Inside edge
All posts from: May 2010
Spinning the axe
Ministers in successive governments have spun cuts in housing investment as increases but David Laws did it with real style in parliament yesterday.
If he keeps this up he may even come close to matching John Prescott’s performance in 1997. The former deputy prime minister boasted about billions of pounds extra for housing when Labour took power when the truth was that the new homes programme in particular was actually set for deep cuts.
And the new chief secretary to the Treasury was up to the same thing yesterday in the parliamentary debate on spending cuts.
‘We are allocating an additional £170 million to fund investment in social rented housing in 2010-11 to help to deliver 4,000 social housing starts - members on both sides should welcome that,’ he told shadow chancellor Alistair Darling.
‘In the savings that we make, we are seeking to ensure that we cut with care,’ he told Conservative MP and former chair of the public accounts committee Edward Leigh. ‘We have demonstrated this week that we can find efficiency savings and also put money into the areas that many of us in the House are passionate about-protecting education and putting more money than the previous Government did into social housing.’
He was referring to the £170m of savings that will be redistributed back into housing at the insistence of the Lib Dems. But there was no mention of the £150m cut to housing announced on Monday or of the £780m cut to the Communities and Local Government budget to make it the biggest departmental loser.
No mention either of the briefing document published on Tuesday by the Homes and Communities Agency (HCA) that showed that housing will be cut by £230m - and that hundreds of millions of pounds worth of kickstart, local authority new build, housing market renewal and growth fund investment has been frozen ahead of the emergency budget on June 22.
Shadow housing minister John Healey has already accused the government of using the extra money as a ‘fig leaf for cuts to come’.
He told Inside Housing this week: ‘Not axeing money that is already funding a programme does not constitute new money, and this is just old fashioned spin rather than the long promised “new politics”.’
But Laws didn’t stop there. Criticised by Labour’s Dennis Skinner for campaigning against cuts and then imposing them, he hit back: ‘The hon. Gentleman talked about the decisions that we have made. Perhaps he could acknowledge two things. First, we have protected the NHS and we have protected schools. We have put money into social housing, which he might have aspired to do if he had had influence on the previous Government.’
And his real triumph came when he was congratulated on his appointment by Lib Dem backbencher Mike Hancock and asked to explain ‘some of the benefits that will accrue, particularly with regard to the amount of money being put into social housing’.
‘I am grateful to him for drawing attention to the additional investment that we are making in social housing,’ he said. ‘That is a real priority for many members across the House, including those in the Liberal Democrat party and the Conservative party, and, I suspect, for a lot of members on the Labour benches, who have been sad that the previous government were unable to invest more in social housing.’
But that was just preparing MPs for a serious charge against the old Labour administration: ‘Among the many black holes that we are discovering in the public finances left to us by that government, we have already found a very big black hole in the funding of the social housing programme. We are determined to do everything we can to ensure that the vulnerable people who depend on social housing - those who are on the waiting lists that built up under the previous government - will have some hope under this administration.’
The ‘black hole’ is presumably a reference to the amount of money that was brought forward from 2010/11 to pay for extra spending in previous years. It does not bode well for the emergency budget or for the spending review.
Buyers beware
A surge in rents and a slowdown in mortgage lending could spell turbulence ahead for a housing market on the turn.
Two surveys out today highlight a shift in the balance between supply and demand that could send recent house price rises into reverse - and that’s before any impact of tax increases, spending cuts and trouble in the financial markets.
The quarterly lettings survey from the Royal Institution of Chartered Surveyors (RICS) today showed a surge in rents in May thanks to a lack of supply. The net balance of surveyors reporting rising rather than falling rents rose from 0% in April to 30% last May. This time last year the balance was -58%.
A continuing fall in the supply of flats and houses for rent was a key factor in the shift, with 12% more surveyors reporting a fall rather than a rise in new instructions. The RICS said the upturn in the housing market had tempted many accidental landlords to sell up and led to an increase in instructions to sell on agents’ books.
The new government’s abolition of home information packs could also encourage more owners to sell.
Meanwhile the latest survey from the British Bankers Association (BBA) showed that little evidence of the traditional Spring bounce in lending. Loans for house purchase in April were up slightly on March but well down on the levels seen at the end of last year let alone pre-credit crunch levels.
That lack of mortgage finance will put a brake on demand and rising prices have already wiped out the value of the stamp duty concession offered to first-time buyers.
All of which suggests that house price inflation will continue to slow down. Major mortgage lenders like the Halifax and Nationwide expect house prices to be flat this year.
However, as the tax rises and spending cuts to come lead to reductions in real incomes and rising job losses, prices that are still significantly over-valued against incomes will come under increasing pressure.
The cuts continue
If the devil is in the details, that’s certainly true of yesterday’s £6.2bn cuts announcement. It began with a surprise announcement of extra money for social housing and ended with Communities and Local Government (CLG) taking the biggest departmental hit. Now for the details.
A briefing document just released by the Homes and Communities Agency says that it will make cuts of £230m as its contribution to the CLG’s target of £780m. However, it is already looking ahead to the emergency budget in June and adds that ‘we have decided to put a complete hold on all uncommitted spending until the position is clarified in June’.
Within the £230m savings, the National Affordable Housing Programme (NAHP) will lose £100m from the budget not yet allocated against any schemes, the gypsy and traveller programme will be cut by £30m, and housing market renewal and Kickstart will be cut by £50m each.
So far, so bad, and that’s already more than the £150m cut to the last government’s housing pledge announced yesterday, but a whole series of commitments on the NAHP, Kickstart and Local Authority New Build Programme could be under threat next month.
The briefing note explains: ‘In addition to the programme savings outlined, further commitments on the remaining uncommitted funds for the National Affordable Housing Programme, Kickstart Round 2 and Local Authority New Build programmes will remain on hold, until Government funding decisions are detailed in the Chancellor’s 50-day budget on 22 June 2010.’
On Kickstart, the briefing note says that the total budget for Round 1 and 2 in 2010/11 is £420.2m and that bids totalling £214m have already gone through the due diligence process. Take off the £50m already cut and that presumably leaves another £156m that’s vulnerable in schemes around the country
The briefing note also lists 912 Local Authority New Build Schemes for which allocations of £58.9m had been agreed but where legal agreements had not been completed before the election.
In addition, housing market renewal and growth fund allocations for 2010/11 will not be confirmed until June.
With the CLG and its arm’s length bodies will be expected to make overall in year efficiencies of 10% in their running costs (on top of the existing target to save 3% on operating costs), little wonder that the HCA announced savings earlier this week.
The announcement has already prompted a strongly worded response from the Home Builders Federation.
Kindest cut?
Sure enough, the apparent good news of extra money for social housing starts to disappear once the detail of today’s cuts package sinks in.
As trailed on the Today programme by George Osborne, social housing, apprenticeships and further education will share in a £500m package of savings redistributed from elsewhere at the insistence of the Lib Dems.
The detailed announcement reveals that housing’s share will be ‘£170m to safeguard delivery of around 4,000 otherwise unfunded social rented homes to start on site this year, protecting 3,500 jobs and prioritising provision for the most vulnerable’.
However, the overall package also includes £150m of cuts to the last government’s housing pledge ‘while seeking to protect social housing’. Communities and Local Government will see £780m cut from this year’s budget - making it the second biggest departmental loser behind Business Innovation and Skills. And local authorities will have to make £1.165bn of savings while seeing £1.7bn of grants de-ringfenced.
The transcript of a statement by David Laws, the Lib Dem chief secretary to the Treasury, puts that £170m for social rented housing firmly under ‘investing in recovery’.
No details are given of the £150m of cuts but that ‘while seeking to protect social housing’ could be a clue that other parts of the housing pledge such as Kickstart could be under threat.
Ironically, of course, the housing pledge was itself a mixture of increases and cuts - the growth fund, private sector renewal and decent homes were all victims.
9.00: A £6bn package of cuts with extra money for social housing? That wasn’t meant to be on the agenda today.
But chancellor George Osborne has just revealed on the Today programme that it will be part of a £500m pot of re-investment of the savings demanded by his Lib Dem coalition partners for apprenticeships, further education and social housing.
The surprise announcement goes against the trend of all recent reports, including this week’s Inside Housing lead story that mortgage rescue, decent homes and £380m of new development could all be under threat in the spending review in the autumn. All three are part of a review of spending commitments made since January 1.
A little extra money today may not make up for bigger cuts that are still to come but at least it shows that housing still has a voice in government. More to come later this morning.
Give and take
HIPs may be history but other parts of the Conservative housing revolution appear to be on the backburner.
The detail of the coalition programme for government published today includes several parts of the Tory manifesto that seem to have been downgraded from commitments to options and several others that are not mentioned at all.
True, regional spatial strategies will be rapidly abolished and decision-making powers on housing and planning returned to local councils. True, these will include new powers to stop garden grabbing.
But that’s followed by: ‘In the longer term, we will radically reform the planning system to give neighbourhoods far more ability to determine the shape of the places in which their inhabitants live, based on the principles set out in the Conservative Party publication ‘Open Source Planning’.
Am I reading too much into that ‘in the longer term’ by making an assumption that this is not going to happen any time soon? Perhaps.
The Communities and Local Government section of the document does after all commit to a key part of Open Source Planning: ‘We will provide incentives for local authorities to deliver sustainable development, including for new homes and businesses.’
The document also states: ‘We will promote shared ownership schemes and help social tenants and others to own or part-own their home.’ tenants’.
Again, that was in the Conservative manifesto. But there is no mention of the more radical Tory policy of equity stakes for ‘good social tenants’ - or indeed of the right to move.
And then there is ‘We will review the effectiveness of the raising of the stamp duty threshold for first-time buyers’. Raising the threshold to £250,000 was the flagship Tory policy on home ownership - the party even accused Labour of stealing it - but now it is only being reviewed.
Elsewhere, there are commitments to create new trusts to make it simpler to build homes for local people, to review the ‘unfair housing revenue account’ (no timetable on that) and cut local government inspection. These were in both the Liberal Democrat and Conservative manifestos.
There are nods to the Lib Dem manifesto with plans for ‘a range of measures to bring empty homes back into use’, for Home on the Farm schemes to encourage farmers to convert existing buildings into homes and for extra protection against bailiffs and repossession.
However, Lib Dem commitments to a specific programme on empty homes, to devote more resources to housing over time and to create a new use class order for second homes do not appear.
Finally, conspiracy theorists may like to note that the Conservative commitment to ‘respect the tenures and rents of social housing’ does not appear either. Is it simply that a programme for government is a list of what it will change rather than leave unchanged - or is that a third shooter on that grassy knoll I see in the distance?
Staying single
Question: what is the single biggest fraud in housing?
The latest annual report from the Audit Commission’s National Fraud Initiative suggests that the answer is not what you (or at least I) might expect - or at least it is in the sort of fraud investigation covered by its datamatching methods.
The fraud investigators recovered £32.3m in housing benefit overpayments and £7.6m from housing fraud (unlawful subletting and wrongly awarded right to buy applications) in 2008/09. But those figures were dwarfed by the £62.3m recovered from people wrongly claiming the council tax single person discount.
Detected housing benefit fraud was up 37% on two years ago and housing fraud up 14% but they actually fell as a percentage of total fraud that was up 50%. In contrast, single person discount fraud quintupled.
In total, councils stopped payment in 22,000 cases - the largest number for any fraud. Salford found one case where a taxpayer had been receiving the discount since 2001 despite having a live-in partner. As a result of that and other cases it now expects to raise £1m in council tax.
As for fraud as a whole, you may find some of the other results surprising as well.
The single biggest detected fraud (£72m) was in public sector pensions - either through pensioners dying and their relatives not letting on, or through pensioners returning to work and wrongfully avoiding pension deductions.
And the second and third biggest numbers of people involved were the 21,500 who had their concessionary travel permits cancelled and the 16,500 wrongful holders of blue badges for their cars.
None of this downgrades the importance of detecting housing benefit fraud and unlawful subletting - or of benefit fraud investigation outside of the datamatching methods employed by the initiative. But it does make the point that fraud is not always committed by the obviously undeserving people that get all the headlines.
Among the future priority areas identified are false claims for empty property discounts and using housing waiting list data to prevent people not entitled to a tenancy from getting one. The 2008/09 report also covers a period before the new initiative on social housing fraud introduced last year.
However, the initiative may still only be scratching the surface of the problem. Part of the reason detected single person discount fraud rose so much was that submission of the required data was only made mandatory in 2008/09 and the number of councils taking part doubled.
It should go without saying that tackling fraud should be a top priority for all organisations - it costs an estimated £30bn a year in the UK at a time when we are preparing for draconian cuts of £6bn in public spending.
Except that it doesn’t seem to be a top priority everywhere. The annual report reveals that the recommendations of a government fraud review in 2006 have not been implemented. No government department, and only one government agency, took part in the initiative in 2008/09 because the government has not exercised its statutory power to require them to do so. The report does not say how many housing associations took part - but the Audit Commission is still trying to persuade more of them to do so.
And the government should also be asking how housing fraud measures up to housing tax evasion. With capital gains tax about to increase, how many second homes will be flipped to avoid it? And how many will suddenly become holiday lets to qualify for the lower business rate?
Gotten gains
The rumblings of discontent are growing louder by the day over what is probably the coalition government’s most surprising new policy.
The plan to increase the rate of capital gains tax on non-business assets could have a big impact on second home owners and buy-to-let investors. And the rumbling is coming not from the opposition but from some of the government’s most natural supporters in the right-wing press and on the Conservative backbenches.
Aside from the expected plan to scrap home information packs (HIPs), the policy is the only one in the joint coalition policy document that will affect housing.
Although the plan to levy capital gains tax (currently 18%) at the same rate as income tax was in the Liberal Democrat manifesto as part of a fairer tax system, it’s a surprising joint policy since it seems to contradict most Conservative instincts (and will potentially clobber its hedge fund donors).
That probably explains the reaction against it. One Cabinet minister John Redwood describes it today as ‘anathema to most Conservatives’ while another, Lord Forsyth,
And the chuntering from the Telegraph is getting louder and louder. Clive Anslet, the editor of Country Life, accuses David Cameron of ‘having a go at me and my kind’ and says he should be standing up for the property rights of the middle class. Religion editor George Pitcher asks: ‘What’s the point of being a Conservative if you’ve decided to re-distribute wealth through property taxation?’
The Mail is not happy either - though it at least has the consolation of pointing out the Lib Dem minister Chris Huhne would have to pay the tax on his two homes and five rental properties.
The effect on the housing market is harder to read. Some commentators are predicting a hiatus and falling house prices as second home owners and buy to letters rush to sell rather than effectively pay twice as much tax. Others say they are in it for the long term and for the rental yield and it will not have much effect.
The National Landlords Association was quick off the mark with a plea for residential property investors to be given the same ‘generous exemptions’ as entrepreneurs and other businesses.
That seems unlikely given the amount of tax involved. The Lib Dem manifesto estimated that CGT reform would raise £1.9bn a year and that would have to be found somewhere else. (Mind you, the Lib Dems’ mansion tax was rejected by Conservatives and that would have raised £1.7bn).
New parliamentary rules that ban taxpayer subsidy of mortgages for second homes for MPs also make the policy more politically possible - not that it has stopped plenty of references to flipping, bath plugs and spare rooms.
However, it’s the details of the new policy that will determine how much they hit second home owners and buy to letters - and potentially benefit first-time buyers. In between the two, and with a Treasury consultation still running, ministers will have to consider the effect on supply in the private rented sector of a move that will benefit institutional investors at the expense of individuals.
There’s still lots of lobbying time between now and the emergency budget on June 22. Can it really be only five weeks since the Conservatives forced the outgoing Labour government to drop a budget change that would have hit, yes, second home owners?
Right pickle
Either a civil servant at Communities and Local Government has a secret sense of humour or life at Eland House really is like The Thick of It or Yes Minister.
Or maybe both. The leaked memo advising their senior officials how to react to incoming Conservative ministers reads like it must have been written by Armando Iannuuci - and which other department could he have had in mind as a model for the Department of Social Affairs and Citizenship?
The memo advises the mandarins to:
- use ‘hot button’ Tory-friendly words in conversation wherever possible - things like ‘families’, ‘radical’, ‘neighbourhoods’ and ‘progressive’
- flatter them with phrases like ‘congratulations! I had so much confidence in you’
- ‘smile’, ‘lean forward’, ‘be interesting’
- engage in ‘supportive listening’ and make eye contact
- talk about value for money and efficiencies without prompting
- expect ‘open, fundamental questions and challenge’ - ‘the Tories are red hot on data’.
The no-nos are to:
- meet ministers in groups of more than three at a time - that may ‘dilute the rapport’
- talk about ‘we’ or ‘us’ when they mean the previous government
- ask Eric Pickles too many questions.
Anyone who is really slow on the uptake is helpfully informed that ‘the minister’s agenda’ is different from ‘our own agenda’ but adds that ‘the department is willing to flex our own agenda’.
Fortunately for the hapless author of the memo, Pickles and Grant Shapps seem to find it as funny as the rest of us. Pickles has tweeted that he hopes he was played by Brian Blessed in the role play sessions it advises them to hold to work out how to build rapport.
But the civil servants will have to come up with other ways to tame the new minister and get them to do what they want because the memo tips them off to smell a rat whenever they are told ‘how Policy X puts the department and the Secretary of State at the centre of Whitehall’.
The memo also reveals just how deep the department is expecting cuts to be - and how badly a sense of humour will be needed.
Among the questions it tells them to expect from Pickles are: ‘Why are we doing this? How soon can we stop doing it? Can we take 40 per cent of the costs out?’
Fresh look
Another fall in repossessions must be encouraging the Treasury see schemes to help people who risk losing their homes as a tempting target for cuts.
It’s not just the fact that repossessions are a two-year low, or even that the Council of Mortgage Lenders (CML) says that its forecast of 53,000 foreclosures this year looks too pessimistic. It’s also that much of the existing support was time-limited and runs out at the end of this year.
Against that background though both the CML and Shelter warned in a joint letter to George Osborne and Vince Cable about the dangers of complacency. They argue that the better than expected figures are the result of the support measures and record low interest rates and Shelter released a survey showing that 29% of mortgage payers are unprepared for an increase in loan rates.
Figures released by the CML yesterday showed there were 9,600 repossessions in the first quarter of 2009, compared to 10,600 in the previous three months and 13,200 this time last year.
The number of borrowers in arrears fell too but the CML pointed out that the fall was much more marked among people with lower arrears than those substantially behind with their payments. It said this suggested that low interest rates and lower unemployment were helping to prevent new households getting into difficulty but that those already in trouble were struggling to get out of it.
The CML’s current forecast for this year assumes that 13,000 families will lose their homes per quarter. ‘If current levels of government support continue, if interest rates do not rise, and we have no new economic shocks, the 53,000 repossessions forecast for the year is pessimistic,’ it said.
The Communities and Local Government said the figures showed that ‘the threat of repossession remains very real for homeowners across the country’.
‘That’s why the Secretary of State for Communities and Local Government, Eric Pickles, will be asking the new Housing Minister to take a fresh look at existing Government schemes which help homeowners struggling to pay their mortgage and make sure that they offer the best deal for homeowners, as well as value for money for the taxpayer.’
It was a gnomic response that gave little away but how telling could that ‘fresh look’ and ‘as well as value for money for the taxpayer’ prove to be?
Watch this space
As the coalition cabinet meets for the first time, what do we know so far?
We know that Eric Pickles is the new communities and local government secretary - returning to a brief he held in opposition before switching to become party chairman.
We know that at least £6bn of cuts this year will be discussed - and we know that housing is not one of the areas that will be protected from them.
We know that radical welfare changes are on the way after the appointment of Iain Duncan Smith as work and pensions secretary.
We know from full text of the coalition agreement that it will adopt the Liberal Democrat policy of increasing capital gains tax on non-business assets from 18% to 40%. That will have a big impact on second home owners and buy-to-let investors and there are already warnings about a hiatus in the housing market as they rush to sell before it comes into force.
And what do we think we know?
The housing minister seems to have been demoted by losing his or her right to attend cabinet meetings. Appointments of ministers who will attend cabinet without being full members were announced last night and the housing minister was not on the list.
The apparent loss of status is not a surprise but it could hardly come at a worse time. Cuts of more than £6bn could be on the way given the extra spending commitments and tax reductions specified in the joint policy document.
Speakers at the Council of Mortgage Lenders affordable housing conference yesterday were already gloomy enough before that became clear. While the Lib manifesto seemed the most housing-friendly of the three major parties and featured a big programme of brining empty properties back into use, the coalition deal has ruled out the mansion tax that would have paid for it.
In any case, the track record of Eric Pickles suggests that the emphasis will be firmly on the local government side of his brief. A Tory hero of the 1980s when he led them to unlikely power in Bradford, he’s been heavily involved in developing the new Conservative policy on localism.
So it should be full steam ahead on Conservative plans to scrap regional spatial strategies, free local authorities from them where they have already been agreed and give them incentives through the council tax to agree to more homes. Nothing was mentioned in the joint policy statement but the Lib Dem manifesto also pledged to abolish government housebuilding targets.
Critics - who include major housebuilders - say that could turn into a charter for nimbys. Supporters say the targets were already failing and local communities will for the first time have a positive reason to agree to new homes.
Pickles should also be well placed to finesse a deal on housing revenue account (HRA) debt. His first chair of housing all those years ago in Bradford was Margaret Eaton - now chairman of the Local Government Association.
But well-paid local authority (and housing association?) bosses watch out: attacks on town hall ‘fat cats’ were a highlight of his spell shadowing the job he now holds.
We don’t yet know who the housing minister will be - an appointment is expected shortly. Between 15 and 20 Lib Dem junior ministers are thought likely to be appointed so the new person could come from either party. Watch this space.
Facing both ways
Away from the election aftermath, the housing market is looking as confused as the political situation.
In a survey released this morning the Royal Institution of Chartered Surveyors (RICS) detects a Spring bounce, with a surge in the number of its members reporting price rises and expecting them in future. London led the way but every region except Wales and Yorkshire and Humberside saw an improvement.
In contrast the Halifax index released on Friday showed that prices fell 0.1% in April. That took the annual rate of house price inflation to 6.6%, the highest since the October 2007, but the bank said the rate was now slowing down as the improvement prompted more people to put their properties on to the market.
The evidence for that was the March RICS survey showing that the ratio of completed sales to stock fell for the fourth month in a row, indicating a loosening in market conditions. The Halifax is sticking to its view that prices will be flat this year.
But the April RICS survey showed that the sales to stock ratio improved for the first time in 2010. The organisation interprets that as evidence that the prospect of an election had dampened demand from buyers but that a spring bounce was now underway.
Confused? Two surveys from estate agent Knight Frank in the last few days show how the market is facing both ways at once.
Yesterday it revealed that average residential land prices rose by 11.5%, the strongest rate of growth since 2005. Demand was especially strong in the south of England.
But on Friday, it released forecasts for the housing market based on different hung parliament scenarios. A stable Conservative-led government would mean modest price falls and a slow growth in sales over 2010. An unstable coalition would risk higher inflation and interest rates and therefore higher mortgage arrears and defaults. It says prices will end the year 3% lower but continue to be split between an active middle to upper end and a more depressed lower end.
So perhaps the wildly varying surveys are not that contradictory after all? Low interest rates and government support schemes have propped up the housing and land market so far and Spring usually sees a bounce. But how much longer before rates rise and the cuts start?
Working it out
As the talks continue between the Conservatives and Liberal Democrats, what might a coalition housing policy look like?
Housing won’t be high on a list of priorities topped by the economy and electoral reform but it might be a promising area for compromise and there are still some intriguing differences - and similarities - between the positions of the two parties.
The good news for a working relationship is that they appear to agree on what is probably the key Conservative policy: scrapping regional housebuilding targets.
The Tories would ‘abolish the entire bureaucratic and undemocratic tier of regional planning, including the regional Spatial Strategies and building targets’ and introduce council tax incentives for communities to agree to new homes. The Lib Dem manifesto was vaguer but pledged to ‘return decision making, including housing targets, to local people’.
Both parties would stop garden grabbing. Both would allow a third party right of appeal on planning applications that go against the local plan. The Conservatives want more community land trusts while the Lib Dems want more community land auctions.
Meanwhile, the Tory pledge to protect the security of tenure and rents of social tenants and the absence of any radical plan to extend the right to buy removes a big potential source of friction.
They agree on freezing public sector pay too. If anything, the one-year Tory freeze that would not apply to people earning below £18,000 is more generous than the two-year Lib Dem plan for a maximum pay rise of £400.
As for affordable housing, the two parties already share power in England’s largest housing authority, Birmingham. Might that make it easier to agree a housing revenue account deal?
Perhaps the Lib Dems would be able to get a slightly better budget deal for housing too? The Tories did make ‘deliver more affordable homes’ part of their pledge to ‘make politics more local’ but have given no commitments at all about the budget. The Lib Dems did not exactly make a commitment but did promise that: ‘Over time, we will seek to provide a greater degree of subsidy as resources allow to increase the number of new sustainable homes being built.’
However, their priorities within the housing budget (if there is much of it left) are likely to be different. The Conservatives promise to ‘make it easier for everyone to get on the housing ladder’ while the Lib Dems identified specific cuts in the Homebuy budget.
As housing chiefs are already pointing out, the differences don’t stop there. While the Conservatives might approve in principle of what is possibly the signature Lib Dem housing policy - bringing 250,000 empty homes back into use - will they agree to pay for it?
First, it’s hard to see George Osborne agreeing to a mansion tax on homes worth over £2m when he wants to scrap inheritance tax on them. Second, the Tories mounted a sustained assault on Lib Dem plans to equalise the rate of VAT between new homes and refurbishment. If VAT stays at 17.5% (or more) on repair and maintenance then many of those conversions may be uneconomic.
The same goes for Lib Dem policies on second homes, a key concern in many of the areas where it has MPs and is challenging the Tories.
The Lib Dems want to give local authorities the option to charge higher council tax on second homes and require planning permission for new ones by creating a new use class order. The Conservatives want to sweep away use class order restrictions where development is in accordance with the local plan. Does the principle of localism mean allowing local people to decide if they want more second homes or not - or will hostile press coverage about the rights of second home owners dictate the agenda?
It’s also hard to see Tories agreeing to the Lib Dem plan to tax capital gains at the same rate as earned incomes so that people who buy homes as speculative investments pay more than 18% tax on the profit when they sell.
The prospects of the change in the public borrowing rules favoured by the Lib Dems look slim in a partnership with the Conservatives. And what will the Lib Dems make of Tory welfare reform plans?
And, perhaps above all, if things do go as far as a coalition will we get a Tory or a Lib Dem housing minister?
Bucking the trend
Two of the biggest surprises on an election night of surprises came from two West London MPs who put housing issues at the heart of their campaigns.
Labour did better in the capital than elsewhere and the 2.8% swing to the Conservatives was the smallest in the country. However, the Tories still took six London seats from Labour and two from the Lib Dems from the list of 116 gains that they needed for an overall majority.
Logically, Karen Buck in Westminister North (61st on the Tory hit list) and Andy Slaughter in Hammersmith (78th) should be joining the MPs packing their desks at Westminster today. Instead both actually increased their vote and the swings to the Conservatives were less than 1%.
Both had campaigned against regeneration plans by their Conservative-run local authorities that they claimed were an excuse to move council tenants out of the area and adopt a more market-driven approach to social housing.
Slaughter linked regeneration plans in Hammersmith & Fulham to a Localis pamphlet co-written by council leader Stephen Greenhalgh advocating the deregulation of social housing and used the Freedom of Information Act to reveal that senior Tories in parliament had met to discuss them.
The revelations were a key part of the attack on the Conservatives by housing minister John Healey that prompted David Cameron to explicitly deny that security of tenure and affordable rents were under threat.
Buck has highlighted redevelopment plans by Westminster and accused Tory councils of trying to make homelessness disappear into the private rented sector. ‘Clearly, there is something being driven, particularly by inner-London councils, and from their point of view it is being driven by land values and a deep political dislike of having poor people in what they think should be expensive city communities,’ she told The Guardian last week. ‘I am absolutely convinced there’s a political motive too. They know [people in] council housing [are] not particularly politically sympathetic to them.’
The Conservatives hit back by accusing them of scaremongering and pledged to protect tenants’ rights in their manifesto. And Buck and Slaughter faced strong challenges from Tory candidates Joanne Cash and Shaun Bailey. Cash is close to Cameron and was even tipped by Tatler as a future housing minister while Bailey was brought up on a council estate.
I wouldn’t want to over-play the importance of housing in the campaign but it’s noteable that only two other London seats on Tory hit list failed to go blue.
Clive Efford held his Eltham seat for Labour while Paul Burstow retained his Sutton & Cheam seat for the Lib Dems. However, defeated Tory candidate Philippa Stroud could still have a big influence on any Cameron government as executive director of the Centre for Social Justice, the think-tank founded by Iain Duncan Smith that has advocated the end of security of tenure. Could she end up a key player working for IDS if he takes charge of welfare reform?
Elsewhere in London, Lib Dem housing spokesperson Sarah Teather was facing an uphill battle against Labour MP Dawn Butler for Brent Central after boundary changes abolished her old seat. She has just won it - could she be a contender for housing minister if there is a coaltion government?
Life goes on
With homeownership shrinking and social housing investment about to be cut, what happens to private renting will be a key issue after the election.
As if to show that life goes on no matter who wins today consultation ended last week on a Treasury consultation paper on investment in the private rented sector closed last week and the responses will be sitting waiting for new ministers in their in-boxes.
The crucial question is supply: can investment in the private rented sector be the new source of finance that will make up for cuts in the affordable housing budget and continuing stagnation in the mortgage market?
Yes, say the Property Industry Alliance, Council of Mortgage Lenders and Association of Real Estate Funds, but not if things stay as they are. Access to debt for ‘is likely to constrain growth in buy to let for the forseeable future’. The few institutional funds that have invested over the last decade are coming to the end of their lives. And housebuilders remain dependent on off-plan purchases who are not around any more. Meanwhile, housing need, population and new households all keep rising.
They say the main obstacles to growth are scale (crucial to make sizeable investments and make management efficient), investment costs (which are higher than for individuals) and tax efficient vehicles.
And they argue that: ‘Political commitment supported by a modest investment in tax terms could help to deliver transformational change to the PRS and the markets for both new and existing housing.’
The problems could be addressed by better use of government land holdings and changes to the tax system such as cutting the higher rate of stamp duty on bulk purchases and VAT - in return for helping to meet current and future housing needs.
How the new government will respond remains to be seen. ‘A modest investment in tax terms’ might ring alarm bells at the Treasury, which has been traditionally resistant in any case to tax incentives to help investment.
And considerable political uncertainty also remains. The Labour government appeared to be on a twin track of improving incentives for institutional investment and improving rights and conditions for tenants.
But Conservative policy documents have been light on detail on private renting. The manifesto did not mention the sector. Last year’s housing green paper promised a review of how the sector can play an enhanced role which would include looking again at the regulation introduced by Labour to eliminate duplication and contradiction.
Taking the pledge
One day to go and here are the latest party standings: Labour 30% (down 1%), Liberal Democrats 27% (up 3%), Greens 27% (down 3%), Conservatives 15% (no change).
As when I last blogged about this two weeks ago, this is of course not a real poll but the percentage of parliamentary candidates in England who have signed up to the National Housing Federation’s affordable housing pledge.
The total number of signatories is up 31% at 323 - almost enough for a parliamentary majority but for the fact that many of them are competing for the same seat.
The pledge is relatively uncontroversial - ‘I pledge to back the building of more affordable homes and to work towards all constituents having access to decent, affordable housing in safe and sustainable communities’ - and is widely supported in urban areas. However, support is still pretty thin on the ground in the NIMBY heartlands south of the M25 and M4.
Tory signatories include obvious names like housing spokesman Grant Shapps and former housing minister Sir George Young as well as some newly noteable ones like Henry Smith. The Conservative candidate for ultra-marginal Crawley may just just have condemned garden grabbing by his wife but he is also the only candidate for the seat to have taken the pledge.
Nothing seems certain about tomorrow but if the Conservatives win a majority tomorrow, then likely winners include signatories of the pledge like Alok Sharma in Reading West and Richard Graham in Gloucester.
Chopping block
Cuts are on the way but how bad will they be? I think we’ve just been given some big clues.
On Friday Jeremy Paxman got the most revealing answer I’ve yet heard from a politician. He asked Gordon Brown in his Newsnight interview: ‘What about the housing budget, are going to cut that?’
Some people may think the answer is just hypothetical since Brown seems unlikely to win on Thursday but I think his answer reveals the thinking not just within the Labour party but within government and Whitehall too.
Here it is in full: ‘Housing is essentially a private sector activity. Let’s be honest about this, Jeremy. Housing is essentially a private sector activity. We’ve renovated about 2m houses over the last 13 years. I don’t see a need for us to continue with such a big renovation programme. And if you take all that capital investment, Jeremy, let me just finish because it will answer most of your questions, if you take our capital investment, we’ve built hospitals, we’ve built schools, we’ve built roads, we’ve built infrastructure, you don’t need to do that a second time. You don’t need to do that next year if you’ve built a hospital last year. And that’s why there is scope for us reducing public expenditure on capital investment projects without actually affecting the basic health service and the basic schools and the basic policing. You don’t need to build your hospital or your school twice.’
A private sector activity? It’s true that homeownership is at just under 70%, that private companies do most of the housebuilding work and that housing associations do not regard themselves as public sector.
But we are only just out of a crash in which most of the private sector housebuilders would have collapsed without government help. Not just Homebuy Direct and Kickstart, but the ultra-low interest rates and action to keep repossessions and forced sales down that propped up house prices and enabled housebuilders time to put their balance sheets back in order.
The answer signals first that even the party promoting a new wave of council housing thinks that things are returning to normal - and normal means the expansion of homeownership.
Second, it reveals that capital investment will be cut back massively whoever wins on Thursday - the key difference being that Labour will only start next year. Councils that have still not met the decent homes target may disagree but capital spending is simply the easiest thing for central government to cut.
Third, the government appears to see no difference between different sorts of capital investment. It’s true that a gleaming new hospital or school may only be needed in a town once every few decades but affordable housing is different - even during the boom years output was not enough to meet need. And the argument that we do need homes next year and we do need to build them over and over again appears to be falling on deaf ears.
The same day I read Inside Housing’s interview with David Cameron. He was asked: ‘What assurances can you give the housing sector about the settlement it will receive if the Conservatives win the election?’
‘Whoever wins this election is going to face some of the worst public finances ever seen and the biggest budget deficit in our peacetime history,’ he said. ‘So the truth is we’ve got to deal with this and sort out Labour’s debt crisis to get our economy moving.’
No assurances in other words. The non-answer was an answer in itself.
