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.
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.
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.
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.
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.
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.
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.
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.
The conclusion of my two-part review of the issues and people I was blogging about in 2012 looks at bullding, owning and affording homes - and a year of anniversaries.
6) Housebuilding: talking a good game
If you measure the importance of an issue by its media profile, 2012 was certainly the year of housebuilding. The first half of the year saw momentum building behind the idea that investment in new homes would be good for the economy as well as people who need a roof over their heads. Support came from economists and politicians (increasingly from the Lib Dem side of the coalition) and even the director-general of the DCLG was talking about a ‘decade of housebuilding’ at the CIH conference in June. Hopes were genuinely high that the case for housing was winning support at the highest levels of government and David Cameron’s party conference speech in October was heavy on anti-nimby rhetotric.
Those hopes were not dashed completely in the second half of the year but it became increasingly clear that the government was intent on a conventional approach and not minded to try anything as radical as QE for housing or changing the public sector borrowing rules for council housing. The housing and planning package in September and the Autumn Statement in December offered little substance and plenty of retreads of existing policies while the housebuilding numbers remained stuck in the doldrums.
7) Giving housebuilders what they want
A poor year for housebuilding proved to be a very good one for housebuilders as their results revealed rising margins, falling debts and soaring profits. The suspicion grew of an assumption within government that the way to boost housebuilding is to give housebuilders what they want, with a succession of housebuilder-friendly government initiatives included the NewBuy scheme to guarantee mortgages for new homes, a review of red tape, measures to unblock stalled sites and the National Planning Policy Framework. By the end of the year the government was introducing a Growth and Infrastructure Bill that allowed the renegotiation of ‘economically unrealistic’ section 106 agreements. If the evidence to justify it seemed weak, so did the apparent lack of any quid pro quo for all the taxpayer support.
8) The affordable squeeze
The changes to section 106 agreements threatened to put an even greater squeeze on affordable housing investment that was already under severe pressure. After a calamitous 97 per cent fall in April to September 2011, 2012 saw starts of affordable homes bounce back. However, the total of 3,735 was still down 72 per cent on 2010 with the biggest falls coming in social rented housing and in London.
The coalition’s social housing reforms continued with the underwhelming relaunch of the right to buy with an unlikely-sounding buy one, get one free offer. Reports from the National Audit Office and Public Accounts Committee revealed concerns about the slow progress of the affordable rent programme and the implications for rent levels and the housing benefit bill. I blogged about the slow death of social housing.
9) A year of anniversaries
Appropriately, given the shift to higher ‘affordable’ rents and the rise and rise of private renting, 2012 marked the 21st anniversary of one of the most significant statements in the recent history of housing. ‘Housing benefit will underpin market rents - we have made that absolutely clear,’ Conservative housing minister Sir George Young said in January 1991. ‘If people cannot afford to pay that market rent, housing benefit will take the strain.’ Not for much longer in the wake of a succession of cuts.
As well as the 5th anniversary of this blog, 2012 saw three other big anniversaries for housing. I blogged about the centenary of the death of Octavia Hill and the mixed legacy of the great social reformer and the 150th anniversary of the announcement of a trust ‘to ameliorate the condition of the poor and needy’ of London by an American banker called George Peabody. The year also saw the 70th anniversary of the Beveridge report, the blueprint for the welfare state that never quite managed to solve the problem of housing costs and a succession of attempts by politicians to claim his legacy. On the Queen’s Diamond Jubilee, I took a look back at six housing generations and their very different experiences of the housing market.
10) Going backwards on the housing market
Speaking of which, house prices and transactions continued to flatline and thousands of first-time buyers continued to be excluded from a dysfunctional market. There were some tentative signs of a slight upturn at the end of the year but the billions of pounds poured into schemes like quantitative easing and Funding for Lending largely benefitted banks and existing home owners. Evictions of tenants was a much bigger problem than repossessions of owners in 2012. Two years after it was pronounced ‘absolutely dead’ buy to let continued to grow while a growing proportion of home sales in London were to overseas property investors.
Long-term reform of property taxation looked as far away as ever and a study for the Joseph Rowntree Foundation concluded that housing market policy was going backwards. The FSA finally published its Mortgage Market Review with the aim of ‘hard-wiring common sense’ into it. However, the legacy of past regulatory failures was graphically illustrated in the tragic case of Malcolm Frost, who was found dead in his garden shed a few days after being evicted from the home he had sold and leased back.
See part 1 here.
The first of a two-part look back at the issues and people that I was blogging about in a momentous year for housing.
1) Private renting: a year of growth
I predicted in January that 2012 would see the private rented sector overtake social renting. As things turned out, I was wrong – but not by much. Whether you judge it by the number of homes or the number of households or the answers given by people in the Census, a combination of growth in buy to let, shrinking home ownership and the slow decline of social housing mean it will happen sooner rather than later.
It was also a year that the boundary between the two sectors continue to blur: social housing responded to the tenure shift as a series of social landlords from Thames Valley to L&Q launched private renting initiatives; private landlords like Grainger registered social housing subsidiaries; and the government approved proposals in the Montague report to kick start institutional investment in private renting.
Yet with size surely comes responsibility. Coalition rhetoric about strong families and stable communities failed to match the reality of short-term, insecure private tenancies. The Labour opposition made tentative proposals for reform of letting agents and tenancies and rents as calls for reform increased.
2) Welfare reform: implementation and some backtracking
Speaking of which, 2012 was the year of welfare reform implementation, with the bedroom tax understandably dominating the agenda for social landlords but increasing awareness that this was only one part of a perfect storm of changes due from April 2013.
The year began with the final parliamentary stages of the Welfare Reform Act. As the Lords battled with the Commons in a game of parliamentary ping-pong, I highlighted doubts about how the benefit cap would work. By the end of the year, even the DWP seemed to agree, with concessions in the Autumn Statement followed by an announcement that the cap will now be introduced in only four London boroughs from April before being introduced in the rest of the country over the summer. You would never guess from the DWP press release that this was not the original plan.
The second half of the year brought growing doubts about the implementation of the universal credit from October 2013. I blogged about how it resembled a slow motion train crash and a whole series of warnings about the detailed regulations. For housing organisations though, direct payment of housing costs to tenants is the key concern and publication of the first results from the demonstration projects and witnesses at a public accounts committee hearing confirmed the impression that we are flying blind on what will happen.
3) Homelessness: a suitable safety net?
A devastating report for Crisis in December spelt out the point that welfare reform cannot be taken in isolation: key elements of the housing support system are changed too. The year brought continuing tension between local authorities looking to cope with the new system and ministers promising that safeguards would remain. April saw a furious row between housing minister Grant Shapps and Newham mayor Sir Robin Wales over plans to send homeless people as far away as Stoke-on-Trent.
However, this was only a response to the previous year’s changes in the local housing allowance. In November, the homelessness legislation was substantially weakened when Localism Act regulations allowing local authorities to discharge their homelessness duty into the private rented sector became law. Any private tenancy has to be ‘suitable’ in its physical condition, affordability and location but it remains to be seen how this will work in practice.
4) From Shapps to Prisk
Speaking of Grant Shapps, I blogged extensively about his housing reforms, his record on housebuilding, his regular rows about statistics and the man who we learned was not just a minister but a rapper too. However, I never guessed that in addition to his many faces, Shapps also had many names. September saw me blog about his move from the housing portfolio to become chair of the Conservative Party.
The new DCLG team brought us Mark Prisk as housing minister and Nick Boles as planning minister. I blogged early on about the potential for creative tension between the two over issues such as the green belt. Boles carved himself a high profile with public statements about the need for more new homes while Prisk left me unimpressed with his defence of government policies but hoping that delivery matters more to him than his media profile.
5) Welfare reform II: strivers and scroungers
The move from housing to a party role thrust Shapps straight into the growing political row about welfare between the main three parties. The political aspects were nothing new, with the Conservatives attempting to use Labour opposition to the benefit cap to argue that the opposition was therefore opposed to hard-working families. However, the temperature was steadily raised as the budget numbers implied a need for another £10 billion of welfare cuts after the election. In April, news leaked of a Conservative plan to cut benefits for the under-25s. In June David Cameron made that official with a speech contrasting hard-working families and claimants. And by October strivers v scroungers rhetoric was filling the party conference speeches of both the prime minister and chancellor George Osborne.
However, the Lib Dems spent the second half of the year trying to put some distance between themselves and their coalition partners. Notwithstanding Nick Clegg’s plan to allow parents to raid their pension funds to buy houses for their kids, the party made it increasingly clear that it would block more radical Conservative ideas on welfare. In the Autumn Statement there was no sign of ending housing benefit for the under-25s or cutting benefits for large families. However, it also confirmed plans to restrict the increase in most working age benefits including the local housing allowance to just 1 per cent between 2014/15 and 2015/16. Austerity – and the fall-out for housing – will last for at least four more years.
Part two of my review of 2012 follows on Monday morning.
It seems about as realistic to expect clear answers from the direct payment demonstration projects as it does to expect them from senior civil servants at a select committee hearing – and that’s exactly how things turned out this week.
As the Department for Work and Pensions (DWP) was publishing the first data from the projects, witnesses including its permanent secretary Robert Devereux and head of housing policy division Andrew Parfitt were appearing before MPs at the public accounts committee (watch again here). The two things happened so simultaneously that the officials told the MPs that there was ‘no data on arrears so far’.
Which was almost true given that the report was only 18 pages long and consisted of brief snapshots from the six projects. As Carl Brown reported yesterday, the headline results are that they failed to collect around 8 per cent of the rent on average (about double the normal level) and switched 316 tenants out of 6,220 back to direct payment to the landlord in the first four months of the projects.
On the surface, those results look worrying but not as bad as many people had feared. Look beneath it, though, and the picture is much murkier. First, I believe that participation is voluntary for tenants, so the results may exclude groups who are more likely to run up arrears but even so there were still 8 per cent arrears. Second, greater support and resources is available in the project areas than will be the case once direct payment is in place nationwide. Third, the projects have different triggers for the reintroduction of payment to the landlord, which is sensible in terms of seeing what works best but makes it hard to generalise from the results.
And perhaps most importantly these demonstration projects are taking place in isolation from the wave of other changes in welfare payments that will happen before the universal credit and direct payment are introduced. It’s one thing to pay your rent on time now but it may be quite another in the wake of the bedroom tax, the benefit cap and all the other housing benefit changes due in April 2013. And once housing costs are paid direct to the tenant any of the other elements of universal credit is a potential trigger for rent arrears. As Professor John Hills of the LSE pointed out in the first session of the PAC hearing: ‘All of this is happening at once so as well as the percentage of rent loss we need to think what people will be left with to pay for everything else.’
None of that reckons with behaviour change – a mantra repeated constantly by the DWP officials. The ‘reforms’ are designed to save money but they are also designed to push people into employment (if there are jobs) and cheaper accommodation (if there is any). It is not so much nudge as shove theory. As Professor Hills said, the knock-on effects depend on what people do. If they stay put, there will be rent arrears and debt; if they move, other public authorities including schools could feel the effects.
Sitting alongside him, Mike Donaldson, the group director of strategy and operations at L&Q, said it had already made allowance in its accounts for rent arrears to double from 3.5 per cent to 7 per cent. While it would be working hard to try not to let that happen and had created a hardship fund, he added that: ‘The reality is we do think there is going to be a group of people who fall between the cracks.’
He pointed out that the the local housing allowance and all the behavioural issues involved there had been piloted over six years before being introduced around the country. ‘This is being done incredibly quickly and on a much broader scale,’ he said. ‘And I think to a certain extent the department is flying blind and we won’t know what the consequences will be until it’s far too late.’
And will it actually save any money? The worry for L&Q is that the government will impose more cuts as the housing benefit bill continues to increase because of rising rents. and that the government will therefore impose more cuts. It estimates that the housing benefit bill from rents on its affordable rent properties will go up by £4.5 to £5 million.
‘Multiply that across the country and add increases in the private rented sector as well and we cannot understand how those savings can be achieved because rents are only going in one direction,’ he said. ‘Our concern is that what will happen is that there will be more cuts over and above those introduced so far to achieve that level of savings for the department.’
The second part of the hearing consisted of jousting between PAC MPs and the DWP officials that switched back and forth bewilderingly from the LHA caps to the 30th percentile to the bedroom tax to the benefit cap to affordable rent to direct payment.
The MPs were considering November’s report from the National Audit Office on the housing benefit changes warning of ‘unplanned and perhaps un-plannable challenges ahead’. They wanted to know how much money will really be saved if the housing benefit bill is still rising.
The answer was like something out of Yes, Minister or The Thick of It. ‘I don’t know if I’ve got a bit of paper that tells me what I’ve done,’ said Robert Devereux, the DWP’s Sir Humphrey, before going on to argue effectively that the DWP will save more money than first estimated because housing benefit is costing more.
It is actually a reasonable explanation in the crazy world of housing benefit. The state of the economy means that the claimant count has gone up, which in turn means the total bill has gone up, so each individual cut could save more than originally forecast at the same time as it costs more. However, it still sounded like a compulsive shopper convincing themselves that the more they spend in the January sales the more money they will save.
‘It’s all smoke and mirrors,’ exclaimed Conservative committee member Richard Bacon. It is indeed and it doesn’t bring us much closer to what we really want to know: what the impact of direct payment will be on top of all the other ‘reforms’. We really are flying blind.
The big shift from owning to renting revealed in the census has potentially massive implications for government spending on housing costs.
The headline results revealed by the Office for National Statistics last week were that home ownership fell from 68.3 per cent of households if England and Wales in 2001 to 63.5 per cent in 2011. Private renting increased from 9 per cent to 15 per cent and social renting fell from 19.3 per cent to 17.6 per cent.
However, within that total for home ownership, the proportion of households owning outright actually increased, so the really significant change was the fall in the number buying with a mortgage from 8.4 million (38.8 per cent of households) in 2001 to 7.6 million (32.7 per cent) in 2011.
As I highlight on my other blog, if mortgaged ownership had maintained its 2001 share of total tenure, there would now be an extra 1.4 million households with between one and ten years on the housing ladder. Instead they are tenants, mostly of buy-to-let landlords. The number of outstanding buy-to-let mortgages in 2011 was – by complete coincidence of course – 1.4 million. I also have more analysis of the overall trends in tenure, including the areas with the highest and lowest owning and renting.
In this blog I want to concentrate on two long-term consequences of this change.
The first is obviously the growth of the private rented sector beyond what might be considered its traditional role as a flexible housing option for the young. As research by Shelter – and last week’s Labour policy paper – highlighted the sector is now home to more than a million families with children and its short-term tenancies look increasingly ill-suited to people who need long-term stability.
At the same time, the government appears to want an increase in private renting financed by pension funds and institutions along the lines recommended by the Montague report. So with mortgage lending constrained and social housing investment in short supply, further growth in private renting looks inevitable. Many housing associations are seeing an opportunity for expansion by applying professional management standards to a portfolio that can be used to diversify their business and cross subsidise their affordable housing. And changes to the homelessness legislation will create expanding demand for private rented homes for homeless families from local authorities.
Which brings me to the second long-term consequence of the change in tenure. Expanding home ownership has formed a key part of moves towards asset-based welfare over the last 20 years. Owners have an asset to fall back on later in life. Once they have paid off their mortgage, their only housing costs are council tax and repair and maintenance, and when it comes to long-term care or income in retirement, the equity in their home is a potential source of income.
In contrast, renters not only have no asset to fall back on and use to pay for their care or living expenses, but they also have to continue to pay rent in retirement. Unless they have built up substantial pension assets – and all the trends are against this too – that means the state will have to step in and help with housing benefit. The more private renting continues to grow, the higher that housing benefit bill will be.
The census confirms that home ownership is shrinking and so is the scope for asset-based welfare. A report by the Strategic Society Centre in the summer highlighted this issue alongside the long-term growth in the number of pensioners from 12.6 million now to 15.9 million in 2020 and 18.8 million in 2060 (when today’s 20-year-olds will be over 70).
In 2009/10, 1.5 million pensioner households received housing benefit and up to another 390,000 were entitled to claim but did not do so. They claimed an average of £69 a week at a total cost of £5.3 billion.
The report projected that by 2060 around 40 per cent of pensioners – 7.5 million – will be renting and that around half of them will receive housing benefit. It put the total cost of pensioner housing benefit in 2060 at £13.4 billion or £8.1 billion a year more than now.
However, even that projection was based on some very conservative assumptions about tenure and rents. For a start, it was based on a forecast that home ownership in England would fall to 63.8 per cent in 2021. Last week’s Census revealed that it was already lower than that in 2011.
As things stand, home ownership looks certain to fall even more over the next ten years. A report for the Joseph Rowntree Foundation in June warned of a looming housing crisis with an extra 1.5 million under-30s forced into private renting by 2020. Another out today from the Building Societies Association says that one in four prospective first-time buyers believes that it will take them at least 10 years to save a deposit.
Second, the estimate was based on the same £69 a week average pensioner housing benefit claim as now. While that allows a comparison in today’s terms, it does not reflect the continuing shift in tenure within renting. About 11 per cent of current pensioners receiving housing benefit rent privately compared to 28 per cent of non-pensioners. If the shift to private renting (and even within social housing to higher rents) continues, the proportion of pensioners paying higher private rents looks set to rise significantly in the longer term and so does the housing benefit bill.
So that projection that the housing benefit bill will rise by 40 per cent as a result of changes in tenure and demographics is likely to prove a highly conservative estimate. Faced with those kind of numbers, what should the government do?
The Strategic Society Centre argued for ‘aggressive steps to increase rates of ownership’: ‘Since declining rates of home-ownership will have severe fiscal consequences in the long-term, policymakers should therefore explicitly target the highest possible rates of owner-occupation consistent with economic stability (i.e. a lack of “housing bubbles”, or high-rates of foreclosures) and labour market flexibility. In short, policymakers should not be neutral to tenure. Higher rates of home-ownership are ultimately cheaper for the taxpayer.’
It added that policy makers should also look at over-consumption and multiple ownership of housing including second homes and buy-to-let investment. As I argued on my other blog, the census results show less a fall in home ownership than a fall in owner-occupation. Many of those 1.4 million buy-to-let mortgages are being paid by people who see their investment as their pension. Far better, surely, to come up with incentives for pension investment that do not push up house prices and leave the taxpayer to pick up much of the long-term bill. Alongside the increases in housing supply now supported by all parties, the job of government would be to strike the right long-term balance between tenures.
The looming housing timebomb should also mean increased investment in genuinely affordable housing and intervention in the private rented sector to go with measures to make it easier to get on the housing ladder at affordable prices. There is a debate to be had about whether that should just mean increased regulation and greater security or rent control too but it is one that is needed urgently.
The complete opposite, in other words, of what we currently do: short-term schemes to boost ownership for a few that just increase prices and make it less accessible for everyone else; laissez-faire policies for the private rented sector; and the slow death of social housing.
Oh yes, and squeezing entitlement to housing benefit, first for the under-25s, then for the under-35s, then for private tenants, then for social tenants. So far pensioners have been protected from any cuts – but for how much longer if nothing changes?
A combination of the recession, welfare reform and localism is set to generate increases in almost all forms of homelessness in England, according to comprehensive new analysis.
Homelessness Monitor: England 2012 published yesterday by Crisis is the full version of an academic study from which headline findings were released last week (equivalents will also be published for Wales and Scotland). It draws together evidence not only on what we normally think of as homelessness – rough sleeping and homeless acceptances – but also more hidden forms too such as concealed households, sharing and overcrowding.
On almost every measure, the study concludes that homelessness has got worse over the last year and is set to get much worse over the next three. The headline figures quoted in the report are already bad enough:
- Rough sleeping up by 23 per cent in the year to Autumn 2011- the most dramatic growth since the 1990s. Recorded rough sleeping is up by 48 per cent in London, although No Second Night Out is having an impact on long-term street homelessness.
- Homelessness acceptances up 34 per cent since bottoming out in late 2009.
- Temporary accommodation and bed and breakfast placements are both on the increase. Last week’s homelessness statistics, published too late for this report, showed that the number of families with children in B&B has risen from 740 in second quarter of 2010 when the coalition took power to 2,020 in the third quarter of 2012. The number in B&B beyond the legal limit of six weeks has quintupled from 160 to 880 over the same period.
- 1.5 million concealed households involving single people and 214,00 involving couples and long parents in 2012
- An increase in the number of sharing households between 2007 and 2010 after a long-term decline
- Overcrowding affecting 670,000 households according to the latest figures.
- Homelessness resulting from the termination of assured shorthold tenancies up 156 per cent in London in the two years to 2011/12.
The report by academics from Heriot-Watt and York concludes that the combination of the downturn plus continuing welfare reform ‘seems certain to drive homelessness up yet further over the next few years’. In the last housing market recession, statutory homelessness fell because falling house prices eased access to home ownership and freed up additional social and private lets but ‘no such benign impact …is likely this time
They say the full effects of the first wave of cuts in housing benefit in April 2011 – the bedroom caps in local housing allowance – will not be felt until later in 2012/13 because of transitional protection and the way that London boroughs have extended it to the maximum with technical breaks in tenancies.
The shared accommodation rate extended to 25 to 34 year olds in January is seen as ‘disastrous’ by charities working in the sector because it increases pressure on a supply of property that is already very constrained. Meanwhile increased conditionality and tougher benefit sanctions are having a negative impact on homeless people with chaotic lifestyles.
In next year’s wave of welfare reforms, the study says:
- there is ‘little doubt’ that the bedroom tax will ‘drive up rent arrears and/or evictions’ in less pressured parts of the UK
- the benefit cap will hit higher cots areas and one effect will be to drive up the number of out-of-area placements of homeless families
- major concerns remain about the universal credit, especially on online claiming, monthly budgeting and direct payment of housing costs to tenants.
On top of all that though the coalition’s localism reforms could make things much worse. The report argues that up to now our housing system – a combination of housing benefit, social housing and the homelessness legislation - has given poorer households greater protection than is true in many other countries.
It goes on: ‘Moves towards fixed-term tenancies in the social rented sector, and rents at up to 80 per cent of market levels, will in time weaken the sector’s safety net function, while local restrictions on eligibility for social housing risk excluding some marginalised groups in high housing need. ‘
Breaking the link between statutory homelessness and social lettings ‘appears designed to render “minimal” the number of new homelessness applications’ and to discourage family exclusions of young people based on the assumption made with scant evidence that they are jumping the queue.
That implies that there could be an apparent reduction in homelessness as measured by statutory homelessness applications. Allowing local authorities to discharge their duty into the private rented sector creates a mechanism for minimising homelessness applications in the first place and therefore one perception of the problem without doing much at all about the reality.
Ironically, the one form of homelessness that it concludes is not rising is the one that attracts most media attention: middle class homelessness. Thanks to a combination of low interest rates and lender forbearance, mortgage repossessions of well-paid professionals have not reached the levels seen in the early 1990s recession.
Otherwise though the study concludes that the period from now until the next election ‘is a crucial time period over which the homelessness impacts of the recession are likely to intensify, and be severely exacerbated by the government’s radical welfare and housing reforms’.
Ministers at the DWP routinely dismiss warnings like this as ‘scaremongering’ or – if they are really close to the mark – ‘irresponsible scaremongering’. We shall see.
In the meantime, I’ll be watching Panorama tonight for more on Britain’s Hidden Housing Crisis.
I’d love to give three cheers for Labour’s new approach to the private rented sector but I can only manage two.
Yesterday it published a policy review paper on stability and affordability for renters and families. This is the second of three policy review papers on private renting: the first covered management and letting agents, the third will cover standards and rogue landlords.
My first cheer is for the party’s analysis of the problems faced by private tenants.
The statistics provide strong backing for a new approach. Figures just published from the 2011 census reveal that private renting now accounts for almost 17 per cent of housing in England and Wales compared to just 9 per cent in 2001.
We know that there are 1.1 million families with children in the private rented sector and that six-month assured shorthold tenancies do absolutely nothing to give them the stability they need. Private renters with children are 11 times more likely to have moved within the last year than home owners with children.
Projections of future trends make an overwhelming case for reform: the policy document quotes predictions of a million people locked out of home ownership by 2020 and 27 per cent of low to middle income families in the private rented sector by 2025. A new report from the IPPR yesterday revealed the impact that these trends are having on young people in particular.
My second cheer is for the future it envisages of greater stability with longer-term tenancies and predictable rents very much along the lines of the one proposed by Shelter recently.
The policy document says: ‘We need real change in the housing market so that private renters can, where they want to, gain access to longer tenancies and obtain greater financial certainty. When renters and landlords enter into these longer tenancies, rent could be indexed for the duration of that tenancy – we will consider the most appropriate type of indexation to allow the market to operate as freely as possible, while giving certainty over future rent levels for renters and landlords.’
It makes a wholly convincing case for longer-term tenancies, one that is overwhelmingly backed by tenants and is also supported by many landlords who see that they could also benefit through reduced costs and greater ability to plan ahead. It is often the practices of letting agents and the conditions imposed by lenders for buy to let mortgages, rather than the preferences of landlords, that get in the way of this.
Labour will look at options ranging from a voluntary incentive-based approach and a ‘something for something’ deal with landlords to one that gives renters greater legal rights to longer tenancies and predictable rents. And it quotes the examples of Germany, where private tenants have a high level of security and there are limits on rent increases, and France, where the minimum term is three years and rents cannot increase by more than the increase in the reference rent index.
The party will work with mortgage lenders to ensure that buy-to-let mortgages do not prevent landlords offering longer tenancies. And it will look at options including the direct payment of housing benefit and tax incentives to landlords who do offer them.
As shadow housing minister Jack Dromey sums it up: ‘With longer term tenancies and predicable rents, the private rented sector will offer the affordable and stable homes that renters need. Families will feel that their rented house is a home and it will help strengthen communities as people put down roots and get to know their neighbours.’
As for my third cheer, I can’t quite give that because I still have a nagging doubt about Labour’s ultra-cautious approach.
The party is quite right to be concerned about the impact that talk of greater regulation in general and of rent control in particular could have on the supply of privately rented homes. It’s also right that ‘all too often, private renting is unaffordable, unstable and subject to poor conditions and bad management’.
However, when it claims that ‘our first Policy Review paper on housing set out steps to tackle unscrupulous letting agents and to end rip-off charges’, er, no it didn’t. It actually promised to ‘consider’ different models to improve standards, to ‘work in partnership with the sector to develop solutions’ and to ‘consider’ how compliance could be monitored, for example by a regulatory body with enforcement powers’. Again, it was hard to disagree with the content but there were no definite proposals and no actual policy commitments.
It could be argued that two and a half years before the next election is not the time to expect an opposition party to make those sort of commitments. However, when it comes to making all the right noises about private renting and then doing very little, Labour has previous.
Remember the Law Commission’s 2006 report on Renting Homes with its proposals for a shake-up and simplification of the law relating to all forms of renting? The last Labour government let the proposals gather dust on the shelf alongside the draft Bill that would have implemented them.
Remember the Rugg review, the independent report commissioned by Labour that in 2008 proposed regulation of letting agents and registration of landlords? As I blogged in July, the last government produced a green paper in May 2009 pledging mandatory regulation of letting agents and management agents’ but had done nothing by the time it lost power a year later.
The Labour government in Wales is now about to implement most of these proposals through its Housing Bill and Rented Homes Bill. The party in England is making all the right noises and some of what it is talking about could go still further if it wins power in 2015 – but will it actually be prepared to act next time around?
16:04: Right, time to pull a few things together. At the start of this blog I posed eight questions that might or might not be resolved in the Autumn Statement. Here’s my assessment of what we know so far:
- What will he do about those £10 billion cuts in welfare apparently needed in the next spending review period? Have the Lib Dems beaten off calls for cuts in housing benefit for the under-25s and benefits for large families and a freeze on all working age benefits? Even if they have, is something nasty still lurking in the fine print?
There was no mention of the under-25s or large families but there was still something very nasty indeed. Limiting increases in the local housing allowance to 1 per cent was at least balanced by some recognition of its disastrous impact in high rent areas. There was also no mention of housing benefit in the social sector so (presumably) the government has decided against breaking the link with actual rents and the RPI +1 formula that funds new homes. At least I hope so - but what about under universal credit?
However, restricting the increases in other working age benefits and tax credits and the universal credit from 2014 will put even more pressure on household budgets that are already at breaking point. Any cut in any benefit could trigger rent arrears when direct payment of the housing element goes to the tenant.
‘Tough for everyone – but toughest for those at the bottom,’ is how Julia Unwin of the Joseph Rowntree Foundation sums it up.
- Will he give any sort of signal about what will happen to housing investment after 2015? Social landlords badly need some certainty.
Nope. Talk of single housing pots under local enterprise partnerships could even add an extra institutional uncertainty.
- Will he give some detail about those guarantees for housebuilding?
- Will housing gain at all from the rumoured extra £5 billon of capital spending or will it all go to non-housing infrastructure?
In between all the re-announcements about support for 50,000 (or was it 120,000 homes) it’s hard to tell what is really new. As Gav Hollander is reporting, there does seem to be some new cash to unblock small sites and release public sector land. Whether that amounts to anything more than yet more subsidies to housebuilders remains to be seen.
- Will he and Iain Duncan Smith give some answers to the remaining questions about universal credit?
There were more details – and that 1 per cent uprating – but the devil really is in the detail on this one and I’ll await the verdict of the experts.
- Will the almost inevitable home ownership wheeze be anything more than window dressing?
Surprisingly perhaps there was no new initiative (SecondBuy had a good ring to it too). However, one of the more surprising aspects of the statement was that Osborne found extra money to extend support for mortgage interest concessions for an extra two years at a time when repossessions are falling and there are cuts everywhere else. Fear of them rising again before the election? Brilliant lobbying by the Council of Mortgage Lenders? Or both?
- Will he really clamp down on tax avoidance by buyers of high value homes and put any money raised to good use?
Osborne promised no new property taxes but there was no detail that I could see on proposals to levy an annual charge on homes owned through offshore companies.
- This one is a long shot but will the government finally admit that any serious plan for housebuilding has to include allowing local authorities more freedom to borrow and invest?
I had it about right with long shot, it seems, although the Greater London Authority is being allowed to borrow £1 billion for the Northern Line extension.
Overall then, there was nothing much on new homes even though there was money to build new schools to replace ones that already exist and roads that take much longer to get off the ground and create fewer jobs per pound spent. And the squeeze continues on working-age benefits and local government spending. Despite all the talk from Nick Clegg and Nick Boles about garden cities there was nothing about them either.
Better hope it works this time. Independent estimates from the Office for Budget Responsibility reveal that the rising caseloads mean the housing benefit bill is higher than it thought only six months ago. And its fiscal forecasts for the future appear to rely on a wildly optimistic expectation of improvement in the housing market, with the take from stamp duty on house sales doubling between 2011/12 and 2017/18.
15:12: Treasury expectations of housing benefit savings in the Autumn Statement will be far outweighed by the cost of more people claiming it, according to forecasts from the Office of Budget Responsibility.
The Autumn Statement documents say that uprating the local housing allowance by only 1 per cent will save £105 millon in 2014/15, £225 million in 2015/16, £245 million in 2016/17 and £260 million in 2017/18. Total saving over those four years: £835 million.
However, the OBR’s Economic and Fiscal Outlook says that higher caseloads mean that housing benefit will cost £600 million more in 2012/13 than it forecast at the time of the Budget in March, £700 million more in 2013/14, £600 million more in 2014/15, £500 million more in 2015/16 and £400 million more in 2016/17.
Those are remarkable figures when you consider that the March forecasts will have included all of the cuts announced so far. Housing benefit will cost a total of £2.8 billion more over the next five years than it forecast just six months ago.
14:42: The National Housing Federation welcomed Osborne’s commitment to building 120,000 homes and the extra money for the DCLG to buy surplus public sector land.
However, it warned that the below inflation increases in benefits created a very real risk of rising debt and arrears that could damage housing associations’ income streams and result in fewer homes being built.
The NHF added that the proposal to create a single housing pot for local enterprise partnerships raised important questions such as whether the money would be ring-fenced and whether there would be flexibility to move money to areas of greatest need.
14:37: The government still has not recognised the scale of the housing crisis, says the Chartered Institute of Housing.
It said the Autumn Statement’s £225 million to boost construction of 50,000 homes was welcome but only a small contribution, while it was disappointing that there was no more detail on the £10 billion loan guarantee fund put forward in September and Osborne had ignored calls to lift local authority borrowing caps.
14:10: The tables at the back of the Autumn Statement documents reveal the sheer scale of the savings that Osborne will be making from uprating benefits by 1 per cent from 2014/15.
On the local housing allowance, the expected saving is £105 million in 2014/15 rising to £260 million in 2017/18. The really serious savings come from working age discretionary benefits and tax credits (£505 million this year rising to £2.6 billion in 2017/18) and universal credit (£170 million in 2014/15 rising to £1.2 billion in 2017/18).
By contrast, only increasing the higher rate tax threshold by 1 per cent saves £295 million in 2014/15 rising to £1.1 billion in 2017/18. And similar restrictions on the thresholds for inheritance tax and capital gains tax raise only £40 million between them by 2017/18.
13:55: Is this good news for supported housing on the benefit cap? ’Housing payments for those in supported exempt accommodation will be disregarded for the purpose of the benefit cap. Funds available for Discretionary Housing Payments will be reduced by £10 million in 2013-14 and 2014-15, and by £5 million in 2015-16 and 2016-17, to fund this measure.’
13:38: Looking at the main Autumn Statement documents now. Here are some highlights:
- There will be ‘a temporary increase in capital spending to promote growth. This funds £5.5 billion of additional investment in infrastructure and support for businesses, including investment in roads, housing and local infrastructure, regional growth and business, exports, science, and schools and colleges.’ Sounds like quite a shopping list.
- Some extra funding for housing? ‘To support both housing and commercial development and support growth and jobs, the Government is providing a further £683 million through capital grants and financial transactions. In England, the Government will invest £474 million in local infrastructure on a recoverable basis. Around £60 million of this will be made available to support infrastructure in a limited number of Enterprise Zones. Around £225 million will be used to accelerate delivery of large housing sites, supporting around 50,000 homes. Around £190 million of the funding will be used to de-risk public sector land and enable the quicker disposal of surplus sites for new homes. Alongside this, the Government will provide £100 million to bring forward public sector sites for development.
- On housing benefit, the government will ‘uprate Local Housing Allowance rates in line with the previously announced policy in April 2013, but will cap increases to 1 per cent in most areas in 2014-15 and 2015-16’
- However, it will also ‘use 30 per cent of the potential savings to exempt rates in those areas where rent increases are highest, in recognition of the fact that rental markets differ across the country’
- support for mortgage interest ‘will now be continued at the current level through the SMI scheme to March 2015’
- More on pay to stay: ‘The Government will respond to this consultation by Budget 2013 to ensure the best use of social housing assets and that those who can afford to make a greater contribution do so, while ensuring that tenants on low incomes are not affected.’
13:25: As George Osborne sits down, that 1 per cent increase in local housing allowance looks worse and worse. Bear in mind that when it was linked to CPI rather than RPI inflation, research by Shelter and the CIH estimated that a private rented home would be unaffordable on LHA in 34 per cent of all local authority districts in England by 2023.
13:09: So far then, there seems to be a re-annouucement of housebuilding guarantees, a pledge of no new property taxes and benefits will be cut in real terms - no more than 1 per cent in the next three years, including the local housing allowance.
12.51: This being brought to you courtesy of Virgin Cross-Country Wi-fi, which is less reliable than George Osborne’s spending plans, so bear with me.
12.25 So here it is, the moment of truth. After all the advance speculation, George Osborne is finally about to give us some answers.
Probably not, in fact. That will have to wait until full details are published in the Autumn statement documents later and perhaps in departmental announcements to follow over the next few days.
However, most of the housing interest centres on key questions:
- What will he do about those £10 billion cuts in welfare apparently needed in the next spending review period? Have the Lib Dems beaten off calls for cuts in housing benefit for the under-25s and benefits for large families and a freeze on all working age benefits? Even if they have, is something nasty still lurking in the fine print?
- Will he give any sort of signal about what will happen to housing investment after 2015? Social landlords badly need some certainty?
- Will he give some detail about those guarantees for housebuilding?
- Will housing gain at all from the rumoured extra £5 billon of capital spending or will it all go to non-housing infrastructure?
- Will he and Iain Duncan Smith give some answers to the remaining questions about universal credit?
- Will the almost inevitable home ownership wheeze be anything more than window dressing?
- Will he really clamp down on tax avoidance by buyers of high value homes and put any money raised to good use?
- This one is a long shot but will the government finally admit that any serious plan for housebuilding has to include allowing local authorities more freedom to borrow and invest?
More to come, including a few answers hopefully.
Inside Housing’s account of Pat Ritchie’s departure from the HCA only adds to the eerie sense of familiarity that struck me when the news first broke.
According to Nick Duxbury’s story for IH, the interim chief executive turned down the chance to take the job on a permanent basis because the pay was not high enough. The £142,000 salary on offer is lower than other executive salaries at Maple House. It is lower than the £163,904 a year paid to Barry Rowland, who she will succeed as chief executive of Newcastle City Council (a fine city but one that is also facing a budget crisis).
It is also considerably less than the £233,000 paid to her predecessor at the HCA Sir Bob Kerslake. That was before Kerslake took a £50,000 pay cut to become permanent secretary at the DCLG. The job has also changed but the job has grown also changed with the HCA taking over the regulatory functions of the TSA but losing responsibility for London to the mayor.
The problem seems to be the government’s drive to drive down the pay of top public servants. This is on the basis that none of them should be paid more than David Cameron (even though prime ministers get free housing and can cash in with book deals, lucrative speaking engagements and charitable foundations when they leave office).
However, two other things strike me about the situation looking at it from the outside. First, two years is an awfully long time to be an ‘interim’ chief executive. Second, there are huge parallels with what happened five years ago at the Housing Corporation.
Cast your mind back to March 2007. As the merger with English Partnerships loomed (called Communities England at the time but to be renamed the HCA), Corpie chief executive Jon Rouse resigned to become chief executive of a local authority (Croydon).
According to Inside Housing’s account at the time, pay was a big factor then too. The departure came within months of the DCLG turning down a bid by Corpie chair Peter Dixon to get Rouse a 15 per cent rise on his £150,000 salary. The Croydon job reportedly paid £180,000 but it’s interesting that the Corpie one paid more five years ago than the HCA one does now.
Over at English Partnerships, not just the chief executive but most of the other directors were on more than that. Within a year, the new chief executive of the HCA, Sir Bob Kerslake, was appointed on £220,000 plus a £20,000 bonus.
As news emerged of Rouse’s departure, Inside Housing feared a power vacuum and loss of focus at the top. However, that was a time when housing investment was still expanding and the new agency was an enticing enough prospect to attract Sir Bob from local government.
The opposite is true now. The cliff edge of 2015 looms and uncertainty continues about the future of grant funding. Housing associations are battening down the hatches fearing restrictions on future rent increases. Housebuilders are warning that social landlords are reluctant to commit to section 106 purchases. Talk of transferring investment to the regions may also have an impact. And back at the HCA there are fears about the resources devoted to regulation.
Despite all the noises coming out of government about the importance of housing, none of this is sending positive signals about the importance of housing’s principal agency. It can’t be doing much for morale within the organisation. And it would seem to make the search for a high-powered successor to Pat Ritchie both more important and more difficult.
The awful story of Malcolm Frost, who was evicted and found dead in his garden shed 10 days later, has implications that go beyond one individual tragedy.
The details as reported from the inquest by The Sentinel are these. The 61-year-old former painter and decorator was evicted from his home in Alsager, Cheshire in March for not paying the rent. Roy Edwards, a friend and neighbour, had called the council to register concern about his welfare three months before but staff took no action. He told the inquest that he had been buying Mr Frost food every day because he had no money. He found him living in his shed after he was evicted and the locks were changed and when he went to check on him a few days later he was dead.
The house from which Mr Frost was evicted was his childhood home. It emerged at the inquest that he had stopped working a few years before his death and money worries had prompted him to sell his house to a private landlord and pay rent to live there. Then he fell into arrears.
The coroner recorded an open verdict in the inquest. According to The Sentinel, the case has already led to changes in Cheshire East council’s adult services department and the council is in the process of trying to trace the landlord that evicted him.
Apart from the identity of the landlord, many of the other details are unclear, including when Mr Frost sold his house and rented it back and what the details of the arrangement were. However, was there a more systemic failure on top of falings in procedures at the council and a human tragedy?
This sounds very much like a sale and rent back (or leaseback) deal of the kind that was more or less outlawed by the Financial Services Authority in February. However, that was four and a half years after the Council of Mortgage Lenders, Citizens Advice and Shelter first called on the Treasury to allow the FSA to regulate.
Comments by former CML director general Michael Coogan in October 2007 seem horribly pertinent now. ‘Controls exist for action taken by mortgage lenders when customers are in arrears but there are no such safeguards for customers entering into sale-and-leaseback schemes,’ he said. ‘In a climate of rising repossession, consumers in financial difficulty need to be well informed and protected. The government needs to consider urgently whether regulation of sale-and-leaseback schemes by the Financial Services Authority is appropriate because it would provide protection for potentially vulnerable consumers.’
As I’ve blogged several times since then for Inside Housing, the action actually taken by the authorities was anything but urgent. The Treasury finally asked the OFT to investigate in March 2008. The FSA launched a consultation in September 2009. The FSA got oversight of the sector in June 2010 and in August 2011 the Treasury introduced new regulations requiring anyone purchasing a sale and rent back home to be authorized by the regulator. In February 2012 the FSA published a report showing that most sale and rent back deals were either unaffordable or unsuitable and should never have been sold and announced what it described as a temporary closure of the sector.
Whatever the precise circumstances in the case of Mr Frost, this is not the only such tragedy involving housing over the last year or so.
Keith Cooper reported for Inside Housing last month on the child who starved to death in Westminster after a benefits delay. That was blamed on flaws in the support system for successful asylum seekers.
Richard Sanderson, 44, committed suicide at his home in Southfields, south London, in May 2011, weeks after being told that his housing benefit was to be cut by £30 a week. He left a note saying he could not face the thought of his family being homeless. In the background to this case were job centre rules and local housing allowance bedroom caps.
Peter Williams, 63, took his own life in February 2012 on the day he was due to be evicted from his home in Langford, Bedfordshire over non-payment of council tax. According to the most recent press report I can find, he owed £70,000 in legal fees over an original debt of £1,500 from the 1990s. He was a talented engineer who owned his house of more than 30 years outright but the council refused to drop the case despite being told by his MP, his GP and his friends that he suffered from mental illness.
All of these were individual tragedies and all of them happened in very different circumstances. Looking at them with hindsight, all of them may have been avoidable in the sense that someone somewhere could have done something before it was too late. However, looking at them with foresight, to what extent were they predictable too?
Consider all that in the context of next year’s welfare reforms. As vulnerable families face cuts in income and an increased risk of rent arrears and eviction, more individual tragedies look not just predictable but inevitable. The same is already true for other aspects of welfare reform, such as the administration of the work capability assessment by Atos and the case of Brian McArdle, who collapsed and died on the day his benefits were axed.
To say that is to risk the standard government accusation of ‘scaremongering’. That was the response from the DWP to last month’s warning from three charities that 450,000 disabled people and their families could lose out under the universal credit. It was also how the department described last week’s statement by Community Housing Cymru comparing the impact of the bedroom tax on people in Wales with Hurricane Sandy.
Ministers point to safeguards for vulnerable households and the pot of discretionary housing payments that is there to help. However, as the government, local authorities and landlords grapple with the implementation of next year’s cuts and reforms, tragedies like these are a powerful reminder of the potential human impact of the decisions they make and the procedures they adopt. These can seem very different seen from an office and seen from the home of a vulnerable person affected by the changes.
When issues such as retaining direct payment of housing costs for vulnerable households and the procedure for claiming the universal credit are under discussion, this is why they matter so much. That was brought home to me all too clearly in a reply to one of my tweets on Friday from Bradford District Tenants and Residents Federation quoting the reaction of one addict to the prospect of direct payment to tenants: ’Month one I’ll pay, month two in pub, month three dead.’
Decidedly mixed signals are emerging from different parts of the government over cutting housing benefit for the under-25s.
David Cameron seems determined to press ahead with the idea he first raised in April and then again at the Conservative conference in October. At prime minister’s questions yesterday he told Labour MP Mary Glindon: ‘I know that housing benefit is a very important issue, but there is a problem, which needs proper attention: we seem to give some young people a choice today, in that if they are on jobseeker’s allowance they can have access to housing benefit, but if they are living at home and trying to work they cannot. We need to recognise that in many cases we are sending a negative signal to young people through our welfare system.’
If that sounds like full steam ahead, Mary Glindon was getting some very different signals barely an hour earlier during a Westminster Hall debate she secured on the issue. Lib Dem communities minister Don Foster told her: ‘The hon. Member for North Tyneside said that the idea is something that the Government might effect, but the fact that something was said at a Conservative party conference does not mean that it becomes coalition policy. At the moment, it certainly is not.’
MPs had been briefed with arguments against the cut put not just by Crisis as part of its No Going Home campaign but also by Shelter, the National Housing Federation, Places for People and the Prince’s Trust, the charity founded by Prince Charles to help young people start their own business.
Out of 383,000 people under 25 claiming housing benefit, 204,000 have children themselves and 66,000 are in work. ‘Most young people who claim housing benefit are not in work, but young people all want to work,’ said Glindon. ‘In a recent survey by the Prince’s Trust, young people who had previously been unemployed were asked how many jobs they had applied for, and the most common response was that they had made more than 100 applications… The Prince’s Trust has also pointed out that young people who want to strike out on their own in business, and take up the trust’s enterprise programme, are often lone parents who claim housing benefit. They need housing benefit to supplement their incomes until their business is profitable enough to allow them enough salary to cover accommodation costs.’
Another key issue is what would happen to vulnerable young people who do not have a parental home to go back to or who have been forced to leave. Conservative backbencher Steve Brine raised his concern about the impact on a night shelter in his Winchester constituency and the possibility of exemptions for supported accommodation. And Mary Glindon cited the work of a support project run by Places for People in her constituency with case studies of a young woman who had suffered domestic abuse and of a young man with cerebral palsy whose support had relied on housing benefit.
In his response, Foster said that both Cameron and Nick Clegg had stressed that ‘were such a move to become reality, vulnerable groups, particularly those in care, will be protected’. He listed everything that the government is doing on youth homelessness and argued: ‘England has one of the strongest safety nets in the world for families with children and for vulnerable people who become homeless through no fault of their own. Sixteen and 17-year-olds, care leavers under the age of 21 and people over 21 who are vulnerable as a result of being in care are priority groups and, as such, should they find themselves without a roof over their head, they will be housed by local authorities.’
That sounds at first like the usual ministerial bluster that does not address the issue. However, Foster was warming to his theme: ‘We have funded youth homelessness charity St Basils to support local authorities and their partners in that work. Thanks to the work of young people’s homelessness charities such as St Basils, Centrepoint and Depaul… and to the work of local authorities, it is now very rare for young people under 18 to end up on our streets.
‘Many people experiencing homelessness have had a range of negative experiences in their childhood or youth. We accept that young people are a key risk group—35 per cent of those accepted by local authorities as homeless in 2011-12 were under 25. As the hon. Lady rightly said, family breakdown is a prime cause of youth homelessness. Young people with experience of care are particularly vulnerable, with 16 per cent of rough sleepers surveyed by a recent study having experienced care at some point during their childhood.’
It was not exactly off message – since there is no agreed coalition message – but in defence of a hypothetical coalition policy that has not yet been agreed Foster was actually putting some very impressive arguments against the cut. As Mary Glindon pointed out: ‘What commitment is there to keeping housing benefit for those young people under 25? Once they have benefited from all the support, not being able to work may stop those in rented accommodation being able to pay the full rent. What assurance is there that that cushion will remain for as long as people need it so they can live in a home of their own?’
Behind the scenes, and sometimes in front of them, talks continue between the Conservatives and Liberal Democrats about the extra £10 billion of welfare cuts (and maybe even more) that projections of the public finances say will be needed after 2015. Cutting housing benefit for the under-25s is the most prominent of the Tory suggestions and obviously has Cameron’s personal backing. However, work and pensions secretary Iain Duncan Smith has already said that any cut would only apply to new claimants, which dramatically reduces the scope for savings and will put the pressure on other parts of the budget, and as the debate showed the campaign against is gaining momentum. The Lib Dems say they will only agree to more welfare cuts for the poor if they are accompanied by tax increases on the rich.
As Foster replied to Mary Glindon’s questions: ‘I cannot give her an assurance one way or the other. All I can do is tell her that that is not currently the Government’s policy. We will both have to wait to see what emerges.’
A year ago this week some devastating statistics were published that undermined everything that the government was saying in its housing strategy. Has anything changed 12 months on?
The 97 per cent fall in starts of affordable homes (to just 454 in the whole of England) between April to September 2010 and the same six months in 2011 was published the day after David Cameron and Grant Shapps launched a strategy they claimed was ‘radical and unashamedly ambitious’. Whether the timing was coincidence, cock-up or conspiracy it caused acute embarrassment for the government.
After that, the only way was up. Starts duly picked up in the second half of the year but the acid test was always going to be the number of starts a year later.
Stats published by the DCLG reveal that there were 3,735 starts of affordable homes in April-September 2012. The good news for the government is that is almost eight times more than the record low of April to September 2011 (now revised upwards slightly to 480). Starts of homes for social rent and affordable home ownership both improved but most of the increase came from 2,608 homes for affordable rent.
The bad news is that the total is still 72 per cent down on April to September 2010. Starts for affordable home ownership are down 80 per cent from 3,197 to 629 over the last two years while starts for social rent are down 95 per cent at 490.
The pattern is clearly illustrated in the graph below showing the 12-month rolling totals of starts every six months since the end of March 2010 (just before the election). The Labour programme dominated by social rent but also including significant number of homes for affordable home ownership and intermediate rent has tailed away and the smaller coalition one dominated by affordable rent is only just getting going.
This is also the first set of stats since the London mayor Boris Johnson took over responsibility for the affordable housing programme in the capital from the HCA in April. No London-only figures have yet been published that I can find but it’s simple enough to work them out from the DCLG stats for the whole of England and the HCA stats for England outside of London. [EDIT: The London stats with borough breakdown are available here.]
Affordable housing starts totalled 4,341 in London in April-September 2010 and fell to just 56 a year ago (all of them for social rent). The figures for April-September 2012 show an improvement but only to 425 for the whole of London.
This second graph shows the 12-month rolling totals for starts of affordable homes in London for each six-month period back to March 2010. The pattern is the same as for the national graph, with a steep decline setting in from April 2011 as social rent starts fall away dramatically from 2,563 in April to September 2010 to 56 in the same period last year and 117 in April to September 2012.
However, the fall in starts in London has been much steeper than in the rest of the country. In April-September 2010 33 per cent of all starts were in the capital. That proportion fell to 12 per cent in 2011 and fell again to 11 per cent in 2012.
The stats for completions in England (which I don’t have space to go into in detail here) show a decline from 19,565 in April to September 2010 to 12,788 in 2011 and 11,432 in 2012. For London only, completions fell from 3,965 in 2010 to 2887 in 2011 and 1,558 in 2012. The capital accounted for more than 20 per cent of completions between 2009 and 2011 but its share fell to just 14 per cent in 2012.
If the affordable rent programme delivers as planned, we can expect to see the numbers improve in the run-up to 2015. The public accounts committee said last month that delays in agreeing contracts mean delivery is skewed to the final year of the programme.
What’s striking is that the biggest falls so far are in the most affordable type of home (social rent) and in the least affordable region (London). That’s not a big surprise given that the focus of the programme is on keeping numbers up despite a 60 per cent cut in investment. Some of the lost ground should be made up by 2015. However, it’s still a stark illustration of the impact on affordable housing construction – and this at a time when it could have made the most difference to the economy.
Halfway through the parliament and the traffic lights seem to be taking for ever to change from red to green for housing.
It also looks like a good time to judge the record of this government and a time to stand back and admit that whoever had been in charge over the last two and a half years would have struggled against the grim backdrop of austerity.
Those are points well made by the CIH, NHF and Shelter in their third Housing Report. The good news is that ministers are at last making the right noises about the positive effects of housing investment but, as the report says, pledges and policies are not proof of progress.
On a traffic light system, the report gives the coalition four red lights, four ambers and two greens. On the face of it, not much has changed since the first report in October 2011 (four red lights, three ambers, two greens) and the second in May 2012 (five reds, three ambers and two greens).
It’s certainly hard to argue with the red light verdicts on overcrowding, homelessness, help with housing costs and affordability in the private rented sector. Green looks right on empty homes and evictions, repossessions and arrears while a non-committal amber looks appropriate for planning and mobility.
So for the real debate is about the final two categories given amber. On home ownership, that’s unchanged on the previous two reports and this one balances the continuing fall in home ownership with a slight improvement in house sales and relative stability in house prices.
It’s true that existing home owners are doing quite nicely thanks to low interest rates but that is reflected in the stats on arrears and repossessions. All the political rhetoric about Right to Buy 2 and all the millions of pounds poured into initiatives like FirstBuy and NewBuy have not made much difference to people who want to buy and are stuck paying extortionate rents. And the slow decline in owner-occupation masks a more pronounced fall in those buying with a mortgage rather than owning outright.
If the colour of the traffic light is debatable there, I find it harder to understand why the CIH, NHF and Shelter conclude that housing supply has improved from red in the first two reports to amber now. (Though I do now with the comment below from Toby Lloyd: amber means no progress whereas red means getting worse).
True, David Cameron promised in September ‘to unleash one of the biggest housebuilding programmes this country has seen in a generation’ but the rhetoric only showed up the stunning lack of progress since the original housing strategy in November 2011. True, ministers have made themselves busy announcing the initiatives like the Get Britain Building Fund, the debt guarantee, the Montague report and the self-build fund the progress on the ground has been modest at best.
As I blogged a couple of weeks ago there is some good news, some bad news and some very bad news in the latest figures on net additional housing supply. Total supply in 2011/12 was up 11 per cent on 2010/11 at 135,000 but that is still more than 100,000 short of the level needed to meet demand, which means the housing shortage is still getting worse. Affordable housing supply was down 4 per cent.
And what is there to show for all the initiatives and money ploughed into housebuilding? Figures on construction output released earlier this month show that new work on housing is down by 13 per cent since the government launched its Plan for Growth in March 2011 and 12 per cent since the housing strategy a year ago.
However, I may be looking in the wrong place for good news. The Financial Times reported earlier this week that the major housebuilders say government incentives to boost housebuilding are paying off. Sales numbers are up but it’s telling that the article sees rising sale prices (and margins) as a yardstick for success.
According to one city analyst: ‘Rising profits translated into rising share prices in 2012 and we would expect this to repeat in 2013, although it is unlikely that the sector would record another increase of over 50 per cent in the year.’
A 50 per cent increase in share prices in the first year of the housing strategy certainly seems to deserve a green light. The boss of Persimmon predicts a wave of takeovers as housebuilders chase land and prepares to return £1.9 billion to shareholders. Profits at Barratt are up 159 per cent over the last year on the back of 24 per cent of sales supported by the taxpayer.
As the housing sector sits at the traffic lights waiting for them to change, housebuilders are shooting straight through them in the inside lane.