All posts from: November 2009
Homelessness prevention has to go down as one of the success stories of the noughties in the wake of new figures showing that 130,000 families were helped last year.
Published for the first time yesterday, the homelessness prevention and relief statistics show that local authorities in England helped 75,000 families obtain alternative accommodation and 48,000 remain in their own home in 2008/09.
That’s great news even if the suspicion remains that in some local authorities the work is more about homelessness application prevention than homelessness prevention. As with the stats on homeless acceptances, that doubt will persist even though it’s hard to tell whether or where such gatekeeping is happening.
That health warning aside, when taken as a whole the figures are vindication of the duty placed on authorities under the Homelessness Act 2002 to gave a strategy on preventing homelessness in their district. That duty applies to everyone, not just those in priority need.
The broad scope of that work is shown by the breakdown of the help provided. For people helped to get alternative accommodation, half came from private rented sector accommodation, 18% through social housing and 10% through a hostel or HMO place. For people who were able to remain in their existing homes help ranged from debt advice to family mediation and resolution of housing benefit problems to sanctuary scheme measures for domestic violence.
That may not be as progressive as the legislation introduced in Scotland to phase out the whole concept of priority need by 2012 but it’s still a big step forward from what went before and has helped far more people than more-publicised help to prevent repossessions. What is also highlights though is the crucial role of the private rented sector at a time when tenants are under more financial pressure than ever - something that, as Shelter pointed out in its response, makes it all the more urgent to improve standards and management.
Private tenants emerge as the forgotten victims of the recession in a new survey published today that shows 90% of lower-income renters are struggling financially.
While media and government attention has been firmly focussed on the fight to save homeowners from repossession, financial problems are stacking up for private tenants, according to research by Shelter and the Money Advice Trust. Just 51% of tenants said they were struggling in a similar survey in 2006.
More than a third of lower-income private tenants - with a household income of less than £20,000 or £25,000 in London - had fallen behind with at least one major bill, including their rent.
Worryingly that included many tenants whose rent is theoretically covered by the local housing allowance. Of the 52% of tenants receiving it, more than 60% found it did not cover their full rent. Almost a quarter of benefit recipients were making up a shortfall of £49 or more per week.
Figures like that put all the good work done in limiting repossessions into perspective. While homeowners (and landlords) have benefited from record low interest rates and a range of other help little has been done for private tenants - and unlike housing association tenants they cannot look forward to a rent cut next year.
And while the campaign continues to stop the government taking up to £15 a week away from private tenants on local housing allowance who shopped around for a cheaper rent, the survey is a stark reminder that rent shortfalls are an even bigger issue.
Labour loves the idea, the Conservatives adore it and the Lib Dems find it irresistible. So why is co-operative housing still struggling to take off in the UK?
The potential is clear from a report just published by the Commission on Co-operative and Mutual Housing. The sector makes up 18% of the stock in Sweden, 15% in Norway, 8% in Austria and 6% in Germany but just 0.6% in the UK.
This despite all that support from the main parties and the fact that surveys show resident satisfaction is higher than in other tenures. Co-operative housing is flexible and adaptable too, taking in tenant management organisations, community land trusts, co-housing schemes for older people and co-ownership schemes to give people a way on to the housing ladder.
The commission calls for funding streams to be realigned to support the sector and for the legal and regulatory framework to be made more sympathetic. Meanwhile, local authorities and housing associations are challenged to support co-operative and mutual housing in their areas and within their own stock.
But it says the crucial ingredient is a commitment by government at all levels to introduce more democracy into housing to give ordinary people and communities the means to take control of their homes, lives and neighbourhoods.
The recommendations seem obvious and the desirability of a bigger co-operative sector self-evident - even more so in the wake of the financial crisis and ahead of the public spending clampdown.
But the report also acknowledges some past problems. Co-ownership, as encouraged by the government and Housing Corporation in the 1960s and 1970s, failed in the 1980s because most members chose to buy and take a quick profit rather than remain as co-operators. Co-operatives can also be prone to governance problems and squabbles between residents.
You sense this is going to be about something much more difficult than changing legislation and regulations. Attitudes will have to change if co-operation is to take off because it represents a challenge to the traditional way of doing things.
For central government, that means more than paying lip service to the ideals of co-operation and mutuality and a determination to back them even when they seem more difficult to implement than the alternatives.
For local government, it means treating co-operative housing in the same way as other tenures rather than (like self-build) as some sort of hippy distraction. For housing associations it means asking themselves whether they have left something important behind in the drive for growth at all costs.
For lenders and funding agencies it means taking a long hard look at whether the criteria they use to judge housing schemes really lead to long-term value for money. For residents it means asking themselves what they really want from their home and their community.
None of that will be easy but all of it has to change if co-operative and mutual housing is going to be anything more than something that everyone agrees is a good thing and then leaves it to other people to make happen.
A doubling in mortgage approvals sounds like yet more evidence that the housing market mini-boom will continue. But stats released by the British Bankers Association (BBA) this morning also indicate it could be running out of steam.
The number of loans approved almost doubled from 21,361 in October 2007 to 42,238 now. The value of loans approved more than doubled from £2,783m to £6,075m. That’s impressive growth and lenders seem to be more relaxed about handing out bigger mortgages too - the average value of a loan for house purchase is up 10% since last October and 22% so far this year.
What’s more, approvals will show an even bigger improvement on a year ago next month since they reached their lowest point in November 2008.
However, the figures also show that most of the doubling in approvals happened up to mid summer and that there has been a marked slowdown since then. In the eight months between November 2008 and July 2009, the number of approvals rose 123%. In the three months since the increase is just 4%.
This month’s total may be almost double that of October 2007 but it is also the second lowest October total recorded by the BBA since it started releasing the stats in 1997 and was barely changed on September.
What’s happening with approvals tends to feed through into house prices a few months later, which suggests the mini-boom will start to run out by the end of the year.
The National Empty Homes Week of Action has started with the depressing news that the problem is getting worse not better.
A survey published by the Halifax Bank shows that the number of privately-owned homes empty for more than six months in England rose by 25,000 to reach more than 300,000 in 2007/08, the most recent year for which figures are available. The 8.6% increase took the total to levels last seen five years ago.
The total number of empties is now 970,000 - one in 30 homes in the country. The arguments for the sort of concerted national campaign called for by the Empty Homes Agency seem unanswerable when Audit Commission research shows that a 5% cut in that total would save local authorities £500m a year.
The case is even stronger when you consider that the increase in the number of empty homes is happening at the same time as a decrease in starts of new ones. Starts fell by 16,000 between 2006/07 and 2007/08 and by 66,000 between 2007/08 and 2008/09.
The time lag in the empty homes stats makes it hard to judge the impact of the downturn. The biggest increases came in the North West and in areas that already had high levels of deprivation. In theory the downturn should have led to an increase in the number of unsold homes that would then either be rented out or sold at cheaper prices. In practice, though, low interest rates mean there is less pressure on owners to sell empties and they even get perverse incentives through the council tax to leave them vacant.
Ahead of next month’s pre-Budget report the Empty Homes Agency is making yet another call for the Treasury to tackle the issue of VAT being charged at the full rate on repair and improvement work and zero on new homes.
That call has been made so many times before that writing about it again makes me feel like this must be Groundhog Day. But with that worrying increase in empties and the full rate of VAT due to go back up to 17.5% in January surely now is the time for action at last.
What do you think would most impress a new Conservative government? Traditional, sober blue? New, tree-hugging green? Or pink?
The Tenant Services Authority (TSA) is clearly going to have its work cut out if it is not to join regional spatial strategies, eco-towns and home information packs on the scrapheap if the Tories win next year’s election - and it will need more than the bold branding that distinguishes it from its predecessor, the Housing Corporation.
As Inside Housing reports today, a plan floated by shadow housing minister Grant Shapps to transfer the regulation of housing associations to local authorities has sparked a rearguard action by landlords, lenders and tenants dubbed ‘Operation Pink’.
Shapps has made little secret of his scepticism about both the TSA and Homes and Communities Agency. ‘Not impressed’ is his general line - with the HCA’s 20 offices and £4.5m a month salaries bill and with the fact that by July the TSA had ‘so far spent its time surveying 27,000 tenants to get responses and then writing a draft report about what it might do’.
We’re now seeing the results of all that consultation and trips in the pink camper van and the TSA appears to be starting to find a balance between cutting red tape for landlords and giving tenants something a bit more meaningful than warm words about ‘empowerment’.
But will that cut any ice with the Conservatives? Transferring regulation to local authorities would certainly be in tune with their localist thrust - even if it would be completely at odds with what they did to local government between 1979 and 1997.
The imminent extension of TSA regulation to local authorities is another factor in the equation. The Local Government Association supports domain-wide regulation but says it ‘will need to be assured the entire regulatory system is designed so that landlords focus on their tenants and delivering for them, not on satisfying what they see as the regulator’s concerns and priorities’.
At the same time it’s very hard to see banks and building societies supporting the idea of regulation of the landlords it lends to by anything other than an independent body - and there is that key argument that having independent regulation saves £500m a year in interest payments.
The grey old Corpie managed to survive repeated threats to its existence in the 80s and 90s because that regulatory role is so vital. Sometimes grey can be the new pink - or even the new blue.
It’s not exactly time to get carried away but housing starts are now higher than a year ago for the first time since the credit crunch.
Third quarter figures from the Communities and Local Government (CLG) department today show starts in England were up for the third quarter in a row at 26,550 - 18% up on the second quarter and 16% up on the same quarter a year ago.
While starts by housing associations were up again at 4,930, the lion’s share of the improvement came in the private sector with starts increasing from 17,770 in the second quarter to 21,600 this time.
That fits with evidence from the trading statements of the major housebuilders that Kickstart and Homebuy Direct funding and the general improvement in the housing market since the Spring have persuaded them to restart work on sites that were mothballed and even start work on some new ones.
That’s the good news. The bad news is that the total number of starts over the last four quarters is barely a third of the government’s target of 240,000 net additional homes.
Take off conversions and that amounts to about 210,000 new starts. That is actually the total since the start of the credit crunch more than two years ago and it means there is already a deficit of something like 250,000 homes to be made up.
Meeting even the more modest target of matching the peak in starts of 185,000 in 2005/06 looks a tall order. The current total is half that and, while the improvement looks set to continue, it’s hard to see where a sustained increase is coming from. Housebuilders are looking to repair their margins by cutting costs and building fewer, more expensive homes while public funding for housing associations is about to fall off a cliff.
If it’s any consolation to those affected, it’s not just key housing reforms that were left out of today’s Queen’s Speech - and it may not have made much difference if they had been included.
As Tom Lloyd blogged yesterday, the stripped-down programme of legislation published today does not include a Housing Bill. That will disappoint council tenants and their local authorities who might have expected measures to reform the housing revenue account subsidy system and will now apparently be left hoping that the government can broker a voluntary agreement.
But it could mean a double whammy for private rented sector tenants. It’s hard to see how they will now get the extra protection pledged by the government if their landlord is repossessed. While the government can still implement some aspects of the Rugg review of the sector, many of the proposals are long term and require primary legislation.
That will disappoint reputable landlords and agents too. As the Royal Institution of Chartered Surveyors (RICS) put it today: ‘Without teeth provided by legislation this initiative will have limited impact and be confined to agents and landlords who are already protecting consumers.’
Other bills left in the legislative waiting room appear to include a Health Bill giving new rights to NHS patients, an Animal Health Bill. However, with little parliamentary time left and the Conservatives promising delaying tactics in the House of Lords, it is by no means certain that the bills that are in the speech will make it into law before the election.
That’s exactly what happened the last time a Labour government lost power. The final Queen’s Speech of the Callaghan government included a Housing Bill that would have given council tenants security of tenure.
The fate of that bill then lay with the incoming Conservatives - just as the fate of the unfinished housing business will if they win their expected victory next year.
Will that mean yet more months in limbo? Not necessarily. I’m not quite sure what the lesson from history might be but it’s often forgotten that the victorious 1979 Tories actually went ahead and introduced security of tenure in their first Housing Act and then added something of their own - the right to buy.
Orders up, reservations up and debt down all sound like pretty good news for Britain’s biggest housebuilders so why does it not quite feel like it?
Interim management statements from Barratt today, Persimmon yesterday and Taylor Wimpey two weeks ago all contain plenty of green shoots. Taylor Wimpey said it had already sold its stock of homes for 2009, Persimmon could boast the same plus forward orders up 50% on a year ago and Barratt said net private reservations per site were running 34% ahead of a year ago.
Following a rights issue, Barratt’s debt is half what it was this time last year at £700m, Taylor Wimpey’s net debt is £860m against £1.87bn and Persimmon owes £399m rather than £960m. The companies are even starting to buy land again.
All of which is an impressive recovery compared to the doom and gloom of last year, partly thanks to government support through HomeBuy Direct (Persimmon has just seen its 1,000th house reserved through the scheme since March). However, the focus in all three companies still seems to be on continuing to dig themselves out of a hole by achieving sales prices increases and controlling costs.
‘Sustaining the current recovery will be dependent on improvements in mortgage availability and the wider economy,’ says Taylor Wimpey. ‘We remain concerned about the potential impact on our markets of any significant increase in unemployment over the coming months,’ says Persimmon.
The same caution is evident in Barratt’s statement today. The company is operating from 20% fewer active sites than a year ago and warns: ‘Whilst there has been an improvement in market conditions, further recovery will be dependent on increases in mortgage lending particularly in the higher loan to value segment.’
Given that the Council of Mortgage Lenders (CML) said last week that ‘to all intents and purposes the UK mortgage book is stagnating at present’ the prospects of that do not look great.
The unspoken fear for housebuilders is a double dip in the housing market.
If there are three words that are guaranteed to get the goat of any Conservative parliamentary candidate they are regional, spatial and strategy.
The Tories are already pledged to abolish the hated product of the last Labour shake-up of the planning system, which is routinely described as ‘top-down’ at best and ‘Stalinist’ at worst and housing spokesman Grant Shapps says have created ‘a generation of NIMBYs’.
But statements so far by local candidates include an awful lot more about the homes they don’t want than his new policies to make local communities pro-development.
Over at the official The Blue Blog on the party website, West Worcestershire candidate Harriett Baldwin waxes lyrical about how growth has happened organically in Worcester and nearby villages and towns and is raging about the regional spatial strategy. ‘This centuries-old process changed when Prime Minister Gordon Brown decreed in 2007 that 3,000,000 homes in Britain should be built by 2020,’ she says. ‘Does he know how many bathplugs will be needed too, do you think?’
The county has a particular electoral resonance given the popular view that the votes of so-called Worcester Woman handed New Labour its early election victories. In the city itself, the Tory hoping to unseat Labour’s Mike Foster, Robin Walker, has warned of the danger of Worcester being ‘swallowed up in a gigantic West Midlands urban agglomeration’.
The key issue for both is the imposition of 25,000 new homes in the city, Malvern Hills and Wychavon, where the Conservative-controlled local authorities are backing a six-month delay in adopting their joint core strategy until after the election. Baldwin says Malvern Hills needs 4,900 new homes, not the 11,000 in the strategy, and has urged the joint core strategy team that ‘it would be prudent to phase these imposed housing numbers, so that should the national government abolish the RSS after the General Election, changes can still be made’.
Delay was also urged by shadow communities secretary Caroline Spelman in her leaked letter to local authorities in August advising them to delay major developments. She urged them ‘not to rush ahead with implementing the controversial elements of regional spatial strategies’ and pledged not to pay disappointed developers any compensation.
Baldwin argues on her blog that: ‘There is no question that the open spaces are there to be built on. There is no shortage of farmland that farmers are willing to option off to developers. What is lacking is local demand for the homes, local infrastructure and local democratic control over the scale of development.’
A similar message is being heard from Conservative candidates around the country and my guess is the voters will find it a seductive one - without asking what happens if every district only builds enough homes to meet ‘local demand’.
Will the government climb down on its plans to scrap excess payments to local housing allowance claimants?
The pre-Budget report on December 9 looks like the ideal opportunity for a re-think and there have been hints of a u-turn from ministers under pressure from Labour backbenchers and opposition parties over an issue they have been warned could turn into another 10p tax debacle.
Plan were announced in the Budget to end the shopping incentive that lets claimants keep up to £15 a week from their allowance if they can find a cheaper rent. Budget papers estimated this would save £160m. But opponents say it would amount to a benefit cut for some of the poorest in society and there is no guarantee that the money would actually be saved.
On Wednesday Lib Dem leader Nick Clegg took up the issue directly with Gordon Brown at prime minister’s questions. ‘How is it possible, in the middle of a recession, with unemployment at 2.5m and rising, that this government - a Labour government - should be planning to change local housing allowance rules to take £15 a week from some of the poorest people in Britain?’
The prime minister batted it away with Labour’s record on taking people out of poverty and said he did not believe the figures were accurate. Clegg hit back with: ‘How would he feel if he was on £80 a week and the Government came along and said, “We’re going to take £15 of that away”? This is going to hit up to 300,000 of the poorest people in this country and it will not save the Treasury any money. It took him months to do the right thing - the U-turn - on the 10p tax rate fiasco. Will he now look at this measure, stop it, and stop it now? Will he do that - yes or no?’
Brown’s response was interesting: ‘This is the man who talked about savage cuts in public services. What we are trying to do is to reform housing benefit in a way that helps those who are most in need. What we are also trying to do is to use our resources to help those who are unemployed get back into work. If the right hon. Gentleman is talking about proposals on housing benefit, he is talking about proposals for consultation - no decision has been made.’
That ‘no decision has been made’ seems to tally with reports that the government is taking a fresh look at the issue. Work and pensions secretary Yvette Cooper told a select committee last month that: ‘We are considering all of the consultation responses. I think some quite important issues were raised as part of that consultation which we do need to look at very carefully because there are significant questions there.’
One reason could be the realisation that the £160m saving may not turn out to be all it is cracked up to be - what’s to stop landlords simply ramping up the rent? Lib Dem shadow housing minister Sarah Teather asked what the average excess payment is in a written questions this week and was told the information is not available.
Her early day motion on the issue now has the backing of Labour and Tory MPs as well as her own party.
The full extent of the remarkable transformation in the housing market since the gloom of a year ago is revealed in new figures from the Council of Mortgage Lenders (CML) today.
In December 2008 the CML was forecasting levels of arrears and repossessions in 2009 as great as in the crash of the early 1990s. Up to 75,000 families would lose their homes, it said, and 500,000 would be more than three months behind with their mortgages.
It had already revised those forecasts in June as it became clear that record low interest rates and a range of government initiatives would mean things would not be remotely as bad. Today it revised them down again to 48,000 repossessions and 195,000 mortgages more than 2.5% in arrears (a measure it now sees as more accurate) in 2009.
The trend is clear from the third quarter figures also published today. Repossessions between July and September totalled 11,700 - 300 more than in the second quarter and 600 more than a year ago. Arrears were also down on the second quarter in all but the worst cases - families with arrears of more than 10% of their mortgage.
The contrast with 1991 and 1992 could hardly be greater - as I’m sure Labour ministers will waste no time reminding us - and the transformation does not stop there.
The buy-to-let market had looked vulnerable to meltdown in the early part of 2009, with big rises in arrears, repossessions and properties with a receiver of rent appointed and falls in lending.
The third quarter figures for buy to let show that arrears and receivership cases fell, although there were 14% more repossessions, and that gross advances rose for the first time since the start of the credit crunch.
All in all it’s quite a recovery - except for the fact that it won’t feel like one. With unemployment rising and lending capacity still weak, the CML expects the market to stay subdued. Transactions will barely rise at all in 2010, it forecasts, and stay at around half the level seen in 2007. Gross advances will rise slightly but be less than half 2007 levels.
Meanwhile repossessions will rise 10% to 53,000 next year. That sounds like good news compared to all the gloom until you remember that it’s double the level seen in 2007.
How many housing association tenants will actually see the 0.9% rent cut they should apparently be expecting next April?
Not many is the clear implication of the detail of the government’s response to its consultation on directions to the Tenant Services Authority (TSA). Its apparent confirmation of the cut has sparked a furious reaction from the National Housing Federation (NHF) and also led to threats of legal action.
The response concedes that most respondents wanted a rent freeze rather than a floor of -2%. Some argued that there is no provision in the legislation for a reduction in rents; others that it could reduce finance for new homes, leave them in breach of their loan covenants, affect their credit ratings and send negative messages about the sector to private investors.
That’s quite an agenda but the government rejects those arguments on three main grounds. First, the RPI has not fallen by as much as feared and it needs to balance those arguments with the interests of tenants and the implications for the housing benefit bill.
Second, associations were able to set relatively high increases of up to 5.5% in 2009/10 thanks to a high RPI in September 2008. (By the time the increase was implemented in April, inflation had fallen back to virtually nothing but it’s hard to remember any of them protesting about the impact on their tenants.)
But it’s the third reason that’s the most interesting to me - that rents on most homes are not actually restricted to RPI plus 0.5% at all. For homes that are below target rent and associations that want to get them up to target quickly, the formula is actually RPI plus 0.5% plus £2 - which works out as an increase next year.
Conference presentations by Peter Marsh of the TSA earlier this year put the number of homes affected at 850,000. Far from insignificant - but still a minority of homes.
However, the government response goes much further. It points out that the higher formula applies to rents below 105% of target and that analysis of more than 1.7m homes by the TSA showed only 201,000 homes in excess of 105% of target rent - less than 12%. ‘This 12 per cent is reasonably concentrated within the sector, which will provide a focus for TSA engagement,’ it says. ‘However, this also means that many RSLs should be able to avoid an overall cut in rental income.’
And that’s not the end of the flexibility. The draft direction also gives the TSA scope to allow extensions to rent restructuring where there might be ‘a threat to RSL viability or any breach to a funding covenant’ or where promises made to tenants as part of a stock transfer deal might be broken.
Might this be the beginning of the end of the house price mini-boom? For the first time since the credit crunch surveyors are reporting an increase in instructions to sell property in all regions.
Along with record low interest rates, lack of supply has been one of the main reasons why prices have risen so much recently. According to the Halifax October index published last week prices are up 7.1% in the last six months but the bank also detected signs that more people were putting their homes on the market.
That seems to be confirmed in the October housing market survey published today by the Royal Institution of Chartered Surveyors (RICS). The balance of surveyors reporting an increase in instructions to sell rose to +15% from +5% in September. It was positive in every region of England and Wales and the rise was strongest in the North, South West, London and Yorkshire and Humberside.
The increase in supply is significant given that low interest rates mean there are fewer forced sellers than in previous recessions. Sooner or later, all the artificial stimulus of quantitative easing, stimulus spending and those low rates will be withdrawn.
It’s only a tentative indicator - the stock of unsold properties on the average surveyor’s books was unchanged for the third month in a row - but if it is sustained it should start to take some of the heat out of the market.
For the moment the market is still rising. There was another big jump in the balance of surveyors reporting price rises rather than falls and the market in London looks stronger than at any time since 1996 - but for how much longer?
With the likely next government committed to give social housing tenants a right to move, time is running out for their landlords to come up with a better alternative.
The good news is that the Homes and Communities Agency (HCA) and a group of eight housing associations have just published some ideas on how a national mobility scheme might work. The bad news is that the group was unable to carry out the original plan - to set up a national pilot scheme.
The report says: ‘It was envisaged that the pilot would have afforded an opportunity to explore how residents could be offered additional housing options to meet the needs of changing households. The aim was to unlock ineffectiveness within existing transfer and lettings processes to examine whether this option could contribute to tackling over-crowding and under-occupation, as well as offering learning on enabling greater mobility amongst social housing residents.’
Sounds like a great idea, you might think. Except that ‘the study was unable to recruit sufficient numbers of housing associations to justify the initial investment that would be required to run a pilot’.
Reluctant associations blamed the fact that they were scaling back non-core activities because of the downturn or were in the middle of large-scale reviews of their group structures. ‘Many associations considered it to be the right project but at the wrong time.’
Right project? Certainly, when a survey of tenants revealed that 37% wanted to move and 17% wanted to move alot and allowing them to could increase economic mobility, free up larger homes and improve community cohesion. The research concludes that 680,000 tenants would like to move and 128,000 would like to relocate to a different part of the country.
The same issue was highlighted by John Hills in his report on social housing in 2007, when he pointed out how much less likely social tenants are to move for job-related reasons than private tenants and owner-occupiers and the benefits of improving mobility within the existing stock.
Wrong time? Er, there are seven months to go before the election and the Conservatives are committed to give social tenants the right to move. Under a plan put forward by the Policy Exchange thinktank they would get the right to tell their landlord to sell the property they are in and buy an equivalent one elsewhere.
The plan has many landlords scratching their heads about the logistics of owning isolated homes scattered around the country and both the Chartered Institute of Housing and National Housing Federation say it is unworkable.
But if they want to convince the Conservatives otherwise it might be an idea to read today’s report about how a national scheme might work - and then act on it.
EDIT 17:00 MONDAY: It’s emerged today that the Conservatives and NHF are already working up an alternative - both a national swap scheme for social tenants and a mobility taskforce headed up by David Orr. Can they succeed where Move UK and the HCA initiative failed?
Britain will get three new banks under the deal announced yesterday - but will it make any difference to mortgage lending?
Negotiations between the European Commission, the Treasury and the banks concerned mean Lloyds will have to sell off assets including its Cheltenham & Gloucester and TSB brands and RBS will have to sell 200 branches. Last week a deal was reached to split Northern Rock into two separate companies.
In theory, that ought to mean more competition in a mortgage market that is now dominated by a handful of lenders. Almost 80% of mortgages to homeowners in 2008 were lent by just six companies - Lloyds, Santander, Nationwide, Barclays, RBS and HSBC. Of the top 30 lenders in 2007, before the credit crunch, seven have been taken over by other banks, three are on their knees and in public ownership, five have ceased new lending and one has gone bust.
The takeover of HBOS by Lloyds created a bank with more than 30% of new mortgage lending on its own. Lloyds says the sell-off will transfer just under a fifth of that but it will still be left with almost a quarter of the market. The same concentration in the market applies as much if not more to lending to housing assocations and lending to shared owners.
In practice though, do banks that will be owned by Richard Branson, Tescos or American hedge funds really sound like the answer? And if the European competition commissioner can force this through now, what were her predecessors doing when most of our mutually owned lenders (including Cheltenham & Gloucester and TSB) converted to PLC status and then got swallowed up?
Anyone looking for easy answers about the future of Supporting People will not find them in today’s report from MPs on the communities and local government committee.
It’s rare to read any committee report that is so much more about dilemmas than solutions but then that’s probably true too of so many of the problems that Supporting People addresses. It’s rarer too to read a report about a programme whose funding is under threat that apparently saves £2 for every £1 spent.
On perhaps the most pressing issue, the removal of the ringfence on funding from April 2010, the MPs conclude that the upside of extra flexibility is worth the downside of potentially losing funding to other services. ‘Central government must show how much money it provides for Supporting People within each local area-based grant,’ says committee chair Phyllis Starkey. ‘Local authorities should be free to manage their own budgets, but must then be prepared to justify any decisions to redirect Supporting People funds to deliver other locally targeted services.’
This despite the fact that, as the committee acknowledges, pressure on local authority budgets poses a real threat to the future of some services and heighten the risk that currently unmet needs will not be addressed. ‘The question is how best to address that threat, recognising that it applies equally to other local authority services, and that local people should in principle be in the best position to determine how best to allocate resources,’ say the MPs.
Similarly, they reject the arguments for putting Supporting People services on a statutory basis - apart from anything else, they would be extremely difficult to define in legislation - but say that the case for that should be reconsidered later. What they leave unsaid is that this may apply especially under a new government that gives local authorities far more freedom from meeting national standards and targets.
The dilemmas do not stop at ringfencing alone. Others include how to:
- reach the greatest number of people without ignoring some
- empower and involve people using services
- get efficiency from competitive tendering without creating a short- term contract culture.
- make the most of the benefits of floating support without excluding small voluntary agencies
- maintain the balance between maintaining and attaining independence
- give people more choice through personalisation without overwhelming them with too much choice.
That’s quite an agenda and it is only scratching the surface of the report that looks in depth at the issues involved in the transition to the new system and new structures in local government.
However, one more dilemma - along with competitve tendering the most hotly disputed issues, according to the committee - is whether sheltered housing should be part of the Supporting People regime at all. On this, and the loss of wardens in favour of floating support, the MPs defer to the ministerial group currently considering the issues, though with recommendations on where it should focus.
House price inflation may be slowing down but there is little sign yet of the second slump that many pundits expect and the market continues to defy the pattern seen in previous recessions.
Figures from Hometrack this morning showed a 0.2% rise in prices in October, taking the annual rate to -4.2%. On Friday the Nationwide reported a 0.4% rise in October and prices that were higher than a year ago for the first time since March 2008.
Over the last six months, prices on the Nationwide index are up 6.5%. At a time when prices generally are falling, that almost qualifies as a boom.
However, the rise in October was much smaller than September’s 0.9% and the building society highlighted signs of further moderation to come, including a slowdown in the recovery of mortgage approvals.
Hometrack director of research Richard Donnell noted a marked slowdown in the rate of growth in the number of new buyers registering with estate agents. Earlier in the year, new buyer registrations were rising by 7.5% a month but the last three months have seen an average monthly rise of 1.1%.
That slower growth in demand could counteract the continuing shortage of supply. However, with interest rates still at a record low and the number of forced sales reduced because owners can refinance their loans it is hard to see any short-term trigger for price falls.
That must be one big reason why house prices have not reacted in the same way as in previous recessions. Since 1975, according to the Nationwide, house prices have risen by 2.9% a year in real terms.
In the mid-1970s, early 1980s and early 1990s prices rose above that trend line in the boom and then fell below it in the bust. Prices peaked at 34% above trend in 1990 but fell to 30% below it by 1995.
This time around, prices were 31% above the trend at the peak of the boom in Autumn 2007. They fell rapidly until the start of the year and looked set on a similar course. Instead, they fell close to the trend at the start of this year but never below it - and then started to rise again.
For my money that says that once the stimulus of low interest rates, quantitative easing and public spending is replaced by higher taxes and spending cuts, house prices will resume their journey back to equilibrium with earnings and the long-term trend. For the moment, though, they continue to defy gravity.