Saturday, 25 March 2017

Inside edge

All posts from: June 2013

Facing the future

Fri, 28 Jun 2013

So now we know: 10 years of certainty on rents, five years on grant and who knows how many more years of welfare ‘reform’.

The future has come into much clearer focus this week following the spending round on Wednesday and the investment announcement on Thursday. And, as luck would have it, all of this coincided with the biggest housing conference of the year.

The CPI plus 1 per cent rent formula from 2015/16 is pretty good news for social landlords that had been planning for something less generous. On current levels of inflation it’s actually more than RPI plus 0.5 per cent. However that misses out the +£2 a week bit of the old formula and perhaps that, plus different forecasts of the gap between the two measures, explains why the Treasury also expects to save around £1 billion over the spending round period.

I had to leave Manchester before Mark Prisk delivered the sting in the tail of the good news about the £3.3 billion affordable housing programme from 2015/16: faster disposal and conversion of vacant stock.

The last thing I heard was Lord Freud attempting to reassure providers about the universal credit and struggling to reassure anyone about the bedroom tax. As others have pointed out already, his justification for something that will drive many tenants into the hands of doorstep lenders charging 5,000 per cent was that it is needed to keep interest rates low. He is not the first work and pensions minister to use this dubious argument incidentally – it’s part of a much bigger process and more benefit cuts are to come.

Put all of that together and this was a momentous week for housing. It could also hasten the commercialisation of many housing associations and accelerate the slow death of what we used to call social housing in England.

‘Affordable’ rent now seems to have moved from being a temporary policy to keep the show on the road to a more long-term plan for near-market rents that defines affordability in relation to the market rather than what people can actually afford to pay. As research published by the Joseph Rowntree Foundation today shows, rising rents are part of a much bigger inflationary squeeze on people on low incomes and that is set to get worse.

The new affordable housing programme will apparently deliver 165,000 affordable homes for £2.8 billion of grant. As Pete Jefferys points out on Shelter’s policy blog, that implies an average grant of £17,400, compared to £22,000 under the 2011-2015 programme and £60,000 under the 2008-2011 one.

Treasury chief secretary Danny Alexander hailed it as ‘the biggest public housing programme for over 20 years’. Judged strictly in terms of the number of units, he’s right – is it completely ridiculous to imagine that the starting point was being able to make that claim?

Allowing him some leeway, I’ll ignore the fact that most of the money will come from private finance and delivery will mostly be through housing associations that count as private for public borrowing purposes. However, he over-egged the hype when he also claimed it was ‘the most ambitious and significant investment in affordable housing for a generation’. In fact, in real terms it is not just a cut on the previous spending round but probably the smallest investment since the mid-2000s.

It would seem that the Treasury and DCLG decided to ignore warnings from housing associations that they do not have the capacity for another round of affordable rent. That sounds logical when they have cried wolf many times before over the last 25 years only to fall into line and compete for the cash when it becomes available. However, the fact that the DCLG considered tweaking the rent formula to disadvantage non-developing associations might be seen as evidence that this remains a background concern. 

The new programme already appears to include about three times as many affordable rent homes as in the existing one (much of which was social rent inherited from Labour). However, yesterday’s speech from Mark Prisk indicated that the spending round will extend affordable rent even further and faster than before:

‘With all this money and this commitment, there will be expectations about efficiencies. We will need to maximise the value we get out of every taxpayers’ pound… In considering bids for grant, we will expect providers to bring forward ambitious plans for maximising their own financial contribution – and we will expect this to include a rigorous approach to efficiency, along with plans to maximise cross subsidy from your existing stock. We expect providers to take a rigorous approach when looking at every relet and asking how they can use them to build more homes for more families. I expect the result to be a significant change in the number of homes that are either converted to be let at affordable rent or are sold when they become vacant.’

Under the existing programme, relets are limited to around 2 per cent of the existing stock (around 80,000 homes). An increase would mark a significant acceleration of the vanishing act for traditional social housing that I mapped out a year ago.

However, it would also have a much greater impact on the housing benefit bill – and those savings the Treasury is expecting from the rent formula. A recent report by the Future of London found that the proportion of tenants on benefits in affordable rent properties was the same as in traditional social housing. It found that even though rents were nowhere near the 80 per cent of market rent maximum, they were still on average 40 per cent higher than social rents. That means tenants in ‘affordable’ housing are in effect being condemned to the welfare dependency the government claims it is dedicated to defeating.

And the future of welfare will have a profound impact on the policy too. Housing associations will be taking part in affordable rent knowing that they can no longer rely on housing benefit to ‘take the strain’. More and more rents will start to hit the household benefit cap and and housing benefit will also be part of the overall welfare cap that threatens to leave tenants with rising shortfalls year on year. As Matthew Gardiner says in his assessment of the week: ‘you can charge it, but can you collect it?’ could now be the question asked by boards and funders.

Given all that, why take part at all? Why not simply concentrate on development for sale and proper market renting and for working households and use the profits to cross-subsidise their other work? That assumes that this can be squared with the regulator (who they will now have to pay) of course. Just as well then that Julian Ashby made a similar point this week, arguing that social housing could just become a ‘legacy’ for some organisations as they become more commercial.

One potential solution, according to Future of London, would be to make affordable rent a more explicit intermediate tenure for people in low-paid employment, alongside traditional social rents for those on benefits. That sounds logical and it may well be where we are heading. However, given it would be happening alongside a continuing reduction in social rent, it also implies that people on benefits will in reality be corralled into the lowest cost and lowest quality end of the private rented sector.

The government has also rejected the case for more borrowing freedom for council housing. That is a no-brainer that could have delivered tens of thousands more homes and generated growth and jobs much more quickly than the grand infrastructure projects featured in the rest of the Treasury’s Investing in Britain’s Future document. 

The Treasury’s hostility to anything that smacks of a return to the past seems to have killed that idea. However, it also seems to have rejected the carefully reasoned arguments put forward by larger housing associations for the freedom to raise their rents and borrow against the income streams to fund more homes. That would still have been unpalatable to some but it would at least have been based on a definition of ‘affordable’ that relates to incomes rather than market rents.

Given that Labour is implying it will stick to the government plans, the spending round has set the ground rules for housing for the next five years at least (though it could at least address the borrowing cap on councils). Despite the good news on the rent formula and future availability of grant, that can only intensify the dilemmas facing housing associations that are already struggling to balance being socially hearted and commercially minded. 

Facing the future

Fri, 28 Jun 2013

So now we know: 10 years of certainty on rents, five years on grant and who knows how many more years of welfare ‘reform’.

The future has come into much clearer focus this week following the spending round on Wednesday and the investment announcement on Thursday. And, as luck would have it, all of this coincided with the biggest housing conference of the year.

The CPI plus 1 per cent rent formula from 2015/16 is pretty good news for social landlords that had been planning for something less generous. On current levels of inflation it’s actually more than RPI plus 0.5 per cent. However that misses out the +£2 a week bit of the old formula and perhaps that, plus different forecasts of the gap between the two measures, explains why the Treasury also expects to save around £1 billion over the spending round period.

I had to leave Manchester before Mark Prisk delivered the sting in the tail of the good news about the £3.3 billion affordable housing programme from 2015/16: faster disposal and conversion of vacant stock.

The last thing I heard was Lord Freud attempting to reassure providers about the universal credit and struggling to reassure anyone about the bedroom tax. As others have pointed out already, his justification for something that will drive many tenants into the hands of doorstep lenders charging 5,000 per cent was that it is needed to keep interest rates low. He is not the first work and pensions minister to use this dubious argument incidentally – it’s part of a much bigger process and more benefit cuts are to come.

Put all of that together and this was a momentous week for housing. It could also hasten the commercialisation of many housing associations and accelerate the slow death of what we used to call social housing in England.

‘Affordable’ rent now seems to have moved from being a temporary policy to keep the show on the road to a more long-term plan for near-market rents that defines affordability in relation to the market rather than what people can actually afford to pay. As research published by the Joseph Rowntree Foundation today shows, rising rents are part of a much bigger inflationary squeeze on people on low incomes and that is set to get worse.

The new affordable housing programme will apparently deliver 165,000 affordable homes for £2.8 billion of grant. As Pete Jefferys points out on Shelter’s policy blog, that implies an average grant of £17,400, compared to £22,000 under the 2011-2015 programme and £60,000 under the 2008-2011 one.

Treasury chief secretary Danny Alexander hailed it as ‘the biggest public housing programme for over 20 years’. Judged strictly in terms of the number of units, he’s right – is it completely ridiculous to imagine that the starting point was being able to make that claim?

Allowing him some leeway, I’ll ignore the fact that most of the money will come from private finance and delivery will mostly be through housing associations that count as private for public borrowing purposes. However, he over-egged the hype when he also claimed it was ‘the most ambitious and significant investment in affordable housing for a generation’. In fact, in real terms it is not just a cut on the previous spending round but probably the smallest investment since the mid-2000s.

It would seem that the Treasury and DCLG decided to ignore warnings from housing associations that they do not have the capacity for another round of affordable rent. That sounds logical when they have cried wolf many times before over the last 25 years only to fall into line and compete for the cash when it becomes available. However, the fact that the DCLG considered tweaking the rent formula to disadvantage non-developing associations might be seen as evidence that this remains a background concern. 

The new programme already appears to include about three times as many affordable rent homes as in the existing one (much of which was social rent inherited from Labour). However, yesterday’s speech from Mark Prisk indicated that the spending round will extend affordable rent even further and faster than before:

‘With all this money and this commitment, there will be expectations about efficiencies. We will need to maximise the value we get out of every taxpayers’ pound… In considering bids for grant, we will expect providers to bring forward ambitious plans for maximising their own financial contribution – and we will expect this to include a rigorous approach to efficiency, along with plans to maximise cross subsidy from your existing stock. We expect providers to take a rigorous approach when looking at every relet and asking how they can use them to build more homes for more families. I expect the result to be a significant change in the number of homes that are either converted to be let at affordable rent or are sold when they become vacant.’

Under the existing programme, relets are limited to around 2 per cent of the existing stock (around 80,000 homes). An increase would mark a significant acceleration of the vanishing act for traditional social housing that I mapped out a year ago.

However, it would also have a much greater impact on the housing benefit bill – and those savings the Treasury is expecting from the rent formula. A recent report by the Future of London found that the proportion of tenants on benefits in affordable rent properties was the same as in traditional social housing. It found that even though rents were nowhere near the 80 per cent of market rent maximum, they were still on average 40 per cent higher than social rents. That means tenants in ‘affordable’ housing are in effect being condemned to the welfare dependency the government claims it is dedicated to defeating.

And the future of welfare will have a profound impact on the policy too. Housing associations will be taking part in affordable rent knowing that they can no longer rely on housing benefit to ‘take the strain’. More and more rents will start to hit the household benefit cap and and housing benefit will also be part of the overall welfare cap that threatens to leave tenants with rising shortfalls year on year. As Matthew Gardiner says in his assessment of the week: ‘you can charge it, but can you collect it?’ could now be the question asked by boards and funders.

Given all that, why take part at all? Why not simply concentrate on development for sale and proper market renting and for working households and use the profits to cross-subsidise their other work? That assumes that this can be squared with the regulator (who they will now have to pay) of course. Just as well then that Julian Ashby made a similar point this week, arguing that social housing could just become a ‘legacy’ for some organisations as they become more commercial.

One potential solution, according to Future of London, would be to make affordable rent a more explicit intermediate tenure for people in low-paid employment, alongside traditional social rents for those on benefits. That sounds logical and it may well be where we are heading. However, given it would be happening alongside a continuing reduction in social rent, it also implies that people on benefits will in reality be corralled into the lowest cost and lowest quality end of the private rented sector.

The government has also rejected the case for more borrowing freedom for council housing. That is a no-brainer that could have delivered tens of thousands more homes and generated growth and jobs much more quickly than the grand infrastructure projects featured in the rest of the Treasury’s Investing in Britain’s Future document. 

The Treasury’s hostility to anything that smacks of a return to the past seems to have killed that idea. However, it also seems to have rejected the carefully reasoned arguments put forward by larger housing associations for the freedom to raise their rents and borrow against the income streams to fund more homes. That would still have been unpalatable to some but it would at least have been based on a definition of ‘affordable’ that relates to incomes rather than market rents.

Given that Labour is implying it will stick to the government plans, the spending round has set the ground rules for housing for the next five years at least (though it could at least address the borrowing cap on councils). Despite the good news on the rent formula and future availability of grant, that can only intensify the dilemmas facing housing associations that are already struggling to balance being socially hearted and commercially minded. 

Spending review – live blog

Wed, 26 Jun 2013

16:55 A final thought on that £3 billion for affordabie housing. We won’t know more details until tomorrow when they seem set to be part of the government’s Investing in Britain’s Future announcement. What we do know, though, from the full spending round document, is that the DCLG Communities capital budget will see the second biggest cut across the whole of Whitehall. it will fall 35.6 per cent from £4.7 billion in 2014/15 to £3.1 billion in 2015/16. The smoke and mirrors - and more - will no doubt be revealed tomorrow.

16:30 Although the Lib Dems and Conservatives could not agree on more benefit cuts, that did not stop George Osborne announcing yet more ‘welfare reform’. On top of the long-term cap on benefits including housing benefit, he revealed that new claimants will have to wait seven days before receiving job seekers allowance in future.

Alison Garnham of the Child Poverty Action Group attached that as a ‘foodbanks first’ policy that would hurt families stuck in the low pay, no pay cycle. Once direct payment comes in it also looks like a guaranteed way of generating rent arrears - and/or businsess for payday lenders. 

16:15 Back from speaking about blogging to doing the thing itself and we don’t seem much closer to clarity on some of the key spending review issues. Reaction so far is subject to detail that should start to emerge from tomorrow.

As David Orr of the National Housing Federation puts it: ‘The Chancellor has made some broadly positive announcements for housing and health and social care today. But we need the full details of the capital settlement for developing new homes to really understand what impact today’s announcements will have on our ailing housing market.’

And Grainia Long of the CIH said it was unclear whether the spending round passed test it had set that housing should be recognised as an important form of infrastrucutre with detail still to emerge on the £3 billion mentioned by Osborne.

David Orr saw the CPI+1% rent formula as a ‘positive step’ that could help housing associations plan for building more homes but Grainia Long was concerned that it could reduce landlords’ income and therefore their ability to deliver more homes.  

Nick Duxbury reports for Inside Housingthat the formula could save the Treasury £540 million a year by 2017/18. the figure comes from policy costings attached to the spending round that say ‘there is expected to be a reduction in local authority current receipts and capital expenditure’.

 13:45: Signing out for now to talk about blogging at Manchester 2013 - back here later. Highlights so far are that extra £3 billion for affordable housing (is it new money? grant? guarantees?) and the new CPI plus 1 per cent rent formula (rather than RPI plus 0.5 per cent plus £2 - how will it work, especially with housing benefit included in the welfare cap linked to inflation?). No mention (that I can see so far) of council housing borrowing cap.

13:30 Some highlights from the spending review documents just published here:

‘The Government is today publishing capital allocations for all departments for 2015-16 and will set out shortly how over £100 billion of capital will be invested over the next Parliament in transport, science, schools, housing, broadband and flood defences.

‘The Government is committing to a significant package of capital spending on housing. The Government will set out its approach to affordable housing in Investing in Britain’s Future.This will include giving certainty that social rents will increase by CPI plus 1 per cent a year from 2015-16 to 2024-25.’

13:20 Osborne confirms housing benefit will be included in welfare cap. Will apply from April 2015 set for four years, reflecting inflation but in cash terms. More pain for tenants - and for landlords too?

12:47: Osborne pledges ‘over £3 billion of affordable housing investment’ to balance 10 per cent cut in DCLG’s resource budget. More details to come.

11.55: Interesting quote from Philippa Roe, Conservative leader of Westminster City Council, on council borrowing reported on Andrew Sparrow’s Guardian Live blog:

‘It’s now down to us as local authorities to behave differently when it comes to delivering services, and that covers everything from social finance schemes to early intervention on troubled families. Freeing up restrictions and allowing councils to borrow against their assets is key. That will allow us to build more houses, get more people into work, save money and deliver better public services. The chancellor has an opportunity with the spending round to do exactly this, but he needs to be radical and not let the opportunity slip.’

10:45: Just under two hours to go and here are some of the many key spending review questions for housing:

1) Is housing infrastructure? The good news story coming out of the review will undoubtedly be extra investment in infrastructure (full details of projects tomorrow). However, that tends to mean big-ticket items like roads and rail that deliver easily measured benefits to business while housing tends to be mentioned as an afterthought. How much (if any) housing grant will Osborne retain – and could he even attempt to spin a cut as an investment boost?

2) Where will the cap fall? Osborne is said to be about to spell out the details of how a cap on many working-age benefits will operate. Much of this will be after housing benefit is absorbed into universal credit. Are we set for years of below-inflation and below-rent increases in housing payments to private tenants – and how far will the cap extend to the social sector too?

3) What about rents? Speaking of which, the social sector will be watching closely for signals on the future of ‘affordable’ rent and the government’s renewal or otherwise of the RPI plus 0.5 per cent rent formula. Where will the balance be struck between the needs of landlords for certainty about future revenue and investment, Treasury concerns about rising housing benefit and the needs of tenants whose incomes are set to rise by much less than that? Will the government attempt to squeeze non-developing associations through the formula?

4) What about council borrowing? If Osborne and the coalition are even remotely serious about tackling the affordable housing crisis, they have to set local authorities free. The CIH argues that raising the borrowing cap by £7 billion could generate 75,000 homes in the next five years. Surely nothing can stand in the way of such a no-brainer – or can it?

5) What about London? It’s where the housing crisis is most acute and a certain mayor wants to take control of the capital’s stamp duty and other taxes. The G15 argues a major programme of affordable housing could be funded by discounted land and ring-fenced stamp duty receipts. Will Osborne really hand over the money or put the idea quietly on a Treasury shelf?

8.30: Here are the highlights of the advance speculation in this morning’s media.

Most Whitehall departments face cuts of 8-10 per cent in the review covering 2015/16, according to Nick Robinson of the BBC. Health, schools and overseas aid are protected. Robinson says Osborne will announce more long-term plans to ‘to invest more in Britain’s infrastructure in building roads, railways and housing’ plus more details of a long-term cap on much of benefits spending.

The Financial Times says Osborne will sweeten the £11.5 billion of cuts by promising ‘long-term capital commitments to road, rail, energy, housing and broadband projects’. Capital spending priorities for the next five years will be detailed later, with details of which specific infrastructure projects will be funded to follow on Thursday. While energy infrastructure will be high on the list, George Parker and Elizabeth Rigby say: ‘Housebuilders will also be given a boost as the government outlines details for the next cycle of the affordable homes programme.’ Let’s hope it’s not just housebuilders.

Osborne will unveil details of a consultation on a long-term welfare spending cap, which would cover disability and housing benefits, according to The Guardian. Though the review will only cover 2015/16, Patrick Wintour says Osborne will try to put Labour on the back foot by challenging it to accept the need for more cuts in the two years after that and has more on the politics of that here. As local government looks set to be in the firing line for more cuts, The Guardian says Osborne will set out the size of the single local growth fund while Treasury chief secretary Danny Alexander is expected to reveal details of the extension of community budgets in a bid to save £4 billion by ending duplication of services. A separate ‘good news’ announcement on infrastructure projects will follow on Thursday.

Just to lighten the mood, Andrew Grice in The Independent has experts forecasting that further cuts and tax rises will have to follow after 2015/16 whoever wins the next election, while Allister Heath in the Telegraph says turmoil in the financial markets could torpedo Osborne’s plans before they have even been published.

Elsewhere, the Centre for Cities has a briefing on the single local growth fund asking whether there will devolution or disappointment. The Social Market Foundation has a briefing putting the spending review in the (depressing) context of more austerity to come after 2015/16.

For more on what’s at stake for housing, including rents, council borrowing and more, see Michael Haddon’s feature in last week’s Inside Housing.

Spending review – live blog

Wed, 26 Jun 2013

16:55 A final thought on that £3 billion for affordabie housing. We won’t know more details until tomorrow when they seem set to be part of the government’s Investing in Britain’s Future announcement. What we do know, though, from the full spending round document, is that the DCLG Communities capital budget will see the second biggest cut across the whole of Whitehall. it will fall 35.6 per cent from £4.7 billion in 2014/15 to £3.1 billion in 2015/16. The smoke and mirrors - and more - will no doubt be revealed tomorrow.

16:30 Although the Lib Dems and Conservatives could not agree on more benefit cuts, that did not stop George Osborne announcing yet more ‘welfare reform’. On top of the long-term cap on benefits including housing benefit, he revealed that new claimants will have to wait seven days before receiving job seekers allowance in future.

Alison Garnham of the Child Poverty Action Group attached that as a ‘foodbanks first’ policy that would hurt families stuck in the low pay, no pay cycle. Once direct payment comes in it also looks like a guaranteed way of generating rent arrears - and/or businsess for payday lenders. 

16:15 Back from speaking about blogging to doing the thing itself and we don’t seem much closer to clarity on some of the key spending review issues. Reaction so far is subject to detail that should start to emerge from tomorrow.

As David Orr of the National Housing Federation puts it: ‘The Chancellor has made some broadly positive announcements for housing and health and social care today. But we need the full details of the capital settlement for developing new homes to really understand what impact today’s announcements will have on our ailing housing market.’

And Grainia Long of the CIH said it was unclear whether the spending round passed test it had set that housing should be recognised as an important form of infrastrucutre with detail still to emerge on the £3 billion mentioned by Osborne.

David Orr saw the CPI+1% rent formula as a ‘positive step’ that could help housing associations plan for building more homes but Grainia Long was concerned that it could reduce landlords’ income and therefore their ability to deliver more homes.  

Nick Duxbury reports for Inside Housingthat the formula could save the Treasury £540 million a year by 2017/18. the figure comes from policy costings attached to the spending round that say ‘there is expected to be a reduction in local authority current receipts and capital expenditure’.

 13:45: Signing out for now to talk about blogging at Manchester 2013 - back here later. Highlights so far are that extra £3 billion for affordable housing (is it new money? grant? guarantees?) and the new CPI plus 1 per cent rent formula (rather than RPI plus 0.5 per cent plus £2 - how will it work, especially with housing benefit included in the welfare cap linked to inflation?). No mention (that I can see so far) of council housing borrowing cap.

13:30 Some highlights from the spending review documents just published here:

‘The Government is today publishing capital allocations for all departments for 2015-16 and will set out shortly how over £100 billion of capital will be invested over the next Parliament in transport, science, schools, housing, broadband and flood defences.

‘The Government is committing to a significant package of capital spending on housing. The Government will set out its approach to affordable housing in Investing in Britain’s Future.This will include giving certainty that social rents will increase by CPI plus 1 per cent a year from 2015-16 to 2024-25.’

13:20 Osborne confirms housing benefit will be included in welfare cap. Will apply from April 2015 set for four years, reflecting inflation but in cash terms. More pain for tenants - and for landlords too?

12:47: Osborne pledges ‘over £3 billion of affordable housing investment’ to balance 10 per cent cut in DCLG’s resource budget. More details to come.

11.55: Interesting quote from Philippa Roe, Conservative leader of Westminster City Council, on council borrowing reported on Andrew Sparrow’s Guardian Live blog:

‘It’s now down to us as local authorities to behave differently when it comes to delivering services, and that covers everything from social finance schemes to early intervention on troubled families. Freeing up restrictions and allowing councils to borrow against their assets is key. That will allow us to build more houses, get more people into work, save money and deliver better public services. The chancellor has an opportunity with the spending round to do exactly this, but he needs to be radical and not let the opportunity slip.’

10:45: Just under two hours to go and here are some of the many key spending review questions for housing:

1) Is housing infrastructure? The good news story coming out of the review will undoubtedly be extra investment in infrastructure (full details of projects tomorrow). However, that tends to mean big-ticket items like roads and rail that deliver easily measured benefits to business while housing tends to be mentioned as an afterthought. How much (if any) housing grant will Osborne retain – and could he even attempt to spin a cut as an investment boost?

2) Where will the cap fall? Osborne is said to be about to spell out the details of how a cap on many working-age benefits will operate. Much of this will be after housing benefit is absorbed into universal credit. Are we set for years of below-inflation and below-rent increases in housing payments to private tenants – and how far will the cap extend to the social sector too?

3) What about rents? Speaking of which, the social sector will be watching closely for signals on the future of ‘affordable’ rent and the government’s renewal or otherwise of the RPI plus 0.5 per cent rent formula. Where will the balance be struck between the needs of landlords for certainty about future revenue and investment, Treasury concerns about rising housing benefit and the needs of tenants whose incomes are set to rise by much less than that? Will the government attempt to squeeze non-developing associations through the formula?

4) What about council borrowing? If Osborne and the coalition are even remotely serious about tackling the affordable housing crisis, they have to set local authorities free. The CIH argues that raising the borrowing cap by £7 billion could generate 75,000 homes in the next five years. Surely nothing can stand in the way of such a no-brainer – or can it?

5) What about London? It’s where the housing crisis is most acute and a certain mayor wants to take control of the capital’s stamp duty and other taxes. The G15 argues a major programme of affordable housing could be funded by discounted land and ring-fenced stamp duty receipts. Will Osborne really hand over the money or put the idea quietly on a Treasury shelf?

8.30: Here are the highlights of the advance speculation in this morning’s media.

Most Whitehall departments face cuts of 8-10 per cent in the review covering 2015/16, according to Nick Robinson of the BBC. Health, schools and overseas aid are protected. Robinson says Osborne will announce more long-term plans to ‘to invest more in Britain’s infrastructure in building roads, railways and housing’ plus more details of a long-term cap on much of benefits spending.

The Financial Times says Osborne will sweeten the £11.5 billion of cuts by promising ‘long-term capital commitments to road, rail, energy, housing and broadband projects’. Capital spending priorities for the next five years will be detailed later, with details of which specific infrastructure projects will be funded to follow on Thursday. While energy infrastructure will be high on the list, George Parker and Elizabeth Rigby say: ‘Housebuilders will also be given a boost as the government outlines details for the next cycle of the affordable homes programme.’ Let’s hope it’s not just housebuilders.

Osborne will unveil details of a consultation on a long-term welfare spending cap, which would cover disability and housing benefits, according to The Guardian. Though the review will only cover 2015/16, Patrick Wintour says Osborne will try to put Labour on the back foot by challenging it to accept the need for more cuts in the two years after that and has more on the politics of that here. As local government looks set to be in the firing line for more cuts, The Guardian says Osborne will set out the size of the single local growth fund while Treasury chief secretary Danny Alexander is expected to reveal details of the extension of community budgets in a bid to save £4 billion by ending duplication of services. A separate ‘good news’ announcement on infrastructure projects will follow on Thursday.

Just to lighten the mood, Andrew Grice in The Independent has experts forecasting that further cuts and tax rises will have to follow after 2015/16 whoever wins the next election, while Allister Heath in the Telegraph says turmoil in the financial markets could torpedo Osborne’s plans before they have even been published.

Elsewhere, the Centre for Cities has a briefing on the single local growth fund asking whether there will devolution or disappointment. The Social Market Foundation has a briefing putting the spending review in the (depressing) context of more austerity to come after 2015/16.

For more on what’s at stake for housing, including rents, council borrowing and more, see Michael Haddon’s feature in last week’s Inside Housing.

Sold short

Mon, 24 Jun 2013

A stark warning of the consequences of market failure in the housing system comes from an independent commission today.

The broad-based group set up by the Royal Institution of Chartered Surveyors is chaired by Michael Newey, RICS president elect and chief executive of Broadland Housing Group, and also includes Mark Clare of Barratt, Nick Jopling of Grainger, James Pargeter of Deloitte Real Estate, Paul Tennant of Orbit and Duncan Maclennan of the University of St Andrews.

They argue that: ‘High house prices, complemented with high levels of housing unaffordability are the greatest signs of market failure. This in turn has an adverse effect on labour mobility, commuting, productivity and job creation. This commission recognises the negative impact that a poor housing system has on the wider economy and hopes to see it elevated still higher on government agendas.

In other words, what the commission argues are ‘clear signs of market failure’ include negative externalities that go far beyond housing and require a switch away from the ‘short-termism’ that has characterised policy for the last 50 years.

However, in an illustration of just how difficult it is to break away from a short-term approach, the commission seems to face both ways on current government policies. For example, it manages to ‘welcome’ help to buy as one of several ‘positive initiatives to help the state of housing supply’ and as ‘making a positive impact’ while virtually everyone else has criticised it for boosting demand while doing nothing for supply. And it ‘welcomes the gradual departure from falling house prices across most UK regions’ while warning of ‘signs of the next boom already emanating from faster growth regions’.

There are similar problems with some of the recommendations. For example, the last government considered allowing self-invested private pension schemes (SIPPS) to invest in housing only to drop the idea over fears of a massive new, tax-subsidised boom in buy-to-let. The commission says that this should be restricted to newly developed property, but unlike the build to rent schemes that are specifically for rentals, this could still mean affluent holders of SIPPS pricing out owner-occupiers in the new-build market.

However, those caveats aside, the report offers a compelling analysis of why governments need to tackle housing and some good ideas on how to make policy more effective.

Alongside a call for better policy scrutiny, there is a stark warning to the government about the ‘unintended consequences’ of welfare reform that is all the more powerful for coming from such a broad-based group. ‘The UK government has to recognise that driving down capital subsidies, in the context of changing welfare support for rents, will expose not-for-profit housing providers, who continue to house low-income families, to excessive risk,’ it says. The report calls for the scrapping of the under-occupation penalty in cases where tenants are unlikely to secure another home in the same travel to work area – and especially in smaller communities and rural areas.

More radically, it calls for the right to buy to be replaced with a new portable home ownership discount for tenants that could be integrated with help to Buy. That would represent the end of the Conservatives most iconic (and controversial) housing policy but the commission argues this would preserve low-income homes while giving more choice to people who aspire to buy.

And it makes the case for bricks and mortar subsidies too: ‘Decent housing for poorer households always requires subsidies. The least expensive form of subsidy for low-income housing provision in the long term is often still likely to be a capital subsidy to providers, as rent levels can then be cheaper.’

To help pay for that, the UK administrations should give social landlords at least 15 years of certainty on rent setting to help ensure the attractiveness of the sector for private investors and funders. However, the report warns that has to take account of welfare policy. ‘If rental levels exceed maximum housing revenue subsidies, the element of risk introduced will make the affordable housing sector unattractive to third party investors, as well as putting strain on the collective financial viability of the sector.’

Extra investment would come too from allowing local authorities to use their prudential borrowing capacity to build homes and to introduce additional council tax bands on high-value homes with the extra money ring-fenced for affordable housing.

The report calls for a doubling of targets for the release of public land, backed by assumptions that it will be for residential purposes except where demand should not exist, an that a third of homes will be affordable and that it will be on a pay as you go basis. Land owners in general would be ‘required to use their best endeavours’ to ensure that construction starts within three years.

More controversially, the commission recommends a new ‘affordable rented housing’ planning class for fringe sites on the edge of existing settlements that would not easily get permission for full market activities. The homes would be let at 80 per cent of market rent for at least 15 years before being sold or let at higher rents. It’s an idea that sounds like it has potential to open up more sites but it sounds like a red rag to Simon Jenkins and co.

On private renting, the commission says the government should review tenancy arrangements for longer-term lets ‘that recognise tenants’ interests without reducing landlords’ rights’. If you’re thinking that sounds easier said than done, it proposes a ‘rental covenant’ within section 106 arrangements guaranteeing that homes will be available for rent for a specific period.

There is also a plea to all political parties to ‘make a commitment not to introduce rent controls’ as this would reduce supply. Opinion within the Labour Party has recently been moving in the opposite direction.

On energy efficiency of existing homes, the commission proposes some radical action on VAT, stamp duty, rental levels in social housing and Green Deal interest rates. It also recommends an idea that seems certain to annoy Eric Pickles: that anyone building an extension should be required to improve the standard of the rest of their home to at least EPC level C.

I suspect most people will disagree with some things in this report. However, despite my own earlier caveats, the fact that such a diverse commission can agree on the need for policies ‘to facilitate housing supply of all tenures rather than showing bias to just one or two’ is still real progress. 

Sold short

Mon, 24 Jun 2013

A stark warning of the consequences of market failure in the housing system comes from an independent commission today.

The broad-based group set up by the Royal Institution of Chartered Surveyors is chaired by Michael Newey, RICS president elect and chief executive of Broadland Housing Group, and also includes Mark Clare of Barratt, Nick Jopling of Grainger, James Pargeter of Deloitte Real Estate, Paul Tennant of Orbit and Duncan Maclennan of the University of St Andrews.

They argue that: ‘High house prices, complemented with high levels of housing unaffordability are the greatest signs of market failure. This in turn has an adverse effect on labour mobility, commuting, productivity and job creation. This commission recognises the negative impact that a poor housing system has on the wider economy and hopes to see it elevated still higher on government agendas.

In other words, what the commission argues are ‘clear signs of market failure’ include negative externalities that go far beyond housing and require a switch away from the ‘short-termism’ that has characterised policy for the last 50 years.

However, in an illustration of just how difficult it is to break away from a short-term approach, the commission seems to face both ways on current government policies. For example, it manages to ‘welcome’ help to buy as one of several ‘positive initiatives to help the state of housing supply’ and as ‘making a positive impact’ while virtually everyone else has criticised it for boosting demand while doing nothing for supply. And it ‘welcomes the gradual departure from falling house prices across most UK regions’ while warning of ‘signs of the next boom already emanating from faster growth regions’.

There are similar problems with some of the recommendations. For example, the last government considered allowing self-invested private pension schemes (SIPPS) to invest in housing only to drop the idea over fears of a massive new, tax-subsidised boom in buy-to-let. The commission says that this should be restricted to newly developed property, but unlike the build to rent schemes that are specifically for rentals, this could still mean affluent holders of SIPPS pricing out owner-occupiers in the new-build market.

However, those caveats aside, the report offers a compelling analysis of why governments need to tackle housing and some good ideas on how to make policy more effective.

Alongside a call for better policy scrutiny, there is a stark warning to the government about the ‘unintended consequences’ of welfare reform that is all the more powerful for coming from such a broad-based group. ‘The UK government has to recognise that driving down capital subsidies, in the context of changing welfare support for rents, will expose not-for-profit housing providers, who continue to house low-income families, to excessive risk,’ it says. The report calls for the scrapping of the under-occupation penalty in cases where tenants are unlikely to secure another home in the same travel to work area – and especially in smaller communities and rural areas.

More radically, it calls for the right to buy to be replaced with a new portable home ownership discount for tenants that could be integrated with help to Buy. That would represent the end of the Conservatives most iconic (and controversial) housing policy but the commission argues this would preserve low-income homes while giving more choice to people who aspire to buy.

And it makes the case for bricks and mortar subsidies too: ‘Decent housing for poorer households always requires subsidies. The least expensive form of subsidy for low-income housing provision in the long term is often still likely to be a capital subsidy to providers, as rent levels can then be cheaper.’

To help pay for that, the UK administrations should give social landlords at least 15 years of certainty on rent setting to help ensure the attractiveness of the sector for private investors and funders. However, the report warns that has to take account of welfare policy. ‘If rental levels exceed maximum housing revenue subsidies, the element of risk introduced will make the affordable housing sector unattractive to third party investors, as well as putting strain on the collective financial viability of the sector.’

Extra investment would come too from allowing local authorities to use their prudential borrowing capacity to build homes and to introduce additional council tax bands on high-value homes with the extra money ring-fenced for affordable housing.

The report calls for a doubling of targets for the release of public land, backed by assumptions that it will be for residential purposes except where demand should not exist, an that a third of homes will be affordable and that it will be on a pay as you go basis. Land owners in general would be ‘required to use their best endeavours’ to ensure that construction starts within three years.

More controversially, the commission recommends a new ‘affordable rented housing’ planning class for fringe sites on the edge of existing settlements that would not easily get permission for full market activities. The homes would be let at 80 per cent of market rent for at least 15 years before being sold or let at higher rents. It’s an idea that sounds like it has potential to open up more sites but it sounds like a red rag to Simon Jenkins and co.

On private renting, the commission says the government should review tenancy arrangements for longer-term lets ‘that recognise tenants’ interests without reducing landlords’ rights’. If you’re thinking that sounds easier said than done, it proposes a ‘rental covenant’ within section 106 arrangements guaranteeing that homes will be available for rent for a specific period.

There is also a plea to all political parties to ‘make a commitment not to introduce rent controls’ as this would reduce supply. Opinion within the Labour Party has recently been moving in the opposite direction.

On energy efficiency of existing homes, the commission proposes some radical action on VAT, stamp duty, rental levels in social housing and Green Deal interest rates. It also recommends an idea that seems certain to annoy Eric Pickles: that anyone building an extension should be required to improve the standard of the rest of their home to at least EPC level C.

I suspect most people will disagree with some things in this report. However, despite my own earlier caveats, the fact that such a diverse commission can agree on the need for policies ‘to facilitate housing supply of all tenures rather than showing bias to just one or two’ is still real progress. 

Own goal

Mon, 17 Jun 2013

As average asking prices pass £250,000 for the first time, two-thirds of the under-45s seem to have given up on the idea of ever owning a home.

Two surveys out today underline the point that what’s ‘good news’ for existing owners is exactly the opposite for people struggling to get on to the housing ladder.

Rightmove says that the market in the ‘under-priced’ (its word not mine) South East has ‘lifted off’ with asking prices rising by 14.8 per cent in the first six months of 2013 alone. However, the average increase across England and Wales is 10.4 per cent and the increase is even 5.8 per cent in the least buoyant region, the East Midlands.

If anything like that was repeated across the whole 12 months, 2013 would be appear to be set for a boom unlike anything seen since the credit crunch hit in 2007. True these are asking prices and prices actually achieved are still in the relative doldrums but they indicate that existing owners are reacting predictably to the start of Help to Buy by ramping up their demands.

Contrast that with another survey out today from the Halifax. Its Generation Rent report shows that only 32 per cent of non-owners aged 20-45 have a realistic plan to buy within the next five years. The remaining 68 per cent are split between those who like to buy but don’t think they will ever be able to (36 per cent), those who have given up because they were rejected for a mortgage (2 per cent) and those who don’t want to buy and haven’t tried (29 per cent, up from 23 per cent in 2011).

Deep pessimism about earning enough to buy is one reason for the split: the average mortgage that they think they can afford is £425 a month whereas the amount currently required by the average first-time buyer is £580 a month.

Problems obtaining a mortgage are another: over half of Generation Rent and an even higher proportion of their parents think it is ‘very hard’ or ‘virtually impossible’ to get one.

And Help to Buy does not seem to have changed the mood among buyers as much as it obviously has among sellers: 30 per cent of 20-45 year olds think it and similar schemes will work but 30 per cent believe the opposite.

Surveys like this can usually be taken with a pinch of salt but this one has some worrying implications for the future too. Some 71 per cent of Generation Rent fear that the country is in danger of being divided by social and economic differences between owners and non-owners and 58 per cent think it will create long-term social problems.

Perhaps most alarmingly, 57 per cent in the Generation Rent survey think that without a foothold on the property ladder they will be unable to retire. That perhaps shows a very low awareness of housing benefit and, as I’ve blogged before, the financial consequences of falling ownership will be huge for the Treasury.

That’s just one of the implications for the housing market and for the housing system as a whole.

Some 52 per cent of Generation Rent think Britain will become a nation of renters within the next generation – up from 46 per cent in 2011. And more people think Britain is becoming more like Europe, where renting is the norm.

However, as the report points out, European law means rental agreements are much longer than the six and 12 months contracts that are the norm in the UK. Pressure for reform can only grow.

So too is the evidence that Britain’s housing market has moved beyond dysfunctionality into something even worse. Last week, the National Housing Federation published figures showing that the number of people aged 30-44 has fallen by 9 per cent in rural areas thanks to soaring prices.

Meanwhile the Intermediary Mortgage Lenders Association published a discussion document warning that the regulatory response to the financial crisis has ‘hard wired’ a lower level of ownership into the system. It points out that on current trends only a third of 25-34 year olds will be owners by the end of the decade. That is half the level seen in 1993.

Warning that the regulatory response an imbalance between the regulated mortgage market and the unregulated buy to let, with the continuing availability of interest-only mortgages giving landlords a marked competitive advantage over would-be first-time buyers.

If nothing else will, perhaps the prospect of that soaring benefit bill for pensioners will concentrate government attention on more fundamental and long-term reforms to the whole housing system?

Own goal

Mon, 17 Jun 2013

As average asking prices pass £250,000 for the first time, two-thirds of the under-45s seem to have given up on the idea of ever owning a home.

Two surveys out today underline the point that what’s ‘good news’ for existing owners is exactly the opposite for people struggling to get on to the housing ladder.

Rightmove says that the market in the ‘under-priced’ (its word not mine) South East has ‘lifted off’ with asking prices rising by 14.8 per cent in the first six months of 2013 alone. However, the average increase across England and Wales is 10.4 per cent and the increase is even 5.8 per cent in the least buoyant region, the East Midlands.

If anything like that was repeated across the whole 12 months, 2013 would be appear to be set for a boom unlike anything seen since the credit crunch hit in 2007. True these are asking prices and prices actually achieved are still in the relative doldrums but they indicate that existing owners are reacting predictably to the start of Help to Buy by ramping up their demands.

Contrast that with another survey out today from the Halifax. Its Generation Rent report shows that only 32 per cent of non-owners aged 20-45 have a realistic plan to buy within the next five years. The remaining 68 per cent are split between those who like to buy but don’t think they will ever be able to (36 per cent), those who have given up because they were rejected for a mortgage (2 per cent) and those who don’t want to buy and haven’t tried (29 per cent, up from 23 per cent in 2011).

Deep pessimism about earning enough to buy is one reason for the split: the average mortgage that they think they can afford is £425 a month whereas the amount currently required by the average first-time buyer is £580 a month.

Problems obtaining a mortgage are another: over half of Generation Rent and an even higher proportion of their parents think it is ‘very hard’ or ‘virtually impossible’ to get one.

And Help to Buy does not seem to have changed the mood among buyers as much as it obviously has among sellers: 30 per cent of 20-45 year olds think it and similar schemes will work but 30 per cent believe the opposite.

Surveys like this can usually be taken with a pinch of salt but this one has some worrying implications for the future too. Some 71 per cent of Generation Rent fear that the country is in danger of being divided by social and economic differences between owners and non-owners and 58 per cent think it will create long-term social problems.

Perhaps most alarmingly, 57 per cent in the Generation Rent survey think that without a foothold on the property ladder they will be unable to retire. That perhaps shows a very low awareness of housing benefit and, as I’ve blogged before, the financial consequences of falling ownership will be huge for the Treasury.

That’s just one of the implications for the housing market and for the housing system as a whole.

Some 52 per cent of Generation Rent think Britain will become a nation of renters within the next generation – up from 46 per cent in 2011. And more people think Britain is becoming more like Europe, where renting is the norm.

However, as the report points out, European law means rental agreements are much longer than the six and 12 months contracts that are the norm in the UK. Pressure for reform can only grow.

So too is the evidence that Britain’s housing market has moved beyond dysfunctionality into something even worse. Last week, the National Housing Federation published figures showing that the number of people aged 30-44 has fallen by 9 per cent in rural areas thanks to soaring prices.

Meanwhile the Intermediary Mortgage Lenders Association published a discussion document warning that the regulatory response to the financial crisis has ‘hard wired’ a lower level of ownership into the system. It points out that on current trends only a third of 25-34 year olds will be owners by the end of the decade. That is half the level seen in 1993.

Warning that the regulatory response an imbalance between the regulated mortgage market and the unregulated buy to let, with the continuing availability of interest-only mortgages giving landlords a marked competitive advantage over would-be first-time buyers.

If nothing else will, perhaps the prospect of that soaring benefit bill for pensioners will concentrate government attention on more fundamental and long-term reforms to the whole housing system?

The big switch

Thu, 6 Jun 2013

Ed Miliband has ended three decades of political consensus that it’s better to subsidise rents than new homes but changing course will not be easy. 

The Labour leader’s speech in Newham this morning is significant in all kinds of ways: for the party’s positioning ahead of the next election; for the implied switch to contributory benefits and ‘something for something’; for tackling low pay; and for the careful use of ‘social security’ to avoid the loaded term ‘welfare’.

Even the setting – Newham Dockside – is significant since it looks very much like an endorsement of the more proactive but harsher approach to benefit claimants adopted by its mayor Sir Robin Wales.

All of those things could have major implications for housing but none so much as the plan to shift spending back from housing benefit to bricks and mortar – the end of ‘letting housing benefit take the strain’ and admitting the failure over decades to build enough homes.

Ed Miliband argues that:

‘We can’t afford to pay billions on ever-rising rents, when we should be building homes to bring down the bill.
Thirty years ago for every £100 we spent on housing, £80 was invested in bricks and mortar and £20 was spent on housing benefit. Today, for every £100 we spend on housing, just £5 is invested in bricks and mortar and £95 goes on housing benefit.

 There’s nothing to be celebrated in that.
 And as a consequence we are left with a housing benefit bill that goes up higher and higher.
For the simple reason, that we have built too few homes in this country and therefore we see higher and higher prices, particularly in the private sector.’

The numbers come from a report by the IPPR last year and this video makes the point very effectively.

It is a very welcome and long overdue move but, rather like getting toothpaste back into the tube, it will not be simple to achieve the switch. First, although it makes sound financial sense over the long term (see the work by PWC for L&Q quoted in the g15’s spending review submission) it will not deliver savings in the short term given the upfront capital grant required.

Second, unless the switch is carefully handled, it risks creating losers among tenants still dependent on housing benefit to pay their high rents.

Labour seems to have two mechanisms in mind. The first is to get local authorities to negotiate down the cost of rents through bulk purchasing from landlords. Miliband said:

‘At the moment, we expect individual families to negotiate with their landlords.
In these circumstances, it is almost inevitable that tenants end up paying over the odds. 
And so does the taxpayer, in the housing benefit bill.
It’s time to tackle this problem at source.

 So a Labour government would seek a radical devolution to local authorities.
And Labour councils in Lewisham, Liverpool, Leeds, Manchester, Sheffield and Birmingham have all come to us and said that if they had power to negotiate on behalf of tenants on housing benefit, they could get far greater savings than the individual on their own.
 So a Labour government would give councils this power.
Bringing the cost of housing benefit down.
 And what is more, we would let them keep some of the savings they make on the condition that they invested that money in helping build new homes. 
This is the way we can start to bring about the shift from benefits to building.’

That begs the question of why councils are not doing this already but under the current system they do not have much incentive to do so. The IPPR advocated localising housing benefit as part of a new system of affordable housing grants (the opposite of what is happening under universal credit). It’s not clear whether Labour would go that far but there would have to be some mechanism for verifying the savings and creating the incentive.

The second mechanism would be a cap on structural benefits. This seems to be different from the regional caps on overall benefits that were the subject of advance press speculation and the cap proposed by Iain Duncan Smith on annual managed expenditure (AME). As Miliband put it:

‘The next Labour government will use a three-year cap on structural welfare spending to help control costs. 
Such a cap will alert the next Labour government to problems coming down the track.
 And ensure that we make policy to keep the social security budget in limits. 
Introducing greater discipline, as ministers from across departments will be led to control the big drivers of spending.  

‘Structural’ welfare spending means benefits that are not a function of unemployment and the state of the economy. That would appear to include housing benefit. The dots would be joined at last between a rising housing benefit bill and not building enough homes but would the sums stack up over the three years?

In the social sector, an obvious issue is how the cap could be reconciled with social rents rising in line with the RPI plus 0.5 per cent formula that is due for renewal in 2015. If rent levels were capped that would help control housing benefit but it would come at the cost of lower borrowing capacity and lower investment in new homes. Bricks and mortar and personal subsidies can merge with each other in complex ways.

In the private sector, it begs the question of what happens if councils have wrung all they can out of bulk purchasing and rents and the housing benefit bill still keeps on rising. On the Today programme this morning shadow work and pensions secretary Liam Byrne put it this way:

‘The housing benefit bill is going up and up and up. We’re spending 95 per cent of the money we spend on housing on housing benefit and only 5 per cent on building houses. That doesn’t make sense and what a lot of councils are saying to us is if they had more power to regulate and control prices in the private rented sector they could create some savings which we could recycle into building more homes.’

‘The power to regulate and control prices’ certainly made me wake up since it implies the end of another 35 years of political consensus on housing. As Evan Davis asked, did he mean the return of rent control? Byrne replied:

‘I think that might be going a bit far. What I’m saying is that local councils are saying they’ve got lots of ideas of how they can make savings and they’d be prepared to crack on with that if there’s a deal on the table to share in the savings to build more houses. The reason why we’re saying a long-term cap on social security spending makes sense is that it forces you to engage in these long-term reforms.’

‘Might be going a bit far’ does not sound to me like rent control is being ruled out completely (and later on the Today programme Polly Toynbee argued that it was definitely on the table). How else will Labour keep within the cap if rents and housing benefit are still rising unless it wants to land tenants with further shortfalls?

The big switch

Thu, 6 Jun 2013

Ed Miliband has ended three decades of political consensus that it’s better to subsidise rents than new homes but changing course will not be easy. 

The Labour leader’s speech in Newham this morning is significant in all kinds of ways: for the party’s positioning ahead of the next election; for the implied switch to contributory benefits and ‘something for something’; for tackling low pay; and for the careful use of ‘social security’ to avoid the loaded term ‘welfare’.

Even the setting – Newham Dockside – is significant since it looks very much like an endorsement of the more proactive but harsher approach to benefit claimants adopted by its mayor Sir Robin Wales.

All of those things could have major implications for housing but none so much as the plan to shift spending back from housing benefit to bricks and mortar – the end of ‘letting housing benefit take the strain’ and admitting the failure over decades to build enough homes.

Ed Miliband argues that:

‘We can’t afford to pay billions on ever-rising rents, when we should be building homes to bring down the bill.
Thirty years ago for every £100 we spent on housing, £80 was invested in bricks and mortar and £20 was spent on housing benefit. Today, for every £100 we spend on housing, just £5 is invested in bricks and mortar and £95 goes on housing benefit.

 There’s nothing to be celebrated in that.
 And as a consequence we are left with a housing benefit bill that goes up higher and higher.
For the simple reason, that we have built too few homes in this country and therefore we see higher and higher prices, particularly in the private sector.’

The numbers come from a report by the IPPR last year and this video makes the point very effectively.

It is a very welcome and long overdue move but, rather like getting toothpaste back into the tube, it will not be simple to achieve the switch. First, although it makes sound financial sense over the long term (see the work by PWC for L&Q quoted in the g15’s spending review submission) it will not deliver savings in the short term given the upfront capital grant required.

Second, unless the switch is carefully handled, it risks creating losers among tenants still dependent on housing benefit to pay their high rents.

Labour seems to have two mechanisms in mind. The first is to get local authorities to negotiate down the cost of rents through bulk purchasing from landlords. Miliband said:

‘At the moment, we expect individual families to negotiate with their landlords.
In these circumstances, it is almost inevitable that tenants end up paying over the odds. 
And so does the taxpayer, in the housing benefit bill.
It’s time to tackle this problem at source.

 So a Labour government would seek a radical devolution to local authorities.
And Labour councils in Lewisham, Liverpool, Leeds, Manchester, Sheffield and Birmingham have all come to us and said that if they had power to negotiate on behalf of tenants on housing benefit, they could get far greater savings than the individual on their own.
 So a Labour government would give councils this power.
Bringing the cost of housing benefit down.
 And what is more, we would let them keep some of the savings they make on the condition that they invested that money in helping build new homes. 
This is the way we can start to bring about the shift from benefits to building.’

That begs the question of why councils are not doing this already but under the current system they do not have much incentive to do so. The IPPR advocated localising housing benefit as part of a new system of affordable housing grants (the opposite of what is happening under universal credit). It’s not clear whether Labour would go that far but there would have to be some mechanism for verifying the savings and creating the incentive.

The second mechanism would be a cap on structural benefits. This seems to be different from the regional caps on overall benefits that were the subject of advance press speculation and the cap proposed by Iain Duncan Smith on annual managed expenditure (AME). As Miliband put it:

‘The next Labour government will use a three-year cap on structural welfare spending to help control costs. 
Such a cap will alert the next Labour government to problems coming down the track.
 And ensure that we make policy to keep the social security budget in limits. 
Introducing greater discipline, as ministers from across departments will be led to control the big drivers of spending.  

‘Structural’ welfare spending means benefits that are not a function of unemployment and the state of the economy. That would appear to include housing benefit. The dots would be joined at last between a rising housing benefit bill and not building enough homes but would the sums stack up over the three years?

In the social sector, an obvious issue is how the cap could be reconciled with social rents rising in line with the RPI plus 0.5 per cent formula that is due for renewal in 2015. If rent levels were capped that would help control housing benefit but it would come at the cost of lower borrowing capacity and lower investment in new homes. Bricks and mortar and personal subsidies can merge with each other in complex ways.

In the private sector, it begs the question of what happens if councils have wrung all they can out of bulk purchasing and rents and the housing benefit bill still keeps on rising. On the Today programme this morning shadow work and pensions secretary Liam Byrne put it this way:

‘The housing benefit bill is going up and up and up. We’re spending 95 per cent of the money we spend on housing on housing benefit and only 5 per cent on building houses. That doesn’t make sense and what a lot of councils are saying to us is if they had more power to regulate and control prices in the private rented sector they could create some savings which we could recycle into building more homes.’

‘The power to regulate and control prices’ certainly made me wake up since it implies the end of another 35 years of political consensus on housing. As Evan Davis asked, did he mean the return of rent control? Byrne replied:

‘I think that might be going a bit far. What I’m saying is that local councils are saying they’ve got lots of ideas of how they can make savings and they’d be prepared to crack on with that if there’s a deal on the table to share in the savings to build more houses. The reason why we’re saying a long-term cap on social security spending makes sense is that it forces you to engage in these long-term reforms.’

‘Might be going a bit far’ does not sound to me like rent control is being ruled out completely (and later on the Today programme Polly Toynbee argued that it was definitely on the table). How else will Labour keep within the cap if rents and housing benefit are still rising unless it wants to land tenants with further shortfalls?

Decline and fall

Tue, 4 Jun 2013

Coalition ministers rarely fail to taunt Labour with the fact that the number of affordable homes fell under the last government. 

Conservative housing minister Mark Prisk and Lib Dem junior communities minister Don Foster deployed it yet again at DCLG questions yesterday.

Labour’s Jack Dromey attacked the government’s record on housebuilding and called for a rejection of the ‘economic illiteracy of austerity, which is pushing up the costs of failure through additional borrowing and soaring housing benefit bills’. He asked: ‘Does the housing minister agree that the time has come to invest in badly needed social and affordable homes to rent or buy, creating jobs and apprenticeships, bringing down the costs of failure and getting our economy moving?’

In response Foster was quick to deploy the favourite stat:

‘I think that the whole House will have been somewhat amused by the cheek of the hon. Gentleman, given that under his party’s administration we saw a reduction of 421,000 in the number of affordable homes. This government have introduced measures to reverse that trend, and we hope to announce further measures in the near future.’

Later Mark Prisk also had the number to hand to reply to an attack on Conservative Hammersmith & Fulham council by local Labour MP Andy Slaughter. ‘We are delivering on the completion of 170,000 more affordable homes; the Labour Government presided over the loss of 421,000 homes,’ said the housing minister.

These are just the two latest examples of the way that Tory and Lib Dem ministers alike use the 421,000 figure to attack Labour. With good reason too, since it is a very rare example of a government statistic that is both accurate and has been endorsed by the independent UK Statistics Authority.

Following a complaint from Dromey last year about misuse of statistics by former housing minister Grant Shapps, UKSA chair Andrew Dilnot replied that: ‘Official estimates of net change are available for social rented dwellings, but not for the wider stock of “affordable” housing beyond this category. They show an overall reduction of 421,000 in the stock of homes rented from local authorities and housing associations over the period 1997 to 2010.’

For the record, DCLG dwelling estimates show that there were 4,386,000 council and housing association homes when Labour came to office in 1997 and 3,966,000 when it lost power in 2010 – a fall of 420,000. The reductions were 150,000 in its first term, 268,000 in its second and 3,000 in its third.

On the face of it, then it’s game, set and match to Shapps and Prisk – and also to Foster and his Lib Dem predecessor Andrew Stunell.

But there are good reasons why the 421,000 figure could be a hostage to fortune.

First, will the coalition actually achieve the 170,000 affordable homes quoted by Prisk? Ministers insist they will but the programme has been slow to get off the ground to put it mildly. As the National Audit Office noted last year, more than half of the output is scheduled for the final year of the programme.

Second, as Dilnot pointed out, the 421,000 figure refers to ‘social rented’ rather than ‘affordable’ homes. The coalition’s 170,000 figure does include some social rented (a legacy of previous Labour plans) and some shared ownership homes but 80,000 homes for affordable rent. As I’ve argued before, the new programme also relies on the conversion of up to 80,000 existing social rented properties to affordable rent.

Third, though Labour now admits it did not do enough on new homes, one of the main reasons why the affordable housing stock fell between 1997 and 2010 was that right to buy sales exceeded new starts. Between 1997/98 and 2009/10 600,000 council and housing association homes were sold to tenants. Sales peaked at 84,000 in 2003/04 but after Labour introduced caps on discounts, the numbers fell dramatically and, following the credit crunch, they slumped to just 3,000 a year.

However, elsewhere in yesterday’s DCLG questions Prisk was boasting about the impact of coalition measures to boost right to buy sales:

‘Since we reinvigorated the right to buy last year, sales have more than doubled, to the highest level in six years. We believe it is vital to ensure that all eligible tenants know exactly how to exercise their right, which is why this month we are writing directly to more than 500,000 households right across England.’

Figures released last month show that there were 5,942 sales in 2012/13 – and that the 2,449 sales in the fourth quarter was more than four times the total in the same period of 2011/12. That’s before Prisk’s publicity drive and before measures announced in the Queen’s Speech to reduce the eligibility period from five years to three.

The coalition inherited a council and housing association stock of 3,966,000 in 2010. In its first two years, despite some of the lowest right to buy sales in the last 35 years, the total stock increased by just 27,000 to 3,993,000.

So Prisk is trying to have his cake and eat it too. The main reason for the 421,000 fall under Labour was a policy that he strongly supports. It was around half the fall seen under the Conservatives between 1979 and 1997 when right to buy sales were at their peak.

However, there was also one brighter piece of news in yesterday’s DCLG questions: a hint from Don Foster about the spending review. Asked by Green MP Caroline Lucas whether the government would ‘look again at lifting the current cap on council borrowing for house building’, Foster replied that ‘We are looking at the point the Hon. Lady has raised and an announcement will be made on 26 June.’

That and much more will be required in the review. Otherwise, if the government succeeds in reinvigorating the right to buy as much as Prisk boasts, the social housing stock will continue to shrink under his government just as it has under the last two. Even as the need for it increases exponentially.

Decline and fall

Tue, 4 Jun 2013

Coalition ministers rarely fail to taunt Labour with the fact that the number of affordable homes fell under the last government. 

Conservative housing minister Mark Prisk and Lib Dem junior communities minister Don Foster deployed it yet again at DCLG questions yesterday.

Labour’s Jack Dromey attacked the government’s record on housebuilding and called for a rejection of the ‘economic illiteracy of austerity, which is pushing up the costs of failure through additional borrowing and soaring housing benefit bills’. He asked: ‘Does the housing minister agree that the time has come to invest in badly needed social and affordable homes to rent or buy, creating jobs and apprenticeships, bringing down the costs of failure and getting our economy moving?’

In response Foster was quick to deploy the favourite stat:

‘I think that the whole House will have been somewhat amused by the cheek of the hon. Gentleman, given that under his party’s administration we saw a reduction of 421,000 in the number of affordable homes. This government have introduced measures to reverse that trend, and we hope to announce further measures in the near future.’

Later Mark Prisk also had the number to hand to reply to an attack on Conservative Hammersmith & Fulham council by local Labour MP Andy Slaughter. ‘We are delivering on the completion of 170,000 more affordable homes; the Labour Government presided over the loss of 421,000 homes,’ said the housing minister.

These are just the two latest examples of the way that Tory and Lib Dem ministers alike use the 421,000 figure to attack Labour. With good reason too, since it is a very rare example of a government statistic that is both accurate and has been endorsed by the independent UK Statistics Authority.

Following a complaint from Dromey last year about misuse of statistics by former housing minister Grant Shapps, UKSA chair Andrew Dilnot replied that: ‘Official estimates of net change are available for social rented dwellings, but not for the wider stock of “affordable” housing beyond this category. They show an overall reduction of 421,000 in the stock of homes rented from local authorities and housing associations over the period 1997 to 2010.’

For the record, DCLG dwelling estimates show that there were 4,386,000 council and housing association homes when Labour came to office in 1997 and 3,966,000 when it lost power in 2010 – a fall of 420,000. The reductions were 150,000 in its first term, 268,000 in its second and 3,000 in its third.

On the face of it, then it’s game, set and match to Shapps and Prisk – and also to Foster and his Lib Dem predecessor Andrew Stunell.

But there are good reasons why the 421,000 figure could be a hostage to fortune.

First, will the coalition actually achieve the 170,000 affordable homes quoted by Prisk? Ministers insist they will but the programme has been slow to get off the ground to put it mildly. As the National Audit Office noted last year, more than half of the output is scheduled for the final year of the programme.

Second, as Dilnot pointed out, the 421,000 figure refers to ‘social rented’ rather than ‘affordable’ homes. The coalition’s 170,000 figure does include some social rented (a legacy of previous Labour plans) and some shared ownership homes but 80,000 homes for affordable rent. As I’ve argued before, the new programme also relies on the conversion of up to 80,000 existing social rented properties to affordable rent.

Third, though Labour now admits it did not do enough on new homes, one of the main reasons why the affordable housing stock fell between 1997 and 2010 was that right to buy sales exceeded new starts. Between 1997/98 and 2009/10 600,000 council and housing association homes were sold to tenants. Sales peaked at 84,000 in 2003/04 but after Labour introduced caps on discounts, the numbers fell dramatically and, following the credit crunch, they slumped to just 3,000 a year.

However, elsewhere in yesterday’s DCLG questions Prisk was boasting about the impact of coalition measures to boost right to buy sales:

‘Since we reinvigorated the right to buy last year, sales have more than doubled, to the highest level in six years. We believe it is vital to ensure that all eligible tenants know exactly how to exercise their right, which is why this month we are writing directly to more than 500,000 households right across England.’

Figures released last month show that there were 5,942 sales in 2012/13 – and that the 2,449 sales in the fourth quarter was more than four times the total in the same period of 2011/12. That’s before Prisk’s publicity drive and before measures announced in the Queen’s Speech to reduce the eligibility period from five years to three.

The coalition inherited a council and housing association stock of 3,966,000 in 2010. In its first two years, despite some of the lowest right to buy sales in the last 35 years, the total stock increased by just 27,000 to 3,993,000.

So Prisk is trying to have his cake and eat it too. The main reason for the 421,000 fall under Labour was a policy that he strongly supports. It was around half the fall seen under the Conservatives between 1979 and 1997 when right to buy sales were at their peak.

However, there was also one brighter piece of news in yesterday’s DCLG questions: a hint from Don Foster about the spending review. Asked by Green MP Caroline Lucas whether the government would ‘look again at lifting the current cap on council borrowing for house building’, Foster replied that ‘We are looking at the point the Hon. Lady has raised and an announcement will be made on 26 June.’

That and much more will be required in the review. Otherwise, if the government succeeds in reinvigorating the right to buy as much as Prisk boasts, the social housing stock will continue to shrink under his government just as it has under the last two. Even as the need for it increases exponentially.

Help to Build

Mon, 3 Jun 2013

Grant Britain Homes logo

So, George Osborne, what about some Help to Build to go with all that Help to Buy?

The chancellor’s multi-billion flagship housing policy is under fire from virtually everyone because they can see what the result will be of stoking up demand while doing nothing about supply.

Now the CIH, NHF and g15 are all calling on Osborne to fund an expansion of affordable housing in the spending review for 2015/16 that will be published later this month. That is what they always do ahead of spending reviews of course, but they are deploying some powerful arguments.

The CIH argues that there is little prospect of private developers building the homes we need. We have only ever built enough homes when the state has played an active role and doing so would deliver wider benefits for the economy: every £1 of spending on construction generates £2.84 of economic activity; and 56p of every £1 invested in housing returns to the Treasury.

The NHF quotes figures from the IPPR showing that for every £1 spent on housing, 95p goes on housing benefit and only 5p on new homes. ‘The simplest and most effective way of redressing the balance and reducing the housing benefit bill is build more affordable homes.’

The g15 cites modelling by L&Q and accountancy firm PwC that looked at three different scenarios for financing affordable housing beyond 2015: a continuation of affordable rent; a return to higher capital grant plus lower social rents; and a move to full market rents with housing benefit taking the strain. The best value option for the taxpayer is higher grant with lower social rents.

The next three weeks will tell whether the government is listening or turning its usual deaf ear to those arguments. Recent history suggests the latter but the arguments are being made with renewed confidence given the growing political importance of housing. When Osborne reveals some of the detail on June 26, it’s worth looking out for six things in particular:

Housing’s place within infrastructure spending. The coalition admits that it cut capital spending too much in its first spending review and seems receptive to arguments made by the CBI and others about the economic impact of big infrastructure projects. Part of the justification for those is the supply-side impact of road and rail schemes on business costs and efficiency. A strong case can be made that new homes do the same, not just in terms of the direct impact on jobs and growth, but the benefits to employers too (see the NHF’s survey showed last week). The spending review will set out plans until 2020/21 ‘for the most economically valuable areas of capital expenditure’. As the NHF argues, that should include housing.

The future of subsidy. For a long time after the 2010 spending review it looked like there might not be one. Many people feared that capital subsidy would disappear altogether in the one to follow. A statement by Grant Shapps at the CIH conference last year (‘In all honesty I find it difficult to imagine a world with no government grant for housing’) was interpreted optimistically by many people but what will his successor Mark Prisk be saying as Osborne reveals the spending review in the middle of this year’s conference? It’s worth noting that virtually all of the new schemes announced by Osborne in the last 12 months, including Help to Buy, have relied on financial wheezes such as government guarantees rather than direct spending.

Meanwhile, if grant does continue, what will it fund: more affordable rent, a return of social rent or low-cost home ownership? The CIH calls for a £2 billion per year programme to deliver 55-65,000 homes a year in a mixture of the three, with a separate funding stream within it reserved for specialist and supported housing at social rent levels. However, it adds that affordable rent is unlikely to be sustainable for long given the rate at which it consumes providers’ financial capacity,  and calls for a fundamental review of  longer-term funding for sub-market housing.

What happens in London. Mayor Boris Johnson wants to take control of the multi-billion revenue generated in the capital through stamp duty and other taxes and decide how they are spent. The G15 is calling for a capital subsidy funded affordable and social rent programme funded with the money coming from discounted land or from grant that could be financed by ring-fencing stamp duty. It may make sense to use the receipts from taxes on London’s soaring house price  to solve the affordability crisis that they have created but will the Treasury really be prepared to give up control? And should it, given that the effects are felt well beyond the capital too?

The future of council housing. It seems like a no-brainer to allow local authorities to borrow more to build affordable homes. The CIH argues that raising housing revenue account (HRA) borrowing caps by an additional £7 billion would allow councils to build 75,000 homes over five years, creating 23,500 jobs and generating £5.6 billion of economic activity. Boris Johnson’s London Finance Commission also called for the caps to be lifted. Given the low levels of existing debt on council housing, that would be easily sustainable within their financial capacity. However, will Osborne and the Treasury really be prepared to go against 35 years of financial orthodoxy that says council housing is bad news and borrowing for it even worse?

What happens to rents. The current rent formula for social housing (rent rises of RPI plus 0.5 per cent +/- £2 a week) expires in 2015. A chancellor looking to cut spending, who has already restricted the increases in other benefits to the lower CPI rate of inflation, might well see that as a target. As the NHF and CIH submissions point out, that would be disastrous for future lending and business and investment plans. The chancellor promised in the Budget to set out a ten-year rental settlement and they say it is vital that this is based on the existing formula, which should be extended until 2025. The G15 calls for:  ‘A new settlement on rents which strikes a balance between what people can afford to pay and the need for investment in new homes. For now the current formula should be extended allowing time for discussion about what our residents can afford to pay.  Only then should we reset the target rent and move towards it in a way which is fair for residents and viable for housing providers.’

The implications for housing benefit of a cap on AME spending. The cap on annually managed expenditure (AME) announced by Osborne in the Budget may have sounded for a few micro-seconds like a purely technical measure but it is one that could have massive implications for housing. AME accounts for around half of all government expenditure and two thirds of that is social security and tax credits. So, although reports suggest Osborne has ruled out further cuts in working age benefits thanks to opposition from the Lib Dems, the AME cap suggests the opposite. As the CIH points out, that would have implications both for tenants’ wellbeing and landlords’ business plans (Moody’s has already downgraded the credit rating of 29 housing associations because of other welfare reform).

Inside Housing is calling for a long-term commitment to grant funding for affordable homes in the spending review. Support the Grant Britain Homes campaign.

Help to Build

Mon, 3 Jun 2013

Grant Britain Homes logo

So, George Osborne, what about some Help to Build to go with all that Help to Buy?

The chancellor’s multi-billion flagship housing policy is under fire from virtually everyone because they can see what the result will be of stoking up demand while doing nothing about supply.

Now the CIH, NHF and g15 are all calling on Osborne to fund an expansion of affordable housing in the spending review for 2015/16 that will be published later this month. That is what they always do ahead of spending reviews of course, but they are deploying some powerful arguments.

The CIH argues that there is little prospect of private developers building the homes we need. We have only ever built enough homes when the state has played an active role and doing so would deliver wider benefits for the economy: every £1 of spending on construction generates £2.84 of economic activity; and 56p of every £1 invested in housing returns to the Treasury.

The NHF quotes figures from the IPPR showing that for every £1 spent on housing, 95p goes on housing benefit and only 5p on new homes. ‘The simplest and most effective way of redressing the balance and reducing the housing benefit bill is build more affordable homes.’

The g15 cites modelling by L&Q and accountancy firm PwC that looked at three different scenarios for financing affordable housing beyond 2015: a continuation of affordable rent; a return to higher capital grant plus lower social rents; and a move to full market rents with housing benefit taking the strain. The best value option for the taxpayer is higher grant with lower social rents.

The next three weeks will tell whether the government is listening or turning its usual deaf ear to those arguments. Recent history suggests the latter but the arguments are being made with renewed confidence given the growing political importance of housing. When Osborne reveals some of the detail on June 26, it’s worth looking out for six things in particular:

Housing’s place within infrastructure spending. The coalition admits that it cut capital spending too much in its first spending review and seems receptive to arguments made by the CBI and others about the economic impact of big infrastructure projects. Part of the justification for those is the supply-side impact of road and rail schemes on business costs and efficiency. A strong case can be made that new homes do the same, not just in terms of the direct impact on jobs and growth, but the benefits to employers too (see the NHF’s survey showed last week). The spending review will set out plans until 2020/21 ‘for the most economically valuable areas of capital expenditure’. As the NHF argues, that should include housing.

The future of subsidy. For a long time after the 2010 spending review it looked like there might not be one. Many people feared that capital subsidy would disappear altogether in the one to follow. A statement by Grant Shapps at the CIH conference last year (‘In all honesty I find it difficult to imagine a world with no government grant for housing’) was interpreted optimistically by many people but what will his successor Mark Prisk be saying as Osborne reveals the spending review in the middle of this year’s conference? It’s worth noting that virtually all of the new schemes announced by Osborne in the last 12 months, including Help to Buy, have relied on financial wheezes such as government guarantees rather than direct spending.

Meanwhile, if grant does continue, what will it fund: more affordable rent, a return of social rent or low-cost home ownership? The CIH calls for a £2 billion per year programme to deliver 55-65,000 homes a year in a mixture of the three, with a separate funding stream within it reserved for specialist and supported housing at social rent levels. However, it adds that affordable rent is unlikely to be sustainable for long given the rate at which it consumes providers’ financial capacity,  and calls for a fundamental review of  longer-term funding for sub-market housing.

What happens in London. Mayor Boris Johnson wants to take control of the multi-billion revenue generated in the capital through stamp duty and other taxes and decide how they are spent. The G15 is calling for a capital subsidy funded affordable and social rent programme funded with the money coming from discounted land or from grant that could be financed by ring-fencing stamp duty. It may make sense to use the receipts from taxes on London’s soaring house price  to solve the affordability crisis that they have created but will the Treasury really be prepared to give up control? And should it, given that the effects are felt well beyond the capital too?

The future of council housing. It seems like a no-brainer to allow local authorities to borrow more to build affordable homes. The CIH argues that raising housing revenue account (HRA) borrowing caps by an additional £7 billion would allow councils to build 75,000 homes over five years, creating 23,500 jobs and generating £5.6 billion of economic activity. Boris Johnson’s London Finance Commission also called for the caps to be lifted. Given the low levels of existing debt on council housing, that would be easily sustainable within their financial capacity. However, will Osborne and the Treasury really be prepared to go against 35 years of financial orthodoxy that says council housing is bad news and borrowing for it even worse?

What happens to rents. The current rent formula for social housing (rent rises of RPI plus 0.5 per cent +/- £2 a week) expires in 2015. A chancellor looking to cut spending, who has already restricted the increases in other benefits to the lower CPI rate of inflation, might well see that as a target. As the NHF and CIH submissions point out, that would be disastrous for future lending and business and investment plans. The chancellor promised in the Budget to set out a ten-year rental settlement and they say it is vital that this is based on the existing formula, which should be extended until 2025. The G15 calls for:  ‘A new settlement on rents which strikes a balance between what people can afford to pay and the need for investment in new homes. For now the current formula should be extended allowing time for discussion about what our residents can afford to pay.  Only then should we reset the target rent and move towards it in a way which is fair for residents and viable for housing providers.’

The implications for housing benefit of a cap on AME spending. The cap on annually managed expenditure (AME) announced by Osborne in the Budget may have sounded for a few micro-seconds like a purely technical measure but it is one that could have massive implications for housing. AME accounts for around half of all government expenditure and two thirds of that is social security and tax credits. So, although reports suggest Osborne has ruled out further cuts in working age benefits thanks to opposition from the Lib Dems, the AME cap suggests the opposite. As the CIH points out, that would have implications both for tenants’ wellbeing and landlords’ business plans (Moody’s has already downgraded the credit rating of 29 housing associations because of other welfare reform).

Inside Housing is calling for a long-term commitment to grant funding for affordable homes in the spending review. Support the Grant Britain Homes campaign.

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