Monday, 27 March 2017

Inside edge

All posts from: March 2011

Fair's fair?

Thu, 31 Mar 2011

All in this together? Try applying that to tenants and owners.

Last week’s Budget was for once not about extra cuts but extra spending: £250m for Firstbuy Direct; £135m for another 12-month extension of more generous support for mortgage interest (SMI); and £560m over five years for reduced stamp duty for institutional landlords. Add in the previous £90m extension of SMI in last year’s spending review and that’s more than £1bn of extra support for owners.

As for tenants, for once the Budget contained no new bad news. However, a few days later the government announced it was bringing forward implementation of the shared room rate for the 26-35s by three months.

But figures in the back of the Budget red book reveal the decisions taken last year that take effect from Friday onwards. Add up the caps, the CPI indexation, the non-dependent deductions, the 30th percentile and the rest, subtract the odd concession like discretionary housing payments, and the total cut facing tenants over the next five years is £7.2bn. 

That does not include the cut in housing investment from £8.6bn over three years to £4.5bn over four in the spending review. Some of that lost £4.1bn would have gone to low-cost home ownership schemes but the majority would have been spent on homes for rent. 

And if that does not exactly sound like we’re all in this together, consider this. Ministers have consistently justified the cuts in the local housing allowance on the grounds of fairness to hard-working families.

That was the argument made for the bedroom caps when they were introduced last year. It’s also the reason why the total benefits any family can receive will be restricted to £26,000 or the median after-tax earnings of a working household from 2013/14.

But that argument breaks down when it comes to the support for mortgage interest (SMI) concessions that the government has now extended to April 2013.

The first is to reduce the waiting period for payment from 39 weeks to 13. The second extends the maximum mortgage eligible for help from £100,000 to £200,000.

Both are perfectly reasonable ways to help homeowners in arrears: the original limits were introduced in 1995 when repossessions were falling and the average house price and mortgage were less than half what they are now.

But what about fairness to the average working family? They would be lucky to qualify for a £100,000 mortgage and, unless they could find a substantial deposit, would be forced into private renting, with rents rising year on year and cuts in the local housing allowance if they lose their job.

In contrast, anyone with a £200,000 mortgage has already saved hundreds of pounds a year as a result of interest rates being cut to a record low. 

Fair's fair?

Thu, 31 Mar 2011

All in this together? Try applying that to tenants and owners.

Last week’s Budget was for once not about extra cuts but extra spending: £250m for Firstbuy Direct; £135m for another 12-month extension of more generous support for mortgage interest (SMI); and £560m over five years for reduced stamp duty for institutional landlords. Add in the previous £90m extension of SMI in last year’s spending review and that’s more than £1bn of extra support for owners.

As for tenants, for once the Budget contained no new bad news. However, a few days later the government announced it was bringing forward implementation of the shared room rate for the 26-35s by three months.

But figures in the back of the Budget red book reveal the decisions taken last year that take effect from Friday onwards. Add up the caps, the CPI indexation, the non-dependent deductions, the 30th percentile and the rest, subtract the odd concession like discretionary housing payments, and the total cut facing tenants over the next five years is £7.2bn. 

That does not include the cut in housing investment from £8.6bn over three years to £4.5bn over four in the spending review. Some of that lost £4.1bn would have gone to low-cost home ownership schemes but the majority would have been spent on homes for rent. 

And if that does not exactly sound like we’re all in this together, consider this. Ministers have consistently justified the cuts in the local housing allowance on the grounds of fairness to hard-working families.

That was the argument made for the bedroom caps when they were introduced last year. It’s also the reason why the total benefits any family can receive will be restricted to £26,000 or the median after-tax earnings of a working household from 2013/14.

But that argument breaks down when it comes to the support for mortgage interest (SMI) concessions that the government has now extended to April 2013.

The first is to reduce the waiting period for payment from 39 weeks to 13. The second extends the maximum mortgage eligible for help from £100,000 to £200,000.

Both are perfectly reasonable ways to help homeowners in arrears: the original limits were introduced in 1995 when repossessions were falling and the average house price and mortgage were less than half what they are now.

But what about fairness to the average working family? They would be lucky to qualify for a £100,000 mortgage and, unless they could find a substantial deposit, would be forced into private renting, with rents rising year on year and cuts in the local housing allowance if they lose their job.

In contrast, anyone with a £200,000 mortgage has already saved hundreds of pounds a year as a result of interest rates being cut to a record low. 

Waiting for Godot

Tue, 29 Mar 2011

Is the curtain finally about to come down on housing’s version of a play by Samuel Beckett?

Waiting for Godot has been described as one in which ‘nothing happens - twice’. Over two days in two acts, Vladimir and Estragon wait in vain for the mysterious Godot. At the end they agree to leave but they do not actually move.

After 20 years of writing about the chances of institutional investors returning to private renting, I know how they feel. Every time something happens to imply that they might come back - rent deregulation, assured shortholds, the business expansion scheme, real estate investment trusts, HCA initiatives  - nothing happens. And the wait goes on.

Last week’s Budget finally removed what are seen as two of the last remaining barriers to institutional investment with reform of bulk purchase stamp duty and REITs. The British Property Federation hailed a ‘Budget for property’ and hoped it would ‘tip the balance in encouraging institutional funds into building homes’ while the RICS said it would ‘help encourage large investors including pension funds into the sector providing a revolution in how rented homes are supplied’. 

The attractions seem clear. Five individual investors who buy five £200,000 flats in a block currently pay 1% stamp duty on each, a total of £10,000. Without reform, an institution buying all five would have had to pay 5% stamp duty on the bulk purchase price of £1m, a total of £50,000. After the Budget, they will pay stamp duty on the average price per unit.

The change was almost included in the 2009 Budget but was dropped at the last minute and the property industry believed that the chance had gone under current economic conditions. So there was genuine surprise that the chancellor included a measure that the Budget red book estimates will cost £560m over the next five years. 

The details of the change on REITs will go out to consultation. However, it is clear that the 2% charge to convert to a REIT will go. This was designed to stop existing property companies converting to avoid their capital gains tax liabilities but it also applied to all new trusts. The Treasury now seems to have been convinced that most existing companies have converted and paid up. Also on the agenda is the removal of the requirement that all REITs have to have an expensive stock exchange listing.

Taken together, those reforms should remove a significant upfront cost for institutional investors. In the meantime, another objection to investing in residential property seems to hold less water now. Investors in commercial property look to the income yield - rents - rather than capital values. The opposite has applied in residential property as soaring house prices have reduced yield.

However, the respected IPD Index shows that residential investment has offered better total returns than commercial over the last three, five and ten years. The index for 2010, published two weeks ago, showed that residential under-performed commercial for the first time in four years, but even then if offered a total return of 10.4%. 

So has the moment finally arrived? There’s certainly lots of chatter about the big institutions considering their options and the Scottish government has been talking to individual pension funds about investing in social and affordable housing. 

But two more barriers remain. First, institutional investors need stock - lots of it. With housebuilding still stuck at its lowest level since the war, and most housebuilders retrenched into building fewer, more expensive, homes. Perhaps other Budget reforms to make it easier to convert commercial property to residential could help there. 

Second, natural conservatism means that fear of being the first fund manager to take the plunge and risk making a loss seems to count for more than the hope of being the first to make a profit.

But sooner or later you feel it has to happen. The returns are good. The risks are lower than for a commercial sector still riddled with empty office blocks. And, with government investment slashed and the banks still not lending, the institutions look like the only realistic source of new investment over the next few years. 

Unless of course we are all still Waiting for Godot…

Waiting for Godot

Tue, 29 Mar 2011

Is the curtain finally about to come down on housing’s version of a play by Samuel Beckett?

Waiting for Godot has been described as one in which ‘nothing happens - twice’. Over two days in two acts, Vladimir and Estragon wait in vain for the mysterious Godot. At the end they agree to leave but they do not actually move.

After 20 years of writing about the chances of institutional investors returning to private renting, I know how they feel. Every time something happens to imply that they might come back - rent deregulation, assured shortholds, the business expansion scheme, real estate investment trusts, HCA initiatives  - nothing happens. And the wait goes on.

Last week’s Budget finally removed what are seen as two of the last remaining barriers to institutional investment with reform of bulk purchase stamp duty and REITs. The British Property Federation hailed a ‘Budget for property’ and hoped it would ‘tip the balance in encouraging institutional funds into building homes’ while the RICS said it would ‘help encourage large investors including pension funds into the sector providing a revolution in how rented homes are supplied’. 

The attractions seem clear. Five individual investors who buy five £200,000 flats in a block currently pay 1% stamp duty on each, a total of £10,000. Without reform, an institution buying all five would have had to pay 5% stamp duty on the bulk purchase price of £1m, a total of £50,000. After the Budget, they will pay stamp duty on the average price per unit.

The change was almost included in the 2009 Budget but was dropped at the last minute and the property industry believed that the chance had gone under current economic conditions. So there was genuine surprise that the chancellor included a measure that the Budget red book estimates will cost £560m over the next five years. 

The details of the change on REITs will go out to consultation. However, it is clear that the 2% charge to convert to a REIT will go. This was designed to stop existing property companies converting to avoid their capital gains tax liabilities but it also applied to all new trusts. The Treasury now seems to have been convinced that most existing companies have converted and paid up. Also on the agenda is the removal of the requirement that all REITs have to have an expensive stock exchange listing.

Taken together, those reforms should remove a significant upfront cost for institutional investors. In the meantime, another objection to investing in residential property seems to hold less water now. Investors in commercial property look to the income yield - rents - rather than capital values. The opposite has applied in residential property as soaring house prices have reduced yield.

However, the respected IPD Index shows that residential investment has offered better total returns than commercial over the last three, five and ten years. The index for 2010, published two weeks ago, showed that residential under-performed commercial for the first time in four years, but even then if offered a total return of 10.4%. 

So has the moment finally arrived? There’s certainly lots of chatter about the big institutions considering their options and the Scottish government has been talking to individual pension funds about investing in social and affordable housing. 

But two more barriers remain. First, institutional investors need stock - lots of it. With housebuilding still stuck at its lowest level since the war, and most housebuilders retrenched into building fewer, more expensive, homes. Perhaps other Budget reforms to make it easier to convert commercial property to residential could help there. 

Second, natural conservatism means that fear of being the first fund manager to take the plunge and risk making a loss seems to count for more than the hope of being the first to make a profit.

But sooner or later you feel it has to happen. The returns are good. The risks are lower than for a commercial sector still riddled with empty office blocks. And, with government investment slashed and the banks still not lending, the institutions look like the only realistic source of new investment over the next few years. 

Unless of course we are all still Waiting for Godot…

Budget 2011 aftermath – live blog

Thu, 24 Mar 2011

12:20 The Lex column inFinancial Times has some heavyweight criticism of the £250m Budget scheme to help housebuilders, sorry first-time buyers.

‘Firstbuy Direct is a small step,’ it says. ‘Even so, it is in the wrong direction, and not just because it will mostly just push up the price of starter homes. Governments should not be encouraging the purchase of a home with a big mortgage as a way to build wealth.’

The new scheme offers a 20% equity loan (split between housebuilders and the government) rather than 30% under HomeBuy Direct. As Tony Clements of Red Brick points out, a certain politician who described HomeBuy Direct as ‘a very expensive flop’ now presides over its £250m replacement.

For my money, HomeBuy Direct was actually an essential element in the rescue of the housebuilding industry after the credit crunch. Any collapse of a major housebuilder would have had dire knock-on consequences for the banks and the rest of the economy. The case for Firstbuy is less clear - housebuilders do not have thousands of unsold homes now - but one can still be made based on the jobs it will help to generate.

But what about the buyers? Detail is thin as yet but the Budget announcement said that the £250m will apply to 10,000 homes – indicating they will be priced at an average of £250,000. That implies buyers will get equity loans for £50,000, put down a deposit of £12,500 and take out a mortgage of £187,500.

Two points here. First, the scheme is not exactly being aimed at your average first-time buyer – it sounds like something designed to benefit London and the South East. 

First, what happens if prices fall? Could Firstbuy be a ticket to negative equity? Say prices fall by 20%.

The £250,000 house is worth £175,000. The equity loan is worth 20% of that - £35,000 – so the government and the housebuilder are each looking at a notional loss of £7,500 on their loan. The buyer owns 80% - now worth £140,000 when their mortgage is still for £187,500.

OK that’s a gloomy forecast. The Office for Budget Responsibility’s forecasts at the back of the Budget document say that house prices will fall by 2.3% in 2011 before rising again from 2012. So what’s the problem?

It is that, as Brian Green points out on his Brickonomics blog, that does not seem to stack up with the OBR’s forecast of what is going to happen to average earnings. They fell in real terms last year and are set to do so again in 2011 and 2012. At the same time, taxes are rising and mortgage rates are set to rise too – the OBR forecasts that interest rates will double over the next year and double again in the two years after that.

What will that mean for house prices and those Firstbuyers?

10:05 David Ireland has an interesting and provocative take on the sector’s reaction to the Budget in general and Firstbuy on his blog.

Campbell Robb of Shelter described the scheme as ‘the policy equivalent of a sticking plaster on a broken leg’ while Sarah Webb of the CIH saw it as ‘a welcome adrenaline boost’.

But the chief executive of Empty Homes says they’ve got it wrong. ‘The housing sector has confused itself with the housebuilding industry.Every housing problem that is raised whether it be homelessness, overcrowding, poor living conditions or affordability the sector’s answer is “we need to build more houses” Except the housing sector doesn’t actually build any homes. The housebuilding industry does. From the housebuilders point of view this is no doubt great news. They have had their business elevated to a moral necessity by organisations with the public goodwill of Shelter and the credibility of the CIH.’

And he says nobody is asking two important questions: ‘Why is housebuilding so low? and if it were to magically accelerate would it really solve all the country’s housing problems?’

9:45: No prizes for guessing who was most delighted and who was most dismayed with yesterday’s Budget.

From Firstbuy to planning reform and from zero carbon to section 106, the Home Builders Federation got virtually everything it was lobbying for. ‘We are pleased the Government is listening to industry concerns and has recognised the economic and social benefits of building more homes,’ said executive chairman Stewart Baseley. ‘With Firstbuy the Government has stepped up with a policy that will help first time buyers, boost economic growth and provide a vital shot in the arm for the house-building industry.’

Individual housebuilders are already marketing Firstbuy: ‘You could buy your own Barratt home sooner than you thought’.

In contrast environmental groups attacked the government’s decision to water down the zero carbon standard as ‘a shameful u-turn’ and ‘a shocking weakening of the government’s green agenda’.

‘I personally sit on this [zero carbon] task force for WWF,’ said WWF head of campaigns Colin Butfield I’ve sat there whilst the Housing Minister Grant Shapps confirmed his support for the zero carbon homes policy and now without even an email beforehand to those of us involved he slips these few lines in on page 121 and destroys a flagship green policy, and the goodwill and trust of many who want to see a low carbon UK. Greenest Government ever? Someone should have told the Housing Minister.’

According to the UK Green Building Council, Shapps told the Zero Carbon Hub annual conference on 1 February: ‘The commitment to Zero Carbon remains in place - there’s no ambiguity about that.’ And the government’s Carbon Plan published on 8 March said: ‘The government is committed to ensuring that new-build homes are zero carbon from 2016 and do not add extra carbon dioxide emissions to the atmosphere.’

‘In the space of two weeks, this government has gone from a firm commitment on zero carbon homes, to a watered down policy,’ said chief executive Paul King. ‘A zero carbon home will no longer do what it says on the tin. The world leading commitment that new homes would not add to the carbon footprint of our housing stock from 2016 has been scrapped despite a remarkable consensus between industry and NGOs in support of it.’

Budget 2011 aftermath – live blog

Thu, 24 Mar 2011

12:20 The Lex column inFinancial Times has some heavyweight criticism of the £250m Budget scheme to help housebuilders, sorry first-time buyers.

‘Firstbuy Direct is a small step,’ it says. ‘Even so, it is in the wrong direction, and not just because it will mostly just push up the price of starter homes. Governments should not be encouraging the purchase of a home with a big mortgage as a way to build wealth.’

The new scheme offers a 20% equity loan (split between housebuilders and the government) rather than 30% under HomeBuy Direct. As Tony Clements of Red Brick points out, a certain politician who described HomeBuy Direct as ‘a very expensive flop’ now presides over its £250m replacement.

For my money, HomeBuy Direct was actually an essential element in the rescue of the housebuilding industry after the credit crunch. Any collapse of a major housebuilder would have had dire knock-on consequences for the banks and the rest of the economy. The case for Firstbuy is less clear - housebuilders do not have thousands of unsold homes now - but one can still be made based on the jobs it will help to generate.

But what about the buyers? Detail is thin as yet but the Budget announcement said that the £250m will apply to 10,000 homes – indicating they will be priced at an average of £250,000. That implies buyers will get equity loans for £50,000, put down a deposit of £12,500 and take out a mortgage of £187,500.

Two points here. First, the scheme is not exactly being aimed at your average first-time buyer – it sounds like something designed to benefit London and the South East. 

First, what happens if prices fall? Could Firstbuy be a ticket to negative equity? Say prices fall by 20%.

The £250,000 house is worth £175,000. The equity loan is worth 20% of that - £35,000 – so the government and the housebuilder are each looking at a notional loss of £7,500 on their loan. The buyer owns 80% - now worth £140,000 when their mortgage is still for £187,500.

OK that’s a gloomy forecast. The Office for Budget Responsibility’s forecasts at the back of the Budget document say that house prices will fall by 2.3% in 2011 before rising again from 2012. So what’s the problem?

It is that, as Brian Green points out on his Brickonomics blog, that does not seem to stack up with the OBR’s forecast of what is going to happen to average earnings. They fell in real terms last year and are set to do so again in 2011 and 2012. At the same time, taxes are rising and mortgage rates are set to rise too – the OBR forecasts that interest rates will double over the next year and double again in the two years after that.

What will that mean for house prices and those Firstbuyers?

10:05 David Ireland has an interesting and provocative take on the sector’s reaction to the Budget in general and Firstbuy on his blog.

Campbell Robb of Shelter described the scheme as ‘the policy equivalent of a sticking plaster on a broken leg’ while Sarah Webb of the CIH saw it as ‘a welcome adrenaline boost’.

But the chief executive of Empty Homes says they’ve got it wrong. ‘The housing sector has confused itself with the housebuilding industry.Every housing problem that is raised whether it be homelessness, overcrowding, poor living conditions or affordability the sector’s answer is “we need to build more houses” Except the housing sector doesn’t actually build any homes. The housebuilding industry does. From the housebuilders point of view this is no doubt great news. They have had their business elevated to a moral necessity by organisations with the public goodwill of Shelter and the credibility of the CIH.’

And he says nobody is asking two important questions: ‘Why is housebuilding so low? and if it were to magically accelerate would it really solve all the country’s housing problems?’

9:45: No prizes for guessing who was most delighted and who was most dismayed with yesterday’s Budget.

From Firstbuy to planning reform and from zero carbon to section 106, the Home Builders Federation got virtually everything it was lobbying for. ‘We are pleased the Government is listening to industry concerns and has recognised the economic and social benefits of building more homes,’ said executive chairman Stewart Baseley. ‘With Firstbuy the Government has stepped up with a policy that will help first time buyers, boost economic growth and provide a vital shot in the arm for the house-building industry.’

Individual housebuilders are already marketing Firstbuy: ‘You could buy your own Barratt home sooner than you thought’.

In contrast environmental groups attacked the government’s decision to water down the zero carbon standard as ‘a shameful u-turn’ and ‘a shocking weakening of the government’s green agenda’.

‘I personally sit on this [zero carbon] task force for WWF,’ said WWF head of campaigns Colin Butfield I’ve sat there whilst the Housing Minister Grant Shapps confirmed his support for the zero carbon homes policy and now without even an email beforehand to those of us involved he slips these few lines in on page 121 and destroys a flagship green policy, and the goodwill and trust of many who want to see a low carbon UK. Greenest Government ever? Someone should have told the Housing Minister.’

According to the UK Green Building Council, Shapps told the Zero Carbon Hub annual conference on 1 February: ‘The commitment to Zero Carbon remains in place - there’s no ambiguity about that.’ And the government’s Carbon Plan published on 8 March said: ‘The government is committed to ensuring that new-build homes are zero carbon from 2016 and do not add extra carbon dioxide emissions to the atmosphere.’

‘In the space of two weeks, this government has gone from a firm commitment on zero carbon homes, to a watered down policy,’ said chief executive Paul King. ‘A zero carbon home will no longer do what it says on the tin. The world leading commitment that new homes would not add to the carbon footprint of our housing stock from 2016 has been scrapped despite a remarkable consensus between industry and NGOs in support of it.’

Budget 2011 - live blog

Wed, 23 Mar 2011

16:45 The perils of live blogging: most of what I wrote earlier seems to have disappeared into the digital ether. I'm going to add the key points back in below.

15:05 Housebuilding is a key part of the Plan for Growth published alongside the Budget.

It argues that:  ‘A housing offer fit for the 21st century, providing new homes in the right places, is also vital for our future economic competitiveness, enabling a mobile workforce and dynamic economy. Levels of housebuilding are currently at their lowest level in peacetime since 1924. The immediate constraint is a lack of effective demand, with wider economic uncertainties and low levels of mortgage lending affecting people’s ability and willingness to purchase homes. As these constraints improve, it is critical that industry gets the support it requires to build houses on the scale the UK needs, through planning reform and new financial incentives for home building.’ 

Any housebuilders reading should uncork the champagne now: the government seems to have swallowed your arguments wholesale. 

Here are some highlights from a quick first look:

  • Firstbuy and reform to stamp duty reform on bulk purchases and REITS seen as promoting labour mobility.
  • Planning system seen as ‘overly slow and bureaucratic’: ‘Low levels of housing completions and limits on land supply also create barriers to mobility and high costs of entry for firms coming to the country.’
  • Eric Pickles is making a written statement today ‘setting clear expectations that local planning authorities and other bodies involved in granting development consents should prioritise growth and jobs’. And ‘the Government will adopt the same pro-growth approach as it reforms national planning policy. The Chief Planning Officer will write to all local planning authorities to outline the Government’s intent.’ 
  • ‘Where developments are stalled due to extensive planning obligations, negotiated in more buoyant property market conditions, local authorities will be asked to reconsider these in light of new circumstances and planning policy tests, and, where possible, to modify obligations to allow development to proceed.’
  • The presumption in favour of sustainable development ‘will reinforce a pro-growth emphasis on plan-making. It will require local authorities to work promptly to accept applications that comply with up-to-date plans and national planning policies.’ [How is Pickles going to square all this with localism?]
  • ‘Local authorities will be required to identify and plan for development, with a clear role for market signals in assessing the need for development. For example, if land prices are high for housing, this should inform an assessment of relative need and may indicate housing shortages.’ 
  • Businesses as well as local communities will be able to bring forward neighbourhood plans and development orders, meaning that subject to agreement with the local community, they can develop plans without a need for additional planning consents.

There's also a big announcement on zero carbon homes - which should now be renamed zero (well, ok, not strictly speaking zero) homes. 'To ensure that it remains viable to build new houses, the Government will hold housebuilders accountable only for those carbon dioxide emissions that are covered by Building Regulations, and will provide cost-effective means through which they can do this.'

What that means is that it will only cover emissions from heating, fixed lighting, hot water and building services - and not from cooking and electrical appliances in the home. 

All in all it looks like a stunning bit of lobbying by housebuilders. Replacement for HomeBuy Direct. Check. Pro-growth planning guidance to counteract localist nimbys. Check. Release more public sector land. Check. Help to renegotiate section 106 agreements. Check. Clearing away planning red tape. Check. Water down zero carbon definition. Check.

14:00: I had written an entry on what's in the Budget document, but sadly it disappeared at some stage this afternoon. 

Here's a brief summary of what seemed to be the key points to me:

  • As expected the planning reforms include a pilot of the land auction model and a consultation on proposals to make it easier to convert from commercial premises to residential. The government also reiterates the presumption in favour of sustainable development. 
  • There will be 'localised choice about the use of previously developed land', something that involves 'removing nationally imposed targets while retaining existing controls on greenbelt land' [quite a tightrope to walk there]
  • 'The government will work with local authorities to expedite planning decisions for surplus military land and other public sites suitable for housing, also testing ’build now, pay later’ techniques to quicken delivery.' The document says that will potentially allow the Ministry of Defence to sell £350m of land, enough for 20,000 new homes by 2014/15.
  • Temporary concessions on support for mortgage interest (a 13-week waiting period and £200,000 mortgage limit) will be extended until January 2013.
  • The government will provide £250m for the Firstbuy programme to assist first-time buyers, with equity investments jointly funded by housebuilders. 
  • Stamp duty on bulk purchases will be reformed, seemingly by taking the mean value of the individual properties. [As it stands a company buying a building of 10 flats each worth £200,000 would have to pay stamp duty at 5% on the total purchase price of £2m, a total of £100,000; whereas ten individual buyers would each pay 1% of £200,000 or £2,000 each, a total of £20,000. So this change should benefit big landlords - and maybe housing associations too].
  • Changes to the rules on real estate investment trusts (REITs) to make them easier to set up. 
  • A review of the £250,000 stamp duty holiday for first-time buyers, due to expire next April, the results to be announced in the Autumn.

10:35: Nine months on from the spending cuts and housing benefit caps in George Osborne's first Budget, less drama is expected from the chancellor this time. 

So what do we (think we) know so far:

A growth package including planning reforms to encourage more new homes will be published alongside the Budget. The package will reportedly include a pilot of local land auctions and proposals to make it easier to convert offices and shops into homes. To maintain the balance of the coalition, one idea comes from the Lib Dem think-tank CentreForum, the other from the Conservative one Policy Exchange.  

There could be help for first-time buyers (what Budget doesn't have help for first-time buyers?) with a £250m plan called Firstbuy Direct.  According to the Financial Times, Firstbuy will involve a 10% equity loan from the government, another 10% loan from the housebuilder and a 5% deposit by the purchaser. The scheme would represent something of a coup for the Home Builders Federation, which has made a replacement for HomeBuy Direct one of its main lobbying priorities. 

There will be a Green Investment Bank, but not yet, and it will not cover loans for energy efficiency in housing. 

Might something happen on stamp duty? It's not been mentioned in the leaks but the coalition has a year to decide what happens to the holiday for first-time buyers on properties up to £250,000 that expires in April 2012. It was the Conservatives' flagship policy before Labour nicked it and the coalition's programme for government promised to review its effectiveness. 

The Council of Mortgage Lenders seemed uncertain last week about whether the holiday had done much to kickstart the market. It is calling for reform of the slab structure of stamp duty that can trigger huge increases in tax at the £250,000, £500,000 and (from next month) £1m thresholds, arguing that a marginal rate system similar to income tax could remove disincentives, improve liquidity in the labour and housing markets and deliver a more stable tax base over time. 

And does anyone rule out more cuts? 

Budget 2011 - live blog

Wed, 23 Mar 2011

16:45 The perils of live blogging: most of what I wrote earlier seems to have disappeared into the digital ether. I'm going to add the key points back in below.

15:05 Housebuilding is a key part of the Plan for Growth published alongside the Budget.

It argues that:  ‘A housing offer fit for the 21st century, providing new homes in the right places, is also vital for our future economic competitiveness, enabling a mobile workforce and dynamic economy. Levels of housebuilding are currently at their lowest level in peacetime since 1924. The immediate constraint is a lack of effective demand, with wider economic uncertainties and low levels of mortgage lending affecting people’s ability and willingness to purchase homes. As these constraints improve, it is critical that industry gets the support it requires to build houses on the scale the UK needs, through planning reform and new financial incentives for home building.’ 

Any housebuilders reading should uncork the champagne now: the government seems to have swallowed your arguments wholesale. 

Here are some highlights from a quick first look:

  • Firstbuy and reform to stamp duty reform on bulk purchases and REITS seen as promoting labour mobility.
  • Planning system seen as ‘overly slow and bureaucratic’: ‘Low levels of housing completions and limits on land supply also create barriers to mobility and high costs of entry for firms coming to the country.’
  • Eric Pickles is making a written statement today ‘setting clear expectations that local planning authorities and other bodies involved in granting development consents should prioritise growth and jobs’. And ‘the Government will adopt the same pro-growth approach as it reforms national planning policy. The Chief Planning Officer will write to all local planning authorities to outline the Government’s intent.’ 
  • ‘Where developments are stalled due to extensive planning obligations, negotiated in more buoyant property market conditions, local authorities will be asked to reconsider these in light of new circumstances and planning policy tests, and, where possible, to modify obligations to allow development to proceed.’
  • The presumption in favour of sustainable development ‘will reinforce a pro-growth emphasis on plan-making. It will require local authorities to work promptly to accept applications that comply with up-to-date plans and national planning policies.’ [How is Pickles going to square all this with localism?]
  • ‘Local authorities will be required to identify and plan for development, with a clear role for market signals in assessing the need for development. For example, if land prices are high for housing, this should inform an assessment of relative need and may indicate housing shortages.’ 
  • Businesses as well as local communities will be able to bring forward neighbourhood plans and development orders, meaning that subject to agreement with the local community, they can develop plans without a need for additional planning consents.

There's also a big announcement on zero carbon homes - which should now be renamed zero (well, ok, not strictly speaking zero) homes. 'To ensure that it remains viable to build new houses, the Government will hold housebuilders accountable only for those carbon dioxide emissions that are covered by Building Regulations, and will provide cost-effective means through which they can do this.'

What that means is that it will only cover emissions from heating, fixed lighting, hot water and building services - and not from cooking and electrical appliances in the home. 

All in all it looks like a stunning bit of lobbying by housebuilders. Replacement for HomeBuy Direct. Check. Pro-growth planning guidance to counteract localist nimbys. Check. Release more public sector land. Check. Help to renegotiate section 106 agreements. Check. Clearing away planning red tape. Check. Water down zero carbon definition. Check.

14:00: I had written an entry on what's in the Budget document, but sadly it disappeared at some stage this afternoon. 

Here's a brief summary of what seemed to be the key points to me:

  • As expected the planning reforms include a pilot of the land auction model and a consultation on proposals to make it easier to convert from commercial premises to residential. The government also reiterates the presumption in favour of sustainable development. 
  • There will be 'localised choice about the use of previously developed land', something that involves 'removing nationally imposed targets while retaining existing controls on greenbelt land' [quite a tightrope to walk there]
  • 'The government will work with local authorities to expedite planning decisions for surplus military land and other public sites suitable for housing, also testing ’build now, pay later’ techniques to quicken delivery.' The document says that will potentially allow the Ministry of Defence to sell £350m of land, enough for 20,000 new homes by 2014/15.
  • Temporary concessions on support for mortgage interest (a 13-week waiting period and £200,000 mortgage limit) will be extended until January 2013.
  • The government will provide £250m for the Firstbuy programme to assist first-time buyers, with equity investments jointly funded by housebuilders. 
  • Stamp duty on bulk purchases will be reformed, seemingly by taking the mean value of the individual properties. [As it stands a company buying a building of 10 flats each worth £200,000 would have to pay stamp duty at 5% on the total purchase price of £2m, a total of £100,000; whereas ten individual buyers would each pay 1% of £200,000 or £2,000 each, a total of £20,000. So this change should benefit big landlords - and maybe housing associations too].
  • Changes to the rules on real estate investment trusts (REITs) to make them easier to set up. 
  • A review of the £250,000 stamp duty holiday for first-time buyers, due to expire next April, the results to be announced in the Autumn.

10:35: Nine months on from the spending cuts and housing benefit caps in George Osborne's first Budget, less drama is expected from the chancellor this time. 

So what do we (think we) know so far:

A growth package including planning reforms to encourage more new homes will be published alongside the Budget. The package will reportedly include a pilot of local land auctions and proposals to make it easier to convert offices and shops into homes. To maintain the balance of the coalition, one idea comes from the Lib Dem think-tank CentreForum, the other from the Conservative one Policy Exchange.  

There could be help for first-time buyers (what Budget doesn't have help for first-time buyers?) with a £250m plan called Firstbuy Direct.  According to the Financial Times, Firstbuy will involve a 10% equity loan from the government, another 10% loan from the housebuilder and a 5% deposit by the purchaser. The scheme would represent something of a coup for the Home Builders Federation, which has made a replacement for HomeBuy Direct one of its main lobbying priorities. 

There will be a Green Investment Bank, but not yet, and it will not cover loans for energy efficiency in housing. 

Might something happen on stamp duty? It's not been mentioned in the leaks but the coalition has a year to decide what happens to the holiday for first-time buyers on properties up to £250,000 that expires in April 2012. It was the Conservatives' flagship policy before Labour nicked it and the coalition's programme for government promised to review its effectiveness. 

The Council of Mortgage Lenders seemed uncertain last week about whether the holiday had done much to kickstart the market. It is calling for reform of the slab structure of stamp duty that can trigger huge increases in tax at the £250,000, £500,000 and (from next month) £1m thresholds, arguing that a marginal rate system similar to income tax could remove disincentives, improve liquidity in the labour and housing markets and deliver a more stable tax base over time. 

And does anyone rule out more cuts? 

Class struggle

Tue, 22 Mar 2011

Cutting red tape to make it easier to convert empty property into homes sounds like a great idea and one that seems set to feature in the growth package to be announced in tomorrow’s Budget.

In a report published last week, Policy Exchange, the think-tank that has a fast track to Conservative Central Office, proposed making it easier to convert empty shops and office buildings into homes. It’s an attractive idea but one that I can’t help comparing to another recent development. 

At the moment it’s hard to change the use from Class A (retail) and Class B (employment) to Class C3 (dwelling houses) but each use is set in stone in local development plans and frameworks that only tend to change once a decade.

The result has been 266,000 empty ‘hereditaments’ (taxable units of property some of which are big enough for several homes) and several thousand more empty buildings demolished to avoid paying empty property tax.

The solution, says Policy Exchange, is to allow any A or B class building that has been vacant more than a year to convert to C3 housing with any need for planning permission. The same would apply in any five-year period to 50% of the floorspace in any A or B building that’s been vacant for less than a year.

To safeguard against villages losing their shops and pubs, the provision would only apply provided there is another one operating within a one mile radius.

The obvious argument against is that it will just exacerbate the trend towards dormitory towns with decaying high streets and out of town (now rebranded edge of town) shops and offices and an endless increase in car journeys. Policy Exchange makes the reasonable point that empty shops do not do much for high streets either.

However, Lib Dems might reasonably see an irony in the coalition changing the rules on use class orders to provide more homes when it rejected a plan in their manifesto designed to achieve the same thing. The party wanted to introduce a new use class order that would mean planning permission would be required to convert a C3 dwelling house into a second home. 

And I can’t help seeing the irony of the idea being introduced in the same week as the government moves to criminalise another group of people dedicated to ignoring red tape: squatters. 

Fuelled by newspaper stories about homeowners left with huge legal bills to evict squatters, this may seem like a straightforward case of the government acting to defend the law-abiding and criminalise squatting.

But is property ownership a universal human right even when that building is kept empty for years? 

Rather less was heard of those arguments when squatters occupied Saif Gadaffi’s £11m mansion in Hampstead Garden Suburb.

And the combination of the two stories resonates back to the famous occupation of an iconic Class B building in central London in 1974.

Property tycoon Harry Hyams had kept Centrepoint empty for seven years while he waited to let it to a lucrative single tenant. Squatters occupied it to raise awareness of homeslessness and the housing crisis.

The reforms expected tomorrow would leave a modern-day Hyams free to convert their office block into homes - but equally free to keep it empty. 

Class struggle

Tue, 22 Mar 2011

Cutting red tape to make it easier to convert empty property into homes sounds like a great idea and one that seems set to feature in the growth package to be announced in tomorrow’s Budget.

In a report published last week, Policy Exchange, the think-tank that has a fast track to Conservative Central Office, proposed making it easier to convert empty shops and office buildings into homes. It’s an attractive idea but one that I can’t help comparing to another recent development. 

At the moment it’s hard to change the use from Class A (retail) and Class B (employment) to Class C3 (dwelling houses) but each use is set in stone in local development plans and frameworks that only tend to change once a decade.

The result has been 266,000 empty ‘hereditaments’ (taxable units of property some of which are big enough for several homes) and several thousand more empty buildings demolished to avoid paying empty property tax.

The solution, says Policy Exchange, is to allow any A or B class building that has been vacant more than a year to convert to C3 housing with any need for planning permission. The same would apply in any five-year period to 50% of the floorspace in any A or B building that’s been vacant for less than a year.

To safeguard against villages losing their shops and pubs, the provision would only apply provided there is another one operating within a one mile radius.

The obvious argument against is that it will just exacerbate the trend towards dormitory towns with decaying high streets and out of town (now rebranded edge of town) shops and offices and an endless increase in car journeys. Policy Exchange makes the reasonable point that empty shops do not do much for high streets either.

However, Lib Dems might reasonably see an irony in the coalition changing the rules on use class orders to provide more homes when it rejected a plan in their manifesto designed to achieve the same thing. The party wanted to introduce a new use class order that would mean planning permission would be required to convert a C3 dwelling house into a second home. 

And I can’t help seeing the irony of the idea being introduced in the same week as the government moves to criminalise another group of people dedicated to ignoring red tape: squatters. 

Fuelled by newspaper stories about homeowners left with huge legal bills to evict squatters, this may seem like a straightforward case of the government acting to defend the law-abiding and criminalise squatting.

But is property ownership a universal human right even when that building is kept empty for years? 

Rather less was heard of those arguments when squatters occupied Saif Gadaffi’s £11m mansion in Hampstead Garden Suburb.

And the combination of the two stories resonates back to the famous occupation of an iconic Class B building in central London in 1974.

Property tycoon Harry Hyams had kept Centrepoint empty for seven years while he waited to let it to a lucrative single tenant. Squatters occupied it to raise awareness of homeslessness and the housing crisis.

The reforms expected tomorrow would leave a modern-day Hyams free to convert their office block into homes - but equally free to keep it empty. 

Vacuum packed

Thu, 17 Mar 2011

Another day, another rap over the knuckles for Messrs Pickles and Shapps - except that this time it comes from a Commons committee with a Conservative majority and it’s more like a club over the head.

MPs on the communities and local government select committee say their abolition of regional spatial strategies has left a vacuum at the heart of the English planning system and risks creating a ‘damaging intertia’ that will hinder development.

And they call on the government to include effective strategic planning arrangements in the Localism Bill and ‘ensure a biting obligation on local authorities to have regard to the evidence and to meet identified needs’.

They want action to ensure that robust and consistent evidence goes into local development plans. ‘It is not acceptable for ministers to abdicate their responsiblities in this regard by leaving all the responsiblity with under-resources and under-skilled local planning authorities.’

That’s pretty strong language in any context but particularly so within the polite conventions of select committee reports. ‘The DCLG has not explained how infrastructure, economic development, housing and environment protection be retained at a strategic level nor has it explained how the current planning system will move to the new system, after the Localism Bill comes into effect, without any transitional arrangements in place,’ they conclude

On housing, Shapps told them in an oral evidence session: ‘Building more homes is the gold standard upon which we shall be judged. The idea is to get a system which delivers housing in this country.’

And he explained the government’s localist approach would make local authorities more responsive to local needs and provide more houses in future.

But the MPs warn that: ‘The tension between local choice and national need cannot merely be wished away. There is a balance to be struck between housing targets set at a national or regional level, which are seen as being imposed against the wishes of local people, and leaving it to local communtiies to decide, which can lead to house building proposals being effectively blocked.’

Eric Pickles criticised research by Tetlow King for the National Housing Federation that indicated plans for 182,000 homes had been dropped as based on ‘iffy’ evidence. But when the committee invited the consultant to rebut his claims in January, it said the number had grown to more than 200,000.

The MPs welcome the government’s recognition of the need for more homes, and its plan to build 150,000 affordable homes, but ‘question whether either of these aspirations will be achievable under the government’s current proposals for the planning system’.

And that figure of 200,000 homes lost from the planning system leads them to ‘conclude that the government may well be faced with a stark choice in deciding whether to compromise on its intention to build more homes than the previous government, or on its desire to promote localism in decisions of this kind’.

Ouch. And there’s more. ‘No evidence was produced to support the Government’s view that local authorities will achieve comparable rates of house building to those in the past, let alone an increase. If the evidence of success fails to materialise very quickly, the Government is going to have to review its selection of levers of influence.’

The MPs also uncovered widespread scepticism about whether the new homes will work and no evidence that it will increase housing supply by the 8-13% claimed by ministers.

‘Much of the evidence suggests that the New Homes Bonus may well be ineffective in increasing house building at all, let alone the building of the right homes in the right places,’ they say.

They warn that the bonus ‘is particularly likely to fail in the affordable housing sector’.

And they say it needs to be linked explicitly to the delivery of homes provided for in local plans following robust assessments of housing need.

It’s an extraordinary call for a u-turn on key aspects of housing policy from a committee with five Conservative, one Lib Dem and four Labour MPs.

But are Eric and Grant listening?

Vacuum packed

Thu, 17 Mar 2011

Another day, another rap over the knuckles for Messrs Pickles and Shapps - except that this time it comes from a Commons committee with a Conservative majority and it’s more like a club over the head.

MPs on the communities and local government select committee say their abolition of regional spatial strategies has left a vacuum at the heart of the English planning system and risks creating a ‘damaging intertia’ that will hinder development.

And they call on the government to include effective strategic planning arrangements in the Localism Bill and ‘ensure a biting obligation on local authorities to have regard to the evidence and to meet identified needs’.

They want action to ensure that robust and consistent evidence goes into local development plans. ‘It is not acceptable for ministers to abdicate their responsiblities in this regard by leaving all the responsiblity with under-resources and under-skilled local planning authorities.’

That’s pretty strong language in any context but particularly so within the polite conventions of select committee reports. ‘The DCLG has not explained how infrastructure, economic development, housing and environment protection be retained at a strategic level nor has it explained how the current planning system will move to the new system, after the Localism Bill comes into effect, without any transitional arrangements in place,’ they conclude

On housing, Shapps told them in an oral evidence session: ‘Building more homes is the gold standard upon which we shall be judged. The idea is to get a system which delivers housing in this country.’

And he explained the government’s localist approach would make local authorities more responsive to local needs and provide more houses in future.

But the MPs warn that: ‘The tension between local choice and national need cannot merely be wished away. There is a balance to be struck between housing targets set at a national or regional level, which are seen as being imposed against the wishes of local people, and leaving it to local communtiies to decide, which can lead to house building proposals being effectively blocked.’

Eric Pickles criticised research by Tetlow King for the National Housing Federation that indicated plans for 182,000 homes had been dropped as based on ‘iffy’ evidence. But when the committee invited the consultant to rebut his claims in January, it said the number had grown to more than 200,000.

The MPs welcome the government’s recognition of the need for more homes, and its plan to build 150,000 affordable homes, but ‘question whether either of these aspirations will be achievable under the government’s current proposals for the planning system’.

And that figure of 200,000 homes lost from the planning system leads them to ‘conclude that the government may well be faced with a stark choice in deciding whether to compromise on its intention to build more homes than the previous government, or on its desire to promote localism in decisions of this kind’.

Ouch. And there’s more. ‘No evidence was produced to support the Government’s view that local authorities will achieve comparable rates of house building to those in the past, let alone an increase. If the evidence of success fails to materialise very quickly, the Government is going to have to review its selection of levers of influence.’

The MPs also uncovered widespread scepticism about whether the new homes will work and no evidence that it will increase housing supply by the 8-13% claimed by ministers.

‘Much of the evidence suggests that the New Homes Bonus may well be ineffective in increasing house building at all, let alone the building of the right homes in the right places,’ they say.

They warn that the bonus ‘is particularly likely to fail in the affordable housing sector’.

And they say it needs to be linked explicitly to the delivery of homes provided for in local plans following robust assessments of housing need.

It’s an extraordinary call for a u-turn on key aspects of housing policy from a committee with five Conservative, one Lib Dem and four Labour MPs.

But are Eric and Grant listening?

Lending a hand

Wed, 16 Mar 2011

The week before the Budget is traditionally the time for a clamour of calls for a boost for the housing market. This year, for understandable reasons, it’s more of a background chatter.

The Council of Mortgage Lenders (CML) had a go yesterday with a call for reform of stamp duty to switch away from the slab structure that imposes huge extra tax once homes sell above the thresholds of £250,000, £500,000 and (for the first time from April) £1m. 

Within the next 12 months the government will also have to make a decision on whether to keep the stamp duty holiday for first-time buyers on homes up to £250,000 that expires in April 2012.

The holiday was introduced by Labour last year to accusations that it was stealing the Conservatives’ flagship housing policy. However, the coalition programme for government stopped short of going further and promised instead to review its effectiveness.

If that sounds low priority in an age of austerity, there’s a clear incentive for reform for the Treasury in that stamp duty receipts from residential property collapsed from £6.7bn in 2007/08 to just £3bn in each of the last two years.

But none of that if mortgage lending continues to fall as it did in January. The CML was quick to argue that one-off factors were to blame but loans for house purchase down 12% on a year ago and 29% on December.

However, it concedes that  a combination of pressure on household finances from tax increases and inflation, anaemic earnings growth and job losses means ‘2011 is set to be a challenging year for households and the housing market’. 

Help could be under the way though from an unlikely source: local authorities. Under the local lend a hand initiative, councils will put up a deposit for first-time buyers and Lloyds TSB will offer them 95% mortgages. 

It sounds a good idea (with nostalgic echoes of the local authority mortgages of the 1970s) for anyone who benefits. But 95% mortgages are also an uncomfortable reminder of the journey to 100% loans in the noughties. 

Lurking in the background is the Mortgage Market Review by the Financial Services Authority (FSA). Lenders are still lobbying furiously against proposals like banning self-certified mortgages but the FSA’s Retail Conduct Risk Outlook last month warned of risks including a boom in unregulated buy-to-let and second charge lending.

Many people would argue that the best thing that could happen for first-time buyers is a fall in house prices. However, despite Grant Shapps’s calls for stability in the market, that would lead to inevitable calls for the government to act.

One survey published by the CML found that 84% thought it was too difficult even for people with good jobs to become homeowners, unless they had help from their parents.

Another found that 77% of MPs (and 92% of Conservatives) believe support for homeownership is an important policy goal. 

George Osborne may be more interested in enterprise and growth next week but sooner of later the chatter for a Conservative chancellor to act will turn into a clamour once again. 

Lending a hand

Wed, 16 Mar 2011

The week before the Budget is traditionally the time for a clamour of calls for a boost for the housing market. This year, for understandable reasons, it’s more of a background chatter.

The Council of Mortgage Lenders (CML) had a go yesterday with a call for reform of stamp duty to switch away from the slab structure that imposes huge extra tax once homes sell above the thresholds of £250,000, £500,000 and (for the first time from April) £1m. 

Within the next 12 months the government will also have to make a decision on whether to keep the stamp duty holiday for first-time buyers on homes up to £250,000 that expires in April 2012.

The holiday was introduced by Labour last year to accusations that it was stealing the Conservatives’ flagship housing policy. However, the coalition programme for government stopped short of going further and promised instead to review its effectiveness.

If that sounds low priority in an age of austerity, there’s a clear incentive for reform for the Treasury in that stamp duty receipts from residential property collapsed from £6.7bn in 2007/08 to just £3bn in each of the last two years.

But none of that if mortgage lending continues to fall as it did in January. The CML was quick to argue that one-off factors were to blame but loans for house purchase down 12% on a year ago and 29% on December.

However, it concedes that  a combination of pressure on household finances from tax increases and inflation, anaemic earnings growth and job losses means ‘2011 is set to be a challenging year for households and the housing market’. 

Help could be under the way though from an unlikely source: local authorities. Under the local lend a hand initiative, councils will put up a deposit for first-time buyers and Lloyds TSB will offer them 95% mortgages. 

It sounds a good idea (with nostalgic echoes of the local authority mortgages of the 1970s) for anyone who benefits. But 95% mortgages are also an uncomfortable reminder of the journey to 100% loans in the noughties. 

Lurking in the background is the Mortgage Market Review by the Financial Services Authority (FSA). Lenders are still lobbying furiously against proposals like banning self-certified mortgages but the FSA’s Retail Conduct Risk Outlook last month warned of risks including a boom in unregulated buy-to-let and second charge lending.

Many people would argue that the best thing that could happen for first-time buyers is a fall in house prices. However, despite Grant Shapps’s calls for stability in the market, that would lead to inevitable calls for the government to act.

One survey published by the CML found that 84% thought it was too difficult even for people with good jobs to become homeowners, unless they had help from their parents.

Another found that 77% of MPs (and 92% of Conservatives) believe support for homeownership is an important policy goal. 

George Osborne may be more interested in enterprise and growth next week but sooner of later the chatter for a Conservative chancellor to act will turn into a clamour once again. 

Charity begins at home

Tue, 15 Mar 2011

If Eton can keep its charitable status should housing associations really have any problem?

Rents at up to 80% of market levels may seem like the opposite of affordable but David Cameron’s alma mater charges fees of £30,000 a year. So surely the sector’s highly-paid lawyers should be able to resolve  the uncertainty about charitable status raised by the Charity Commission’s reponse to the TSA consultation.

The gist of the commission’s response seems to be that it all depends on the circumstances of individual associations and their aims. 

So perhaps traditional aims such as ‘providing housing and any associated amenities for persons in necessitous circumstances upon terms appropriate to their means’ might raise questions. However, vaguer aims such as ‘providing good quality affordable homes’ might cover all the bases. 

But the bigger problem for me is the way that financial and legal considerations could combine to raise real issues about the way that public money is being spent.

The widespread assumption about affordable rent has been that homes would go to the same group of tenants who currently go into social rent. 

However, as Inside Housing also reports this week, the CIH is warning that associations could decide to let homes only to richer tenants who can afford the rents without housing benefit.

That may be an understandable reaction to concerns that benefit cuts and the cap on total welfare payments could undermine their businesses and their ability to cross-subsidise other work. But where exactly does it leave poorer tenants if new homes and a proportion of re-lets only go to people who can afford near market rents?

A similar thing has happened with funding for low-cost home ownership, with help now available from London mayor Boris Johnson for individuals earning up to £60,000 and couples earning up to £74,000.

So, whether by accident or design, public funding for housing is not only drastically reduced but also targeted further up the income scale. 

The poorer families who might have expected help are forced into the private rented sector, further increasing the housing benefit bill and fuelling demands for more cuts in the name of fairness to hard-working families. 

And all this is justified on the argument that ‘homes for life’ are a waste of money. 

It all sounds very 19th century to me and a reminder of why ‘charity’ got a bad name in the 20th. 

Charity begins at home

Tue, 15 Mar 2011

If Eton can keep its charitable status should housing associations really have any problem?

Rents at up to 80% of market levels may seem like the opposite of affordable but David Cameron’s alma mater charges fees of £30,000 a year. So surely the sector’s highly-paid lawyers should be able to resolve  the uncertainty about charitable status raised by the Charity Commission’s reponse to the TSA consultation.

The gist of the commission’s response seems to be that it all depends on the circumstances of individual associations and their aims. 

So perhaps traditional aims such as ‘providing housing and any associated amenities for persons in necessitous circumstances upon terms appropriate to their means’ might raise questions. However, vaguer aims such as ‘providing good quality affordable homes’ might cover all the bases. 

But the bigger problem for me is the way that financial and legal considerations could combine to raise real issues about the way that public money is being spent.

The widespread assumption about affordable rent has been that homes would go to the same group of tenants who currently go into social rent. 

However, as Inside Housing also reports this week, the CIH is warning that associations could decide to let homes only to richer tenants who can afford the rents without housing benefit.

That may be an understandable reaction to concerns that benefit cuts and the cap on total welfare payments could undermine their businesses and their ability to cross-subsidise other work. But where exactly does it leave poorer tenants if new homes and a proportion of re-lets only go to people who can afford near market rents?

A similar thing has happened with funding for low-cost home ownership, with help now available from London mayor Boris Johnson for individuals earning up to £60,000 and couples earning up to £74,000.

So, whether by accident or design, public funding for housing is not only drastically reduced but also targeted further up the income scale. 

The poorer families who might have expected help are forced into the private rented sector, further increasing the housing benefit bill and fuelling demands for more cuts in the name of fairness to hard-working families. 

And all this is justified on the argument that ‘homes for life’ are a waste of money. 

It all sounds very 19th century to me and a reminder of why ‘charity’ got a bad name in the 20th. 

Taking the strain

Thu, 10 Mar 2011

Grant Shapps is not the only one who can’t square the circle between housing and housing benefit.

The minister told an online Q&A hosted by The Guardian yesterday that the widespread assumption that rents at up to 80% of market levels must inevitably increase the benefit bill ‘misses out an important factor from the equation’.

‘Many of the people likely to move into Affordable Rent homes are living in the Private Rented Sector and may be receiving HB for all of their current higher rent,’ he said. ‘Therefore in HB terms there isn’t much impact through our Affordable Homes programme.’

It was an unconvincing attempt to change the premise of the question - but Shapps is far from the only politician to do that.

Over in the House of Commons, MPs were debating the second reading of the Welfare Reform Bill and the contradictions were mounting up rapidly.

‘What we are doing is reasonable,’ Iain Duncan Smith was claiming. ‘What we are trying to do is not to damage people, but to get them to locations where they can afford both to live and to work.’

Yet today his department’s response to the work and pensions committee’s report on housing benefit continued to play down the number of people who will have to move as a result of the bedroom caps. 

‘The Government acknowledges that the caps will result in some tenants moving from the more expensive areas,’ it said. ‘However there is already a substantial annual turnover rate of about 40% in the private rented sector, and some of those who will need to move would have done so in any case. In all but three of the most central areas of London at least 30% of properties will still be affordable within Local Housing Allowance rates.’

Perhaps - but not for long after the Welfare Reform Bill imposes a cap on the total benefits anyone can receive set at £500 a week or the national average household wage.

At the same time, pointed out Labour’s Liam Byrne, policies like affordable rent and increased homelessness as a result of the caps would increase the housing benefit bill. ‘One half of the Conservative party does not know what the other half is doing, and taxpayers are picking up the tab,’ he said.

Except that, as several Tories were not slow to mention, Labour’s 2010 manifesto had promised pretty much the same thing: ‘Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.’

Then there were the Lib Dems, who opposed the smaller cuts made by the Labour government but are now meant to support the bigger ones being imposed by their own. 

Backbenchers Jenny Willott and John Leech both mentioned the way the caps interact. The £400 a week housing benefit cap and the benefit cap at £500 would leave large families with just £100 a week to live on. ‘We will need to know about the impact on children, in particular, before we can support it,’ said Willott. 

And there was bad news too for any social landlords clinging to the hope that direct payment of housing benefit can somehow survive under the universal credit. 

Pressed by Alison Seabeck about concerns that ‘arrears will rise and lenders will become nervous’, Duncan Smith waffled. ‘On this matter, there is no absolute, but there is at least a debate on both sides, and that is simply where we are at the moment—trying to discuss the issue with those who feel that they would be most affected.’

What I suspect is the real thinking on the Tory benches was put by Stewart Jackson: ‘Was it not a moral catastrophe and economic madness when, under the previous Labour Government, registered social landlords had no incentive to tackle welfare dependency, because their main funding stream was housing benefit? Under this Bill, registered providers will have an opportunity to tackle welfare dependency among their tenants.’ 

And so the circle that began with the claim in the 1980s that ‘housing benefit will take the strain’ continues to turn. 

Taking the strain

Thu, 10 Mar 2011

Grant Shapps is not the only one who can’t square the circle between housing and housing benefit.

The minister told an online Q&A hosted by The Guardian yesterday that the widespread assumption that rents at up to 80% of market levels must inevitably increase the benefit bill ‘misses out an important factor from the equation’.

‘Many of the people likely to move into Affordable Rent homes are living in the Private Rented Sector and may be receiving HB for all of their current higher rent,’ he said. ‘Therefore in HB terms there isn’t much impact through our Affordable Homes programme.’

It was an unconvincing attempt to change the premise of the question - but Shapps is far from the only politician to do that.

Over in the House of Commons, MPs were debating the second reading of the Welfare Reform Bill and the contradictions were mounting up rapidly.

‘What we are doing is reasonable,’ Iain Duncan Smith was claiming. ‘What we are trying to do is not to damage people, but to get them to locations where they can afford both to live and to work.’

Yet today his department’s response to the work and pensions committee’s report on housing benefit continued to play down the number of people who will have to move as a result of the bedroom caps. 

‘The Government acknowledges that the caps will result in some tenants moving from the more expensive areas,’ it said. ‘However there is already a substantial annual turnover rate of about 40% in the private rented sector, and some of those who will need to move would have done so in any case. In all but three of the most central areas of London at least 30% of properties will still be affordable within Local Housing Allowance rates.’

Perhaps - but not for long after the Welfare Reform Bill imposes a cap on the total benefits anyone can receive set at £500 a week or the national average household wage.

At the same time, pointed out Labour’s Liam Byrne, policies like affordable rent and increased homelessness as a result of the caps would increase the housing benefit bill. ‘One half of the Conservative party does not know what the other half is doing, and taxpayers are picking up the tab,’ he said.

Except that, as several Tories were not slow to mention, Labour’s 2010 manifesto had promised pretty much the same thing: ‘Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.’

Then there were the Lib Dems, who opposed the smaller cuts made by the Labour government but are now meant to support the bigger ones being imposed by their own. 

Backbenchers Jenny Willott and John Leech both mentioned the way the caps interact. The £400 a week housing benefit cap and the benefit cap at £500 would leave large families with just £100 a week to live on. ‘We will need to know about the impact on children, in particular, before we can support it,’ said Willott. 

And there was bad news too for any social landlords clinging to the hope that direct payment of housing benefit can somehow survive under the universal credit. 

Pressed by Alison Seabeck about concerns that ‘arrears will rise and lenders will become nervous’, Duncan Smith waffled. ‘On this matter, there is no absolute, but there is at least a debate on both sides, and that is simply where we are at the moment—trying to discuss the issue with those who feel that they would be most affected.’

What I suspect is the real thinking on the Tory benches was put by Stewart Jackson: ‘Was it not a moral catastrophe and economic madness when, under the previous Labour Government, registered social landlords had no incentive to tackle welfare dependency, because their main funding stream was housing benefit? Under this Bill, registered providers will have an opportunity to tackle welfare dependency among their tenants.’ 

And so the circle that began with the claim in the 1980s that ‘housing benefit will take the strain’ continues to turn. 

Can of worms

Wed, 9 Mar 2011

The government seems to have got itself into a right old mess over security of tenure for existing social tenants.

Before the election the Conservatives pledged to preserve security for current and future tenants. After it the coalition said the guarantee only applied to existing tenants. Now it seems it may only apply if they stay in their existing homes. 

I’d already seen Inside Housing’s story of the apparent u-turn in yesterday’s session of the Localism Bill committee but now the full detail is available in Hansard.

The problems began [see col 854 of the morning session] when shadow housing minister Alison Seabeck asked about a clause in the Bill that lets tenants with secure tenancy rights keep them if they mutually exchange with someone who does not have security. 

How, she asked, did that stack up with the government saying in its response to the housing reform consultation that it will ‘protect the security and rights of those who were social housing tenants at 31 March 2012 by granting them a tenancy with no less security where they choose to move to another social rent home (this requirement does not apply where a tenant chooses to move to an affordable rent home)’? 

Housing minister Andrew Stunell said this was meant to ‘set a floor below which the conditions offered to tenants may not fall’.

He went on: ‘It means that if tenants move to another social rent home, they are absolutely protected; if they choose to move to one of the new affordable rent homes, there is not a floor that requires that to be the case. A landlord could easily determine to offer that continued protection with a move to an affordable rent, but the phrase in brackets indicates that that will not form part of the floor minimum offer available to tenants.’

Pressed by Labour’s Nick Raynsford that this made the pledge by Grant Shapps about the rights of existing tenants ‘not fully operative’, Stunell seemed flustered.

‘We are talking about the preservation of those rights in socially rented accommodation; that is the pledge made by both the Minister for Housing and Local Government and the Secretary of State,’ he said.  ‘I am taking stock of what the right hon. Member for Greenwich [Raynsford] and Woolwich and the hon. Member for Plymouth, Moor View [Seabeck], have said, and I will take stock of the precise nature of what we have announced. I certainly do not want to contradict anything that the Secretary of State has said on the matter.

‘In everything that we have introduced, we have been clear that existing social tenants are protected while they continue to have social tenancies, either in their current tenancy or if they transfer or move to another tenancy. That applies to the arrangements for flexible tenancies as well.’

When Raynsford pressed him again to clarify the position, Stunell said: ‘I do not think we are talking about two different situations. The guarantee always applies if existing secure tenants or existing assured tenants are required to move by the landlord. But if a tenant chooses to move to an affordable rent property, it is reasonable that discretion should be available to the landlord as to whether that remains in place in that particular case. A tenant’s decision to choose to do that might be linked to what offer he or she thought the landlord was making about longer-term security. In a situation in which there is a requirement to move, the guarantee continues without exception. In a situation where a tenant chooses to move to affordable rent, it could be maintained by the landlord, but it is not part of what I have described as the floor requirement.’

Stunell was back for more in the committee’s afternoon session despite the fact that the debate had already moved on to a different issue. 

He said: ‘In light of this morning’s debate, I will reflect further on the case for extending the guarantee of continued security where existing tenants choose to move to an affordable-rent tenancy. That is, rightly, part of the debate about what should be included in our direction to the regulator on the content of a tenancy standard. We want to ensure that disincentives for existing tenants to move are minimised. Equally, we must ensure that we do not prejudice the delivery of new affordable homes by limiting the flexibility of providers to generate new supply.’

Raynsford pressed him again to clarify: ‘Is he still saying, as he was this morning, that if tenants choose to move into an affordable-rent tenancy, they will not be guaranteed to keep their security? Or is he saying that the matter is being reconsidered and that the Government will try to maintain security of tenure to all existing tenants of secure tenancies, as has been promised?’

Stunell replied: ‘I will repeat what I said: I will reflect further on the case for extending the guarantee of continued security where existing tenants choose to move to an affordable-rent tenancy. I am not in a position to go further than that this afternoon.’

None of which seems to sit very comfortably with the pledge by Shapps at the end of last month that ‘there is no chance of, or way in which, a social tenancy can be broken or changed for anybody already in council or housing association homes’.

His junior’s comments open up a whole can of worms - but perhaps that’s not surprising given the contradictions implicit in the coalition’s reforms.

First, it’s always seemed strange that the reforms are justified in the name of flexibility for landlords and fairness to people on the waiting list and in overcrowded homes while at the same time they preserve tenancy terms for existing tenants that are seen as inflexible and unfair. Something like what happened yesterday has always seemed likely. 

Second, the whole programme for ‘affordable’ homes’ does not stack up financially unless the homes go to tenants on flexible tenancies paying higher rents. Since all new homes and a proportion of re-lets will be ‘affordable’, that leaves an ever-shrinking stock of homes available for any secure tenant who want to move on the same terms.

Third, the reforms are designed to address the situation whereby 400,000 tenants have more than one spare bedroom and 200,000 are in overcrowded homes. They’re backed by cuts in housing benefit that will leave under-occupying claimants with a choice between moving (and possibly accepting less security) or staying put and accepting a shortfall on their rent. 

Yet the government does know how many socially rented homes of each bedroom size will be needed to meet demand from those who have to move. Stunell said in a written answer to Karen Buck last week that ‘the information requested is not available’.

Ending security of tenure for new tenants but still giving them the right to buy. Making work pay while increasing rents. The list goes on. 

For the moment security of tenure only seems guaranteed for existing tenants if they stay in their existing home or they are required to move by their landlord. 

Can of worms

Wed, 9 Mar 2011

The government seems to have got itself into a right old mess over security of tenure for existing social tenants.

Before the election the Conservatives pledged to preserve security for current and future tenants. After it the coalition said the guarantee only applied to existing tenants. Now it seems it may only apply if they stay in their existing homes. 

I’d already seen Inside Housing’s story of the apparent u-turn in yesterday’s session of the Localism Bill committee but now the full detail is available in Hansard.

The problems began [see col 854 of the morning session] when shadow housing minister Alison Seabeck asked about a clause in the Bill that lets tenants with secure tenancy rights keep them if they mutually exchange with someone who does not have security. 

How, she asked, did that stack up with the government saying in its response to the housing reform consultation that it will ‘protect the security and rights of those who were social housing tenants at 31 March 2012 by granting them a tenancy with no less security where they choose to move to another social rent home (this requirement does not apply where a tenant chooses to move to an affordable rent home)’? 

Housing minister Andrew Stunell said this was meant to ‘set a floor below which the conditions offered to tenants may not fall’.

He went on: ‘It means that if tenants move to another social rent home, they are absolutely protected; if they choose to move to one of the new affordable rent homes, there is not a floor that requires that to be the case. A landlord could easily determine to offer that continued protection with a move to an affordable rent, but the phrase in brackets indicates that that will not form part of the floor minimum offer available to tenants.’

Pressed by Labour’s Nick Raynsford that this made the pledge by Grant Shapps about the rights of existing tenants ‘not fully operative’, Stunell seemed flustered.

‘We are talking about the preservation of those rights in socially rented accommodation; that is the pledge made by both the Minister for Housing and Local Government and the Secretary of State,’ he said.  ‘I am taking stock of what the right hon. Member for Greenwich [Raynsford] and Woolwich and the hon. Member for Plymouth, Moor View [Seabeck], have said, and I will take stock of the precise nature of what we have announced. I certainly do not want to contradict anything that the Secretary of State has said on the matter.

‘In everything that we have introduced, we have been clear that existing social tenants are protected while they continue to have social tenancies, either in their current tenancy or if they transfer or move to another tenancy. That applies to the arrangements for flexible tenancies as well.’

When Raynsford pressed him again to clarify the position, Stunell said: ‘I do not think we are talking about two different situations. The guarantee always applies if existing secure tenants or existing assured tenants are required to move by the landlord. But if a tenant chooses to move to an affordable rent property, it is reasonable that discretion should be available to the landlord as to whether that remains in place in that particular case. A tenant’s decision to choose to do that might be linked to what offer he or she thought the landlord was making about longer-term security. In a situation in which there is a requirement to move, the guarantee continues without exception. In a situation where a tenant chooses to move to affordable rent, it could be maintained by the landlord, but it is not part of what I have described as the floor requirement.’

Stunell was back for more in the committee’s afternoon session despite the fact that the debate had already moved on to a different issue. 

He said: ‘In light of this morning’s debate, I will reflect further on the case for extending the guarantee of continued security where existing tenants choose to move to an affordable-rent tenancy. That is, rightly, part of the debate about what should be included in our direction to the regulator on the content of a tenancy standard. We want to ensure that disincentives for existing tenants to move are minimised. Equally, we must ensure that we do not prejudice the delivery of new affordable homes by limiting the flexibility of providers to generate new supply.’

Raynsford pressed him again to clarify: ‘Is he still saying, as he was this morning, that if tenants choose to move into an affordable-rent tenancy, they will not be guaranteed to keep their security? Or is he saying that the matter is being reconsidered and that the Government will try to maintain security of tenure to all existing tenants of secure tenancies, as has been promised?’

Stunell replied: ‘I will repeat what I said: I will reflect further on the case for extending the guarantee of continued security where existing tenants choose to move to an affordable-rent tenancy. I am not in a position to go further than that this afternoon.’

None of which seems to sit very comfortably with the pledge by Shapps at the end of last month that ‘there is no chance of, or way in which, a social tenancy can be broken or changed for anybody already in council or housing association homes’.

His junior’s comments open up a whole can of worms - but perhaps that’s not surprising given the contradictions implicit in the coalition’s reforms.

First, it’s always seemed strange that the reforms are justified in the name of flexibility for landlords and fairness to people on the waiting list and in overcrowded homes while at the same time they preserve tenancy terms for existing tenants that are seen as inflexible and unfair. Something like what happened yesterday has always seemed likely. 

Second, the whole programme for ‘affordable’ homes’ does not stack up financially unless the homes go to tenants on flexible tenancies paying higher rents. Since all new homes and a proportion of re-lets will be ‘affordable’, that leaves an ever-shrinking stock of homes available for any secure tenant who want to move on the same terms.

Third, the reforms are designed to address the situation whereby 400,000 tenants have more than one spare bedroom and 200,000 are in overcrowded homes. They’re backed by cuts in housing benefit that will leave under-occupying claimants with a choice between moving (and possibly accepting less security) or staying put and accepting a shortfall on their rent. 

Yet the government does know how many socially rented homes of each bedroom size will be needed to meet demand from those who have to move. Stunell said in a written answer to Karen Buck last week that ‘the information requested is not available’.

Ending security of tenure for new tenants but still giving them the right to buy. Making work pay while increasing rents. The list goes on. 

For the moment security of tenure only seems guaranteed for existing tenants if they stay in their existing home or they are required to move by their landlord. 

View results 10 per page | 20 per page | 50 per page

Newsletter Sign-up

IH Subscription