Monday, 27 March 2017

Inside edge

All posts from: April 2011

Repent at leisure

Thu, 28 Apr 2011

February: the government claims that two-thirds of social landlords support its tenure reforms. April: almost half of local authority cabinet members for housing oppose fixed-term tenancies. 

So what’s changed between the DCLG’s publication of responses to its social housing reform consultation and today’s Inside Housing survey?

After all, according to the DCLG not only were 66% in favour of the reforms, but a further 20% were undecided, implying that only 14% were opposed. 

It’s true that the consultation responses came from social landlords (230 councils and ALMOs and 141 housing associations) as a whole while the Inside Housing survey only covers 71 local authorities. It’s also true that the DCLG lumped together all of the tenure reforms, including some less controversial ones, in a way that probably exaggerated support. But even so that still implies quite a shift in opinion.

Labour cabinet members were unsurprisingly the most opposed to fixed tenancies but Lib Dem members were almost as strongly against and only half of Conservative members said they would introduce fixed terms.

Noteable refuseniks include Lib Dem-led Sheffield and Portsmouth and Tory-led Peterborough.

Only a small minority of cabinet members said they would not support affordable rent proposals in their area but life could still be awkward for housing associations in Blackburn, North East Lincolnshire, South Derbyshire, Stevenage and Islington. And different councils want to implement it in different ways.

However, 28 out of the 71 councils interviewed had not yet decided what they were going to do about affordable rent and several still had no official policy on fixed tenancies. 

And many councils are likely to change their policy if Labour makes as many gains in next week’s local elections as current forecasts suggest. Lib Dems already seem well aware that much of their success in local politics over the last 30 years was based on convincing tenants that they were listening to their concerns. And how many Tory-controlled authorities that still have their own stock will be left?

All of which will leave the coalition’s policy on fixed-term tenancies in a right mess and create some teething problems for affordable rent too.

But is any of this much of a surprise when the consultation on the package of reforms was such a sham in the first place? To suit the timetable for the Localism Bill, and contrary to the government’s own code of practice, the consultation was truncated into just eight weeks rather than 12, stretched over Christmas and the New Year and published too late to influence the policy outcome.

It will still just about be possible to present a confusing mish-mash of local outcomes as a triumph for localism. But the more the people who will have to implement fixed term tenancies think about the idea the less they seem to like it. And that’s before they consider the implications of a postcode lottery on tenure, different landlords offering different systems and possible future changes of political control. 

As I blogged back in December, if you act in haste you tend to repent at leisure.

Repent at leisure

Thu, 28 Apr 2011

February: the government claims that two-thirds of social landlords support its tenure reforms. April: almost half of local authority cabinet members for housing oppose fixed-term tenancies. 

So what’s changed between the DCLG’s publication of responses to its social housing reform consultation and today’s Inside Housing survey?

After all, according to the DCLG not only were 66% in favour of the reforms, but a further 20% were undecided, implying that only 14% were opposed. 

It’s true that the consultation responses came from social landlords (230 councils and ALMOs and 141 housing associations) as a whole while the Inside Housing survey only covers 71 local authorities. It’s also true that the DCLG lumped together all of the tenure reforms, including some less controversial ones, in a way that probably exaggerated support. But even so that still implies quite a shift in opinion.

Labour cabinet members were unsurprisingly the most opposed to fixed tenancies but Lib Dem members were almost as strongly against and only half of Conservative members said they would introduce fixed terms.

Noteable refuseniks include Lib Dem-led Sheffield and Portsmouth and Tory-led Peterborough.

Only a small minority of cabinet members said they would not support affordable rent proposals in their area but life could still be awkward for housing associations in Blackburn, North East Lincolnshire, South Derbyshire, Stevenage and Islington. And different councils want to implement it in different ways.

However, 28 out of the 71 councils interviewed had not yet decided what they were going to do about affordable rent and several still had no official policy on fixed tenancies. 

And many councils are likely to change their policy if Labour makes as many gains in next week’s local elections as current forecasts suggest. Lib Dems already seem well aware that much of their success in local politics over the last 30 years was based on convincing tenants that they were listening to their concerns. And how many Tory-controlled authorities that still have their own stock will be left?

All of which will leave the coalition’s policy on fixed-term tenancies in a right mess and create some teething problems for affordable rent too.

But is any of this much of a surprise when the consultation on the package of reforms was such a sham in the first place? To suit the timetable for the Localism Bill, and contrary to the government’s own code of practice, the consultation was truncated into just eight weeks rather than 12, stretched over Christmas and the New Year and published too late to influence the policy outcome.

It will still just about be possible to present a confusing mish-mash of local outcomes as a triumph for localism. But the more the people who will have to implement fixed term tenancies think about the idea the less they seem to like it. And that’s before they consider the implications of a postcode lottery on tenure, different landlords offering different systems and possible future changes of political control. 

As I blogged back in December, if you act in haste you tend to repent at leisure.

Lost keys

Wed, 27 Apr 2011

House prices are still so expensive for key workers that the only places they can afford to buy in the whole of London and the South East are Clacton and Portsmouth.

The good news is that it’s a big improvement on the peak of the housing market boom four years ago. A survey out today from the Halifax headlines the fact that rising wages and falling house prices mean 38% of towns are now affordable for key workers compared to just 3% in 2007.

‘Affordable’ in this case is defined as house prices being less than four times their average earnings.

The first piece of bad news is that we are talking about nurses, paramedics, teachers and police officers and fire fighters rather than equally essential but lower-paid key workers like bus drivers and hospital cleaners. 

Second, the improvement is only on 2007. Ten years ago, there were 26 affordable towns in the South East, now there are two. In 2001, there were even two affordable boroughs in London (Barking & Dagenham and Newham), now there are none.  

Third, huge variations in house price falls and increases mean the most affordable towns are all in the old industrial areas of the North West, North East, South Wales and central Scotland - places like Nelson, Lochgelly, Bootle and Ebbw Vale. Wrexham has seen the biggest improvement.

No prizes for guessing that the least affordable places for all five groups of key workers are Kensington & Chelsea, Westminster and Camden. Next come Winchester, Rickmansworth and Richmond.

Exactly the sort of ‘expensive’ areas that 60% of population believes should stop offering social housing, according to a Policy Exchange opinion poll yesterday. 

The Halifax survey reveals the obvious point that house prices in expensive areas tend to rise faster than earnings in general and key worker earnings in particular. Where house prices lead, private sector rents (and housing benefit caps) will follow.

There are of course still affordable pockets of the South East that are too small to be picked up in surveys like this but how many will there be in another ten years? Where will the equivalents of Clacton and Portsmouth be for nurses and teachers and the rest in 2021?

And does anyone believe that the market alone should determine where people live? 

Lost keys

Wed, 27 Apr 2011

House prices are still so expensive for key workers that the only places they can afford to buy in the whole of London and the South East are Clacton and Portsmouth.

The good news is that it’s a big improvement on the peak of the housing market boom four years ago. A survey out today from the Halifax headlines the fact that rising wages and falling house prices mean 38% of towns are now affordable for key workers compared to just 3% in 2007.

‘Affordable’ in this case is defined as house prices being less than four times their average earnings.

The first piece of bad news is that we are talking about nurses, paramedics, teachers and police officers and fire fighters rather than equally essential but lower-paid key workers like bus drivers and hospital cleaners. 

Second, the improvement is only on 2007. Ten years ago, there were 26 affordable towns in the South East, now there are two. In 2001, there were even two affordable boroughs in London (Barking & Dagenham and Newham), now there are none.  

Third, huge variations in house price falls and increases mean the most affordable towns are all in the old industrial areas of the North West, North East, South Wales and central Scotland - places like Nelson, Lochgelly, Bootle and Ebbw Vale. Wrexham has seen the biggest improvement.

No prizes for guessing that the least affordable places for all five groups of key workers are Kensington & Chelsea, Westminster and Camden. Next come Winchester, Rickmansworth and Richmond.

Exactly the sort of ‘expensive’ areas that 60% of population believes should stop offering social housing, according to a Policy Exchange opinion poll yesterday. 

The Halifax survey reveals the obvious point that house prices in expensive areas tend to rise faster than earnings in general and key worker earnings in particular. Where house prices lead, private sector rents (and housing benefit caps) will follow.

There are of course still affordable pockets of the South East that are too small to be picked up in surveys like this but how many will there be in another ten years? Where will the equivalents of Clacton and Portsmouth be for nurses and teachers and the rest in 2021?

And does anyone believe that the market alone should determine where people live? 

Fair's fair

Tue, 26 Apr 2011

An opinion poll about fairness, poverty and welfare reform has some alarming implications for anyone with an interest in social housing. 

The poll by the influential free-market think-tank Policy Exchange has already made headlines on the basis of its support for workfare and benefit sanctions but two more questions have a lot to say about what’s on its agenda for housing. 

It asked respondents to agree or disagree with two propositions:

  • People should not be offered council houses that are worth more than the average house in their local authority - 73% agree, 15% disagree and 12% don’t know
  • People should not be offered council housing in expensive areas - 60% agree, 28% disagree and 13% don’t know.

Those seem like pretty convincing majorities and, whether you break down the answers by region, voting intention, age, housing tenure, class, most people agreed with both statements.

Support for not offering council housing in expensive areas was lowest among Labour voters (47% agreed, 40% disagreed), in Scotland (46% to 38%) and among social housing tenants (43% to 39%) - but it was still support.

This is of course just a poll, not a manifesto, but it’s entirely in keeping with the way that the coalition has justified cuts in the local housing allowance and caps on total benefit entitlement in the name of fairness to the average working family.

And other results in the poll, on benefit sanctions and the distinction between the deserving and undeserving poor, are not just in keeping with David Cameron’s comments about incapacity benefit before Easter but also the abandoned plans to cut housing benefit by 10% for anyone unemployed for more than a year. 

But I wonder what the result would have been if the pollsters had asked housing professionals for their opinion. 

My guess is that there would be some support for the first proposition on homes worth more than the average. However, most people would also point out the obvious practical problems with using a narrow classification like council houses as a proxy for all of social housing, shared equity and shared ownership and with using what happens to local house prices as a measure of ‘fairness’ in the social sector.

But what about the second? Could housing professionals really support the idea of not offering social housing in expensive areas? Of completing the social cleansing begun by cuts in housing benefit in the private rented sector? 

I guess and hope not. But the very fact that I am asking myself the question is an indication of just how far the idea of ‘fairness’ has been appropriated by people promoting market-based solutions.

Policy Exchange is the most influential of all the right-wing think tanks, with a great track record of promoting ideas that end up becoming Conservative party policy. Its most recent success was a proposal on turning empty homes but radical ideas such as the ‘equitisation’ of housing associations are also on its agenda. 

Those of us who disagree have to do a much better job of defining what’s fair and what’s not fair about housing policy and of communicating it to the politicians and the voters to stand any chance of competing with what’s looking like the final leg on the journey from council housing to social housing to welfare housing. 

One good place to start is the latest blog on the housing benefit cuts by Bristol academic Alex Marsh and his argument that ‘we’re lacking a strong, coherent statement of why the direction the government appears to be taking is folly’. 

Fair's fair

Tue, 26 Apr 2011

An opinion poll about fairness, poverty and welfare reform has some alarming implications for anyone with an interest in social housing. 

The poll by the influential free-market think-tank Policy Exchange has already made headlines on the basis of its support for workfare and benefit sanctions but two more questions have a lot to say about what’s on its agenda for housing. 

It asked respondents to agree or disagree with two propositions:

  • People should not be offered council houses that are worth more than the average house in their local authority - 73% agree, 15% disagree and 12% don’t know
  • People should not be offered council housing in expensive areas - 60% agree, 28% disagree and 13% don’t know.

Those seem like pretty convincing majorities and, whether you break down the answers by region, voting intention, age, housing tenure, class, most people agreed with both statements.

Support for not offering council housing in expensive areas was lowest among Labour voters (47% agreed, 40% disagreed), in Scotland (46% to 38%) and among social housing tenants (43% to 39%) - but it was still support.

This is of course just a poll, not a manifesto, but it’s entirely in keeping with the way that the coalition has justified cuts in the local housing allowance and caps on total benefit entitlement in the name of fairness to the average working family.

And other results in the poll, on benefit sanctions and the distinction between the deserving and undeserving poor, are not just in keeping with David Cameron’s comments about incapacity benefit before Easter but also the abandoned plans to cut housing benefit by 10% for anyone unemployed for more than a year. 

But I wonder what the result would have been if the pollsters had asked housing professionals for their opinion. 

My guess is that there would be some support for the first proposition on homes worth more than the average. However, most people would also point out the obvious practical problems with using a narrow classification like council houses as a proxy for all of social housing, shared equity and shared ownership and with using what happens to local house prices as a measure of ‘fairness’ in the social sector.

But what about the second? Could housing professionals really support the idea of not offering social housing in expensive areas? Of completing the social cleansing begun by cuts in housing benefit in the private rented sector? 

I guess and hope not. But the very fact that I am asking myself the question is an indication of just how far the idea of ‘fairness’ has been appropriated by people promoting market-based solutions.

Policy Exchange is the most influential of all the right-wing think tanks, with a great track record of promoting ideas that end up becoming Conservative party policy. Its most recent success was a proposal on turning empty homes but radical ideas such as the ‘equitisation’ of housing associations are also on its agenda. 

Those of us who disagree have to do a much better job of defining what’s fair and what’s not fair about housing policy and of communicating it to the politicians and the voters to stand any chance of competing with what’s looking like the final leg on the journey from council housing to social housing to welfare housing. 

One good place to start is the latest blog on the housing benefit cuts by Bristol academic Alex Marsh and his argument that ‘we’re lacking a strong, coherent statement of why the direction the government appears to be taking is folly’. 

Unfair shares

Wed, 20 Apr 2011

Which is the nastiest of the housing benefit cuts? The extension of the shared accommodation rate is certainly shaping up to be a contender.

What used to be called the single room rate will be extended from the under-25s to 25-34 year olds under regulations that are expected to be laid by the Department for Work and Pensions (DWP) soon.

The coalition justified the cut on the grounds that it would ‘ensure that housing benefit rules reflect the housing expectations of people of a similar age not on benefits’. 

It was announced in the spending review in October and came on top of all the other housing benefit cuts revealed in the June 2010 Budget. Savings are expected to rise from £130m in 2012/13 to £225m in 2013/14. About 88,000 claimants will be affected, implying that they will lose an average of £47 a week each unless they move from self-contained accommodation into shared houses.

But will they? In a survey of housing professionals in local authorities and the voluntary sector published today by Crisis 87% say they already have problems finding enough shared accommodation for the under-25s and 72% say there is not enough shared accommodation in their area.

And the consequences could simply drive up costs elsewhere. Some 63% of professionals say there is a higher risk of tenancies breaking down in shared properties and 95% expressed concerns including worry that it could lead to increased homelessness, hardship and destitution and higher costs for local authorities.

But the DWP already knows all this. It only needs to look back to research it published in 2005 that showed that 87% of single room rate claimants were facing a shortfall even then and that they were having to find an average of £35 a week out of their other benefits to pay their rent.

With 88,000 more claimants about to compete for the same accommodation, Crisis is warning that the is calling on the government for a rethink and at a minimum exemptions for the most vulnerable groups. 

Unfair shares

Wed, 20 Apr 2011

Which is the nastiest of the housing benefit cuts? The extension of the shared accommodation rate is certainly shaping up to be a contender.

What used to be called the single room rate will be extended from the under-25s to 25-34 year olds under regulations that are expected to be laid by the Department for Work and Pensions (DWP) soon.

The coalition justified the cut on the grounds that it would ‘ensure that housing benefit rules reflect the housing expectations of people of a similar age not on benefits’. 

It was announced in the spending review in October and came on top of all the other housing benefit cuts revealed in the June 2010 Budget. Savings are expected to rise from £130m in 2012/13 to £225m in 2013/14. About 88,000 claimants will be affected, implying that they will lose an average of £47 a week each unless they move from self-contained accommodation into shared houses.

But will they? In a survey of housing professionals in local authorities and the voluntary sector published today by Crisis 87% say they already have problems finding enough shared accommodation for the under-25s and 72% say there is not enough shared accommodation in their area.

And the consequences could simply drive up costs elsewhere. Some 63% of professionals say there is a higher risk of tenancies breaking down in shared properties and 95% expressed concerns including worry that it could lead to increased homelessness, hardship and destitution and higher costs for local authorities.

But the DWP already knows all this. It only needs to look back to research it published in 2005 that showed that 87% of single room rate claimants were facing a shortfall even then and that they were having to find an average of £35 a week out of their other benefits to pay their rent.

With 88,000 more claimants about to compete for the same accommodation, Crisis is warning that the is calling on the government for a rethink and at a minimum exemptions for the most vulnerable groups. 

Penthouse living

Tue, 19 Apr 2011

Recession? Spending cuts? Housing market crash? How about the apartment in London that’s just sold for £136.6m or the one that’s up for rent at £25,000 a week?

It’s true that both of them are penthouses and both of them are in Knightsbridge but even so they hardly indicate a country just coming out of recession and a housing market stuck in the doldrums. Except that this particular market has very little to do with Britain and its economy.

The £136.6m penthouse at One Hyde Park was reportedly bought by a company owned by Ukraine’s richest man, Rinat Akhmetov. In setting a new UK record for the most expensive home, he’s buying two flats, knocking them together and spending another £60m doing them up.

The much-hyped development was completed in January and completion of the sale of the penthouse took claimed total sales to £964m with another £125m in the pipeline. 

Only about 10% of buyers are thought to be British, with demand apparently especially strong from investors from the Middle East, China and India. Many of them operate through offshore companies. 

The owner of the building is Project Grande (Guernsey), a joint venture between Nick and Christian Candy, brothers who made a buy-to-let fortune in Britain, and the prime minister of Qatar. The two flats that will make up Akhmetov’s penthouse were originally bought through an offshore company registered in the British Virgin Islands. 

Latest figures from the Land Registry show that total sales of homes in England and Wales fell by 30% between between December 2009 and December 2010. The one part of the market that bucked the trend was the top end, with sales of homes worth over £2m rising by 35%. 

For the government and taxpayers, there ought to be a silver lining out of that. From this month, homes worth more than £1m will be liable for 5% stamp duty. Even at the previous 4% rate, sales so far at One Hyde Park would have been liable for £38.6m in duty.

Or were they? Although some stamp duty loopholes were closed in the Budget in March they are impossible to close completely and people who can afford £2m homes can also afford the best tax advice. Meanwhile a Lib Dem manifesto for a mansion tax on homes worth over £2m did not make it into the coalition programme for government.  

Throw in the tax privileges enjoyed by non-doms and the big fall in the value of the pound and it’s not hard to see why the London housing market is so attractive to foreign investors. For the super-rich these are affordable homes. 

Or how soaring prices at the top end of the market lead to escalating prices and rents - and caps on housing benefit - in the middle and at the bottom. 

Penthouse living

Tue, 19 Apr 2011

Recession? Spending cuts? Housing market crash? How about the apartment in London that’s just sold for £136.6m or the one that’s up for rent at £25,000 a week?

It’s true that both of them are penthouses and both of them are in Knightsbridge but even so they hardly indicate a country just coming out of recession and a housing market stuck in the doldrums. Except that this particular market has very little to do with Britain and its economy.

The £136.6m penthouse at One Hyde Park was reportedly bought by a company owned by Ukraine’s richest man, Rinat Akhmetov. In setting a new UK record for the most expensive home, he’s buying two flats, knocking them together and spending another £60m doing them up.

The much-hyped development was completed in January and completion of the sale of the penthouse took claimed total sales to £964m with another £125m in the pipeline. 

Only about 10% of buyers are thought to be British, with demand apparently especially strong from investors from the Middle East, China and India. Many of them operate through offshore companies. 

The owner of the building is Project Grande (Guernsey), a joint venture between Nick and Christian Candy, brothers who made a buy-to-let fortune in Britain, and the prime minister of Qatar. The two flats that will make up Akhmetov’s penthouse were originally bought through an offshore company registered in the British Virgin Islands. 

Latest figures from the Land Registry show that total sales of homes in England and Wales fell by 30% between between December 2009 and December 2010. The one part of the market that bucked the trend was the top end, with sales of homes worth over £2m rising by 35%. 

For the government and taxpayers, there ought to be a silver lining out of that. From this month, homes worth more than £1m will be liable for 5% stamp duty. Even at the previous 4% rate, sales so far at One Hyde Park would have been liable for £38.6m in duty.

Or were they? Although some stamp duty loopholes were closed in the Budget in March they are impossible to close completely and people who can afford £2m homes can also afford the best tax advice. Meanwhile a Lib Dem manifesto for a mansion tax on homes worth over £2m did not make it into the coalition programme for government.  

Throw in the tax privileges enjoyed by non-doms and the big fall in the value of the pound and it’s not hard to see why the London housing market is so attractive to foreign investors. For the super-rich these are affordable homes. 

Or how soaring prices at the top end of the market lead to escalating prices and rents - and caps on housing benefit - in the middle and at the bottom. 

Glass half full

Mon, 18 Apr 2011

At first glance it’s hard to see the scope for converting empty offices into 260,000 homes over the next ten years but look a little closer and maybe it’s not out of the question.

The figure comes from the impact assessment of the consultation launched by the DCLG earlier this month and is an estimate of the potential for converting half of the long-term empty property in the B1 (business - offices, R&D premises and light industry), B2 (general industrial) and B8 (storage and distribution). The key idea in the consultation is to remove the need for planning permission when converting to the C3 (dwelling house) use class.

It seems a good idea and one with plenty of scope in many towns and cities. For example, as I discovered in my research for my feature in this week’s Inside Housing, Birmingham alone has almost 4m sq ft of empty office space and only 750,000 sq ft of that is regarded as Grade A space that will be easy to re-let.

However, it’s not quite as simple as reforming use class orders and ordering lots of skips. There are a number of practical issues that local authorities and developers will have to consider that could severely limit that potential. Here are five for starters but it’s not hard to imagine more.

First, there’s demand. Office blocks can only be converted into apartments and the market for them disappeared with the credit crunch and the mortgage crisis. That may not be a problem in parts of London and other upmarket areas where residential values are high and demand for flats is still there - if the banks are willing to lend. 

The second issue is cost. Most office and industrial buildings can be converted to residential but meeting ever more stringent building regulations on factors such as energy efficiency and noise insulation will cost money. That would either drive up the prices that would have to be charged for the apartments, which could also hit demand, or lead to shoddy conversions to cheap designs.  

Third comes the wider impact of lots of conversions, an issue that will concern many local authorities. If change of use without planning permission happens on any scale, the policy seems to leave them with no way to get developers to contribute to the social and transport infrastructure to support the new homes. 

The fourth is VAT. Using empty property seems a much more sustainable way of meeting demand for housing than building new homes but the economics are undermined by the fact that conversion work attracts VAT whereas new build is zero rated

Finally, what happens when the economy recovers? Whether we are just coming out of recession or just about to go into a double dip, the consultation is happening at a low point in the economic cycle when there will invevitably be lots of empty offices and factories. Local authorities will be anxious to retain sites and buildings that could generate future employment and a conversion free-for-all would jeopardise any idea of strategic planning.

All five are good reasons to think that the impact of the plan could be more limited than ministers hope. And yet there are other factors that could come into play and influence things the other way.

For example, we are not just talking about empty office blocks in city centres but commercial and industrial property in general - perhaps the sort of low-density business parks in edge of town locations where housing would never have got planning permission. The consultation paper also proposes relaxing the rule that space above shops can only be converted into one home - though strangely says nothing about converting shops themselves. 

And might there be more demand for apartments in empty offices than people currently think? On the face of it, not much chance: too many buy-to-let investors who got their fingers burned; too many developers who got their timing wrong; and too little lending from the banks.

But the move on change of use was only one of a package of financial reforms proposed in the Budget designed to generate more investment in housing and a package of planning reforms intended to generate growth. 

Stamp duty was reformed so that bulk purchasers of homes pay the same rate as individual purchasers. The rules on real estate investment trusts (REITs) will make them easier and cheaper for property companies to use. As I blogged last month, the industry hailed it as a ‘Budget for property’ and there are definite attractions for institutional investors like pension funds of moving to residential, even if they have done their best to ignore them so far.

In the last two years only 3,900 homes were produced by conversion from B1 to C3 use - just 0.2% of the stock of B1 floor space per year. It’s not hard to see the potential for expansion - especially when many of those same institutions already own the stock of long-term empty offices.

Glass half full

Mon, 18 Apr 2011

At first glance it’s hard to see the scope for converting empty offices into 260,000 homes over the next ten years but look a little closer and maybe it’s not out of the question.

The figure comes from the impact assessment of the consultation launched by the DCLG earlier this month and is an estimate of the potential for converting half of the long-term empty property in the B1 (business - offices, R&D premises and light industry), B2 (general industrial) and B8 (storage and distribution). The key idea in the consultation is to remove the need for planning permission when converting to the C3 (dwelling house) use class.

It seems a good idea and one with plenty of scope in many towns and cities. For example, as I discovered in my research for my feature in this week’s Inside Housing, Birmingham alone has almost 4m sq ft of empty office space and only 750,000 sq ft of that is regarded as Grade A space that will be easy to re-let.

However, it’s not quite as simple as reforming use class orders and ordering lots of skips. There are a number of practical issues that local authorities and developers will have to consider that could severely limit that potential. Here are five for starters but it’s not hard to imagine more.

First, there’s demand. Office blocks can only be converted into apartments and the market for them disappeared with the credit crunch and the mortgage crisis. That may not be a problem in parts of London and other upmarket areas where residential values are high and demand for flats is still there - if the banks are willing to lend. 

The second issue is cost. Most office and industrial buildings can be converted to residential but meeting ever more stringent building regulations on factors such as energy efficiency and noise insulation will cost money. That would either drive up the prices that would have to be charged for the apartments, which could also hit demand, or lead to shoddy conversions to cheap designs.  

Third comes the wider impact of lots of conversions, an issue that will concern many local authorities. If change of use without planning permission happens on any scale, the policy seems to leave them with no way to get developers to contribute to the social and transport infrastructure to support the new homes. 

The fourth is VAT. Using empty property seems a much more sustainable way of meeting demand for housing than building new homes but the economics are undermined by the fact that conversion work attracts VAT whereas new build is zero rated

Finally, what happens when the economy recovers? Whether we are just coming out of recession or just about to go into a double dip, the consultation is happening at a low point in the economic cycle when there will invevitably be lots of empty offices and factories. Local authorities will be anxious to retain sites and buildings that could generate future employment and a conversion free-for-all would jeopardise any idea of strategic planning.

All five are good reasons to think that the impact of the plan could be more limited than ministers hope. And yet there are other factors that could come into play and influence things the other way.

For example, we are not just talking about empty office blocks in city centres but commercial and industrial property in general - perhaps the sort of low-density business parks in edge of town locations where housing would never have got planning permission. The consultation paper also proposes relaxing the rule that space above shops can only be converted into one home - though strangely says nothing about converting shops themselves. 

And might there be more demand for apartments in empty offices than people currently think? On the face of it, not much chance: too many buy-to-let investors who got their fingers burned; too many developers who got their timing wrong; and too little lending from the banks.

But the move on change of use was only one of a package of financial reforms proposed in the Budget designed to generate more investment in housing and a package of planning reforms intended to generate growth. 

Stamp duty was reformed so that bulk purchasers of homes pay the same rate as individual purchasers. The rules on real estate investment trusts (REITs) will make them easier and cheaper for property companies to use. As I blogged last month, the industry hailed it as a ‘Budget for property’ and there are definite attractions for institutional investors like pension funds of moving to residential, even if they have done their best to ignore them so far.

In the last two years only 3,900 homes were produced by conversion from B1 to C3 use - just 0.2% of the stock of B1 floor space per year. It’s not hard to see the potential for expansion - especially when many of those same institutions already own the stock of long-term empty offices.

Moving target

Wed, 13 Apr 2011

What are the chances of the coalition delivering 150,000 new affordable homes over the next four years?

This government is not meant to do targets and has been busily scrapping them everywhere from the health service to regional housebuilding numbers, but the 150,000 seems like the exception that proves the rule. Two reports out this week offer contrasting perspectives on its chances of success. 

In its latest forecasts, the Construction Products Association says funding constraints and uncertainty in the private market will make it difficult to achieve. Public housing starts are forecast to fall by 40% by 2013 and only recover modestly after that. 

But that is taking a very narrow definition of affordable at a time when the coalition seems intent on stretching it to breaking point: the hope is that extra borrowing capacity from the new ‘affordable’ rents of up to 80% market rents will compensate for lower public investment.

How realistic is that? In an analysis circulated this week, Richard Donnell of Hometrack has a go.

For starters, commitments made by the previous Labour government already account for about 70,000 homes, so the coalition’s new programme needs to support delivery of another 80,000 to meet the target.

Coming up with an answer on the rest involves making lots of assumptions. Donnell’s base scenario assumes that ‘affordable’ rents are charged on all ‘true re-lets’ (about half of total re-lets once you exclude new lets and moves within the sector). It would use £1bn of grant- or £20,000 per property - and require £3bn of extra borrowing by housing associations.

It also assumes that ‘affordable’ rents are set at 80% of private rent (subject to housing benefit caps and limited to 60% in London), or the cost of buying outright, whichever is lower. 

That would deliver 12,340 homes per year or just short of 50,000 by 2014/15 and would involve conversion of 31,000 existing social rented homes to ‘affordable’.

A higher scenario delivering 56,000 units would require grant of £27,500 per property (using £1.5bn of the £1.7bn of funding available). If associations provide match funding of £10,000 per unit on top of that, output could increase to 69,000.

That’s still shy of the 80,000 needed but add in low-cost home ownership - still a priority for Boris Johnson in London - and you can see how it could be achieved in theory. 

In practice though, is conversion of 100% of true re-lets realistic? Can larger properties be re-let at anything like ‘affordable’ rents? What if some associations choose not to get involved and not convert their re-lets? Will opposition from some local authorities influence others? If only 50% of true re-lets are converted, Donnell estimates that output would fall by more than half. 

What if different assumptions are made about rents? Donnell estimates that pegging them to levels affordable to people on lower quartile incomes would reduce potential delivery by 26%. 

And will associations be prepared to risk £10,000 per unit of their own money at a time when they and their lenders are worried about other risks such as the end of housing benefit direct?

However, against that, the history of previous squeezes on the grant rate shows that developing housing associations tend to follow the money. Although grant was cut by a massive 60% in the spending review it came at a high point for housing: the previous review under Labour had increased investment by 49%. 

And in the final analysis the government controls the means to meet its 150,000 target by adjusting the definition of ‘affordable’. For example, including homes that will be generated from Firstbuy Direct would add 10,000 to the total, even though the scheme will cover homes worth up to £280,000, hardly most people’s idea of affordable. 

If you think you’re in danger of missing a target, it helps if you can simply move it closer. 

Moving target

Wed, 13 Apr 2011

What are the chances of the coalition delivering 150,000 new affordable homes over the next four years?

This government is not meant to do targets and has been busily scrapping them everywhere from the health service to regional housebuilding numbers, but the 150,000 seems like the exception that proves the rule. Two reports out this week offer contrasting perspectives on its chances of success. 

In its latest forecasts, the Construction Products Association says funding constraints and uncertainty in the private market will make it difficult to achieve. Public housing starts are forecast to fall by 40% by 2013 and only recover modestly after that. 

But that is taking a very narrow definition of affordable at a time when the coalition seems intent on stretching it to breaking point: the hope is that extra borrowing capacity from the new ‘affordable’ rents of up to 80% market rents will compensate for lower public investment.

How realistic is that? In an analysis circulated this week, Richard Donnell of Hometrack has a go.

For starters, commitments made by the previous Labour government already account for about 70,000 homes, so the coalition’s new programme needs to support delivery of another 80,000 to meet the target.

Coming up with an answer on the rest involves making lots of assumptions. Donnell’s base scenario assumes that ‘affordable’ rents are charged on all ‘true re-lets’ (about half of total re-lets once you exclude new lets and moves within the sector). It would use £1bn of grant- or £20,000 per property - and require £3bn of extra borrowing by housing associations.

It also assumes that ‘affordable’ rents are set at 80% of private rent (subject to housing benefit caps and limited to 60% in London), or the cost of buying outright, whichever is lower. 

That would deliver 12,340 homes per year or just short of 50,000 by 2014/15 and would involve conversion of 31,000 existing social rented homes to ‘affordable’.

A higher scenario delivering 56,000 units would require grant of £27,500 per property (using £1.5bn of the £1.7bn of funding available). If associations provide match funding of £10,000 per unit on top of that, output could increase to 69,000.

That’s still shy of the 80,000 needed but add in low-cost home ownership - still a priority for Boris Johnson in London - and you can see how it could be achieved in theory. 

In practice though, is conversion of 100% of true re-lets realistic? Can larger properties be re-let at anything like ‘affordable’ rents? What if some associations choose not to get involved and not convert their re-lets? Will opposition from some local authorities influence others? If only 50% of true re-lets are converted, Donnell estimates that output would fall by more than half. 

What if different assumptions are made about rents? Donnell estimates that pegging them to levels affordable to people on lower quartile incomes would reduce potential delivery by 26%. 

And will associations be prepared to risk £10,000 per unit of their own money at a time when they and their lenders are worried about other risks such as the end of housing benefit direct?

However, against that, the history of previous squeezes on the grant rate shows that developing housing associations tend to follow the money. Although grant was cut by a massive 60% in the spending review it came at a high point for housing: the previous review under Labour had increased investment by 49%. 

And in the final analysis the government controls the means to meet its 150,000 target by adjusting the definition of ‘affordable’. For example, including homes that will be generated from Firstbuy Direct would add 10,000 to the total, even though the scheme will cover homes worth up to £280,000, hardly most people’s idea of affordable. 

If you think you’re in danger of missing a target, it helps if you can simply move it closer. 

The Great Estate

Tue, 12 Apr 2011

If you missed last night’s thought-provoking documentary about the history of council housing it’s well worth making time to catch the repeat.

In The Great Estate: The Rise and Fall of the Council House on BBC Four, author Michael Collins offers an interesting but at times controversial view of what we got right and where we went wrong.

He talks to residents and some of the original tenants of some of the country’s most iconic council housing: the Boundary Estate, Becontree, Thamesmead and Robin Hood Gardens in London; St Andrews Gardens in Liverpool; Stevenage new town; and Park Hill in Sheffield.

It’s a reminder of just how much those original tenants loved their new homes, of how ambitious and visionary planners and architects such as the maginificently named Sir Lancelot Keay really were, and of how quickly things started to go wrong. 

And it’s also a reminder of all the issues that still dominate the management of social housing today. Through homes fit for heroes, bakers living next door to bankers and the rest, tenure, allocations, rents, tenant behaviour and the rest were all as much on the agenda as they are now. 

On what’s claimed to be the world’s first council estate - the Boundary Estate in Shoreditch - only 11 out of the 5,000 inhabitants of the slums it replaced could afford the rents.

On what’s seen as the largest in the world, Becontree, every aspect of how the residents lived, from how often they cleaned and gardened to how many inches from the wall lino could be laid, were dictated by the tenants’ handbook.

But the documentary is more than just a nostalgia trip. Collins argues that all the paternalism and rules and regulations, and allocation first to the prosperous working classes and then up the income scale were what made council housing a success - a step up rather than a step back.

By the 1970s a third of us lived in council housing but the rot was setting in even as it was reaching its peak. Collins blames the subsidy policies of the 1950s and 1960s that encouraged shoddy high-rise construction and two products of the late 1970s. 

Controversially, he argues that the homelessness legislation introduced by Labour in 1977 was at least as much to blame as the right to buy that followed the Conservative victory in 1979. That’s because priority for the homeless helped make people see council housing as a step back at the same time as home ownership became the step up. 

Collins sees things very much from the point of view of the white working class - his most famous book is a biography of it called The Likes of Us that enraged many liberals - and he courts controversy too when he makes a staunch defence of sons and daughters allocations policies and rather airily dismisses the complaints of discrimination they produced. 

But he has a message for the coalition too. Two-year fixed term tenancies seem to have been pretty much what the London County Council had in mind when it built the Boundary Estate but Collins argues that council housing succeeded because it became what people wanted - a home for life - and that throwing away that sense of permanency will only condemn it to more failure.

Whether you agree with him or not, Michael Collins has produced a rare piece of television that looks beyond the normal caricatures of council housing and council tenants. It’s repeated on BBC Four several times this week or catch it on iPlayer here.

The Great Estate

Tue, 12 Apr 2011

If you missed last night’s thought-provoking documentary about the history of council housing it’s well worth making time to catch the repeat.

In The Great Estate: The Rise and Fall of the Council House on BBC Four, author Michael Collins offers an interesting but at times controversial view of what we got right and where we went wrong.

He talks to residents and some of the original tenants of some of the country’s most iconic council housing: the Boundary Estate, Becontree, Thamesmead and Robin Hood Gardens in London; St Andrews Gardens in Liverpool; Stevenage new town; and Park Hill in Sheffield.

It’s a reminder of just how much those original tenants loved their new homes, of how ambitious and visionary planners and architects such as the maginificently named Sir Lancelot Keay really were, and of how quickly things started to go wrong. 

And it’s also a reminder of all the issues that still dominate the management of social housing today. Through homes fit for heroes, bakers living next door to bankers and the rest, tenure, allocations, rents, tenant behaviour and the rest were all as much on the agenda as they are now. 

On what’s claimed to be the world’s first council estate - the Boundary Estate in Shoreditch - only 11 out of the 5,000 inhabitants of the slums it replaced could afford the rents.

On what’s seen as the largest in the world, Becontree, every aspect of how the residents lived, from how often they cleaned and gardened to how many inches from the wall lino could be laid, were dictated by the tenants’ handbook.

But the documentary is more than just a nostalgia trip. Collins argues that all the paternalism and rules and regulations, and allocation first to the prosperous working classes and then up the income scale were what made council housing a success - a step up rather than a step back.

By the 1970s a third of us lived in council housing but the rot was setting in even as it was reaching its peak. Collins blames the subsidy policies of the 1950s and 1960s that encouraged shoddy high-rise construction and two products of the late 1970s. 

Controversially, he argues that the homelessness legislation introduced by Labour in 1977 was at least as much to blame as the right to buy that followed the Conservative victory in 1979. That’s because priority for the homeless helped make people see council housing as a step back at the same time as home ownership became the step up. 

Collins sees things very much from the point of view of the white working class - his most famous book is a biography of it called The Likes of Us that enraged many liberals - and he courts controversy too when he makes a staunch defence of sons and daughters allocations policies and rather airily dismisses the complaints of discrimination they produced. 

But he has a message for the coalition too. Two-year fixed term tenancies seem to have been pretty much what the London County Council had in mind when it built the Boundary Estate but Collins argues that council housing succeeded because it became what people wanted - a home for life - and that throwing away that sense of permanency will only condemn it to more failure.

Whether you agree with him or not, Michael Collins has produced a rare piece of television that looks beyond the normal caricatures of council housing and council tenants. It’s repeated on BBC Four several times this week or catch it on iPlayer here.

Source code

Mon, 11 Apr 2011

Government plans to convert offices into homes sound like a great idea but who leaked them to the press four days before they were announced in the Budget?

The idea was first revealed in a report by the Press Association news agency on March 19 that was picked up by newspapers around the country (herehere and here, for example). 

PA quoted a ‘Whitehall source’ as saying that: ‘Many towns and cities have office blocks, warehouse and business parks needlessly lying empty, while house-building has fallen to the lowest in peacetime history because the planning system has tied developers up in knots of red tape. By unshackling developers from a legacy of bureaucratic planning, we can help them turn thousands of vacant commercial properties into enough new homes to jump-start housing supply and help get the economy back on track.’

The report was accurate and duly revealed in the Budget on March 23. More details were published by the Communities and Local Government department on Friday.

Nothing particularly new in all that, you might think. Governments since time immemorial have leaked stories to the media to get favourable coverage and it’s not exactly unheard of for features of the Budget to be trailed before the day itself. 

Except that  it doesn’t quite square with the promise David Cameron gave in opposition to rebuild trust in politics and end ‘thirteen years of government by initiative, press release and media management’.

And that’s encouraged MPs to complain about policies that are announced to the media before parliament.

On Saturday the Treasury committee published a report on the Budget that criticised leaks and media briefings ahead of the day itself. ‘It has been noticeable over many years under successive Governments that measures appear to have been trailed, sometimes accurately, sometimes in a way designed to place them in the most favourable light,’ it says. ‘Whether particular press reports are leaks or briefings or merely press speculation, we have no view, but we deprecate both leaks, and any advance briefing. Such activities are corrosive of good government.’

So was the report on the offices to homes plan a leak, a briefing or press speculation? And just who was that Whitehall source engaging in such activities?

Draw your own conclusions but when I read this quote from Eric Pickles in Friday’s CLG press release I was convinced I’d heard it somewhere before:

‘Many towns and cities have office blocks, warehouse and business parks needlessly lying empty, while housebuilding has fallen to the lowest in peace time history because the planning system has tied developers up in knots of red tape,’ he said. ‘By unshackling developers from a legacy of bureaucratic planning we can help them turn thousands of vacant commercial properties into enough new homes to jump start housing supply and help get the economy back on track.’

Source code

Mon, 11 Apr 2011

Government plans to convert offices into homes sound like a great idea but who leaked them to the press four days before they were announced in the Budget?

The idea was first revealed in a report by the Press Association news agency on March 19 that was picked up by newspapers around the country (herehere and here, for example). 

PA quoted a ‘Whitehall source’ as saying that: ‘Many towns and cities have office blocks, warehouse and business parks needlessly lying empty, while house-building has fallen to the lowest in peacetime history because the planning system has tied developers up in knots of red tape. By unshackling developers from a legacy of bureaucratic planning, we can help them turn thousands of vacant commercial properties into enough new homes to jump-start housing supply and help get the economy back on track.’

The report was accurate and duly revealed in the Budget on March 23. More details were published by the Communities and Local Government department on Friday.

Nothing particularly new in all that, you might think. Governments since time immemorial have leaked stories to the media to get favourable coverage and it’s not exactly unheard of for features of the Budget to be trailed before the day itself. 

Except that  it doesn’t quite square with the promise David Cameron gave in opposition to rebuild trust in politics and end ‘thirteen years of government by initiative, press release and media management’.

And that’s encouraged MPs to complain about policies that are announced to the media before parliament.

On Saturday the Treasury committee published a report on the Budget that criticised leaks and media briefings ahead of the day itself. ‘It has been noticeable over many years under successive Governments that measures appear to have been trailed, sometimes accurately, sometimes in a way designed to place them in the most favourable light,’ it says. ‘Whether particular press reports are leaks or briefings or merely press speculation, we have no view, but we deprecate both leaks, and any advance briefing. Such activities are corrosive of good government.’

So was the report on the offices to homes plan a leak, a briefing or press speculation? And just who was that Whitehall source engaging in such activities?

Draw your own conclusions but when I read this quote from Eric Pickles in Friday’s CLG press release I was convinced I’d heard it somewhere before:

‘Many towns and cities have office blocks, warehouse and business parks needlessly lying empty, while housebuilding has fallen to the lowest in peace time history because the planning system has tied developers up in knots of red tape,’ he said. ‘By unshackling developers from a legacy of bureaucratic planning we can help them turn thousands of vacant commercial properties into enough new homes to jump start housing supply and help get the economy back on track.’

Taking stock

Thu, 7 Apr 2011

Cuts in lending, housebuilding and public spending must make unlocking the potential of existing homes an urgent priority. So why aren’t we doing more?

Taking Stock, a thought-provoking new report out from Shelter, draws the facts together in the context of housing completions at about 100,000 a year and what it estimates as newly arising housing need of 223,000 homes a year:

  • 59,000 empty social sector homes
  • 288,000 long-term empty private sector homes (more than six months)
  • 252,000 second homes
  • 429,000 under-occupying social tenants
  • 7.3m under-occupying private tenants and homeowners.

Empty homes are the obvious place to start. But the report argues the issues are never entirely clear cut: some homes are empty because they’re uninhabitable; others because the owner has died or is in hospital; and there’s a geographical mismatch between concentrations of empty homes and housing need.

Second homes seem an obvious target too, especially in rural and coastal areas where they are heavily concentrated, but powers to do anything about them are limited.

Under-occupation in the social sector is set for government action through caps on housing benefit, ending security of tenure for new tenants and extra funding for local authorities. But social tenants are actually less likely to under-occupy than anyone else.

Some  88% of under-occupiers are homeowners and many of them choose to buy as large a house as they can afford to maximise capital gains and space. And the people most likely to under-occupy - older people with no children at home - are also the least likely to want to move.  

With an ageing population and a shortage of new supply, the report argues these trends are likely to continue but that there are no easy solutions.

On under-occupation, action in the social sector faces the practical problem that there are not enough smaller homes for people to move into, let alone the moral and political problems of forcing people to move. Action in the private sector would be seen as draconian. And even the apparently least controversial step of action on empty homes has faced accusations that the rights of property owners are being infringed.

But Shelter says action that could be taken includes:

  • measures to boost homesharing such as increasing the £4,250 a year tax-free threshold for the rent a room scheme (unchanged since 1997/98)
  • abolishing the council tax discount for owners of second homes (raising £42m)
  • action on avoidance of capital gains tax by owners who ‘flip’ their second home and a wider review of property taxation and its effects
  • action on planning, including encouragement for downsizing and retirement villages
  • action on empty homes including making empty homes work a statutory duty for local authorities
  • encouragement for downsizers rather than penalties for under-occupiers. 

No magic solutions then but maybe a range of measures that taken together might make a difference in a decade that seems certain to face a continuing shortage of new homes.

I wonder though if Shelter is ignoring a few things. Campaigners against empty homes and second homes will argue the report does not go far enough: for an alternative view on the housing crisis see David Ireland’s blog on ‘5 big housing lies’;  for another option on second homes consider the 2011 Lib Dem manifesto plan to give local authorities the power to require planning permission for new ones. 

Then consider the amount of empty commercial and industrial property that could be converted to homes - new rules on planning proposed in the Budget could be just the start. 

Finally, there’s the other side of the equation. Just as high house prices and rents force people into smaller homes, so the housing benefit cuts (under-occupation, bedroom caps, shared room rate) and total benefit cap are going to force claimants to move to cheaper and smaller properties. 

If the boom in conversion of houses into flats that is happening in parts of London I’ve visited recently is anything to go by, developers are already exploiting an opportunity. So will landlords.

Taking stock

Thu, 7 Apr 2011

Cuts in lending, housebuilding and public spending must make unlocking the potential of existing homes an urgent priority. So why aren’t we doing more?

Taking Stock, a thought-provoking new report out from Shelter, draws the facts together in the context of housing completions at about 100,000 a year and what it estimates as newly arising housing need of 223,000 homes a year:

  • 59,000 empty social sector homes
  • 288,000 long-term empty private sector homes (more than six months)
  • 252,000 second homes
  • 429,000 under-occupying social tenants
  • 7.3m under-occupying private tenants and homeowners.

Empty homes are the obvious place to start. But the report argues the issues are never entirely clear cut: some homes are empty because they’re uninhabitable; others because the owner has died or is in hospital; and there’s a geographical mismatch between concentrations of empty homes and housing need.

Second homes seem an obvious target too, especially in rural and coastal areas where they are heavily concentrated, but powers to do anything about them are limited.

Under-occupation in the social sector is set for government action through caps on housing benefit, ending security of tenure for new tenants and extra funding for local authorities. But social tenants are actually less likely to under-occupy than anyone else.

Some  88% of under-occupiers are homeowners and many of them choose to buy as large a house as they can afford to maximise capital gains and space. And the people most likely to under-occupy - older people with no children at home - are also the least likely to want to move.  

With an ageing population and a shortage of new supply, the report argues these trends are likely to continue but that there are no easy solutions.

On under-occupation, action in the social sector faces the practical problem that there are not enough smaller homes for people to move into, let alone the moral and political problems of forcing people to move. Action in the private sector would be seen as draconian. And even the apparently least controversial step of action on empty homes has faced accusations that the rights of property owners are being infringed.

But Shelter says action that could be taken includes:

  • measures to boost homesharing such as increasing the £4,250 a year tax-free threshold for the rent a room scheme (unchanged since 1997/98)
  • abolishing the council tax discount for owners of second homes (raising £42m)
  • action on avoidance of capital gains tax by owners who ‘flip’ their second home and a wider review of property taxation and its effects
  • action on planning, including encouragement for downsizing and retirement villages
  • action on empty homes including making empty homes work a statutory duty for local authorities
  • encouragement for downsizers rather than penalties for under-occupiers. 

No magic solutions then but maybe a range of measures that taken together might make a difference in a decade that seems certain to face a continuing shortage of new homes.

I wonder though if Shelter is ignoring a few things. Campaigners against empty homes and second homes will argue the report does not go far enough: for an alternative view on the housing crisis see David Ireland’s blog on ‘5 big housing lies’;  for another option on second homes consider the 2011 Lib Dem manifesto plan to give local authorities the power to require planning permission for new ones. 

Then consider the amount of empty commercial and industrial property that could be converted to homes - new rules on planning proposed in the Budget could be just the start. 

Finally, there’s the other side of the equation. Just as high house prices and rents force people into smaller homes, so the housing benefit cuts (under-occupation, bedroom caps, shared room rate) and total benefit cap are going to force claimants to move to cheaper and smaller properties. 

If the boom in conversion of houses into flats that is happening in parts of London I’ve visited recently is anything to go by, developers are already exploiting an opportunity. So will landlords.

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