Friday, 28 April 2017

Inside edge

All posts from: September 2012

Five-year stretch

Fri, 28 Sep 2012

Five years ago this month I started this blog wondering how I would ever find enough interesting things to say. I needn’t have worried.

Fortunately for me (bad news is always good news for bloggers and journalists) and unfortunately for everyone else, the week before I wrote my first post a small bank called Northern Rock went bust. The consequences of that still dominate my blogging five years later (and hopefully that makes it interesting enough to keep reading).

In the first year, as the credit crunch got worse and worse, and the entire financial system teetered on the brink, it seemed that the housing market would experience a crash as bad if not worse than the one it went through in the 1990s.

The banks were quick to try to pin the blame for the crisis on sub-prime lending in America but their own activities did not stand much scrutiny: 125 per cent mortgages, self-certified mortgages and mortgages handed out at five or six times income were all part of a deregulated splurge in lending.

The main people in the firing line appeared to be people who had bought at the tail end of the boom. If house prices really were over-valued by up to 30 per cent, the crash seemed set to lead to widespread negative equity and soaring repossessions among both home owners and buy-to-let landlords. Most of my blogs from 2007 and 2008 are lost somewhere in the depths of the Inside Housing website but here’s a couple of examples of how bad things looked at the time.

As things turned out, the worst fears were misplaced. The government reacted to the crisis with a series of emergency measures that bailed out bankers, home owners and landlords alike. The cut in interest rates to a record low 0.5 per cent reduced mortgage payments by billions of pounds a year, hundreds of millions more were poured in to mortgage and home owner support schemes and the banks had learned forbearance can be cheaper than eviction. There were still tens of thousands of repossessions but the total was about half that seen in the early 1990s

Housebuilders too teetered on the brink. Stuck with houses they could not sell built on land they had paid too much for, several household names were only kept afloat at the discretion of banks who knew that letting them go bust would increase their own losses. Remarkably, HBOS (now part of Lloyds) had decided that it could go against all previous norms by buying up sizeable stakes in several of its own housebuilding customers but it, and they, were rescued by the taxpayer. Meanwhile the housebuilding industry as a whole benefitted from the first in a series of schemes backed by government cash.

Attention then turned to the next set of potential housing victims: housing associations that could not sell their shared ownership homes. Thanks to prompt action by the Homes and Communities Agency and Tenant Services Authority and extra funding from the government, this crisis too was averted.

In the meantime, though, the credit crunch was feeding through into mortgage lending with a vengeance. Banks that had happily handed out mortgages at 100 per cent loan to value or more in the boom now demanded deposits of up to 25 per cent in the bust.

The picture varied around the country but, especially in London and the South East, would-be first-time buyers faced having to raise a deposit of around a year’s salary before they could get into the market. Transactions plummeted to less than half previous levels but, thanks to low interest rates, there was no collapse in prices. That meant that tens of thousands and, in time, hundreds of thousands of young people were locked out of home ownership and forced to rent.

The opportunities were clear for buy-to-let landlords as rents soared, especially in London. Fergus Wilson, the buy-to-let poster boy, said in 2010 that the sector was ‘absolutely dead and will never return’. But by 2011 lending was booming again. The number of buy-to-let mortgages is now up 45 per cent since the credit crunch.

For a while, the crisis prompted the Labour government to pump more money into affordable housing. However, as 2008 and 2009 gave way to 2010 and the general election drew near it became clear that whichever party won there would be huge cuts in public spending to cut the deficit. All three were careful not to spell out in any detail where the axe would fall and who would be paying the bill for the bail-out of the banks and the housebuilders and landlords and home owners.

So who would pay for it all? The coalition’s first spending review the answer was none of the above. The price would instead be paid by savers as interest rates on their savings dwindled to nothing, by private tenants as rents soared and home ownership became ever more inaccessible,  and by anyone on benefits as a result of welfare reform. And they will carry on paying: many of the decisions taken then and in subsequent budgets have yet to be implemented and the introduction of the bedroom tax and household benefit cap looms every closer in April 2013. Bankers, home owners, buy-to-let landlords and housebuilders are doing very nicely by comparison.

I started this blog five years ago with the vague aim of showing how the whole system is inter-connected and it’s no longer possible to talk of social housing in isolation from other tenures. I did not foresee how big the changes would be in the housing landscape, with home ownership shrinking, private renting set to overtake social renting for the first time in 50 years and the boundary between the two disappearing. Or just how big the gap would become between housing haves and housing have-nots. Or that five years later the fundamental problem would remain that house prices are too high.

So here’s to the start of my sixth year of blogging for Inside Housing, with no sign that the issues that dominated the first five are going away any time soon. 

Five-year stretch

Fri, 28 Sep 2012

Five years ago this month I started this blog wondering how I would ever find enough interesting things to say. I needn’t have worried.

Fortunately for me (bad news is always good news for bloggers and journalists) and unfortunately for everyone else, the week before I wrote my first post a small bank called Northern Rock went bust. The consequences of that still dominate my blogging five years later (and hopefully that makes it interesting enough to keep reading).

In the first year, as the credit crunch got worse and worse, and the entire financial system teetered on the brink, it seemed that the housing market would experience a crash as bad if not worse than the one it went through in the 1990s.

The banks were quick to try to pin the blame for the crisis on sub-prime lending in America but their own activities did not stand much scrutiny: 125 per cent mortgages, self-certified mortgages and mortgages handed out at five or six times income were all part of a deregulated splurge in lending.

The main people in the firing line appeared to be people who had bought at the tail end of the boom. If house prices really were over-valued by up to 30 per cent, the crash seemed set to lead to widespread negative equity and soaring repossessions among both home owners and buy-to-let landlords. Most of my blogs from 2007 and 2008 are lost somewhere in the depths of the Inside Housing website but here’s a couple of examples of how bad things looked at the time.

As things turned out, the worst fears were misplaced. The government reacted to the crisis with a series of emergency measures that bailed out bankers, home owners and landlords alike. The cut in interest rates to a record low 0.5 per cent reduced mortgage payments by billions of pounds a year, hundreds of millions more were poured in to mortgage and home owner support schemes and the banks had learned forbearance can be cheaper than eviction. There were still tens of thousands of repossessions but the total was about half that seen in the early 1990s

Housebuilders too teetered on the brink. Stuck with houses they could not sell built on land they had paid too much for, several household names were only kept afloat at the discretion of banks who knew that letting them go bust would increase their own losses. Remarkably, HBOS (now part of Lloyds) had decided that it could go against all previous norms by buying up sizeable stakes in several of its own housebuilding customers but it, and they, were rescued by the taxpayer. Meanwhile the housebuilding industry as a whole benefitted from the first in a series of schemes backed by government cash.

Attention then turned to the next set of potential housing victims: housing associations that could not sell their shared ownership homes. Thanks to prompt action by the Homes and Communities Agency and Tenant Services Authority and extra funding from the government, this crisis too was averted.

In the meantime, though, the credit crunch was feeding through into mortgage lending with a vengeance. Banks that had happily handed out mortgages at 100 per cent loan to value or more in the boom now demanded deposits of up to 25 per cent in the bust.

The picture varied around the country but, especially in London and the South East, would-be first-time buyers faced having to raise a deposit of around a year’s salary before they could get into the market. Transactions plummeted to less than half previous levels but, thanks to low interest rates, there was no collapse in prices. That meant that tens of thousands and, in time, hundreds of thousands of young people were locked out of home ownership and forced to rent.

The opportunities were clear for buy-to-let landlords as rents soared, especially in London. Fergus Wilson, the buy-to-let poster boy, said in 2010 that the sector was ‘absolutely dead and will never return’. But by 2011 lending was booming again. The number of buy-to-let mortgages is now up 45 per cent since the credit crunch.

For a while, the crisis prompted the Labour government to pump more money into affordable housing. However, as 2008 and 2009 gave way to 2010 and the general election drew near it became clear that whichever party won there would be huge cuts in public spending to cut the deficit. All three were careful not to spell out in any detail where the axe would fall and who would be paying the bill for the bail-out of the banks and the housebuilders and landlords and home owners.

So who would pay for it all? The coalition’s first spending review the answer was none of the above. The price would instead be paid by savers as interest rates on their savings dwindled to nothing, by private tenants as rents soared and home ownership became ever more inaccessible,  and by anyone on benefits as a result of welfare reform. And they will carry on paying: many of the decisions taken then and in subsequent budgets have yet to be implemented and the introduction of the bedroom tax and household benefit cap looms every closer in April 2013. Bankers, home owners, buy-to-let landlords and housebuilders are doing very nicely by comparison.

I started this blog five years ago with the vague aim of showing how the whole system is inter-connected and it’s no longer possible to talk of social housing in isolation from other tenures. I did not foresee how big the changes would be in the housing landscape, with home ownership shrinking, private renting set to overtake social renting for the first time in 50 years and the boundary between the two disappearing. Or just how big the gap would become between housing haves and housing have-nots. Or that five years later the fundamental problem would remain that house prices are too high.

So here’s to the start of my sixth year of blogging for Inside Housing, with no sign that the issues that dominated the first five are going away any time soon. 

Child's play

Mon, 24 Sep 2012

Nick Clegg’s ‘pensions for property’ plan is the most breathtakingly stupid idea since, well, the last time a government proposed something similar.

Liberal Democrat leader Nick Clegg and Treasury chief secretary Danny Alexander put forward the proposal in interviews on Sunday as a way of allowing parents and grandparents to use their pension fund to guarantee a deposit for their children and grandchildren.

Party sources briefed the media that they believe 250,000 people with a pension pot of more than £40,000 could potentially benefit and that about 5 per cent of them (12,500) were likely to take it up.

The idea seems to be that the lump sum element of the pension – usually about 25 per cent – could be used as a deposit, so someone with a £40,000 pot could use it to allow their child or grandchild could borrow a deposit of £10,000

Reports suggest that the mortgage deposit scheme is more than just a Lib Dem conference idea and is being looked at by both the Treasury and DWP.

At first glance, and unless I’m missing something, this looks exactly the sort of tinkering with the housing market that politicians love because it puts them on the side of aspiration - but then they fail to think through the consequences.

First, what happens if things go wrong? What if the doomsters prove correct and house prices fall by 20 per cent? That would jeopardise the retirement income of parents or grandparents.

Many with spare cash outside their pension will already be using it to help so (as presented) this looks like it applies to people without many other assets. Since the income from their pension pot would already be tiny (a fund of £40,000 is tiny in the scheme of things and would deliver an income of about £40 a week) presumably that would force them to rely more on the state minimum income guarantee. Effectively the state would be paying for negative equity.

Second, what if things go right? Deposits guaranteed by the pension pots of parents and desperate grandparents desperate to help their kids simply help prop up house prices.

If house prices rise, that just increases the exclusion of young would-be buyers with no parental help. The divide between housing haves and have-nots grows ever wider and social mobility – something that Lib Dems are meant to be in favour of – slows down even more.

Just about the best that can be said for the pensions for property proposal is that it is too small to make much difference – though once accountants get to work on it who is to say that it could not end up applying to more pensioners too and have a much bigger impact?

Reaction within the pension industry so far has ranged from caution to hostility, with one anonymous expert describing it as ‘Maxwellesque’, Ros Altmann of Saga calling it ‘a political gimmick’ and the National Association of Pension funds saying that ‘at first glance this idea leaves us feeling slightly uneasy’.

Another downside could be that it concentrates the minds of pension funds on housing risks at exactly the time that the government is desperately trying to persuade them to invest directly in (private rented) housing.

The last time a government tried to relax the rules on pension funds for property it changed its mind at the last minute.

This was the idea proposed by Gordon Brown and the Treasury in 2005 to make residential property one of the eligible categories for investment by people with self-invested personal pensions (SIPPs). The changes were due to take effect in April 2006.

Campaigners warned over and over again that the consequences would be a boom in ownership of second homes and holiday homes fuelled by tax breaks on investment in pensions.

Finally, in the pre-Budget report in December 2005, the Treasury came to its senses and ruled that residential property (along with fine wine, antiques and racehorses) would not be eligible for investment.

Clegg’s ‘pension for property’ idea may not be quite as monumentally stupid as the SiPPs plan but the implication that it is being examined across government suggests that ministers have learned nothing in the seven years since Brown’s u-turn and the five since the credit crunch. 

And the real shame is that the Liberal Democrats seem set to debate some sensible new housing policies later in the week.

Child's play

Mon, 24 Sep 2012

Nick Clegg’s ‘pensions for property’ plan is the most breathtakingly stupid idea since, well, the last time a government proposed something similar.

Liberal Democrat leader Nick Clegg and Treasury chief secretary Danny Alexander put forward the proposal in interviews on Sunday as a way of allowing parents and grandparents to use their pension fund to guarantee a deposit for their children and grandchildren.

Party sources briefed the media that they believe 250,000 people with a pension pot of more than £40,000 could potentially benefit and that about 5 per cent of them (12,500) were likely to take it up.

The idea seems to be that the lump sum element of the pension – usually about 25 per cent – could be used as a deposit, so someone with a £40,000 pot could use it to allow their child or grandchild could borrow a deposit of £10,000

Reports suggest that the mortgage deposit scheme is more than just a Lib Dem conference idea and is being looked at by both the Treasury and DWP.

At first glance, and unless I’m missing something, this looks exactly the sort of tinkering with the housing market that politicians love because it puts them on the side of aspiration - but then they fail to think through the consequences.

First, what happens if things go wrong? What if the doomsters prove correct and house prices fall by 20 per cent? That would jeopardise the retirement income of parents or grandparents.

Many with spare cash outside their pension will already be using it to help so (as presented) this looks like it applies to people without many other assets. Since the income from their pension pot would already be tiny (a fund of £40,000 is tiny in the scheme of things and would deliver an income of about £40 a week) presumably that would force them to rely more on the state minimum income guarantee. Effectively the state would be paying for negative equity.

Second, what if things go right? Deposits guaranteed by the pension pots of parents and desperate grandparents desperate to help their kids simply help prop up house prices.

If house prices rise, that just increases the exclusion of young would-be buyers with no parental help. The divide between housing haves and have-nots grows ever wider and social mobility – something that Lib Dems are meant to be in favour of – slows down even more.

Just about the best that can be said for the pensions for property proposal is that it is too small to make much difference – though once accountants get to work on it who is to say that it could not end up applying to more pensioners too and have a much bigger impact?

Reaction within the pension industry so far has ranged from caution to hostility, with one anonymous expert describing it as ‘Maxwellesque’, Ros Altmann of Saga calling it ‘a political gimmick’ and the National Association of Pension funds saying that ‘at first glance this idea leaves us feeling slightly uneasy’.

Another downside could be that it concentrates the minds of pension funds on housing risks at exactly the time that the government is desperately trying to persuade them to invest directly in (private rented) housing.

The last time a government tried to relax the rules on pension funds for property it changed its mind at the last minute.

This was the idea proposed by Gordon Brown and the Treasury in 2005 to make residential property one of the eligible categories for investment by people with self-invested personal pensions (SIPPs). The changes were due to take effect in April 2006.

Campaigners warned over and over again that the consequences would be a boom in ownership of second homes and holiday homes fuelled by tax breaks on investment in pensions.

Finally, in the pre-Budget report in December 2005, the Treasury came to its senses and ruled that residential property (along with fine wine, antiques and racehorses) would not be eligible for investment.

Clegg’s ‘pension for property’ idea may not be quite as monumentally stupid as the SiPPs plan but the implication that it is being examined across government suggests that ministers have learned nothing in the seven years since Brown’s u-turn and the five since the credit crunch. 

And the real shame is that the Liberal Democrats seem set to debate some sensible new housing policies later in the week.

Runaway train

Mon, 17 Sep 2012

The universal credit was meant to be the great prize that would make up for all the pain of welfare cuts but what if it just adds to it?

A range of evidence about the past, present and future of welfare is published today and the results suggest a system that is cracking under the strain even before the big wave of cuts due next April and the phased introduction of the universal credit starting at the same time.

The National Housing Federation (NHF) is highlighting the impact of the first wave of cuts on the number of homeless families living in bed and breakfast. The 44 per cent increase has come in the year since the caps on local housing allowance began.

However, the latest Social Attitudes survey out today suggests welfare reform still enjoys broad public support and that there is less sympathy for the unemployed now than at any time over the last 30 years.

The proportion of people saying that if benefits were less generous people would stand on their own two feet has doubled from 26 per cent in 1991 to 54 per cent in 2011. In previous downturns, public support for more spending on welfare benefits has grown but this time around support is down from 43 per cent in 2001 to just 28 per cent in 2011.

The report suggests that this shift in opinion was nurtured by a tougher stance towards welfare under the last Labour government and has continued under the coalition. 

In that context, the universal credit was meant to be the big reform of the system: a new benefit that would make work pay and give claimants a new sense of personal financial responsibility. 

The cracks in that façade have been deepening over the last few weeks:

  • Divisions have appeared within the government, with a failed attempt to move Iain Duncan Smith from the DWP in the reshuffle and cabinet secretary Sir Jeremy Heywood apparently expressing scepticism about the policy.
  • Responses to the detail from councils, charities and other groups have raised a whole host of concerns about implementation. 
  • Labour is calling for the whole thing to be delayed by a year amid concern about whether the complex computer system will actually work.
  • The Social Security Advisory Committee is reported to be warning IDS that the reforms will be ‘unworkable and unfair’. 
  • And, most spectacularly, Frank Field, the government’s welfare reform tsar, says the universal credit will be a ‘disaster’ that will ‘rot the soul of the low paid’.

Now a report from the Social Market Foundation (SMF) warns that the universal credit will backfire without significant improvements and undermine the government’s aim of boosting people’s sense of personal responsibility by pushing them into debt.

The results are all the more startling coming from a think-tank that has been supportive of the broad thrust of welfare reform and because the research is based on detailed interviews with claimants themselves about how the universal credit will work.

On the credit in general, the SMF warns that moving to a single monthly payment for all benefits will remove the markers and aids that families rely on to budget effectively with little evidence that it will prepare them for going into work.

‘Our research shows this will throw people in at the deep end leaving them to either sink or swim,’ says SMF deputy director Nigel Keohane. And the impact will be felt not just by the families themselves but by those they will end up owning money to, including social landlords.

The report finds widespread mystification about the key housing reforms including the one that has most exercised landlords: the direct payment of money to cover the rent to claimants.  As one claimant put it: ‘I just think, it’s not your money is it? So why does it have to pass through your hands if it’s not your money? You haven’t earned it, you haven’t done anything for it.’

Some people worried about the effect on them personally whole others worried about the effect on other claimants if ‘everyone is going to be in arrears’. The SMF comments that: ‘More generally, the proposal was met with considerable surprise and many were unable to understand what would motivate such a change.’

Where claimants did identify responsibility as an issue, they saw it in terms of the government trying to avoid the administrative work of processing payments rather than trying to boost personal responsibility. Most thought it would just put them under even greater pressure and risk of hardship and debt.

The SMF says that the research results, plus the experience of private landlords and tenants under the local housing allowance, ‘suggest that it will be extremely hard to make the existing universal credit proposal work’ and that it risks undermining the finances of social landlords.

The report proposes that there should be an online budgeting portal. The idea is that claimants would be able to opt in to it and make changes to the way their benefit money was directed before it came into their bank account. That would mean they could choose to have their rent direct paid direct to their landlord and choose to get their benefit weekly rather than monthly.

Iain Duncan Smith and the DWP will no doubt continue to resist calls for changes and stick to their line that the universal credit will make work pay and boost personal responsibility. However, the reform is looking increasingly like a slow motion train crash that everyone else can see is going to happen.

Benefit cuts are already biting and are set to affect far more families from next April with the bedroom tax and benefit cap. The danger is that IDS’s flagship reform will make things worse rather than better. There is still time to stop the train before it is too late. 

Runaway train

Mon, 17 Sep 2012

The universal credit was meant to be the great prize that would make up for all the pain of welfare cuts but what if it just adds to it?

A range of evidence about the past, present and future of welfare is published today and the results suggest a system that is cracking under the strain even before the big wave of cuts due next April and the phased introduction of the universal credit starting at the same time.

The National Housing Federation (NHF) is highlighting the impact of the first wave of cuts on the number of homeless families living in bed and breakfast. The 44 per cent increase has come in the year since the caps on local housing allowance began.

However, the latest Social Attitudes survey out today suggests welfare reform still enjoys broad public support and that there is less sympathy for the unemployed now than at any time over the last 30 years.

The proportion of people saying that if benefits were less generous people would stand on their own two feet has doubled from 26 per cent in 1991 to 54 per cent in 2011. In previous downturns, public support for more spending on welfare benefits has grown but this time around support is down from 43 per cent in 2001 to just 28 per cent in 2011.

The report suggests that this shift in opinion was nurtured by a tougher stance towards welfare under the last Labour government and has continued under the coalition. 

In that context, the universal credit was meant to be the big reform of the system: a new benefit that would make work pay and give claimants a new sense of personal financial responsibility. 

The cracks in that façade have been deepening over the last few weeks:

  • Divisions have appeared within the government, with a failed attempt to move Iain Duncan Smith from the DWP in the reshuffle and cabinet secretary Sir Jeremy Heywood apparently expressing scepticism about the policy.
  • Responses to the detail from councils, charities and other groups have raised a whole host of concerns about implementation. 
  • Labour is calling for the whole thing to be delayed by a year amid concern about whether the complex computer system will actually work.
  • The Social Security Advisory Committee is reported to be warning IDS that the reforms will be ‘unworkable and unfair’. 
  • And, most spectacularly, Frank Field, the government’s welfare reform tsar, says the universal credit will be a ‘disaster’ that will ‘rot the soul of the low paid’.

Now a report from the Social Market Foundation (SMF) warns that the universal credit will backfire without significant improvements and undermine the government’s aim of boosting people’s sense of personal responsibility by pushing them into debt.

The results are all the more startling coming from a think-tank that has been supportive of the broad thrust of welfare reform and because the research is based on detailed interviews with claimants themselves about how the universal credit will work.

On the credit in general, the SMF warns that moving to a single monthly payment for all benefits will remove the markers and aids that families rely on to budget effectively with little evidence that it will prepare them for going into work.

‘Our research shows this will throw people in at the deep end leaving them to either sink or swim,’ says SMF deputy director Nigel Keohane. And the impact will be felt not just by the families themselves but by those they will end up owning money to, including social landlords.

The report finds widespread mystification about the key housing reforms including the one that has most exercised landlords: the direct payment of money to cover the rent to claimants.  As one claimant put it: ‘I just think, it’s not your money is it? So why does it have to pass through your hands if it’s not your money? You haven’t earned it, you haven’t done anything for it.’

Some people worried about the effect on them personally whole others worried about the effect on other claimants if ‘everyone is going to be in arrears’. The SMF comments that: ‘More generally, the proposal was met with considerable surprise and many were unable to understand what would motivate such a change.’

Where claimants did identify responsibility as an issue, they saw it in terms of the government trying to avoid the administrative work of processing payments rather than trying to boost personal responsibility. Most thought it would just put them under even greater pressure and risk of hardship and debt.

The SMF says that the research results, plus the experience of private landlords and tenants under the local housing allowance, ‘suggest that it will be extremely hard to make the existing universal credit proposal work’ and that it risks undermining the finances of social landlords.

The report proposes that there should be an online budgeting portal. The idea is that claimants would be able to opt in to it and make changes to the way their benefit money was directed before it came into their bank account. That would mean they could choose to have their rent direct paid direct to their landlord and choose to get their benefit weekly rather than monthly.

Iain Duncan Smith and the DWP will no doubt continue to resist calls for changes and stick to their line that the universal credit will make work pay and boost personal responsibility. However, the reform is looking increasingly like a slow motion train crash that everyone else can see is going to happen.

Benefit cuts are already biting and are set to affect far more families from next April with the bedroom tax and benefit cap. The danger is that IDS’s flagship reform will make things worse rather than better. There is still time to stop the train before it is too late. 

Going backwards

Tue, 11 Sep 2012

The government is missing the chance to tackle housing market volatility and its damaging consequences for households and the wider economy.

That’s the fear expressed in a progress report out today from the Joseph Rowntree Foundation’s housing market taskforce that warns that ‘in some ways we are moving further away from this goal’.

Co-authors of the report, senior housing academics Mark Stephens and Peter Williams, say that the government has demonstrated it can take tough decisions in other areas ‘but it continues to be too timid concerning actions that are needed to bring about greater housing market stability’.

The report measures progress on tackling volatility since the taskforce published its main report last year. In the long run that will come through increasing housing supply and in the short run through financial regulation and the tax system, protecting homeowners from the consequences of volatility and developing alternatives to home ownership.

And it may be time to look at the short run more urgently because things do not look too good in the long run: ‘The serious shortfall in housing supply has worsened, exacerbating our exposure to housing market cycles, with all the consequences this has for households, communities and the economy.’ (I have some more on the supply shortage and one more possible reason for it on my other blog here).

First up is financial regulation and taxation. Its failings made a significant contribution to the financial crisis and the government is in the midst of replacing the FSA with a new financial policy committee (FPC) at the Bank of England. The FPC’s remit includes the control of systemic risks but consultations so far under the FSA’s Mortgage Market Review (MMR) have backed away from counter-cyclical credit controls such as maximum loan to value (LTV) ratios amid fears that this would squeeze lending still further on those locked out of the market.

The report argues that there is a good case for using LTV limits as part of macro-prudential policy and that it is vital that the government and regulators keep a full range of instruments available. It warns of the dangers of neglecting sectors like housing with ‘great destabilising potential’ and it goes on: ‘The continued neglect of the role that property taxation might play is an obvious concern. The taskforce report showed how the council tax could evolve into a national property tax. By neglecting the management of the housing market as a whole there is a danger that it will reveal the next hole in the system of regulation.’

The taskforce recommends that there should be a council tax revaluation followed by its gradual transformation into a national land and property value tax. Both would be politically contentious: successive governments have backed away from council tax revaluation for fear of creating too many losers (even though an estimated 3.7 million households are worse off as a result of the failure to revalue); and new planning minister Nick Boles joked last year when he publicly backed a land value tax that he was ‘committing career suicide’. His prediction proves untrue but tax reform still seems to fall into the category that civil servants in Yes, Minister would call ‘brave’ and that Malcolm Tucker in The Thick of It might have a stronger word for.

On protection for homeowners, the report says that the current safety net is ‘inadequate’ and it warns of that it is important that discretion given to lenders under the MMR ‘does not facilitate a return to any irresponsible lending’. It concludes that; ‘A a rethink is required to find a solution that improves security for home-owners faced with reductions in income, whilst also meeting the Government’s objective of making work pay.’

On alternatives to owning, private renting is growing rapidly while any scope for expansion of social renting and shared ownership is limited. The report welcomes the prospect of REITs and the Montague review’s call for more institutional investment but argues that any concessions on section 106 and affordable homes should be conditional on tenants getting greater security. And it argues that housing subsidies should be switched away from a reliance on housing benefit and back towards housing supply ‘as part of a new model for financing new affordable housing’.

Stephens and Williams believe that ‘the downward trend in homeownership may be hardening into a structural change’, highlighting the need for alternatives. However, there are serious problems with all of them: ‘The government’s efforts have focused on identifying ways to attract institutional investment into the private rental sector, which even if successful, does not address the chronic insecurity that prevails there. Moreover, the housing benefit cuts will serve to make tenants less, rather than more, secure. With low-cost home-ownership always likely to be a minority tenure and with the security that is traditionally associated with social renting being diluted, this is an area where we are rapidly moving backwards. A key challenge remains to find ways to make private renting more secure without prompting mass landlord exits from the sector.’

The warnings in the report are all the more striking for being expressed in such measured language. With the housing market flat-lining and the deficit the key political priority, the temptation for the government will be to do nothing that rocks the boat, especially on housing market taxation, but the history of successive boom and busts and their damaging consequences suggests that would be a serious mistake that we will all come to regret.  

Going backwards

Tue, 11 Sep 2012

The government is missing the chance to tackle housing market volatility and its damaging consequences for households and the wider economy.

That’s the fear expressed in a progress report out today from the Joseph Rowntree Foundation’s housing market taskforce that warns that ‘in some ways we are moving further away from this goal’.

Co-authors of the report, senior housing academics Mark Stephens and Peter Williams, say that the government has demonstrated it can take tough decisions in other areas ‘but it continues to be too timid concerning actions that are needed to bring about greater housing market stability’.

The report measures progress on tackling volatility since the taskforce published its main report last year. In the long run that will come through increasing housing supply and in the short run through financial regulation and the tax system, protecting homeowners from the consequences of volatility and developing alternatives to home ownership.

And it may be time to look at the short run more urgently because things do not look too good in the long run: ‘The serious shortfall in housing supply has worsened, exacerbating our exposure to housing market cycles, with all the consequences this has for households, communities and the economy.’ (I have some more on the supply shortage and one more possible reason for it on my other blog here).

First up is financial regulation and taxation. Its failings made a significant contribution to the financial crisis and the government is in the midst of replacing the FSA with a new financial policy committee (FPC) at the Bank of England. The FPC’s remit includes the control of systemic risks but consultations so far under the FSA’s Mortgage Market Review (MMR) have backed away from counter-cyclical credit controls such as maximum loan to value (LTV) ratios amid fears that this would squeeze lending still further on those locked out of the market.

The report argues that there is a good case for using LTV limits as part of macro-prudential policy and that it is vital that the government and regulators keep a full range of instruments available. It warns of the dangers of neglecting sectors like housing with ‘great destabilising potential’ and it goes on: ‘The continued neglect of the role that property taxation might play is an obvious concern. The taskforce report showed how the council tax could evolve into a national property tax. By neglecting the management of the housing market as a whole there is a danger that it will reveal the next hole in the system of regulation.’

The taskforce recommends that there should be a council tax revaluation followed by its gradual transformation into a national land and property value tax. Both would be politically contentious: successive governments have backed away from council tax revaluation for fear of creating too many losers (even though an estimated 3.7 million households are worse off as a result of the failure to revalue); and new planning minister Nick Boles joked last year when he publicly backed a land value tax that he was ‘committing career suicide’. His prediction proves untrue but tax reform still seems to fall into the category that civil servants in Yes, Minister would call ‘brave’ and that Malcolm Tucker in The Thick of It might have a stronger word for.

On protection for homeowners, the report says that the current safety net is ‘inadequate’ and it warns of that it is important that discretion given to lenders under the MMR ‘does not facilitate a return to any irresponsible lending’. It concludes that; ‘A a rethink is required to find a solution that improves security for home-owners faced with reductions in income, whilst also meeting the Government’s objective of making work pay.’

On alternatives to owning, private renting is growing rapidly while any scope for expansion of social renting and shared ownership is limited. The report welcomes the prospect of REITs and the Montague review’s call for more institutional investment but argues that any concessions on section 106 and affordable homes should be conditional on tenants getting greater security. And it argues that housing subsidies should be switched away from a reliance on housing benefit and back towards housing supply ‘as part of a new model for financing new affordable housing’.

Stephens and Williams believe that ‘the downward trend in homeownership may be hardening into a structural change’, highlighting the need for alternatives. However, there are serious problems with all of them: ‘The government’s efforts have focused on identifying ways to attract institutional investment into the private rental sector, which even if successful, does not address the chronic insecurity that prevails there. Moreover, the housing benefit cuts will serve to make tenants less, rather than more, secure. With low-cost home-ownership always likely to be a minority tenure and with the security that is traditionally associated with social renting being diluted, this is an area where we are rapidly moving backwards. A key challenge remains to find ways to make private renting more secure without prompting mass landlord exits from the sector.’

The warnings in the report are all the more striking for being expressed in such measured language. With the housing market flat-lining and the deficit the key political priority, the temptation for the government will be to do nothing that rocks the boat, especially on housing market taxation, but the history of successive boom and busts and their damaging consequences suggests that would be a serious mistake that we will all come to regret.  

Third time lucky?

Thu, 6 Sep 2012

So here it is: what by my reckoning the coalition government’s third housing strategy in two and a half years.

Mark one was the assumption that implementing the coalition’s programme for government would do the trick. The ‘powerful new incentive’ of the new homes bonus would persuade local authorities to approve more homes and get housebuilding moving. The Localism Act would turn help turn NIMBYs into YIMBYs. And FirstBuy would give a time-limited kick-start to the housing market with equity loans for first-time buyers.

When that didn’t work, Mark two came last November. The big idea was NewBuy, a government-backed mortgage indemnity scheme to give 95 per cent mortgages on new homes to up to 100,000 buyers. That was backed up by funds for custom homes and empty homes, a consultation on right to buy 2 and another review of investment in the private rented sector.

When that didn’t work, Mark three was announced this morning in what David Cameron said was evidence that ‘this government is serious about rolling its sleeves up and doing all it can to kick-start the economy’.

Details so far are pretty thin on the ground to put it mildly but here are some initial comments from the No 10 statement [see below for the parliamentary statement by Eric Pickles]:

•  Removing restrictions on stalled sites by removing ‘costly affordable housing requirements’ where developers can prove they make the project unviable. This has been coming for a while as part of a consultation on renegotiating section 106 deals prior to 6 April 2010 that runs until October 8. It sounds like the outcome has already been decided. The No 10 press release says this will help unlock 75,000 homes but it’s not clear how this figure is calculated. It’s also not clear how the system will work since it is already quite possible to renegotiate section 106 agreements and only three weeks ago Eric Pickles was sending in ‘expert brokers’ to sort it out.

•  Confirmation of government guarantees of up to £10 billion for new homes. This was the announcement that was expected earlier in the summer and delayed. This will be part of the Infrastructure (Financial Assistance) Bill and include guaranteeing the debt of housing associations and private developers. The thinking seems to be that this will bring lending rates down close to those enjoyed by the government while remaining off the public balance sheet. It’s not clear though what the balance will be between associations and developers or how much of the lending will be new and how much will replace existing bank loans.

•  An extra £300 million in ‘new capital funding’ for up to 15,000 affordable homes and 5,000 empty homes brought back into use. This is good news and seems to be the Lib Dem price for agreeing to the section 106 changes. However, note the ‘up to’ and the clear implication that this will be more affordable rent when many of the scrapped agreements will have specified social rent. It’s also not at all clear what will happen to section 106 in the longer term.

•  An additional 5,000 homes for market rent in line with the proposals in the Montague report. Again, no more detail yet but the speculation is that the government will agree to Montague’s proposals including removing affordable housing requirements on schemes that are for market rent.

•  Including big residential schemes in the planning fast-track for major infrastructure schemes so that ‘where councils are poor’ developers can go straight to the Planning Inspectorate. Again there are no more details so we do not know what counts as big but perhaps this could clear the way for future new garden cities and urban extensions?

•  Putting the worst-performing planning departments into special measures and setting up a fast-track appeal process. This assumes that planning is the problem but, as the LGA points out in research out today, housebuilders already have planning permission on 400,000 homes and are taking up to nine years to build homes in some cases.

•  A £280 million extension of the FirstBuy scheme to help 16,500 first-time buyers. Again there are no more details but this marks a change from the statement in last year’s housing strategy was a ‘fixed term measure’. FirstBuy mark two is also much less generous:  FirstBuy mark one provided £400 million for 10,500 first-time buyers to give them a 20 per cent equity loan of almost £40,000 each; FirstBuy mark two works out at at an average of around £17,000 each

•  Freeing up the planning rules on extensions and improvements for a time-limited period. As reported, this will allow single-storey extensions of up to 8 metres without permission. This appears to represent not one by two u-turns: one of the government’s first acts was to ban garden grabbing for new homes but now it seems they can be grabbed for extensions; and only last week ministers were launching a clampdown on beds in sheds but now it seems they will be allowed if they are attached to the main house. The consequences of this remain to be seen. Ironically, it could turn us from NIMBYs quite literally into YIMBYs. However, it could also reduce housing market transactions still further as people decide not to move and spark off a wave of cowboy conversion work in city suburbs with big gardens.

That’s all the detail so far. Overall, this strategy seems rather less full of hype than the last two, as does the promise of ‘up to 70,000 homes’. But maybe that’s no bad thing. I’ll add more when there is more detail.

ADDED 11.50am

A parliamentary statement by Eric Pickles has more detail on the package. Here are some highlights:

•  Montague and the private rented sector: the government is ‘investing £200 million in housing sites to ensure that the high-quality rented homes that are needed are available to institutional investors quickly’. A taskforce of developers, management bodies and institutional investors will broker deals. Providers who commit to invest in additional new-build rented homes will be be eligible to raise debt with government guarantee from the £10 billion fund. Expressions of interest will be invited from tomorrow and ‘it is expected that housing associations, property management companies and developers will be amongst those to benefit’.

•  Affordable housing, the government will be inviting bids for up to 15,000 extra affordable homes ‘through the use of loan guarantees, asset management flexibilites and capital funding’. The £300 million extra government funding will also cover brining an extra 5,000 empty homes back into use.

•  FirstBuy: the extra £280 million will enable the scheme to be extended to March 2014.

•  Large housing schemes: the government will look to work in partnership with developers and local authorities to do more deals like Ebbsfleet.

•  Off-site construction: Pickles revives memories of John Prescott’s campaign for off-site construction, with the creation of an industry-led group convened by DCLG and BIS to look at barriers to the growth of the sector and how increase incentives to use off-site techniques. This will make proposals by Budget 2013.

•  Public land: the role of the HCA outside London will be strengthened with a ‘targeted programme of transfers from other government departments and agencies’. Pickles adds: ‘We will also work to accelerate disposals by preparing the land for market and providing a single ‘shop window’ for all surplus public sector land.’

•  Planning:Pickles confirms the plan to allow applications to be decided by the Planning Inspectorate ‘if the local authority has a poor track record of consistently poor performance in the speed or quality of its decisions’. However, unlike the statement by No 10, Pickles does not mention housing in the definition of major infrastructure projects that will be able to use fast-track planning procedures.

•  Section 106: the government will introduce legislation effective from early 2013 that ‘will allow any developer of sites which are unviable because of the number of affordable homes to appeal with immediate effect’. Pickles goes on: ‘The Planning Inspectorate will be instructed to assess how many affordable homes would need to be removed from the Section 106 agreement for the site to be viable in current economic conditions. The Planning Inspectorate would then, as necessary, set aside the existing Section 106 agreement for a three year period, in favour of a new agreement with fewer affordable homes. We would encourage councils to take the opportunity before legislation comes into effect to seek negotiated solutions where possible.’ This is in addition to the consultation on non-viable section 106 agreements made before April 2010. This appears to signal that all section 106 agreements are potentially up for grabs and it poses all sorts of questions, not least about the ability and expertise of planning inspectors to rule on viability. Sounds like good news for lawyers.

•  Green Belt: Pickles says the coalition agreement ‘safeguarding the Green Belt  and other environmental designations’ but says the government will ‘encourage councils to use the flexibilities set out in the National Planning Policy Framework to tailor the extent of Green Belt land in their areas to reflect local circumstances’ and to make better use of previously developed land.

•  Empty offices: ‘We will introduce permitted development rights to enable change of use from commercial to residential purposes, while providing the opportunity for authorities to seek a local exemption where they believe there will be an adverse economic impact. This common sense measure will help the regeneration of our towns and cities. Our high streets will benefit from a greater resident population, increasing footfall and supporting local shops.’

Third time lucky?

Thu, 6 Sep 2012

So here it is: what by my reckoning the coalition government’s third housing strategy in two and a half years.

Mark one was the assumption that implementing the coalition’s programme for government would do the trick. The ‘powerful new incentive’ of the new homes bonus would persuade local authorities to approve more homes and get housebuilding moving. The Localism Act would turn help turn NIMBYs into YIMBYs. And FirstBuy would give a time-limited kick-start to the housing market with equity loans for first-time buyers.

When that didn’t work, Mark two came last November. The big idea was NewBuy, a government-backed mortgage indemnity scheme to give 95 per cent mortgages on new homes to up to 100,000 buyers. That was backed up by funds for custom homes and empty homes, a consultation on right to buy 2 and another review of investment in the private rented sector.

When that didn’t work, Mark three was announced this morning in what David Cameron said was evidence that ‘this government is serious about rolling its sleeves up and doing all it can to kick-start the economy’.

Details so far are pretty thin on the ground to put it mildly but here are some initial comments from the No 10 statement [see below for the parliamentary statement by Eric Pickles]:

•  Removing restrictions on stalled sites by removing ‘costly affordable housing requirements’ where developers can prove they make the project unviable. This has been coming for a while as part of a consultation on renegotiating section 106 deals prior to 6 April 2010 that runs until October 8. It sounds like the outcome has already been decided. The No 10 press release says this will help unlock 75,000 homes but it’s not clear how this figure is calculated. It’s also not clear how the system will work since it is already quite possible to renegotiate section 106 agreements and only three weeks ago Eric Pickles was sending in ‘expert brokers’ to sort it out.

•  Confirmation of government guarantees of up to £10 billion for new homes. This was the announcement that was expected earlier in the summer and delayed. This will be part of the Infrastructure (Financial Assistance) Bill and include guaranteeing the debt of housing associations and private developers. The thinking seems to be that this will bring lending rates down close to those enjoyed by the government while remaining off the public balance sheet. It’s not clear though what the balance will be between associations and developers or how much of the lending will be new and how much will replace existing bank loans.

•  An extra £300 million in ‘new capital funding’ for up to 15,000 affordable homes and 5,000 empty homes brought back into use. This is good news and seems to be the Lib Dem price for agreeing to the section 106 changes. However, note the ‘up to’ and the clear implication that this will be more affordable rent when many of the scrapped agreements will have specified social rent. It’s also not at all clear what will happen to section 106 in the longer term.

•  An additional 5,000 homes for market rent in line with the proposals in the Montague report. Again, no more detail yet but the speculation is that the government will agree to Montague’s proposals including removing affordable housing requirements on schemes that are for market rent.

•  Including big residential schemes in the planning fast-track for major infrastructure schemes so that ‘where councils are poor’ developers can go straight to the Planning Inspectorate. Again there are no more details so we do not know what counts as big but perhaps this could clear the way for future new garden cities and urban extensions?

•  Putting the worst-performing planning departments into special measures and setting up a fast-track appeal process. This assumes that planning is the problem but, as the LGA points out in research out today, housebuilders already have planning permission on 400,000 homes and are taking up to nine years to build homes in some cases.

•  A £280 million extension of the FirstBuy scheme to help 16,500 first-time buyers. Again there are no more details but this marks a change from the statement in last year’s housing strategy was a ‘fixed term measure’. FirstBuy mark two is also much less generous:  FirstBuy mark one provided £400 million for 10,500 first-time buyers to give them a 20 per cent equity loan of almost £40,000 each; FirstBuy mark two works out at at an average of around £17,000 each

•  Freeing up the planning rules on extensions and improvements for a time-limited period. As reported, this will allow single-storey extensions of up to 8 metres without permission. This appears to represent not one by two u-turns: one of the government’s first acts was to ban garden grabbing for new homes but now it seems they can be grabbed for extensions; and only last week ministers were launching a clampdown on beds in sheds but now it seems they will be allowed if they are attached to the main house. The consequences of this remain to be seen. Ironically, it could turn us from NIMBYs quite literally into YIMBYs. However, it could also reduce housing market transactions still further as people decide not to move and spark off a wave of cowboy conversion work in city suburbs with big gardens.

That’s all the detail so far. Overall, this strategy seems rather less full of hype than the last two, as does the promise of ‘up to 70,000 homes’. But maybe that’s no bad thing. I’ll add more when there is more detail.

ADDED 11.50am

A parliamentary statement by Eric Pickles has more detail on the package. Here are some highlights:

•  Montague and the private rented sector: the government is ‘investing £200 million in housing sites to ensure that the high-quality rented homes that are needed are available to institutional investors quickly’. A taskforce of developers, management bodies and institutional investors will broker deals. Providers who commit to invest in additional new-build rented homes will be be eligible to raise debt with government guarantee from the £10 billion fund. Expressions of interest will be invited from tomorrow and ‘it is expected that housing associations, property management companies and developers will be amongst those to benefit’.

•  Affordable housing, the government will be inviting bids for up to 15,000 extra affordable homes ‘through the use of loan guarantees, asset management flexibilites and capital funding’. The £300 million extra government funding will also cover brining an extra 5,000 empty homes back into use.

•  FirstBuy: the extra £280 million will enable the scheme to be extended to March 2014.

•  Large housing schemes: the government will look to work in partnership with developers and local authorities to do more deals like Ebbsfleet.

•  Off-site construction: Pickles revives memories of John Prescott’s campaign for off-site construction, with the creation of an industry-led group convened by DCLG and BIS to look at barriers to the growth of the sector and how increase incentives to use off-site techniques. This will make proposals by Budget 2013.

•  Public land: the role of the HCA outside London will be strengthened with a ‘targeted programme of transfers from other government departments and agencies’. Pickles adds: ‘We will also work to accelerate disposals by preparing the land for market and providing a single ‘shop window’ for all surplus public sector land.’

•  Planning:Pickles confirms the plan to allow applications to be decided by the Planning Inspectorate ‘if the local authority has a poor track record of consistently poor performance in the speed or quality of its decisions’. However, unlike the statement by No 10, Pickles does not mention housing in the definition of major infrastructure projects that will be able to use fast-track planning procedures.

•  Section 106: the government will introduce legislation effective from early 2013 that ‘will allow any developer of sites which are unviable because of the number of affordable homes to appeal with immediate effect’. Pickles goes on: ‘The Planning Inspectorate will be instructed to assess how many affordable homes would need to be removed from the Section 106 agreement for the site to be viable in current economic conditions. The Planning Inspectorate would then, as necessary, set aside the existing Section 106 agreement for a three year period, in favour of a new agreement with fewer affordable homes. We would encourage councils to take the opportunity before legislation comes into effect to seek negotiated solutions where possible.’ This is in addition to the consultation on non-viable section 106 agreements made before April 2010. This appears to signal that all section 106 agreements are potentially up for grabs and it poses all sorts of questions, not least about the ability and expertise of planning inspectors to rule on viability. Sounds like good news for lawyers.

•  Green Belt: Pickles says the coalition agreement ‘safeguarding the Green Belt  and other environmental designations’ but says the government will ‘encourage councils to use the flexibilities set out in the National Planning Policy Framework to tailor the extent of Green Belt land in their areas to reflect local circumstances’ and to make better use of previously developed land.

•  Empty offices: ‘We will introduce permitted development rights to enable change of use from commercial to residential purposes, while providing the opportunity for authorities to seek a local exemption where they believe there will be an adverse economic impact. This common sense measure will help the regeneration of our towns and cities. Our high streets will benefit from a greater resident population, increasing footfall and supporting local shops.’

Home delivery

Wed, 5 Sep 2012

It’s still very early days but the appointments of the new ministerial team at the DCLG team are already raising some questions for me.

According the line being spun by the new Conservative chair Grant Shapps on the Today programme this morning, the government is now at the delivery stage. Within that context, new housing minister Mark Prisk’s previous job as construction minister should bode well for the top priority of building more homes. Meanwhile the appointment of Nick Boles as planning minister looks to signal a fresh emphasis on reforming the planning system to boost the economy.

However, a brief look at their track record suggests some intriguing possibilities on policy – as well as some potential tensions. Here are three initial questions that occur to me:

What about the green belt? There could, to say the least, be some creative tension here.

Chancellor George Osborne sees relaxing planning controls as one way to generate growth. That’s a view shared by Policy Exchange, the influential think-tank founded by Boles. In Cities for Growth, a report published last November, it argued that ‘green belts are not that green and make our cities greyer’ by forcing the development of playing fields and gardens and assume that ‘development is always a negative’. It called for a new generation of garden cities and city suburbs with large financial incentives for local residents who approve them.

I’m guessing that will not go down too well with constituents in Mark Prisk’s semi-rural constituency of Hertford and Stortford who will be looking nervously at the nearby new towns of Stevenage, Harlow, Welwyn and Hatfield. A quick look at his website reveals his backing for local campaigns against the last Labour government’s plans for 80,000 homes in the county and proposals by developers for a green belt development at Harlow North.

What then will he and his constituents make of the way Boles describes countryside campaigners and opponents of planning reform? As the Daily Mail reports this morning, he told the Tory Reform Group last year that they were ‘hysterical, scare-mongering, latter-day luddites’.

Prisk may also have a particular problem with an idea floated by Osborne over the weekend. The chancellor cited the example of Cambridge. He told Andrew Marr: ‘They have been pretty smart about swapping some bits of the green belt for other bits – in other words allowing some development on the green belt if you bring in new pieces of land into the green belt. Those powers already exist but are not widely used. I would like to see more.’

In 2005, spurred on by the 1,500 acres in his own constituency that he said were under threat, Prisk promoted a private member’s Green Belt Reform Bill. This sought to abolish flexibility introduced by Labour that sounds uncannily close to the swapping described by Osborne and re-establish the ‘permanent character of the green belt’. He told MPs: ‘In a county such as Hertfordshire, it means that land can be released for development if land elsewhere in the region—near Peterborough, for example—is rebadged as green belt,’ he said. ‘As hon. Members will realise, that entirely undermines the idea of a permanent green belt that shapes a city. Indeed, what it leaves us with is more like an elastic band, something that is continually stretched as more and more development is forced in.’

What about the private rented sector? Despite the apparent contradiction of support for the green belt, Prisk is strongly in favour of deregulation and liberalisation as a rule. As a business minister he dealt with selling off the assets of regional development agencies and replacing them with local enterprise partnerships and was also involved in freeing up regulations to allow social housing tenants to start businesses from home.

However, there is one other exception to his suspicion of regulation. In 2007 he tried unsuccessfully to amend Labour’s Consumer, Estate Agents and Redress Bill to regulate lettings agents in the same way as estate agents and give trading standards officers and the Office of Fair Trading powers to tackle rogue firms. He argued:

‘As a Conservative, I am instinctively cautious about arguing for more regulation. However, as a chartered surveyor and a constituency member of parliament, I know that we need to put lettings on the same regulatory footing as sales. The fact that the National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the rest of the industry agree shows that the measure is long overdue.’

He also quoted approvingly the argument put by Shelter about the negative effects of high letting agent fees on tenants struggling to pay their rent and the ‘opportunity to improve regulation of this sector and ensure consistency and affordability of letting agent practice’. At the time the Labour government dismissed his amendments as a ‘cynical manoeuvre’ that was about ‘who represents consumers’ interests’.

However, five years on, does this open up space for movement on the issue that had been closed off by Shapps, who dismissed any kind of private rented sector regulation as ‘red tape’?

The problem, after all, has been getting worse for the last five years: as Shelter revealed yesterday, one in four people feel they have been charged unfair fees.

Another encouraging sign that the new minister may be prepared to listen to the concerns of tenants came just before the election when he was one of 34 Conservatives to support an early day motion moved by Labour’s Brian Iddon calling for more protection for tenants whose landlords are repossessed. Iddon’s Mortgage Repossession (Protection Of Tenants Etc) Act subsequently passed with all-party support.

What about housebuilding? With his construction minister background, Prisk will already be familiar with the issues when the government launches its latest attempt to kick-start more housebuilding on Thursday. The Home Builders Federation was quick to tweet that it had ‘already done some good de-regulatory work with him’ as construction minister and says his priorities should be maintaining funding for FirstBuy, boosting mortgage finance, improving planning and cutting regulatory costs..

However, as I argued yesterday in my blog on Grant Shapps, one of the big problems so far is that the government has been too ready to assume that what is good for big housebuilders will be good for housebuilding. Deregulation such as the relaxation of section 106 and sustainability requirements have boosted the value of their land and their profit margins while housing starts have remained stubbornly stuck at half the level needed.  Will Prisk and the DCLG continue to favour the bigger housebuilders or will they be bolder in encouraging smaller firms and new entrants into the market?

That’s just a flavour of the questions that Prisk and Boles will face as they attempt to implement the government’s housing strategy that is expected tomorrow (and answer questions in a Labour debate today).

However, action to deliver an effective housing strategy has to come from across government – not just the DCLG.  On that front could the new boys have some questions of their own to add? Less than a year ago Nick Boles joked that he was ‘committing career suicide’ by publicly backing the idea of a land value tax (LVT). It didn’t seem to do his prospects too much harm on Tuesday. 

Home delivery

Wed, 5 Sep 2012

It’s still very early days but the appointments of the new ministerial team at the DCLG team are already raising some questions for me.

According the line being spun by the new Conservative chair Grant Shapps on the Today programme this morning, the government is now at the delivery stage. Within that context, new housing minister Mark Prisk’s previous job as construction minister should bode well for the top priority of building more homes. Meanwhile the appointment of Nick Boles as planning minister looks to signal a fresh emphasis on reforming the planning system to boost the economy.

However, a brief look at their track record suggests some intriguing possibilities on policy – as well as some potential tensions. Here are three initial questions that occur to me:

What about the green belt? There could, to say the least, be some creative tension here.

Chancellor George Osborne sees relaxing planning controls as one way to generate growth. That’s a view shared by Policy Exchange, the influential think-tank founded by Boles. In Cities for Growth, a report published last November, it argued that ‘green belts are not that green and make our cities greyer’ by forcing the development of playing fields and gardens and assume that ‘development is always a negative’. It called for a new generation of garden cities and city suburbs with large financial incentives for local residents who approve them.

I’m guessing that will not go down too well with constituents in Mark Prisk’s semi-rural constituency of Hertford and Stortford who will be looking nervously at the nearby new towns of Stevenage, Harlow, Welwyn and Hatfield. A quick look at his website reveals his backing for local campaigns against the last Labour government’s plans for 80,000 homes in the county and proposals by developers for a green belt development at Harlow North.

What then will he and his constituents make of the way Boles describes countryside campaigners and opponents of planning reform? As the Daily Mail reports this morning, he told the Tory Reform Group last year that they were ‘hysterical, scare-mongering, latter-day luddites’.

Prisk may also have a particular problem with an idea floated by Osborne over the weekend. The chancellor cited the example of Cambridge. He told Andrew Marr: ‘They have been pretty smart about swapping some bits of the green belt for other bits – in other words allowing some development on the green belt if you bring in new pieces of land into the green belt. Those powers already exist but are not widely used. I would like to see more.’

In 2005, spurred on by the 1,500 acres in his own constituency that he said were under threat, Prisk promoted a private member’s Green Belt Reform Bill. This sought to abolish flexibility introduced by Labour that sounds uncannily close to the swapping described by Osborne and re-establish the ‘permanent character of the green belt’. He told MPs: ‘In a county such as Hertfordshire, it means that land can be released for development if land elsewhere in the region—near Peterborough, for example—is rebadged as green belt,’ he said. ‘As hon. Members will realise, that entirely undermines the idea of a permanent green belt that shapes a city. Indeed, what it leaves us with is more like an elastic band, something that is continually stretched as more and more development is forced in.’

What about the private rented sector? Despite the apparent contradiction of support for the green belt, Prisk is strongly in favour of deregulation and liberalisation as a rule. As a business minister he dealt with selling off the assets of regional development agencies and replacing them with local enterprise partnerships and was also involved in freeing up regulations to allow social housing tenants to start businesses from home.

However, there is one other exception to his suspicion of regulation. In 2007 he tried unsuccessfully to amend Labour’s Consumer, Estate Agents and Redress Bill to regulate lettings agents in the same way as estate agents and give trading standards officers and the Office of Fair Trading powers to tackle rogue firms. He argued:

‘As a Conservative, I am instinctively cautious about arguing for more regulation. However, as a chartered surveyor and a constituency member of parliament, I know that we need to put lettings on the same regulatory footing as sales. The fact that the National Association of Estate Agents, the Royal Institution of Chartered Surveyors and the rest of the industry agree shows that the measure is long overdue.’

He also quoted approvingly the argument put by Shelter about the negative effects of high letting agent fees on tenants struggling to pay their rent and the ‘opportunity to improve regulation of this sector and ensure consistency and affordability of letting agent practice’. At the time the Labour government dismissed his amendments as a ‘cynical manoeuvre’ that was about ‘who represents consumers’ interests’.

However, five years on, does this open up space for movement on the issue that had been closed off by Shapps, who dismissed any kind of private rented sector regulation as ‘red tape’?

The problem, after all, has been getting worse for the last five years: as Shelter revealed yesterday, one in four people feel they have been charged unfair fees.

Another encouraging sign that the new minister may be prepared to listen to the concerns of tenants came just before the election when he was one of 34 Conservatives to support an early day motion moved by Labour’s Brian Iddon calling for more protection for tenants whose landlords are repossessed. Iddon’s Mortgage Repossession (Protection Of Tenants Etc) Act subsequently passed with all-party support.

What about housebuilding? With his construction minister background, Prisk will already be familiar with the issues when the government launches its latest attempt to kick-start more housebuilding on Thursday. The Home Builders Federation was quick to tweet that it had ‘already done some good de-regulatory work with him’ as construction minister and says his priorities should be maintaining funding for FirstBuy, boosting mortgage finance, improving planning and cutting regulatory costs..

However, as I argued yesterday in my blog on Grant Shapps, one of the big problems so far is that the government has been too ready to assume that what is good for big housebuilders will be good for housebuilding. Deregulation such as the relaxation of section 106 and sustainability requirements have boosted the value of their land and their profit margins while housing starts have remained stubbornly stuck at half the level needed.  Will Prisk and the DCLG continue to favour the bigger housebuilders or will they be bolder in encouraging smaller firms and new entrants into the market?

That’s just a flavour of the questions that Prisk and Boles will face as they attempt to implement the government’s housing strategy that is expected tomorrow (and answer questions in a Labour debate today).

However, action to deliver an effective housing strategy has to come from across government – not just the DCLG.  On that front could the new boys have some questions of their own to add? Less than a year ago Nick Boles joked that he was ‘committing career suicide’ by publicly backing the idea of a land value tax (LVT). It didn’t seem to do his prospects too much harm on Tuesday. 

Taken for granted

Tue, 4 Sep 2012

Many people will be celebrating the departure of Grant Shapps today. My own feelings are much more mixed.

I’ve disagreed with the housing minister on most of the major policy changes he’s made, from ending security of tenure to affordable rent and from watering down the homelessness legislation to pay to stay, as well as those he hasn’t like greater regulation of the private rented sector.

However, I’ve never agreed with those who regard him as a few sheets short of a ministerial brief: the Stan Laurel to the Oliver Hardy of Eric Pickles. Entertaining as the comparison was at the time, amusing as it may be to play #shappstistics and #shappsbingo on twitter, if he was just a figure of fun would he have been able to deliver the most radical change in social housing policy for 30 years?

In doing so he has taken an agenda devised in Conservative west London and implemented it with astonishing speed. He’s used the prospect of ‘localism’ to hoodwink the Lib Dems into agreeing to policies they opposed and he’s easily beaten off a Labour opposition that still does not know where it stands on the key issues.

Grant Shapps is a far more complex character than he first appeared. I’ve blogged before about his many faces and his many more faces as Bumptious Shapps jostles for position with Political Shapps, Shameless Shapps, Comedy Shapps and Rapping Shapps. But none of that had prepared me for the appearance over the weekend of his business alter-egos, Michael Green and Sebastian Fox.

For a while it seemed that they might even be enough to wipe him from Downing Street’s reshuffle whiteboard but it’s just been confirmed that he will indeed be replacing Baroness Warsi as Conservative Party co-chair. Who knows, maybe those cheesy books about How to Bounce Back from Recession could even come in handy?

But what about his record as housing minister? As I may have mentioned once or twice, the statistics on housebuilding, homelessness, affordable homes and private sector rents all have to go in the minus column (despite his valiant attempts to spin a good news story out of them). None of his confident pronouncements about the impact of the new homes bonus or building more homes than Labour show any signs of delivering. On just about every measure, the housing crisis has got worse under his stewardship (although in fairness it was always likely to with the economy in recession and housing investment cut by 65 per cent).

Later this week his successor will presumably help to launch the coalition’s housing strategy mark 3 in hopes that stats do not emerge a few days later showing a 97 per cent fall in affordable housing starts. Throughout his term in office, Shapps showed a naïve faith that giving housebuilders everything they want would do the trick when the evidence suggests that they are intent on building their profit margins rather than homes. On what is currently the biggest housing issue facing the country, his time in office has to go down as two wasted years.

On the plus side, at least he has been in the job for over two years (five if you include his time as shadow housing minister). Compared to the revolving door comings and goings under Labour that makes him a veteran who knows his brief. That, plus an ability to charm his critics, was much in evidence at the CIH conference in Manchester in June. Easy as it was to deride many of his initiatives, some of them (like self-build) have still made progress thanks to him.

Shapps has also been refreshingly honest about the fundamental problem in our housing system: that house prices are too high and need to come down. He deserves great credit for speaking out against the assumption that ever-rising prices are a good thing (even if he’s failed to see that this contradicts his argument that everything that is not a market rent is a ‘subsidy’).

He’s said that homelessness is what got him into politics and (discharge of the homelessness duty aside in my opinion) has done some good work in office. It’s worth pointing out that his final public act as housing minister was to announce that homelessness prevention grant will be protected until 2015. I’ve got no inside knowledge but that does seem like an unusual move by an outgoing minister and it was accompanied by confirmation of plans for StreetLink, a new service to be run by Homeless Link and Broadway that aims to ensure that as few people as possible face spending Christmas on the streets. That’s not a bad legacy to leave behind and it’s not hard to see that a new minister could be bad news for homelessness and supported housing.

Even his more grandiose statements are not necessarily a bad thing. His ‘gold standard’ of building more homes than Labour looks about as likely as his pledge to make us a nation of homebuilders but they were both ways of holding him to account and highlighting his record. So was his statement at the CIH conference about grant funding after 2015. A new minister will simply be able to shrug them off as nothing to do with them.

So for all of those reasons, plus a more personal one that he has given me so much to write about over the last five years, I will regret the departure of Grant Shapps.

The appointment of a new minister (not expected until tomorrow) presents opportunities as well as dangers. Maybe they will be open to movement in territory that was closed off until now – notably (as I was reminded on twitter this morning) on the need for greater regulation in the private rented sector that Shapps dismissed as ‘red tape’. Maybe they will not be quite so effective in driving through measures that undermine social housing. Maybe they will be prepared to admit that relying on housebuilders and the market is no solution to the housing crisis. Maybe they will even be part of a beefed-up housing department and have cabinet status. But I’m not holding my breath.

Taken for granted

Tue, 4 Sep 2012

Many people will be celebrating the departure of Grant Shapps today. My own feelings are much more mixed.

I’ve disagreed with the housing minister on most of the major policy changes he’s made, from ending security of tenure to affordable rent and from watering down the homelessness legislation to pay to stay, as well as those he hasn’t like greater regulation of the private rented sector.

However, I’ve never agreed with those who regard him as a few sheets short of a ministerial brief: the Stan Laurel to the Oliver Hardy of Eric Pickles. Entertaining as the comparison was at the time, amusing as it may be to play #shappstistics and #shappsbingo on twitter, if he was just a figure of fun would he have been able to deliver the most radical change in social housing policy for 30 years?

In doing so he has taken an agenda devised in Conservative west London and implemented it with astonishing speed. He’s used the prospect of ‘localism’ to hoodwink the Lib Dems into agreeing to policies they opposed and he’s easily beaten off a Labour opposition that still does not know where it stands on the key issues.

Grant Shapps is a far more complex character than he first appeared. I’ve blogged before about his many faces and his many more faces as Bumptious Shapps jostles for position with Political Shapps, Shameless Shapps, Comedy Shapps and Rapping Shapps. But none of that had prepared me for the appearance over the weekend of his business alter-egos, Michael Green and Sebastian Fox.

For a while it seemed that they might even be enough to wipe him from Downing Street’s reshuffle whiteboard but it’s just been confirmed that he will indeed be replacing Baroness Warsi as Conservative Party co-chair. Who knows, maybe those cheesy books about How to Bounce Back from Recession could even come in handy?

But what about his record as housing minister? As I may have mentioned once or twice, the statistics on housebuilding, homelessness, affordable homes and private sector rents all have to go in the minus column (despite his valiant attempts to spin a good news story out of them). None of his confident pronouncements about the impact of the new homes bonus or building more homes than Labour show any signs of delivering. On just about every measure, the housing crisis has got worse under his stewardship (although in fairness it was always likely to with the economy in recession and housing investment cut by 65 per cent).

Later this week his successor will presumably help to launch the coalition’s housing strategy mark 3 in hopes that stats do not emerge a few days later showing a 97 per cent fall in affordable housing starts. Throughout his term in office, Shapps showed a naïve faith that giving housebuilders everything they want would do the trick when the evidence suggests that they are intent on building their profit margins rather than homes. On what is currently the biggest housing issue facing the country, his time in office has to go down as two wasted years.

On the plus side, at least he has been in the job for over two years (five if you include his time as shadow housing minister). Compared to the revolving door comings and goings under Labour that makes him a veteran who knows his brief. That, plus an ability to charm his critics, was much in evidence at the CIH conference in Manchester in June. Easy as it was to deride many of his initiatives, some of them (like self-build) have still made progress thanks to him.

Shapps has also been refreshingly honest about the fundamental problem in our housing system: that house prices are too high and need to come down. He deserves great credit for speaking out against the assumption that ever-rising prices are a good thing (even if he’s failed to see that this contradicts his argument that everything that is not a market rent is a ‘subsidy’).

He’s said that homelessness is what got him into politics and (discharge of the homelessness duty aside in my opinion) has done some good work in office. It’s worth pointing out that his final public act as housing minister was to announce that homelessness prevention grant will be protected until 2015. I’ve got no inside knowledge but that does seem like an unusual move by an outgoing minister and it was accompanied by confirmation of plans for StreetLink, a new service to be run by Homeless Link and Broadway that aims to ensure that as few people as possible face spending Christmas on the streets. That’s not a bad legacy to leave behind and it’s not hard to see that a new minister could be bad news for homelessness and supported housing.

Even his more grandiose statements are not necessarily a bad thing. His ‘gold standard’ of building more homes than Labour looks about as likely as his pledge to make us a nation of homebuilders but they were both ways of holding him to account and highlighting his record. So was his statement at the CIH conference about grant funding after 2015. A new minister will simply be able to shrug them off as nothing to do with them.

So for all of those reasons, plus a more personal one that he has given me so much to write about over the last five years, I will regret the departure of Grant Shapps.

The appointment of a new minister (not expected until tomorrow) presents opportunities as well as dangers. Maybe they will be open to movement in territory that was closed off until now – notably (as I was reminded on twitter this morning) on the need for greater regulation in the private rented sector that Shapps dismissed as ‘red tape’. Maybe they will not be quite so effective in driving through measures that undermine social housing. Maybe they will be prepared to admit that relying on housebuilders and the market is no solution to the housing crisis. Maybe they will even be part of a beefed-up housing department and have cabinet status. But I’m not holding my breath.

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