Inside edge
All posts from: June 2009
Better late than never
After three false starts, the government seems to have finally come up with a housing rescue package that could make a real difference.
The £1.5bn of apparently new funding for new homes and imminent introduction of self-financing for council housing announced in Building Britain’s Future by Gordon Brown yesterday may not be everything the sector was pressing for but it amounts to much more than the paltry packages of brought-forward money announced last year.
Half of the new money seems to come from other budgets (eco towns? RDAs? decent homes?) and half from other departments like the Home Office and Transport. It’s a recognition at last that the credit crunch and recession just might mean that more needs to be spent on affordable homes. Better late than never - and it comes at a time when the pressure is on public spending of any kind.
The Communities and Local Government (CLG) department says the £1.5bn will fund 20,000 new affordable homes and another 10,000 delivered through the private sector. The detailed breakdown is:
- extra funding for councils and housing associations to deliver 15,500 new homes (11,000 social rented, 4,000 affordable)
- extending the Kickstart programme with the aim of delivering 13,000 homes (of which 4,000 will be affordable)
- investing in the development of public sector land to delivery 1,250 homes of which 500 will be affordable.
Previous Labour spending statements have had a habit of not turning out to be quite impressive as they were spun at the time. However, taking this one at face value, it will have a double benefit, delivering more desperately needed new homes in the next two years and ensuring that the housing budget enters the slash and burn spending round after the next election starting from a higher base.
Housing minister John Healey is due to announce more details of the review of the housing revenue account later today. However, Brown’s statement made it clear that councils would be allowed to keep both capital receipts and their rents and Healey told Inside Housing last night that he would ‘dismantle’ the current system.
That still sounds some way short of what Defend Council Housing and the Local Government Association (LGA) were demanding and of Brown’s pledge in February that he would ‘sweep away anything that stands in their way’ but again it is better later than never. The devil will now be in the detail of how self- financing is equalised between different local authorities and how the government intends to ensure that surpluses are spent on housing.
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Crunch time
A cash windfall from the Home Office and Department for Transport is not a bad way to start a crucial week for housing.
Business secretary Lord Mandelson has revealed that spending will be shifted within and between departments when the government publishes its policy department later today.
Speaking on the Today programme he singled out housing as a main beneficiary of the process. ‘He [Gordon Brown] will be announcing a major boost in the provision of social and affordable housing over the next two years,’ he said. ‘That reflects a shift in spending both within the relevant department and between the Home Office and Department for Transport to the department.’
Whether Building Britain’s Future really will amount to anything major on new homes remains to be seen but reports suggest it will also include anti-BNP measures on allocations. What seems more certain is that it will be the last spending announcement for a year - Mandelson also revealed that the next spending review will not be held until after the next election.
Housing’s crucial week is expected to continue with publication of the review of the housing revenue account (HRA) - the timing probably linked to the Local Government Association conference.
The LGA started its campaign to build up to 300,000 new homes in the next ten years earlier this month. Disappointingly, though, only 40 MPs have so far signed an early day motion backing the campaign - 22 Labour, 13 Lib Dems, two Democratic Unionists, an independent and just two Tories.
Home James
So what can five celebs with 10 houses and a palace between them tell us about homelessness?
Last night’s Famous, Rich and Homeless on BBC1 (watch again here) set out to find out. Journalist Rosie Boycott, comedian Hardeep Singh, former tennis player Annabel Croft, actor Bruce Jones and James, Marquess of Blandord were sent to sleep rough by Big Issue founder John Bird and former Centrepoint worker Craig Last.
I should confess at this point that I’m not exactly the greatest fan of reality TV - and the reviews have not been universally kind - but I kept watching as they coped with being dumped on the streets with just the clothes they stood up in.
Rosie’s lies about being homeless because she’d been beaten up by her drunken husband nets her £8 straight off and then another £40 from one woman.
Annabel is dropped in Soho but is soon sleeping rough in the doorway of Dolce and Gabana in Bond Street and finding out where to get fed. Hardeep (‘I don’t want to be urinated on unless it’s in the privacy of my own home’) heads straight for Soho.
Bruce offers to take pictures of tourists at Westminster and then asks them for money. ‘I’m working - it’s not begging,’ he says.
And James? As readers of the tabloids will have already known, on the first night he disappears into the car park of a 5 star hotel where his camera crew is conveniently escorted off the premises and Craig later discovers his untouched sleeping bag. On the second the production team let him sleep in the hotel. On the third, he’s walking out of the programme pursued up the street by John Bird.
All entertaining stuff. I’m not sure it’s going to change many viewers’ opinions about homelessness but it should open a few eyes about life on the streets and (tonight) in hostels. As for the ten houses and a palace (though I’m not sure James actually gets to inherit the palace), at no stage were they seen as potentially part of the problem.
I did find myself wonder though what the John Bird who was telling the Daily Mail two years ago that the answer was to ‘lock up the homeless’ might make of all this.
‘What nobody wants to acknowledge is that 90 per cent of people in and around homelessness have drink and drug problems. And 90 per cent of that figure are people who cannot control it,’ he wrote. ‘The people who are homeless through addiction are feckless, unstable, unreliable, incapable of holding down a job, feeding themselves or cleaning themselves.
‘You take them into a hostel, patch them up and put them in State housing on benefits and they continue to kill themselves at the State’s expense. They are ill and should be “sectioned” - lifted from the streets and confined in the care of the mental health system, behind bars if necessary. It sounds drastic - and I expect a lot of outraged criticism - but it is the only realistic solution.’
Whether you agree or disagree with that draconian solution, what about James, Marquess of Blandford, reality show cheat ….and drug abuser?
Famous, Rich and Sectioned? I was about to say I’d watch that…but then I realised a TV producer is probably pitching the idea somewhere even as I speak.
Weeds and shoots
With the latest stats on mortgage approvals, transactions and house prices all showing improvement, everything in the garden looks much rosier than it seemed last winter. But could yellow weeds be about to sprout up around all those green shoots?
The Japanese knotweed in the plot is still rising unemployment. That’s the main reason for the Council of Mortgage Lenders predicted an accelerating rate of repossessions yesterday, even though the headline number will not be as bad as it feared - and perhaps why credit conditions do not seem to be improving.
But negative equity could prove to be equally herbicide-resistant, according to a survey by ratings agency Fitch that says 15%of borrowers with prime residential mortgage-backed securities (RMBS) already have loans worth more than their home and that the total could rise to 34 per cent by the end of the downturn.
And things are not looking to good in the private rented garden either. The Royal Institution of Chartered Surveyors shows that rents are falling at the fastest rate since it started its survey 10 years ago and are now falling faster than house prices.
The Fitch survey is important because it is only talking about securitised prime loans - negative equity is probably even higher in the sub-prime sector. They will also be loans taken out in the last few years, arranged through securitisation vehicles like Northern Rock’s Granite.
The implications for lenders, and therefore for lending levels, are that borrowers who are ‘underwater’ are less able to get out of trouble and more likely to default. There is also a huge problem of people who have positive equity but not enough to qualify for good remortgage rates.
Fitch expects house prices to fall more too - by up to 35% from peak to trough as opposed to the current 19% despite recent rises in the Halifax and Nationwide indices. It argues that those increases were driven by lack of supply and could in themselves be the catalyst for further declines as homeowners who have been waiting for prices to stabilise decide to sell, so increasing supply.
Many of those non-sellers are currently reluctant landlords and they will not find the latest RICS survey very pleasant reading. Some 55% more surveyors reported a fall in rents than a rise. The percentage balance expecting a further fall fell back from the record high recorded in January but is still at -25%. And gross yields - the return on rents and capital values - are falling for the first time since April 2007, indicating that rents are falling faster than house prices.
The survey does not yet show evidence of a significant increase in landlords planning to sell but that overhang, combined with negative equity and unemployment, could be the weeds in the garden for years to come.
Grown-up debate
Supporters of an end to security of tenure might like to take time out to read a heavyweight new report that studies the life chances of four generations of social housing tenants.
Growing up in Social Housing shows the dramatic change in the profile of social tenants - with 27% of the least well-off and 11% of the best-off families in 1946 changing to 49% of the least well-off and 2% of the best-off by 2000. As Ruth Lipton, one of the team of authors from the Institute of Education and London School of Economics, says in this week’s Inside Housing there is also a widening gap between tenures in education levels and lone parenthood.
That concentration of deprivation has been used in other studies to justify radical changes to security of tenure and worklessness. But the report for the Tenant Services Authority, Scottish government and Joseph Rowntree Foundation begs to differ.
‘This report offers no support for reducing the attractiveness of social renting or the number of homes available,’ it says. ‘If anything, it suggests the reverse: we need to help social housing catch up with the desirability of home-ownership housing, and increase its social mix.’
‘Crucially, other areas of social policy, such as childcare and education, also need to more effectively tackle childhood tenure gaps as these cannot be effectively addressed through housing policy initiatives.’
As inequality grows, they argue, housing policy can do less about it - the answer lies in other policy areas. ‘The more that we target social housing on the disadvantaged; the less can be expected of specific housing policies (for example changes in tenancy conditions). In some respects we might expect other social policies targeted towards those who need social housing to do far more, and housing policy to do less, to ensure that the disadvantage with which people enter the social housing sector does not continue or get worse.’
That sounds like a pretty good case against the easy ‘solution’ of an end to the ‘tenancy for life’. Will it be the last word on the subject? Almost certainly not.
Good news and bad
A downgraded repossession forecast by the Council of Mortgage Lenders (CML) is widely being reported as more good news on the housing market. It is anything but.
The CML now says 65,000 families will lose their homes this year, compared to the 75,000 it forecast six months ago, as a result of lower interest rates, increased forebearance by lenders and government intervention. That means the total should peak well short of the 75,500 seen in the last crash in 1991.
But before anyone gets too carried away with that, it is also warning that ‘the improvement is likely to be slow and drawn out, especially as the extensive fiscal, monetary and credit support measures are gradually unwound’.
It’s been clear that the 75,000 figure was an overestimate since the CML published figures showing 12,800 repossessions in the first quarter of the year. That was a 50% rise on the first quarter of 2008 but much better than it had expected.
However, the latest estimate suggests that the rest of the year will see another 52,000 families lose their homes - a rise of 66% on the last three quarters of 2008. That hardly sounds like a recovery - the repossession rate will actually accelerate from now.
It’s the same story with the rest of the CML predictions, despite a reduced forecast for the number of people in mortgage arrears. It says the number of transactions will fall to just 700,000 this year (the same as it forecast six months ago), less than half of the level seen in 2006 and 2007 and 23% down on an already appalling 2008.
The CML also says the lending famine will continue. Gross advances will still fall to £145 bn, down 44% on 2008 and 60% on 2007. And although net lending will not be quite as disastrous as it said six months ago, it will still be in unprecedented negative territory, with banks lending £5 bn less in new mortgages than they are repaid on old ones.
It’s perfectly possible that these forecasts too will turn out to be too gloomy, leading to more ‘good news’ reports at the end of the year. However, the CML rightly raises the question of what happens when all the emergency intervention comes to an end. When you bear in mind that the recovery so far is based on interest rates that cannot stay this low for ever, on time-limited government support schemes and on multi-billion schemes to boost lending, it’s clear that there is still plenty of pain to come.
Public interest
Can of worms? Deep waters? Grey areas? The Appeal Court judgement yesterday that housing associations are public bodies under human rights law leaves me wondering which metaphors to mix next.
Associations were already public bodies for the purposes of EU procurement legislation. Now they are for human rights purposes too, which means they must take account of tenants’ rights such as the right to a family life and the right to a fair trial when applying for an eviction order. They will probably come to be seen as public bodies for freedom of information purposes too.
The implications of all that are far-reaching and unpredictable enough (just read the comments on Inside Housing’s story) but they would be dwarfed by any move to reclassify associations as public bodies for financial purposes, a decision that is down not to the courts but to the Office for National Statistics (ONS).
If that happened, and housing association borrowing was classified as public borrowing, it would remove their key advantage over local authorities at a stroke and undermine pretty much the whole funding model for building new homes and refurbishment via stock transfer too.
It’s not clear what would trigger reclassification, but the legal moves in other areas, plus the bail-outs that have revealed that devices like the PFI are not as private as they seem, have surely brought it closer.
From a quick read of the Appeal Court judgement (downloadable here) it’s clear that there is no single test of what constitutes a public body. The judges even disagreed between themselves, with two saying that L&Q is and one that it isn’t.
A whole range of factors came into play in the majority ruling, including: the funding of associations through grant and housing benefit; their powers to apply for anti-social behaviour and parenting orders; the fact that 10% of L&Q’s stock is ex-local authority; statutory regulation; nomination agreements.
Lord Justice Elias said in his ruling: ‘None of these factors taken in isolation would suffice to make the functions of the provision of housing public functions, but I am satisfied that when considered cumulatively, they establish sufficient public flavour to bring the provision of social housing by this particular RSL within that concept.’
A bit like the complicated test for whether someone is employed or self-employed, it depends on the particular circumstances of the case. From the ruling it seems quite possible that a different RSL in different circumstances would not be a public body. Pending any possible appeal to the House of Lords, the judgement makes things a bit clearer but not completely clear.
But while that might mean trebles all round for the legal profession, the ruling also seems to leave the Tenant Services Authority with a few issues to resolve. For a start, if it exists to promote the interests of tenants, surely, like the Equality and Human Rights Commission, it should welcome the extra new rights the judgement gives them.
Looming on the horizon is the extension of its regulation remit to cover almo and local authority tenants too. That will again raise the case for a single tenancy for all social housing tenants and in particular the case for stopping associations using ground 8 to evict tenants with no grounds for stopping associations using ground 8 to evict tenants with no grounds for intervention by the courts.
That, ironically, was the ostensible reason why Susan Weaver took L&Q to court in the first place - and she lost on that. But the long-term implications of the case she launched will not go away so easily.
Capital punishment
Who springs to mind when you think of victims of the credit crunch and property crash? Repossessed homeowners? Northern Rock shareholders? How about local authorities, who lost a cool £2.6bn in capital receipts last year?
New figures published by the Communities and Local Government department today reveal that total receipts fell 65% from £4bn in 2007/08 to just £1.4bn in 2008/09. Housing accounted for almost half of the losses, with capital receipts from housing fell 73% from £1.7bn to £466m.
The slump is not unexpected - it was revealed in an exclusive poll in Inside Housing in February - but still shocking. Receipts have been falling since the government cut right to buy discounts but actually saw a modest increase last year before falling off a cliff.
To put the figures in perspective, the total amount local authorities so prudently invested in Icelandic banks was just under £1bn. And capital receipts have fallen by more in percentage terms than mortgage approvals. Only 12 months ago the government was forecasting that they would be pretty much the same as last year.
The figures also show an 11% fall in capital expenditure on housing by local authorities, from £5bn in 2007/08 to £4.4bn. But that was only half the £1.2bn slump in housing capital receipts. The slump is yet another reminder of the vicious spending squeeze to come.
Minding the gap
What are the chances of the government coming anywhere near to its target of 45,000 social rented homes a year by April 2011?
No chance, says a new assessment by the Construction Products Association (CPA). Maybe, if you give us £3.6bn says the National Housing Federation (NHF).
The headline graph in the CPA’s annual Achievable Targets report published yesterday makes clear that the target and forecast output are travelling in different directions. Output is set to fall from last year’s 27,000 to little more than 20,000 this year, it says, before recovering to about 22,000 in the next three.
The answer, says the NHF, is £3.2bn of public investment. That would deliver 50,000 new social homes by next June, with a quarter of them paid for by housing associations. The alternative, it says, is a remorseless rise in waiting lists until one in ten people are on them by 2020.
The case for extra investment has been unanswerable for months. There is maybe one last chance. But the problem is that, regardless of the encouraging noises that housing will feature in Gordon Brown 3.0, the cupboard is almost bare.
As Sir Bob Kerslake tells Inside Housing TV today: ‘The key thing for me is that we recognise the continuing importance of continuing to build new houses and new communities and to recognise that to do that we have to make both the affordable housing sector work and the private housing sector work. We can’t simply rely on a public funded housing boom, it’s got to come from the two.’
That’s the background to his announcement yesterday of a new Housing Finance Group to look for new sources of private finance. Bridging that gap between output and need will take everything that can be squeezed out of the Treasury, all the extra abilities of local councils after the HCA review - and then some.
Free association
It’s hard not to pinch yourself when you see Conservative-dominated local authorities demanding the right to build thousands of new council houses from a Labour government.
The campaign launched at Harrogate today by the Local Government Association says that its members could build up to 300,000 additional affordable homes if the government reforms the housing revenue account (HRA), get to keep the extra income from retaining their tenants’ rents, are released from their historic debt and allowed to borrow against their assets.
After all the private borrowing of the last decade, by the banks and through the private finance initiative, turned out to need a public bail-out when things went wrong, why not set councils free?
But you also have to wonder why, if it’s that simple, the government has not done it already. True, it’s taken years of campaigning to convince the Treasury to allow local authorities any freedom at all but can it really just be a conspiracy led by evil financial mandarins?
Experts are most sceptical about central government taking over that historic debt, pointing out that the servicing costs would still have to be paid at a time when public spending budgets are under their greatest pressure in 30 years. Has the moment already passed?
If local authorities get to retain their rents, who is to say that the ones with the surpluses will use it to build more homes? What happens to the big inner city authorities who have deficits rather than surpluses? And even if the public borrowing rules are changed what’s to stop the Treasury using it as an excuse to cut the Homes and Communities Agency budget accordingly?
Which is why the review of the HRA, when it is finally published, is likely to be considerably less radical than the LGA says it wants. ‘Freedom’ for local authorities is a worthy cause - but only if it delivers desperately needed new homes. Which then makes you wonder how many Conservative councils also want ‘freedom’ from exactly that.
Search for solutions
The Chartered Institute of Housing (CIH) conference opens in Harrogate today with the problems piling up and Britain’s housing system in crisis. Solutions are rather thinner on the ground.
An opinion poll commissioned by the CIH reveals that young people in particular have gone off homeownership. Only a third of 18-24 year olds think it is the right tenure for them. Hardly surprising when 28% of those with a mortgage in the 25 to 35 age group are in negative equity.
The effects can be seen in a survey of CIH members. Some 80% say that demand for rented accommodation has gone up over the last 12 months and 84% reported increased demand for debt advice and counselling services.
How much worse might things have been had the government actually succeeded in creating a million extra homeowners by 2010? That was the target set in May 2005 by the then chancellor Gordon Brown. ‘We are determined to build on the one million more home owners since 1997 to reach two million by 2010,’ he said at the launch.
The target looked reckless at the time and was never achieved. By the end of last year the number of homeowners in England had fallen by 160,000 and the number of people buying with a mortgage by almost 500,000. Good news since, with house prices now back to 2005 levels, the number of people in negative equity could be double what it is now.
But what about solutions? CIH chief executive Sarah Webb says: ‘We’ve driven too many people into unsustainable owner occupation and we need to make a far better job of putting renting and owning on a level playing field. A generation has grown up believing it has to own at any cost – in part because we haven’t provided them with decent information about the alternatives. We can’t repeat this mistake with future young people.’
With green shoots appearing in the housing market and an election a maximum of a year away, it’s probably too much to expect the politicians to come up with much that will alienate the 68% of the population who still own their homes. With public spending cuts in the offing it’s probably too much to expect much more in the way of social housing investment, whatever Gordon Brown might hint at.
But there has probably never been a better time for the housing profession to reach out beyond the boundaries of social housing and try to influence where policy goes next.
Popular demand
You have to wonder who the Tenant Services Authority (TSA) had a conversation with before it floated the idea of less secure tenancies in areas of high demand.
Search through the findings of its national conversation with tenants, prospective tenants, shared owners and landlords and there is only one reference to security of tenure. Prospective tenants named it midway down the list of the reasons why they wanted to move into social housing in the next two years.
The idea does not appear in the summary of its regulatory proposals either [download all documents here]. The section on the tenancy agreement says that, although security of tenure did not feature as a high priority in the national conversation, ‘it is our view that a standard is essential in this area to ensure that tenancy agreements are applied to give actual or potential tenants an appropriate degree of choice and protection’.
The summary proposes that ‘landlords must issue the most appropriate form of tenancy for the type of accommodation which gives the most security of tenure’ and says that ‘the practical effect of this is that most tenants will either have a secure of assured tenancy (for local authority and other types of landlord respectively).
So far, so uncontroversial. But the section on tenure in the full document reads rather differently. It says that the objective for the standard could be expressed as: ‘Providers must issue the most appropriate form of tenancy for the type of accommodation which confers the greatest security of tenure consistent with balancing the needs of potential as well as existing tenants.’
Is it just me or is that a very different principle? Both the summary and the full document mention that less secure forms of tenancy can be used, for example assured shortholds for new tenants. However, only the full document says that: ‘The use of less secure tenancies may be justifiable in areas where demand for homes significantly outstrips supply, and the use of other tenure options may be more appropriate to meeting housing need and creating mixed-income communities.’
The TSA is right that security of tenure is about more than just the form of the tenancy agreement. Landlords’ policies on rent arrears have a crucial impact too - and there is a real issue about whether the national tenure standard should include them.
However, the principle matters too. High demand areas are the result of low supply policies. It’s hard to see how it would give new or existing tenants more choice and protection, or create mixed-income communities, by turning them into high turnover areas too.
Falling through the net
Seven months after claiming that Scottish homeowners do not need extra protection from repossession the SNP government has been forced to admit that, er, they do.
The u-turn by deputy first minister Nicola Sturgeon follows publication of a report by the independent repossessions working group that recommends new safeguards. In particular, the report highlights the need to extend protection to all repossession cases - not just those where the homeowner defends the action - and for legislation to require lenders to show that they have considered every reasonable alternative to repossession.
In November Sturgeon had said that Scotland described the new protections being introduced in England as ‘spin’ and ‘misleading’ but protests by other parties forced her to set up the working group.
Labour’s Cathy Jamieson accused her of ‘arrogance, complacency and ineptitude’ that had cost thousands of Scots their homes. And today Labour leader Iain Gray called on first minister Alex Salmond to return from holiday and introduce emergency legislation.
But before Labour, or the English, get too full of themselves, they might want to consider the growing evidence of gaps in the safety net south of the border too.
Take the mortgage arrears pre-action protocol. A survey of advisers last month found that half of mainstream lenders have improved their practices since it was introduced in October - but only a fifth of sub-prime lenders. While repossession actions have gone down, there is still a question whether they have gone away or just been delayed.
The longer the housing market crash continues the longer the list grows of victims of the reckless lending and borrowing that preceded it.
Fighting back
In the search for explanations for the BNP’s breakthrough in the European elections, Labour’s collapse is the one taking the headlines but housing is not far behind.
Chancellor Alistair Darling said yesterday that the BNP had exploited anxiety about lack of housing in traditional Labour areas and that the government would bring forward plans to build more homes and provide jobs for unemployed construction workers.
‘We are looking at housing,’ he tells today’s Guardian.’It is one of those issues we really need to deal with.’
While the focus had been on falling house prices, Darling added that the ‘real housing problem is that not enough houses are being built. It is a big, big priority for us.’
Labour MP Glenda Jackson (‘How to beat the fascists? Build more houses’) draws a similar conclusion in the Independent today and calls for a ‘social housing revolution’ and ‘policy priorities that reach out to voters who have never stepped inside a focus group’.
Labour MP Jon Cruddas argues today that it could have been far worse and that mass opposition on the ground helped limit the damage. ‘The long term legacy of “Middle England” politics, free market economics, mass immigration and a housing crisis all helped create this sense of inevitable electoral success,’ he argues on his blog.
So far, so good. But if Darling and the others are right then the mainstream parties have a lot of ground to make up. The combined stock of social rented housing has fallen by more than half a million in England in the last ten years as new starts have failed to keep pace with losses to the right to buy and demolition.
Communities and Local Government stats reveal that the stock has fallen most in the north and midlands - precisely the areas where the BNP did best. Without wanting to make too much of the comparison, the stock fell 12% in England as a whole but by 17% in the two regions where the BNP took European seats, Yorkshire & Humberside and the North West.
Making any kind of dent in that shortfall will take time but it does provide a powerful argument for protecting the new rented homes budget from the drastic cuts that are just around the corner whoever wins the next election and for finding ways to kickstart regeneration without alienating local communities.
It’s also yet another good argument for changing the rules to let local authorities take the lead and show voters that politicians are at last responding to their concerns. Perhaps new homes can get the message across in ways that decent homes have not?
Selling out
One indicator is stubbornly resisting any hint of a housing market recovery: the number of new instructions to sell property received by estate agents has just fallen for the 24th month in succession.
Every other measure assessed by the Royal Institution of Chartered Surveyors in its May survey is displaying the same green shoots as the mortgage lenders’ house price surveys.
Buyer interest is reported to be at its highest level in 10 years. Sales were up for the third month in a row. The number of unsold properties on agents’ books is down 35% on a year ago. More surveyors are still seeing prices fall than rise but the balance is the smallest since November 2007.
So why so few sellers? The RICS says that the shortage has if anything got worse recently. It says anecdotal evidence suggests that changes on the rules on home information packs - can anything so hated by estate agents really be that bad? - introduced in April may be to blame for that.
A simpler explanation is that only people who have to sell do so at a time when prices are falling. As other surveys show, there has been an increase in homes for rent - and downward pressure on rents as a result. The corresponding shortage of homes for sale is helping to support prices.
Like record low interest rates, which are bound to increase if the evidence of a recovery mounts, that is a situation that cannot last for ever. Rising prices should mean rising supply in the sales market - and demand will be limited by continuing shortage of mortgages for first-time buyers.
Revolving door
The nine months are up so it must be time for another housing minister. Step forward, John Healey, but on past form make the most of the job while you can.
Margaret Beckett was replaced by Healey, the former local government minister, after just 35 weeks in the job. That was a week less than her predecessor, ex-Europe minister Caroline Flint.
When Beckett took over in October 2008 she became the eighth Labour housing minister in 11 years - a turnover rate denounced at the time as ludicrous by her Conservative shadow Grant Shapps.
Healey is now the ninth person to hold the job in 12 years and the fourth in less than two. Combine that with a communities secretary in John Denham and the signs are not exactly promising for a CLG agenda that includes the crucial review of the housing revenue account.
On the plus side, the two new men in charge do have something of a track record in housing. Denham, for example, was chair of housing in Southampton from 1989 to 1993 so should have considerable insight into the problems faced by local authorities as a result of a housing market crash.
Meanwhile Healey co-authored a Smith Institute paper on housing and the economy in 2004 with future schools secretary Ed Balls. Previous jobs as financial secretary to the Treasury and parliamentary private secretary to Gordon Brown should also give him access where it counts.
That could be important as, like Beckett and Flint, he will attend Cabinet without being a member. Beckett was reportedly sacked when she demanded full membership in the reshuffle while Flint resigned in a blaze of publicity claiming she had been marginalised.
Muddied blue water
As Labour awaits the full scale of its kicking in the local and European elections, the question everyone is asking is no longer whether there will be a Conservative government but when. The more intriguing one is what kind.
Will it be the kind of administration envisaged by Michael Portillo in his Inside Housing interview today? One that will adopt the sort of policies advocated by the think-tank Localis and end security of tenure in social housing?
Or will it be a national Conservative government in tune with the priorities of Tory councillors like John Lines in places like Birmingham. The city today launched the new Birmingham Municipal Housing Trust, the first stage in a plan to build 500 new council homes a year.
With the frankness of an ex-politician Portillo says that a Tory administration will have to cut and cut deep. ‘The need to rein back on public spending is tremendous,’ he says. ‘There needs to be a huge shift of policy and I can’t predict what the consequences are. I’m afraid I can’t be very reassuring about it.’
For Portillo: ‘It should be clear that social housing, which is in short supply, is made available to meet social need, and where the need ceases to exist, the provision is no longer appropriate.’ The solution to shortage, in other words, is to keep the tenancies moving.
For Lines, though, the solution to shortage is to build more homes: ‘I am passionate about council housing and sadly we have moved away from that over many years. The council is providing decent homes for its people. This is a highly significant step for Birmingham.’
I may be exaggerating the distance between the two positions - after all, a future Conservative government could end security of tenure and build more homes too - but there are genuinely two different traditions within the party.
One view wants to take the legacy of Thatcherism and go further, to reach the parts of welfare state dependency that she could not and reform them. The second was never entirely comfortable with the way the right to buy was implemented or the way that councils lost the ability to build homes for their own people in the 1980s. That’s a view that has particularly deep roots in municipalist Birmingham, where Neville Chamberlain is fondly remembered as a champion of council housing and town planning.
In between you have people like former leader Iain Duncan-Smith, whose work with his Centre for Social Justice think-tank has convinced him that secure tenancies stifle aspiration but who also believes that the right to buy was one of the reasons for the concentration of deprivation on estates. Housing spokesman Grant Shapps launched a policy paper in April that steered clear both of ending security of tenure and of extending the right to buy.
In the middle you have millions of tenants and potential tenants wondering if the future holds yet more insecurity or some sort of revival for council housing. One election result declared today will not get many headlines but it did have a turnout (72.6%) three or four times higher than in most local and European contests. Tenants in South Cambridgeshire voted 72.6% no to the stock transfer plans of their (Conservative) district council.
Earning power
One stat leaps out of this morning’s Halifax index showing a 2.6% rise in house prices in May: mortgage payments have fallen from 48% of average disposable earnings at the start of the credit crunch to just 31% now.
The boost in affordability generated by record low interest rates means that mortgage payments in relation to earnings are now below the long-term average of 37% recorded over the last 37 years.
Coming on top of the 1.2% increase in the Nationwide index, and the rise in mortgage approvals recorded by the Bank of England, it’s being taken as yet more evidence that the housing market could be on the turn.
Yet house prices are still 10% higher in relation to earnings than the long-term average. The average home is now worth 4.36 times earnings as opposed to an average of 3.97 since 1983.
During the boom, it was fashionable to dismiss the house price/earnings ratio as out-dated: lower interest rates had made higher house prices sustainable. But that was before boom and bust were un-abolished and before the banks discovered that lending on property was not risk-free.
A quicker than expected recovery ought to lead to gradual increases in interest rates and a deterioration in affordability that limits fresh price rises. In the long term, prices should still rise in line with earnings.
However, the Bank of England has no remit to control house prices - just an inflation target using a measure that does not include housing costs - and its other quantitative easing policies seem designed to prop up the prices of housing and other assets. Rates remained unchanged today.
The Halifax itself was quick to point out the importance of not putting too much weight on one month’s figures. It recorded a 2% rise in January but then three successive monthly falls. Even in the dark days of 1991 and 1991, when prices fell 11% nationally, there were five monthly price rises.
Running out of time
Better late than never. More than 18 months since the sale and rent back scandal first broke, the government finally introduced legislation yesterday. But with a maximum of 11 months until the next election, and a growing list of ministerial resignations now including Hazel Blears suggesting that it could be even sooner, the time to get other unfinished business completed is running out fast.
Housing minister Margaret Beckett - a candidate to take over from Blears but who could go anywhere in the reshuffle - spent much of her time in communities and local government questions yesterday defending the government against accusations of being slow to help repossession victims and slow to reform the housing revenue account (HRA).
Her clashes with the Conservatives over the mortgage rescue and homeowner mortgage support schemes got most of the coverage as Beckett was interrupted with Tory cries of ‘two’ - the number of households rescued so far - and hit back by accusing them of laughing at families in trouble. From a seemingly weak position, she did a reasonable job of arguing that for every family helped by the schemes, many more were benefiting from lender forbearance influenced by what the government was doing.
In the debate on the housing revenue account there was a palpable sense of urgency from MPs. David Taylor (Labour) called it a ‘once-in-a-generation opportunity’ while Julia Goldsworthy (Lib Dem) questioned why the results of the review were so overdue. ‘In the current economic climate, surely what we need is swift action, rather than further delay,’ she said.
Beckett responded that: ‘The review has not, actually, been massively delayed—we had hoped that it would report in the spring, and we now hope that it will do so this summer.’ She added that she recognised all the criticisms of the current system and hoped to come forward with radical proposals for change that would attract support across all parties but that it was important to come up with something better than the current system.
But note that ‘hope’ that it will do so in the summer. Reform of the HRA will be fiendishly complicated and so will the even bigger prize of reform of the public borrowing rules but time is running out.
With sale and rent back, the scandal broke in October 2007 but it was 12 months before the Office of Fair Trading recommended statutory regulation. It then took another seven months before the Treasury introduced the secondary legislation. And that was with the same ministers in charge.
Bye to right
No wonder receipts from right to buy sales have fallen off a cliff. A written answer in parliament yesterday reveals that the average right to buy discount has more than halved as a proportion of the full value of a home since 1997.
The average discount for tenants in England was worth 49% of the average value of a right to buy property in 1997/98 but by 2007/08 it had fallen to just 24%. As a proportion of the the average house price it fell from 27% to just 11%.
The trend was most dramatic in London, where the average discount was worth 53% of an average right to buy property 11 years ago but is worth just 13% now. In most other regions, the proportion fell from half to a quarter of the value of a right to buy home, with only tenants in the North West (32%) and West Midlands (30%) retaining a more generous shares.
The reduction is the result of remorseless increases in house prices since 1997 and of reductions in the right to buy discount under Labour, especially in London, and is now having a big knock-on effect on the finances of social landlords.
The intriguing thing now, given that the parliamentary question was tabled by Conservative housing spokesman Grant Shapps, will be what a future Tory government will do.
The Conservatives might be expected to act to revive their most iconic housing policy but may find it hard to justify increased discounts at a time when public spending is being cut drastically elsewhere.
‘Radical new housing policies’ launched by Shapps in April included a commitment that any tenant moving within the social sector will retain their right to buy discount but said nothing about reversing the Labour restrictions or a new right to buy for housing association tenants. However, the debate continues within the party.
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