Friday, 28 April 2017

Inside edge

All posts from: September 2010

Duty calls

Thu, 30 Sep 2010

In a powerful speech to the Labour conference, John Healey has accused coalition ministers of washing their hands of any national role or responsibility on housing.

In a week when his new leader Ed Miliband made a point of saying that he would support government decisions when they were right, the shadow housing minister said he had not found anything it had done in the last five months that he could support.

The coalition did not just want a small state, he said, but one that ‘sheds its duty to its people on housing’.

That was not just in areas where we already knew there are deep divisions between government and opposition on cuts in investment, changes to the planning system and cuts in housing benefit but in new ones too.

That shedding of the duty also came in coalition plans on security of tenure that he said would result in local landlords setting their own tenancy conditions.

He added: ‘And you can see it in the questions they now raise over the national cap on rent rises in social housing and on the nationally set duty on local councils on homelessness.

‘On every front they are looking to withdraw national government and we have Tory and Lib Dem ministers washing their hands of any national role or responsibility in meeting the needs and aspirations that people have in this country for their homes for the future.’

‘Meanwhile, local authorities, increasingly Labour local authorities, will be picking up the pieces. And if we don’t help people see what is happening they’ll be picking up the pieces and picking up the blame.’

Healey also said he would be publishing an analysis of the government’s flagship new homes bonus policy that would show that it would rob some councils to pay the rest. Big towns and cities would be hardest hit, he said, and would have to see many more homes built just to break even.

Even though it was relegated to close to the end of the conference, it was quite an attack and it signals perhaps the most divisive parliamentary session on housing since the early 1980s. 

Before that though, Grant Shapps gets a chance to hit back at the Conservative conference next week. 

Duty calls

Thu, 30 Sep 2010

In a powerful speech to the Labour conference, John Healey has accused coalition ministers of washing their hands of any national role or responsibility on housing.

In a week when his new leader Ed Miliband made a point of saying that he would support government decisions when they were right, the shadow housing minister said he had not found anything it had done in the last five months that he could support.

The coalition did not just want a small state, he said, but one that ‘sheds its duty to its people on housing’.

That was not just in areas where we already knew there are deep divisions between government and opposition on cuts in investment, changes to the planning system and cuts in housing benefit but in new ones too.

That shedding of the duty also came in coalition plans on security of tenure that he said would result in local landlords setting their own tenancy conditions.

He added: ‘And you can see it in the questions they now raise over the national cap on rent rises in social housing and on the nationally set duty on local councils on homelessness.

‘On every front they are looking to withdraw national government and we have Tory and Lib Dem ministers washing their hands of any national role or responsibility in meeting the needs and aspirations that people have in this country for their homes for the future.’

‘Meanwhile, local authorities, increasingly Labour local authorities, will be picking up the pieces. And if we don’t help people see what is happening they’ll be picking up the pieces and picking up the blame.’

Healey also said he would be publishing an analysis of the government’s flagship new homes bonus policy that would show that it would rob some councils to pay the rest. Big towns and cities would be hardest hit, he said, and would have to see many more homes built just to break even.

Even though it was relegated to close to the end of the conference, it was quite an attack and it signals perhaps the most divisive parliamentary session on housing since the early 1980s. 

Before that though, Grant Shapps gets a chance to hit back at the Conservative conference next week. 

Credit hunch

Wed, 29 Sep 2010

So is buy to let back following the re-entry into the market of one of its most iconic lenders?

Paragon revealed yesterday that it will start lending to landlords for the first time in two years after securing £200m in finance from Macquarie Bank.

It’s a symbolic moment for two reasons. First, Paragon was the third biggest buy-to-let lender before 2007 with 10% of loans, Second, it sees the credit facility as a precursor to arranging more finance in the mortgage-backed securitisation markets. Securitisation was the mechanism for the expansion of lending across the mortgage market before 2007 but dried up after the credit crunch.

The company said it was taking a cautious approach but that it had been encouraged by recent successful securitisations by other banks.

With increased tenant demand and a shortage of properties pushing rents higher, according to the last RICS survey, Paragon’s move seems well timed. In the longer term, a combination of falling social housing investment and unaffordable house prices looks set to underpin that demand too.

But buy to let has a long way to go before it reach anything like its pre-credit crunch scale. The last CML survey showed that lending in the sector was worth £2.4bn in the second quarter and £9bn over the last year. Lending was worth £45bn in 2007.

Even Paragon’s new lending has to be put in perspective. True, it has a £200m credit facility and it appears to be planning a £250m securitisation next year, but its borrowers have redeemed £230m of loans in the last 11 months. 

In the meantime the housebuilding market has changed out of all recognition with builders switching away from the city centre flats that were bought by investors to larger homes with bigger profit margins. The lending market has changed too, with the disappearance of lenders like Bradford & Bingley. 

And is the appetite really there from investors and amateur landlords? True, many have been bailed out by low interest rates but many have gone bust too.

Out of my study window I can see what happened to the dreams of one would-be buy-to-let tycoon. A local farmer bought two houses in my street and about a dozen more around my home town and divided them into tiny flats with eye-watering rents. He went bust about 18 months ago and notices were posted on the front door by receivers.

The mess he left behind can still be seen on my street. Incredibly, each of the 16 flats in the two houses had a different mortgage with a different bank and they are now all for sale separately. So far, they don’t seem to be shifting. 

It couldn’t happen again, could it? Surely lenders and borrowers couldn’t be so stupid? There are no signs yet that it will but I wouldn’t bet on it. 

Credit hunch

Wed, 29 Sep 2010

So is buy to let back following the re-entry into the market of one of its most iconic lenders?

Paragon revealed yesterday that it will start lending to landlords for the first time in two years after securing £200m in finance from Macquarie Bank.

It’s a symbolic moment for two reasons. First, Paragon was the third biggest buy-to-let lender before 2007 with 10% of loans, Second, it sees the credit facility as a precursor to arranging more finance in the mortgage-backed securitisation markets. Securitisation was the mechanism for the expansion of lending across the mortgage market before 2007 but dried up after the credit crunch.

The company said it was taking a cautious approach but that it had been encouraged by recent successful securitisations by other banks.

With increased tenant demand and a shortage of properties pushing rents higher, according to the last RICS survey, Paragon’s move seems well timed. In the longer term, a combination of falling social housing investment and unaffordable house prices looks set to underpin that demand too.

But buy to let has a long way to go before it reach anything like its pre-credit crunch scale. The last CML survey showed that lending in the sector was worth £2.4bn in the second quarter and £9bn over the last year. Lending was worth £45bn in 2007.

Even Paragon’s new lending has to be put in perspective. True, it has a £200m credit facility and it appears to be planning a £250m securitisation next year, but its borrowers have redeemed £230m of loans in the last 11 months. 

In the meantime the housebuilding market has changed out of all recognition with builders switching away from the city centre flats that were bought by investors to larger homes with bigger profit margins. The lending market has changed too, with the disappearance of lenders like Bradford & Bingley. 

And is the appetite really there from investors and amateur landlords? True, many have been bailed out by low interest rates but many have gone bust too.

Out of my study window I can see what happened to the dreams of one would-be buy-to-let tycoon. A local farmer bought two houses in my street and about a dozen more around my home town and divided them into tiny flats with eye-watering rents. He went bust about 18 months ago and notices were posted on the front door by receivers.

The mess he left behind can still be seen on my street. Incredibly, each of the 16 flats in the two houses had a different mortgage with a different bank and they are now all for sale separately. So far, they don’t seem to be shifting. 

It couldn’t happen again, could it? Surely lenders and borrowers couldn’t be so stupid? There are no signs yet that it will but I wouldn’t bet on it. 

Because they're worth it?

Mon, 27 Sep 2010

A row about housing association salaries is becoming as much a part of Autumn as the nip in the air and the leaves changing colour.

Poor old Anchor Trust still took the unwanted title for the highest paid chief executive in Inside Housing’s survey despite paying Jane Ashcroft a mere £290,000 - £100,000 less than John Belcher. [However, its accounts also reveal that it paid £382,000 in compensation for loss of office to another director].  

Grant Shapps was outraged and used his speech to the National Housing Federation (NHF) to chastise them and call for more transparency. ‘I want to know how it can be justified to pay enormous salaries which are ultimately being paid for either through the hard work and toil of taxpayers - or worse, from the rents of tenants who maybe the people in society least able to afford your salary.’

David Orr was hurt. ‘I think that the way he raised it was a diversionary tactic,’ he said, ‘it felt like something going on that is in the big scheme of things monumentally unimportant compared to those things that are important which took third or fourth priority in his presentation. I think that’s disappointing.’

It got me wondering where association chief executives would fit in a recent BBC survey comparing the actual pay of a variety of different occupations with what the public thought they should get paid. 

Three groups of people in the survey were paid more than the prime minister. Chief executives of FTSE100 companies get an average of £2.1m - a figure the public thought should be cut to £118,000.

Premiership footballers get £1.7m but ought to get £365,000. And bond traders get £225,000 which should be cut to £58,000.

Even poor old David Cameron would see his £142,500 reduced to a mere £119,000. (He’ll have to make do with the millions that he can earn on the lecture circuit and in book deals when he leaves office).

Broadly speaking, anyone paid more than about £30,000 would get a pay cut if the public’s preference were applied while anyone paid below £25,000 would get an increase. It seems a fair bet that association chief exec salaries as set by the public would be well below £100,000.

Housing associations are not responsible for the disease of inflated top pay. That took root in the private sector and spread like Japanese knotweed into the public and voluntary sectors and it’s still not been tackled at source in the banks. 

But associations should be collectively responsible for an environment that seems to see pay at the top escalate year on year regardless of whether the sector is doing well or badly. The message seems to have got through to the minority who took a pay cut or a freeze last year but elsewhere it fell on deaf ears. 

And Shapps is right to call for more transparency from organisations who get millions of pounds in housing grant and housing benefit (four landlords refused even to take part in Inside Housing’s survey). But he’s got no power to force them without risking the sort of political interference that would risk all their borrowing being reclassified as public sector. 

The irony is that in the new world after the spending review, with little or no investment grant and cuts in housing benefit undermining their revenue, those association bosses really will have to earn their money. 

And, who knows, if the government takes heed of the latest report from the influential Policy Exchange think-tank calling for ‘equitisation’, a lucky few could find themselves being paid even more. 

 

Because they're worth it?

Mon, 27 Sep 2010

A row about housing association salaries is becoming as much a part of Autumn as the nip in the air and the leaves changing colour.

Poor old Anchor Trust still took the unwanted title for the highest paid chief executive in Inside Housing’s survey despite paying Jane Ashcroft a mere £290,000 - £100,000 less than John Belcher. [However, its accounts also reveal that it paid £382,000 in compensation for loss of office to another director].  

Grant Shapps was outraged and used his speech to the National Housing Federation (NHF) to chastise them and call for more transparency. ‘I want to know how it can be justified to pay enormous salaries which are ultimately being paid for either through the hard work and toil of taxpayers - or worse, from the rents of tenants who maybe the people in society least able to afford your salary.’

David Orr was hurt. ‘I think that the way he raised it was a diversionary tactic,’ he said, ‘it felt like something going on that is in the big scheme of things monumentally unimportant compared to those things that are important which took third or fourth priority in his presentation. I think that’s disappointing.’

It got me wondering where association chief executives would fit in a recent BBC survey comparing the actual pay of a variety of different occupations with what the public thought they should get paid. 

Three groups of people in the survey were paid more than the prime minister. Chief executives of FTSE100 companies get an average of £2.1m - a figure the public thought should be cut to £118,000.

Premiership footballers get £1.7m but ought to get £365,000. And bond traders get £225,000 which should be cut to £58,000.

Even poor old David Cameron would see his £142,500 reduced to a mere £119,000. (He’ll have to make do with the millions that he can earn on the lecture circuit and in book deals when he leaves office).

Broadly speaking, anyone paid more than about £30,000 would get a pay cut if the public’s preference were applied while anyone paid below £25,000 would get an increase. It seems a fair bet that association chief exec salaries as set by the public would be well below £100,000.

Housing associations are not responsible for the disease of inflated top pay. That took root in the private sector and spread like Japanese knotweed into the public and voluntary sectors and it’s still not been tackled at source in the banks. 

But associations should be collectively responsible for an environment that seems to see pay at the top escalate year on year regardless of whether the sector is doing well or badly. The message seems to have got through to the minority who took a pay cut or a freeze last year but elsewhere it fell on deaf ears. 

And Shapps is right to call for more transparency from organisations who get millions of pounds in housing grant and housing benefit (four landlords refused even to take part in Inside Housing’s survey). But he’s got no power to force them without risking the sort of political interference that would risk all their borrowing being reclassified as public sector. 

The irony is that in the new world after the spending review, with little or no investment grant and cuts in housing benefit undermining their revenue, those association bosses really will have to earn their money. 

And, who knows, if the government takes heed of the latest report from the influential Policy Exchange think-tank calling for ‘equitisation’, a lucky few could find themselves being paid even more. 

 

Equity calling

Thu, 23 Sep 2010

One report from David Cameron’s favourite think tank calling for radical reform of housing associations might be a coincidence. But two in three weeks?

The latest idea from Policy Exchange is ‘equitisation’, a process that would transform associations into social enterprises able to raise equity finance. The author, housing finance lawyer Natalie Elphicke, says that could release £30bn for investment in 500,0000 social rented home without any need for public grant.

Three weeks ago another Policy Exchange report, Making Housing Affordable, called for what would amount to the nationalisation of housing association stock as a prelude to selling it off.

With a spending review that will leave associations with little or no grant due in less than a month, these are just two of the alternative options being put forward. 

Last week London & Quadrant and PricewaterhouseCoopers called for a new contract under which associations would make their resources work harder in return for greater operational freedoms from the government. And a report by Andrew Heywood for the Smith Institute laid out the alternative options and the downsides of each of them. 

Under the latest Policy Exchange proposals, associations would be set free to raise new money though equity investment as social enterprise structures modelled on organisations like BUPA, John Lewis and the Cooperative. 

Elphicke says the new financing model using equity is possible under the Housing and Regneration Act 2008, which allowed the registration of ‘for profit’ bodies as registered providers for the first time. 

Investors such as pension funds would be able to buy preference shares that would only pay interest when the association is in profit. She calculates that based on existing assets and surpluses and the yield that investors would expect, associations could raise £30bn - enough to build 100,000 homes a year for the next five years without any public grant.

She says that up to now any discussion of equity finance has assumed full privatisation. The alternative is the Bupa or John Lewis model where investors could buy preference stock that only pays interest when they are in profit.

However, she says the reform would only affect how associations raise money. Tenants’ rights, including security of tenure would not change and would still be protected under law and regulation.

Whatever anyone thinks of that model, there can be little doubt that change is on the way for associations that could even be as radical as the shift to private finance in 1988. 

All of which may prompt some concern at a time when they are under attack from housing minister Grant Shapps for the pay of their chief executives.

The irony is that one of the main ways the association that pays the most, Anchor Trust, justifies its top salary (£338,000 to John Belcher and £290,000 to his successor Jane Ashcroft) is by comparing the pay packages on offer at other private developers and healthcare companies.

One of the companies it names as one of its main competitors is BUPA - a possible model for the future under the Policy Exchange plan. BUPA paid its chief executive Ray King a basic salary of £676,000 in 2009, plus another £60,000 in benefits, plus a bonus of £617,000 - a total package worth £1.35m. 

Equity calling

Thu, 23 Sep 2010

One report from David Cameron’s favourite think tank calling for radical reform of housing associations might be a coincidence. But two in three weeks?

The latest idea from Policy Exchange is ‘equitisation’, a process that would transform associations into social enterprises able to raise equity finance. The author, housing finance lawyer Natalie Elphicke, says that could release £30bn for investment in 500,0000 social rented home without any need for public grant.

Three weeks ago another Policy Exchange report, Making Housing Affordable, called for what would amount to the nationalisation of housing association stock as a prelude to selling it off.

With a spending review that will leave associations with little or no grant due in less than a month, these are just two of the alternative options being put forward. 

Last week London & Quadrant and PricewaterhouseCoopers called for a new contract under which associations would make their resources work harder in return for greater operational freedoms from the government. And a report by Andrew Heywood for the Smith Institute laid out the alternative options and the downsides of each of them. 

Under the latest Policy Exchange proposals, associations would be set free to raise new money though equity investment as social enterprise structures modelled on organisations like BUPA, John Lewis and the Cooperative. 

Elphicke says the new financing model using equity is possible under the Housing and Regneration Act 2008, which allowed the registration of ‘for profit’ bodies as registered providers for the first time. 

Investors such as pension funds would be able to buy preference shares that would only pay interest when the association is in profit. She calculates that based on existing assets and surpluses and the yield that investors would expect, associations could raise £30bn - enough to build 100,000 homes a year for the next five years without any public grant.

She says that up to now any discussion of equity finance has assumed full privatisation. The alternative is the Bupa or John Lewis model where investors could buy preference stock that only pays interest when they are in profit.

However, she says the reform would only affect how associations raise money. Tenants’ rights, including security of tenure would not change and would still be protected under law and regulation.

Whatever anyone thinks of that model, there can be little doubt that change is on the way for associations that could even be as radical as the shift to private finance in 1988. 

All of which may prompt some concern at a time when they are under attack from housing minister Grant Shapps for the pay of their chief executives.

The irony is that one of the main ways the association that pays the most, Anchor Trust, justifies its top salary (£338,000 to John Belcher and £290,000 to his successor Jane Ashcroft) is by comparing the pay packages on offer at other private developers and healthcare companies.

One of the companies it names as one of its main competitors is BUPA - a possible model for the future under the Policy Exchange plan. BUPA paid its chief executive Ray King a basic salary of £676,000 in 2009, plus another £60,000 in benefits, plus a bonus of £617,000 - a total package worth £1.35m. 

Rent support

Wed, 22 Sep 2010

Never mind the lack of hard evidence, the argument that housing benefit cuts will lead to a reduction in rents has become one of the coalition’s first lines of defence. 

It was trotted out again in support of the cuts yesterday by welfare minister Steve Webb in a Q&A at the Liberal Democrat conference [close to the start of the afternoon session here if anyone’s interested]. 

He said: ‘One of the things we hope will happen as a result of that is that instead of housing benefit underwriting higher and higher and higher rents…if we can actually rein in the rising rents then instead of paying somebody a massive rent on housing benefit which means they could just never work because they could never find a job that would pay a rent at that level out of their take-home pay, we do something about rents for example we might enable people not to need housing benefit because they can find a job that can afford the rent.’

Webb admitted that ‘it’s a long way from here to there’ but clearly sees it as a key long-term aim.

But what happens in the shorter term? One answer comes today in new research by London Councils and the London Landlord Accreditation Scheme. They surveyed 270 landlords to try to find out the impact of the local housing allowance (LHA) cuts on the 106,000 claims that will be affected.

On one and two bed properties, 60% of landlords would not reduce their rent by even a small amount if their tenant can no longer pay the full rent due to the cuts and 39% would reduce the rent to the new LHA level.

Where the shortfall was over £10 a week, 78% would evict the tenant or nor renew the tenancy and 22% would reduce the rent.

Where the shortfall was over £20 a week, only 4% would reduce the rent.

On larger properties, 35% of landlords would reduce the rent to the LHA level where there was any shortfall,  7% where the shortfall was over £20 a week and just 3% where the shortfall was over £50.

London Councils concludes from that that 82,000 tenants across London will be at risk of losing their home - 15,000 from next April and another 67,000 from next October. 

So while some landlords seem willing to trim their rents, most say their will not - and higher the potential shortfall the higher the proportion of landlords who would evict their tenant or not renew the tenancy instead.

The one ray of light in the survey is that 46% of landlords say they might be prepared to lower their rent if direct payment of LHA to landlords was re-instated. London Councils says that could save 22,000 households from eviction.

I tend to take surveys of landlords with a pinch of salt - after all they have an interest in saying they would not reduce their rent. However, it’s harder to dismiss evidence like this when the government has yet to produce any to support its case that the cuts will reduce rents rather than just increase shortfalls and homelessness.

Rent support

Wed, 22 Sep 2010

Never mind the lack of hard evidence, the argument that housing benefit cuts will lead to a reduction in rents has become one of the coalition’s first lines of defence. 

It was trotted out again in support of the cuts yesterday by welfare minister Steve Webb in a Q&A at the Liberal Democrat conference [close to the start of the afternoon session here if anyone’s interested]. 

He said: ‘One of the things we hope will happen as a result of that is that instead of housing benefit underwriting higher and higher and higher rents…if we can actually rein in the rising rents then instead of paying somebody a massive rent on housing benefit which means they could just never work because they could never find a job that would pay a rent at that level out of their take-home pay, we do something about rents for example we might enable people not to need housing benefit because they can find a job that can afford the rent.’

Webb admitted that ‘it’s a long way from here to there’ but clearly sees it as a key long-term aim.

But what happens in the shorter term? One answer comes today in new research by London Councils and the London Landlord Accreditation Scheme. They surveyed 270 landlords to try to find out the impact of the local housing allowance (LHA) cuts on the 106,000 claims that will be affected.

On one and two bed properties, 60% of landlords would not reduce their rent by even a small amount if their tenant can no longer pay the full rent due to the cuts and 39% would reduce the rent to the new LHA level.

Where the shortfall was over £10 a week, 78% would evict the tenant or nor renew the tenancy and 22% would reduce the rent.

Where the shortfall was over £20 a week, only 4% would reduce the rent.

On larger properties, 35% of landlords would reduce the rent to the LHA level where there was any shortfall,  7% where the shortfall was over £20 a week and just 3% where the shortfall was over £50.

London Councils concludes from that that 82,000 tenants across London will be at risk of losing their home - 15,000 from next April and another 67,000 from next October. 

So while some landlords seem willing to trim their rents, most say their will not - and higher the potential shortfall the higher the proportion of landlords who would evict their tenant or not renew the tenancy instead.

The one ray of light in the survey is that 46% of landlords say they might be prepared to lower their rent if direct payment of LHA to landlords was re-instated. London Councils says that could save 22,000 households from eviction.

I tend to take surveys of landlords with a pinch of salt - after all they have an interest in saying they would not reduce their rent. However, it’s harder to dismiss evidence like this when the government has yet to produce any to support its case that the cuts will reduce rents rather than just increase shortfalls and homelessness.

Ray of hope?

Tue, 21 Sep 2010

How far can new freedoms and powers for local government make up for the spending cuts due in 31 days time?

Nick Clegg’s announcement on tax increment financing (TIF) yesterday means that councils will get new powers to borrow against their future additional income from business rates to fund infrastructure. 

While the detail will not come out until a white paper is published around the time of the spending review, the announcement appears to mean success for extensive lobbying from local authorities and British Property Federation (BPF) and builds on the pilots announced by Labour last year.

TIFs do not generate new homes directly but they can finance infrastructure out of the future business rates on new commercial developments that will also encourage new reisdential development. 

And a report from the Town and Country Planning Association (TCPA) argues that the government could go further with new enterprise zones and devices including capital allowances for affordable housing, local authority housing bonds and housing bonds aimed at private investors. 

It says a general power of competence in the Localism Bill could make it easier for councils to issue bonds provided the Treasury shows some flexibility (how often have we heard that plea?). 

Council tax incentives for new housing are also on the way. They will not provide new money but, as the BPF points out, they will redistribute cash from councils that do not give permission for new homes to those that do. With huge cuts on the way, that could have quite an impact on the behaviour of councillors.

None of that means that the Treasury is about to drop its guard on local authority borrowing - that would be deeply ironic given that the spending cuts are all about reducing central government debt.

And it does not necessarily mean that it will abandon its traditional suspicion of tax incentives for development that would have happened anyway. Earlier this month it dismayed the BPF by rejecting new incentives to promote investment in private renting

There’s not much substance to all of this yet and it could still amount to not very much. But might it also be one small ray of hope in the grim days ahead?

Ray of hope?

Tue, 21 Sep 2010

How far can new freedoms and powers for local government make up for the spending cuts due in 31 days time?

Nick Clegg’s announcement on tax increment financing (TIF) yesterday means that councils will get new powers to borrow against their future additional income from business rates to fund infrastructure. 

While the detail will not come out until a white paper is published around the time of the spending review, the announcement appears to mean success for extensive lobbying from local authorities and British Property Federation (BPF) and builds on the pilots announced by Labour last year.

TIFs do not generate new homes directly but they can finance infrastructure out of the future business rates on new commercial developments that will also encourage new reisdential development. 

And a report from the Town and Country Planning Association (TCPA) argues that the government could go further with new enterprise zones and devices including capital allowances for affordable housing, local authority housing bonds and housing bonds aimed at private investors. 

It says a general power of competence in the Localism Bill could make it easier for councils to issue bonds provided the Treasury shows some flexibility (how often have we heard that plea?). 

Council tax incentives for new housing are also on the way. They will not provide new money but, as the BPF points out, they will redistribute cash from councils that do not give permission for new homes to those that do. With huge cuts on the way, that could have quite an impact on the behaviour of councillors.

None of that means that the Treasury is about to drop its guard on local authority borrowing - that would be deeply ironic given that the spending cuts are all about reducing central government debt.

And it does not necessarily mean that it will abandon its traditional suspicion of tax incentives for development that would have happened anyway. Earlier this month it dismayed the BPF by rejecting new incentives to promote investment in private renting

There’s not much substance to all of this yet and it could still amount to not very much. But might it also be one small ray of hope in the grim days ahead?

Having the debate

Mon, 20 Sep 2010

I got a sense of deja vu this morning when I saw that the Lib Dem motion defending the rights of social housing tenants will not be debated at the party conference.

As Isabel Hardman reports on her blog today, the motion put forward by deputy leader Simon Hughes called on the government to rule out removing security of tenure for social tenants will not be debated because it only came second in a ballot of MPs.

My mind flashed back to Labour conference after Labour conference in the noughties called for a level playing field for council housing only to be ignored by the leadership. The defeats even prompted the party to change its rules in 2007 to avoid divisive debates in future.

So is there a difference between Lib Dem non-debates and Labour ones? Hughes himself was clear on the Today programme this morning that there is.

‘As it happens that motion came second in the ballot so sadly we won’t have the opportunity to debate it this week, but I think the party view is clear – we are very happy to have the debate,’ he said. ‘There is a debate about the terrible unmet need left by Labour, a really bad legacy. There’s a huge debate about how we build the social housing not built by Labour whose record was appalling and there’s a commitment across both coalition parties to build more social housing every year under this government than in any year of Labour government.

‘But what will happen is the ministers in the relevant department, Communities and Local Government, will obviously take the intitiative. We have a minister in that department. If matters can’t be agreed in the department they get referred up to the prime minister and the deputy prime minister and others to see if we can negotiate an agreement and if we can’t it doesn’t become government policy.’

Presenter Justin Webb asked whether that meant they had the power  to stop David Cameron.

Hughes responded: ‘Well, to be fair to David Cameron, he said he wanted a debate on this. He wasn’t saying that it had been decided. We’re happy to have the debate.’

Could they also stop it happening?

‘We can stop things happening because this is not a government where you have the second and smaller party looking after a bit of the territory,’ said Hughes. ‘This is a government where all the decisions are shared and Nick Clegg as deputy prime minister co-owns the decisions. That’s a far more influential position than that of many parties in coalition who are the junior partner looking after a department.  It’s not like that.’

Taking that at face value, the coalition should put Lib Dems in a stronger position to influence the government than the Labour left was to change the view of the Labour government. But do things really work that way?

Grant Shapps gave a rather different impression at a Shelter fringe meeting last night. The first ever Tory minister to speak at a Lib Dem conference said social landlords would be given discretion to introduce fixed-term tenancies according to local housing conditions.

‘We could leave tenure for 10 years: that’s what has been done in the past,’ he said. ‘It has been left and left and left. Unless we do it now, in 20 or 30 years’ time we will be in the same situation.’

Shapps has also previously promised to build more homes than Labour. But I don’t think he has ever gone so far as Hughes in pledging ‘a commitment across both coalition parties to build more social housing every year under this government than in any year of Labour government’.

The Labour government eventually changed its mind on council housing, with some of the current leadership contenders admitting that the conference got it right and the government got it wrong. Will Lib Dem supporters of social housing have any more influence over what happens next?

Having the debate

Mon, 20 Sep 2010

I got a sense of deja vu this morning when I saw that the Lib Dem motion defending the rights of social housing tenants will not be debated at the party conference.

As Isabel Hardman reports on her blog today, the motion put forward by deputy leader Simon Hughes called on the government to rule out removing security of tenure for social tenants will not be debated because it only came second in a ballot of MPs.

My mind flashed back to Labour conference after Labour conference in the noughties called for a level playing field for council housing only to be ignored by the leadership. The defeats even prompted the party to change its rules in 2007 to avoid divisive debates in future.

So is there a difference between Lib Dem non-debates and Labour ones? Hughes himself was clear on the Today programme this morning that there is.

‘As it happens that motion came second in the ballot so sadly we won’t have the opportunity to debate it this week, but I think the party view is clear – we are very happy to have the debate,’ he said. ‘There is a debate about the terrible unmet need left by Labour, a really bad legacy. There’s a huge debate about how we build the social housing not built by Labour whose record was appalling and there’s a commitment across both coalition parties to build more social housing every year under this government than in any year of Labour government.

‘But what will happen is the ministers in the relevant department, Communities and Local Government, will obviously take the intitiative. We have a minister in that department. If matters can’t be agreed in the department they get referred up to the prime minister and the deputy prime minister and others to see if we can negotiate an agreement and if we can’t it doesn’t become government policy.’

Presenter Justin Webb asked whether that meant they had the power  to stop David Cameron.

Hughes responded: ‘Well, to be fair to David Cameron, he said he wanted a debate on this. He wasn’t saying that it had been decided. We’re happy to have the debate.’

Could they also stop it happening?

‘We can stop things happening because this is not a government where you have the second and smaller party looking after a bit of the territory,’ said Hughes. ‘This is a government where all the decisions are shared and Nick Clegg as deputy prime minister co-owns the decisions. That’s a far more influential position than that of many parties in coalition who are the junior partner looking after a department.  It’s not like that.’

Taking that at face value, the coalition should put Lib Dems in a stronger position to influence the government than the Labour left was to change the view of the Labour government. But do things really work that way?

Grant Shapps gave a rather different impression at a Shelter fringe meeting last night. The first ever Tory minister to speak at a Lib Dem conference said social landlords would be given discretion to introduce fixed-term tenancies according to local housing conditions.

‘We could leave tenure for 10 years: that’s what has been done in the past,’ he said. ‘It has been left and left and left. Unless we do it now, in 20 or 30 years’ time we will be in the same situation.’

Shapps has also previously promised to build more homes than Labour. But I don’t think he has ever gone so far as Hughes in pledging ‘a commitment across both coalition parties to build more social housing every year under this government than in any year of Labour government’.

The Labour government eventually changed its mind on council housing, with some of the current leadership contenders admitting that the conference got it right and the government got it wrong. Will Lib Dem supporters of social housing have any more influence over what happens next?

Seconds out

Thu, 16 Sep 2010

As attention shifts to the next round of welfare cuts, has enough been paid to the last lot?

Iain Duncan Smith is variously reported to be taking on George Osborne over benefit cuts and in agreement with David Cameron over his plans for a universal credit.

With Nick Clegg also mounting a defence of coalition welfare reform policies today, the debate is really hotting up ahead of the party conferences and the spending review. 

The deputy prime minister says in a Times article that the reforms are ‘profoundly liberal in intent and effect’. He writes: ‘Welfare needs to become an engine of mobility, changing people’s lives for the better, rather than a giant cheque written by the State to compensate the poor for their predicament.’

The battle is all about the next stage of benefit cuts. Duncan Smith says he ‘simply did not recognise’ the figure of £4bn extra cuts that he was reported to have agreed with the Treasury and denied reports of rows with the Treasury at the welfare and pensions committee yesterday. His speech next week to the NHF conference should be interesting. 

The welfare and pensions secretary has been battling to win Osborne’s approval for a radically simplified system with all existing benefits (including housing benefit) incorporated in one credit for people in work and one for people not in work. Extra money invested in work incentives in the short term would save billions in the long term, he argues.

In the meantime the battle goes on over the housing benefit cuts announced in June. The Chartered Institute of Housing (CIH) has just published its evidence to the Social Security Advisory Committee on the June cuts in housing benefit and argues that the government has not considered the full implications of the individual measures or their cumulative impact. 

‘This is a significant oversight that downplays the real impact of the reforms to date,’ it says. And that’s before thinking about the knock-on effects of the cuts on rents and the housing association business plans that underpin the supply of new homes.

The CIH accuses the government of starting with a figure to be saved and then contriving measures to support it. ‘Little account appears to have been taken of the immediate costs that will arise elsewhere (e.g. from increased homelessness) let alone the long-term costs and the impact these measures could have on the government’s own longer term policy objectives around welfare reform, community sustainability and housing policy.’

It argues that many of the measures contradict each other. Raising non-dependant charges will encourage young people to leave home at the same time as other cuts tackle under-occupation. Paying local housing allowance (LHA) at the 30th percentile will supposedly encourage tenants to shop around at the same time as they lose the existing incentive of up to £15 a week excess payments. LHA reforms will encourage people to move to areas that are cheaper because they offer less employment at the same time as cuts will penalise people unemployed for more than 12 months.

And it points to evidence that cuts such as the bedroom caps in London will hit the housing benefit subsidy system for temporary accommodation and cause homelessness.  ‘Perversely, we could end up in a position whereby  a provision which is designed to make a saving actually ends up costing the tax-payer more whilst causing distress for the individual families concerned.’

But its biggest objection is the plan to link LHA payments to the CPI rather than RPI inflation. Because rent inflation outstripped CPI inflation by an average of 2.6% a year between 1991 and 2009 that makes it inevitable that sooner or later no properties will be available to rent at the LHA rate. 

That’s just a flavour of the objections to the existing cuts. Underlying them are a concern that many of the same principles could be extended in the cuts still to come: once CPI increases are applied to LHA rates in the private sector, the same system could be extended to the social sector with serious consequences for landlords and their business plans as well as tenants; once under-occupying measures are applied to working age claimants, exempting pensioners might be seen as an unjustified anomaly.

If the cuts go ahead, the CIH wants a range of interim measures to mitigate the impact such as moving the introduction of the caps back to October 2011 and uprating them in line with rent inflation and reviewing broad rental market areas to ensure that 30% of private rented homes really are available to claimants.

But it also urges the government to carry out a comprehensive analysis of the knock-on effects of the June cuts on public spending and on private investment in affordable homes before taking any further steps in the same direction. 

Seconds out

Thu, 16 Sep 2010

As attention shifts to the next round of welfare cuts, has enough been paid to the last lot?

Iain Duncan Smith is variously reported to be taking on George Osborne over benefit cuts and in agreement with David Cameron over his plans for a universal credit.

With Nick Clegg also mounting a defence of coalition welfare reform policies today, the debate is really hotting up ahead of the party conferences and the spending review. 

The deputy prime minister says in a Times article that the reforms are ‘profoundly liberal in intent and effect’. He writes: ‘Welfare needs to become an engine of mobility, changing people’s lives for the better, rather than a giant cheque written by the State to compensate the poor for their predicament.’

The battle is all about the next stage of benefit cuts. Duncan Smith says he ‘simply did not recognise’ the figure of £4bn extra cuts that he was reported to have agreed with the Treasury and denied reports of rows with the Treasury at the welfare and pensions committee yesterday. His speech next week to the NHF conference should be interesting. 

The welfare and pensions secretary has been battling to win Osborne’s approval for a radically simplified system with all existing benefits (including housing benefit) incorporated in one credit for people in work and one for people not in work. Extra money invested in work incentives in the short term would save billions in the long term, he argues.

In the meantime the battle goes on over the housing benefit cuts announced in June. The Chartered Institute of Housing (CIH) has just published its evidence to the Social Security Advisory Committee on the June cuts in housing benefit and argues that the government has not considered the full implications of the individual measures or their cumulative impact. 

‘This is a significant oversight that downplays the real impact of the reforms to date,’ it says. And that’s before thinking about the knock-on effects of the cuts on rents and the housing association business plans that underpin the supply of new homes.

The CIH accuses the government of starting with a figure to be saved and then contriving measures to support it. ‘Little account appears to have been taken of the immediate costs that will arise elsewhere (e.g. from increased homelessness) let alone the long-term costs and the impact these measures could have on the government’s own longer term policy objectives around welfare reform, community sustainability and housing policy.’

It argues that many of the measures contradict each other. Raising non-dependant charges will encourage young people to leave home at the same time as other cuts tackle under-occupation. Paying local housing allowance (LHA) at the 30th percentile will supposedly encourage tenants to shop around at the same time as they lose the existing incentive of up to £15 a week excess payments. LHA reforms will encourage people to move to areas that are cheaper because they offer less employment at the same time as cuts will penalise people unemployed for more than 12 months.

And it points to evidence that cuts such as the bedroom caps in London will hit the housing benefit subsidy system for temporary accommodation and cause homelessness.  ‘Perversely, we could end up in a position whereby  a provision which is designed to make a saving actually ends up costing the tax-payer more whilst causing distress for the individual families concerned.’

But its biggest objection is the plan to link LHA payments to the CPI rather than RPI inflation. Because rent inflation outstripped CPI inflation by an average of 2.6% a year between 1991 and 2009 that makes it inevitable that sooner or later no properties will be available to rent at the LHA rate. 

That’s just a flavour of the objections to the existing cuts. Underlying them are a concern that many of the same principles could be extended in the cuts still to come: once CPI increases are applied to LHA rates in the private sector, the same system could be extended to the social sector with serious consequences for landlords and their business plans as well as tenants; once under-occupying measures are applied to working age claimants, exempting pensioners might be seen as an unjustified anomaly.

If the cuts go ahead, the CIH wants a range of interim measures to mitigate the impact such as moving the introduction of the caps back to October 2011 and uprating them in line with rent inflation and reviewing broad rental market areas to ensure that 30% of private rented homes really are available to claimants.

But it also urges the government to carry out a comprehensive analysis of the knock-on effects of the June cuts on public spending and on private investment in affordable homes before taking any further steps in the same direction. 

No easy options

Wed, 15 Sep 2010

I thought I was being gloomy until I read Andrew Heywood’s analysis of the prospects for affordable housing for the Smith Institute

It’s not just the inevitable cuts in investment in 35 days time that concern the former deputy head of policy at the Council of Mortgage Lenders (CML). It’s also the indirect effects of cuts in housing benefit and changes to regulation. And the fact that the development model based on cross-subsidy is still broken, shows few signs of being fixed and could be put under even more pressure by a housing market downturn. 

The report comes to many of the same conclusions on alternative approaches as London & Quadrant and PricewaterhouseCoopers earlier this week and conference presentations over the last few months, which is hardly surprising since it’s based on conversations with all the leading players across the sector. But it doesn’t pretend that any of them will be easy options. 

Heywood warns that without an alternative strategy the inevitable consequence of the cuts will be an accelerated downturn in affordable housing development and increased risks for housing associations that ‘stay in the game’.

And he’s especially concerned about housing benefit reform plans that threaten ‘an essential and pre-eminent element in underpinning lender and investor involvement in the sector’ and could increase lending rates and reduce lenders’ willingness to support the ‘present leverage levels’ of developing associations.

The prospect, he says, are grim, with a real threat that lenders will lose their appetite to lend and associations will abandon development in favour of concentrating on being a landlord to their existing tenants. 

The alternatives he maps out will all be familiar from previous reports - especially the central idea of a new deal between associations and the government - but he’s careful to lay out the downsides of each of them as well as the upsides.

Market renting might be an attractive new market for associations and boost the supply of homes but it would also damage work incentives and attempts to build mixed communities and cost working tenants more - and it might not be viable in all housing market areas. 

Intermediate renting would mitigate some of those problems but substantial subsidy is still required unless there is an assumption that the tenant will buy within a certain period.  For many associations it would be hard to justify as part of a planned strategy, he says.

Reform of housing benefit has to recognise the key role that it plays in attracting private investment and underpinning association income streams as well as the government’s desire to promote personal responsibility and work incentives.

There is scope for efficiency savings by associations but that has to be seen in the context of cuts in grant that could run into billions over the next spending review period and ‘the impact of cuts in housing benefit or loss of confidence by lenders in regulation could be at least as great’.

Local authorities could make a greater contribution if the government built on the work of its Labour predecessor and especially if it listened to arguments about changing the public borrowing rules. But would the markets take that as a sign of the financial weakness that the cuts are all about avoiding?

Heywood seems to see increased rents for existing tenants as an opportunity. He argues that they could boost the overall financial capacity of the sector and reduce the grant needed for future development by more than it costs in increased in housing benefit. 

But he warns that the idea is not a panacea. In areas where private rents are low it won’t work. It will make getting off benefit and into work more difficult and cost poor working tenants more. 

There has to be constructive engagement with the government, he says, so that it understands the direct and indirect effects of the cuts and addresses some of the issues that could mitigate against the fall in new development. 

And even if that happens there will be a price to be paid: less general needs development; higher rents for the working poor; a more painful transition from benefits to work; and a move away from many of the social objectives of housing associations and local authorities. 

No easy options

Wed, 15 Sep 2010

I thought I was being gloomy until I read Andrew Heywood’s analysis of the prospects for affordable housing for the Smith Institute

It’s not just the inevitable cuts in investment in 35 days time that concern the former deputy head of policy at the Council of Mortgage Lenders (CML). It’s also the indirect effects of cuts in housing benefit and changes to regulation. And the fact that the development model based on cross-subsidy is still broken, shows few signs of being fixed and could be put under even more pressure by a housing market downturn. 

The report comes to many of the same conclusions on alternative approaches as London & Quadrant and PricewaterhouseCoopers earlier this week and conference presentations over the last few months, which is hardly surprising since it’s based on conversations with all the leading players across the sector. But it doesn’t pretend that any of them will be easy options. 

Heywood warns that without an alternative strategy the inevitable consequence of the cuts will be an accelerated downturn in affordable housing development and increased risks for housing associations that ‘stay in the game’.

And he’s especially concerned about housing benefit reform plans that threaten ‘an essential and pre-eminent element in underpinning lender and investor involvement in the sector’ and could increase lending rates and reduce lenders’ willingness to support the ‘present leverage levels’ of developing associations.

The prospect, he says, are grim, with a real threat that lenders will lose their appetite to lend and associations will abandon development in favour of concentrating on being a landlord to their existing tenants. 

The alternatives he maps out will all be familiar from previous reports - especially the central idea of a new deal between associations and the government - but he’s careful to lay out the downsides of each of them as well as the upsides.

Market renting might be an attractive new market for associations and boost the supply of homes but it would also damage work incentives and attempts to build mixed communities and cost working tenants more - and it might not be viable in all housing market areas. 

Intermediate renting would mitigate some of those problems but substantial subsidy is still required unless there is an assumption that the tenant will buy within a certain period.  For many associations it would be hard to justify as part of a planned strategy, he says.

Reform of housing benefit has to recognise the key role that it plays in attracting private investment and underpinning association income streams as well as the government’s desire to promote personal responsibility and work incentives.

There is scope for efficiency savings by associations but that has to be seen in the context of cuts in grant that could run into billions over the next spending review period and ‘the impact of cuts in housing benefit or loss of confidence by lenders in regulation could be at least as great’.

Local authorities could make a greater contribution if the government built on the work of its Labour predecessor and especially if it listened to arguments about changing the public borrowing rules. But would the markets take that as a sign of the financial weakness that the cuts are all about avoiding?

Heywood seems to see increased rents for existing tenants as an opportunity. He argues that they could boost the overall financial capacity of the sector and reduce the grant needed for future development by more than it costs in increased in housing benefit. 

But he warns that the idea is not a panacea. In areas where private rents are low it won’t work. It will make getting off benefit and into work more difficult and cost poor working tenants more. 

There has to be constructive engagement with the government, he says, so that it understands the direct and indirect effects of the cuts and addresses some of the issues that could mitigate against the fall in new development. 

And even if that happens there will be a price to be paid: less general needs development; higher rents for the working poor; a more painful transition from benefits to work; and a move away from many of the social objectives of housing associations and local authorities. 

Fall guys

Tue, 14 Sep 2010

Falling house prices and more homes up for sale should be good news for first-time buyers but it doesn’t seem to be working out that way so far.

The RICS August housing market survey out today provides yet more evidence that the recovery in prices that began in the Spring of 2009 is not only over but going into reverse.

The net balance of surveyors seeing falling rather than rising prices declined from -8 in July to -32 in August, the lowest level seen since May 2009. The RICS says the trend is being driven by a combination of increasing new sales instructions and falling new buyer enquiries. 

Price falls were seen everywhere apart from Scotland, with East Anglia and the East Midlands leading the way down. Things do not look much better in the run-up to Christmas: the balance expecting further falls over the next three months fell from -28 to -38, the lowest since March 2009.

That should all be good news for people looking to get on the housing ladder but figures from the CML out yesterday show that the number of loans to first-time buyers actually fell in July.

July saw a 7% increase in the total number of loans for house purchase (including home movers as well as first-timers) but the CML said that even that represented weak demand in what is traditionally a strong month for the market.

The number of loans to first-time buyers was down 2% on June and 3% on a year ago. Their share of the market fell from 38% to 34%, the lowest since the start of the credit crunch. And they needed a 24% deposit, up from 21% in April and May.

Homes remain unaffordable for anyone who cannot get family help with a deposit - even though monthly payments for anyone who can get a mortgage are at their most affordable for six years. With few signs that the banks are about to relax their lending criteria, it will take more than the modest falls in prices seen so far to change that.

Fall guys

Tue, 14 Sep 2010

Falling house prices and more homes up for sale should be good news for first-time buyers but it doesn’t seem to be working out that way so far.

The RICS August housing market survey out today provides yet more evidence that the recovery in prices that began in the Spring of 2009 is not only over but going into reverse.

The net balance of surveyors seeing falling rather than rising prices declined from -8 in July to -32 in August, the lowest level seen since May 2009. The RICS says the trend is being driven by a combination of increasing new sales instructions and falling new buyer enquiries. 

Price falls were seen everywhere apart from Scotland, with East Anglia and the East Midlands leading the way down. Things do not look much better in the run-up to Christmas: the balance expecting further falls over the next three months fell from -28 to -38, the lowest since March 2009.

That should all be good news for people looking to get on the housing ladder but figures from the CML out yesterday show that the number of loans to first-time buyers actually fell in July.

July saw a 7% increase in the total number of loans for house purchase (including home movers as well as first-timers) but the CML said that even that represented weak demand in what is traditionally a strong month for the market.

The number of loans to first-time buyers was down 2% on June and 3% on a year ago. Their share of the market fell from 38% to 34%, the lowest since the start of the credit crunch. And they needed a 24% deposit, up from 21% in April and May.

Homes remain unaffordable for anyone who cannot get family help with a deposit - even though monthly payments for anyone who can get a mortgage are at their most affordable for six years. With few signs that the banks are about to relax their lending criteria, it will take more than the modest falls in prices seen so far to change that.

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