Saturday, 25 March 2017

Inside edge

All posts from: September 2013

2020 vision

Wed, 25 Sep 2013

Ed Miliband’s conference speech was much vaguer about housing than the advance briefing but it still sounds like good news.

The Labour leader said that ‘we’ll have an aim that at the end of the parliament Britain will be building 200,000 homes a year, more than at any time in a generation’.

He said that in 2010 there were a million too few homes in Britain but that the shortfall would rise to 2 million – the equivalent of five cities the size of Birmingham – by 2020 if we carry on as we are.

He warned land-hoarding developers they would have to ‘use the land or lose the land’. That prompted loud applause in the hall but it is already generating ‘Red Ed is back’ headlines outside it.

He promised local communities a new ‘right to grow’ without obstruction from neighbouring authorities. Best of all, he pledged that a Labour government would identify sites for new towns and garden cities.

And, in case anyone had forgotten since Friday night, he promised that ‘I’ll be the prime minister who repeals the bedroom tax’. That was the line that prompted an immediate attack from Conservative Party chairman Grant Shapps about a million spare bedrooms but it is still an important turning of the tide in the political debate on benefits.

But that’s where what Mr Miliband actually said finishes and interpretation begins. Take that 200,000 pledge. For a start, if he really meant Britain that is a very modest pledge indeed: the last time there were more than 200,000 homes built was five years, not a generation, ago. He also seems to have forgotten that Westminster does not control housing policy in Scotland and Wales except indirectly through UK policy on the economy and welfare.

So I’ll assume that he really meant England and that the niceties of devolution did not fit with his theme of ‘that’s how we make Britain better than this’.

The last time there were more than 200,000 completions in England was 1988/89, which does fit with that ‘a generation ago’. It would be almost double the 107,000 in 2012/13 so it’s significant but it still seems some way short of the ‘million homes in the next parliament’ pledge that Labour was rumoured to be considering ahead of the conference. It is also still less than is required to meet demand and it will have taken 13 years to get back to pre-credit crunch levels of building.

As Carl Brown has been reporting, shadow housing minister Jack Dromey revealed more on ‘the right to grow’ at a fringe meeting yesterday while shadow communities secretary Hilary Benn had more details on ‘use it or lose it’ in his speech this morning.

He explained that: ‘When communities have given planning permission they should be able to say to developers, “we have given you the go ahead so please get on and build the homes you said would. And if you don’t then we will charge you, and if you still don’t, we will sell the land on to someone else who will”.’

There was more detail in this morning’s preview of Mr Miliband’s speech in The Guardian. Patrick Wintour reported that the Labour leader would appoint local government finance expert Sir Michael Lyons to lead a commission looking into the obstacles to new building and enable an incoming government to draw up housing reform legislation quickly.

‘The Lyons housing commission will look to see how little-used existing compulsory purchase orders – which require owners to sell – can be strengthened by making them less legalistic and time-consuming.’ he said.

‘It will also examine how to give local authorities proper compulsory purchase powers so that they can buy, assemble and grant planning permission on land that is being hoarded and is holding back development.’

It would also set out detailed plans to establish new towns and garden cities including financial incentives and freedoms for local authorities, such as the ability to retain the increase in business rates for 30 years to invest in infrastructure and services.

That is good news for anyone like me who believes that new towns and compulsory purchase of land are prerequisites for building enough homes. It also sounds like some serious thought has gone into how to get to that 200,000 figure. Better a modest but achievable target than one dreamt up out of thin air.

That said, new towns will take time even if the planning starts on Labour’s first day in office. Given that the most likely location for them will be Conservative-held seats in the south east, they will face some ferocious opposition. How much of a contribution will they really be making after five years?

Labour will also be taking power just as help to buy 2 begins to wind down. If those predicting a house price bubble are correct then it could burst at exactly the wrong time, sending private house building into reverse.

That only emphasises the point that the numbers will only be achieved with a big contribution from the public sector. England has not seen 200,000 a year on a consistent basis since the early 1980s and the end of the council house building programme.

So it was disappointing not to see an explicit commitment from Mr Miliband or (yesterday) Ed Balls to changing the public borrowing rules for council housing. Mr Benn promised in his speech this morning that ‘a Labour government will help councils to build more affordable homes by reforming the housing revenue account’ but hasn’t that already happened? There may be an overwhelming desire in the party to change the rules and build social housing but is the leadership yet ready?

In his speech, Mr Balls said that we need to secure stronger growth and invest for the future: ‘That is why we have consistently said, it is why the IMF has said, bring forward £10 billion of infrastructure investment right now, build 400,000 affordable houses over the next two years, create half a million jobs and thousands of apprenticeships. That is the way to secure an economy that works for all and is built to last.’

However, I read that as him saying what the coalition should do now – not committing himself to it in 2015. Perhaps we’ll hear more later this week but we’ll probably have to await the outcome of his zero-based spending review for the detail. 

It’s worth noting that the Liberal Democrats committed themselves to a target of 300,000 homes a year last week. However, after the leadership successfully opposed an amendment on lifting borrowing caps completely, party policy is now merely to allow councils to pool them, so it is far from clear how they would achieve it.

Someone sharper-eyed than me spotted that The Independent’s preview of the speech talked of boosting the number of new homes ‘from 87,000 to 200,000’ by 2020. That 87,000 is the current total of private completions – so would any social housing be on top of that? We don’t currently have enough detail to say but that would be a much bigger deal. Without council housing, England has only achieved 200,000 completions three times since the war: 1964, 1967 and 1968.

That, coincidentally, was the last time that a Labour government came to power with a serious house building target and it went on to demonstrate the risks of getting too obsessed with the numbers game to the exclusion of other considerations. There seems little danger of that with a much more modest target for 2020. 

While gaps remain in the detail, and there are still questions to be answered, the very good news is that housing is back as a top priority for Labour. 

2020 vision

Wed, 25 Sep 2013

Ed Miliband’s conference speech was much vaguer about housing than the advance briefing but it still sounds like good news.

The Labour leader said that ‘we’ll have an aim that at the end of the parliament Britain will be building 200,000 homes a year, more than at any time in a generation’.

He said that in 2010 there were a million too few homes in Britain but that the shortfall would rise to 2 million – the equivalent of five cities the size of Birmingham – by 2020 if we carry on as we are.

He warned land-hoarding developers they would have to ‘use the land or lose the land’. That prompted loud applause in the hall but it is already generating ‘Red Ed is back’ headlines outside it.

He promised local communities a new ‘right to grow’ without obstruction from neighbouring authorities. Best of all, he pledged that a Labour government would identify sites for new towns and garden cities.

And, in case anyone had forgotten since Friday night, he promised that ‘I’ll be the prime minister who repeals the bedroom tax’. That was the line that prompted an immediate attack from Conservative Party chairman Grant Shapps about a million spare bedrooms but it is still an important turning of the tide in the political debate on benefits.

But that’s where what Mr Miliband actually said finishes and interpretation begins. Take that 200,000 pledge. For a start, if he really meant Britain that is a very modest pledge indeed: the last time there were more than 200,000 homes built was five years, not a generation, ago. He also seems to have forgotten that Westminster does not control housing policy in Scotland and Wales except indirectly through UK policy on the economy and welfare.

So I’ll assume that he really meant England and that the niceties of devolution did not fit with his theme of ‘that’s how we make Britain better than this’.

The last time there were more than 200,000 completions in England was 1988/89, which does fit with that ‘a generation ago’. It would be almost double the 107,000 in 2012/13 so it’s significant but it still seems some way short of the ‘million homes in the next parliament’ pledge that Labour was rumoured to be considering ahead of the conference. It is also still less than is required to meet demand and it will have taken 13 years to get back to pre-credit crunch levels of building.

As Carl Brown has been reporting, shadow housing minister Jack Dromey revealed more on ‘the right to grow’ at a fringe meeting yesterday while shadow communities secretary Hilary Benn had more details on ‘use it or lose it’ in his speech this morning.

He explained that: ‘When communities have given planning permission they should be able to say to developers, “we have given you the go ahead so please get on and build the homes you said would. And if you don’t then we will charge you, and if you still don’t, we will sell the land on to someone else who will”.’

There was more detail in this morning’s preview of Mr Miliband’s speech in The Guardian. Patrick Wintour reported that the Labour leader would appoint local government finance expert Sir Michael Lyons to lead a commission looking into the obstacles to new building and enable an incoming government to draw up housing reform legislation quickly.

‘The Lyons housing commission will look to see how little-used existing compulsory purchase orders – which require owners to sell – can be strengthened by making them less legalistic and time-consuming.’ he said.

‘It will also examine how to give local authorities proper compulsory purchase powers so that they can buy, assemble and grant planning permission on land that is being hoarded and is holding back development.’

It would also set out detailed plans to establish new towns and garden cities including financial incentives and freedoms for local authorities, such as the ability to retain the increase in business rates for 30 years to invest in infrastructure and services.

That is good news for anyone like me who believes that new towns and compulsory purchase of land are prerequisites for building enough homes. It also sounds like some serious thought has gone into how to get to that 200,000 figure. Better a modest but achievable target than one dreamt up out of thin air.

That said, new towns will take time even if the planning starts on Labour’s first day in office. Given that the most likely location for them will be Conservative-held seats in the south east, they will face some ferocious opposition. How much of a contribution will they really be making after five years?

Labour will also be taking power just as help to buy 2 begins to wind down. If those predicting a house price bubble are correct then it could burst at exactly the wrong time, sending private house building into reverse.

That only emphasises the point that the numbers will only be achieved with a big contribution from the public sector. England has not seen 200,000 a year on a consistent basis since the early 1980s and the end of the council house building programme.

So it was disappointing not to see an explicit commitment from Mr Miliband or (yesterday) Ed Balls to changing the public borrowing rules for council housing. Mr Benn promised in his speech this morning that ‘a Labour government will help councils to build more affordable homes by reforming the housing revenue account’ but hasn’t that already happened? There may be an overwhelming desire in the party to change the rules and build social housing but is the leadership yet ready?

In his speech, Mr Balls said that we need to secure stronger growth and invest for the future: ‘That is why we have consistently said, it is why the IMF has said, bring forward £10 billion of infrastructure investment right now, build 400,000 affordable houses over the next two years, create half a million jobs and thousands of apprenticeships. That is the way to secure an economy that works for all and is built to last.’

However, I read that as him saying what the coalition should do now – not committing himself to it in 2015. Perhaps we’ll hear more later this week but we’ll probably have to await the outcome of his zero-based spending review for the detail. 

It’s worth noting that the Liberal Democrats committed themselves to a target of 300,000 homes a year last week. However, after the leadership successfully opposed an amendment on lifting borrowing caps completely, party policy is now merely to allow councils to pool them, so it is far from clear how they would achieve it.

Someone sharper-eyed than me spotted that The Independent’s preview of the speech talked of boosting the number of new homes ‘from 87,000 to 200,000’ by 2020. That 87,000 is the current total of private completions – so would any social housing be on top of that? We don’t currently have enough detail to say but that would be a much bigger deal. Without council housing, England has only achieved 200,000 completions three times since the war: 1964, 1967 and 1968.

That, coincidentally, was the last time that a Labour government came to power with a serious house building target and it went on to demonstrate the risks of getting too obsessed with the numbers game to the exclusion of other considerations. There seems little danger of that with a much more modest target for 2020. 

While gaps remain in the detail, and there are still questions to be answered, the very good news is that housing is back as a top priority for Labour. 

Sanctions impact

Mon, 23 Sep 2013

As everyone focuses on the bedroom tax, there is worrying evidence today of the impact of another part of the benefits system on vulnerable homeless people.

Tougher benefits sanctions were introduced in October 2012 for people on job seeker’s allowance. The period that benefit can be stopped increased from between one and 26 weeks to four weeks and three years. Changes for those on employment support allowance followed in December 2012.

The changes are part of steadily escalating conditionality requirements, including the claimant commitment that will be introduced in 100 job centres a month from October as part of the government’s conviction that ‘looking for work should be a full time job’. 

Claimants can be sanctioned for offences including ailing to attend a job interview or to participate in the work programme and refusing an employment or training scheme or leaving one voluntarily or through misconduct. The idea is that the sanctions will change people’s behaviour and make them more likely to find employment.

However, research out today Homeless Link finds that the new regime is disproportionately affecting homeless people: 31 per cent of those on JSA had been sanctioned compared to just 3 per cent of claimants overall.

The report said: ‘While the intention of sanctions is to incentivise claimants into work, our research shows that this is not happening for homeless people. Instead, sanctions are effectively punishing vulnerable people – who are trying to engage with finding work – for making mistakes. This is a high cost to pay for people who are least able to manage.’

The consequences can be extreme. The report found that some sanctioned homeless people are turning to petty crime while some are suffering increased anxiety that worsens existing mental health issues. Others are going into food poverty. When I tweeted about this yesterday, I was also told of young homeless people who have been sanctioned and ended up in hospital being treated for malnutrition.

As one service provider told Homeless Link: ‘We are working with some very vulnerable people at the outset and sanctions take people to another level of vulnerability.’

The housing consequences can be serious too despite the fact that claimants who are sanctioned are meant to continue receiving housing benefit. The report said that in practice homeless claimants do not know to notify the local authority of their circumstances and ended up losing their housing benefit too.

All but one of the 45 service providers who responded to the Homeless Link survey said that homeless people were falling into rent arrears as a result and 23 said that clients had been evicted because of sanctions.

Homelessness organisations face a loss of rental income and of service charge income too, with impacts on organisational income and on the workload of support workers.

If the findings are alarming enough for homeless people suffering from sanctions and the organisations trying to help them, they should also be deeply worrying for the Department for Work and Pensions because they suggest that sanctions are failing in their principal aim of incentivising people into work.

Among the recommendations, the report says that the DWP should take more account of the difficulties faced by people with complex needs and that guidance should make provision for exemptions or special terms for homeless people who need more support. Meanwhile clearer and more consistent information would help prevent people losing housing benefit as well as sanctioned benefits.

For homelessness service providers, the message is to give more encouragement and support to clients to inform Job Centre Plus of their circumstances and to make them aware of their responsibilities.

But is there an unspoken message for housing as a whole too? Beyond the bedroom tax, other less visible cuts in housing benefit continue to rise, especially for younger people, and homelessness is on the increase. And it’s not just cuts in housing benefit that can lead to consequences such as rent arrears and evictions. If and when the universal credit starts, with payment of the housing element direct to the claimant, any cut in any benefit will be mean potential rent arrears. This report highlights yet again the importance of maintaining direct payment for vulnerable claimants and having effective procedures in place.

While universal credit itself may not be seen for a while beyond a limited roll-out in a few job centres at a time, associated elements of the new system including a steadily tighter conditionality regime are still being introduced at the same time. Ten pilots on in-work conditionality, where up to a million working claimants could be sanctioned for not working enough hours, begin next month.

Sanctions impact

Mon, 23 Sep 2013

As everyone focuses on the bedroom tax, there is worrying evidence today of the impact of another part of the benefits system on vulnerable homeless people.

Tougher benefits sanctions were introduced in October 2012 for people on job seeker’s allowance. The period that benefit can be stopped increased from between one and 26 weeks to four weeks and three years. Changes for those on employment support allowance followed in December 2012.

The changes are part of steadily escalating conditionality requirements, including the claimant commitment that will be introduced in 100 job centres a month from October as part of the government’s conviction that ‘looking for work should be a full time job’. 

Claimants can be sanctioned for offences including ailing to attend a job interview or to participate in the work programme and refusing an employment or training scheme or leaving one voluntarily or through misconduct. The idea is that the sanctions will change people’s behaviour and make them more likely to find employment.

However, research out today Homeless Link finds that the new regime is disproportionately affecting homeless people: 31 per cent of those on JSA had been sanctioned compared to just 3 per cent of claimants overall.

The report said: ‘While the intention of sanctions is to incentivise claimants into work, our research shows that this is not happening for homeless people. Instead, sanctions are effectively punishing vulnerable people – who are trying to engage with finding work – for making mistakes. This is a high cost to pay for people who are least able to manage.’

The consequences can be extreme. The report found that some sanctioned homeless people are turning to petty crime while some are suffering increased anxiety that worsens existing mental health issues. Others are going into food poverty. When I tweeted about this yesterday, I was also told of young homeless people who have been sanctioned and ended up in hospital being treated for malnutrition.

As one service provider told Homeless Link: ‘We are working with some very vulnerable people at the outset and sanctions take people to another level of vulnerability.’

The housing consequences can be serious too despite the fact that claimants who are sanctioned are meant to continue receiving housing benefit. The report said that in practice homeless claimants do not know to notify the local authority of their circumstances and ended up losing their housing benefit too.

All but one of the 45 service providers who responded to the Homeless Link survey said that homeless people were falling into rent arrears as a result and 23 said that clients had been evicted because of sanctions.

Homelessness organisations face a loss of rental income and of service charge income too, with impacts on organisational income and on the workload of support workers.

If the findings are alarming enough for homeless people suffering from sanctions and the organisations trying to help them, they should also be deeply worrying for the Department for Work and Pensions because they suggest that sanctions are failing in their principal aim of incentivising people into work.

Among the recommendations, the report says that the DWP should take more account of the difficulties faced by people with complex needs and that guidance should make provision for exemptions or special terms for homeless people who need more support. Meanwhile clearer and more consistent information would help prevent people losing housing benefit as well as sanctioned benefits.

For homelessness service providers, the message is to give more encouragement and support to clients to inform Job Centre Plus of their circumstances and to make them aware of their responsibilities.

But is there an unspoken message for housing as a whole too? Beyond the bedroom tax, other less visible cuts in housing benefit continue to rise, especially for younger people, and homelessness is on the increase. And it’s not just cuts in housing benefit that can lead to consequences such as rent arrears and evictions. If and when the universal credit starts, with payment of the housing element direct to the claimant, any cut in any benefit will be mean potential rent arrears. This report highlights yet again the importance of maintaining direct payment for vulnerable claimants and having effective procedures in place.

While universal credit itself may not be seen for a while beyond a limited roll-out in a few job centres at a time, associated elements of the new system including a steadily tighter conditionality regime are still being introduced at the same time. Ten pilots on in-work conditionality, where up to a million working claimants could be sanctioned for not working enough hours, begin next month.

Export market

Fri, 20 Sep 2013

What price homes for Londoners when new developments are marketed first to overseas investors with a promise that there will be ‘no social housing’?

As The Standard reported yesterday, the ‘fully private’ flats at Capital Towers near the Olympic Park go on sale in Malaysia this weekend in what it dubs a ‘no riff raff row’.

That example comes from a report out today by Darren Johnson, a Green Party London Assembly member, who claims that a third of all buyers of new homes are from overseas and that two-thirds go to investors rather than occupiers.

He accuses mayor Boris Johnson of actively encouraging a process that leads to increasing concentration of housing wealth, a severe social housing shortage and the unnecessary demolition of existing stock and a lifetime of insecure renting for most Londoners.

The exact stats on overseas investment are disputed and can depend on whether you are talking about central London or the whole of the capital. However, there seems little doubt that off-plan sales overseas are an increasingly important way of funding new development.

Developers and estate agents argue that it is precisely this investment that makes schemes viable and enables them to fund contributions to affordable housing. In effect, the new build market in London is now a highly successful export market.

However, it’s a funny kind of export that stays in the same place. As Darren Johnson points out, it means that the mayor’s drive to increase supply is simultaneously increasing demand. Many of the new ‘homes’ become buy-to-leave investments or second homes for the international elite.

The report cites other developments including the Belzier building near Old Street, where only a third of properties had residents on the electoral roll and paying council tax, and regeneration schemes in Earl’s Court and Elephant and Castle that will see former council estates demolished and replaced with luxury developments with a minimal ‘affordable’ component.

These are not isolated examples. A year ago this week, in his first act as the new housing minister, Mark Prisk made a fact-finding mission to the Saffron Square development in Croydon and praised the way that the developer had been able to renegotiate the affordable housing requirement to make the scheme viable. Strangely he did not mention the marketing brochure aimed at Far Eastern investors that boasted that ‘the development does not contain ANY rented affordable housing and only includes 36 “shared ownership” units within the scheme’.

Last week I blogged about One Commercial Street, the venue for George Osborne’s speech proclaiming that the economy is ‘turning a corner’. He hammered home that message against the backdrop of a scheme where work stalled in 2008 under Labour and restarted in 2012 under the coalition. What he did not mention was that 40 per cent of the private apartments were sold to Far Eastern investors before being marketed in Britain. And while the scheme does at least include 70 affordable flats they will be accessed via a separate entrance tucked discreetly away around the corner to allow owners and investors ‘the exclusive use of the impressively stylish entrance lobby’.

Earlier this week, an investigation by the Bureau of Investigative Journalism showed how developers are using viability assessments on schemes all over the country to water down their contributions to affordable housing. In London, of course, Boris Johnson faces a legal challenge from eight boroughs over his attempts to force them to accept ‘affordable’ rather than social rents. A report by London Councils last week estimated that the capital needs 800,000 new homes over the next eight years and is currently on course to deliver just 250,000.

The radical alternative approach put forward by Darren Johnson includes controls and taxes on overseas investors and second home owners and a tax on all land values. Councils, housing associations and co-ops would get the money and powers to build genuinely affordable housing for themselves rather than rely on the private market. And private tenants would get stabilising rent controls and new protections.

Policies like that will be anathema to Messrs Osborne, Prisk and (Boris) Johnson. As things stand, though, London seems stuck in a situation where developments are only viable if a proportion of homes are sold for export, affordable housing can only be built by making it unaffordable and the housing shortage keeps getting steadily worse.

See this week’s Inside Housing for a roundtable discussion on the London housing crisis. 

Export market

Fri, 20 Sep 2013

What price homes for Londoners when new developments are marketed first to overseas investors with a promise that there will be ‘no social housing’?

As The Standard reported yesterday, the ‘fully private’ flats at Capital Towers near the Olympic Park go on sale in Malaysia this weekend in what it dubs a ‘no riff raff row’.

That example comes from a report out today by Darren Johnson, a Green Party London Assembly member, who claims that a third of all buyers of new homes are from overseas and that two-thirds go to investors rather than occupiers.

He accuses mayor Boris Johnson of actively encouraging a process that leads to increasing concentration of housing wealth, a severe social housing shortage and the unnecessary demolition of existing stock and a lifetime of insecure renting for most Londoners.

The exact stats on overseas investment are disputed and can depend on whether you are talking about central London or the whole of the capital. However, there seems little doubt that off-plan sales overseas are an increasingly important way of funding new development.

Developers and estate agents argue that it is precisely this investment that makes schemes viable and enables them to fund contributions to affordable housing. In effect, the new build market in London is now a highly successful export market.

However, it’s a funny kind of export that stays in the same place. As Darren Johnson points out, it means that the mayor’s drive to increase supply is simultaneously increasing demand. Many of the new ‘homes’ become buy-to-leave investments or second homes for the international elite.

The report cites other developments including the Belzier building near Old Street, where only a third of properties had residents on the electoral roll and paying council tax, and regeneration schemes in Earl’s Court and Elephant and Castle that will see former council estates demolished and replaced with luxury developments with a minimal ‘affordable’ component.

These are not isolated examples. A year ago this week, in his first act as the new housing minister, Mark Prisk made a fact-finding mission to the Saffron Square development in Croydon and praised the way that the developer had been able to renegotiate the affordable housing requirement to make the scheme viable. Strangely he did not mention the marketing brochure aimed at Far Eastern investors that boasted that ‘the development does not contain ANY rented affordable housing and only includes 36 “shared ownership” units within the scheme’.

Last week I blogged about One Commercial Street, the venue for George Osborne’s speech proclaiming that the economy is ‘turning a corner’. He hammered home that message against the backdrop of a scheme where work stalled in 2008 under Labour and restarted in 2012 under the coalition. What he did not mention was that 40 per cent of the private apartments were sold to Far Eastern investors before being marketed in Britain. And while the scheme does at least include 70 affordable flats they will be accessed via a separate entrance tucked discreetly away around the corner to allow owners and investors ‘the exclusive use of the impressively stylish entrance lobby’.

Earlier this week, an investigation by the Bureau of Investigative Journalism showed how developers are using viability assessments on schemes all over the country to water down their contributions to affordable housing. In London, of course, Boris Johnson faces a legal challenge from eight boroughs over his attempts to force them to accept ‘affordable’ rather than social rents. A report by London Councils last week estimated that the capital needs 800,000 new homes over the next eight years and is currently on course to deliver just 250,000.

The radical alternative approach put forward by Darren Johnson includes controls and taxes on overseas investors and second home owners and a tax on all land values. Councils, housing associations and co-ops would get the money and powers to build genuinely affordable housing for themselves rather than rely on the private market. And private tenants would get stabilising rent controls and new protections.

Policies like that will be anathema to Messrs Osborne, Prisk and (Boris) Johnson. As things stand, though, London seems stuck in a situation where developments are only viable if a proportion of homes are sold for export, affordable housing can only be built by making it unaffordable and the housing shortage keeps getting steadily worse.

See this week’s Inside Housing for a roundtable discussion on the London housing crisis. 

Seeing the cracks

Tue, 17 Sep 2013

Whether it’s the UN, the Lib Dem conference or tribunals in Fife, the cracks in the bedroom ceiling are growing by the day.

As Pete Apps reports for Inside Housing, only two members of the junior coalition party voted against a grassroots motion at the conference in Glasgow yesterday calling for an immediate evaluation of the controversial policy.

The motion condemned the policy that Lib Dem MPs were instructed to call the ‘spare room subsidy’ for ‘discriminating against the most vulnerable in society’.  Richard Kemp, former leader of Liverpool Council, called it ‘reprehensible and evil’ and Baroness Shirley Williams, probably the party’s senior figure, called it a ‘big mistake’.

A separate poll of party members by the website Lib Dem Voice found that 53 per cent were opposed. That’s a lower proportion than at the Glasgow conference though the comments suggest that a number of them support the principle of the policy while deploring the implementation. While that might seem like a classic example of Lib Dem middle-of-the-roadery, that perhaps suggests that minds are changed when confronted with the reality that the policy is impossible to implement fairly within any reasonable timescale.

Conservative supporters of the policy will now presumably dismiss this week’s motion of ‘those people from Glasgow’ as easily as they rejected last week’s preliminary findings of ‘that woman from Brazil’ Raquel Rolnik. A motion at the Lib Dem conference is unlikely to worry IDS too much but the pressure is still growing at a political level.

Attention now turns to next week’s Labour conference in Brighton. Labour has been performing contortions over the issue for several weeks. Some reports confidently predict that Ed Miliband will commit to scrapping the bedroom tax in his conference speech but in others party sources are playing down a suggestion from Scottish welfare spokesperson Jackie Baillie over the weekend that we can ‘expect an announcement relatively soon’.  

Away from politics, the cracks are now appearing in the legal system. Tenants have now been successful in four out of five First Tier Tribunal cases in Fife. These cover cases where rooms were held to be too small to count as a bedroom and cases where there is a ‘well established alternative’ use which means they are not a bedroom. Joe Halewood has chronicled the detail and the implications extensively on his blog and in his latest post argues that the decisions could be even better news for landlords and councils than for tenants. Paul Lewis also has more details on his blog.

Rulings by First Tier Tribunals are not legally binding on those elsewhere. However, they seem consistent with the QC’s opinion obtained by Glasgow Advice Agency that I blogged about in February. As Giles Peaker comments at Nearly Legal, it’s hard to see how other tribunals could not take it on themselves ‘to decide what isn’t a bedroom, given the absence of any definition in law’. He also highlights the ‘high-risk problems’ facing the DWP as it considers fresh guidance in the light of the rulings.

Away from politics and the law, the effects of the bedroom tax continue to play out in unpredictable ways. In the last few days, the Daily Record has reported on tenants in Glasgow banned from downsizing until they pay off their arrears and The Sentinel has covered rising voids in Stoke as tenants are forced into smaller and more expensive private rented homes As columns like this one by Simon Faulkner in the Grimsby Telegraph and this brilliant one by Ian Bell in The Herald show, the implications and contradictions of the policy are now well understood in the mainstream media.

If the government thought that the furore over the bedroom tax would start to die down once it was implemented in April, or after a quiet summer, it will clearly have to think again. It will take more than a fresh coat of paint or a new strip of wallpaper to cover up those cracks in the bedroom ceiling. 

Seeing the cracks

Tue, 17 Sep 2013

Whether it’s the UN, the Lib Dem conference or tribunals in Fife, the cracks in the bedroom ceiling are growing by the day.

As Pete Apps reports for Inside Housing, only two members of the junior coalition party voted against a grassroots motion at the conference in Glasgow yesterday calling for an immediate evaluation of the controversial policy.

The motion condemned the policy that Lib Dem MPs were instructed to call the ‘spare room subsidy’ for ‘discriminating against the most vulnerable in society’.  Richard Kemp, former leader of Liverpool Council, called it ‘reprehensible and evil’ and Baroness Shirley Williams, probably the party’s senior figure, called it a ‘big mistake’.

A separate poll of party members by the website Lib Dem Voice found that 53 per cent were opposed. That’s a lower proportion than at the Glasgow conference though the comments suggest that a number of them support the principle of the policy while deploring the implementation. While that might seem like a classic example of Lib Dem middle-of-the-roadery, that perhaps suggests that minds are changed when confronted with the reality that the policy is impossible to implement fairly within any reasonable timescale.

Conservative supporters of the policy will now presumably dismiss this week’s motion of ‘those people from Glasgow’ as easily as they rejected last week’s preliminary findings of ‘that woman from Brazil’ Raquel Rolnik. A motion at the Lib Dem conference is unlikely to worry IDS too much but the pressure is still growing at a political level.

Attention now turns to next week’s Labour conference in Brighton. Labour has been performing contortions over the issue for several weeks. Some reports confidently predict that Ed Miliband will commit to scrapping the bedroom tax in his conference speech but in others party sources are playing down a suggestion from Scottish welfare spokesperson Jackie Baillie over the weekend that we can ‘expect an announcement relatively soon’.  

Away from politics, the cracks are now appearing in the legal system. Tenants have now been successful in four out of five First Tier Tribunal cases in Fife. These cover cases where rooms were held to be too small to count as a bedroom and cases where there is a ‘well established alternative’ use which means they are not a bedroom. Joe Halewood has chronicled the detail and the implications extensively on his blog and in his latest post argues that the decisions could be even better news for landlords and councils than for tenants. Paul Lewis also has more details on his blog.

Rulings by First Tier Tribunals are not legally binding on those elsewhere. However, they seem consistent with the QC’s opinion obtained by Glasgow Advice Agency that I blogged about in February. As Giles Peaker comments at Nearly Legal, it’s hard to see how other tribunals could not take it on themselves ‘to decide what isn’t a bedroom, given the absence of any definition in law’. He also highlights the ‘high-risk problems’ facing the DWP as it considers fresh guidance in the light of the rulings.

Away from politics and the law, the effects of the bedroom tax continue to play out in unpredictable ways. In the last few days, the Daily Record has reported on tenants in Glasgow banned from downsizing until they pay off their arrears and The Sentinel has covered rising voids in Stoke as tenants are forced into smaller and more expensive private rented homes As columns like this one by Simon Faulkner in the Grimsby Telegraph and this brilliant one by Ian Bell in The Herald show, the implications and contradictions of the policy are now well understood in the mainstream media.

If the government thought that the furore over the bedroom tax would start to die down once it was implemented in April, or after a quiet summer, it will clearly have to think again. It will take more than a fresh coat of paint or a new strip of wallpaper to cover up those cracks in the bedroom ceiling. 

Silly season

Fri, 13 Sep 2013

Silly? Naïve? Bonkers? Proposals by the RICS for managing house price inflation are getting about as warm a welcome in the property industry as the UN got at Conservative HQ.

Some of the reactions are just as self-interested too since an end to house price volatility would be good news for people who want to buy but very bad news for some of those queuing up to say the whole idea is crazy. While some critics point with good reason to the practical difficulties of implementing the idea, others seem personally offended by the very idea of putting a stop to the house price gravy train.

The proposal follows a wider-ranging report on housing in June by an independent commission set up by the RICS and chaired by incoming president Michael Newey, the chief executive of Broadland Housing Group. That concluded that: ‘High house prices, complemented with high levels of housing unaffordability, are the greatest signs of market failure.’.

The proposal is that house price inflation of 5 per cent should trigger action by the Bank of England, which currently has no explicit policy on asset prices and house prices to go with its target on inflation. Rather than increase interest rates, it should use macroprudential tools such as caps on the term of a mortgage, loan to value or loan to income caps and changing banks’ capital requirements. These would act like ‘speed bumps’ for the market and also help prevent inflationary expectations.

This is not the first time that ideas like this have been put forward. A range of options were put forward in early drafts of the Mortgage Market Review before it was watered down. Mark Carney told MPs yesterday that the Bank would consider loan to value ratios and ‘more intensive supervision’ of the banks to rein in mortgage lending. And caps on the term of a mortgage were used in Canada when he ran the central bank there.

Ken Gibb has an excellent discussion of the policy options and difficulties on his blog, where he makes the case for going further with real house price stability, matching general price inflation over the longer term.  

The RICS stresses that it is not wedded the 5 per cent limit but chose it to reflect 3 per cent average annual wage growth seen since 1998 plus a 2 per cent premium to reflect the impact of the shortage of new supply.

To give some idea of the potential gains from that I took a quick look at the Halifax house price index. The average UK house price was £72,000 in 1998. If it had risen by 5 per cent a year, it would now be around £142,000. Instead the average is now £167,000 and that is after a substantial correction following the credit crunch. Homes would still be expensive but still more within reach.

But my choice of the Halifax index and 1998 reveals some of the practical difficulties with the idea. A range of other indices and starting points could be used with very different results.

Above all, there is that UK average. What is the use of a 5 per cent national cap if prices are rising 10 per cent a year in London and standing still elsewhere? The RICS acknowledges that regional caps may be needed but there would be practical difficulties with them too.

On the implementation side, tackling house price inflation through action on mortgages would do nothing to deal with cash buyers or buyers from overseas, who account for sizeable proportions of the market. It would not necessarily do anything about buy to let, which is not financed through conventional mortgages. And the example of Canada may not be quite such a good one to cite given that its house prices seem even more over-valued than ours.

Those are formidable difficulties, as the RICS acknowledges, but does that mean it is not worth discussing the plan, as the critics imply? Those who argue that this would be interfering in the free market have to face the fact that it has not worked out so well so far, that it is currently operating in the entirely artificial conditions of 0.5 per cent base rates, and that the government is already interfering in the opposite direction through Funding for Lending and Help to Buy.

Those who argue that the whole idea is crazy when the real issue is supply have an obvious point that was covered in some detail in the first RICS report. However, as I argued on my other blog yesterday, there is no immediate prospect within the current housebuilding system of supply increasing to the levels needed. A report out today from London Councils argues that 809,000 new homes will be needed in the capital between now and 2021 to meet new demand and the backlog of housing need. On current projections we will only build 250,000. New supply is vital but concentrating on supply alone risks exacerbating the problems we already face. It has to make sense to look at demand too and to find ways to stop house prices escalating ever further out of reach, especially in London.

Finally, if you haven’t already, I urge you to brighten up your day by reading Jeremy Warner’s column on the RICS in the Telegraph. He makes the supply argument very powerfully and argues that ‘as silly suggestions go, they don’t come much sillier than the RICS’s proposed 5 per cent house price gap’. This being the Telegraph, he also has to have a go at planning minister Nick Boles for his latest ‘war on the countryside’ speech (this time an alleged all-out offensive on our national parks).

Then he brings the silliness full circle by quoting an exchange on twitter in which Boles claims that he only does it to wind up Simon Jenkins, the nimby-in-chief at the National Trust. Except for one thing: all along he had been speaking to the excellent (but not entirely genuine) @GeneralBoles

Silly season

Fri, 13 Sep 2013

Silly? Naïve? Bonkers? Proposals by the RICS for managing house price inflation are getting about as warm a welcome in the property industry as the UN got at Conservative HQ.

Some of the reactions are just as self-interested too since an end to house price volatility would be good news for people who want to buy but very bad news for some of those queuing up to say the whole idea is crazy. While some critics point with good reason to the practical difficulties of implementing the idea, others seem personally offended by the very idea of putting a stop to the house price gravy train.

The proposal follows a wider-ranging report on housing in June by an independent commission set up by the RICS and chaired by incoming president Michael Newey, the chief executive of Broadland Housing Group. That concluded that: ‘High house prices, complemented with high levels of housing unaffordability, are the greatest signs of market failure.’.

The proposal is that house price inflation of 5 per cent should trigger action by the Bank of England, which currently has no explicit policy on asset prices and house prices to go with its target on inflation. Rather than increase interest rates, it should use macroprudential tools such as caps on the term of a mortgage, loan to value or loan to income caps and changing banks’ capital requirements. These would act like ‘speed bumps’ for the market and also help prevent inflationary expectations.

This is not the first time that ideas like this have been put forward. A range of options were put forward in early drafts of the Mortgage Market Review before it was watered down. Mark Carney told MPs yesterday that the Bank would consider loan to value ratios and ‘more intensive supervision’ of the banks to rein in mortgage lending. And caps on the term of a mortgage were used in Canada when he ran the central bank there.

Ken Gibb has an excellent discussion of the policy options and difficulties on his blog, where he makes the case for going further with real house price stability, matching general price inflation over the longer term.  

The RICS stresses that it is not wedded the 5 per cent limit but chose it to reflect 3 per cent average annual wage growth seen since 1998 plus a 2 per cent premium to reflect the impact of the shortage of new supply.

To give some idea of the potential gains from that I took a quick look at the Halifax house price index. The average UK house price was £72,000 in 1998. If it had risen by 5 per cent a year, it would now be around £142,000. Instead the average is now £167,000 and that is after a substantial correction following the credit crunch. Homes would still be expensive but still more within reach.

But my choice of the Halifax index and 1998 reveals some of the practical difficulties with the idea. A range of other indices and starting points could be used with very different results.

Above all, there is that UK average. What is the use of a 5 per cent national cap if prices are rising 10 per cent a year in London and standing still elsewhere? The RICS acknowledges that regional caps may be needed but there would be practical difficulties with them too.

On the implementation side, tackling house price inflation through action on mortgages would do nothing to deal with cash buyers or buyers from overseas, who account for sizeable proportions of the market. It would not necessarily do anything about buy to let, which is not financed through conventional mortgages. And the example of Canada may not be quite such a good one to cite given that its house prices seem even more over-valued than ours.

Those are formidable difficulties, as the RICS acknowledges, but does that mean it is not worth discussing the plan, as the critics imply? Those who argue that this would be interfering in the free market have to face the fact that it has not worked out so well so far, that it is currently operating in the entirely artificial conditions of 0.5 per cent base rates, and that the government is already interfering in the opposite direction through Funding for Lending and Help to Buy.

Those who argue that the whole idea is crazy when the real issue is supply have an obvious point that was covered in some detail in the first RICS report. However, as I argued on my other blog yesterday, there is no immediate prospect within the current housebuilding system of supply increasing to the levels needed. A report out today from London Councils argues that 809,000 new homes will be needed in the capital between now and 2021 to meet new demand and the backlog of housing need. On current projections we will only build 250,000. New supply is vital but concentrating on supply alone risks exacerbating the problems we already face. It has to make sense to look at demand too and to find ways to stop house prices escalating ever further out of reach, especially in London.

Finally, if you haven’t already, I urge you to brighten up your day by reading Jeremy Warner’s column on the RICS in the Telegraph. He makes the supply argument very powerfully and argues that ‘as silly suggestions go, they don’t come much sillier than the RICS’s proposed 5 per cent house price gap’. This being the Telegraph, he also has to have a go at planning minister Nick Boles for his latest ‘war on the countryside’ speech (this time an alleged all-out offensive on our national parks).

Then he brings the silliness full circle by quoting an exchange on twitter in which Boles claims that he only does it to wind up Simon Jenkins, the nimby-in-chief at the National Trust. Except for one thing: all along he had been speaking to the excellent (but not entirely genuine) @GeneralBoles

Bedroom blues

Wed, 11 Sep 2013

Just when you were beginning to miss him, Grant Shapps is back with a bang and a complaint to the United Nations about that ‘woman from Brazil’.

The Conservative Party chairman brought an international twist to his old housing stomping ground in a Today programme interview that pitted him against Raquel Rolnik, the UN’s special rapporteur on adequate housing. Readers will need no reminding that in a preliminary statement following a two-week visit to the UK she is calling for the bedroom tax to be suspended immediately and fully re-evaluated.

Shapps described it as ‘an absolute disgrace’ and accused Rolnik of having an ‘agenda’. He went on:

‘It is completely wrong and an abuse of the process for somebody to come over, to fail to meet with government ministers, to fail to meet with the department responsible, to produce a press release two weeks after coming, even though the report is not due out until next spring, and even to fail to refer to the policy properly throughout the report. That is why I am writing to the secretary general today to ask for an apology and an investigation as to how this came about.’

Earlier, a DWP spokesperson had joined in the attack on the UN envoy with a statement that: ‘It is surprising to see these conclusions being drawn from anecdotal evidence and conversations after a handful of meetings, instead of actual hard research and data.’ Coming from the department headed by Iain ‘I believe I am right’ Duncan Smith that was quite a claim.

At a press conference this morning, Rolnik said it was ‘absolutely not true she had come with an agenda and that ‘this was an official visit – I was invited by the UK government and it was organized by the UK government’. It’s since emerged that Rolnik did meet Shapps’s former boss, communities secretary Eric Pickles, as well as officials from the DWP and three other UK government departments, the Welsh, Scottish and Northern Irish governments, plus numerous other government agencies, local authorities, housing associations and charities, lawyers and academics. For a flavour of some of the discussion, see Ken Gibb’s blog here and for more of the context see Grainia Long’s blog for Inside Housing here.  

Rolnik’s full statement is a fascinating read that reveals the high opinion the rest of the world has about housing in the UK:

‘The United Kingdom has much to be proud of in the provision of affordable housing. It has had a history of ensuring that low-income households are not obliged to cope with insecure tenure and poor housing conditions, and can be well-housed. Some of the policies and practices that have played a role in providing social housing include the construction and further regeneration of a large social housing stock as well as a welfare system which covers housing as part of a social safety net. These can serve as an inspiration to other parts of the world.

She was assessing the UK’s performance under international human rights law and specifically the International Covenant on Economic, Cultural and Social Rights. The UK ratified this in 1976 and accepted obligations ‘to take steps to ensure and sustain the progressive realization of the right to adequate housing, making use of the maximum of its available resources’. In addition, governments cannot ‘move backward without offering a strict, evidence-based justification of the need to take such measures and without having weighted various alternatives’ and must protect the most vulnerable members of society. As such that would appear to make the inadequacies of Brazil’s record on housing cited by Shapps irrelevant in a UK or UN context.

In a statement covering a whole range of housing issues and government policies, Rolnik found ‘signs of retrogression in the enjoyment of the right to adequate housing’ and says ‘it is not clear that every effort has been made to protect the most vulnerable’.

She found ‘the so-called bedroom tax, or the spare bedroom under-occupancy penalty’ to be ‘especially worrisome’:

‘In only a few months of its implementation the serious impacts on very vulnerable people have already been felt and the fear of future impacts are a source of great stress and anxiety. Of the many testimonies I have heard, let me say that I have been deeply touched by persons with physical and mental disabilities who have felt targeted instead of protected; of the grandmothers who are carers of their children and grandchildren but are now feeling they are forced to move away from their life-long homes due to a spare bedroom or to run the risk of facing arrears; of the single parents who will not have space for their children when they come to visit; of the many people who are increasingly having to choose between food and paying the penalty. Those who are impacted by this policy were not necessarily the most vulnerable a few months ago, but they were on the margins, facing fragility and housing stress, with little extra income to respond to this situation and already barely coping with their expenses.’

None of that will be news to anyone with a passing knowledge of the issues but such a verdict from a UN official, let alone one from Brazil, was bound to be a red rag to the Conservative half of the coalition. As I understand it, the UN Covenant is not enforceable in UK law but her report will undoubtedly be drawn to the attention of judges considering bedroom tax cases and it will only add to Tory suspicion of anything that includes those pesky ‘human rights’

However, before Shapps seals the envelope on his letter of complaint to UN secretary general Ban Ki-Moon he might want to read Rolnik’s statement in full. She has two other recommendations apart from the one about suspending the bedroom tax.

First, ‘I would recommend that the government puts in place a system of regulation for the private rent sector, including clear criteria about affordability, access to information and security of tenure’. Which housing minister was it, I wonder, who rejected any idea of PRS regulation as ‘red tape’?

Second, ‘I would encourage a renewal of the government’s commitment to significantly increasing the social housing stock and a more balanced public funding for the stimulation of supply of social and affordable housing which responds to the needs.’ Shapps had already protested about his ‘170,000 affordable homes’ in the Today interview but it sounds very much like she was familiar with the nuances behind that number.

To read more about the private rented sector click here.

Bedroom blues

Wed, 11 Sep 2013

Just when you were beginning to miss him, Grant Shapps is back with a bang and a complaint to the United Nations about that ‘woman from Brazil’.

The Conservative Party chairman brought an international twist to his old housing stomping ground in a Today programme interview that pitted him against Raquel Rolnik, the UN’s special rapporteur on adequate housing. Readers will need no reminding that in a preliminary statement following a two-week visit to the UK she is calling for the bedroom tax to be suspended immediately and fully re-evaluated.

Shapps described it as ‘an absolute disgrace’ and accused Rolnik of having an ‘agenda’. He went on:

‘It is completely wrong and an abuse of the process for somebody to come over, to fail to meet with government ministers, to fail to meet with the department responsible, to produce a press release two weeks after coming, even though the report is not due out until next spring, and even to fail to refer to the policy properly throughout the report. That is why I am writing to the secretary general today to ask for an apology and an investigation as to how this came about.’

Earlier, a DWP spokesperson had joined in the attack on the UN envoy with a statement that: ‘It is surprising to see these conclusions being drawn from anecdotal evidence and conversations after a handful of meetings, instead of actual hard research and data.’ Coming from the department headed by Iain ‘I believe I am right’ Duncan Smith that was quite a claim.

At a press conference this morning, Rolnik said it was ‘absolutely not true she had come with an agenda and that ‘this was an official visit – I was invited by the UK government and it was organized by the UK government’. It’s since emerged that Rolnik did meet Shapps’s former boss, communities secretary Eric Pickles, as well as officials from the DWP and three other UK government departments, the Welsh, Scottish and Northern Irish governments, plus numerous other government agencies, local authorities, housing associations and charities, lawyers and academics. For a flavour of some of the discussion, see Ken Gibb’s blog here and for more of the context see Grainia Long’s blog for Inside Housing here.  

Rolnik’s full statement is a fascinating read that reveals the high opinion the rest of the world has about housing in the UK:

‘The United Kingdom has much to be proud of in the provision of affordable housing. It has had a history of ensuring that low-income households are not obliged to cope with insecure tenure and poor housing conditions, and can be well-housed. Some of the policies and practices that have played a role in providing social housing include the construction and further regeneration of a large social housing stock as well as a welfare system which covers housing as part of a social safety net. These can serve as an inspiration to other parts of the world.

She was assessing the UK’s performance under international human rights law and specifically the International Covenant on Economic, Cultural and Social Rights. The UK ratified this in 1976 and accepted obligations ‘to take steps to ensure and sustain the progressive realization of the right to adequate housing, making use of the maximum of its available resources’. In addition, governments cannot ‘move backward without offering a strict, evidence-based justification of the need to take such measures and without having weighted various alternatives’ and must protect the most vulnerable members of society. As such that would appear to make the inadequacies of Brazil’s record on housing cited by Shapps irrelevant in a UK or UN context.

In a statement covering a whole range of housing issues and government policies, Rolnik found ‘signs of retrogression in the enjoyment of the right to adequate housing’ and says ‘it is not clear that every effort has been made to protect the most vulnerable’.

She found ‘the so-called bedroom tax, or the spare bedroom under-occupancy penalty’ to be ‘especially worrisome’:

‘In only a few months of its implementation the serious impacts on very vulnerable people have already been felt and the fear of future impacts are a source of great stress and anxiety. Of the many testimonies I have heard, let me say that I have been deeply touched by persons with physical and mental disabilities who have felt targeted instead of protected; of the grandmothers who are carers of their children and grandchildren but are now feeling they are forced to move away from their life-long homes due to a spare bedroom or to run the risk of facing arrears; of the single parents who will not have space for their children when they come to visit; of the many people who are increasingly having to choose between food and paying the penalty. Those who are impacted by this policy were not necessarily the most vulnerable a few months ago, but they were on the margins, facing fragility and housing stress, with little extra income to respond to this situation and already barely coping with their expenses.’

None of that will be news to anyone with a passing knowledge of the issues but such a verdict from a UN official, let alone one from Brazil, was bound to be a red rag to the Conservative half of the coalition. As I understand it, the UN Covenant is not enforceable in UK law but her report will undoubtedly be drawn to the attention of judges considering bedroom tax cases and it will only add to Tory suspicion of anything that includes those pesky ‘human rights’

However, before Shapps seals the envelope on his letter of complaint to UN secretary general Ban Ki-Moon he might want to read Rolnik’s statement in full. She has two other recommendations apart from the one about suspending the bedroom tax.

First, ‘I would recommend that the government puts in place a system of regulation for the private rent sector, including clear criteria about affordability, access to information and security of tenure’. Which housing minister was it, I wonder, who rejected any idea of PRS regulation as ‘red tape’?

Second, ‘I would encourage a renewal of the government’s commitment to significantly increasing the social housing stock and a more balanced public funding for the stimulation of supply of social and affordable housing which responds to the needs.’ Shapps had already protested about his ‘170,000 affordable homes’ in the Today interview but it sounds very much like she was familiar with the nuances behind that number.

To read more about the private rented sector click here.

Giving hope

Tue, 10 Sep 2013

Housing and philanthropy seemed to go together naturally in the 19th century. Can they do it again in the 21st?

An interesting report out today from the Smith Institute, New Philanthropy Institute and Peabody Trust sets out to answer that question and in the process asks some more of its own about what the relationship should be between the state, housing providers and the private sector.

Peabody is of course one of the prime examples of Victorian philanthropy. American banker George Peabody donated a total of £500,000 (the equivalent of £40 million now) to ‘ameliorate the condition of the poor and needy’ in London. Thanks to careful management of its money, requiring a return of 3 per cent on its capital, it developed into an organisation with 20,000 properties housing 55,000 people.

Yet, as I blogged in celebration of Peabody’s 150th anniversary last year, that begs the question of why there are no equivalents today. Inequality is back to levels last seen in the 1920s and the super-rich grow ever more super and richer. So why is there no contemporary equivalent of Peabody or William Sutton or Octavia Hill? Why is there no Richard Branson Trust or Fred Goodwin Model Dwellings Society? The last major housing development funded by a philanthropist was Silver Edge, a model village in Essex founded by window magnate Francis Crittall – and that was in 1925.

The obvious answer – but not the only one - is that the state took over. The philanthropists were squeezed out as council housing took off in the 20th century. Things may be different now, with new provision dominated by housing associations as social businesses, but philanthropists are still reluctant to fund things they consider government’s responsibility. It’s certainly not hard to imagine a future government using any charitable windfall as an excuse to cut public grant still further.

New Philanthropy Capital also argues that funders are nervous to take on housing because they see the issue as too big and the cost of making a difference as prohibitively high. Homes and land simply cost too much.

From a housing point of view this is not necessarily a bad thing. Peter Malpass argues that Victorian philanthropy never succeeded in generating enough money to achieve decent standards at affordable rents. ‘The question asked in this pamphlet is: “Can we rebuild the relationship between philanthropy and affordable housing?” And my answer is “I sincerely hope not”!’ writes Lord Best, chair of Hanover Housing. He argues that housing traded the old relationship for one with the state. That had its downsides but ‘it has led to a massive increase in the size and importance of non-profit housing providers’.

However, he says philanthropy can still have a role, perhaps in funding new, smaller specialist or co-operative housing bodies or in ‘mission-related investment’ in particular projects.   

David Orr of the National Housing Federation argues that housing associations have transformed the philanthropy of the past into a new kind of ‘entrepreneurial philanthropy’ with commercial activities supporting their core social purpose. However, he still sees space for philanthropists in backing supported housing and perhaps in donating land and room for new approaches such as crowdfunding and social impact bonds and for philanthropy targeted at schemes where it can have the most impact.

Examples such as the Real Lettings Property Fund, set up by homelessness charity Broadway with funding from many different foundations, and Golden Lane Housing, set up by Mencap with the first retail bond issued by a national charity, show what can be achieved through social investment.

Meanwhile five charitable investors find the Community Land Trust pilot fund operated by the Charities Aid Foundation’s Venturesome fund. The idea is to support the CLT model by providing access to finance, building 150 affordable homes in the process and demonstrating to commercial funds that the idea can work.

So if we seem unlikely to return to the days of the Victorian philanthropists any time soon (or hope that we’re not) there still seems plenty of room for new relationships between philanthropy and housing to develop. The report argues that the NHF and and New Philanthropy Capital could work on a memorandum of understanding and an organising framework for a new partnership between housing and philanthropy.

But you don’t have to go back nearly as far as George Peabody to find examples of what can happen with a little money and determination. This year sees the 50th anniversary of two organisations that started out with one house apiece and grew into two of our biggest housing associations: London & Quadrant and Notting Hill Housing. For good measure, Rev Bruce Kenrick, who is said to have started Notting Hill with a soiled 10s (50p) note, went on to found Shelter three years later. Not philanthropy in its traditional Victorian sense, perhaps, but examples of people getting togther to solve problems in the spirit of their times. 

Giving hope

Tue, 10 Sep 2013

Housing and philanthropy seemed to go together naturally in the 19th century. Can they do it again in the 21st?

An interesting report out today from the Smith Institute, New Philanthropy Institute and Peabody Trust sets out to answer that question and in the process asks some more of its own about what the relationship should be between the state, housing providers and the private sector.

Peabody is of course one of the prime examples of Victorian philanthropy. American banker George Peabody donated a total of £500,000 (the equivalent of £40 million now) to ‘ameliorate the condition of the poor and needy’ in London. Thanks to careful management of its money, requiring a return of 3 per cent on its capital, it developed into an organisation with 20,000 properties housing 55,000 people.

Yet, as I blogged in celebration of Peabody’s 150th anniversary last year, that begs the question of why there are no equivalents today. Inequality is back to levels last seen in the 1920s and the super-rich grow ever more super and richer. So why is there no contemporary equivalent of Peabody or William Sutton or Octavia Hill? Why is there no Richard Branson Trust or Fred Goodwin Model Dwellings Society? The last major housing development funded by a philanthropist was Silver Edge, a model village in Essex founded by window magnate Francis Crittall – and that was in 1925.

The obvious answer – but not the only one - is that the state took over. The philanthropists were squeezed out as council housing took off in the 20th century. Things may be different now, with new provision dominated by housing associations as social businesses, but philanthropists are still reluctant to fund things they consider government’s responsibility. It’s certainly not hard to imagine a future government using any charitable windfall as an excuse to cut public grant still further.

New Philanthropy Capital also argues that funders are nervous to take on housing because they see the issue as too big and the cost of making a difference as prohibitively high. Homes and land simply cost too much.

From a housing point of view this is not necessarily a bad thing. Peter Malpass argues that Victorian philanthropy never succeeded in generating enough money to achieve decent standards at affordable rents. ‘The question asked in this pamphlet is: “Can we rebuild the relationship between philanthropy and affordable housing?” And my answer is “I sincerely hope not”!’ writes Lord Best, chair of Hanover Housing. He argues that housing traded the old relationship for one with the state. That had its downsides but ‘it has led to a massive increase in the size and importance of non-profit housing providers’.

However, he says philanthropy can still have a role, perhaps in funding new, smaller specialist or co-operative housing bodies or in ‘mission-related investment’ in particular projects.   

David Orr of the National Housing Federation argues that housing associations have transformed the philanthropy of the past into a new kind of ‘entrepreneurial philanthropy’ with commercial activities supporting their core social purpose. However, he still sees space for philanthropists in backing supported housing and perhaps in donating land and room for new approaches such as crowdfunding and social impact bonds and for philanthropy targeted at schemes where it can have the most impact.

Examples such as the Real Lettings Property Fund, set up by homelessness charity Broadway with funding from many different foundations, and Golden Lane Housing, set up by Mencap with the first retail bond issued by a national charity, show what can be achieved through social investment.

Meanwhile five charitable investors find the Community Land Trust pilot fund operated by the Charities Aid Foundation’s Venturesome fund. The idea is to support the CLT model by providing access to finance, building 150 affordable homes in the process and demonstrating to commercial funds that the idea can work.

So if we seem unlikely to return to the days of the Victorian philanthropists any time soon (or hope that we’re not) there still seems plenty of room for new relationships between philanthropy and housing to develop. The report argues that the NHF and and New Philanthropy Capital could work on a memorandum of understanding and an organising framework for a new partnership between housing and philanthropy.

But you don’t have to go back nearly as far as George Peabody to find examples of what can happen with a little money and determination. This year sees the 50th anniversary of two organisations that started out with one house apiece and grew into two of our biggest housing associations: London & Quadrant and Notting Hill Housing. For good measure, Rev Bruce Kenrick, who is said to have started Notting Hill with a soiled 10s (50p) note, went on to found Shelter three years later. Not philanthropy in its traditional Victorian sense, perhaps, but examples of people getting togther to solve problems in the spirit of their times. 

Saying yes

Mon, 9 Sep 2013

Yes to Homes is a campaign message that seems to be gaining support but it also begs some obvious questions about what comes next.

As David Orr explained on his blog, the National Housing Federation wanted last week to be a grassroots campaign to mobilise local support and sees it as ‘an opportunity to turn up the volume and ensure our politicians hear the clamour’.  The simple message to local councillors of all parties is that ‘your vote and their seats depend on them saying Yes to Homes’, which has to be a good move given that the voices of objectors to new housing are too often the only ones they hear.

At a national level the signs are promising too. Planning minister Nick Boles, shadow housing minister Jack Dromey and Lib Dem president Tim Farron all said Yes to Homes on behalf of their parties in blogs for the campaign website. 

That is perhaps reflecting housing’s new importance in the opinion polls. Ben Marshall of Ipsos MORI writes in a guest post for Shelter’s policy blog that housing is now rated as an important issue by 14 per cent of voters. That may not sound like much but that is the highest rating since 2008 and it puts housing only just behind education and law and order and ahead of pensions and benefits and inflation and prices.

Meanwhile the case for housing supply is being backed not just by the usual suspects in the left and centre but also by a range of different groups on the right. In just the latest example, the Adam Smith Institute, the free market thinktank, attacked Help to Buy as a demand-side intervention in a supply-side problem. So far, so good but the question is what comes next. As I blogged last month, Eric Pickles and other ministers are very quick to choose the most flattering statistics on the supply of new homes while conveniently ignoring the fact that completions are still down on a year ago and even on the total when the coalition took power.

Recent results and trading statements by major housebuilders do suggest that they are at last increasing production rather than simply rebuilding their profit margins. The Home Builders Federation unsurprisingly takes a much rosier view of Help to Buy and promised housing minister Mark Prisk last week that ‘we will build more’.

However, we are still only building half the homes we need and, as the DCLG acknowledges, even if housebuilders increase their output by 4.5 per cent a year it will take until 2022 to get back to 2007 levels. Given past history that is an optimistic assumption and in the meantime we will have fallen another 500,000 homes behind the level needed to meet demand.

In that context Yes to Homes has to be about investment as well as planning. As David Orr says in his blog, the transport lobby has been far more successful than housing in making its case: ‘Politicians pay attention to what their electors say – and they don’t hear enough of us telling them they have to say yes to building more homes.’

And that in turn begs the question of what kind of homes we are saying yes to. If you read their Yes to Homes blogs carefully it becomes clear that the three party representatives answer that question in completely different ways.

For Nick Boles, it is all about freeing up the planning system and extending the home owning democracy. ‘The desire to provide a secure home for yourself and your family is one of the most fundamental human urges,’ he says. ‘People love their homes, take pride in them, invest in them. If you know that you are likely to stay in your home for some time, you are more likely to meet your neighbours, support local community groups and get involved in local schools.’ Not much room for that kind of involvement if you have an insecure private let or one of the coalition’s new fixed-term social tenancies.

For Jack Dromey ‘putting housing centre stage’ is about building more homes and creating a secure and affordable private rented sector. And he repeats a line quoted by shadow Treasury ministers Ed Balls and Rachel Reeves last week: if the £10 billion boost to infrastructure recommended by the IMF was invested in housing, the government could build 400,000 affordable homes.

For Tim Farron, ‘the housing debate isn’t about buildings, it’s about people’ and ‘too much emphasis is put on the concept that building affordable homes is like a mathematical formula dictated by central government, when it shouldn’t be’. There are things national government can do, such as a plan to build 25,000 new council houses, but the housing crisis has to be tackled locally with councillors working with local people.

Those three very different ways of saying ‘Yes to Homes’ confirm the obvious point that the next stage in the campaign could be rather more difficult. As Ben Marshall points out:

‘The challenge remains to frame and articulate housing as the kind of mass issue that gets high profile coverage in an election campaign. This is likely to involve engaging the electorally more powerful owner and mortgagee groups (as well as mobilising renters) and using a local slant in the style of “Bank of Mum and Dad” and “Yes to Homes”. Housing’s stock does appear to be on the rise. Current political, media and public interest is an opportunity and something to build on, and it will be interesting to see what is made of housing at the upcoming party conferences.’

However, as we gear up for the conference season starting with the Lib Dems next week, perhaps the most significant thing in the three blogs is the way that Boles makes a party political case for more homes:

‘The Conservative Party wins elections when it backs people’s ambitions to create a good life for themselves and their families. It loses them when it defends the privileges of a comfortable elite. As the next election approaches, David Cameron is clear that the Conservative Party should be saying Yes to Homes.’

Considering that ‘comfortable elite’ include many Conservative voters, that really is quite a statement even if more nimby-friendly voices within the party balance out Boles.  There is still a long way to go but it is clearly no longer enough for politicians to say ‘next question’ when asked to say ‘Yes to Homes’.

Saying yes

Mon, 9 Sep 2013

Yes to Homes is a campaign message that seems to be gaining support but it also begs some obvious questions about what comes next.

As David Orr explained on his blog, the National Housing Federation wanted last week to be a grassroots campaign to mobilise local support and sees it as ‘an opportunity to turn up the volume and ensure our politicians hear the clamour’.  The simple message to local councillors of all parties is that ‘your vote and their seats depend on them saying Yes to Homes’, which has to be a good move given that the voices of objectors to new housing are too often the only ones they hear.

At a national level the signs are promising too. Planning minister Nick Boles, shadow housing minister Jack Dromey and Lib Dem president Tim Farron all said Yes to Homes on behalf of their parties in blogs for the campaign website. 

That is perhaps reflecting housing’s new importance in the opinion polls. Ben Marshall of Ipsos MORI writes in a guest post for Shelter’s policy blog that housing is now rated as an important issue by 14 per cent of voters. That may not sound like much but that is the highest rating since 2008 and it puts housing only just behind education and law and order and ahead of pensions and benefits and inflation and prices.

Meanwhile the case for housing supply is being backed not just by the usual suspects in the left and centre but also by a range of different groups on the right. In just the latest example, the Adam Smith Institute, the free market thinktank, attacked Help to Buy as a demand-side intervention in a supply-side problem. So far, so good but the question is what comes next. As I blogged last month, Eric Pickles and other ministers are very quick to choose the most flattering statistics on the supply of new homes while conveniently ignoring the fact that completions are still down on a year ago and even on the total when the coalition took power.

Recent results and trading statements by major housebuilders do suggest that they are at last increasing production rather than simply rebuilding their profit margins. The Home Builders Federation unsurprisingly takes a much rosier view of Help to Buy and promised housing minister Mark Prisk last week that ‘we will build more’.

However, we are still only building half the homes we need and, as the DCLG acknowledges, even if housebuilders increase their output by 4.5 per cent a year it will take until 2022 to get back to 2007 levels. Given past history that is an optimistic assumption and in the meantime we will have fallen another 500,000 homes behind the level needed to meet demand.

In that context Yes to Homes has to be about investment as well as planning. As David Orr says in his blog, the transport lobby has been far more successful than housing in making its case: ‘Politicians pay attention to what their electors say – and they don’t hear enough of us telling them they have to say yes to building more homes.’

And that in turn begs the question of what kind of homes we are saying yes to. If you read their Yes to Homes blogs carefully it becomes clear that the three party representatives answer that question in completely different ways.

For Nick Boles, it is all about freeing up the planning system and extending the home owning democracy. ‘The desire to provide a secure home for yourself and your family is one of the most fundamental human urges,’ he says. ‘People love their homes, take pride in them, invest in them. If you know that you are likely to stay in your home for some time, you are more likely to meet your neighbours, support local community groups and get involved in local schools.’ Not much room for that kind of involvement if you have an insecure private let or one of the coalition’s new fixed-term social tenancies.

For Jack Dromey ‘putting housing centre stage’ is about building more homes and creating a secure and affordable private rented sector. And he repeats a line quoted by shadow Treasury ministers Ed Balls and Rachel Reeves last week: if the £10 billion boost to infrastructure recommended by the IMF was invested in housing, the government could build 400,000 affordable homes.

For Tim Farron, ‘the housing debate isn’t about buildings, it’s about people’ and ‘too much emphasis is put on the concept that building affordable homes is like a mathematical formula dictated by central government, when it shouldn’t be’. There are things national government can do, such as a plan to build 25,000 new council houses, but the housing crisis has to be tackled locally with councillors working with local people.

Those three very different ways of saying ‘Yes to Homes’ confirm the obvious point that the next stage in the campaign could be rather more difficult. As Ben Marshall points out:

‘The challenge remains to frame and articulate housing as the kind of mass issue that gets high profile coverage in an election campaign. This is likely to involve engaging the electorally more powerful owner and mortgagee groups (as well as mobilising renters) and using a local slant in the style of “Bank of Mum and Dad” and “Yes to Homes”. Housing’s stock does appear to be on the rise. Current political, media and public interest is an opportunity and something to build on, and it will be interesting to see what is made of housing at the upcoming party conferences.’

However, as we gear up for the conference season starting with the Lib Dems next week, perhaps the most significant thing in the three blogs is the way that Boles makes a party political case for more homes:

‘The Conservative Party wins elections when it backs people’s ambitions to create a good life for themselves and their families. It loses them when it defends the privileges of a comfortable elite. As the next election approaches, David Cameron is clear that the Conservative Party should be saying Yes to Homes.’

Considering that ‘comfortable elite’ include many Conservative voters, that really is quite a statement even if more nimby-friendly voices within the party balance out Boles.  There is still a long way to go but it is clearly no longer enough for politicians to say ‘next question’ when asked to say ‘Yes to Homes’.

Out of credit

Thu, 5 Sep 2013

Take your pick of today’s official criticisms of the universal credit. It was over-ambitious and high risk, it had no clear plan and it has offered poor value for money.

Has the National Audit Office (NA0) ever delivered a more damning verdict on a key government policy than the one it has just published?

Think of just about every rumour you’ve heard about the IT system, every assumption about the chaos behind the scenes and every time you reacted sceptically to DWP assurances that the latest changes to the timetable were all part of the original plan, and you will find them all in the report published today.

What you won’t find is anything on the issues of most pressing concern to housing organisations such as the introduction of direct payment to tenants and the measures the DWP is introducing to minimise the impact on landlords’ finances. But that’s only because there are so many problems with the underlying systems that it’s still unclear when that will happen on any significant scale.

Based on this report, further delays look inevitable despite those familiar assurances from the DWP that it is committed to delivering on time and on budget. The universal credit is still adjusting to the ‘reset’ insisted on by the Cabinet Office between February and May and Howard Shiplee, the fifth ‘senior responsible owner’ in charge of the project in a year, completes his 100-day planning period at the end of this month. The DWP will not have approval for further spending until after November, when it asks the Treasury to approve a new business case.

According to the original plan the new system was meant to be introduced for all new out-of-work claims from October. They would be followed by all new in-work claims from April 2014 and all migrating benefit claims by October 2017. Instead next month will merely see another six pathfinder sites added to the four already running on a very limited basis handling the simplest claims.

The NAO says ‘it is likely that universal credit will not be able to take all new claims and provide the full planned service until at least December 2014’. The reset team considered scenarios including ‘complete migration later than October 2017’ and the senior responsible owner is currently ‘looking at different options for timing of full roll-out’. The NAO comments that ‘to keep to the 2017 completion date, the department would have to migrate a large volume of claimants within a short time frame’, which hardly sounds like a vote of confidence.

Many of the problems go back right to the start of the project when the DWP adopted that ambitious timetable. The NAO says that: ‘The department was unable to explain to us how it originally decided on October 2013 or how it evaluated the feasibility of roll-out by this basis. The ambitious timetable created pressure on the department to act quickly and meant that it needed to manage progress tightly.’

It does not comment further but one clue is that the traditional ‘Waterfall’ approach to programme management, where IT projects are developed in sequential steps, would have been much slower and only allowed roll-out in April 2015. Is it too much to imagine that a month before the general election was seen as bad timing?

The DWP instead used a different approach where processes and systems are developed at the same time as defining policy requirements. This ‘Agile’ approach seems to be a perfectly respectable way of running IT projects but the DWP was unfamiliar with the methodology and no government project of this size had used it before.

By January 2012 the DWP was introducing Agile 2.0 in an attempt to integrate the two approaches. The result seems to be a complete mess where short-term systems were developed separately and with limited functionality for the pathfinders and the DWP ‘does not yet know the extent to which its new IT systems will support national roll-out’.

The current system cannot identify potentially fraudulent claims and without that in place the department will be unable to deliver the savings it promised. Under the pathfinder system, claimants cannot register changes in circumstances online and the work has to be done manually instead, adding to costs.  

In May, the DWP identified a need to write off £34 million (17 per cent) of its new IT assets but the waste could go much further than that. The reports also says that the DWP currently estimates that its IT assets are worth just 53 per cent (£162 million) of the £303 million it has invested in universal credit systems so far and remedial work could increase the budget still further.

The reset team recommended that the DWP should replace ‘digital by default’, a key principle of the universal credit, with ‘digital as appropriate’. This is something the DWP consistently denied at the time but the NAO says it is now reviewing which activities should be conducted online.

Things might have been better with adequate management systems in place. Instead the opposite happened, right down to invoices being paid without checks on whether the services had been delivered. The report says that:

‘Given the tight timetable, unfamiliar programme management approach and lack of a detailed operating model, it was critical that the department should have good progress information and effective controls. In practice the department did not have any adequate measures of progress.’

The NAO identifies weaknesses including:

  • Lack of transparency and challenge. There was a ‘fortress mentality’ in the programme team and a ‘good news’ reporting culture that ‘limited open discussion of risks’. (This is a criticism that might just as easily be made of the whole DWP and its repeated claims that everything is on track.)
  • Inadequate financial control including poorly managed and documented financial governance and insufficient review of contractor performance before making payment.
  • Ineffective departmental oversight. The DWP never had a detailed plan or management information and so could never measure progress effectively.
  • Failure to address recommendations from assurance reviews.

The report concludes that ‘at this early stage of the universal credit programme the department has not achieved value for money’. It is still possible that it may achieve its aims with ‘considerable benefits for society’ but ‘to do so the department will need to learn from its early mistakes’.

The NAO says the DWP must produce a realistic plan with clear programme objectives linked to policy design and service requirements. It should use a management approach that allows policy experts, operational teams and systems developers to work together. And it should establish effective governance processes and structure and tighten financial management.

All of which sound like fairly basic things that should have been in place right from the beginning rather than be recommended a month before the original roll-out date.

Much now depends on Howard Shiplee, the former construction director of the 2012 Olympics who was brought in to lead the project at the end of March. In a piece for the Telegraph on Monday he candidly admitted the ‘missteps’ and ‘bad luck’ that have dogged progress so far. If he can put things right he will deserve a medal all to himself.

However, the points raised by the NAO are all to do with the implementation of the universal credit rather than how it will operate once it is up and running. I’ve blogged before many times about the serious concerns raised in many different quarters about what happens once it is up and running. These cover not just the implications of digital by default and direct payment but monthly payment and payment to a single member of the household and the awful precedent of the chaos that followed major administrative changes to housing benefit in the 1980s.

All of that is yet to come.  

Out of credit

Thu, 5 Sep 2013

Take your pick of today’s official criticisms of the universal credit. It was over-ambitious and high risk, it had no clear plan and it has offered poor value for money.

Has the National Audit Office (NA0) ever delivered a more damning verdict on a key government policy than the one it has just published?

Think of just about every rumour you’ve heard about the IT system, every assumption about the chaos behind the scenes and every time you reacted sceptically to DWP assurances that the latest changes to the timetable were all part of the original plan, and you will find them all in the report published today.

What you won’t find is anything on the issues of most pressing concern to housing organisations such as the introduction of direct payment to tenants and the measures the DWP is introducing to minimise the impact on landlords’ finances. But that’s only because there are so many problems with the underlying systems that it’s still unclear when that will happen on any significant scale.

Based on this report, further delays look inevitable despite those familiar assurances from the DWP that it is committed to delivering on time and on budget. The universal credit is still adjusting to the ‘reset’ insisted on by the Cabinet Office between February and May and Howard Shiplee, the fifth ‘senior responsible owner’ in charge of the project in a year, completes his 100-day planning period at the end of this month. The DWP will not have approval for further spending until after November, when it asks the Treasury to approve a new business case.

According to the original plan the new system was meant to be introduced for all new out-of-work claims from October. They would be followed by all new in-work claims from April 2014 and all migrating benefit claims by October 2017. Instead next month will merely see another six pathfinder sites added to the four already running on a very limited basis handling the simplest claims.

The NAO says ‘it is likely that universal credit will not be able to take all new claims and provide the full planned service until at least December 2014’. The reset team considered scenarios including ‘complete migration later than October 2017’ and the senior responsible owner is currently ‘looking at different options for timing of full roll-out’. The NAO comments that ‘to keep to the 2017 completion date, the department would have to migrate a large volume of claimants within a short time frame’, which hardly sounds like a vote of confidence.

Many of the problems go back right to the start of the project when the DWP adopted that ambitious timetable. The NAO says that: ‘The department was unable to explain to us how it originally decided on October 2013 or how it evaluated the feasibility of roll-out by this basis. The ambitious timetable created pressure on the department to act quickly and meant that it needed to manage progress tightly.’

It does not comment further but one clue is that the traditional ‘Waterfall’ approach to programme management, where IT projects are developed in sequential steps, would have been much slower and only allowed roll-out in April 2015. Is it too much to imagine that a month before the general election was seen as bad timing?

The DWP instead used a different approach where processes and systems are developed at the same time as defining policy requirements. This ‘Agile’ approach seems to be a perfectly respectable way of running IT projects but the DWP was unfamiliar with the methodology and no government project of this size had used it before.

By January 2012 the DWP was introducing Agile 2.0 in an attempt to integrate the two approaches. The result seems to be a complete mess where short-term systems were developed separately and with limited functionality for the pathfinders and the DWP ‘does not yet know the extent to which its new IT systems will support national roll-out’.

The current system cannot identify potentially fraudulent claims and without that in place the department will be unable to deliver the savings it promised. Under the pathfinder system, claimants cannot register changes in circumstances online and the work has to be done manually instead, adding to costs.  

In May, the DWP identified a need to write off £34 million (17 per cent) of its new IT assets but the waste could go much further than that. The reports also says that the DWP currently estimates that its IT assets are worth just 53 per cent (£162 million) of the £303 million it has invested in universal credit systems so far and remedial work could increase the budget still further.

The reset team recommended that the DWP should replace ‘digital by default’, a key principle of the universal credit, with ‘digital as appropriate’. This is something the DWP consistently denied at the time but the NAO says it is now reviewing which activities should be conducted online.

Things might have been better with adequate management systems in place. Instead the opposite happened, right down to invoices being paid without checks on whether the services had been delivered. The report says that:

‘Given the tight timetable, unfamiliar programme management approach and lack of a detailed operating model, it was critical that the department should have good progress information and effective controls. In practice the department did not have any adequate measures of progress.’

The NAO identifies weaknesses including:

  • Lack of transparency and challenge. There was a ‘fortress mentality’ in the programme team and a ‘good news’ reporting culture that ‘limited open discussion of risks’. (This is a criticism that might just as easily be made of the whole DWP and its repeated claims that everything is on track.)
  • Inadequate financial control including poorly managed and documented financial governance and insufficient review of contractor performance before making payment.
  • Ineffective departmental oversight. The DWP never had a detailed plan or management information and so could never measure progress effectively.
  • Failure to address recommendations from assurance reviews.

The report concludes that ‘at this early stage of the universal credit programme the department has not achieved value for money’. It is still possible that it may achieve its aims with ‘considerable benefits for society’ but ‘to do so the department will need to learn from its early mistakes’.

The NAO says the DWP must produce a realistic plan with clear programme objectives linked to policy design and service requirements. It should use a management approach that allows policy experts, operational teams and systems developers to work together. And it should establish effective governance processes and structure and tighten financial management.

All of which sound like fairly basic things that should have been in place right from the beginning rather than be recommended a month before the original roll-out date.

Much now depends on Howard Shiplee, the former construction director of the 2012 Olympics who was brought in to lead the project at the end of March. In a piece for the Telegraph on Monday he candidly admitted the ‘missteps’ and ‘bad luck’ that have dogged progress so far. If he can put things right he will deserve a medal all to himself.

However, the points raised by the NAO are all to do with the implementation of the universal credit rather than how it will operate once it is up and running. I’ve blogged before many times about the serious concerns raised in many different quarters about what happens once it is up and running. These cover not just the implications of digital by default and direct payment but monthly payment and payment to a single member of the household and the awful precedent of the chaos that followed major administrative changes to housing benefit in the 1980s.

All of that is yet to come.  

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