All posts from: July 2010
Is the answer to over-crowding really to use the housing benefit system to force out anyone in a home too big for them who is not rich enough to have used the right to buy or old enough to have retired?
I highlighted the fact yesterday that the benefit cuts planned for under-occupying social housing tenants are seven times bigger than the bedroom caps for private tenants that have made all the headlines so far. Today the £490m cut makes headlines of its own.
Lord Freud, the Labour welfare reform adviser turned Conservative welfare reform minister, tells papers including the Daily Mail: ‘We cannot continue with this absurd situation where some of our poorest families have to live in overcrowded conditions while others are subsidised to live in big homes with plenty of spare room.’
The story highlights the fact that 234,000 households are overcrowded while 456,000 are under-occupied and have more than one spare room.
It’s not clear yet how the housing benefit cuts planned from 2013 will work but they are likely to see a cap on payments to anyone of working age living in a home that is too big for their household size. It’s not clear either how many of those under-occupiers are of working age but the cut could affect thousands of people whose children have grown up and left home, for example.
With new research on social mobility in the sector expected to be published later this week, there is scope for carrots and incentives for people to move and swap accommodation before the cut comes in. A report for Circle Anglia earlier this week highlighted the costs of the current lack of mobility and called for all social landlords to be part of a national exchange scheme, which sounds like a pretty basic starting point.
But the stick will be much more controversial. A lack of new supply is a key cause of the lack of mobility that’s silted up the system and there seems little prospect of that being addressed. But anyone facing the prospect of being penalised out of a home that’s judged to be too big for them surely deserves as wide a choice as possible and as many incentives to do so before being forced out.
The effects will also be arbitrary, exempting anyone aged 65 in April 2013 but penalising anyone aged 64, for example, and exempting anyone who did the right to buy but penalising their neighbour who did not.
And how might it fit with the Conservative manifesto to give well-behaved tenants an equity stake in their home? Might they get a stake but still be forced to downsize?
Above all, if the priority is to tackle under-occupation and overcrowding, why restrict the carrots and sticks to social housing?
The same stats quoted by Lord Freud reveal that 5.9% of social rented homes are over-crowded, compared to 5.1% of private rented and 1.4% of owner-occupied homes. Justification for acting first in the social sector, you might think?
Except for the fact that under-occupation in the social sector is actually far lower than elsewhere: 11.4% of social renters under-occupy compared to 17.3% of private renters and 46.7% of owner-occupiers.
The stats are of course a reflection of our ageing society and the rise in single person households but they are also the product of a tax system that encourages homeowners to buy a home that is as large and expensive as they can afford.
It’s a sobering thought that housing benefit cuts that have received little attention so far will save many times more money than the bedroom size caps that have taken all the headlines.
The caps will also be one of the first cuts to be introduced alongside the reduction to the 30th percentile, the cut to the £15 excess and the imposition of a four-bed limit
The draconian effects were shown in an impact assessment published on Friday. The net result is that all but a handful of local housing allowance claimants will lose an average of £12 a week or £600 a year. Meanwhile far less private rented accommodation will be available to claimants. In Central London availability will fall from 52% to just 7% of homes.
However, those dramatic cuts still only account for a third of the £1.8bn a year savings that are planned by 2014/15.
Cuts to deductions for non-dependents will save £125m in 2011/12 and £425m in 2014/15 and will be debated alongside decisions on uprating benefits after the pre-Budget report.
Reducing awards to 90% for anyone claiming jobseekers allowance for more than 12 months will save £100m in 2013/14 and £110m in 2014/15. Switching to CPI indexation for local housing allowance will save £300m in 2013/14 and £390m in 2014/15. And limiting working age entitlement to reflect the size of the family in the social sector will save £490m in 2014/15.
Together, those last three measures account for more than half of the proposed savings. Because they will take affect later, the impact will be debated in the next welfare bill. However, to put them in context, the working age entitlement limit will on its own save seven times more than the £70m forecast from bedroom caps in 2014/15.
The number of people on JSA for more than 12 months doubled between May 2009 and May 2010 and the Charterted Institute of Housing (CIH) estimates that the 10% cut could affect more than 100,000 claims.
Indexing claims according to the CPI rather than the retail prices index will continue to ratchet up savings and tenant shortfalls against their rent year after year. The RPI includes housing costs whereas the CPI does not and over the last two decades it has risen by an average of 2.5% a year more.
Limiting payments to working age tenants by property size is expected to yield the highest savings of all. The CIH says that the last English Housing Survey identified 430,000 social sector households as under-occupying but did not break down how many of these were pensioners and how many were of working age.
That implies huge cuts in their average benefit. It’s unclear how the £490m estimated saving stacks up. However, if we assume that half those under-occupying tenants are of working age but that half of the savings come from freeing up larger homes for other tenants, that implies they would be facing an average cut of £1,100 or £22 a week each - almost twice as much as the loss private tenants are facing from the first four cuts.
The debate may have started with the caps but it is set to run and run.
After all the estimates here’s the official verdict on the impact of the housing benefit cuts: all but a handful of the 939,000 local housing allowance (LHA) claimants in Britain will lose an average of £12 a week each.
Only a few thousand people in Scotland, Wales and the East Midlands will not lose out from the caps on payments by bedroom size and removing the £15 excess from April 2011 and calculating allowance rates on the 30th percentile from October 2011, according to my initial reading of an impact assessment by the Department for Work and Pensions. The average loss to claimants will range from £9 a week in the North East, Wales and Yorkshire and the Humber to £22 a week in London.
The DWP also expects the changes to severely restrict the availability of private rented accommodation in some areas. In Central London availability will fall from 52% of accommodation now to just 7% after the changes. Only 25% of accommodation in Inner North & West London and 29% in Inner South West London will be accessible.
However, availability will fall to less than a third of accommodation in about another 70 broad rental market areas throughout the country.
The assessment looks in great detail at the effect of the cuts made by Labour in March, the coalition in May and the comparison between the two - far more detail than I have time to go into this late on a Friday afternoon.
To pick out a few highlights:
- Almost a quarter of LHA claimants in London will lose more than £20 a week
- Weekly losses to claimants in high-profile Westminster will average £9 for a shared room, £73 for a one-bed home, £140 for two beds, £262 for three, £373 for four and £622 for five. Losses in Kensington and Chelsea are slightly higher than that.
- Newham will see the lowest losses in London, ranging from £7 for a shared room to £42 for five beds.
- Claimants also face losses of more than £100 a week on five-bed homes in areas of the South East including Slough and Woking.
- Almost all of the problems caused by the caps by bedroom size will be in Inner London with few losers elsewhere. Westminster and Kensington are again the big losers but Camden will also see 80% of claimants lose out in two-bed homes, 88% in three bed and 92% in four bed.
With the National Housing Federation warning earlier today that the caps put 750,000 people at risk of losing their homes in London and the South East, the debate about the impact of the cuts in general and the cuts in London in particular is bound to intensify.
However, even this assessment does not reflect the whole impact of the Budget. It does not assess the impact of other cuts such as the 10% penalty facing people unemployed for more than a year, the reduction facing people of working age who under-occupy in the social sector or basing future increases on a lower measure of inflation. And it does not look at the knock-on costs in areas like education that could be caused by a migration of claimants from more expensive to cheaper areas.
My back of an envelope says that the £12 a week loss for 936,000 LHA claimants will save the government about £600m a year. That’s only a third of the £1.8bn a year saving it is forecasting for the end of this parliament.
What are the chances of the coalition compromising over cuts in housing benefit?
On the face of it, slim. Cuts are the government’s top priority. Lower cuts in welfare will have to be made up elsewhere and, as ministers keep reminding us, housing benefit costs more than the police and universities put together. And the coalition seems determined to make the moral case for improving work incentives and being fairer to people in work by reducing the rent that can be claimed while on benefit.
But scratch the surface a little and the worries about the effects of the cuts in general and the impact on London in particular are spreading well beyond the usual suspects. In the past week two of the most senior coalition politicians not in government have expressed their concern.
Boris Johnson, the Conservative mayor of London, teamed up with the Labour chair of London Councils to call for special treatment for the capital including special transitional arrangements.
And Simon Hughes, deputy leader of the Liberal Democrats, urged the government to slow down the reforms and warned of the danger of a cross-party rebellion. ‘I want the government to think very carefully about how they implement some of the benefits changes,’ he told the Evening Standard. ‘I’m very conscious of the effect of housing benefit changes in London and the South-East.’
Will warnings from such senior figures combined with campaigning across the housing sector be enough to convince the Department for Work and Pensions (DWP)?
One obvious compromise that would mitigate the effects of the cuts would be to apply the proposed local housing allowance caps to new claims only. That’s was one measure proposed byLondon Councils in a briefing last week although it would mean savings would come through more slowly than the DWP wants and it also only addresses one of the cuts in one part of the country.
London Councils also floats the option of spreading the pain more evenly around the country by regional capping and redirecting all of the proposed increase in discretionary housing payments to the capital.
That would mitigate some of the problems but only at the cost of creating many more around the rest of the country. There are no easy options if the coalition really is determined to save £1.8bn.
At first glance the government’s decision to retain a scheme that has only helped 34 families in more than a year of operation seems at odds with its determination to sweep away Labour’s legacy virtually everywhere else.
Grant Shapps and other Conservatives constantly questioned the value of the homeowners mortgage support scheme when they were in opposition and many lenders were sniffy about taking part despite lots of arm twisting from the government.
The mortgage rescue scheme was also dogged by problems and only one family was rescued in its first three months but it too will be kept in a modified form. In the first quarter of 2010 886 families applied for help via their local authority and 353 were accepted.
Within days of the election communities secretary Eric Pickles asked Shapps ‘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’.
And the emergency Budget cut support for mortgage interest from October by using the lower Bank of England average mortgage rate rather than the standard interest rate.
Shapps said today that the risk of repossessions remains high, with the CML forecasting 53,000 in 2010, and that the most effective thing the government could do to help families in trouble was to keep interest rates low.
Both schemes will be retained but scaled back. The mortgage rescue scheme will be refocussed on delivering better value for money. There will be tighter caps on property price and repair costs and housing associations will have to make do with a reduced grant rate.
The homeowners mortgage support scheme will stay as a backstop scheme before closing as planned in April 2010. Shapps said that despite the limited number of people it has helped the scheme has low administrative costs and research showed it has had a positive impact on lender forebearance and mortgage arrears management.
However, it’s clear that a report modelling the impact of different factors on mortgage arrears and repossessions from the axed quango the National Housing and Planning Advice Unit also had an impact.
Two Oxford academics found that repossessions would remain above 10,000 per quarter on even the most optimistic assumptions. However, the total could easily be much higher. They found that an increase in interest rates from 4.0% to 4.4% would lead to a 19% increase in repossessions while an ‘extreme but not impossible scenario’ would send repossessions significantly above the level of the early 1990s.
Shapps said in a parliamentary answer that the worst-case scenario showed there could be 175,000 repossessions by 2012. However, the worst case in the report shows 175,000 repossessions in 2012 alone and that quarterly repossessions would rise from about 12,000 now to 45,000 by 2012 and only fall below 40,000 at the end of 2013.
Repossessions at anything like those levels would be political disaster for the coalition. Reason enough to be very careful with this particular bit of Labour’s legacy.
The only surprise about news that local authorities have dropped plans for thousands of new homes is that anyone should be surprised.
Research published today by the National Housing Federation finds that councils have reduced their housebuilding targets by 85,000 since Eric Pickles wrote to planning authorities in May telling them they could treat the coalition government’s intention to abolish regional strategies as a material consideration in their decisions.
The report finds the letter had a ‘very significant impact’ and has resulted directly or indirectly in plans for 84,150 homes being dropped.
Almost 60,000 of those were in the South West, where the regional strategy had not been adopted before the election and where large numbers of constituencies were battles between Conservative and Lib Dem candidates who both promised to curb housebuilding.
According to the NHF, that means the number of new homes could fall even lower than the 123,000 built last year - the lowest since 1923 - and maybe even below 100,000.
‘It is frankly disappointing that so many local authorities have decided to revise down the number of homes planned for their areas following the scrapping of the regional housebuilding targets,’ says NHF chief executive David Orr. ‘Local authorities need to recognise that just because regional targets have gone, housing need has not. To prevent a slump in the number of desperately needed new homes, the Government should replace the regional planning system with transitional arrangements as a matter of urgency.’
The problem - as everyone from the Campaign to Protect Rural England to the Home Builders Federation has pointed out - is that there are no transitional arrangements at the moment.
We know that regional strategies have been revoked and we know that they will be replaced by council tax incentives to build new homes. We know the incentives will amount to a double council tax rebate for six years and more for affordable homes. But we know none of the fine print and until we do it’s not clear how much of an incentive they will really be.
Even if a council that approves a new homes will get, say, double a council tax of £1,200 for six years - a total of £14,400 - will that really be without anything being clawed back through the local government finance system? If it is, how does that stack up in an age of austerity? If it isn’t, what difference will it make.
Where’s the incentive for nimby local residents and their elected councillors to vote in favour of a nearby development that will reduce their house prices? Won’t that just push new development into the poorest areas?
Why should even communities and councils that want new housing vote in favour now when they know they’ll get money for it some time next year?
And if the government is as confident as it seems to be that the new system really will work better and deliver more homes why not pilot it somewhere like the South West first?
Today is the deadline for government departments to submit the first drafts of their plans for 25% and 40% spending cuts to the Treasury.
It’s already clear that the debate is going to be as much about what gets cut as how much gets cut and as much about the knock-on effects of any cuts as the cuts themselves.
A joint spending review submission by the Chartered Institute of Housing (CIH), National Housing Federation (NHF) and National Federation of Almos makes the economic case for investment in new homes, with a plan they say would safeguard 178,000 jobs and add 0.4% to GDP by the end of a five-year programme.
On housebuilding they argue that every £1 spent generates £1.40 in gross output across the economy as a whole. On housing-related support they quote research for the CLG that investing £1.6bn a year generated savings of £3.bn in areas such as health, crime and homelessness.
But in tune with the times this is the first spending review submission I can remember that does not argue that the government should be spending substantially more on housing.
On housing support, the three say investment should be maintained at current levels in real terms between 2011 and 2015. That should be combined with longer-term revenue contracts, cuts in bureaucracy and greater local transparency.
On housing benefit, they repeat the arguments about the effects of the cuts but also want to see pilots of transition into work payments and a public review of housing cuts before any further cuts are considered.
On new homes, they argue for £9.5bn of investment over the next four years. This would be matched by £12.6bn from housing associations to provide 150,000 homes.
That represents a cut of 15% in nominal terms and 25% in real terms after inflation, the impact of increased VAT and the costs of building to higher standards are taken into account. However, they also want action on a range of other issues including VAT, section 106, regulation of asset management and public sector land and no change to the current recycled capital grant fund system.
On existing homes, they want self-financing for local authorities and almos and greater local responsibility for capital investment and they make their case for switching to a European measure of public borrowing that would free resources and also help reduce the public deficit. Could a Treasury that has previously always said no to changing the rules finally be tempted?
One key issue could be what happens within the new homes programme. The three organisations envisage a programme that would be 70% for affordable rent and 30% for low-cost homeownership, mainly shared ownership.
That represents a shift in favour of renting from the current position. Shelter argued earlier this week that disporportionate amounts of money were being spent on the intermediate market without a clear policy goal and argued for a combination of concentrating on renting and schemes that generate cross-subsidy and reform of the private rented sector.
Meanwhile, the CML concluded that low-cost homeownership is ‘at a crossroads’ with a shortage of finance from lenders as well as the government and called for a debate about how it can be funded in future.
And ministers’ instincts - that call by Grant Shapps for a new age of aspiration - will probably in favour of shifting the balance towards homeownership. Greater use of programmes like shared equity, which cost less in public subsidy per home, would also enable them to claim that they are generating more affordable homes.
Will that be enough to satisfy the CLG and a cuts-hungry Treasury? Almost certainly not but the latest round of exchanges shows just how difficult the decisions are going to be.
Just how uncomfortable are Lib Dem ministers finding the housing benefit cuts?
Steve Webb (a professor of social policy before he became first an MP and now a welfare and pensions minister) found himself in the hot seat yesterday when he had to listen to a flood of complaints from Labour MPs before responding for the government in a Westminster Hall debate.
He’s also the minister who has repeatedly had to decline to answer written questions on the effects of the cuts on the grounds pending an impact assessment to be published next week.
Webb argued yesterday that the reform was about value for money and fairness. The housing benefit bill was going up by £1bn a year and the taxpayers on low wages who paid for it had to have a voice in the debate.
‘What we cannot do is to continue to pay out blank cheques to private landlords—this is a blank cheque not to tenants but to private landlords. Rents have been going up and the state has been a passive observer. The housing market has demanded cash from us and we have simply handed it over. Then it has demanded more and we have handed it over again.’
He asked why someone in low-paid work should be should have to restrict their housing choice and end up in a worse position than someone who is unemployed. And he went on: ‘If we allow rents to go on rising as they are doing, how can we expect people to find the work that will enable them to pay those exorbitant rents? There are not the jobs that will enable people to afford to pay those rents. If we can do something about the rents that landlords charge, more people will find it worth working. At the moment, people get no return for work.’
However, his answers will have done little to satisfy Labour MPs from London and elsewhere who queued up to condemn the cuts. ‘Pumping billions of pounds of taxpayers’ money into the pockets of private landlords is an insane way to go about a housing policy, but what is proposed is more insane,’ said Karen Buck.
And she concluded: ‘I am absolutely confident that the Department does not realise the full gravity of what is proposed.’
But it’s not just Webb who must be shifting a little awkwardly in his seat.
The official Lib Dem biography of junior communities minister Andrew Stunnell still boasts of how he has successfully ‘opposed cuts to housing benefit for tenants of private landlords’.
And education minister Sarah Teather was a vociferous opponent of cuts when she held the housing brief in opposition before the election. She was prominent in the campaign last year against Labour’s plan to withdraw the £15 a week shopping incentive for local housing allowance claimants.
She told readers of The Guardian website seven months ago: ‘Imagine being out of work and getting by on £64.30 a week. It’s not easy, but you can survive, just. You can forgo luxuries; cut down on basics; live in the cheapest parts of town. With some forward planning and some imagination, you can make every penny pull its weight. Now imagine that through careful planning, you’ve managed to save yourself an extra £15 a week. Then someone says they want it back. Just like that, without any warning. That’s exactly what the government has in store for some of the poorest families in Britain.’
Dubbing the cut ‘Robin Hood in reverse’, she said it would hit even poorer families than Labour’s removal of the 10p tax rate.
Given that the £15 shopping incentive was only available in areas where it was possible to rent a home for less than the local housing allowance rate, you have to wonder what she thinks of the much bigger cuts being planned in areas where tenants already have to make up a shortfall between their allowance and their rent.
Still, at least she’s in good company. Her leader Nick Clegg challenged Gordon Brown at prime minister’s questions in November: ‘How is it possible that in the middle of a recession, with unemployment now at two and a half million and rising, this government, a Labour government, wants to change the local housing allowance rules to take £15 a week from some of the poorest families in Britain?’
Forcing lenders to check that borrowers really are earning as much as they say seems pretty fundamental to effective regulation of the mortgage market - but could it make things worse rather than better?
A ban on self-certified mortgages is the key proposal in a consultation paper published today by the Financial Services Authority (FSA). The so-called liar loans accounted for more than half of all mortgages sold at the peak of the market in 2007 and still made up 42% of loans taken out in the first quarter of 2010.
The FSA points out that the only other countries with a significant non-income verified market are the USA and Ireland, both of which saw a boom and bust in mortgage credit and house prices. Countries like Canada and Australia where the majority of mortgages were income verified did better in the financial crisis and saw lower levels of arrears.
The Council of Mortgage Lenders (CML) argues that its plans will not just stop self-certification but also fast-track mortgage processing used for lower-risk borrowers. ‘The risk is that the gain will not match the pain in the short term,’ says director general Michael Coogan. ‘The industry and consumers will feel the costs of imposing new regulatory requirements now, in a market where they are not needed, but the potential consumer benefits will only be felt at some unspecified time in the future.’
The Intermediary Mortgage Lenders Association (IMLA), which represents specialist lenders who deal through brokers rather than a direct network, goes even further. The FSA plans represent nothing less than a ‘step into the abyss’, according to its executive chairman Peter Williams.
Williams argues that ‘the FSA has taken regulation into uncharted territory with unknown consequences for the shape and effectiveness of the UK mortgage market’.
Moreover, he adds: ‘It has done nothing to address the big question today regarding the lack of mortgage finance; the market it plans to bequeath to us seems some considerable distance from meeting the requirements of an ‘age of aspiration’, as set out recently by the housing minister Grant Shapps.’
The issue as always is how to strike the right balance between consumer protection and that aspiration. Self-certified loans started off as a way to get a mortgage for self-employed people who find it hard to verify their income but turned into a free-for-all for anyone who needs a bigger mortgage than they can afford. Similarly, sub-prime mortgages were a way for people with impaired credit to get on the housing ladder before they became a symbol of all that was wrong with the boom and bust.
Too much regulation means excluding thousands of potential first-time buyers from the housing market at a time when 80% already need help from their parents. Too little risks fuelling yet another house price boom and bust.
As CML figures showed yesterday, low interest rates mean mortgage payments for existing homeowners currently make up a lower proportion of their income than at any time since 1974. Even with surveyors warning today that house prices are likely to fall, that sounds like a ladder well worth lying about your income to climb aboard. Those low rates also explain why arrears and repossessions problems have not developed into a full-blown crisis.
The political temptation for the government must be to water down the proposals of the FSA, which in any case is about to be abolished. However, interest rates cannot stay at a historic low for ever. Any sudden increase would risk turning an age of aspiration into first another age of speculation and then another age of repossession.
As tenants assess their chances of becoming ‘casualties’ of the cuts, there is one group of people who’ve never had it so good with their housing costs.
Thanks to the record low interest rates introduced in the wake of the credit crunch, mortgage costs for home movers are currently lower than at any time since records began in 1974.
A survey by the Council of Mortgage Lenders (CML) shows that mortgage payments take up just 9.5% of their income in May. That proportion has been below 10% for the last five months. To put that in perspective, payments peaked at 17.9% at the end of 2007.
First-time buyers are doing pretty well too - provided they can get a mortgage in the first place. Their home loan costs fell to 13.2% of their income in May compared to over 20% in 2007. However, that’s still higher than between 1994 and 1996 and 2002 and 2003, thanks to high house prices and higher interest rates charged on higher loan-to-value mortgages.
House purchase lending is still rising slightly, with mortgages up 15% in volume and 28% in value since last May. However, the CML says much of that reflects the boost from the stamp duty holiday at the end of last year and it expects lending to lose momentum as the austerity measures start to bite and that its forecast for gross lending in 2010 may be over-optimistic.
With arrears and repossessions also up far less than had been feared, the majority of homeowners have done well out of the financial crisis so far. However, with warnings of a second credit crunch, rising unemployment and cuts to support for mortgage interest rates on the way, how much longer can that last?
And any increase in interest rates would generate sharp increases in those mortgage cost figures. One member of the Bank of England’s monetary policy committee voted for a rise at the meeting in early June but the big question is whether the scale of the austerity measures in the Budget will be enough to persuade the other members to keep rates low. Could bad news for tenants on housing benefit once again be good news for people with a mortgage?
House prices are on the way down even before tax increases and public sector cuts have an impact on the market, according to the latest figures from the Halifax this morning.
Prices fell 0.6% in June to £166,203, the third monthly fall in succession and the fourth in the last six months. The UK average price is now down 1.2% this year and is back at the levels seen last Autumn.
However, the Halifax is sticking to its view that prices will be ‘broadly unchanged’ in 2010 as a whole. An increase in supply is easing upward pressure on prices, it says, but low interest rates continue to support demand.
That’s a view supported by the rival Nationwide index, which shows prices up 3% in the first six months of the year.
However, separate Halifax research show just how much everything depends on low interest rates. The cost of owning and running a home has fallen by 6% or £544 over the last two years to £9,020 a year. But that was entirely due to a 19% (£881) decline in mortgage payments.
If you combine the looming squeeze on disposable incomes caused by tax increases and a public sector pay freeze, rising job losses triggered by draconian public sector spending cuts and warnings that mortgages are becoming harder to come by, the prospects for 2011 are already looking much shakier.
The Nationwide thinks we’re in for a repeat of the 1990s, when prices stabilised after the crash and then stayed in the doldrums for several years.
However, a double-dip recession or an increase in interest rates could trigger fresh falls in prices that still look significantly over-valued against earnings. While there seems little immediate prospect of an increase in rates, the chances of one are increasing. The June meeting of the monetary policy committee saw a member vote for an increase for the first time in almost two years.
First they were discarded, now they’ve been revoked and in the Autumn they will finally be abolished. Is that clear at last?
I am of course talking about regional strategies (formerly regional spatial strategies) and the answer to the question from everyone from the Home Builders Federation (HBF) to the Campaign to Protect Rural England (CPRE) seems to be ‘clear as mud’.
In a written statement in parliament yesterday communities secretary Eric Pickles said: ‘Regional strategies added unnecessary bureaucracy to the planning system. They were a failure. They were expensive and time-consuming. They alienated people, pitting them against development instead of encouraging people to build in their local area. The revocation of regional strategies will make local spatial plans, drawn up in conformity with national policy, the basis for local planning decisions. The new planning system will be clear, efficient and will put greater power in the hands of local people, rather than regional bodies.’
The statement seems aimed at resolving the legal uncertainty caused by the gap between Pickles telling planners in May to treat the government’s intention to abolish the strategies as a ‘material planning consideration’ and the legislation that will actually abolish them that will be introduced in the Autumn.
A letter to chief planning officers answers many of the questions raised in a parliamentary debate last week. Local development frameworks and core strategies will continue and so will the requirement to provide a five-year land supply. Local authorities will determine their own housing targets without any regional dictats.
The letter also confirms that councils will be able to replace regional strategy targets with ‘option one numbers’. These were the much lower targets for new homes that they put forward as part of the regional strategy process and were then told to increase. In the South West, for example, the option one total is more than 20% lower than the total in the draft strategy.
However, developers say they need precise details of the transitional arrangements. ‘We risk major problems ahead without direction that puts councils at ease and gives them confidence that going ahead with development will not lead them into costly legal challenges,’ says Liz Peace of the British Property Federation (BPF).
Planning lawyer Michael Gallimore of Hogan Lovells says the result will be a further break on development. ‘There will be an inevitable hiatus in policy formulation at the local level whilst councils re-align their thinking and back away from the regional housing numbers,’ he says. ‘We are seeing that already with authorities now delaying their Core Strategies. The statement that the LDF system will be further reformed will provide an excuse for authorities who wish to tread water on Core Strategies and housing delivery.’
He argues that the new system of council tax incentives to deliver new homes lacks any detail. ‘It is a huge leap of faith to expect incentives to provide the necessary stimulus to deliver housing at a local level, particularly in parts of the South East where consenting new homes in the numbers needed is simply a “no go” for locally elected members.’
Even the CPRE, which welcomes the ‘goodbye to top-down housing’, argues that the abandonment of the strategies still leaves a ‘worrying gap’.
‘Strategic planning has helped ensure local authorities make consistent decisions on development across their boundaries, including affordable housing, public transport and waste provision,’ says head of planning Fiona Howie. ‘These developments need a high level of cross authority working and the government will need to outline a credible alternative to fill this void.’
The HBF argues that the statement clarifies the position legally but does nothing in terms of the transitional arrangements. They say they have still seen no detail about how the incentives will work beyond hints that they may apply to homes approved now but not completed before next April.
And could the council tax incentives to approve more homes have the opposite effect in the short term? After all, if you were a planner what would you do now knowing that incentives are on the way?
Now you see it: £390m more for housebuilding. Now you don’t: £450m less for housebuilding.
The government justifiably decried the way that Labour span its spending announcements but it seems to have developed a mystery delivery all of its own.
The Communities and Local Government version is to welcome confirmation of £390m to build 8,500 homes. It’s ‘extra’ because it partly meets unfunded commitments made by Labour that were reliant on underspending across Whitehall.
That’s on top of the ‘extra’ £170m already made available in the coalition spending announcement on 24 May that also cut £230m from the housing budget and froze schemes worth another £610m. In that context the CLG announcement sounds like good news.
The net result of all that comes in a briefing note from the Homes and Communities Agency yesterday afternoon.
The government had identified a £780m shortfall in the £1.5bn housing pledge made by Labour. Add back the ‘extra’ £170m and the £390m and housing is short £220m. Take away the £230m that was announced in May and housing is left with a total cut of £450m.
That means the HCA will meet all contractual commitments across its programmes and fund Round 2 Kickstart schemes that were approved before 6 April.
Remaining schemes from the National Affordable Housing Programme, Local Authority New Build and Kickstart 2 that are not in contract will be reviewed to ‘determine which of those can be funded with available resources based on the aim of maximising affordable housing and achieving best value for money’.
That sounds like bad news for the Housing Market Renewal and Growth Fund allocations that were also frozen in May.
Overall, according to the HCA, that represents a 10% cut in its capital budget for 2010/11 to £4.1bn.
According to former housing minister John Healey, the announcement means 6,000 planned affordable homes will not be created and 5,000 people will not be employed to build them.
The big question now is what will happen in the spending review in October. As departments seek cuts of at least 25%, the overall budget will obviously be cut but what will the priorities be between social renting and low-cost homeownership?
This week’s announcement suggests that the existing balance between homes for sale and for rent is staying for the moment. According to the CLG, the ‘extra’ £390m should mean 4,500 social rented homes, 3,000 homes for sale at affordable prices and 1,000 stalled by the recession.
The HCA announcement reveals that the Kickstart 2 schemes where funding is secured will generate a total of 8,842 homes: 3,483 for sale, 3,216 for HomeBuy Direct, 519 for other low-cost home ownership and 1,624 for social rent. Local Authority New Build schemes that are going ahead will generate 3,192 homes
However, funding has not been secured for another 74 Kickstart 2 schemes comprising a total of 7,078 homes (3,566 for sale, 1,013 for HomeBuy Direct, 633 for other low-cost home ownership and 1,866 for social rent) or Local Authority New Build schemes for 912 homes. These will be subject to further evaluation.
One final interesting aspect of the whole thing is that the CLG announcement highlights the fact that the £390m will ‘protect over 8,000 construction jobs’. That’s one per home or £46,000 per job (or £32,000 if you believe housebuilders that each home generates 1.5 jobs).
Price in the tax paid by those workers and the fact that they will not be on the dole and receiving benefit (according to some estimates each construction worker on the dole costs the Treasury £20,000). Take account of the tax paid by the building companies and the jobs created and tax paid at their suppliers. Include lower housing benefit payments for new social tenants no longer stuck in the private rented sector. Sounds like a pretty good deal for the taxpayer.
The communities secretary’s letter told them to treat the government’s intention to abolish regional spatial strategies as a ‘material planning consideration’ when they considered new applications.
But Conservative and Lib Dem MPs queued up in a Westminster Hall debate last week to raise questions about what will happen in the meantime and how the new system will work and they did not get many answers.
Instead the debate saw warnings of paralysis and chaos in the planning system. Planning minister Bob Neill admitted that the govermnent has ‘a legal minefield to walk through’ and former housing minister John Healey confessed that Labour’s system had been too top-down and inflexible.
The debate was secured by the Conservative MP for Milton Keynes North, Mark Lancaster, who asked whether primary legislation would be needed to scrap the strategies, whether there would be an interim mechanism to allow planners to resist or defer applications. He also raised a series of questions about how the new system will work in Milton Keynes, including its infrastructure tarriff and relations with neighbouring authorities.
The Tory MP for Milton Keynes South, Iain Stewart, said council officials had told him that there is a legal doubt about whether the Pickles letter will be treated as a material consideration at appeal.
That was echoed by Geoffrey Clinton-Brown (Con, Cotswold), who was concerned that the Pickles letter would not stand up in court because it assumes that the strategies will be abolished even though the matter has not yet been determined by parliament. ‘Whether or not such views are correct, it should not allow the paralysis of the planning system.’
Clinton-Brown said a ‘window of ambiguity’ had been opened that risked small councils like his incurring major costs at appeal
It was clear from the local issues raised by other MPs that many local planning authorities do not know what to do. Duncan Hames (Lib Dem, Chippenham) said: “Local conservation campaigners fear that if Wiltshire council does not adopt a core strategy, its draft core strategy, which sought to conform to the regional spatial strategy, may impose regional housing targets by the back door while a local policy vacuum remains.’
Chris Skidmore (Con, Kingswood) asked what would happen to the current obligation on planners to ‘consider favourably’ applications for housing where the authority cannot show that a five-year supply of land is in place and warned this was being used by developers to challenge decisions.
John Healey admitted that ‘our approach was too top-down’ and that the Labour government’s approach to planning had been ‘too inflexible to reflect some of the differences between regions’. But he said the new system was ‘simply a charter for nimby resistance to new homes’.
Bob Neill said that abolishing the strategies would require primary legislation in the localism bill that will be introduced in this session of parliament. But he added that: ‘We will also explore the possibility of using secondary legislation to remove the most difficult part of the regional strategies in advance of that. We are actively discussing with officials the means by which this may be done.’
He said that the government’s advice was that the Pickles letter was legal. ‘I am aware that there has been some attempt to dispute that, but I will simply say that lawyers disagree.’
Further guidance would be issued soon, he said, and local authorities would be able to partially revise local plans to reflect the abolition of the strategies. ‘Everybody wants to move as swiftly as possible but, because the arrangements for planning regulations under the previous government were so complex, we have something of a legal minefield to walk through to ensure that we get it right. If we make important changes, we are determined that we do not have any false starts.’
So far, so complicated - and that’s just abolishing the old system let alone creating the new one.
If the Tenant Services Authority really is ‘toast’ then it seems to have landed butter side up.
As Inside Housing reports today, Grant Shapps has been forced to drop his plans to scrap the quango after the Treasury insisted on a full review of social housing regulation. In the last few weeks the housing minister has not only used the T-word to describe its future but also said he will ‘delete’ it.
A review is no guarantee that the TSA will survive - regulation could still be transferred to the Homes and Communities Agency and complaints to the Housing Ombudsman - but it gives the sector an unexpected chance to argue again the case for the system developed over the last two years.
The reasoning is spelt out in a letter from Treasury chief secretary Danny Alexander to senior ministers that warns them that a ‘precipitate’ decision could jeaopardise private finance for housing associations.
In the letter (leaked to the Financial Times) Alexander says there is ‘some nervousness among lenders and rating agencies of further change to the regulatory arrangements for the sector, which have only just begun to bed down. A downgrading of housing association credit ratings could have a serious impact on the financial capacity of the sector’.
He also warns that abolition could trigger an £80m pension liability and that putting financing and regulation back together could lead to ‘potential detriment of value for money’.
The review will now form part of the autumn spending review with any change subject to value for money and the impact ‘on lending and delivery of new affordable housing’.
In his speech at Harrogate, Shapps was scathing about the TSA. ‘I place huge premium on tenant empowerment - but I’m far from convinced that a large national quango is the best way to do it,’ he said. ‘It’s also no secret that I have been concerned for some time about whether the Tenants Services Authority offers value for money. To give one specific example, this quango spent close to £100,000 on lobbyists to lobby - amongst others… the Government. And that seems frankly ill-judged.’
But it’s now clear that ‘reviewing the role and purpose’ of the TSA does not automatically mean it will be deleted or that scrapping it will be part of the Decentralisation and Localism Bill.
In the meantime TSA chief executive Peter Marsh has written to all registered providers spelling out their responsibilities during the review period. The 2008 Housing Act remains in force, he says. The TSA is committed to delivering its objectives on economic regulation and consumer protection and providers are obliged to meet the standards that were introduced in April and to prepare their annual reports to tenants and develop plans for local offers to be introduced in April 2011.
That does not exactly sound like toast - or even brown bread - and the business as usual message leaves the quango hunting Shapps and Eric Pickles with a single kill to celebrate so far.
The National Housing and Planning Advice Unit was so closely linked to the planning framework that the government is busily scrapping that it made an easy target. Just like the Housing Corporation in the 1990s, the TSA is proving a more elusive prey thanks to its importance to lenders.
Meanwhile a Cabinet Office survey of top pay in quangos and the civil service reveals that only Peter Marsh at the TSA earns more than £150,000 (in the band £165,000-£169,999).
That compares with four high-paid executives at the HCA, four at the Communities and Local Government department and eight at the Audit Commission.