid by council taxpayers. Their rents are only ‘subsidised’ by comparison with market house prices and rents to which social housing is an alternative. On the same argument anyone who bought their home years ago for a fraction of today’s prices is also ‘subsidised’.
Tenants who use the right to buy? The logical response for a family with a household income of £60,000 a year facing a rent increase of £74 a week will be to take a look at Right to Buy 2. The mortgage may well be cheaper than the increased rent and the government has just doubled the maximum discount to £75,000. This is, of course, not a subsidy in any sense and there is no upper income limit.
Home owners? They are surely the ‘strivers’ who are paying for all that ‘subsidy’ – until you stop to think about it. First homes are exempt from capital gains tax and since the 1960s have been free of tax on the imputed rental value. What’s another word for a tax that the government chooses not to impose?
People with a mortgage? In addition to the taxes not imposed on first homes, anyone with a mortgage has benefitted from much lower mortgage rates ever since the Bank of England cut interest rates to a record low 0.5 per cent. If a cut of two percentage points does not sound like much, it amounts to a combined reduction of around £20 billion a year. Effectively it’s a mortgage subsidy that is coming out of the pockets of savers and pensioners who are receiving much lower interest on their money.
First-time buyers? Without a sizeable deposit they will not get the same low rates as existing borrowers and they may not get a mortgage at all, but many get help from the Bank of Mum and Dad. The subsidy advantage of home ownership is transmitting down through the generations.
Buyers of new build homes? No £60,000 income limit here. The government’s NewBuy scheme guarantees 95 per cent mortgages on homes worth up to £500,000, implying that a household with an income of more than £160,000 could benefit.
Buy to let landlords? Unlike home owners, they do pay capital gains tax. However, they can also offset costs like the interest on their mortgage, rental insurance, maintenance, letting agency fees and depreciation against the tax they pay on their rental income.
‘Pay to stay’ was contradictory and problematic enough when the proposed income threshold was £100,000. Reducing it to £60,000 just makes it even more contradictory. On one level, it’s a nakedly political move to capitalise on the popularity of the benefit cap and its supposed ‘fairness’. But on a deeper level it’s hard to avoid the conclusion that this is really about accelerating the Conservative end-game for social housing: reducing it to a residualised rump reserved for the very poorest while leaving everything else to the market.
And, judging by an article over at LibDemVoice that confuses social and affordable rent and the discussion that follows, their coalition partners seem too divided on the policy to stop it.
Grant Shapps has predictably had a go but it’s hard to see the housebuilding figures out today as anything other than awful.
The housing minister tweeted that housing starts in 2011 were up 29 per cent on 2009. Curiously, though, he did not mention the figures that had just been published for the first quarter of 2012.
These showed that total starts were down 11 per cent on the previous three months and 15 per cent on a year ago. Starts by private housebuilders were down 8 per cent and 7 per cent on the same basis.
And starts by housing associations collapsed by 21 per cent compared with October to December 2011 and 40 per cent compared with January to March 2011.
To be charitable, these are only the figures for one quarter and the previous one did show an improvement.
However, they also make it possible for the first time to compare what’s happened in the second year of the coalition compared to the first. By now, surely, all those policies like the new homes bonus and the scrapping of regional strategies ought to be working.
In fact, starts totalled 104,970, a fall of 6 per cent on 2010/11. Again the picture was much worse for housing associations (down 24 per cent) than for private enterprise (down 1 per cent).
It’s true that the starts total is well up on both 2008/09 and 2009/10 and that completions are up this year as a consequence but things do not look good for Shapps or his ‘gold standard’ of building more homes than Labour. He now needs almost 500,000 starts over the next three years to achieve that.
And the figures only reinforce the message in the Housing Report from the Chartered Institute of Housing, National Housing Federation and Shelter this morning that the government is failing on the housing crisis in general and supply in particular.
At best, housebuilding is flat-lining as the effects of Labour’s stimulus run out. Total starts are stuck at around 65 per cent of the level seen before the credit crunch and less than half the level needed to meet demand. Shapps writes on ConservativeHome this morning that ‘the vital phase III of this government is now underway – turning legislation into action’.
If so, the pressure is really on now for the new homes bonus, the NPPF, the right to buy, the public land initiative and all his other initiatives to deliver. And initial reports on the flagship NewBuy programme do not exactly look promising.
Here’s hoping that Grant Shapps found a bit more to do in the Netherlands on Monday than enthuse about self-build and get Kevin McCloud’s autograph.
The housing minister and the Grand Designs presenter were part of a UK housing delegation visiting Europe’s largest self-build project at Almere. There was also an event at the British Embassy aimed at boosting trade and business links.
They were clearly impressed by what’s happening and with good reason. There are more than 800 homes at Almere that people have built for around €50,000 less than the same property would cost in the commercial sector. Imagine something similar in Britain backed with planning reforms and help with finance and what Shapps is saying about the sector doubling in size starts to make sense (even if I wish he wouldn’t keep repeating the same announcements). If, as the minister told us two weeks ago, the future’s bright, it seems the future is orange too.
MPs on the communities and local government committee also became self-build converts after a visit to Almere last year. In their report last week, they recommended that the government should also work with local authorities to pilot volume self-build schemes by allocating sites and taking a flexible approach to planning.
It’s a rare example of all parties enthusiastically backing a housing idea and also one of those times when Shapps deserves some credit but (there’s always a but) my rather unkind opening paragraph was about more than just grabbing your attention and I’m hoping that he found time to talk to the Dutch about a few other things too. Here’s a selection (feel free to correct my less than perfect knowledge of Dutch housing):
First, the self-build site at Almere is just part of a new city that’s been under construction since the 1970s. As far as I can tell, the self-build experiment was in part the result of the credit crunch slowing down conventional development. In between a statistical spat with shadow communities secretary Hilary Benn yesterday, Shapps himself tweeted yesterday that the Almere presentation featured pictures of Ebenezer Howard, the creator of Welwyn Garden City in his constituency. But did he get the point that the Dutch have continued with an idea that we invented and then abandoned after 1979?
As housebuilding in England fails to keep up with demand from new households it’s not hard to see why support for new towns and urban extensions is coming from across a spectrum ranging from the TCPA to Policy Exchange. Almere may seem uniquely Dutch in that is built on land reclaimed from the sea but the wider lesson is that publicly owned land is the key to large-scale development. Are we capable over here of looking beyond the finite stock of land currently owned by the public sector and compulsorily purchasing tracts of land as we did for new towns in the past or trusting local authorities to form joint development companies like the Dutch?
The National Self Build Association put it this way in its evidence to the CLG committee: ‘The biggest challenge with a project like Almere is finding a local authority with the vision and enterprise to give it a go. The other key to the success is the initial land cost; it has to be acquired at something like agricultural values initially. The council then has to invest in the infrastructure—roads, utilities etc—and this usually adds at least £10,000 per plot provided.’
In contrast, it said that over here the HCA was about to release ‘five large sites for group self-build opportunities that should deliver around 70 homes’.
Second, the CLG committee MPs were impressed by BNG, the Dutch municipal bank that is the fourth largest in the country and jointly owned by the Ministry of Finance and municipalities. Lending is restricted to public and semi-public organisations and 52 per cent goes to housing associations. The MPs supported calls for the creation of a national housing investment bank here but Shapps told them he was ‘not convinced by that argument at all. I think the banking system in this country needs to work for all industries and sectors’.
Third, as a report published by the Joseph Rowntree Foundation published in February makes clear, there’s plenty to learn from the Dutch experience of managing the development of new settlements. Maybe they have discovered a thing or two along the way about making them sustainable and successful? At Vathorst in Amersfoort basic principles were set out in one large masterplan but individual blocks have their own character and opposition was overcome by agreeing community benefits like infrastructure before work started. It was BNG, incidentially, that lent €750 million to the joint development company formed by the Amersfoort municipality and five private companies to develop the Vathorst.
Fourth, there’s the Dutch experience of granting financial independence to housing associations in 1995. The MPs heard that Dutch associations now get no government subsidy and fund all new development through a revolving fund generated by the sale of existing and new build properties at market rate. That’s maybe not a million miles away from where we are heading after 2015 but the committee noted a mix of positive points about associations as ‘financially independent and strong performers in a tight housing market’ and negative ones about them straying too far from their core role and taking too many risks (with the largest Dutch association losing £2 billion in a derivatives deal). According to the CLG committee, the Dutch have set up a full parliamentary inquiry into the social housing sector and the outcome needs watching closely.
The lessons to be learned from the Netherlands go way beyond what I have space for here and my limited knowledge. The Almere visit and the enthusiasm for self-build are a good start but even doubling the size of the sector will not solve our housing crisis on its own. Here’s hoping the message about public sector involvement, trusting local authorities, alternative sources of finance, masterplanning, sustainable development and the rest has been heard too.
It’s hard to know whether it’s good news or bad news that there is so little legislation affecting housing in the new parliamentary session.
The Care and Support Bill will have implications for the sector but it’s effectively another delay to the government’s response to the Dilnot Commission’s funding proposals because it’s only a draft bill. See this from Rachael Byrne of Home Group and this from Simon Parker of the New Local Government Network for a flavour of the reaction to that.
Apart from that the Queen’s Speech had nothing on housing. The only piece of legislation from the Communities and Local Government (CLG) department is another draft Bill dealing with the consequences of abolishing the Audit Commission while the Department for Work and Pensions (DWP) will have its hands full with pensions.
All of which is bad news for anyone who expected further action to tackle the housing crisis (reform of the private rented sector anyone?) but probably good news for people still struggling to cope with the consequences of all that legislation in the previous two-year session of parliament.
Grant Shapps yet again hailed ‘some of the biggest social housing reforms for a generation’ in his column for Inside Housing last week and they went way beyond his own departmental responsibilities.
So perhaps a pause in the ‘reforms’ is to be welcomed. Maybe housing organisations already have enough on their plate with affordable rent, changing allocations and the homelessness duty, the law on squatting, cuts to legal aid and the rest. As Kate Hughes put it on her blog last week, just one of the welfare reforms – the bedroom tax – is likely to be the biggest challenge that social housing communications practitioners have ever faced.
If anyone needs a reminder of how much has changed with the Welfare Reform Act, the Localism Act and the Legal Aid and Punishment of Offenders Act, here are two indications of just how much work they will cause on just one of the measures they introduced.
Like the bedroom tax, the household benefit cap is going to be (to put it mildly) a major and growing communications headache as tenants struggle to work out if and how they will be affected. But the portents do not look at all good as the DWP starts sending out a warning letter to those who may be affected.
First, according to a story in today’s Guardian, the letter has already gone out wrongly to 2,000 families with children who will not be affected and councils are reporting that up to one in five of the 67,000 affected households have been wrongly identified.
Second, to make matters even worse, as noticed by Joe Halewood on twitter, the BBC is still reporting – wrongly – on its website that the cap has exemptions for housing benefit, child benefit and child tax credit. In fact all three count towards the cap. Meanwhile, even before the cap has been introduced, there are already calls for the Conservative right for it to be reduced still further.
That’s just one example of the problems to come in the implementation phase of the welfare and housing reforms. However, I’ll still be watching the big picture for signs of movement on the 2013 spending review, preparations for the universal credit and the continuing debate about the role and purpose of social housing.
On the first, the challenge will be to harness the growing consensus among economists about the need for measures to boost growth to make the case that housing is one of the best ways to do it. Is the second a welcome simplification of the system or a computerised disaster in the making or both? And on the third, as I argue on my other blog this week, the challenge is to find new ways to frame the political case for housing at a time when the rhetoric from the Conservatives about ‘strivers’ is becoming ever more hostile towards benefit claimants and people in ‘subsidised’ homes.
Finally, there remains the question of what will happen to the architect of the housing reforms. Will Grant Shapps really stick around and go on and on with initiative after initiative and excuse after excuse for the lack of new homes? Or, with rumours continuing about a government reshuffle, will someone else be there to take the credit (or the blame)?
The maths involved in the CLG committee’s new report on the financing of new housing supply is depressingly simple.
Add newly arising need to cope with population growth (232,000 homes a year on the latest estimate) to the backlog of existing need (1.99 million households in 2009), then take away the completions in 2011 (109,000) and you are left with a huge gap in provision. Even if private housebuilders succeed in increasing their output from last year’s miserable 82,000 to the maximum they managed over the last 20 years of 150,000 (a very big if) the gap will still be huge and the backlog will still be growing.
So it’s little wonder that the committee admits there is ‘no silver bullet’ in its report, that it ‘suggests that potentially radical changes of policy and alternative sources of finance will be needed if housing supply is ever to reach levels of demand’ and that while it welcomes the housing strategy as a start it is sceptical about many of the glib solutions offered by Grant Shapps.
The report follows extensive hearings with witnesses from across the UK housing world and beyond, including a visit to the Netherlands to see if there are lessons to be learned from the Dutch approach to housing. The idea is that bridging the gap will require an increased contribution from all of the familiar sources and some that are unfamiliar too.
On private investment, the government already has a review of the barriers to housing’s version of Waiting for Godot: institutional investment in built to let. Yet while there was backing for the idea from a wide range of witnesses, there was still doubt about what Nick Jopling of Grainger called the three main barriers of ‘scale, suitability of stock and yield’. For all the innovation, for example by Manchester and its pension fund, and all the talk of using public land and waiving section 106 requirements, the yield problem remains. In other words, house prices are too high in relation to achievable rents.
Other options for private investment include institutions backing moves by housing associations into private renting (or even social renting too) and further exploration of ideas for a Housing Investment Fund for housing associations and co-operative housing. Despite scepticism from Shapps, the committee also likes the idea of a Housing Investment Bank.
However, on the private rented sector, the committee heard warnings of ‘large scale disinvestment by landlords’ because returns are too low without capital appreciation (those house prices again). One possible solution might be tax simplification linked to professionalisation of the sector, another might be the British Property Federation’s idea of Housing Zones designated by local authorities with local tax reliefs.
On affordable housing delivery, there’s plenty of scepticism from the committee about whether affordable rent can be sustained beyond 2015 and whether (as Shapps claims) it will really have no impact on the housing benefit bill. Significantly, the committee calls for ‘a rebalancing of subsidy arrangements away from housing benefit can back to bricks and mortar’, which would put the priorities of the last 30 years into reverse.
However, the committee also expresses concern about two other government policies that could threaten affordable housing investment. Plans to give developers the power to force local authorities to reopen section 106 agreements are ‘contrary to the government’s professed commitment to localism’. And as for plans to introduce direct payment of housing benefit to tenants ‘there is a clear risk that these arrangements will have a detrimental effect on providers’ capacity to invest in new housing supply’ and the committee says the government should only proceed ‘when any issues identified by the pilots have been fully resolved’.
On housing associations, the committee is enthusiastic about retail bonds but more sceptical about proposals on historic grant. It notes warnings that writing off the grant could increase borrowing costs and converting it into equity would create a for-profit sector. There is also the Dutch experience of giving associations financial independence from government: a mix of positive points about financial performance and more negative ones about associations straying too far from their core role and the risk taking that resulted in the largest Dutch association losing £2 billion in a derivatives deal.
The committee welcomes housing revenue account (HRA) reform for local authorities but says the government should lift the cap on borrowing and allow the trading of headroom between authorities. Both of these ideas have been rejected by Shapps so far. More radically the committee says the government should look again at reform of the public sector borrowing rules (supported by Conservative Westminster City Council) and at easing restrictions on councils’ use of bond finance (supported by Birmingham City Council, which was Conservative-led until last week).
And the MPs are also highly sceptical about claims by Shapps about the right to buy. ‘We are not convinced that the government will deliver on its plans for “one-for-one” replacement of additional properties sold under the new proposals, especially if the discount cap is set as high as £75,000,’ it says. ‘We are also concerned that the proposals will lead to a reduction in the country’s social housing stock, with social housing being replaced by homes for Affordable Rent.’ Instead it wants ‘like for like’ replacement of social rented homes, with extra government funding if necessary, and says individual local authorities should be able to apply for an exemption from the right to buy where they can demonstrate that housing is limited an d cannot easily be replaced.
On owner-occupation, the committee notes a number of concerns about NewBuy: that it will simply reduce the mortgage finance available elsewhere; that it could lead to negative equity for buyers; and that it excludes smaller builders. There is support for Shapps’s plans for self-build, with the committee noting that something on the scale of the programme it saw in the Netherlands could result in up to 150,000 homes over five years, but that there are still barriers to overcome with lenders and local authorities.
As that quick survey hopefully shows, the committee’s report ranges far and wide over every conceivable way of financing new housing supply (with the exception of quantitative easing for housing). It should be essential reading for anyone involved in all sectors of housing because we are going to need a contribution from all of them to stand even a chance of bridging that supply gap.
The committee argues, probably rightly, that there is no ‘silver bullet’. However, what it does not identify, after collecting together all the ordinary bullets, wooden stakes and strings of garlic on offer is the identity of the vampire. To my mind, the big problem wearing fangs and a black cape is that house prices (and rents) are too high. Financing new housing supply would be an awful lot simpler – and cheaper – if it happened alongside measures to put that creature of the night back in its coffin.
It’s Communities and Local Government questions – so it must time for a barrage of contradictory statistics.
I’ve grown used to the trading of numerical insults every few weeks between coalition and opposition over the last year or so. But would a week in which politics has been dominated by a stat (the 0.2 per cent fall in GDP that means the UK is in a double dip recession) make any difference?
No chance. Not in an election week. The tone was summed up in an exchange about council tax between shadow communities secretary Hilary Benn (‘Labour councils £81 cheaper than Conservative ones for Band D’) and Eric Pickles (‘Tory ones £62 cheaper’) and was repeated over and over again.
First up, was housebuilding, a subject on which both parties pride themselves on the ability to find the most flattering and unflattering comparisons between each other. Faced with 2011’s dismal total of 98,000 housing starts, Grant Shapps simply paired it with the even more dismal figure from the depths of the credit crunch in 2009 to show that they were actually 25 per cent up.
Labour’s Jack Dromey hit back with a reference to the Shapps gold standard. ‘We know from figures released today that house building is down 26 per cent on average compared with what was achieved under a Labour government,’ he said. This is of course a comparison flattering to Labour since it smooths out the effect of the credit crunch. The ‘figures released today’ turned out to be a Labour press release quoting CLG housebuilding stats which Dromey said ‘show the government’s policies are making the housing crisis worse not better’. If that sounds familiar, that’s because he said exactly the same in February.
Shapps hit back with a repetition of the ’25 per cent up on 2009’ stat backed up with some figures that will be of consolation to a construction industry that has just gone into a triple-dip recession: ‘In the same period the value of new housing construction was up 33 per cent and construction orders were up 35 per cent,’ he said.
Will there ever be an end to Shapps and Dromey slapping each other around the head with wet statistics? Perhaps, if the housing minister gets promoted in a mooted reshuffle after the local elections (more on that on my blog here). If not, we seem set to face a never-ending wait for a clear winner to emerge.
Here’s a quick attempt to resolve it. The comparison in the CLG stats between housing starts in the six complete quarters since the election and the six before that currently favours the coalition. However, we are only six quarters into the 20 that would make up a five-year parliament. If the trend of the last six quarters is repeated over the next 14, the coalition will see around 500,000 starts in those five years. Labour managed 672,000 between 2005 and 2010. So, even if the coalition increases output, it will need another 525,000 starts in the next 14 quarters. That’s an average of 37,500 per quarter: 50 per cent more than it has managed in any quarter so far.
However, that was not the end of the statistical battles in the Commons. Attacked by a Labour backbencher over the housing market renewal programme, Shapps claimed that the coalition would build 170,000 affordable rent homes in the next three years and ‘that will be more than were built in 13 years when affordable housing numbers declined under Labour’. Invited by a Tory backbencher to condemn plans for thousands of homes in his constituency imposed by the old regional strategies, he maintained that scrapping the strategies and introducing the new homes bonus would mean ‘more building in the long run’. Invited by another Conservative to praise Boris Johnson’s record in London he argued: ‘It seems very likely that he will have delivered 50,000 homes for affordable rent. It is worth bearing in mind that fewer than that were delivered throughout the entire country under 13 years of Labour.’ Never mind, of course, that the Johnson total relies on homes funded by the last Labour government or that the 13-year total is calculated after right to buy sales that Shapps has pledged to increase.
Finally, no CLG questions would be complete without private rents. Former Labour housing minister John Healey had asked why the million families with children who are renting privately are denied ‘even the basic security of a legal right to a written tenancy agreement’ but that did not prevent Shapps quoting yet more stats (though oddly not what Inside Housing or Shelter or Hometrack say).
‘Pressure in the system caused by more than a decade of building far fewer homes than are required, which has led to rents rising very quickly,’ he said. ‘There are now some signs that rents have started to moderate. The English housing survey shows that rents rose at a slower pace than inflation; LSL Property Services shows falls for the third month in a row; and Professor Michael Ball reports that they fell by a tenth in real terms between 2008 and 2011.’
And Shapps was at it again in his response to a question from Labour’s Stephen Timms about Newham. ‘Immediately that the Newham story was flagged up, we went on just one website to search for properties and we could find within the Newham cap of £15,000 rent a year—not the £21,000 maximum cap—1,000 properties available in Newham or within five miles of it. That is why it is a disgrace that the council was considering sending people halfway across the country.’
Never mind that ‘available’ on the website is not the same as ‘available for let to local housing allowance claimants’. Things would be so much simpler if all you had to do to solve the housing crisis was look on Rightmove.
A small dip in the GDP and suddenly there is an opportunity to put housing back on the agenda.
It was only -0.2 per cent but yesterday’s figures confirm that the economy is in a double dip recession for the first time since the 1970s in a downturn that has already gone on longer than the one in the 1930s.
Even though the figure could easily be revised upwards at some stage, it was mainly due to a 3 per cent contraction in the construction sector. For anyone interested in the detail, Brickonomics points out that it could have been even worse, while the Construction Products Association is forecasting a 22 per cent fall in public housing this year. Yet the grim news seems to have changed the terms of the wider debate about the economy.
In this morning’s newspapers it’s hard to avoid a whole series of calls for change. Here’s Ben Chu in the Independent: ‘It is not just the pace of the deficit reduction that’s worrying some analysts, but the nature of the cuts. While Government current spending (which goes on public-sector wages and welfare) grew last year, Government capital spending (the money used to build new schools, social housing and transport schemes) was slashed by around 13 per cent.’
Jeremy Warner in the Telegraph: ‘When you look at where the axe is falling hardest, it is on government investment – spending on schools, hospitals, roads, bridges, affordable housing, and so on. This is the easiest thing to chop, so that’s where the Coalition has acted first. In fact, this form of state spending should be doubled, tripled or even quadrupled, with the money made up by further cuts in entitlements and bureaucracy.’
Many economists have been making the same points for weeks and months. DeAnne Julius and Vicky Pryce both argued for investment on infrastructure and housing on the Today programme this morning (play clip at 0731) while presenter Evan Davis made the point that he had barely spoken to an economist over the last six months who did not advocate more capital spending and yet that was what exactly had been cut.
Tim Leunig, again in the Telegraph, argues that housebuilding was key to the recovery from the 1930s recession: ‘Every house we build employs the equivalent of 3.5 people for a year. Raising Britain’s house building levels from around 100,000 to (say) 400,000 would create 1 million new jobs in construction.’
Jonathan Portes of the National Institute of Economic and Social Research points out that even the IMF – usually seen as a cheerleader for austerity and structural adjustment - wants us ‘to spend more on infrastructure (and housing) and increase welfare benefits for poor people (who will spend them), and pay with it by taxing the rich (those with a lower “marginal propensity to consume”).’
Even my quick rant about the need for a Plan B based on housebuilding on my other blog last night found me somehow sneaking into New Economist’s list of seven things to read about the double dip alongside luminaries such as Paul Krugman and Stephanie Flanders.
What I take from all that is that people are ready to listen to the case for housing in a way that they haven’t been at any time during the last two years in which the debate has been dominated by austerity and the need to bring down the deficit. Combine that with all the coverage this week about Newham and Stoke and the housing benefit cuts (featured on the Today programme again this morning) and the way that housing is really starting to make waves in the London mayoral race, and a real opportunity has opened up for housing ahead of the 2013 spending review.
That will not be easy. Many people believe that the current affordable housing programme will be the last. And convincing a government wedded to an austerity plan that included cutting housing investment by 60 per cent is just one of the obstacles that need to be overcome.
For months the business lobby headed by the CBI has been arguing for an essentially housing-free programme of investment in infrastructure. A programme published by the Social Market Foundation for a £50 billion programme of capital investment funded by ‘growth-friendly cuts’ only mentions housing once.
Meanwhile, the government remains wedded to the idea that it can boost housebuilding by relying on the big housebuilders and giving them what they want on planning, regulation, affordable housing and anything else. As I’ve argued many times before, this is a fallacy since the big firms are explicitly committed to a strategy of increasing their margins by tight control of costs and careful management of how many homes they build.
To counter those arguments, first the sector could make the case that housing can deliver growth and jobs quicker and more cost-effectively than other forms of investment (only repair and maintenance scores better whereas big road and rail schemes take years and do not employ many people). Second, it could argue that the government needs to look to other players like housing associations and local authorities and reform housebuilding (see this report by the IPPR). Third, it could make a more radical case about the income stream and savings in housing benefit that rented homes deliver and argue for reform of the borrowing rules or even a new form of quantitative easing for housing.
In an age in which the housing minister can boast that he does not read Inside Housing, I would not want to overstate my case, but there is a chink of light nevertheless.
Stoke? Hull? Newham? Croydon? Westminster? Housing benefit cuts are a story in search of a location.
What I mean by that is that the story that dominated this morning’s Today programme could have been about just about any borough in London and any city in the north and midlands. We all know that sooner or later there will be real faces to put to the victims of the housing benefit cuts and real places where the problems will emerge. Up to now, though, and with several of the more draconian cuts still to come, we’ve had largely anecdotal evidence.
So Newham’s letter to a housing association in Stoke was always likely to be big news. Add in the elements that Newham is the Olympic borough and that its mayor Sir Robin Wales has a history of rows with government and controversial statements on affordable housing and you have a story that is irresistible.
That much was clear from the bare bones of the story reported on the BBC website earlier. Newham was asking Brighter Futures Housing Association to take up to 500 families on housing benefit and on its waiting list that it can no longer afford to house and offering to lease homes at a premium to local rents. It was being ‘forced to look further afield for alternative supply’ because rents locally were overheating because of the ‘onset of the Olympic Games and the buoyant young professionals market’.
Gill Brown, chief executive of the housing association, begged to differ (how could she do otherwise as head of an organisation named Brighter Futures?). ‘I think there is a real issue of social cleansing going on,’ she said. ‘We are very anxious about this letter which we believe signals the start of a movement which could see thousands of needy people dumped in Stoke with no proper plan for their support or their welfare.’
More emerged in Today programme appearances by Wales and housing minister Grant Shapps later. According to Wales, Newham sent letters to 1,179 organisations. Recipients include landlords across the North West, North East and Midlands and the largest one in the constituency of chancellor George Osborne (which binned it, or else we might have had the irony of the victims of his cuts turning up in his well-heeled corner of Cheshire).
According to Shapps, rents are ‘actually, at the moment, falling’. Cue a double take from just about everyone and disbelief for anyone in touch with the London market. Most of his responses consisted of the same tired lines: housing benefit being unfair to ‘hardworking’ families (ignoring the fact that 93 per cent of new claimants since the election are working), a ‘huge’ discretionary fund and that the leaked letter from his boss Eric Pickles warning of the effect of the cuts is old and out of date. He also accused Wales of ‘playing politics’ in election season and claimed a search on Rightmove revealed 1,000 homes available at below the housing benefit cap. Initial calls by The Guardian suggest many of these will not take tenants on housing benefit.
What was new to me was his reference to changes on the discharge of the homelessness duty into the private rented sector and guidance on his plans to ‘that they must take into account the welfare of the tenants in doing so, which includes for example not packing up and sending them off to Stoke’. Have I missed it, or has this guidance not been published yet.
As Labour’s Karen Buck said in an earlier interview, the shocking thing is that Newham was meant to be part of the solution to London’s housing problems (as one of the places with cheaper rents) but now it seemed to be another one of the problems. And Robin Wales argued that it was pressure from boroughs like Westminster exporting their own homeless families that was forcing Newham to do the same.
One blog offers barely enough scope to scratch the surface of a story like this and its implications. However, I would point to at least three other factors that are at play here:
- Sir Robin Wales has previous on these issues with controversial views on giving housing priority to people who are working. See, for example, this interview with Nick Duxbury from last year in which he argues ‘don’t come and show us that you’re poor you’re not working and the most needy’.
- Newham is at least attempting to inform people in other areas about what it is doing – as opposed to moving people out by stealth like other London boroughs. It is also attempting to do something about the housing crisis with radical plans on licensing and private sector leasing.
- Over the last few years Newham has also been one of the London authorities with the most homeless families in temporary accommodation waiting for a permanent home. The Localism Act gives it the power to discharge the homelessness duty into the private rented sector. How much of this is about housing benefit cuts and how much about the discharge of the duty and cuts in funding for temporary accommodation specifically? The letter says specifically that: ‘The Localism Act will give local authorities the power to discharge duty into the private sector and as such the council is looking to find affordable accommodation in areas of low demand, for suitable families.’
- Stoke has plenty of problems of its own. A report by Brendan Nevin and Philip Leather for the Northern Area Social Housing Forum in February highlighted a whole series of problems including ‘stark choices for housing benefit claimants’ and a collapse in market activity in disadvantaged areas. This highlights an issue that many have warned about all along: that cuts in housing benefit only encourage people to move (or to be moved) to cheaper areas with fewer jobs. This editorial in The Sentinel makes the point very well:
‘Stoke-on-Trent has a proud history of welcoming outsiders and finding a place for everyone in the city. But as our city seeks to re-build communities ruptured by the decline of traditional industries and create stable neighbourhoods, an unplanned influx of Olympic exiles will do us little good. The 2012 games are bringing huge riches into London. The least those boroughs could do is look after their poor and needy. We look forward to welcoming the flame from Stratford – but not east London’s exiles.’
This story is not going to go away. Newham and Stoke are just the start. For more on this story see my other blog here.
The London mayoral race is throwing up some interesting new ideas on how to tackle the housing crisis in the capital – but will they make any difference?
Thanks to the voting system (the supplementary vote, which gives people two votes in order of preference), the race is not just about Boris Johnson and Ken Livingstone, even if one of them will eventually become the mayor (see part one of my blog here). And, thanks to the mayor’s new powers over investment and land, housing policy features heavily in the manifestos of many of the other candidates too.
For the Lib Dems Brian Paddick is promising not just 360,000 homes of all types over the next decade but also to work to ensure that half of new homes affordable. A bit like Livingstone, he also wants to establish a new ‘living rent’ standard, with ‘the goal that Londoners should pay no more than one-third of their take-home pay on rent costs’. He would set a benchmark guideline that half of homes should be affordable, with the detail left to boroughs. He would create a London Housing Company as a vehicle to assemble public land and match it with private investment and give smaller housing associations the chance to raise loan capital through a London Housing Bond supported by City Hall.
In the private rented sector, he would promote ‘the effective registration of private landlords’ by using existing powers for the selective licensing of all private rented housing in specific areas, as pioneered by Newham. Finally, in an interesting indication of Lib Dem thinking on a national coalition policy, ‘until national laws are changed’ he would encourage landlords to offer longer minimum tenancies, especially those landlords being used to discharge councils’ homeless rehousing duties’.
For the Greens, Jenny Jones signals the importance of housing in the subtitle of her manifesto (‘Our vision for a more equal, healthy and affordable London’). She pledges to build at least 15,000 ‘genuinely affordable’ homes per year, of which 40 per cent would be family-sized. She would calculate an annual London Affordable Rent for the average household while using public land to keep rents at or below that cap. A London Mutual Housing Company would help councils, housing associations and co-operatives to assemble sites for development and there would be a ‘much more concerted’ programme of public compulsory purchase. She would set up a clearing house to offer publicly-owned derelict land to community land trusts. And there are specific green pledges on energy efficiency, fuel poverty and empty homes.
Action in the private rented sector would include lobbying for ‘smart reforms’ to bring down rents and the introduction of a default five-year tenancy. She would create a new ethical lettings agency and work with boroughs on ‘blanket licensing for landlords’. In the longer term she promised to campaign for more radical reforms including land value taxation and a ban on foreign investors.
The independent Siobhan Benita makes housing a to priority with a pledge to create Homes for London as a new department at City Hall (a key part of Shelter’s campaign of the same name). Even more intriguingly she proposes the creation of a new ‘fixed-price housing market’ where Londoners would be able to buy or rent at half of commercial rents. The GLA would gift land for development but on a leasehold basis so that it retains ultimate ownership. Any homes built on it would have to be sold into a regulated, secondary market under the control of Homes for London.
Buyers would have to be London residents with the winners drawn by ballot. Anyone wishing to sell would have to offer it back into the fixed-price market at the original price plus an annual uplift agreed by Homes for London. Anyone wishing to rent would have to charge a regulated rent expressed as a fixed proportion of the fixed price value. Social landlords would also be able to buy the properties on the same basis but the right to buy would be a right in the regulated rather than commercial market. Her target would be 80,000 fixed-price homes by the end her mayoralty.
Put it all together and there is no shortage of ideas about what the new mayor should do on housing. There is also a growing consensus about the need to push to the limit of the mayor’s powers and beyond and to do something radical about affordability and housing supply. If you happen to be a London voter (I’m not) today is the last day to register to vote.
The big question is whether all of that new thinking will make much difference to the result. For one thing, all the attention from the candidates does not seem to be generating much interest in the mainstream media. According to the FT’s Westminster blog, Ken Livingstone complained at a lunch yesterday that only one journalist attended the launch of his housing manifesto.
For another, the one mainstream candidate who seems to be offering nothing more than the current status quo on housing (excluding UKIP and the BNP who don’t have much to offer either) is the one currently leading in the polls: Boris Johnson.