All posts from: February 2009
If any bank has mattered to housing it is HBOS. So today’s news that it lost £10.8bn last year is grim news for homeowners, housing associations and house builders in particular as well as taxpayers and the economy in general.
Before being taken over by Lloyds and then, more or less, by us, Halifax Bank of Scotland was the largest mortgage lender with 20% of the market. It was one of the major lenders to housing associations - combined with Lloyds it is the biggest. And, thanks to a spectacularly ill-advised strategy, it built on its lending to house builders by taking stakes in five of the top 20 companies at the top of the market.
Its accounts show that it made losses of £950m from ‘associates and jointly controlled entities’. This was ‘due to the rapid deterioration in trading performance across the house building and property sectors and falls in the value of investment properties’.
It also made a provision of £1.05bn on lending and investment in the house building sector.
As if this was not bad enough, the problems piled up in its mortgage book too. The proportion of its mortgages with an indexed loan to value of more than 100% - borrowers in negative equity - rose from just 0.1% in 2007 to a staggering 16.8% in 2008.
That’s about the same as house prices fell over the year according to the Halifax house price index but there must also have been significant lending at 100% or more to explain such an increase.
If that 16.8% were repeated across the market it would mean that 1.4m borrowers are already in negative equity. A survey by out today says that could rise to 5m. Anything like that amount will damage the banks still further.
About the only good news that can be derived from HBOS’s accounts is that there is no bad news about housing associations. The merger of Lloyds and HBOS created the largest lender to the social housing sector with £13bn of loans. Associations may not be responsible for HBOS’s housing hell but they will still feel the impact.
New figures out today reveal that house prices are falling at a record rate - but mortgage payments have come down almost twice as quickly.
The 1.8% fall in house prices recorded by the Nationwide in February means that the annual rate of decline is now 17.6% and that the average price is now 20.6% below the peak of October 2007.
But the building society says mortgage payments for the average existing borrower on a variable rate have fallen 31% per cent since December 2007 thanks to record low interest rates. The average existing owner now has an extra £227 a month in their pocket and in London the difference is £359.
And first-time buyers lucky enough to get a mortgage are seeing a double benefit from the combination of low rates and falling house prices - but only those with a large deposit are seeing the full impact.
In December 2007, the average first-time buyer taking a 90% loan on a home worth £157,000 paid a deposit of £15,700. The mortgage rate was 6.06% and their monthly payment was £915.
Massive savings are available now that the price of an average first-time buyer home has fallen to just under £126,000 - but their actual payments will depend on the size of their deposit.
Put down 20%, or £25,000, and they can get a tracker mortgage at 3.99% and their monthly payment will be £530 - a massive saving of £385 a month.
But if they can only afford 10%, or £12,500, the best deal available will be a fixed rate of 6.29%. Their monthly payment will be £748 - a monthly saving of £167.
The Nationwide’s house price figure makes the rise recorded in January by the rival Halifax seem like a blip. Analysts suggested it dispelled any hope that the market had yet reached the bottom. The crucial factors would seem to be the availability of mortgages to first-time buyers - and the rate on that 90% loan is actually higher than in December 2007 despite the huge fall in the Bank of England rate - and the prospect of another million unemployed.
But for all the gloom about house prices and repossessions it’s easy to forget that anyone with a mortgage who has a job is seeing a huge benefit to their disposable income.
As the Nationwide’s Fionnuala Earley argues: ‘In the current climate, falling interest rates have reduced the mortgage costs of existing variable rate borrowers by about a third. This provides substantial relief for borrowers who may otherwise have struggled with their payments and provides additional disposable funds for those who would not. The change in mortgage costs may be one of the factors behind the resilience of retail sales amid the deteriorating economic background.’
Private tenants appear to be benefitting too if two internet surveys can be believed. A flood of frustrated sellers letting out their property and an over-supply of new flats have driven down rental asking prices by 4.8% over the last year, according to one.
All of which throws the large rent increases planned for council and housing association tenants into even starker relief.
Good news! Barratt Developments only lost £4.5m a day over the last six months.
That was the reaction on the stock market this morning when the house builder’s shares rose by more than 10% despite the fact that its interim results revealed a £592.4m loss thanks to a 23.7% fall in revenue and £495m of write downs on the value of its land.
True, chief executive Mark Clare had some green shoots for analysts to chew on in the form of rising private sales and visitor levels, but the market reaction almost certainly had more to do with the fact that its results did not contain any nasty surprises. The same happened with Redrow yesterday.
More land value write downs seem certain to follow from the other major house builders. Analysts estimate they will total £1.6bn over the next month on top of the £1.8bn the companies announced last year. The theory is that with the pain out of the way house builders will be able to go forward with a level of certainty.
But what will be left behind? Barratt’s completions for the half year fell 24% to 6,905 (2007: 9,056). However, the fall did not come where you might think.
Private completions fell by 23.8% to 5,997 (7,177) but social housing completions fell 52% to just 908 (1,879).
Amazingly, at least to me, the proportion of flats in its first-half completions actually went up and so did sales to investors, which accounted for 24% of total sales compared to 14.9% in 2007.
The average selling price of £160,700 was down 9.7% taking into account changes in the product mix and 27% on an underlying basis. However, the average social selling price rose 5.3% to £98,600 thanks to a change in site and product mix.
Public subsidy is set to give it quite a helping hand over the next year too. Barratt has been allocated funding for 3,000 homes under Homebuy Direct with an approximate sales value of £520m. Which works out at an average of £173,000.
Looking forward, Barratt has forward sales of £633m, which it says means it has secured 80% of its full-year requirement when taken alongside completions to date.
If it was right to call for more social rented homes in May 2008, the case made for more investment by the Communities and Local Government select committee today is close to unanswerable.
‘The government set its current targets for new social rented housing in a time of greater prosperity,’ the MPs argue. ‘Even then, the targets did not adequately cater either for projected levels of new need or for the backlog of need.’
Its report on housing and the credit crunch today makes many of the same arguments as its previous report on the supply of rented housing. ‘Our expectations have proved correct. A greater proportion of the total number of households are now likely to need access to social housing as a result of current economic conditions. We recommend that, in response, a greater proportion of the new homes built each year be designated as social homes.’
The problem is that none of the £975m of extra investment announced by the government so far is new money. All of it has been brought forward from the 2010/11 budget.
When the MPs asked housing minister Margaret Beckett what would happen then she replied ‘we have brought forward a lot of funding which we were anticipating using in 2010/11 and that issue will have to be dealt with as we get nearer to that time’.
The MPs find that worrying. ‘We are particularly concerned that the government is borrowing from future budgets now with apparently no idea how it is going to restore that money at a later date,’ says committee chair Phyllis Starkey.
The need to fill the gap now is even more urgent when you consider the likely context for public spending by 2010/11. Last month the independent Institute for Fiscal Studies forecast the Communities and Local Government department will face real terms cuts in its budget in the biggest squeeze on spending in 30 years.
A more explicit call for new investment was made by the 2020 Group yesterday. Chaired by Kate Barker, the group comprises the Local Government Association, National Housing Federation, Shelter and the TUC.
It calls for a stimulus package of between £6.3bn and £9.3bn to fund an extra 20,000 to 30,000 new social rented homes by 2011. This would include extra investment to cover the cost of increased grant for the existing programme and a £750m infrastructure. On top of that 20,000 homes with 75% public subsidy would cost £3bn and 30,000 homes with 100% subsidy £6bn.
It’s a timely case with speculation mounting about a new stimulus package in April’s Budget. Surely, if anything should be in the package, new rented homes should be at the top of the list. Building them creates jobs, generates tax receipts and prevents homelessness. And we could even make a profit on any intermediate rented element by selling the homes when market conditions improve.
On a day when the taxpayer may become liable for £500bn of bad loans and investments made by RBS and Lloyds/HBoS, who would even notice a few extra billion for housing?
Soaring mortgage repossessions and an embarrassing delay to the government’s homeowner support scheme dominated the news on Friday. But you’ll have to search hard for anything on the problems faced by tenants.
As I noted earlier, the gloom of the 54% rise in mortgage repossessions overshadowed some promising signs that government and lender action to limit the damage is starting to work - not least in a 50% fall in mortgage possession actions since the introduction of the pre-action protocol in mid-November.
But a closer look at the Ministry of Justice figures on possession actions in the courts reveals something else too. Despite the housing market crash, tenants are still far more likely to face possession action and possession orders than homeowners.
The totals are superficially similar. Lenders issued 143,000 claims in county courts in England and Wales in 2008. Landlords issued 148,000. The courts made 114,000 possession orders against owners - but 112,000 against tenants.
However, that ignores the fact that there are more than twice as many owners as tenants.
Meanwhile, delving a little deeper into the CML mortgage repossession statistics reveals that the people losing their homes are not always the owners.
The total of 40,000 repossessions includes 4,000 homes owned by buy to let landlords. Repossessions in general increased by half over the year and fell in the final quarter but buy to let repossessions doubled in 2008 and were up 30% in the final quarter. By the end of the year buy to let accounted for 12.5% of repossessions but only 9.9% of mortgages outstanding.
It doesn’t stop there. As an alternative to repossession, buy to let lenders can appoint a receiver of rent to administer properties for them and these are not included in the repossessions stats. In the fourth quarter of 2008 there were 2,700 buy to let mortgages more than three months in arrears with a receiver of rent appointed. That was more than five times the number a year ago.
And there will also be owners who were renting out their property without telling their lender and then get repossessed.
As things stand tenants of a repossessed landlord lose all protection from eviction - even when they have paid their rent on time.
The CML points out that from April all tenants will receive increased notice of five to seven weeks of any court hearing for mortgage repossession. But its advice reveals just how thin that protection really is: ‘Tenants need to open any correspondence addressed to “the occupier”, as this is how they will receive notice of any action a lender might be taking against the borrower/landlord.’
Social tenants may not face that dread of a letter marked ‘the occupier’ dropping through the letterbox - or have to know that it may not just be junk mail - but they are far more likely to face possession action than owners. Rent arrears are to blame in most cases and that problem is about to get a whole lot worse if the government persists with plans for rent rises averaging 6.2% at a time when inflation is zero.
All those initiatives to help homeowners could be starting to work but it is now time for a tenant support scheme too.
Amid the bad news of the 54% increase in repossessions revealed this morning there is actually some good news too.
The figures published by the Council of Mortgage Lenders showed that 40,000 homes were repossessed in 2008, up from 25,900 in 2007. Mortgage arrears also rose sharply, with the number of people with arrears of more than 2.5% of their mortgage up by half.
But there were also some tentative signs that some of the measures taken by the government and by lenders are working.
First, the total was not as bad as the CML’s original 45,000 forecast. Repossessions actually fell between the third and fourth quarters of the year.
Second, the total is still lower than at any time during the last recession - lower than the 43,900 seen in 1990 at a comparable stage of the market cycle and lower than the 42,600 seen in 1996 let alone the peak of 75,500 in 1992.
Third, although mortgage arrears also rose sharply, the total is actually lower than in 1997 and 1998. The number of borrowers more than 12 months in arrears is about a third of the number seen in 1991.
And there is some even better news in Ministry of Justice (MoJ) figures on possession actions published today. These show that the number of possession claims issued in the courts in the fourth quarter was 32% lower than in the third quarter and 29% lower than in the same period in 2007.
The MoJ puts that down to the introduction of the mortgage pre-action protocol in mid-November. This gives clear guidance on what the courts expect lenders and borrowers to have done before a claim is issued. Although it has been criticised in some quarters for not being tough enough, the MoJ says its introduction coincided with a 50% fall in the daily and weekly total of claims being issued.
The big test will be whether that results in a fall in possession orders. These typically come eight weeks after a claim is issued so it’s too early to say as yet.
None of this will come as much compensation if you were one one of the thousands repossessed last year or become one of the 75,000 the CML is still forecasting will lose their homes this year.
But just maybe it’s a sign that all that pressure on lenders and the government and all those initiatives are actually achieving something - and more help is due later today. If you are a homeowner, that is. More on tenants later.
So why not copy Obama? Spend £11bn to reduce the mortgages of families facing repossession and commit another £29bn to refinance expensive mortgages?
That’s the equivalent in British terms (adjusting for the exchange rate and population) of the estimated $275bn Homeowner Affordability and Stability Plan announced President Barack Obama today to help an estimated 9m US homeowners.
The details announced so far obviously depend on America’s very different housing system and the money involved is an expression of a sub-prime and repossession crisis that is worse than ours. In Obama’s words they will help families who are ‘underwater’ - facing repossession, in negative equity or with so little equity that they cannot remortgage to a cheaper loan.
The US statistics vary wildly. Some reports say that 2m or even 3m Americans lost their homes last year. This seems more likely to refer to the 3.1m foreclosure filings - the start of the process when a borrower defaults - on 2.3m homes recorded by RealtyTrac. The total number of families actually losing their homes was put at 862,000 last year. Adjusting for population, that’s the equivalent of 172,000 here or four times the figure expected to be revealed by the Council of Mortgage Lenders (CML) on Friday.
However, another estimate puts the real figure at 400,000 - the equivalent of 80,000 here - and we are at an earlier stage of the housing market cycle. The CML expects repossessions here to rise to 75,000 in 2009 and its stats only include actions by first-charge lenders.
The Obama plan and, closer to home, an Irish plan that makes bailed-out banks wait a year before taking repossession action against anyone in arrears, will increase pressure on our government to do more.
The US plan was welcomed as bold and ambitious by Democrats but Republicans criticised it for not rewarding people who rent or meet their mortgage payments and asked what would happen to homeowners who were helped and then went back into default. Mortgage bankers said it would not help people with negative equity of more than 5%. And the idea of rewarding sub-prime lenders for reducing their extortionate loan rates may also stick in quite a few throats.
But one of the most interesting aspects for me was the end of his speech where he summed up situation in a way it’s hard to imagine many British politicians doing.
’Our housing crisis was born of eroding home values, but also of the erosion of our common values,’ he said. ‘It was brought about by big banks that traded in risky mortgages in return for profits that were literally too good to be true; by lenders who knowingly took advantage of homebuyers; by homebuyers who knowingly borrowed too much from lenders; by speculators who gambled on rising prices; and by leaders in our nation’s capital who failed to act amidst a deepening crisis.
‘So solving this crisis will require more than resources — it will require all of us to take responsibility. Government must take responsibility for setting rules of the road that are fair and fairly enforced. Banks and lenders must be held accountable for ending the practices that got us into this crisis in the first place. Individuals must take responsibility for their own actions. And all of us must learn to live within our means again. These are the values that have defined this nation. These are values that have given substance to our faith in the American Dream.’
That to me sounds like a pretty good summary of the problem and the solution here as well as there. Why haven’t we heard it from anyone apart from Vince Cable? Is it because the main two parties still regard the Homeownership Dream/Obsession as beyond criticism?
Britain’s two different rates of inflation drifted even further apart this morning and stored up fresh problems for housing associations, local authorities and their tenants.
With apologies for banging on about this again, consumer price index (CPI) inflation fell by less than expected, from 3.1% in December to 3% in January. CPI is the measure the Bank of England uses setting interest rates, with a target of 2%, but it does not include housing costs.
Meanwhile retail price index (RPI) inflation fell from 0.9% to just 0.1%. RPI does include costs like mortgages and rents. The September RPI figure is the one used in setting benefit rates and in council and housing association rents.
Back in September, when everyone was obsessed with inflation rather than deflation, the RPI was 5.0%. That will trigger an increase in housing association rents of between 5.5% and an average increase in local authority rents of 6.2% from April 2009 - and even 17% in Lambeth - and another 5% or more from April 2010.
The Communities and Local Government Department is well aware of the problem and Margaret Beckett has pledged to re-examine the implications of the two-year local authority formula in particular.
However, this morning’s figure suggests that the problem could be even worse than feared just a few weeks ago. It increases the likelihood that RPI inflation will be well below zero by April. Given that wage negotiations tend to follow the RPI figure, that will leave working tenants significantly out of pocket this year.
It also had economists forecasting that RPI inflation could fall as low as -4.4% later in the year. If it is anything like that when the key September figure is published it could wreak havoc with housing association finances for 2010/11, since it would imply rental income falling by 3.9% (RPI plus 0.5%) from April 2010. The Tenant Services Authority was worried enough at the prospect of a rate of -2%.
As efforts continue to find a solution that will protect tenants and landlords alike, an added problem is that nobody really knows what will happen next. Are we headed for a period of deflation unknown since the 1930s or are the Bank of England’s measures to print money to stop it a huge mistake that will lead to hyper-inflation? Listen to two eminent economists disagree completely about that one on the Today programme this morning here.
What happened to the government’s homeowner mortgage support scheme? It was announced in a wave of publicity in December with the Treasury claiming the support of eight leading mortgage lenders.
It quickly became clear that they had not actually agreed anything and that most of the detail of the scheme - essentially a two-year payment holiday for borrowers who suffer a loss of income - still had to be negotiated.
The clock is now counting down to Friday, when the Council of Mortgage Lenders will publish its arrears and repossessions figures for the final quarter of the year. These are expected to confirm its forecast of 45,000 families losing their homes.
They will be published on the same day as the Ministry of Justice reveals its stats for possession actions in the courts and will increase the political pressure for action.
Little wonder then that, as the Financial Times reported on Saturday, the Treasury and Communities and Local Government department are pressing lenders to finalise the scheme by the end of this week.
The problem, it says, is that lenders fear they could be sued for mis-selling by ‘rescued’ homeowners if they stay in their homes, see house prices fall further and their negative equity grow.
The FT also says that ministers have been forced to abandon plans to extend the length of mortgages to even out repayments. This will leave homeowners facing higher payments once the holiday ends.
And it says the crucial question of who bears the risks of the scheme is still unresolved.
The doubts about the scheme were reflected in a CML report on repossessions published last week. ‘The proposed home-owner mortgage support scheme will, we believe, have only a modest impact on the level of possessions in the long run,’ it said. ‘It is unlikely to deliver much over and above what lenders already do in extending forbearance to borrowers in difficulty and meeting existing FSA requirements. However, it is too early to assess how many customers going through the scheme would not already be supported by lenders’ direct action.’
That doesn’t exactly sound like a ringing endorsement of the scheme. The CML has two other options to suggest: extending income support for mortgage interest to cover loss of income with the extra cost offset by a second charge on the home; and developing a form of government-backed sale and leaseback.
If a forecast by the economic consultancy Fathom proves correct, the government needs to act and soon. The firm is predicting 375,000 repossessions in this recession - compared to 225,000 in the early 1990s - and it is advocating a £50bn scheme for the government to buy them and rent them back.
Could the rebirth of council housing be stymied by the death of the right to buy?
It sounds a crazy question. Supporters of council housing still pinching themselves at the thought that Gordon Brown might really mean it when he says he will remove ‘anything that stands in their way’ might be expected to cheer news that right to buy sales are drying up around the country.
After all, for every council home lost by stock transfer to housing associations, about two were bought by tenants under the right to buy.
But an Inside Housing snapshot survey today reveals that the right to buy has well and truly hit the buffers. In 10 councils surveyed, sales were down 89% in the third quarter of 2008/09 on a year ago. Between them they sold just 40 homes, compared to 380 last year. Wolverhampton had sold just three houses in three months while Camden sold just one in six.
On one level the sales figures are not surprising. After all, in the wider housing market the average estate agent is selling just 10 homes every three months. And right to buy sales have been falling for the last five years thanks to reduced discounts and a lack of tenants able to afford to own.
But on another level the figures could pose a major problem for council housing finances. If sales proceeds around the country fall by the 89% reported by the councils surveyed, total capital receipts could fall from £934m in 2007/08 in 2007/08 to less than £100m this year.
That would put a real squeeze on funds to maintain their existing stock and increase pressure to raise receipts by selling land rather than use it to build a new generation of council houses. Just like housing associations, local authorities are finding that they cannot escape the consequences of the housing market crash. And next year they could also be facing the same squeeze on rental income.
All of which makes the point that the rebirth of council housing needs to be about more than just the ability to build new homes directly. A sound financial framework for the sector needs to developed that includes homes for sale through the right to buy and the development of local authority mortgage lending. The problem with the right to buy was always that the proceeds were not reinvested in new homes - but if there are no sales there are no proceeds.
Lowest lending to first-time buyers? Lowest orders for new housing? Take your pick from new figures out today that confirm just how bad 2008 really was - and prepare for a grim 2009 while you’re at it.
The Council of Mortgage Lenders (CML) published stats showing that its members made just 194,200 loans to first-time buyers last year. That is 46% down on 2007 the lowest annual figure since its records began in 1974, when the 70s credit crunch saw 197,500 loans to first-timers.
In the process, all but those with a hefty deposit and/or wealthy relatives have been cut off from the housing ladder. The median advance in December was 78% and the median mortgage advance was £100,145. That means that the average buyer needed a deposit of £28,000 - when the median income was just under £34,000.
Contrast that with the position at the peak of the boom in August 2007. The median advance was £119,250 in July 2007 but banks were making 90% loans. The average deposit was therefore £13,000.
It’s not just first-time buyers who suffered. As the CML argues, the mortgage landscape changed completely in 2008. Overall lending for house purchase was only a shade higher than in 1974. The only bright spot was a big improvement in affordability of loans towards the end of the year - but that’s not much use if you can’t get a mortgage.
Meanwhile, figures for new orders for construction show that the full extent of the woe for housebuilders.
Orders for private housing fell off a cliff. The total of £4.5bn for 2009 was down 43% on 2007 and 21% lower than in 1992, the worst year of the last recession. The situation seems to be still getting worse and remember these are figures for work in the pipleline that will only feed through into housing starts this year.
You’d have thought that public housing should be holding up much better given the Homes and Communities Agency’s increased budget but the figures show an alarming dip in November and December. That followed the second wave of the credit crunch sparked by the collapse of Lehman Brothers and rising concern about lending to housing associations.
In November and December combined there were orders for £135m of new public housing. That was half the level seen in November and December last year. December’s figure of £59m was 60% down on December 2007.
Surely 2009 can’t be any worse? Don’t bet on it.
Take two rates of inflation. One takes no account of mortgage payments and rents. The other does. Then, just to really screw things up, use the first one to set interest rate policy and the second to set the rents that can be charged by councils and housing associations.
That is exactly what we did by making the Bank of England use the housing-free consumer prices index (CPI) to set interest rates to keep inflation at 2% and making social landlords use the housing-inclusive retail prices index (RPI) in their rent setting.
Up to now the impact has mainly been on the housing market. All the way through the housing market boom it was clear that setting interest rates using an inflation measure that takes no account of house prices and mortgage payments was inflating the bubble and was likely to make the crash worse when it came.
In April, the impact will be felt by tenants who face rent increases of perhaps 6% at a time when the inflation they see in their everyday lives will be zero or even below and those lucky enough to still have jobs could be facing demands for wage cuts. All that because RPI inflation last September was 5.1%.
CPI inflation is currently 3.1% and RPI 0.9%, both are falling rapidly.
But the latest inflation report published by the Bank of England this morning make clear the full extent of the sting in the tail that will be facing social landlords later this year. The bank’s central forecast for September 2009 - the crucial month for rent setting - is that CPI inflation will be between 0% and 1%.
The report also makes clear that housing costs - mainly mortgage payments but other housing components too - accounted for all of the difference between CPI and RPI. Even if rents do rise in April the effect will almost certainly be outweighed by further falls in interest rates and mortgage payments.
That means that RPI inflation could easily be -2% by September and that housing associations could have to reduce their rents by 1.5% to meet their RPI plus 0.5% formula. The best-case scenario, based on the bank’s forecasts, is an increase of just 0.5%; the worse-case is a cut of 2.5%.
Both government and regulators are well aware of the dangers with promises to look again at this April’s rent increase and to consider the impact of deflation on business plans. As Peter Marsh said in a speech reported by Inside Housing last month: ‘We need to take a very cold look at whether or not housing association business plans could weather a reduction by 1.5 per cent in rental streams. Some, I suggest, probably could not.’
A formula needs to be found to help landlords and tenants alike and it makes obvious sense to consider next year’s rents at the same time as this year’s.
But why is nobody talking about the absurdity of setting interest rates using a measure of inflation that excludes the one thing that most people spend most of their money on?
The Environment Agency has got its timing spot on with its latest warning about the number of planning authorities that are ignoring its advice about flood risks.
Anyone looking out of the window virtually anywhere in England yesterday will wonder how it is that more than 500 homes can get planning permission despite the agency’s objections.
As it argues in its annual report on planning and flood risks: ‘The findings of the Pitt Report and the likelihood of more frequent and more severe rainfall events as a result of climate change, coupled with continued pressure for development means there is a greater need than ever for robust policies for development and flood risk at all levels of the planning system.’
The report reveals that plans for new homes account for almost 70% of its objections to applications in 2007/08. Developers may argue that the fact that the fact that it opposed applications for 57,000 homes means flood risk is being given too much weight by comparison to economic and social need but residents of cities like Gloucester and Hull may beg to differ.
Of those objections, 23,000 were overcome after negotiations, 17,000 were withdrawn by the applicant, 12,000 were refused permission and 3,000 mitigated by the use of planning conditions.
For whatever reason - ignorance of planning guidance, an assumption that they know best, pressure of government targets, fear of appeals - that left 542 homes in seven schemes that were approved by local planning authorities despite the agency’s objections.
Step forward Fenland, Maldon, Pendle, South Staffordshire and Staffordshire Moorlands, all of who had doubts about the agency’s advice or believed it was unreasonable.
And take a bow Ipswich, Pendle (again) and Weymouth & Portland, all of whom believed that previous permissions set a precedent.
The Pitt Report said that a ban on development in flood-risk areas was impractical. For example, 95% of Hull is in a high flood risk area and the city argued that an overcautious approach would mean no more development.
However, it did recommend that the Environment Agency’s powers should be kept under review and strengthened where necessary. Given that only a third of local planning authorities are telling it why they approved applications contrary to advice, it might be time to look at that again.
One of the key political touchstones of this recession will be whether repossessions are as bad as in the housing market crash of the early 1990s.
Later this month the Council of Mortgage Lenders (CML) will reveal a total for 2008 roughly on a par with the 44,000 seen in 1990. Both were for the first year of the downturn.
Its current forecast that 75,000 families will lose their homes in 2009, matches the highest total seen last time around in 1991. If that forecast proves to be correct it will come just months before the government’s five-year term is up and it will have to hold an election.
That maths and that timing explains the urgency with which the government has been tackling the issue. So far it has restored cuts in income support for mortgage interest (ISMI), funded mortgage rescue schemes, announced a new homeowners mortgage support scheme for families who suffer a loss of income but not their job and introduced a new pre-action protocol for repossession court cases.
If all that works, and repossessions turn out to be less than forecast the government will be able to claim that it acted to keep families in their homes in contrast to the do-nothing Conservatives. If it doesn’t…
So a report this morning by the think-tank Centre for Policy Studies (CPS) that all those initiatives will make little difference will hardly make welcome reading in Downing Street. It says the impact of the ISMI change, mortgage rescue and homeowners support will be limited. Meanwhile, the protocol is ‘flawed’ because so many defendants are not legally represented and are not aware of what a ‘reasonable period’ might be for repaying arrears.
A crucial difference between the legal position now and in the early 1990s is the definition of that ‘reasonable period’. In 1991, the courts generally considered it to be two years but that was extended to four years in 1993. Then in 1996, just as the recession was ending, the Court of Appeal ruled (in Cheltenham & Gloucester v Norgan) that it could be the entire outstanding period of the mortgage.
It’s not hard to imagine a dramatic reduction in repossessions if the Norgan judgement were universally applied. Combine it with the lowest interest rates in history and you can see how homeowners could clear off their arrears by maintaining their existing level of payments.
The CPS argues that the move could cut repossessions by more than 30,000 this year alone - and mean 100,000 fewer families losing their homes over the next three years.
So why not just turn it over to the judges? The CML argues that it is already treating borrowers fairly. Helping people to stay in their homes when they cannot sustain the payments just reduces their equity and increases their debts when they are eventually repossessed, it says.
Meanwhile, as it argued in its response to the homeowners support scheme, money tied up in mortgage arrears is capital that is not available for new loans. Lenders, and the government, have to make a choice about where to strike the balance between the financial stability of the banks, the availability of new lending and the treatment of borrowers in arrears.
However, the political heat on the government will increase the closer repossessions get to that 1992 peak and the CML now publishes quarterly figures that will point up the trend all too clearly.
It’s often forgotten that, although repossessions fell after 1992, the issue did not go away. Another 220,000 families lost their homes over the next four years and a key point about many of the government’s changes is that they are temporary and only last for two years.
Given that many of the repossessions this time around will be done by state-owned banks expect more initiatives to come and prepare to hear more about Norgan
Did he really mean anything that stands in their way? First reactions to Gordon Brown’s speech about new freedoms for council housing reflected the fact that hopes have been raised and dashed many times before.
But Sir Bob Kerslake for one believes that the government is now willing to reform the public borrowing rules so that local authorities are treated in the same way as housing associations.
While he emphasised that he did not want to pre-judge whether the government would take action, the chief executive of the Homes and Community Agency (HCA) appears to have made up his mind and is telling local authorities to start to prepare now rather than wait for a formal announcement.
If he’s right it will constitute the biggest shift in housing policy since the right to buy. Campaigners have spent years beating their head against a brick wall trying to convince the government to change the rules.
When Labour was in opposition it seemed for a while that they had succeeded and they had the support of former deputy leader John Prescott . But they could not convince the man and the department who had the final say on domestic policy: Gordon Brown and the Treasury.
So it’s impossible to believe that Brown was unaware of the implications of telling local authorities that he would ‘sweep away anything that stands in their way’.
But until I read Sir Bob’s comments I found it equally hard to believe that he was talking about more than adding to the limited moves already announced by Margaret Beckett by allowing self-financing in the review of the housing revenue account that is due to report in April.
The move makes perfect sense for the government in economic as well as housing terms. The European definition of public borrowing excludes council housing because it is treated as a trading activity. But it could also help transform international perceptions of Britain’s overall borrowing since our borrowing is below the European average on that definition.
Perhaps council housing is benefitting too from Sir Bob’s background in local government. Viewed from that perspective it is crazy that borrowing by local authorities to match social housing grant counts as public subsidy whereas borrowing by housing associations does not.
There is still a long way to go and many intractable issues to be tackled but finally the message seems to have got through. The tragedy is that it’s taken a recession and the worst house building slump for 85 years to make it happen. Exactly the same arguments applied in 1997.
Take an unexpected rise in house prices, add another cut in interest rates and stir in an improving picture for buyer enquiries and mortgage approvals and you have a recipe that will have the makers of TV property programmes salivating.
The 1.9% rise in January announced by the Halifax certainly caught the pundits on the hop - one even called it incredible - and it may have made Margaret Beckett feel better following the criticism she got for claiming she saw signs of recovery. It may very well be a sign that the cheapest mortgages in history and foreign investors tempted by a falling pound are having an impact.
But it is too early to start talking about green shoots. One set of monthly figures, particularly at a time when low sales make prices so volatile, is a flimsy basis for that. The Halifax itself pointed out that the last recession saw prices fall for seven months in a row in 1989 then rise in three of the first ten months of 1990 while the trend was still down.
And consider what happened in early 1993, a time when the green shooters were out in force. Prices rose 1.3% in March and another 2.2% in April only to fall 1.7% in May and 1.3% in June.
Prices started falling in May 1989 last time around. Give or take the odd blip, they carried on falling until mid-1995.
The downturn has been much steeper this time. Cheap mortgages, bank bail-outs and plummeting new supply may make prices fall more slowly but, with the worst recession since the 1930s looming, the decline looks set to continue.
In any case, Location, Location, Location’s Phil Spencer seems to have enough on his plate.
Families who use their living room or large kitchen as bedrooms are not officially overcrowded under England’s 74-year-old legal defintion of the problem.
Keep that in mind and you have one reason why the 11 per cent increase in overcrowding to 565,000 households revealed in new figures is so shocking.
The overcrowding standard used in the figures dates back to 1935. In addition to it being acceptable to sleep in the living room or kitchen, the standard takes no account of babies less than a year old and counts children aged between one and ten as half a person.
Imagine the conditions faced by, say, families in 200,000 homes in London - a third of them in social housing - and you have some idea of the scale of the problem.
The government has pledged to amend the 1935 standard in 2009 and Shelter correctly says that it is ‘more urgent than ever that they keep their word’.
However, as the charity points out, merely changing the wording will not be enough unless the government also increases the supply of family-sized homes on the ground.
And that is the second reason why the figure is so shocking. Far from increasing, that supply is falling at a rate of knots. The housing market is silting up too: according to the latest transaction figures the average owner will spend 33 years in their home, double the amount a couple of years ago.
The effects of that cascade right down through the system, leaving those at the bottom of the pile facing more cramped conditions than ever. What would the level of overcrowding be under a real 2009 definition?
Are the government and Homes and Communities Agency being too cautious in using public investment as a fiscal stimulus during the recession? That was the charge made in an opposition day debate in Parliament yesterday by Vince Cable.
The Lib Dem deputy leader’s consistent warnings about the dangers of the borrowing binge turning to bust were dismissed by ministers at the time. Now he’s accusing them of failing to do enough across a whole series of investment programmes and warning that the £12.5bn committed to cutting VAT would have been better spent on home insulation, social housing projects and public transport.
He warned that the private finance initiative was failing while falling receipts from asset sales and schemes linked to the market were undermining the viability of schemes across the public sector.
‘Despite the government’s claim to be bringing forward capital investment, that is not happening,’ he said. Just £400m had been brought forward from the £8bn housing budget.
The debate also saw what I reckon must be the first criticism of the Homes and Communities Agency since it started work before Christmas. Is Super Bob’s honeymoon now over?
‘Although I think the failings are largely in the government, they are not entirely in the government,’ said Cable. ‘The new agency is probably highly conservative in its approach. I get a sense that it is reluctant, for example, to encourage the buying up of empty stock because it says that it is the wrong quality and cannot be used for public sector housing, so housing stock just sits there empty when many people are desperate. There is a conservatism and a reluctance to act across the board.’
The Lib Dem motion was, as usual, heavily defeated by Labour and the Conservative MPs keen to paint Cable’s party as spendthrift and profligate.
But could things be moving behind the scenes. According to one report yesterday, the government and the HCA are discussing precisely what Cable was advocating: bringing forward the entire final year’s allocation of £2.7bn to spend this year.
Will it really be announced later this month? You have to wonder why, if it were true, ministers would spend so long opposing Cable for saying the same thing on the same day. Needless to say though, this being the Daily Mail, the prospect met an overwhelmingly hostile reaction from readers.
Back in the 1970s nobody went to the bank to get a mortgage.
Building societies existed to take in savings out and loan them out as mortgages. Banks were simply not interested in such long-term, low margin deals.
But then Britain hit a credit crisis. The government was forced to step in with extra funding to prop up lending and local authorities responded by offering mortgage deals of their own.
By the early 1980s local authorities were writing more than 100,000 mortgages a year but all that ground to a halt when the 1985 Housing Act made it uneconomic.
Flash forward to the noughties and virtually everyone has to go to the bank to get a mortgage. Financial deregulation in the last 1980s brought them into the market and they have since swallowed up most of the building societies. But the credit crunch means they are lending half what they used to.
If the think-tank New Local Government Network is correct, today will see a major move to let local authorities fill the gap once more.
Chris Leslie of NLGN said a plan by the Communities and Local Government department to reduce the national standard rate of interest to 3.9% would allow councils to borrow at a more advantageous rate. ‘The private banking sector’s mistrust of one another means that it should fall to the public sector to ease liquidity and offer mortgage finance to the public,’ he said. ‘With the capital markets more willing to trust local authorities than the private banks, councils could prudently pass on cheaper mortgage capital to some of their residents.’
With councils around the country apparently eager to help the signs look good. But they still face two big obstacles. First, they will be entering a market in which house prices are still falling and repossessions are rising - how will they protect council tax payers against losses? Second, as far as I understand it local authority mortgages will still count as public sector borrowing with all the restrictions that implies.