All posts from: May 2011
Could the research on Generation Rent that’s generating so much publicity today by any chance be related to the campaign by the mortgage industry against tighter regulation of lending?
The research by the National Centre for Social Research found that two-thirds of people aged 20 to 45 who do not already own their own home have given up on the idea and believe that renting will become the norm within the next generation.
Among the other findings, 84% say first-time buyers believe banks do not want to lend to them, 92% say it’s hard to get a mortgage and 60% say it’s very hard or virtually impossible - but 77% still want to own their own home. The biggest perceived barrier to home ownership (cited by 67%) is the size of the deposit required to get a mortgage.
Just to really rub it in, a report out today from Rightmove forecasts that rents will rise 10% this year.
The survey was commissioned by the Halifax, Britain’s biggest mortgage lender, and it has pledged to come to the rescue with the launch in July of a new First Time Buyer Pledge - a set of promises to make the mortgage application process easier, to explain its lending criteria and to explain why it has turned an application down.
That’s the same month as the Financial Services Authority (FSA) is due to launch the full consultation on its mortgage market review (MMR), a package of proposals on everything from self-certified mortgages to protection for vulnerable borrowers.
Earlier stages of the review have provoked furious lobbying from the banks and the row was opened up again last week when a Shelter opinion poll finding that three-quarters of first-time buyers back tougher regulation prompted the Council of Mortgage Lenders to argue that there are as many risks from too much regulation as too little.
An alternative view comes in another report out today from the think-tank IPPR which argues that reckless lending by the banks was one of the main reasons for the last boom and concludes that the FSA proposals do not go far enough.
This report concludes that while measures such as increasing supply and reform of property taxation have their place, the obvious way to prevent future booms and busts is mortgage regulation.
It argues that the FSA approach is too narrowly focussed on consumer protection and argues for caps on lending by loan to value and loan to income and specific controls on tougher elements of the market such as interest-only mortgages and buy to let.
And it points out that the government’s focus on targeting reserve requirements within the banking system will do nothing to control credit within the non-banking sector - the source of the huge expansion of lending in the noughties.
The big question now is whether the government is prepared to back Grant Shapps’s fine words about stability in the housing market with practical measures to prevent future booms and busts.
The temptation will be to look at evidence such as the Halifax research and the main barrier to home ownership it identifies (67% said the size of the deposit required was the most significant thing stopping them buying their first home) and conclude that less regulation is the answer.
But that would only exacerbate the underlying problem: high property prices (the second biggest barrier, identified by 52% of would-be buyers) and low incomes (the third biggest, identified by 41%).
Today’s criticism of the mortgage rescue scheme by the National Audit Office got me wondering about the value of all the other initiatives to support vulnerable homeowners through the recession.
Fearing a repeat of the repossessions crisis of the early 1990s, the previous Labour government really threw the kitchen sink at the problem. The fear seemed well-founded at the time, with the Council of Mortgage Lenders (CML) forecasting that 75,000 families would lose their homes in 2009, matching the worst year of the early 1990s crash.
Mortgage rescue was meant to be a key part of the defences. The DCLG expected that 6,000 families would be helped at a cost of £205m through a combination of equity loans (60% of the total) and mortgage to rent (40%). In the event, offered a choice between continuing ownership and becoming a housing association tenant, 98.5% chose the second, and much much more expensive, option.
As the NAO explains, the end result was that only 2,600 families were helped at a cost of £240m and, at an average cost of £93,000, the scheme was not value for money. Cue a chorus of ‘told you so’ from the current government, which cut the mortgage rescue scheme and scrapped the even less successful homeowner mortgage support scheme when it took power.
Even in the early 1990s recession, mortgage rescue was one of the most difficult schemes to get to work. The conclusion then was that people preferred to keep owning their homes rather than be rescued and become tenants.
However, the NAO report also suggests that the scheme may have had a value that went beyond the bare numbers of people who benefited directly.
The number of households accepted as homeless following mortgage arrears fell from 2,340 in 2008 to 2,380 in 2009 and 1,050 in 2010 - a total fall of 55%.
Meanwhile, based on scheme monitoring data, 15,600 families have approached their local authority and been assessed as eligible since it launch. Even those who were not successful would have received advice or been referred to their lender or a money advice agency.
The NAO concludes that more households would have been made homeless in the absence of the scheme and that more will have avoided repossession as a result of the advice but says that the DCLG never took these wider impacts into account in its estimates of the costs and benefit or set itself any objectives. Oddly, it does not seem to mention that the £240m was invested in bricks and mortar rather than simply frittered away.
However, the two schemes were just part of a much wider package of measures to support home owners and the housing market.
The DCLG also introduced a repossession prevention fund for local authorities to help the most vulnerable and funded an enhanced court desk service to ensure the availability of free legal advice and representation. And it launched Kickstart, which was pretty much a rescue scheme for housebuilders.
The DWP offered enhanced support for mortgage interest, temporarily freezing the payment rate at a standard interest rate, reducing the waiting period to 13 weeks and raising the mortgage cap to £200,000.
The Ministry of Justice introduced a mortgage pre-action protocol setting out guidance for judges on the steps that lenders are expected to take before bringing a possession claim to the courts.
Meanwhile, mortgage lenders showed far more forebearance than they had been prepared to offer in the early 1990s. Whether it was altruism, a response to political pressure or an awareness thata surge in repossessions would damage their balance sheets as well as the people who lost their homes, it did work.
Dwarfing everything though was the Bank of England’s move to cut interest rates to a record low of 0.5% in March 2009, which enabled lenders to cut most mortgage rates by an average of 2%. In the 26 months since then, mortgage payers have collectively saved more than £20bn in monthly payments and seen the value of their homes stop falling too.
Except of course if they were on the sort of sub-prime mortgage that left them stuck on a high rate and unable to remortgage - precisely one of the groups that mortgage rescue was designed to help.
The price for that was paid by savers, who got correspondingly less interest, and by anyone without a mortgage, especially any would-be first-time buyers who are still waiting in vain for house prices to become more affordable.
So mortgage rescue has to be seen in the context of all the other policies and schemes that surrounded it. Were repossessions lower as a result? Definitely - they peaked at 47,900 in 2009. Did the benefits outweigh the costs? It depends who you are.
The answer is much more complicated than an audit of one small scheme can provide. And that’s before I even get on to the costs and benefits of the bail-out of the banks and the austerity that has followed.
If nothing else convinces the government to take the urgent need for more new homes more seriously, here’s something that just might.
A report today from the Town and Country Planning Association (TCPA) projects that the number of households in England will increase by 234,000 a year or 2.75m over the next 25 years.
The snappily-titled New and Novel Household Projections for England with a 2008 base is the work of Alan Holmans and Christine Whitehead, Cambridge academics who for years have forecast future household formation from the government’s population projections.
In one sense, the research is good news from the government. That 2.75m forecast from the 2008-based population projections is actually 650,000 (or 26,000 a year) fewer than the previous one that used 2006-based projections.
The bad news is that it is still 50,000 more than the 2004-based population projections and those were the ones used by the previous Labour government to set its target of 240,000 additional homes per year.
Whether the planning system is top-down or bottom-up or shake it all about that remains double the level of new housebuilding (even if last week’s DCLG figures were slightly encouraging).
But the really bad news for the government is a change in the balance of households within those projections. On the 2008-based figures, the report suggests that the number of lone-parent households will grow from 1.4m in 2001 to 1.8m now to 2.5m in 2026. Meanwhile the number of one-person households will rise from 6.3m in 2001 to 7.8m in 2011 to 10.2m in 2026.
That’s 500,000 more lone parents with children than in the previous projection - and 600,000 fewer couples with children.
The bad news is not the change in the balance of different sorts of household as such (though it will seem that way to pro-family sections of the Conservative Party) but the implications for housing policy.
First, housing benefit. In 2008/09 34% of lone parents with children were owner-occupiers, 44% were social tenants and 22% were private tenants. Of those who were private tenants, 70% received housing benefit, a higher proportion than for any other type of household.
The proportion in the private rented sector paying higher rents will rise sharply as a result of government policy on discharging the homelessness duty, the continuing inaccessibility of owner-occupation and the shortfall of new homes. As I blogged last week, one leading estate agent predicts that private renting will grow from 14% of households now to 20% in five years time.
Second, the report also forecasts a net increase of 1.2m couple households living by themselves with no children between 2006 and 2026 and that ‘a somewhat similar increase in “under-occupying” couple households is likely.
In other words, as fast as the government tries to keep down costs by cutting housing benefit and applying sanctions against under-occupiers, all the pressures from population growth and under-provision of new homes are going to send things in the opposite direction.
With all eyes on how Lib Dems would vote in last week’s Localism Bill debates, it would be easy to miss a small but significant Conservative rebellion on security of tenure.
Two Labour amendments on the issue were defeated on Wednesday before the main clauses on social housing reform got a third reading with a comfortable majority for the government. All eyes will now be in the House of Lords, where the second reading debate begins in two weeks time.
However, in the debate itself and in the votes that followed there was clear unease on the coalition side and a noteable unwillingness to accept assurances from government ministers about things that are not explicit in the Bill.
The debate centred on two Labour amendments. The first sought to delete a section of the Bill on flexible tenancies and the second to create an explicit guarantee of security of tenure for existing tenants who move. Both were voted down, but not before four Lib Dems and two Tories had voted with Labour for that guarantee.
This was despite junior housing minister Andrew Stunell attempting to allay the fears of MPs right at the start of the debate by arguing that tenure standards would ensure against an unregulated market.
First, he said that two-year tenancies (the minimum in the Bill) will be the exception rather than the rule. ‘Let me repeat what I said in Committee. In the vast majority of cases in which a social landlord offers a flexible tenancy, we will expect that tenancy to be for at least five years. It will often be appropriate to provide longer—in some instances, lifetime—tenancies.’
Second, he said security was guaranteed for existing tenants. ‘I want to put clearly on the record again that our proposal does not affect any existing tenant, even if they swap or transfer their home, and even if the person they swap with has a flexible tenancy.’
Both were called into question by Labour MPs. ‘The Minister is doing a very good Pontius Pilate impersonation,’ said Andy Slaughter. ‘He is saying, “I’ll wash my hands of it and we will leave it to others.” But he is leaving it to authorities such as Hammersmith and Fulham council or Notting Hill Housing, the second biggest social landlord, which have both said that they will opt for the minimum possible terms for all tenants, including the elderly and the disabled.’
And shadow housing minister Alison Seabeck said: ‘The system allows for discretion, but the evidence suggests that it will not be used, and that Hammersmith and Fulham, Westminster and other councils will simply say, “Sorry, no!” If someone chooses to move—the key point is the choice—they will probably find themselves with a higher rent and a shorter tenure.’
But the unease went beyond just Labour MPs and beyond just west London landlords.
First up, the Lib Dems. Annette Brooke said: ‘I want to put on record my concern about the two-year tenancies. True, it is said that they will be exceptions but there is a big “but” once we start using the term “exceptions”. The Liberal Democrats want this issue to be revisited in the House of Lords. It is incredibly important to get it right.’
She was backed by Lib Dem deputy leader Simon Hughes, who said: ‘We must build communities, and that is done by having more, not less, security. That does not mean that there should be no flexibility or that councils and other providers should have no ability to have tenancies that are not secure, but security of tenure should be the presumption. I hope that as the Bill goes from this place to the other place, the concerns from across the House will continue to be considered.’
Dan Rogerson argued that: ‘Although [the] intention is to provide good local authorities with the flexibility to use the measure when that might help, my worry is that the measure is not robust enough to stop others misusing it and making it the norm.’
And it also went beyond Labour MPs and a few Lib Dems. One of the most impressive and surprising contributions for me came from Andrew Percy, the Conservative MP for Brigg and Goole.
He said he had no problem with the idea of councils offering flexible tenancies ‘but I should like to see more commitment in regard to the proportion that they should offer, and also an absolute guarantee that they will continue to offer secure tenancies’.
And he added: ‘I do not want some official from the local authority to turn up all of a sudden and tell people whose children happen to have left home that under the terms of their flexible tenancies their time is up, and they must move on and make a home somewhere else.’
Percy was backed by Martin Vickers, another Tory backbencher who had also expressed concern at second reading. ‘I put this simple question to the Front-Bench team,’ said the Cleethorpes MP, ‘how will the Bill and the tenancy provisions build stronger, more settled communities? I am afraid that I remain unconvinced.’
What was really striking was that both of them were speaking from personal experience. Vickers was brought up in a council house and as a councillor Percy represented the estate where his father grew up and where his grandma still lived. ‘They are not just bricks and mortar, they are homes, not houses,’ as Vickers put it. ‘We had a sustainable community in which people had invested and in which they wanted to remain,’ said Percy.
Percy argued: ‘I keep using the word “home” because these properties are not merely a facility that belongs to the council—although I suppose legally they are that. They are much more than that, however, so where is the security for the young person who moves out and then wishes to return home? I have absolutely no doubt that these proposals have been made with the best of intentions. On the estate I represented we had huge problems with such patterns of occupation and young people not having a chance to get a home, but we do not want to use a sledgehammer to crack a walnut.’
It was that sense of ‘home’ and ‘community’ and worry that, as Vickers put it, ‘flexbility for the landlord means more inflexiblity for the tenant’ that presumably led both of them to vote for the Labour amendment strengthening guarantees for existing tenants.
Neither that, nor votes for the same amendment by Andrew George, Stephen Gilbert and Dan Rogerson from the Lib Dems, made a difference to the final outcome.
But beyond party politics what Percy and Vickers were saying had a ring of authenticity that came from their personal experience. They were speaking for the vast majority of people who have lived in council housing and known they were not just being given a tenancy but a home and a place in their community too. No matter the justifications and assurances, that is what the flexible tenure plan fundamentally threatens.
When the Localism Bill moves upstairs in two weeks hopefully some of their lordships will take note.
The benefit cap may have made it through the Welfare Reform Bill committee but the fundamental problems with it are not going to go away so easily.
In a momentous week that has also seen the Localism Bill get Commons approval (more on that another time), Labour amendments to the controversial cap that would have written specific amendments into the legislation were defeated after the government described them as wrecking amendments. As welfare minister Chris Grayling put it: ‘The problem with the amendments is that the cap would apply to almost no one.’
The government’s approach seems to be to legislate now and worry about the details later in the regulations that will follow. The Lib Dems on the committee voted in favour of the cap in principle but, as Isabel Hardman reported yesterday, are demanding changes to the details in the secondary legislation to follow.
They may not be the only ones. A Financial Times report over the weekend suggested that the cap is facing opposition not just from deputy prime minister Nick Clegg but also from the main man piloting it through parliament, welfare and pensions secretary Iain Duncan Smith. Combine that with a strongly worded warning about its introduction from the think-tank he founded, the Centre for Social Justice, and it seems clear that concern goes far deeper than the usual suspects.
According to the FT, it’s chancellor George Osborne who’s pushing the policy that he announced at the Tory conference last year. As one of his aides puts it, ‘it is extremely popular with the public and we are confident about it’ - an argument repeated several times by Conservative members of the committee on Wednesday.
A succession of Labour amendments in Bill committee debates on Tuesday morning and afternoon may have been voted down but they also revealed the scale of the problems that the cap could create.
As Labour’s Karen Buck put it: ‘As drafted, the cap is so flawed and so full of perverse incentives that it is really hard to see how it will operate at all - still less operate and save the money on which the proposals are predicated.’
Lib Dem Jenny Willott supported the cap in principle but argued that ‘the cap as proposed will not work’.
Under the cap total household welfare payments for working age households will be limited to £500 a week for a couple and £350 a week for a single person. Under the current plan, there will be exemptions for households including someone entitled to working tax credit, disability living allowance or constant attendance allowance and war widows and some work incentive payments for lone parents and people leaving incapacity benefit will also not be included.
However, here are just some of the potential problems revealed in the debate:
- It will not save money overall. Although it says the primary purpose is to boost work incentives, the DWP says it will deliver cost savings of £270m in 2014/15 but Lib Dem MP Jenny Willott claimed that the DCLG estimates that it will increase homelessness by 20,000 people, costing £300m in emergency housing.
- It may not increase work incentives. Labour’s Karen Buck and Lib Dem Ian Swales argued that it will incentivise people to move from high-cost housing areas to lower-cost ones where there are fewer jobs.
- It contradicts the aims of the Universal Credit to make it easier into work or work more or less hours without suffering a big drop in income. ‘It creates cliff edges and makes a temporary period of unemployment a catastrophe,’ said Buck.
- Even if it does incentivise work, many of the families affected are people the state does not expect to work or who are too sick to work.
- It could penalise people in work who lose hours and cease to qualify for working tax credit and their exemption from the cap.
- It will encourage couples to split up. In the very opposite of a family-friendly policy, a couple’s income will be capped at £500 a week but if they split up into two single households they will each get £350 a week.
- It will penalise families with children. Willott said it would hit hard-working families who suddenly lost their job and could not pay their rent. Even two-child families in London face losing a third of their housing benefit. It will push more children into poverty just as the universal credit promises to lift them out of it. Lone parents moving into work will be worse off because child-care costs are not covered.
- It will have a disportionately damaging impact on social tenants and landlords. The impact assessment estimated 70% of the 50,000 families affected will be in social housing. As Buck put it, ‘they are affected not because their housing costs are dragging them into the cap but because they are larger families and their child tax credit and child benefit payments, in particular, are taking them above the cap for the cheapest housing in the country’. The inevitable rent arrears will threaten homelessness for tenants and damage the finances of landlords.
- It contradicts other housing policies like affordable rent since housing associations building homes at 80% market rents will find their existing client group will be unable to afford them.
What can be done to prevent the booms and busts that seem to happen in the housing market about once a decade?
A report out today from a Joseph Rowntree Foundation (JRF) taskforce says house price volatility since the early 1970s has priced people out of the market, driven up arrears and repossessions, put a brake on housebuilding and led to huge wealth inequality.
The taskforce calls for a combination of improved supply, credit controls, reform of property taxation, an improved safety net for home owners and the development of alternatives to home ownership.
It sounds like a tall order for politicians scared of doing anything that threatens the pockets of the majority of the electorate.
Yet much the same arguments were made in the 1980s and 1990s, when campaigners called for the abolition of mortgage tax relief. A relief on a tax (Schedule A on the imputed rent on a property) that had been scrapped decades before, it had become a multi-billion subsidy for homeowners that helped to inflate house prices.
And what seemed impossible under Margaret Thatcher was eventually delivered in phases under John Major and Tony Blair. Since it was finally abolished in 2000 it has contributed huge savings for the Treasury but it was not enough on its own to prevent the boom and bust of the late noughties.
The JRF report, as might be expected from a taskforce that includes Kate Barker, calls first for an increase in supply, arguing that at current rates the proportion of 30- to 34-year-olds able to afford a purpose-built flat will fall from half now to just 28% in 15 years’ time.
But it argues that improved supply will not be enough on its own to remove the risk of volatility caused by surges in demand - and that takes it into some politically contentious territory.
It says credit controls such as temporary or permanent maximum loan-to-value ratios could be one remedy - though it acknowledges that the trade-off would be restricting access to mortgage credit.
Tax reform comes next. Stamp duty is based on a slab structure that imposes huge increases once homes are valued at more than £250,000, £500,000 and £1m thresholds. The taskforce says it should be remodelled based on a ‘slice’ structure, with higher tax rates only applied on the portion of the property value that exceeds the threshold.
Its call for reform of the council tax will definitely set the political alarm bells ringing.
Homes in England are still taxed on the basis of what their value was in 1993. House prices have trebled or quadrupled since then but only one new band has been introduced and a homeowner could have built an extra four bedrooms, a swimming pool and a heli-pad in their back garden and still be paying the same.
Any revaluation risks creating not just thousands of losers but Daily Mail headlines about government snoopers to boot. Little wonder that politically contentious revaluations were cancelled by Labour in 2005 and the Conservatives in 2010.
The taskforce says there is a case for replacing the council tax with a national property tax under which revenues would rise and fall in line with house prices. Reform would have to be phased in gradually, combined with other reform of local taxation and include a mechanism for protecting low-income households but it could have a powerful counter-cyclical effect on house prices.
That sounds a big ask and the taskforce says that ‘the evidence for its benefits would need to be compelling for such a radical proposal to win support’.
Finally, it calls for an improved safety net for homeowners, including a new insurance model with contributions from borrowers, lenders and government, and the development of more alternatives to ownership.
It’s a long and sometimes contentious list of reforms but the taskforce says they are needed urgently.
‘It would be a profound mistake to leave the underlying volatility of the housing market unaddressed. We know from past experience that, without fundamental reform, the cycle of boom and bust will reassert itself.’
Sadly though, the temptation for the politicians will be to look the other way and hope they benefit from the next great boom.
Can anything stop the relentless rise of private renting? One of the UK’s biggest estate agents is forecasting that at least another million households will be private tenants by the end of 2016.
In a report published last week Savills says 20% of households in the UK will be private tenants in five years’ time, up from 15.6% (in England) now. That implies well over 4m private tenants in England and over 5m in the UK by 2016.
That comes on top of the 1m extra private renters created in England under Labour between 2005 and 2010.
Savills says the increase is being driven by growing demand from a combination of would-be owner-occupiers who cannot afford to buy and workers in the recovering financial sector and shrinking supply as better housing market conditions reduce the number of frustrated sellers accidental landlords.
The result is soaring rents. In London, the average residential rent rose by a staggering 16% in 2010 and prime rents at the top end of the market rose by a further 3-4% in the first three months of 2011.
For would-be buyers it raises the possibility of yet more frustration as the rents available for property drive up prices even further out of their reach.
Those dashed hopes mean that home ownership’s share of overall tenure will continue the decline that started at the peak of the housing market in 2007 and continued through the credit crunch. It will not be a temporary blip but a permanent feature of the housing landscape.
And, as I blogged in February, it means that private renting will overtake social renting in England some time this year (and may have done already).
But the implications will be felt across all sectors of housing in ways that are only just starting to be acknowledged.
Take the housing benefit cuts, for example. The current plans are designed to slow down the growth of the budget caused by an increased number of claims during the recession rather than reduce it. However, rents rising at anything like the level shown by Savills would render the assumptions behind them useless and mean that the bill continues to escalate.
Soaring rents will also mean far more homes and people affected by the bedroom caps and the overall cap on benefits - squeezing claimants between rising rents and caps set at a flat rate.
The effect would be most marked in London but would spread to other parts of the country too. Rents in London last year rose at double or treble the rate of consumer price inflation that will be used to uprate the local housing allowance.
All of which would mean bigger shortfalls for claimants between their rent and their benefit, increased rent arrears for landlords and more homelessness.
Rising private rents would also push up the new ‘affordable’ rents being planned in the social sector because they are based on a formula of up to 80% of market rents.
The prospects for landlords and investors look ‘extremely bullish’, according to Savills, and ‘demand for private rented stock in the country as a whole can only grow’.
But what of those all those new private tenants? The overwhelming majority will be young people locked out of the housing market by high prices and a shortage of mortgages and poor people excluded from social renting by a shortage of new supply.
Minimal regulation of standards and security of tenure and rent levels may have contributed to all that growth in private renting but will such a light touch really be appropriate for a sector housing one in five of us?
The striking thing for me about the coalition is just how little of what it has done in government was agreed or even hinted at when David Cameron and Nick Clegg took that walk in the garden of 10 Downing Street exactly 12 months ago today.
The anniversary made me look again at the detail of the coalition programme for government that was agreed in the days that followed. Here are the dozen things it had to say that are most relevant to housing:
- We will rapidly abolish Regional Spatial Strategies and return decision-making powers on housing and planning to local councils, including giving councils new powers to stop ‘garden grabbing’.
- In the longer term, we will radically reform the planning system to give neighbourhoods far more ability to determine the shape of the places in which their inhabitants live, based on the principles set out in the Conservative Party publication Open Source Planning.
- We will provide more protection against aggressive bailiffs and unreasonable charging orders, ensure that courts have the power to insist that repossession is always a last resort, and ban orders for sale on unsecured debts of less than £25,000.
- We will explore a range of measures to bring empty homes into use.
- We will promote shared ownership schemes and help social tenants and others to own or part-own their home.
- We will promote ‘Home on the Farm’ schemes that encourage farmers to convert existing buildings into affordable housing.
- We will create new trusts that will make it simpler for communities to provide homes for local people.
- We will phase out the ring-fencing of grants to local government and review the unfair Housing Revenue Account.
- We will provide incentives for local authorities to deliver sustainable development, including for new homes and businesses.
- We will review the effectiveness of the raising of the stamp duty threshold for first-time buyers.
- We will seek ways of taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities.
- We will investigate how to simplify the benefit system in order to improve incentives to work.
By my reckoning about nine seven of those 12 policies have either been introduced or are in the process of being introduced. I could have missed them somewhere along the line but action against aggressive bailiffs, home on the farm and stamp duty for first-time buyers seem to have slipped by the wayside. And unless you count FirstBuy as promoting shared ownership and making empty homes eligible for the new homes bonus as a range of measures, not much has happened on that the remaining two either.
The odd Conservative manifesto pledge (equity stakes for well-behaved tenants) was dropped alongside rather more Lib Dems ones (a mansion tax on homes worth over £2m, equalising VAT on new build and renovation, increased council tax on second homes, investigating changing the borrowing rules).
And…er that’s it. No mention of fixed-term tenancies, affordable rent, discharging the homelessness duty into the private rented sector, sweeping changes to housing benefit that amount to far more than just cuts or watering down the commitment on zero carbon homes.
Caroline Thorpe has a more detailed breakdown of how the coalition parties met their promises (or not) in the current Inside Housing.
On one level it’s tempting to argue that one pledge in the programme for government counted for more than all the others put together: ‘We will significantly accelerate the reduction of the structural deficit over the course of a Parliament, with the main burden of deficit reduction borne by reduced spending rather than increased taxes.’
That involved the Lib Dems adopting Conservative policy on how quickly to reduce the deficit and it certainly dictated much of what followed - although Nick Clegg argues today that Labour’s plans would have meant £7 of cuts for every £8 cut by the coalition.
But financial imperatives are not enough on their own to explain all of the housing and welfare reforms.
After all, some of them will only save money over the longer term, if at all. And some of them seem far more radical than a majority Conservative government would have risked introducing on its own. It’s been quite a year.
Devastating? Highly damaging? Warnings about the introduction of the £500 a week cap on total benefits are nothing new - but this one comes from somewhere uncomfortably close to home for Iain Duncan Smith.
The Centre for Social Justice (CSJ), the think-tank he co-founded in opposition with his special advisor Philippa Stroud, today publishes a report card on the coalition’s social policies.
Most of the headlines have gone to its underwhelming 2/10 verdict on the government’s policy on family breakdown.
Other CSJ priorities score better, with performance on tackling educational failure and serious personal debt getting 6/10 and addiction 7/10.
But the star performer, with an impressive 8/10, is tackling economic dependency. That’s not a complete surprise since the government’s flagship policy of a universal credit was developed by the CSJ - even if compromises on the cost mean that the rate of benefit withdrawal is higher than it originally proposed.
‘Overall the welfare reform Bill and its associated white paper mark an exciting start in transforming the Department for Work and Pensions from an administration and process hub into the poverty-fighting arm of government it should be,’ says the CSJ.
Strangely, given the emphasis on making work pay and restricting all the cuts in housing benefit, housing gets a single mention in the document. That is to welcome the government’s decision to abandon the policy of ‘unjustified cuts’ to housing benefit for claimants after 12 months.
However, the CSJ’s biggest complaint is about a policy that will have massive implications for housing: the £500 a week or £26,000 a year total cap on benefits.
‘Our main contention is with current plans to introduce a full benefit cap on households in one fell swoop,’ it says. ‘Without the careful phasing in of such a cap – which is fair for taxpayers in principle – the CSJ is concerned it will bring hardship to as many as 50,000 large families who will have the rug pulled from under them overnight. The impact of the average projected loss for such families of £93 a week could be highly damaging, and for families who are predicted to lose much more, it is likely to be devastating.
‘Giving such families tailored transitional support through initiatives like the Work Programme will mitigate some of the damage, but the government should think again urgently about its implementation plans for the full benefit cap.’
Campaigners against the cap have long warned of the dire implications for tenants and landlords and IDS promised at the second reading of the Welfare Reform Bill that there would be ‘intense help’ and transitional arrangements for families involved.
But statements like that from his old think-tank will encourage campaigners to make their case even harder to MPs. And, who knows, maybe the odd Conservative or Liberal Democrat will listen?
If the election results are going to make the Lib Dems more assertive they will get plenty of opportunities on housing and welfare reform over the next few weeks.
The party is already signalling a more robust stance on NHS reform in the wake of last week’s loss of 800 councillors and the referendum on the voting system. So it will be fascinating to see what its MPs do in the ten remaining sessions in the committee stage of the Welfare Reform Bill over the next three weeks, starting tomorrow, and the report stage of the Localism Bill that begins next week.
Many Lib Dem MPs are on record as opposing many aspects of both Bills and have spoken out against many of the individual reforms but have yet to take the next step from dissension to voting against the government.
Take fixed-term tenancies, for example. In the last parliament, 41 out of 63 current Lib Dem MPs signed early-day motions opposing moves to end secure tenancies.
A response by deputy leader Simon Hughes to the social housing reform consultation revealed that he had plenty of reservations not just about fixed terms but also about changes to the homelessness legislation.
Lib Dem critics can point to the fact that none of the reforms were mentioned in the coalition programme for government.
In terms of welfare reform, there is obvious concern in Lib Dem ranks, especially about the cut in housing benefit for under-occupying social tenants and the cap on the total benefits that any claimant can receive.
However, despite publicly questioning some of the policies in debates, few Lib Dem MPs have been prepared to vote against the government so far, either in committee or on the floor of the House of Commons.
The question now is whether that uneasiness will translate into more active opposition that could help secure changes to the legislation. I’m guessing that’s one that many individual Lib Dem MPs who have campaigned for years on housing issues are asking themselves very seriously. If not, why did they stand in the first place?
Last week’s elections could also trigger some changes at a local level. Many of the councils surveyed by Inside Housing over fixed-term tenancies and affordable rent have changed political control.
In cases like Ashfield, Brighton, Chesterfield, Sheffield and Warrington it may not make any difference, since Lib Dem or Conservative administrations were in any case saying no to fixed-term tenancies.
However, Labour gained Newcastle and Preston, where the previous administrations said they would offer fixed terms, and York, where the Lib Dems were consulting.
And things could easily move in the other direction in some places: the Conservatives gained power in two authorities (Lewes and Woking) that were consulting on their policy and also look set to take control of Winchester.
Pick your media coverage today: the policeman who unlawfully subletted his council flat in London or the artist nominated for the Turner Prize for paintings of the Coventry council estate where he grew up.
PC Stephen Holt was the unwitting star of last night’s Panorama when he was secretly filmed letting his £91 a week flat near Tower Bridge as a £450 a week holiday let to an undercover reporter.
Holt and other unlawful subletters from the 50,000 estimated by the Audit Commission were juxtaposed with some of the 650,000 families living in overcrowded conditions - like the nine members of the Gurnhill family living in a three-bedroom house in Sheffield - and some of the 5m people on the waiting list. So were homeless families getting priority on the list.
Panorama didn’t manage to confront Holt to get his response at the end and rather limply revealed that he’s now facing a notice to quit from Southwark Council. Ironically enough, he’s a crime prevention officer as well as a part-time developer who has appeared on property porn daytime TV shows. He also appears to own a flat next door to the one he’s subletting, a house in Kent and a chateau in France.
The programme didn’t have much new to say either, apart from revealing yet again the scale of a housing crisis that goes way beyond unlawful subletting. If you missed it, you can still catch it on iplayer.
The artist George Shaw was nominated for his paintings of the Tile Hill estate in Coventry. The paintings look shockingly conventional for the Turner Prize until you realise that they are all done with the Humbrol enamel paint. His ordinary landscapes of the estate have been described as being painted ‘with the seriousness of Monet painting Rouen Cathedral’ and as having a ‘muted and sombre’ quality and ‘a sense of foreboding’.
I suspect you have to see the paintings themselves for that to make sense but you can find pictures online of works such as Poets Day, Scenes from the Passion: The Cop Shop and Landscape with Dog Shit Bin that give some indication. There’s a good interview with him here.
Shaw’s paintings may be downbeat, they may seem nostalgic, they may have no people in them but they seem like a celebration of the place he grew up too. A celebration of something that has not yet quite been lost to the PC Stephen Holts of this world.
April 2013 may seem like a long way off but yesterday’s committee debate on the Welfare Reform Bill offered a glimpse of the scale of the problems the housing benefit cut for under-occupiers of working age in the social sector is going to cause for tenants and landlords.
The problems go way beyond the findings in the government’s impact assessment that 670,000 social tenants - or a third of all housing benefit claimants in the sector - will lose an average of £13 a week each.
As Labour’s Karen Buck pointed out, we still do not know what the maximum level of loss will be, what capacity there is in the sector to meet the need for downsizing or whether there will be any transitional arrangements. ‘We are dangerously ill-prepared for the scale of change that we are about to see,’ she said.
Those under-occupying tenants will face the problem that there are simply not enough smaller homes for them to move into. The NHF told the committee that 179,000 tenants are under-occupying two-bed homes but that only 68,000 properties became available for letting in 2010.
That could stymie separate attempts by the DCLG to persuade under-occupying tenants including pensioners (who are not affected by the housing benefit cuts) to downsize voluntarily.
And the irony, as Buck pointed out, is that the more the policy works to reduce under-occupation the less it saves money. ‘It is essential for the government to keep people in their under-occupied properties and to pay the shortfall.’
About 400,000 of the tenants who will be affected are disabled, an unknown number of them serverely enough to qualIfy for disability living allowance. According to the NHF, 108,000 of them live in adapted homes with one or more spare rooms. If they are forced to move, landlords would have to adapt a new property and any savings would simply be spent in a different budget; but if they stay put they’ll see their benefit cut. Here at least the government has promised to consider all the options before finalising the provisions.
Buck failed in her arguments for the cut to be phased in by different categories of people and that nobody should be liable for a shortfall until they have been made an offer of reasonable alternative accommodation - her amendments were withdrawn or voted down by Conservative and Liberal Democrat members.
But there is obvious concern in Lib Dem ranks about the likely effects of the change. Cardiff Central MP Jenny Willott said Lib Dem colleagues had mentioned tenants in Edinburgh who were put in two-bed properties by the council because there were so few one-bed homes and tenants in Manchester allocated larger homes in less favourable parts of the city as part of a council policy of offering them to young and potentially growing families.
The list of potential problems went on and on: families with young children who may be under-occupying now but won’t be in future when they are older and entitled to more space; couples allocated a home with separate bedrooms because of a severe medical condition; recently widowed people facing an immediate housing benefit cut.
At the moment the only way of dealing with issues like that is discretionary housing benefit, a fund that has been increased but also has to deal with problems in the private sector and which Karen Buck compared to the five loaves and fishes ‘not only feeding the 5,000 but stretching to house the 650,000’.
She told welfare minister Maria Miller that the cut was not about tackling under-occupation at all. ‘The measure is simply about a cut in income for vulnerable people, because it is the only way the minister can make the savings that she has again stressed are a priority.’
Miller argued that people would have chance to consider how to deal with the change. ‘We would expect most people to choose to remain in the existing property, even if the option of a smaller one were available. That may be a legitimate choice for a family or individual to make, with them finding other ways to meet the shortfall. They will have time to consider ways in which to do that and appropriate advice will be available as part of our implementation strategy.’
And other government policies would help tenants into work and create more mobility to free up more social tenancies in the social sector.
However, she also advanced the bizarre argument that housing benefit in the social sector had to be cut because it was driving up rents in the private sector. ‘Two thirds of social housing tenants are on housing benefits, and 30% to 40% of people in the private rental sector are. The level of housing benefit that we are talking about here and that works within the social housing market will affect how that market works.’
The ‘evidence’ for this was the DWP’s favourite stat - findaproperty.com’s finding that private rents fell by 5% between November 2008 and February 2010 while local housing allowance (LHA) rates rose. Never mind that Iain Duncan Smith got into hot water by claiming that to be an official ONS stat, never mind that it covers a completely different part of the market to the LHA and never mind that its stats since February 2010 show rents rising much faster than the LHA, this is the dodgy stat that refuses to go away gracefully.
Never mind either that it had absolutely nothing to do with the problems the committee was discussing.
Her attempts to force amendments may have failed but it’s hard to disagree with Karen Buck when she says that: ‘Sadly, but confidently, I predict that ministers will revisit the issue between now and 2013, because I still do not believe that government members have properly understood the sheer scale of what the government are proposing and its impact. When it is revisited, there will be urgent need for some form of phase-in, transitional protection or mitigation to prevent some harsh and painful decisions being inflicted on some of the most vulnerable people in our country.’
A gloomy prognosis for the future of corporate housebuilding makes today a good day to announce a boost for self-building.
The speech by housing minister Grant Shapps at the Grand Designs exhibition seems more a case of putting other people’s land rather than his money where his mouth is but it’s welcome for all that in the context of new research by estate agent Knight Frank.
Housebuilding 2011 says the modest revival in housing starts seen since 2009 is set to stall this year thanks to a combination of planning, economic and regulatory constraints. Building volumes are likely to remain at 100,000-120,000 homes per year at a time, it says, which is less than half the 270,000 extra households forming each year.
Almost 60% of housebuilders said localism legislation will slow down planning consents. Only 1% said the new homes bonus would increase development volumes significantly. And 34% said the HCA’s new funding framework would reduce affordable housing completions.
Knight Frank says housebuilders are set to continue with the strategy they adopted during the recession of moving upmarket with fewer, more expensive homes on smaller sites in better-off areas.
And companies still say there is too much regulation, despite the government relaxing the rules on a whole range of issues including the definitions of affordable homes and zero carbon.
Given all that, how much of the gap between supply and demand for homes can by met by self-builders? As Shapps pointed out in his speech, they are already collectively the biggest housebuilder in the country but proportions of self-build are higher elsewhere in Europe.
He confirmed that the government will make plots exclusively available for self-builders on public sector land released for development under its ‘build now, pay later’ initiative.
And he’s keen to see more land being made available by local authorities, housing associations and the private sector too.
With the industry-government working group he launched in February set to advise on what further action is needed to reduce barriers to self-build, and the community right to buil set to become law later this year, the future is looking good for the sector.
Shapps wants to bring self-building into the mainstream and stop it being ‘the preserve of the privileged few’ (did he mean participants in Grand Designs?).
However, if he is going to achieve that ambition, the government is going to have to do more to address the issue identified by corporate housebuilders as the main risk facing them: the scarcity of mortgage finance.
Visiting a self-build site in Cornwall a few weeks ago, it was hard not to be impressed by the energy and enthusiasm of everyone involved or to imagine the potential of similar schemes around the country.
However, the Cornish self-builders had a salutary story about the current state of the mortgage market. Several different lenders offered mortgages on the first phase and they were also willing to take into account the value of the self-builders’ labour (or sweat equity) as part of the deposit. On the second phase, currently nearing completion, only two lenders were willing to offer mortgages and neither of them would allow sweat equity as part of a hefty deposit.
The one glimmer of hope identified in the Knight Frank research applies just as much to self-builders as to housebuilders: that the mortgage market may have improved by the time many schemes being planned now will be completed.