Saturday, 25 October 2014

Inside edge

The name game

Mon, 11 Mar 2013

So three weeks left until the start of the bedroom tax: is there a still a chance of last-minute concessions?

Thanks to a steady stream of heartbreaking real-life cases in the national media, the issue is not going away for the government. Attempts by ministers from David Cameron down to make the fairness argument for the policy continue to founder on inconvenient facts.

Later today Iain Duncan Smith faces an uncomfortable time at work and pensions questions and on Wednesday Cameron is certain to face another grilling at prime minister’s questions.

Saturday will see demonstrations in more than 50 towns and cities around the country in a remarkable show of grassroots organisation that should help keep the issue at the top of the media and political agendas.

That will be quickly followed by Eric Pickles and Mark Prisk on the spot at CLG questions a week today, a housing announcement from Cameron and Clegg and then George Osborne’s Budget next Wednesday, which is surely the ideal opportunity for a concession or two. Alternatively, the clock is counting down on the 14 days the DWP has to make its case against a judicial review on behalf of 10 disabled and vulnerable children.

Wishful thinking? Perhaps but the pressure is growing all the time and the cracks are starting to appear even within in the government. As Inside Housing reported last week, even IDS’s own thinktank now believes that the bedroom tax should only apply to people who turn down an offer of smaller accommodation. Meanwhile Conservative MPs are starting to express doubts on the record in stories like this.

Cameron tied himself in knots with his first answer at last week’s PMQs when he argued that:

‘Pensioners are exempt, people with severely disabled children are exempt and people who need round-the-clock care are exempt. Those categories of people are all exempt, but there is a basic issue of fairness.’

As the National Housing Federation was quick to point out, those claims are all untrue: the government has appealed against a Court of Appeal ruling that disabled children should not be forced to share with a sibling; some people with non-resident carers may be protected but not those whose partner is their carer and needs to sleep in the ‘spare’ room; and pensioners are currently exempt, but mixed-age couples where one is above pension are and the other below will have to pay the bedroom tax once the universal credit begins.

Other coalition MPs are squirming too. On Any Questions over the weekend, Lib Dem cabinet minister Ed Davey’s heart did not seem in it as he stuck to his line that it was all about being fair to families who are overcrowded while completely ignoring objections that only a small proportion of under-occupiers have anywhere to downside into. Meanwhile when up and coming Tory backbencher Andrea Leadsom was challenged on Cameron’s erroneous claim on disabled children she simply made one of her own. ‘The actual case is that if you have disabled children who need for reasons of their disability to have separate bedrooms then that will be accommodated by the local authority,’ she said. The help is of course discretionary and the £30 million budget is only enough to pay for a fraction of the tax faced by the 230,000 disabled people affected.  

Both Cameron and Leadsom were pushing the government’s ‘spare room subsidy’ alternative to ‘bedroom tax’. As a piece on Conservative Home on Friday acknowledged, it is really much too late (even if a Tory Batman can be found) to win the name game. However, what’s interesting is the way that it links to the Conservative case that social housing is ‘subsidised’ housing – even as the numbers from the UK Housing Review show that home ownership continues to be the most subsidised tenure.

Leadsom claimed that ‘it is simply not fair’ for the taxpayer to be paying for people to live in homes that are too big for them but who really gets the ‘spare room subsidy’? Under-occupation of social housing is after all lower as judged by the bedroom standard (10 per cent) than for private renting (16 per cent) and many times lower than in owner-occupied homes (49 per cent). However, it seems that under-occupation is only an issue for renters. The bedroom tax does not apply to shared owners who are under-occupying in the same way that support for mortgage interest is not cut for home owners with more bedrooms than they need. 

And the real spare room subsidy does not end there: 7.7 million households in England currently receive a single person’s discount of 25 per cent off their council tax. Many will be single adults with children, so not all of them will be under-occupying, but the discount applies regardless of the size of the home. The legislation that transferred council tax benefit to local authorities stipulates the single person discount must continue in their new support schemes. This was presented as a way of avoiding a charge on pensioners living alone but the discount goes to many more people regardless of income.

Work by the Institute for Fiscal Studies estimated that cutting the single person discount from 25 per cent to 17.5 per cent, while exempting pensioners and allowing for increased council tax support to poorer households, would raise enough revenue to cover the £500 million cut in council tax benefit. That is also more than the government claims the bedroom tax will save.

The issues with the council tax and spare rooms do not end there. As Joe Halewood has pointed out, measures exempting empty homes from the council tax make it not just a spare room but a ‘spare home subsidy’. And then there is the way the system itself is designed to avoid big bills for larger homes. As the UK Housing Review points out: ‘The current differentials are regressive, and bear down disproportionately on occupants of low- value properties while providing little disincentive for overconsumption of housing by under-occupiers of large homes.’

Just to bring the argument full circle, the council tax was of course designed as a replacement for another unpopular measure over which a Conservative government lost the name game.

It still seems more likely that the government will react to losing the argument over the bedroom tax by digging in its heels rather than by backtracking and making concessions. However, if the pressure continues to build, especially over the next week, who knows?

After all, even as Margaret Thatcher insisted that there was no question of any change to what she insisted on calling the ‘community charge’, she was losing first the argument, then the policy and finally her job as everyone else protested about the poll tax.

Dynamic duo

Wed, 6 Mar 2013

So will the next big housing announcement from David Cameron and Nick Clegg amount to any more than the last three?

The Financial Times reported yesterday that the coalition double act are ‘drawing up schemes to revive the flatlining housebuilding industry and help people get on the housing ladder’. On the eve of the Budget on March 20 they will make a series of announcements including measures on shared equity schemes, social housing and support for first-time buyers.

Despite the scoop, even the FT admits that this ‘may be treated with some scepticism given that such announcements on housebuilding have become a regular feature of the coalition – while the industry has continued to stagnate’.

That’s not surprising: by my reckoning, this is the coalition’s fourth housing strategy or package in under three years. The first was the programme for government (new homes bonus, Localism Act, FirstBuy) in May 2010. The second in November 2011 gave us NewBuy plus consultations on right to buy 2 and investment in private renting. The third in September 2012 brought us government guarantees, measures to unlock stalled sites and the Montague report.

Housing package Mark 4 seems certain to feature the traditional images of Cameron and Clegg in hard hats and high visibility jackets and perhaps taking tea with a ‘hard-working family’. But what will it actually say?

According to the FT, it will include a promise of new ‘garden towns’ (a cuddlier version of garden cities?), more flats above shops and more private renting. Crucially for housing associations, it may also have details of how affordable rent will work after 2015.

Ministers are also said to be discussing an extension of the NewBuy mortgage guarantee scheme to existing homes. Although OldBuy sounds like a contradiction in terms, it’s worth noting that NewBuy was extended to allow part-exchange of existing homes in January. However, going further than that would raise all sorts of questions about the desirability of taxpayers guaranteeing 95 per cent mortgages across the market.

If some of those measures sounds familiar, that’s because, well, they are. In the Commons yesterday even the coalition’s own MPs seemed to be wearying of all the rebranded announcements and initiatives. ‘I would just comment that a couple of those announcements do not seem to be that new, but I hope that when they are made in a couple of weeks’ time, they will be made with a little more commitment and determination than they were before,’ said Conservative MP George Hollingbery. ‘They are keen on recycling,’ agreed his fellow backbencher Stewart Jackson.

MPs were debating last year’s Communities and Local Government committee report on financing new housing supply, which set out starkly the gap between housing need and provision. Although it emphasised that there was ‘no silver bullet’, it did demonstrate a cross-party consensus that more, much more needs to be done on new homes.

What’s happened since is more regress than progress, with housing starts in 2012 down 11 per cent on the miserable total for 2011. As committee chair Clive Betts pointed out: ‘If our recommendations were correct a year ago, they are probably just as correct now.’

However, the debate did at least show a continuing consensus for change and offered some possible hints of what may be announced in a fortnight. There were calls from both sides of the house for more freedom for local authorities to borrow to invest in new homes and praise for housing associations looking to expand into private renting. Betts appeared almost as enthused by the self-build on show at Almere in the Netherlands as former housing minster Grant Shapps. ‘That seemed a brilliant way forward,’ he said. ‘I see no reason why we cannot build 50,000 self-build homes in this country, instead of the 10,000 we build at present.

Conservative MP Mark Pawsey was critical of the forced renegotiation of section 106 agreements. ‘Perhaps the government should be encouraging local authorities to do that rather than dictating to them,’ he said. And he attacked plans to make it easier to convert offices into homes as ‘not helpful’. He also raised the possibility of a tie-up between housing associations and institutional investors on the management of private rented homes.

More evidence of fresh thinking on the Tory side came from James Morris, another committee member, who argued that ‘there is great scope for local authorities to take on more borrowing capacity and leverage pension funds in order to invest further in houses of different sorts’.

However, there was scepticism from Labour’s Nick Raynsford, a former housing minister, about a key element of the first housing package: the new homes bonus. ‘The Government will have been presiding over a lower level of consents for residential planning than ever before, which is extraordinary when they are spending £3.3 billion in supposed incentives to encourage more planning consents,’ he said. He also questioned the value of extending NewBuy to existing homes under Mark 4.

And shadow housing minister Jack Dromey laid down a challenge: ‘The government badly need to come forward with a serious strategy for getting Britain building, and not yet another false dawn.’

Responding for the government, the Lib Dem communities minister Don Foster did his best. ‘Under this coalition government, shovels are in the ground,’ he tried. The new homes bonus ‘is a powerful incentive that is really working,’ he ventured.

Foster told MPs that despite the leak ‘we will just have to wait and see what is around the corner’. He did have an intriguing hint about those garden ‘towns’ even if he did not appear to have received the memo that they are no longer called ‘cities’. ‘The House will be aware that there has not been a single new development of more than 13,500 homes in this country since the 1970s, so we intend to promote and support larger scale garden cities where there is clear local support and private sector appetite,’ he said. ‘We are currently working through the details on that.’

However, the signs look less positive on more freedom for local authority borrowing, a move that councils argue could enable them to build 60,000 homes in five years. Clive Betts pressed him for a direct answer: ‘Is he prepared to look again at the cap on borrowing to fund housing at local authority level? Why is housing the only form of borrowing that local authorities cannot enter into simply because of the prudential rules?

The response? ‘The hon. Gentleman knows part of the answer, because that is the same problem his Government faced, and it is to do with difficulties with the Treasury. Having said that, we are looking at the issues and are willing to look at the possibility of having flexibility in the cap and other ways of moving forward.’

Whatever happens in two weeks’ time, prepare for housing announcement number five some time later in the year. 

Owning fall-out

Mon, 4 Mar 2013

Should we simply be accepting the continuing shift from home ownership to private renting as somehow inevitable?

That’s one of the many housing questions posed in the latest edition of the UK Housing Review. Now in its 21st edition and published by the Chartered Institute of Housing, the review has long been the bible for housing nerds but it is the best source of authoritative information on tenure and any other aspect of housing you care to think of.

The CIH has press released the story that home ownership has slumped among the young: from 39 to 14 per cent for the 16-24s and 67 to 43 per cent among the 25-34s. However, the rate is falling for older people too. Age-specific home ownership rates derived from Labour Force Survey data analysed by Glen Bramley shows that even 35-44 years olds were less likely to own from the early 90s onwards. In 1992, 79 per cent owned but that had fallen to 69 per cent by 2008 and 63 per cent by 2012.

There was even a fall for 45-54 year olds in the 2000s, with the rate falling from a peak of 80 per cent in 2002 to 75 per cent in 2008 and 71 per cent in 2012.

That leaves those aged over 65 as the only group who have seen rates continuing to climb, from 60 per cent in 1992 to 73 per cent in 2008 and 76 per cent in 2012.

It’s been obvious for some time that the fall in ownership is about much more than the problems seen in the mortgage market since the credit crunch. Thanks to ever-rising house prices, mortgaged ownership and first-time buyers were both falling from the early 2000s, although the scale of the total decline was obscured by a continuing rise in outright ownership.

These new figures confirm the way that the decline has rippled up through the age groups – and the review points out that it will continue to do so unless some fundamental things change.

First, the growth of private renting: the review shows that this has happened across the country and not just mainly in London and the South East. The fastest growth came in Northern Ireland, where the size of the sector increased six-fold between 1991 and 2011. The largest percentage increases in England came in the North East (202 per cent), the North West (170 per cent) and Yorkshire & Humber (150 per cent). The review points out that these were also the regions that saw the biggest decline in social housing, so clearly the tenure shift is about much more than just a fall in ownership.

Second, the housing stock: most of the growth in private renting is happening as a result of the transfer of formerly owner-occupied stock as people decide to rent rather than sell rather than the construction of new homes. Based on an estimate that just 10 per cent of buy to let ‘investment’ goes to new build, the review estimates that only 14,000 of the 246,000 rise in private renting in 2011 represented additional homes.

Third, government moves to support the sort of mortgage lending at high loan to values have largely failed to deliver the sort of funding that first-time buyers need. Loans of 90 per cent fell from 14.9 per cent of all lending in 2007 to just 1.5 per cent in 2009 thanks to the financial crisis. However, despite all the rhetoric and initiatives from ministers, the rate had only risen to 2.5 per cent by 2012.

Fourth, the climate continues to favour buy-to-let landlords over young buyers. Mortgage lending is tightly regulated and now mostly on a repayment basis. That means repayment costs are typically 50 per cent more than on unregulated, interest-only buy-to-let loans. 

Fifth, the continuing fiscal bias towards home ownership: the government took £5.3 billion in inheritance tax and stamp duty out of the sector in 2011/12. However, tax reliefs on imputed rental returns and capital gains tax on first homes (allowing for rollover relief) totally £19.4 billion. The review argues that the importance of this has not been recognised and goes on: ‘It is also notable that these reliefs are almost entirely regressive and favour most those households owning the most expensive dwellings in the country. They have also become part of the barrier that must be crossed by young households entering the sector, as the benefits of limited taxation for existing owners have effectively been factored into the higher house prices they face.’

Put that all together and you have not just an explanation for the shift in tenure over the last 20 years but a powerful argument that it will continue over the next 20 if nothing else changes. The consequences of that will not just be felt by young renters priced out of the market but, as I’ve argued before, by society as a whole in a burgeoning housing benefit bill for people who do not have a home as an asset to fall back on in retirement.

However, is this inevitable? The review says ‘moralistic voices’ are calling for young people to save for a deposit before they become owners but given their savings behaviour and rising student debt, but it argues that this would ‘effectively deny a high proportion of young households – those who cannot draw on parental help – from ever becoming homeowners’.

And should we be accepting it? The review questions the cross-party consensus about backing private renting to support housing mobility and goes on:

‘There has not been any real debate about the pros and cons of the consequences of the policies now in place that effectively constrain many younger households to remain in the rented sector, without the same alternative available to their predecessors to enter the owner-occupied market. There also seems to a sense of fatalism about this outcome in reports from the ‘policy lobby’ that focus on the case for improving the private rented sector offer, but without questioning why younger households that have adequate, secure incomes – but limited savings or access to parental support – should be denied the opportunity to own rather than rent when that is their preference.’

And it also questions the almost universal support for institutional investment in private renting. ‘This is rather a strange obsession given that there is no evidence that consumers prefer institutional landlords, and given that the predominance of small landlords is the norm in other countries, including Germany,’ it says.

For more on this and much more the full 2013 edition of the UK Housing Review is available to buy here. Most of it is online here

Looking again

Thu, 28 Feb 2013

With even the Monster Raving Loonies calling it a crazy policy, is there still time for changes to the bedroom tax?

It’s a measure of how big a political issue it’s become that it was one of only three nominated by voters in Eastleigh for the BBC to put to the 15 candidates in today’s by-election. Ten came out against the bedroom tax, with Howling Laud Hope of the Monster Raving Loony William Hill Party making the far too sensible point that ‘this is like going back to the pre-Victorian window tax.’ The coalition parties could only rely on the backing of the Beer, Baccy and Crumpet Party, the Christian Party (Proclaiming Christ’s Lordship) and an independent.

The by-election winner will enter a House of Commons that is at last giving the bedroom tax the sort of scrutiny it deserves. The Welfare Reform Act packed so many changes in to one piece of legislation that there was little time for detailed debate on each of them. Even when contradictions and unintended consequences were picked up in the Lords, the amendments were reversed in the Commons.

However, the closer we get to April 1, the more bedroom tax victims are appearing in MPs’ surgeries, in the newspapers and on TV and the harder it becomes for ministers to defend. That’s transmitted into questions and debates in the Commons as MPs take the chance to express the anger and fear of their constituents.

Yesterday saw the bedroom tax feature in eight exchanges at Welsh questions and another four at prime minister’s questions. David Cameron was presented with the plight of foster carers, armed service families, a man near pension age who had lived in the same house for his whole life, a wheelchair-bound sufferer with brittle bones who needs a spare room on health grounds and a blind couple who rely on their family and neighbours. Cameron stuck to his formula about case-by-case assistance with discretionary help and the need to act on the deficit and the housing benefit bill while attacking Labour profligacy.

That was followed by an opposition debate led by the SNP, Plaid Cymru and the Green Party that saw MP after MP get to their feet to quote cases from their own constituencies. The debate took over six hours so I’ve only got space for a selection but this should give a flavour:

  • A homeless woman from Corby who was offered a two-bedroom property and was told that if she refused it she would be told she had not accepted re-housing
  • A woman from Glasgow who is a full-time carer for her father who lives nearby but now faces having to downsize to the other side of the city
  • A couple from Newport where the husband’s had his ESA wrongly cut after an Atos assessment, successfully appealed only for his wife to be diagnosed with myleopathy, and then received a bedroom tax letter
  • The man from Carmathernshire who has turned his spare bedroom into a sterile room for his dialysis treatment but now faces the penalty
  • A woman from Rutherglen who has fostered more than 50 children over the last 30 years who’s been told she has three spare bedrooms
  • A disabled man from Bolton who lives in a specially adapted house and lives close to his family and needs their support, who says he’s contemplating suicide if he is forced to downsize.

MPs also queued up to expose the contradictions in the policy. Jim Shannon (DUP) said he had spent 20 years as a councillor upgrading one-bed bungalows to two bedrooms only to find that the very thing he pushed for has to be turned back. Angus Bredan MacNeil (SNP) pointed out that people from rural areas have nowhere else to go. Karen Buck (Labour) argued that if the policy worked and encouraged people to downsize if would not save any money and Dr Eilidh Whiteford (SNP) that ‘the great irony of the bedroom tax is that it will not save any money’. Julie Hilling (Lab) pointed out that when size criteria were introduced by Labour for private tenants (one of minsters’ key arguments for introducing it for social tenants) they did not affect existing tenancies.

MP after MP argued that discretionary housing payments will only cover a fraction of those affected: Labour’s John Healey quoted NHF figures that £50 million of help would only cover 73,000 disabled people, leaving more than half of those on disability living allowance with no help at all.

However, some of the most interesting exchanges for me came between Lib Dem work and pensions minister Steve Webb and MPs including his own backbenchers. The government eventually won the vote by 41 votes and was never in any real danger of losing but is was notable that all of the Lib Dem backbenchers abstained and all of them were pressing for concessions.

Webb began by using the Grant Shapps rebranding of the under-occupation penalty – the spare room subsidy – and making all the usual noises about the deficit, fairness for private tenants and discretionary help. However, challenged directly by Labour’s Liam Byrne on whether he was 100 per cent sure that the policy would deliver the savings set out by the Chancellor he seemed a little less than convincing: ‘Our impact assessment is out best estimate based on what we expect the impact of the policy to be.’

He argued that the government could address ‘the issue of the shortfall’ in two ways, through blanket exemptions and through DHPs. On foster carers, he said that the government saw local discretionary help as the best way forward but both he and Iain Duncan Smith were ‘entirely open to discussing whether that is the most effective way of delivering that support’. Simon Hughes (LD) asked if that meant they ‘would be willing to look at the categories defining which people need a bedroom’. Webb replied that: ‘I can see the attraction of that approach… We could say that a bedroom used for a foster child is a bedroom, so no deduction applies.’

Webb also clarified his position on whether people evicted for bedroom tax arrears would be counted as intentionally homeless. ‘If the only reason for the person’s homelessness is a reduction in benefit that is outside their control they should not be considered intentionally homeless by the local authority. I can put that on the record and hope that is helpful.’

There are no firm commitments here even if the tone suggests a willingness to make concessions. In many ways it was a repeat of comments by Iain Duncan Smith that he had asked DWP officials to ‘look again’ at how the bedroom tax applies to disabled people. The BBC reported that as a small u-turn following a letter from seven charities but the DWP press office tweeted that there was ’no change in spare bedroom policy, as with all reforms we will monitor closely as it comes in this April’. The promise of discretionary help and reviews to follow offers plenty of wriggle room for ministers.

However, another Lib Dem backbencher, Greg Mulholland, put his finger on the problem with the government’s approach. ‘I do not think that the government has got it right, and I ask them to address the issue compassionately and with common sense, not only through the application of discretionary housing payments… but through the provision of further exemptions for certain categories.’ He nominated partners who need separate rooms for medical reasons, disabled children who need a separate bedroom (an issue before the Supreme Court), foster carers and separated parents who have their kids to stay for part of the week. ‘If the exemptions that should be in place are there, the question of where local discretion should be used becomes discretionary rather than a set of difficult choices,’ he said.

It was all a belated attempt to inject some sense into a policy that even the Monster Raving Loonies recognise is crazy. With just 32 days left until April 1, MPs and campaigners need to keep up the pressure to convert the vague assurances and promises to look again at aspects of the bedroom tax into firm commitments.

Sales pitch

Tue, 26 Feb 2013

So how is it going so far for two ‘ambitious schemes’ that we were told would ‘unlock the aspirations of a new generation of home buyers’?

It was March 2012 when David Cameron and Grant Shapps launched NewBuy and the ‘reinvigorated’ Right to Buy 2. ‘This government doesn’t just talk about expanding home ownership: we’re making it happen,’ said the prime minister.

Even as he was speaking it all seemed a tad ambitious. No wonder, when the English Housing Survey has just shown that home ownership fell again in 2011/12.

Flash forward almost a year and Mark Prisk, the successor to Shapps as housing minister, is hailing a doubling in right to buy sales and the highest number of sales since 2007. He said: ‘The reinvigorated right to buy has opened the door to home ownership for thousands of tenants across the country and I’m delighted to see so many taking up this opportunity.’

So far, so good for the government. Figures from the Council of Mortgage Lenders also show a rise in the number of first-time buyers. However, a quick look at today’s figures suggests it may not be time to break out the champagne just yet.

It’s true that right to buy sales have doubled but that’s only if you compare sales between July to September 2012 (1,041) and October to December 2012 (2,100). Might the summer holidays and the Olympics just possibly have had something to do with those figures?

In the nine months since the reinvigoration (with an increase in the right to buy cap to £75,000) sales total 3,495. That is indeed more than in any full year since 2007/08 but on current trends the total for 2012/13 will still be less than half the 12,250 sales achieved five years ago and around 10 per cent of the total seen before the Labour government introduced caps on discounts in the late 2000s.

Despite ‘200,000 hits’ on the DCLG website, that does not seem much of a return on all that initial hype, a discount that is three times what it was in some areas, and a marketing campaign costing close to £1 million. The impact assessment had estimated that 300,000 tenants both have the right to buy and can afford to exercise it.

The housing minister has even less to boast about with NewBuy. Figures released today show that there were just 1,522 sales in the first nine months of the scheme between March and December 2012.

It’s true that the Home Builders Federation said last month that NewBuy reservations now total 3,000 but even that does not come close to matching the hype generated a year ago when Shapps and Cameron boasted that the scheme would enable ‘100,000 prospective and existing homeowners to buy their dream home with much smaller deposits than currently required’.

If sales continue at the current rate, that target will be achieved some time in 2063 – but the scheme ends in March 2015. The only way that sales could get even close to the March 2012 aspiration would be if they continue to double quarter on quarter for the next two years (as they did between the second and third quarters of 2012/13).

However, as with Right to Buy 2, much of the initial enthusiasm was based on pent-up demand that would supposedly be unlocked by the new schemes. It seems just as likely to expect a flood of initial sales followed by a leveling off later as it does to expect such continuing growth.

Little wonder then that the government moved last month to boost sales with the launch of NewBuy Part Exchange. This will make people looking to trade in their existing home for a new one eligible for a mortgage with a 5 per cent deposit. That may be a useful option for second steppers stuck in their first home because they do not have enough equity to move but it will do little for the ‘new generations of home buyers’ that the scheme was meant to help.

One year on from their launch, Right to Buy 2 and NewBuy are still good news for some buyers: council tenants who can afford to buy (and perhaps do not want to pay to stay); first-time buyers who cannot raise a deposit; and now second steppers who cannot otherwise move.

However, sales are already looking much more modest than Shapps and Cameron made out and the results in terms of new homes look like being even more modest.

Even if NewBuy sales continue to rise thanks to the new part-exchange option, it remains to be seen how many of them will truly be additional and how many will simply replace transactions that would have been made anyway under housebuilders’ existing incentive schemes. This week’s results from the major firms are again showing bumper increases in margins and profits on much lower rises in completions.

As for Right to Buy 2, one thing is missing from today’s announcement. As I blogged last year, the idea that each home sold would be replaced on a one-for-one basis by a new affordable home stretched credulity even at the time.

Shapps boasted in March 2012 that ‘we are determined to maintain the number of affordable homes for rent - so for the first time, homes that are sold will be replaced by new affordable homes, helping councils meet housing need and getting the nation building again’.

A year on, the DCLG says that the receipts from Right to Buy 2 sales will be ‘recycled back into new affordable homes for rent’ but any notion of one-for-one replacement seems to have been quietly dropped. 

False start

Fri, 22 Feb 2013

It’s half time for a government that promised to make us ‘a nation of homebuilders’. The crowd are – to put it mildly - not happy.

Figures released yesterday show the performance of the coalition in the first two and a half years of its five-year term. By now its abolition of ‘Stalinist’ top-down regional strategies and creation of the ‘powerful new incentive’ of the new homes bonus and the National Planning Policy Framework should be working.

Instead housebuilding in England is flat-lining at less than half of the level required. The 26,830 housing starts in the fourth quarter of 2012 were up by 180 on the previous three months but down by 400 on a year ago.

Just 98,280 homes were started in the whole of 2012. That is the third quarter in a row when starts have fallen below six figures and is even 11 per cent below the miserable total for 2011, when David Cameron and Nick Clegg proposed their ‘radical and unashamedly ambitious’ housing strategy.

The yardstick for judging the coalition’s performance on housebuilding was set by former housing minister Grant Shapps with his ‘gold standard’ of building more homes than Labour.

The first half of the coalition has seen 261,940 housing starts, a little more than the 253,500 in the second half of the last government. However, that included the worst period of the global financial crisis when mortgage lending seized up and several major housebuilders were on the brink of collapse.

The gold standard was – or should have been – quite a modest ambition but the coalition is slipping behind the required rate all the time.

Looking forward, to match the 695,000 starts seen over the whole of the last Labour government, the coalition needs to see something like 43,000 starts a quarter between now and 2015. That’s an increase of 65 per cent on current levels.  To match the average rate seen between 1997 and 2010 (147,000 a year or 37,000 a quarter) the coalition needs 47,000 starts a quarter or an increase of 80 per cent.

The figures would once have sparked a battle of statistics between Labour and the government. Ex-housing minister Grant Shapps would surely have found a way to spin some good news.

Instead, while Labour’s Jack Dromey accused the government of ‘making the biggest housing crisis in a generation worse, not better’, the reaction from Mark Prisk and the DCLG was silence.

Do they prefer to let actions speak louder than words? Would they rather work on solutions rather than make rash promises? Or do they not have a clue? .

All of the coalition’s policies and housing strategies so far have been based on four things: reforming the planning system to encourage local communities to see the advantages of new homes rather than fight plans imposed from above; reducing the burdens on housebuilders; coming up with ways to tempt institutional investors in to private renting; and, above all, austerity to get the public finances under control and mortgage rates low.

The jury is still out on the first with some tentative signs of post-NPPF growth in permissions matched by the sort of continuing nimbyism that is only too evident in the Eastleigh by-election.

The second has worked spectacularly well – but only if you measure success on the profit margins and share prices of the major housebuilders. If they have found a way to make money out of building 80,000 or so homes a year, why should they build any more if there is no quid pro quo for the government’s help?

It’s too early to tell with the third. Again there are promising signs and the appointment of Andy Rose as the new chief executive of the HCA suggests that it remains a big priority but we’ve heard it all before about institutional investment.

On the fourth, austerity continues with few signs that is succeeding in tackling the deficit. Mortgages remain at a record low but the benefits are going to existing home owners and buy-to-let landlords rather than first-time buyers.

It is clearer than ever that a complete change of tactics is required. There is no shortage of new ideas out there - freedom for council housing; new garden cities; new flexibilities for housing associations; quantitative easing for new housing - and ministers have even talked about some of them.  

The whistle has already blown for the second half.

Bedtime stories

Thu, 21 Feb 2013

It seems remarkable that with less than 40 days to go until we start taxing them we still don’t really know for certain what a bedroom is.

So it’s not surprising that the move by Knowsley Housing Trust to reclassify 566 of its two- and three-bed homes as one- and two-bed has attracted so much attention. Chief executive Bob Taylor told Inside Housing that a stock review showed some homes are currently classified as having more bedrooms than they actually have, because tenants are not using the extra rooms as bedrooms and were therefore paying too much rent.

As I understand it, reclassification affects only some of KHT’s tenants who are facing by the bedroom tax. KHT also seems to be in a minority of landlords intending to reclassify: those I have spoken to have said that they will consider it in extremis but that their hands are effectively tied because of the impact on their rental income and therefore their loan agreements.

Complex issues are involved here that are covered in much more detail elsewhere. Joe Halewood has blogged extensively about landlords and the bedroom definition issue, including a post about KHT here. A recent post on the Nearly Legal blog sums up the murky legal position here.

However, the wider significance of KHT’s move may lie in the fact that is based on how tenants actually use their home. That is exactly in line with a legal opinion from senior counsel obtained by Glasgow Advice Agency (GAA). A headline in the Herald over the weekend that this meant ‘100,000 Scots could cash in on bedroom tax loophole’ has met with some scepticism. However, Mike Dailly of Govan Law Centre and the GAA says the legal opinion could offer a lifeline for many Scots and especially for disabled tenants. If that’s correct, the same applies to the rest of the UK.

The opinion by Jonathan Mitchell QC covers both what counts as a bedroom and who should decide. He says that under the Housing Benefit (Amendment) Regulations 2012: ‘It is for local authorities, who administer housing benefit and are accordingly the relevant authorities for the purposes of regulation b13, to determine “the number of bedrooms” in a dwelling; so, to do so, they must determine whether a particular room is or is not a bedroom.’

While that might seem obvious, there are obvious grey areas when it comes to box rooms and rooms used for something else. Yet the regulations do not define what counts as a bedroom. According to the opinion, what counts is not the design of the home but how it is actually used: ‘It cannot be conclusive to ask simply, “is this room being used as a bedroom” or “is this room being slept in”.’

Jonathan Mitchell could only find one government publication that addresses the definition of a bedroom: the Rent Officer Handbook produced by the Valuation Office Agency of HMRC. In a section on ‘deciding what constitutes a room/bedroom’ it says that ‘at least a small single bed will fit into it, and in most cases it will have a window’ and that anything smaller than 2m by 2m is ‘probably’ not a bedroom. That contrasts with the space standard in the Housing Act 1985 (and Scottish equivalent) that excludes anything under 50 square feet (4.65 sq m) and counts anything under 70 square feet (6.5 sq m) as half a bedroom.

The size question is clearly a very grey area indeed (as one landlord told me recently, ‘if a bedroom has to be big enough for two 15-year-old boys, then we have lots of zero-bed houses’). However, the legal opinion goes on to address ‘the fitting out and use of the room’. If it contains a bed and somebody regularly sleeps there, it is almost certainly a bedroom. But what about one used as a child’s playroom or study or one that is full of therapeutic equipment with no room for a bed? It concludes that:

Ultimately… this is a matter of judgment for the authority. It would be going wrong in law if it determined that it would reach its decisions with the aim of minimising the number of bedrooms calculated so as to defeat the regulation; the consequences of the determination are a matter of law and cannot be for the local authority to take into account. But, equally, it would be going wrong in law if it determined that every room which could possibly be slept in would be classified as a bedroom, whatever its characteristics or actual use. I emphasise that this is a matter of judgment, rather than discretion, because the ultimate question in every case is “do we regard this room as a bedroom”, it is not “do we want to regard this room as a bedroom”.’

Jonathan Mitchell is also very clear that:

‘I cannot see at present how a social landlord which is not the relevant authority for the purposes of the regulations could sensibly develop policies in this regard. It is not the decision maker. Nor would a lease which asserted that a property had a particular number of rooms free the relevant authority from its statutory duty to make up its own mind.’

All of which creates uncertainties for landlords, local authorities and tenants alike that I have not seen addressed anywhere else. The opinion points out that a family whose disabled child sleeps in the living room could be counted as having an extra bedroom whereas one that has turned a bedroom into a therapy or care room could be counted as having one less. ‘For this reason, it might well be helpful if local authorities could develop and publish guidance as to how they will make decisions in such circumstances.’

Glasgow Advice Association is calling for exactly that sort of formal guidance in Scotland, with the Scottish Government taking a lead to ensure a consistent approach by local authorities. It argues that there is an obvious application for disabled tenants who use a ‘spare’ room for therapy, storing wheelchairs or medical equipment or undertaking medical procedures but that other tenants may be able to avoid the bedroom tax too. Mike Dailly explains:

‘Essentially, GAA understand that it is a matter for each local authority as “the relevant authority” under the regulations to determine what is and is not a “bedroom”, and that the actual use of a room by a particular household will be critical in deciding whether that room is a bedroom or not. Accordingly, GAA believes it is possible for tenants to change the use of what might be regarded as a “spare bedroom” in terms of the regulations into something that need not be counted as such, and not be subject to the housing benefit under-occupancy deductions (bedroom tax). In that regard, the guidance and approach of individual local authorities will be critical.’

In the meantime, Govan Law Centre is also coordinating a ‘No evictions for bedroom tax’ petition to the Scottish parliament calling for an amendment to the Housing (Scotland) Act 2001 that would mean landlords would be unable to use rent arrears caused by the under-occupation penalty in eviction actions but would have to pursue them as ordinary debt instead. The petition already has the backing of Shelter Scotland, the Scottish TUC and Oxfam Scotland.

That point would apply in Scotland only. However, the wider considerations apply across the UK. According to the Herald, the Convention of Scottish Local Authorities said it would have to examine the legal opinion before commenting, while the DWP insisted that the decision was up to the landlord: ‘If a social landlord says it is a two-bedroomed house, regardless what happens to it subsequently, it is a two-bedroomed house and that is what housing benefit will be judged on.’

However, if the legal opinion from senior counsel is correct that the decision is up to local authorities rather than landlords, what should they be doing now?

After all, the bedroom tax will hit tenants first but it is local authorities that will have to pick up the knock-on costs so it is in their own interests to do as much to mitigate the impact as they can. While it would be unlawful to set out to evade the tax, the more families that could be classified as having one less bedroom, the fewer will end up being evicted and applying as homeless to that same authority. And the more vulnerable and disabled tenants that can be helped to stay in their adapted homes, the further meagre discretionary housing payments will go in helping everyone else.

Worst fears

Tue, 19 Feb 2013

So the government has finally admitted the potentially devastating consequences of welfare reform in a cumulative impact assessment.

Before anyone starts to think that Iain Duncan Smith has undergone a dramatic change of heart, I should add that I am of course taking about the Welsh Government, not the UK one.

The second stage review of the impact of welfare reform in Wales is accompanied by an analysis by the Institute for Fiscal Studies (IFS) of the effects of welfare reform on labour supply in Wales.

Hard numbers about the impacts are difficult to come by because of uncertainties about behavioural change and the interplay of different factors on each other. And with the UK government adding more cuts with each autumn statement and budget, the analysis does not have definitive answers. 

However, the IFS study estimates that the aggregate impact of welfare reform excluding the universal credit and the additional cuts announced by George Osborne in December will reduce household incomes in Wales by around £590 million in 2014/15. Introduction of the universal credit will reduce that to £525 million but further cuts are already in the pipeline.

Welsh education and skills minister Leighton Andrews said welfare reform would have ‘a huge and damaging effect on Wales as a whole’ and the analysis confirmed the devolved administration’s ‘worst fears about the changes’. He added: ‘From the most vulnerable in our society, through to low-middle income families, these cuts from the UK government are devastating.’

It’s a predictable reaction from what is after all a Labour government responding to cuts imposed by the Conservatives and Liberal Democrats in London. However, it is based on work by the scrupulously independent IFS and by rigorous analysis by neutral civil servants that is all the more striking because of its cautious approach.

In the context of the Westminster debate about ‘strivers’ and ‘scroungers’ and ‘hard-working families’, the IFS analysis is especially interesting when it says:

‘We find that the biggest average losses are experienced not by the very poorest households, but by the lower-middle of the income distribution. This is partly because in-work support (particularly Working Tax Credit) is being cut more sharply than out-of-work support, and partly because universal credit is a giveaway primarily to the lowest-income third of families, partly offsetting the losses those families experience from the wider welfare cuts.’

The Welsh Government’s second stage review is couched in language like ‘could’ and ‘may’. However, it brings together all of the individual welfare reforms and assesses their impact both directly on families and indirectly on other public services and the economy. So far the Westminster government has confined itself to impact assessments of individual measures and not attempted anything so comprehensive.

Seeing everything in one place brings home the full scale of cuts that will total £16 billion across the UK (£18 billion minus £2 billion invested in the universal credit). They also emphasise that some of the reforms that get the most publicity are not the ones that will have the greatest impact.

Of the main housing reforms, the April 2011 changes (including the bedroom caps and 30th percentile) will cost Wales £23 million, the shared accommodation rate £4 million and the household benefit cap £5 million. The bedroom tax (which affects Wales proportionately more than anywhere else) and CPI uprating of the local housing allowance will cost £40 million.

However, the analysis is also a sobering reminder of the much greater impact of cuts in tax credits, reforms affecting disabled people and changes to benefits uprating. To give one example, income losses in Wales from CPI uprating of working age benefits are estimated at £90 million in 2011/12 rising to £600 million in 2015/16. With worse to come under the 1 per cent uprating announced by Osborne in December, these will become even more relevant to housing organisations once direct payment starts under the universal credit.

And then there are the wider economic and social impacts. These are occasionally hinted at in the individual impact assessments produced by the Department for Work and Pensions and referred to directly in the leaked letter from the private office of Eric Pickles to Downing Street.

The Welsh Government analysis highlights impacts including:

  • There could be a potentially direct negative impact on claimants’ health through a reduction or loss of benefit income and increased poverty and the knock-on effects of migration of claimants into ‘cheaper, poorer-quality and possibly overcrowded housing’
  • Social care services could come under increased pressure, especially in the longer term, from factors including claimants forced to migrate away from informal support networks and foster carers hit by the bedroom tax. ‘Families with children are expected to be hardest hit by the benefit changes, which may put particular pressure on children’s services,’ it says. And: ‘If the net cumulative impact of the welfare reforms is poorer health outcomes, this will lead to even greater pressures in the longer term on social services.’
  • Housing could be hit by worsening affordability and increased rent arrears, evictions and homelessness due to benefit cuts, direct and monthly payments and benefit sanctions creating budgeting problems. ‘The squeeze on  household budgets may increase the risk of young people being forced to leave home as parents are unable to support them.’
  • A reduction in private rented supply and shortage of properties available at the shared accommodation rent could force families into cheaper (and already deprived) areas and lead to overcrowding in poorer-quality homes. ‘In some cases, claimants may have to move outside an affordable commute to their current jobs, and to areas with fewer labour market opportunities.’
  • Educational outcomes could be affected by reduced income and increased poverty and by migration effects from the housing benefit reforms. ‘This may lead to an increased concentration of workless, low-income and larger families in less-expensive and already-deprived areas in Wales with reduced access to high-performing schools and their associated positive educational outcomes.’ House moves could also result in the loss of a spare room used as a study area and could ‘in some cases may affect the ability of non-dependant children to stay at home and attend further education’.
  • Economic development will benefit slightly from improved work incentives but the Welsh economy as a whole will suffer as benefits and tax credits are cut by 1 per cent of GDP. According to the Office for Budget Responsibility that will lead to an immediate reduction in GDP of 0.6 per cent in the short run but the report points to international evidence that the multiplier effects may be even larger as ‘a £1 change in the income of a low-income family leads to a bigger change in their spending than a £1 change in the income of a higher-income family’.

That’s just a flavour of a report that does not sensationalise and also presents the potential positive impacts of improved work incentives. It will be followed by a third stage of research analysing the impact of welfare reform by gender, ethnicity, age and disability and at a local authority level plus more detailed work on individual areas such as housing benefit.

All of these points and more of course apply just as much to the rest of the UK as they do to Wales. However, while the Northern Irish and Scottish governments are also doing work of their own, in London the cuts just keep on coming.

One-way street

Thu, 14 Feb 2013

Repossessions are at their lowest and loans to first-time buyers are at their highest since 2007. Has the housing market finally turned the corner?

That’s certainly one interpretation of stats released by the Council of Mortgage Lenders (CML) this week showing big improvements since the year the credit crunch hit.

On Tuesday it revealed that 216,200 first-time buyers became homeowners in 2012. That was a 12 per cent rise on 2011 and it’s the first time since 2007 that the annual total has exceeded 200,000.

The figures even prompted a rare foray on to twitter by housing minister Mark Prisk. He used only his 26th tweet to broadcast the ‘Good news for first-time buyers from @CMLpressoffice. Highest since 2007.’

If he gets a moment this morning, he might want to look at the figures on repossessions too. The number of people losing their homes fell from 37,300 in 2011 to 33,900 in 2012, the third annual fall in a row. And the CML highlighted the 7,700 total for the final three months of the year as the lowest quarterly figure since the final quarter of 2007.

But a few notes of caution before he gets too carried away. First, that 9 per cent fall in annual repossessions leaves the total not just 31 per cent higher than in 2007 but higher than in any of the eight years before that too.

Second, although mortgage arrears also fell slightly, the number of households most seriously behind with their mortgage (with arrears of more than 10 per cent of their balance) rose.

Third, both of those improvements have happened under the benign conditions of the lowest interest rates ever. Any increase back to pre-crisis levels would bring increases in both and this week has also seen a warning about the ‘ticking time bombs’ of a million people on interest-only mortgages.

Fourth, that improvement in the number of first-time buyers has to be put in context. It may be the highest total since 2007 but it is still down by 55 per cent on the 359,900 loans made that year and at the current rate of increase it will take till close to the end of the decade to reach that level again.

Fifth, even that total was well down on what would traditionally be regarded as a healthy total. The years between 1997 and 2002 each saw more than 500,000 first-time buyers but in the final few years of the housing boom the numbers started to plummet.  

Sixth – and linked to that – CML figures also published today show yet another increase in buy-to-let lending. The 136,900 advances made to landlords in 2012 was the highest since 2008 (although it is still well down on the boom years of 2006 and 2007).

There are now over 1.4 million buy to let mortgages outstanding. That’s up 4 per cent on 2011 but 48 per cent since the credit crunch. It is only just over two years since one of its pioneers pronounced the sector ‘absolutely dead and will never return’.

Put all that together and the picture revealed in the English Housing Survey last week is not in the least bit surprising. The survey saw something I’ve predicted for some time: private renting overtook social renting for the first time since the 1960s.

However, there has been another shift of even greater significance: the total number of renters (7.6 million) overtook the number of people buying with a mortgage (7.4 million) for the first time since the mid-1980s, when the right to buy was in full swing. Instead of Margaret Thatcher’s nation of home owners we are becoming a nation of private renters.

This week’s reports from the ONS (saying that real wages have fallen to 2003 levels) and Resolution Foundation (predicting an even longer and deeper squeeze on living standards than it previously forecast) suggest that is not about to change any time soon.

The fall in mortgaged home ownership was happening long before the credit crunch though. It has now fallen as a proportion of housing tenure since 2000 and the boom in mortgage lending in the decade that followed appears to have merely boosted house prices without helping more people on to the housing ladder.

Despite the apparent good news this week, despite funding for lending and all the government’s home ownership wheezes, that trend is set to continue with far-reaching consequences for our dysfunctional housing market and beyond.

Capital crisis

Tue, 12 Feb 2013

The scale of the housing crisis facing London is hitting home with both Londoners and their political leaders.

In an opinion poll in the Evening Standard published today, half of people in the city say they fear being driven out of their neighbourhood by the cost of housing and six out of ten say there is a crisis in their area.

At one end of the housing scale, soaring demand from global investors is threatening to push house prices even further out of reach of ordinary Londoners. According to a report yesterday from the Home Builders Federation, it now takes the average first-time buyer 24 years to raise a deposit in London.

At the other end, homelessness continues to rise. A report on housing homeless people in London that went to the Leaders’ Committee of London Councils earlier warns that on a pretty conservative estimate of supply and demand the city faces a housing deficit of 221,700 homes by 2020 if nothing changes.

Up to now private rented temporary accommodation paid for by housing benefit has been the increasingly threadbare safety net for London’s councils and homeless families. However, boroughs like Newham and Croydon have been at the forefront of those insisting that they will be forced to place their homeless families outside the capital even though this breaches government guidance on suitability.

Meanwhile, Westminster is among those placing more and more families with children in bed and breakfast beyond the six weeks placement rule. A BBC London report last week said that the council is paying hotel bills of up to £12,000 a month for some families. The government claims this is ‘unacceptable’, Westminster says it is facing an ‘unprecedented’ problem, but, according to the report, was paying £350 a night for a hotel for one family who received £700 a week in housing benefit until it was capped.

While the weakening of the homelessness legislation is giving councils more and families fewer options, things will get even worse when the next round of housing benefit cuts hits in just 48 days’ time. The London Councils report says that the supply of temporary accommodation has already fallen by 20 per cent in the last 18 months as landlords withdraw from the market due to caps on local housing allowance and that the decline will accelerate as welfare reform is rolled out over the next 18 months.

The household benefit cap will have more impact in London than anywhere else but will now be piloted first in Croydon, Haringey, Enfield and Bromley in April before being introduced nationally in September. The delay announced before Christmas – ‘without any prior consultation or advice’, according to the London councils report – is already creating problems of its own, with the four boroughs warning they will face additional costs and unfair competition with other councils where there is not yet a cap. As Carl Brown reported two weeks ago, the four are warning that their entire budget for discretionary housing payments will be exhausted by the time the cap is introduced anywhere else.

Representatives from London local government met housing minister Mark Prisk and officials from the CLG before Christmas and put forward a series of proposals to tackle the bed and breakfast and homelessness crisis. Prisk reminded them of both the six-week rule and their obligations to place homeless families as near as possible to their home borough and not out of London. The councils warned of ‘a sustained increase in the level of homeless presentations and acceptances over the next year’ that will be exacerbated by the cap and the shortage of private rented properties available below LHA levels.

In the short term London Councils is pressing for measures to mitigate the impact of the cuts and additional transitional support and flexibility. However, it says a longer-term housing investment strategy covering public land, the powers of the mayor and boroughs and the balance between investment and housing benefit is needed to meet the scale of the challenge. Specifically, it says that the government should lift caps on housing revenue account borrowing to allow the boroughs to deliver 54,000 affordable homes and give tax relief to private landlords coming into the temporary accommodation market.

Those ideas have support not just from boroughs controlled by all parties but from Boris Johnson too. The Conservative mayor is pressing the government to allow him to keep the receipts from stamp duty in the capital as part of a 25-year plan to build a million homes. He wowed guests at the Chartered Institute of Housing’s presidential dinner last week with a speech telling them that: ‘What is needed now is a radically different approach which optimises City Hall’s role, unlocks the potential of the capital’s boroughs, allows developers including housing associations to up their game and creates a stable supply of land for housing. Above all, London needs a stable funding stream which will support and accelerate its housing and infrastructure delivery.’

It all sounds promising. However, all three of those longer-term solutions will require agreement from the Treasury. Lifting the caps and tax relief have both been suggested – and rejected - many times before. The third would require the transfer of stamp duty receipts estimated at £1.3 billion a year by Johnson. However, if the Treasury ever succeeds in generating any growth in the economy and activity in the housing market, the receipts could easily be worth much more than that. Either way, the move would raise all kinds of issues about the tax and spending relationship between the capital and the rest of the country. 

Meanwhile Johnson’s critics point to his ‘dire’ past record of promising much and delivering little. ‘He is building fewer homes and the ones that are being built are more expensive,’ Len Duvall, leader of the Labour group on the London Assembly said in a Guardian article yesterday. ‘London’s housing crisis just gets worse and worse. Johnson is either out of touch with the realities of the crisis or is deliberately seeking to make housing more expensive.’ Labour is calling for more action to help London’s 800,000 private renting households including projects to research a capital-wide lettings agency and London Living Rent.

The political divisions over housing are evident at borough level too, with Labour councils like Islington determined to maintain social housing even as Tory ones like Hammersmith & Fulham, birthplace of Conservative housing reform, target the ‘Bridget Jones’ generation of young professionals.

The first step to tackling a crisis is acknowledging that one exists. On that level, at least London’s politicians are starting to get their act together and do something to alleviate the supply crisis even if they lack the power to do anything about demand. It’s far harder to find a solution that covers the housing needs of more than just the upwardly mobile and the signs are that things are going to continue to get worse for homeless Londoners and people who need genuinely affordable homes.

Under pressure

Thu, 7 Feb 2013

The government’s arguments for the bedroom tax are continuing to unravel under intense media and political scrutiny. Will the pressure finally tell?

For the first time in years that I can remember, a social housing issue led prime minister’s questions yesterday as Labour leader Ed Miliband used the plight of people facing the tax to put David Cameron on the spot.

‘This is not a tax; it is a benefit,’ said the prime minister. Strictly speaking, of course, he’s right – the under-occupation penalty is a reduction in benefit. However, that’s not stopped the bedroom tax becoming such common parlance in the media that even ministers and government press offices have begun to use it. Cameron was committing cardinal error number one at PMQs of repeating his opponent’s attack line.

His main argument in favour was that it’s only fair to people in the private rented sector. Cameron repeated this ‘basic argument of fairness’ several times, pointing out that Labour presided over size criteria for private tenants. He said: ‘If someone is in private rented housing and receives no housing benefit, they do not get money for an extra room, and if someone is in private housing and do get housing benefit, they do not get money for an extra room, so there is a basic argument of fairness. Why should we be doing more for people in social housing on housing benefit than for people in private housing on housing benefit?’

It’s true that private tenants have faced a similar bedroom tax before and after the introduction of the local housing allowance in 2008. However, the justification put forward by Labour ministers at the time was that the government had to act because ‘unlike social housing, the deregulated private rented sector is not subject to any internal rent controls’.

As Hilary Burkitt points out, the size criteria may be pretty much the same but the impact on private and social tenants will be very different. Cameron’s ‘fairness’ argument also raises the prospect of what many social landlords fear after the next election: the introduction of an LHA-style allowance for social tenants that becomes increasingly detached from actual rents.

Finally, there is another group of people who are far more likely to under-occupy their homes than either private or social tenants: home owners. However, there are no size criteria in the support for mortgage interest scheme. And, far from cutting it back, the government has just extended a temporary concession that makes mortgages up to £200,0000 eligible for support.

Next Cameron tried the argument that the government is making extra support available on a case by case basis. This was rather undermined by the fact that he put the total of discretionary housing payments at £50 million rather than the actual £30 million.

When he attacked Labour for opposing all the government’s attempts to cut benefits and reduce the deficit, Miliband responded that the bedroom tax could end up costing more if victims are forced into smaller private rented homes with higher rents. ‘How can it possibly make sense to force people into a situation where they cost the state more, not less, by moving into the private rented sector?’

Cameron did not exactly answer the question. ‘What this Government are doing is building more homes,’ he said. ‘If the right hon. Gentleman supports that, will he now support our changes to the planning system and the new homes bonus?

That enabled Miliband to come back with: ‘So today we discover that the Prime Minister has not even got a clue about his own policy, which he is introducing in April.’

There was just time for Cameron to accuse Miliband of coming up with ‘totally pathetic, pre-scripted rubbish’ and respond to some of his own before it was time for other MPs to ask their questions. Happily, there were three more on the bedroom tax and there was still time for Cameron to repeat his cardinal error as he told Labour’s Greg McClymont: ‘I do not accept that the bedroom tax is a tax.’ As Homer Simpson might put it: ‘Doh!’

Later the same day, the bedroom tax and the prospect of it costing more not less featured on Channel 4 News report featuring Wigan & Leigh Housing. Labour showed its determination to maintain the pressure by putting up shadow work and pensions secretary Liam Byrne. His opponent was not Iain Duncan Smith or a DWP minister but Tory work and pensions committee member Nigel Mills, who wriggled uncomfortably when asked why a tenant should be forced to move and cost the taxpayer more.

The government did at least field work and pensions minister Steve Webb on the Today programme this morning (listen from about 8.30). Its report quoted the case of 60 year old John who cares for his wife Diane, who has MS. ‘It looks like govt has it in for people who are disabled through no fault of their own,’ she said. ‘We’re not scroungers.’ They had two spare bedrooms but it sounded like one was taken up with a through-floor lift and Diane said John needs the other ‘for some respite from me’. Webb argued that discretionary housing payments were specifically intended for cases like theirs but it emerged that they had already been turned down by their local authority.

On the bedroom tax in general he said that it was not fair to pay for a million spare rooms while other tenants were overcrowded. However, questioned about the plight of separated fathers who have their kids to stay at weekends, he pointed out that over 100,000 of the people affected are in work. ‘They could, for example, work a bit more and simply pay the shortfall,’ he said. ‘We’re talking an average of £14-£15 a week, so three hours at the minimum wage would pay the shortfall then he can keep the spare bedroom and have someone to stay.’

If only things were so simple as working an extra shift or a bit of overtime. In fact, as Hilary Burkitt (again) points out, the rate at which people’s benefits are withdrawn as they earn more money makes it far harder to make up the shortfall than Webb made out. A divorced father who works full time and has his 10-year old son and 16-year-old daughter to stay at weekends in his three-bed home would actually have to work 76 hours a week – the equivalent of two full-time jobs – to escape the bedroom tax. 

That minister as knowledgeable as Steve Webb can get his own benefits system so completely wrong is a measure of how fast the policy is unravelling. The more that ministers are confronted with the effects of the bedroom tax on real people the harder it is to defend it and resist calls for extra concessions.

However, with just 53 days to go until tenants’ housing benefit is cut, is it unravelling fast enough?

Growing pains

Tue, 5 Feb 2013

If you drive a car, you need a licence, an MOT and insurance. Why should it be any different to rent out a house?

That point – made by Jacky Peacock of the National Private Tenants Organisation at a Communities and Local Government committee hearing yesterday – got me thinking about the whole issue of licensing and the private rented sector.

At the moment in England we have a mishmash of local licensing schemes – in certain areas, for HMOs and even in complete local authority – and voluntary accreditation schemes. Tenants complain that their interests are inadequately protected, good landlords complain they are paying too much for red tape and both say they are being ripped off by letting agents who charge them both for anything and everything.

As if to emphasise the point, the other witnesses included the architects of two previous attempts to reform renting. Martin Partington headed up the Law Commission when it pubished its final report on Renting Homes in May 2006, when there were just under three million private rented homes. Julie Rugg was one of the authors of a review for the government calling for light-touch regulation of landlords in October 2008, when there were 3.4 million.

Both were left to gather dust on Whitehall shelves (‘I was frankly hacked off,’ said Partington) as ministers came and went and civil servants lost interest until the election in May 2010, when there were 3.9 million.

And private renting continues to expand. ‘The sector is growing – it’s growing as we’re talking,’ Rugg told the committee. In the year to 2011, the most recent data available, the private rented sector had grown by another 228,000 homes – or 624 a day. In the time the committee was hearing evidence, it grew by another 26 homes. .

In the meantime house prices remain out of reach, mortgage lenders demand huge deposits, social landlords look to market renting and (as a survey by Rightmove indicated yesterday) interest in buy to let remains strong.

As another witness, Tim Brown of De Montfort University, put it, it’s vital that the committee – and the government – ‘look forward’ and realise that the sector is already home to a million families with children. By 2020, if growth continues at the rate seen over the last five years, there will be six million private rented homes.

Agreement about what to do next will not come easily. For every Labour MP calling for greater regulation and security of tenure, there is at least one Conservative arguing that all that is required is enforcement of the regulation we already have and that longer tenancies should be by agreement between landlord and tenant.

Licensing is an equally complex issue. Designing a system that penalises bad landlords without imposing extra costs and administrative burdens on good ones will not be easy. Landlords complain that some existing schemes are more ways for local authorities to make money than to identify and tackle rogues.  Any scheme needs to be rigorous to protect tenants but it will be meaningless unless cash-strapped local authorities can enforce it. Landlord organisations continue to press for greater self-regulation but that risks being as meaningless as Boris Johnson’s grandiose-sounding but voluntary housing covenant.

And yet, back with Jacky Peacock’s metaphor, what’s so different about renting a house to driving a car? With driving, nobody questions the need to pass a test of competence or a license that can be taken away for breaking the law. Nobody questions the fact that cars over three years old need to be tested for their roadworthiness and their owners forced to pay for repairs to drive and tax them.  Or that all drivers should be forced to insure their cars. Or that certain types of vehicle – HGVs, for example – need a more specialised license. It can be harder to identify the owner of a house than a car but houses themselves stay in one place and are much easier to track.

It’s not just driving a car either. We may no longer need a license to own a dog in Britain but one is required to catch fish, have a market stall, play music or films in public – and even to be a social landlord. We impose safety requirements on private rented accommodation but they can be all too easy for rogue landlords to evade.

In Wales, the devolved government is about to implement most of the recommendations of the Law Commission and the Rugg Review. In England, awareness of the issues and the need for action is growing but the questioning from MPs yesterday – and the divisions evident in last week’s Commons debate – indicate that reaching any sort of agreement on the crucial issues of regulation, tenure and rents will be far from easy.

However, there is one step that parliament could take straight away: regulation of letting agents and the fees they charge. It’s a measure that is supported by tenants, by landlords, by local authorities, by reputable agents and even (though he now says it was merely a probing amendment) by housing minister Mark Prisk.

Action on this it is long overdue but it will not address many of the bigger issues in a private rented sector that has grown by another 30 homes in the time it took me to write this blog.

Changing the culture

Thu, 31 Jan 2013

As a new report from Shelter shows that private rents continue to rise, politicians are starting to accept the need for reform.

The charity published figures this morning showing that rents rose by an average of 2.8 per cent in the last 12 months. That’s faster than the 1.7 per cent increase in house prices in 2012 revealed by the Land Registry this week and comes at a time when wages are at a standstill.

The picture varies considerably around the country. At one extreme, London tenants seeing a 4.8 per cent increase in their rents while their wages fell by 4.9 per cent. At the other rents in the North East fell 0.4 per cent but wages rose 1.7 per cent. The two biggest increases in the country (14.1 per cent) came in Surrey Heath and nearby Elmbridge, while the eigth largest (10.8 per cent) was in the area around David Cameron’s Witney constituency.

Shelter has an interactive map here and, as it argues, the rent increases in 83 per cent of local authority districts further trap people in renting and leave them even less able to raise a deposit to buy. In the light of the government’s plan to uprate the local housing allowance by just 1% from next April they also raise the prospect of ever-increasing rent shortfalls for private tenants on housing benefit (even with some extra protection for areas seeing the biggest increases).

The conventional wisdom of the last 30 years says that private renting must remain deregulated to ensure a continued flow of investment into the sector. However, what is different about private renting and privatised industries like rail, water, gas and electricity. Prices in all of those are escalating rapidly too but at least control of them is seen as a matter for debate and politicians feel the heat when they go up.

In the meantime, as I argued on my other blog last week, record low interest rates continue to subsidise landlords’ mortgages with few signs that the savings are being passed on to tenants. What was a temporary policy designed to prevent a housing market crash has become a semi-permanent part of austerity.

The private rented sector is now an essential industry with a turnover of £29 billion a year in rents alone. Some £9.2 billion of that comes from the taxpayer in housing benefit. As, a report from the Building and Social Housing Federation showed last week, the sector is no longer just home to the young and mobile. It has grown from 1.5 million to 4 million households in the last ten years and is now home to one in six families with children.

Numbers like that demand action and the politicians are at last realising that. A Commons debate called by Labour last week of course produced the predictable contrast between opposition enthusiasts for regulation and Conservatives ones for the free market but it also showed some interesting shades between the two as well.

Under shadow housing minister Jack Dromey, Labour is developing some interesting policies on private renting. I’ve been rather unkind about them in the past on the basis that the party did not implement reforms when it had the chance when it was in government and which Labour-run Wales is now taking forward. However,  at least the issue has moved up its list of priorities in England too. Two issues dominate the immediate agenda: regulation of letting agents; and greater security and predictability of rents.

On the first, Labour called on the government to ‘regulate letting and management agents to ensure that tenants, landlords and the reputations of reputable agents are protected’. Dromey streesed this had the support of the entire industry – and even at one point of housing minister Mark Prisk. Prisk did say in 2007 that ‘I know we need to put lettings on the same regulatory footing as sales’ but now says rather obliquely this was him tabling a probing amendment.

On the second, Dromey admitted that the issue was how to achieve it and Labour called on the government to ‘take action’ without specifying how. He envisages a move to longer-term tenancies linked to indexed rents, though it’s unclear whether this would be achieved by legislation or encouragement.

However, there was an interesting intervention from Conservative MP Jake Berry, parliamentary private secretary to Shapps, who argued last week in The Spectator that ‘the private rented sector is blocking aspiration and isolating families’ and called for longer-term tenancies as are common in commercial property.

Berry argues that a ‘change in the culture of letting’ is required rather than a change in the law. ‘My personal view of the solution to the problems of the assured shorthold tenancy failing families is that we should look towards a six-year term with rent reviews, which would give landlords certainty of funding and would give tenants certainty,’ he said in the debate. ‘It would fit quite well with the number of years that young people spend in school. Those rent reviews could be retail prices index-related.’ The key to this was ‘to change people’s hearts and minds’ but there was a role for the government in pressing banks to allow landlords to grant longer tenancies.

The idea of longer-term tenancies also drew support from two other Conservatives, Mark Pawsey and Damian Collins. Collins urged the government to consider using direct payment of housing benefit as an incentive to landlords to improve their properties while Pawsey is a member of the Communities and Local Government committee that on inquiry on the issue next week.

Those hints of new thinking do not mean that cross-party consensus on private renting is about to break out any time soon. Labour is still vague about its plans and most Tories are resolutely opposed to regulation. Apart from anything else, a third of the MPs who spoke in the debate (including Don Foster, the minister who responded) are private landlords themselves and had to declare a financial interest. That’s part of a broader culture of landlordism in the country as a whole that far too often sees renting merely as a way to make money regardless of the interests of renters.

Challenging that culture will take time and changing it will take even longer. However, at least the debate has begun and it has dawned on the politicians that renters have votes.

Going spare

Tue, 29 Jan 2013

With just 62 days left the bedroom tax has gone mainstream in parliament and the national press.

The last week alone has seen three different debates in the Commons, a DWP questions in which it was the main issue, and stories in the Sun and Mail as well as, more predictably, the Guardian, Daily Record and Mirror.

Meanwhile virtually every local paper in the UK seems to be finding families affected by the tax that few of their readers would consider to have a ‘spare room’. From Bute to Torfaen and from King’s Lynn to Northampton to Hartlepool the bedroom tax is big news. In Hull, a family of seven in a four-bed house say they face losing £20 a week because of the rules on how old children have to be to get their own room.

But will any of it make any difference to what happens from April 1? A barrage of questions in parliament yesterday was met with a range of stock answers from DWP ministers. It was, alternatively, all Labour’s fault, only fair to private renters, only fair to overcrowded families or all covered by discretionary housing payments (perm any one or two from four).

All of the points raised by MPs and the media were raised again and again as the Welfare Reform Act made its way through parliament in 2011 and early 2012. The impact of welfare reform as a whole on housing associations was well summarised by the National Housing Federation last week.

The difference now is the arguments come with human stories attached. It’s one thing for ministers like Lord Freud to defend the changes in the abstract but quite another when they are confronted by the people they affect on live radio or face tabloid exposure of their own spare bedrooms (11 since you ask).

Meanwhile, as Penny Anderson notes, there is a growing mood of resistance among tenants to the bedroom tax and other cuts. Tenants in Liverpool have organised a Defend Your Home Against the Bedroom Tax campaign while both Shelter Scotland and the STUC are backing a No Eviction for Bedroom Tax campaign organised by Govan Law Centre. Could there yet be legal challenges (as Joe Halewood is arguing forcefully on his blog)?

In terms of public awareness alone all this must make a difference on top of all the publicity campaigns, door knocking, social media initiatives, tenant incentive schemes and phone calls by individual landlords. The attention paid to the issue by MPs from all parties is evidence that it is reaching their surgeries and postbags.

However, the same could be said for any number of the other welfare changes that directly affect housing, from the benefit cap to the direct payment of housing benefit, and for many more that do not. Last night’s Panorama, for example, exposed the failure of the work programme for disabled people.

At DWP questions in the Commons yesterday, ministers faced question after question about the shortage of smaller homes for downsizers and the impact of the under-occupation penalty on particular groups.

Labour’s Liam Byrne made the bedroom tax the subject of his main attack on the government but  work and pensions minister Steve Webb responded to human stories with predictable reassurances about discretionary housing payments and to arguments about the shortage of one-bed homes with a list of options like taking a lodger and working more hours.

Before that, Labour MP Tom Greatrex had raised the case of a foster parent with four foster children who lived on the border between two local authorities and and was facing considerable confusion about discretionary payments. Webb responded that the government had set aside £5 million ‘so that o that local authorities can respond on a case-by-case basis to the needs of foster carers. We believe that that is a more flexible approach than a blanket exemption.’

Labour’s Stephen Doughty asked what the impact of rent arrears from all the benefit changes would be on housing association finances and was told bluntly by Iain Duncan Smith: ‘I don’t believe there will be an impact.’ IDS continued with an attack on Labour’s record before adding: ‘We are trying to ensure that those who are paying this money are not allowed to slip into debt for any great length of time. That matter is being discussed with housing associations and we are making good progress on it. I believe that this approach will help people who are trying to get back into work enormously, rather than their being treated as though they are children who have to have all their bills paid for them.’

Newport East Labour MP Jessica Morden did not even get an answer when she pressed him about ‘the chronic shortage of smaller houses in Wales’. IDS instead attacked the opposition’s record in government and its MPs for shouting ‘like a bunch of discombobulated monkeys bouncing up and down’

The (non) answers kept coming. Webb dismissed arguments about fairness with the point that Labour had been happy with an under-occupation penalty for private renters. And he answered a question on the shortage of smaller accommodation by saying: ‘There is a danger that this is viewed in a very static way. Many of the best housing associations are looking at groups of constituents, some of whom are over-occupying and are overcrowded, and are moving people around to create space.’

However, the questions were not just coming from Labour members. Lib Dem John Leech asked how many families the DWP thought would end up downsizing into more expensive homes in the private rented sector. ‘It is worth stressing that moving is one option, but only one option, for those in work’ said Webb.. ‘Just two or three extra hours on the minimum wage would cover this deduction. There are a range of options—going into work, taking in a lodger or sub-letting—and good housing associations are working with their tenants to achieve best outcomes.’

And Lib Dem deputy leader Simon Hughes pressed for an assurance that foster carers would not lose out financially. IDS responded: ‘We have laid aside £5 million specifically to help with foster carers in the situation he described. However, we are in discussions with local authorities, county councils and the Department for Education about how best the money can be used to ensure that it specifically helps foster carers in this area, so that they suffer no hardship whatever, but can continue, and we can encourage more people to become foster carers.’

That sounds to me as though the education department is arguing that discretionary payments will not be enough and carries just a hint of movement on that particular issue. How about on other aspects of the bedroom tax?

The DWP seems certain to resist any concessions. However, as Steve Hilditch argues at Red Brick, the government may just be politically vulnerable. In 61 days time, the non-answers from ministers about discretionary payments and the ‘other options’ open to tenants will start to be put to the test in the real world. 

Tall story

Thu, 24 Jan 2013

You don’t have to look very hard for the hidden agenda in a report from the Conservatives’ favourite think-tank calling for the demolition of high-rise social housing in London.

Create Streets is a joint report from Policy Exchange and a company of the same name which campaigns for low-rise development in streets and against multi-storey developments. As usual in a Policy Exchange report it starts with a grain of truth and then adds a range of questionable assertions to advance a political agenda.

It’s true that many tower blocks were a disaster, although the blame lies as much with Conservative and Labour governments obsessed with the numbers game as it does with municipal empire builders. As The Secret History of Our Streets demonstrated last year, whole communities were bulldozed to make way for tower blocks that quickly became symbols for everything that was wrong with council housing.

However, there is another side to the story too. Many tower blocks across Britain have already been demolished and redeveloped. Many of those that remain make good homes when they are properly managed and maintained.

The report claims there are 360,000 homes in London on post-war multi-storey estates and argues that these could be replaced and another 260,000 homes built if the estates were replaced with low-rise developments in streets built on the redundant space around them.

Like many of the assertions in the report, those figures sound questionable to me – but even if we accept them one key thing is missing from the recommendations: any idea of where the money is going to come from for the regeneration. Implicitly that means it must come from private sector developers keen to cash in on valuable London sites inconveniently occupied by tower blocks. Whatever breezy assurances are offered to existing residents the net result will be less social housing.

In the meantime it is simply not true to argue, as the report does, that: ‘With very few exceptions, usually lived in by the wealthy and childless, such as the Barbican Centre, large multi-storey estates are nearly universally shunned by those who can afford to choose.’

My immediate reaction to that was that it seemed a bit harsh to tell the developers of the Shard – the tallest building in Europe - that it should be demolished. More seriously though you have to wonder why property developers are currently building 25 schemes with a tower of over 20 storeys and planning another 78 with at least one tower if high-rise living is so unpopular that nobody will buy the apartments. The figures come from a report published by Knight Frank last year that concluded that London is growing taller that residential towers are viable in areas that can command high sales prices.

So Policy Exchange and Create Streets are calling for tower blocks to be demolished in the middle of the biggest boom in building them since the 1960s. They are calling for council estates to be regenerated when many of them already are, amid huge controversy in Hammersmith & Fulham, Southwark and Newham.

The report blames the London Plan’s density targets for the boom in development of new towers but it concentrates mainly on the legacy of the past. For Policy Exchange, if social housing is not expensive enough to be sold off in the manner it advocated last year, then it should be demolished. It seems to be all about releasing the historic value of the stock and the land – but for whose benefit?

Create Streets was a new organisation to me until I saw this report. It includes a range of architects and urban design and regeneration specialists and it’s hard to argue with its stated principles about streets that are capable of lasting generations, homes that are environmentally friendly, aesthetically beautiful and tailored to how people want to live and communities that are mixtures of social housing and owner-occupation. However, is that just a small ‘c’ conservative harking back to the past that ignores examples of successful high-density multi-storey development in London and elsewhere around the world? Listen again here to the Today programme discussion on this point between Alex Morton and architect Maxwell Hutchinson.

And how much of a big ‘C’ Conservative element is there here too? Quite apart from Policy Exchange’s close links to the party, the founder of Create Streets (and co-author of the report) is Nicholas Boys Smith, a former political advisor to Conservative social security secretary Peter ‘I’ve got a little list’ Lilley in the 1990s. As well as being a board member of the Swan Foundation, he is a consultant director of the think tank Reform and a strong advocate of welfare reform and opponent of housing benefit. Other members include John Moss, the regeneration specialist and co-author of the influential Localis report that set out the blueprint for the government’s social housing reforms, and Edward Staite, a communcations and campaign consultant who has worked for George Osborne, David Cameron and Boris Johnson.

As ever with anything involving Policy Exchange, the report is a thought-provoking read that provides welcome backing for the case for new homes. However, by focussing on the tower blocks built in the past by social landlords rather than the ones being built and planned in the future by private developers, and ignoring the question of how new social housing can be financed on regenerated estates, is it concealing a rather different agenda?

You have to wonder how much social housing will be left by the time the most expensive homes have been sold and thousands of tower block homes demolished. But that, I suspect, is the point.

Lack of support

Tue, 22 Jan 2013

After a u-turn by the Welsh government, England is the only UK nation still planning to cut council tax benefit in April – and not all of England either.

As tenants and landlords gear up for the bedroom tax and household benefit cap in April and the start of the universal credit in October, it’s all too easy to forget the cut that will see affected households lose another £2 to £3 a week.

The cut will see administration of council tax benefit transferred from the UK government to devolved administrations and English local authorities but with a 10 per cent cut in funding that will save the Treasury £470 million.

Wales had been planning to implement a national scheme but late on Thursday the devolved administration revealed that it had found an extra £22 million to help with bills in 2013/14.

The Scottish Government had already done the same and Northern Ireland does not have the council tax so that leaves England on its own, with councils able to decide their own scheme provided they protectPefLack pensioners and vulnerable households.

An impact assessment by the DCLG updated in June 2012 says that the cut in England will save £410 million, with 3.1 million claimants of working age affected. Because pensioners are protected, they will lose 16 per cent of their council tax benefit or an average of £2.64 a week. 

English councils have until the end of this month to put a council tax support scheme in place. The New Policy Institute last week on 160 authorities (out of 326) that have agreed a scheme so far. Of those, 124 (77 per cent) will pass on the cut while 36 (23 per cent) will keep the existing arrangements and absorb the funding cut into their overall budget.

The NPI estimates that 830,000 claimants in those areas will be adversely affected, with another 50,000 affected by secondary changes such as the reduction or removal of the second adult rebate. Some 200,000 working people on low incomes will see a council tax increase. Those claimants will lose an average of £146 a year but as much as £213 a year in outer London.

However, there are significant local variations even within the areas passing on the cut. Some councils plan to reduce support to working age claimants by £50 a year and some by £275 a year.

Two-thirds of them will introduce a minimum payment so that everyone pays something regardless of their income, with figures ranging from 8.5 per cent to over 20 per cent.

Other measures include removal of the second adult rebate that people get when they share their home with someone on a low income, changes to non-dependent deductions, counting other benefits like child benefit and child maintenance as income and changing income tapers. There will be £100 million of transitional funding from the government.

Judging from all that, it’s hard to see how even those people who know a cut is on the way will know exactly how much they will have to pay until a bill comes through the letter box. The NPI says there will be a postcode lottery, with people in one London borough having to find 20 per cent of their council tax but those in the borough next door continuing to get support in full.

For tenants, perhaps facing a council tax bill for the first time, that will mean having to find the extra money at a time when many of their other benefits are being squeezed too.

This was exactly the point made by Welsh local government minister Carl Sergeant last week when he explained why the Cabinet had decided to drop the scheme it originally published before Christmas. He said: ‘Since December, the cumulative impact of the UK Government’s raft of changes to welfare benefits has started to become clearer, and we have seen some very disturbing analysis of the cuts by organisations including the Institute for Fiscal Studies, the Joseph Rowntree Foundation and Citizens Advice.’

He said that the government could now safely use some of its reserves held back for contingencies to give extra support for those eligible for help with the council tax.

For landlords worried about the impact of the bedroom tax, the council tax change will mean yet another call on their tenants’ income, backed potentially by court summonses and the bailiffs moving in to seize property but varying by local area.

The prospects become even bleaker come the start of the universal credit and changes to direct payment of housing costs in October.

Meanwhile later today – appropriately enough on ‘blue Monday’ or officially the most depressing day of the year – MPs debate the third reading of the Bill that will uprate many benefits by just 1 per cent from April 2014. 

Ignoring the obvious

Tue, 15 Jan 2013

Without local authorities, England has only seen more than 200,000 housing starts three times since the war. So why is council housing being ignored now?

As John Perry argues in Inside Housing, councils are currently building around 3,000 homes a year but they could build 15,000 if they were given more freedom to borrow. ‘A government that is desperate for house building shouldn’t look a gift horse in the mouth,’ he says.

Desperate is exactly the right word for our current performance on housebuilding: just 105,000 starts in England in 2011/12, down from a miserable 112,000 in 2010/11 and less than half the level needed to meet demand and prevent an ever-increasing spiral of rising prices and rents.

Looked at in the context of history, the refusal to free councils to build is even more curious. The last year in which we built anything like the number of homes needed was 1979 (209,000), which was precisely the year that the rapid decline of council housing began.

Only three times since the war have we seen more than 200,000 housing starts without taking account of the contribution from local authorities: 1964, 1965 and 1968. The total of 176,000 starts by the private sector and housing associations in 2007 was the highest for 35 years but that is when the current slump began.

With housing association investment slashed and build to rent slow to get off the ground, that leaves housebuilding and all its associated benefits for economic growth completely reliant on private housebuilders. They have only started more than 200,000 homes twice since the war and since the late 1960s they have only started more than 175,000 once.

So why the refusal to turn to local authorities? The argument within government I’ve heard advanced most recently is borrowing: under current financial arrangements any by councils and almos would count as public borrowing and increase the deficit; but changing the borrowing rules for councils (as already applies in other countries) would raise the spectre of the disastrous borrowing by regional governments in Spain in the financial markets. Both options would conflict with the coalition’s key priority of deficit reduction.

But there is a deeper prejudice against council housing too. In part this is political, since building more of it would conflict with the logic of the rest of the government’s social housing policy, which is clearly to promote a residualised social housing sector for the most vulnerable and near market rents with fixed-term tenancies for everyone else.

And it’s not just the politics of the coalition either. We have spent the last 35 years under governments of both parties moving from bricks and mortar to personal subsidies. It was not just the Conservatives and Sir George Young who believed that ‘housing benefit will take the strain’.

There also seems to be hostility in Whitehall to local government in general and investment by local government in housing in particular. The institutional memory of the mistakes of mass council housing runs deep even though tower blocks and system building were mostly the result of central government diktat. Even as memories of Ronan Pont fade, the inquest into the 2009 Lakanal House fire provides a grim reminder.

Put all of those arguments together and the resistance to council housing is more understandable. Yet each of them is steadily crumbling.

On the economics, the evidence is mounting by the day that the government’s failure to deliver economic growth is increasing the deficit rather than reducing it. Right at the top of the government there is a recognition that housebuilding is one of the best ways of delivering growth because it generates more jobs and fewer imports than the alternatives. Borrowing to invest in new homes makes just as much economic sense as it makes social sense.

On the politics, many of the leading advocates of more freedom for council housing and a change in the public borrowing rules are Conservative local authorities, notably Westminster City Council under its leader and former Cabinet member for housing Philippa Roe. It may be aiming at affordable rent homes for key workers rather than traditional council housing but the point is the same.

On the subsidies, the key argument is that directing them into housing benefit is more economic because all of the money goes to people in housing need. In contrast, subsidising the construction of a home only meets need for so long as the people in it are in need. This argument is shaky enough already since it implies an ever-increasing housing benefit bill and in any case depends on allocation policies. However, there are also some powerful new arguments against it, which ironically come from coalition policy.

In an interesting session of evidence to the public accounts committee last year, MPs asked David Orr of the NHF and David Montague of L&Q and the G15 about the trade-off between bricks and mortar and personal subsidies. David Orr quoted work showing that if you expected subsidy to be used for more than seven to eight years, capital subsidy was more cost-effective for the public purse. Below that revenue subsidy was better.

David Montague added that: ‘We are in the process of modelling the scenarios that David has also modelled, and now our conclusions are that if you take a seven-to-10-year view, revenue funding is more effective, but if you take a longer term view, capital funding is more effective. It depends very much on whether you believe that the homes that we are building should permanently be for people who will need support.’

On that basis, bricks and mortar subsidies for the sort of fixed-term tenancies introduced under the Localism Act and adopted by mostly Conservative authorities are definitely more cost-effective than housing benefit. If the coalition eventually legislates on pay to stay, with higher rents for higher earners who no longer need subsidy, the arguments will become even stronger. Fixed terms and pay to stay are not to many people’s tastes (including mine) but there are plenty of better alternatives out there and any number of options for rents, tenancies and mixtures of investment and they could improve investment for housing associations as well as councils. The point is that 35 years of orthodoxy saying housing benefit good, bricks and mortar subsidies bad no longer makes any sense.

All of which leaves blind prejudice as the only reason for continuing to ignore council housing.  Even that has partially broken down with the introduction of HRA reform. It’s way past time to go further: lift the borrowing caps, consider changing the borrowing rules for homes as well as roads and rail and allow councils and almos to build again. Let prejudice give way to common sense.

Direct impact

Wed, 9 Jan 2013

Housing is barely mentioned in the DWP impact assessment of the Welfare Benefits Uprating Bill but there is little doubt that the impact will be huge.

The technical reason for the omission appears to be that the Bill only covers benefits and tax credits for which primary legislation is needed to change the uprating method. The 1 per cent increase also applies to the local housing allowance but this can be done by regulation and so is not included in the assessment.

The obvious direct impact will be on private tenants. The 1 per cent uprating in LHA effectively amounts to a cut within a cut within a cut within a cut. More on this aspect below.

However, the impacts do not stop there. Tenants and landlords in the social rented sector could be forgiven for concentrating on the bedroom tax and other cuts due from April 2013. As things stand, housing benefit for social tenants will still be uprated in line with actual rents but how long can that be guaranteed when the link has now been broken for private tenants?

On top of that long-term worry, even if the link survives, tenants will come under even greater pressure as a result of the 1 per cent uprating of their other benefits. The impact assessment puts the average loss at £3 a week per households. However, the biggest impact will be felt by the poorest in the bottom three income deciles, who will lose £4-£5 a week.

This would be worrying enough but this impact will be compounded by the introduction of direct payment under the universal credit from October 2013. Once the housing element is paid to the tenant, any cut in any part of their income will be much more likely to turn into rent arrears. Direct payment and 1 per cent uprating will be a toxic combination even if the housing element remains unaffected.

Next consider the impact of this round of cuts on top of the recession and all the other cuts since 2010 on social housing communities. Research by the Human City Institute estimates that real incomes will fall by a combined £8.5 billion between 2008 and 2015. 

On the uprating itself, I don’t have space to go into the detail here but it is clear that the change will affect working as well as workless households. In the language of the coalition, it is also clear that many of the so-called shirkers and strivers are in fact the same people moving between insecure jobs and unemployment. With 9.6 million households affected overall, it’s likely that most social tenants of working age will be affected in one way or another. For an impartial analysis of the Bill and uprating as a whole, this briefing by the House of Commons Library is a good place to start (although as I’m writing this the link seems to be down).

As for private tenants, 1 per cent uprating is only the latest in a long line of cuts in the local housing allowance. So far, increases in LHA rates have been set to the 30th percentile, frozen for 2012/13 and increased in line with CPI rather than RPI inflation from April 2013. The final cut was meant to be temporary but will now be trumped by 1 per cent uprating in 2014/2015 and 2015/16. That is on top of extending the shared accommodation rate (SAR) to the under 35s.

As a briefing by Crisis points out, over the last decade rents have risen faster than even RPI inflation and in areas like London the disparity is even greater. The DWP impact assessment of CPI inflation assumed that rents would rise at 4 per cent a year.

With the link between the LHA and actual rents already broken, properties in many areas are already unaffordable and over the long term swathes of the country will be inaccessible to people on benefit. Although the highest rent areas will be exempt from the 1 per cent cap, the effects will be dramatic even before we get to April 2014.  A mystery shopping exercise by Crisis found that in a number of areas less than 2 per cent of shared accommodation is available to the under-35s.

Even this may under-estimate the cuts. As Joe Halewood has pointed out on his blog, the published rates for the LHA from April 2013 suggest an increase of just 0.6 per cent rather than the 2.2 per cent rate of CPI. The maximum increase anywhere in the country is 2.2 per cent and the rate is actually being cut in some areas.

The DWP impact assessment of the Bill says that the average household will be £3 a week worse off as a result of 1 per cent uprating. However, this does not include housing costs.

As Kate Webb points out on Shelter’s blog, the losses faced by private renters will be more than double that. Calculations by Shelter suggest that by April 2015 more than half of LHA rates for two-bed properties will be £3.45 a week or more below CPI indexation and £7.45 or more below actual rents.

These cuts will be happening at the same time as local authorities discharge their duty to homeless people with private rented homes – and will only add to fears that this will generate revolving door homelessness as they fall into rent arrears.

In last night’s debate, Conservative MPs accused the opposition of failing to include the impact of the government’s increase in the personal tax allowance. However, a briefing by Citizens Advice points out that anyone on housing and council tax benefit will immediately lose 85p in the £1 from anything they gain on tax. It argues that the cumulative impact of all the tax and benefit changes for a couple with two children with one of them on a full-time wage just above the minimum wage and paying rent of £130 a week will be that they will be £3.50 a week worse off from April 2013, £8 a week from April 2014 and £13 a week from April 2015. The loss for a family with the same rent earning £26,000 a year – the classic ‘hard-working family’ in whose name benefits are supposedly being cut – will see their weekly loss rise from £2.30 in April 2013 to over £12 from April 2015.

If you thought that 2013 might be the worst it was going to get for housing and welfare reform, think again. 

Second half

Tue, 8 Jan 2013

The coalition’s Mid-Term Review is as coy about what was billed as ‘the most radical reform of social housing in a generation’ as it is about what else will be done to tackle the biggest shortage of new homes in four generations.

The section of The Coalition: together in the national interest on Communities and Local Government is one of the shortest in the whole document. The five claims on what’s been done in the first half of the coalition may be many things but none of them involve housing.

Thus the coalition has ‘introduced sweeping reforms to increase local authority freedom’ but not come close to giving councils the freedom to borrow to invest in new homes that is being demanded by local politicians from all parties. It has ‘given neighbourhoods greater power to do things for themselves’ and ‘abolished regional government and reduced the size and cost of central government’ but even Policy Exchange has warned of the plans for new homes lost in the process. It has established mayors in three cities (but seen them rejected in most places). Finally, showing a true sense of priorities, it has restored weekly black bin collections to six million households.

The government’s record on investment in housing is hived off into a separate section with boasts about: introducing NewBuy and FirstBuy; creating Affordable Rent to deliver more affordable homes for less grant; introducing the New Homes Bonus; increasing the maximum Right to Buy discount and ensuring that ‘additional receipts’ are used to build more homes for affordable rent; and introducing the Get Britain Building Fund to unlock stalled sites.

On the Right to Buy the phrasing is interesting. The pledge is merely to ensure that additional receipts are used and there is no mention of the boast frequently made by Grant Shapps that there will be one-for-one replacement.

Put all that together though and there is no mention whatsoever of reforming the homelessness legislation to allow the duty to be discharged into the private sector or allowing landlords to use fixed-term tenancies.

Likewise, on welfare and jobs, the Mid-Term Report has plenty to say about the universal credit and the work programme but does not mention housing benefit beyond a reference to the household benefit cap.

The first two changes were fundamental parts of the Localism Act. All three were identified as key changes to the housing safety net in the Homelessness Monitor published by Crisis last month. Are they not worth boasting about, not worth highlighting, politically inconvenient or just filed under completed business? Or was it just, as I blogged this morning, that none of them were mentioned in the Programme for Government in 2010 either?

Looking to the future the government will ‘increase the rate of housebuilding’ by:

  • Creating a debt guarantee scheme for up to £10 billion of support for new affordable and private rent homes
  • Supporting first-time buyers by extending FirstBuy and continuing to champion NewBuy
  • Allowing developers who can prove that affordable housing requirements make a project unviable to have them reduced or removed
  • Brining more empty homes back into use, releasing public land and reducing planning delays.

The ambitions for the future in Communities and Local Government seem surprisingly modest too. There are only two of them: to continue to devolve responsibility for local government with single funding pots for local areas; and to back proposals by local authorities to share services. It’s noticeable that there is no mention of pay to stay - the big housing reform that has yet to be implemented. Is it now on the backburner, perhaps because of concerns about the practicalities - or is housing apart from housebuilding now so low down the list of priorities that it is not worth highlighting?

Unless I’m missing something (and I’ll add more later if I have), there is nothing new here. The Mid-Term Report is actually being publushed two months late by my reckoning but nothing much seems set to change as the coalition kicks off its second half.

In this afternoon’s press conference David Cameron did promise more help for people who cannot raise a deposit for a mortgage, with more details to be announced before the Budget. Whether this will amount to more than a token scheme remains to be seen but that might be preferable to one big enough to prop up house prices still further.

However, taking the plans for the future as a whole, the strategy seems to be to rely on what has already been announced to fix the broken mortgage and housing markets and encourage new investment in private renting. Plus yet more welfare reform of course – starting with tomorrow’s uprating Bill.

Best-laid plans

Mon, 7 Jan 2013

The launch of the coalition’s mid-term report later today got me thinking back to its original Programme for Government - and how much it did not say about what followed.

According to reports this morning, David Cameron and Nick Clegg, mortgages and housebulding will feature in a package of policies including a new flat rate state pension and help with long-term care. They will say in their foreword: ‘We will build more houses and make the dream of home ownership a reality for more people’

Back in May 2010, fresh from the general election and their walk in the rose garden, the Conservatives and Liberal Democrats agreed a 36-page document setting out their priorities in every department and every area of policy.

At the time I highlighted what had been dropped from the two parties manifestos. Reading it now, almost three years on, the really striking thing is how many key coalition policies were not even mentioned.

Take the section on Communities and Local Government. All the mood music of localism is there in the opening statement that: ‘The government believes that it is time for a fundamental shift of power from Westminster to people. We will promote decentralisation and democratic engagement, and we will end the era of top-down government by giving new powers to local councils, communities, neighbourhoods and individuals.’

There was rapid progress on most of the dozen or so specific pledges relevant to housing, including abolishing regional spatial strategies, reviewing the housing revenue account and exploring ways to bring empty homes back into use.

The pledges illustrated the extent to which localism was the glue that held the coalition together. However, there was no hint that the government would be launching what it described as ‘the most radical reform of social housing in a generation’ within just six months and no mention of fixed-term tenancies, affordable rent, reform of the right to buy, pay to stay or discharging the homelessness duty into the private rented sector.

On jobs and welfare, the emphasis was all on welfare to work. The work programme, payment by results, greater conditionality, reform of incapacity benefit and finding ways to improve incentives to work all featured heavily. However, there was no mention at all of housing benefit or the local housing allowance.

The most significant statement in the whole document was actually on the final page: ‘The deficit reduction programme takes precedence over any of the other measures in this agreement, and the speed of implementation of any measures that have a cost to the public finances will depend on decisions to be made in the Spending Review.’

That obvious financial imperative involved Lib Dem acceptance of the Conservative argument on the target for reducing the deficit (‘We will significantly accelerate the reduction of the structural deficit over the course of a Parliament, with the main burden of deficit reduction borne by reduced spending rather than increased taxes.’) dictated everything that followed.

Each of the unmentioned reforms was subsequently justified in terms of doing more with less money: affordable rent would maintain supply with reduced funding; fixed-term tenancies and the bedroom tax would enable more efficient use of scarce social housing; the right to buy would fund more new build. However, there was also a deeper conviction that social housing was a problem that needed ‘reform’. The thought that a greater reliance on higher and market rents might actually increase the deficit over the longer term went unmentioned.

The glue of ‘localism’ would be accompanied by an appeal to ‘fairness’ with Cameron and Clegg saying that: ‘Difficult decisions will have to be taken in the months and years ahead, but we will ensure that fairness is at the heart of those decisions so that all those most in need are protected.’ However, just as localism came to mean allowing Conservative councils to do more of what they wanted, so fairness was turned on its head to favour ‘hard-working families’ over claimants and justify policies like the benefit cap and the 1 per cent benefit uprating that parliament will debate tomorrow.

It will be fascinating to see what the coalition can come up with in the mid-term report later and it is perfectly possible that there will be something new on housing in addition to window dressing on mortgages and housebuilding. For example, one piece of unfinished business from the original programme was a pledge to ‘review the effectiveness of the raising of the stamp duty threshold for first-time buyers’.

However, just as with the Programme for Government, the financial and ideological parameters for the run-up to May 2015 have already been set.

View results 10 per page | 20 per page | 50 per page |

Newsletter Sign-up

More Newsletters

IH Subscription

- IMPORTANT ANNOUNCEMENT -

 

You will soon need to sign into www.insidehousing.co.uk using your email address rather than your username.

If you are unsure which email address is linked to your account, please Click Here. Your password will remain the same.

If you have a print subscription we need to ensure that we have the correct details in order to link your subscription to your online account, for more information Click Here.

Click Here to close window or press the Esc key.