Sunday, 28 May 2017

Inside edge

All posts from: January 2009

Opportunity knocks

Wed, 14 Jan 2009

What’s housing got to do with social mobility? Not much, according to the new opportunities white paper

Housing gets just nine mentions in 108 pages and one new policy - a £15 million new communities fund to support the work of the Homes and Communities Agency and 10 local authority pilot programmes.

Contrast that with yesterday’s report of the Social Mobility Commission (sponsored by the Lib Dems). Housing gets 54 mentions in 85 pages and is recognised as one of six key drivers.

‘Being in social housing as a child increases the risk of multiple disadvantage in adulthood and being in social housing as a young adult increases the risk of multiple disadvantage later,’ it argues.

‘This association holds in relation to health, education, self-efficacy as well as economic disadvantage.  Such an association is not inevitable: longitudinal analysis shows that the disadvantages of growing up in social housing have increased with the growth of owner occupation, suggesting that it is not social housing per se which is disadvantageous but its relative status in the housing market.’

The commission calls for a new target to end overcrowding in rented accommodation by 2020 and steps to make housing more affordable including giving greater priority to more social rented accommodation. 

And yet the white paper also contains something that could make a huge difference to all public authorities dealing with housing (and maybe even housing associations too if they fail to preserve their public but not public, private but not private status).

‘We will consider legislating to make clear that  tackling socio-economic disadvantage and narrowing gaps in outcomes for people from different backgrounds is a core function of key public services,’ it says. In the Guardian Polly Toynbee calls it ‘Labour’s biggest idea in 11 years’ while the Standard reports that one Cabinet minister describes it as ‘socialism in one clause’.

It remains to be seen whether such a duty will ever be implemented as part of the Equalities Bill but what if it was? 

Take the right to buy. Does it enhance social mobility - it has enabled millions of tenants to buy their homes - or stall it by reducing the stock of affordable rented homes?

Or schools admissions policies. Surely they widen gaps in outcomes by allowing parents to buy homes in the catchment areas of the best schools? The Social Mobility Commission advocates admissions ballots to reduce segregation (a recommendation immediately rejected by the Lib Dems). 

Or the whole debate about secure tenancies. Would abandoning them for new tenants promote mobility for some by making them more independent and aspirational or reduce mobility for others by removing a secure base to look for work.

Or Treasury policies that have increased the threshold for inheritance tax and reinforced the fact that the only first-time buyers able to access the housing market are those with help from their families.

And what about policy as a whole? Despite the recent fall in house prices, the gap between home owners and social tenants has grown exponentially over the last 11 years. None of the laudable things that the government has done on decent homes, sure start or community regeneration can disguise that.  

More radical New Labour thinkers like Alan Milburn (newly returned to the government fold as an adviser on social mobility) once believed that the answer was to extend the right to buy and promote yet more home ownership. ‘We are just scratching the surface,’ he said in a 2003 lecture. ‘You only have to look across the Atlantic to see what could be done. US government-sponsored enterprise companies have helped 58 million low- and moderate-income families buy their own homes.’

Five years and millions of sub-prime foreclosures later that agenda seems dead in the water. What will take its place?

Opportunity knocks

Wed, 14 Jan 2009

What’s housing got to do with social mobility? Not much, according to the new opportunities white paper

Housing gets just nine mentions in 108 pages and one new policy - a £15 million new communities fund to support the work of the Homes and Communities Agency and 10 local authority pilot programmes.

Contrast that with yesterday’s report of the Social Mobility Commission (sponsored by the Lib Dems). Housing gets 54 mentions in 85 pages and is recognised as one of six key drivers.

‘Being in social housing as a child increases the risk of multiple disadvantage in adulthood and being in social housing as a young adult increases the risk of multiple disadvantage later,’ it argues.

‘This association holds in relation to health, education, self-efficacy as well as economic disadvantage.  Such an association is not inevitable: longitudinal analysis shows that the disadvantages of growing up in social housing have increased with the growth of owner occupation, suggesting that it is not social housing per se which is disadvantageous but its relative status in the housing market.’

The commission calls for a new target to end overcrowding in rented accommodation by 2020 and steps to make housing more affordable including giving greater priority to more social rented accommodation. 

And yet the white paper also contains something that could make a huge difference to all public authorities dealing with housing (and maybe even housing associations too if they fail to preserve their public but not public, private but not private status).

‘We will consider legislating to make clear that  tackling socio-economic disadvantage and narrowing gaps in outcomes for people from different backgrounds is a core function of key public services,’ it says. In the Guardian Polly Toynbee calls it ‘Labour’s biggest idea in 11 years’ while the Standard reports that one Cabinet minister describes it as ‘socialism in one clause’.

It remains to be seen whether such a duty will ever be implemented as part of the Equalities Bill but what if it was? 

Take the right to buy. Does it enhance social mobility - it has enabled millions of tenants to buy their homes - or stall it by reducing the stock of affordable rented homes?

Or schools admissions policies. Surely they widen gaps in outcomes by allowing parents to buy homes in the catchment areas of the best schools? The Social Mobility Commission advocates admissions ballots to reduce segregation (a recommendation immediately rejected by the Lib Dems). 

Or the whole debate about secure tenancies. Would abandoning them for new tenants promote mobility for some by making them more independent and aspirational or reduce mobility for others by removing a secure base to look for work.

Or Treasury policies that have increased the threshold for inheritance tax and reinforced the fact that the only first-time buyers able to access the housing market are those with help from their families.

And what about policy as a whole? Despite the recent fall in house prices, the gap between home owners and social tenants has grown exponentially over the last 11 years. None of the laudable things that the government has done on decent homes, sure start or community regeneration can disguise that.  

More radical New Labour thinkers like Alan Milburn (newly returned to the government fold as an adviser on social mobility) once believed that the answer was to extend the right to buy and promote yet more home ownership. ‘We are just scratching the surface,’ he said in a 2003 lecture. ‘You only have to look across the Atlantic to see what could be done. US government-sponsored enterprise companies have helped 58 million low- and moderate-income families buy their own homes.’

Five years and millions of sub-prime foreclosures later that agenda seems dead in the water. What will take its place?

Don't look now

Mon, 12 Jan 2009

If you thought 2008 was bad, just wait for 2009 and 2010, according to gloom-ridden new construction industry forecasts this morning.

The Construction Products Association says housing starts will fall to just 70,000 in 2009 - the lowest peacetime level since 1924 - and 85,000 the following year. 

Rising investment in social housing will offset some of the calamitous slump in private housing output – 20 per cent in 2008, 34 per cent in 2009 and 5 per cent in 2010 - but falling section 106 output means the number of new social homes will peak at just 36,000 rather than the government’s 45,000 target.

The association’s annual forecasts are highly respected in the construction sector and envisage that total industry output will fall by 8.5 per cent in 2009, the biggest decline since the early 1980s. Private housing repair and maintenance work will slump by 15 per cent in 2009.

The pain will be felt across the sector but especially by house builders. Little wonder that their trading updates are revealing desperate measures like working a four-day weekhalving staff numbers and slashing completions

But it’s not just the next two years or the business prospects for house builders that should be setting the alarm bells ringing. The association says housing starts will only recover to 2008 levels in 2011 and will still be 20 per cent below 2007 levels in 2013. In total, the six years between 2008 and 2013 will leave the government more than 600,000 homes short of its long-term target. And provision of affordable homes will rise steadily to 2010 but peak well short of the government’s ambitions.

And all of that is despite everything the Bank of England and government have done to try to revive the housing market. The association says ‘recovery is only likely in 2010 if the credit situation improves and the economy begins to recover’. 

Failing that, and with house building capacity devastated by the recession, the stage will be set for a whole new set of housing supply shortages, booming prices - and an inevitable bust to follow. Why isn’t the government under much more pressure to invest some of the billions of pounds it has committed to VAT cuts and propping up the banks - with more to come soon - in building more homes to avoid that?

Don't look now

Mon, 12 Jan 2009

If you thought 2008 was bad, just wait for 2009 and 2010, according to gloom-ridden new construction industry forecasts this morning.

The Construction Products Association says housing starts will fall to just 70,000 in 2009 - the lowest peacetime level since 1924 - and 85,000 the following year. 

Rising investment in social housing will offset some of the calamitous slump in private housing output – 20 per cent in 2008, 34 per cent in 2009 and 5 per cent in 2010 - but falling section 106 output means the number of new social homes will peak at just 36,000 rather than the government’s 45,000 target.

The association’s annual forecasts are highly respected in the construction sector and envisage that total industry output will fall by 8.5 per cent in 2009, the biggest decline since the early 1980s. Private housing repair and maintenance work will slump by 15 per cent in 2009.

The pain will be felt across the sector but especially by house builders. Little wonder that their trading updates are revealing desperate measures like working a four-day weekhalving staff numbers and slashing completions

But it’s not just the next two years or the business prospects for house builders that should be setting the alarm bells ringing. The association says housing starts will only recover to 2008 levels in 2011 and will still be 20 per cent below 2007 levels in 2013. In total, the six years between 2008 and 2013 will leave the government more than 600,000 homes short of its long-term target. And provision of affordable homes will rise steadily to 2010 but peak well short of the government’s ambitions.

And all of that is despite everything the Bank of England and government have done to try to revive the housing market. The association says ‘recovery is only likely in 2010 if the credit situation improves and the economy begins to recover’. 

Failing that, and with house building capacity devastated by the recession, the stage will be set for a whole new set of housing supply shortages, booming prices - and an inevitable bust to follow. Why isn’t the government under much more pressure to invest some of the billions of pounds it has committed to VAT cuts and propping up the banks - with more to come soon - in building more homes to avoid that?

Tough options

Sun, 11 Jan 2009

Just as we had grown used to the idea of a rank of taxis waiting to rescue struggling housing associations, it emerges that some of the drivers will offer you cash back as well as a lift to your destination.

Who would have imagined a year, six months, even a month ago that, as Inside Housing reports today, housing associations would be lending each other millions of pounds and considering the merits of lender option borrower options (LOBOs) and Bermudan cancellable swaps?

It’s yet another measure of the scale and pace of the financial crisis that terms that were once known only to a small group of finance directors and consultants are now creeping into common parlance in the housing world. 

As Malcolm Levi argues today, the ‘golden age’ is well and truly over. It’s been replaced by an age of uncertainty in which the situation is changing so rapidly that it defies any attempt to predict what will happen next.

The only real comparison I can think of is the early stages of the credit crunch, when it emerged that devices that most people had never heard of - collateralised debt obligations and mortgage-backed securities - had brought the financial system to its knees.

The housing sector is not there yet, but when the regulator admits to a watch list of six associations, a leading house builder says he knows of 22 that are in ‘dire straits’, and an anonymous housing expert tells the Financial Times that the state will have to ‘consider recapitalising the biggest, weakest RSLs’ there is no room for complacency. 

Meanwhile, the immediate cause of the problems - the collapse of the housing market and its effect on low-cost home ownership sales - continues to get worse. According to today’s Herald, there are problems even in the relatively robust Scottish market, with 20 per cent of the 1,324 homes built for shared equity since 2005 lying empty. 

The underlying cause - the credit crunch - shows no signs of improvement. And the cure prescribed - dramatically lower interest rates - has led to a whole new set of problems for associations. 

In that environment, only time will tell the real risks posed by the emergency loans plan (which in many ways is an admirable example of solidarity in the sector) or those LOBOs. 

On the one hand, LOBOs appear to have been a perfectly acceptable alternative to loans from the public works loan board for local authorities and police and fire authorities since at least 2002. If they are the only lending on offer, then needs must. From a local authority perspective, the advantages are attractive rates and the option to repay the loan if the lender increases them and the disadvantages are lack of certainty, inability to repay the loan if the rate is not changed and high minimum principal sums.

On the other, as Traderisks points out in Inside Housing, LOBOs do not provide transparency and ‘housing associations are replacing safe 30-year facilities with new facilities that could end in five years time, thus creating a significant refinancing risk in this very uncertain future’.

Little wonder that the Tenant Services Authority will be spending more on regulation than the Housing Corporation. What ever happened to the old certainty that recessions are good for social housing?

Tough options

Sun, 11 Jan 2009

Just as we had grown used to the idea of a rank of taxis waiting to rescue struggling housing associations, it emerges that some of the drivers will offer you cash back as well as a lift to your destination.

Who would have imagined a year, six months, even a month ago that, as Inside Housing reports today, housing associations would be lending each other millions of pounds and considering the merits of lender option borrower options (LOBOs) and Bermudan cancellable swaps?

It’s yet another measure of the scale and pace of the financial crisis that terms that were once known only to a small group of finance directors and consultants are now creeping into common parlance in the housing world. 

As Malcolm Levi argues today, the ‘golden age’ is well and truly over. It’s been replaced by an age of uncertainty in which the situation is changing so rapidly that it defies any attempt to predict what will happen next.

The only real comparison I can think of is the early stages of the credit crunch, when it emerged that devices that most people had never heard of - collateralised debt obligations and mortgage-backed securities - had brought the financial system to its knees.

The housing sector is not there yet, but when the regulator admits to a watch list of six associations, a leading house builder says he knows of 22 that are in ‘dire straits’, and an anonymous housing expert tells the Financial Times that the state will have to ‘consider recapitalising the biggest, weakest RSLs’ there is no room for complacency. 

Meanwhile, the immediate cause of the problems - the collapse of the housing market and its effect on low-cost home ownership sales - continues to get worse. According to today’s Herald, there are problems even in the relatively robust Scottish market, with 20 per cent of the 1,324 homes built for shared equity since 2005 lying empty. 

The underlying cause - the credit crunch - shows no signs of improvement. And the cure prescribed - dramatically lower interest rates - has led to a whole new set of problems for associations. 

In that environment, only time will tell the real risks posed by the emergency loans plan (which in many ways is an admirable example of solidarity in the sector) or those LOBOs. 

On the one hand, LOBOs appear to have been a perfectly acceptable alternative to loans from the public works loan board for local authorities and police and fire authorities since at least 2002. If they are the only lending on offer, then needs must. From a local authority perspective, the advantages are attractive rates and the option to repay the loan if the lender increases them and the disadvantages are lack of certainty, inability to repay the loan if the rate is not changed and high minimum principal sums.

On the other, as Traderisks points out in Inside Housing, LOBOs do not provide transparency and ‘housing associations are replacing safe 30-year facilities with new facilities that could end in five years time, thus creating a significant refinancing risk in this very uncertain future’.

Little wonder that the Tenant Services Authority will be spending more on regulation than the Housing Corporation. What ever happened to the old certainty that recessions are good for social housing?

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