Monday, 27 March 2017

Inside edge

All posts from: May 2014

In our blood

Thu, 29 May 2014

On a first glance at today’s new figures, the help to buy mortgage guarantee scheme is failing to live up to the fears of its critics or the hopes of ministers.

The figures released by the Treasury show 7,313 sales in the first six months of the scheme. Of these, 72 per cent were for homes valued below £250,000 and 80 per cent were to first-time buyers.

Those completions account for around 1.3 per cent of mortgages over the six months so it’s hard to see how the help to buy 2 mortgage guarantee (HTB2) on its own can have contributed much to rising property prices.

And the regional breakdown shows that HTB2 guarantees account for the lowest proportion of mortgage lending in the regions where prices have risen most – London and the South East. Here are the figures:

Scotland accounts for six of the top 10 local authority areas seeing the most HTB2 completions: Glasgow, Edinburgh, Fife, South Lanarkshire, North Lanarkshire and Aberdeen. Leeds, Birmingham and Wigan also make the list, with Bristol the only entry from the south of England.

In contrast, most of the north London boroughs at the epicentre of the house price boom in the capital saw fewer than 10 HTB2 completions each. Brent and Camden saw one each and the tri-boroughs of Hammersmith & Fulham, Kensington & Chelsea and Westminster two apiece.

Worries that the cap of £600,000 would lead to a rash of high-value completions with high-value liabilities for the government do not seem to have been borne out either. There were just 31 completions worth over £500,000 and another 491 between £250,000 and £500,000.

The mean income of households with a guarantee was £49,056, and 60 per cent of households had an income of between £20,000 and £60,000. Judged against the mean property value of £151,597, that means house price: income multiples for HTB2 borrowers are actually lower than in the rest of the market.

So much for the fears – at least so far. In statistical terms, the impact of Help to Buy has been miniscule compared to low interest rates, Funding for Lending, buy to let and all the other factors underpinning and inflating prices. However, as I’ve blogged before, the deeper impact may have been psychological: the prospect of a state guarantee for the market has inflated the expectations of sellers. While HTB2 has helped 5,843 first-time buyers, Priced Out estimates that rising prices have excluded 250,000 would-be buyers from the market over the last year.

Take-up of HTB2 is accelerating – the 2,657 completions in March represents 36 per cent of the total so far – but it is still nowhere near the initial forecasts of 190,000 completions a year. The scheme was meant to guarantee £12.5 billion of mortgages but completions so far total just £153 million.

That may reflect the fact that help to buy mortgages are relatively expensive compared to the rest of the lending market and that prices in much of the South East are already too far out of reach for many first-time buyers.

It may also explain the curiously muted government spin this morning. The last time HTB2 statistics were released they came complete with case studies and personal appearances by David Cameron. The flipside of fears not being realised so far is that HTB2 has not actually helped many people to buy so far either.

Little wonder that Cameron’s press release this morning concentrates on the aggregate figure for both versions of Help to Buy. So far at least, the supposedly smaller HTB equity loan scheme (HTB1) has seen more sales per month than HTB2.

As he brought forward the launch of HTB2 in October 2013 George Osborne supposedly told the Cabinet: ‘Hopefully we will get a little housing boom and everyone will be happy as property values go up.’ So far his plans for May 2015 seem on course without much obvious help from Help to Buy.

David Cameron said this morning that: ‘As Britons, home ownership is in our blood - it’s about aspiration, planning for the future and laying down roots.’

The bigger picture is that home ownership is shrinking faster than he is helping people on to the ladder (see David Boyle’s apocalyptic warning at Hay yesterday). High and rising house prices mean that the patient expecting a blood transfusion is actually being bled dry.

In our blood

Thu, 29 May 2014

On a first glance at today’s new figures, the help to buy mortgage guarantee scheme is failing to live up to the fears of its critics or the hopes of ministers.

The figures released by the Treasury show 7,313 sales in the first six months of the scheme. Of these, 72 per cent were for homes valued below £250,000 and 80 per cent were to first-time buyers.

Those completions account for around 1.3 per cent of mortgages over the six months so it’s hard to see how the help to buy 2 mortgage guarantee (HTB2) on its own can have contributed much to rising property prices.

And the regional breakdown shows that HTB2 guarantees account for the lowest proportion of mortgage lending in the regions where prices have risen most – London and the South East. Here are the figures:

Scotland accounts for six of the top 10 local authority areas seeing the most HTB2 completions: Glasgow, Edinburgh, Fife, South Lanarkshire, North Lanarkshire and Aberdeen. Leeds, Birmingham and Wigan also make the list, with Bristol the only entry from the south of England.

In contrast, most of the north London boroughs at the epicentre of the house price boom in the capital saw fewer than 10 HTB2 completions each. Brent and Camden saw one each and the tri-boroughs of Hammersmith & Fulham, Kensington & Chelsea and Westminster two apiece.

Worries that the cap of £600,000 would lead to a rash of high-value completions with high-value liabilities for the government do not seem to have been borne out either. There were just 31 completions worth over £500,000 and another 491 between £250,000 and £500,000.

The mean income of households with a guarantee was £49,056, and 60 per cent of households had an income of between £20,000 and £60,000. Judged against the mean property value of £151,597, that means house price: income multiples for HTB2 borrowers are actually lower than in the rest of the market.

So much for the fears – at least so far. In statistical terms, the impact of Help to Buy has been miniscule compared to low interest rates, Funding for Lending, buy to let and all the other factors underpinning and inflating prices. However, as I’ve blogged before, the deeper impact may have been psychological: the prospect of a state guarantee for the market has inflated the expectations of sellers. While HTB2 has helped 5,843 first-time buyers, Priced Out estimates that rising prices have excluded 250,000 would-be buyers from the market over the last year.

Take-up of HTB2 is accelerating – the 2,657 completions in March represents 36 per cent of the total so far – but it is still nowhere near the initial forecasts of 190,000 completions a year. The scheme was meant to guarantee £12.5 billion of mortgages but completions so far total just £153 million.

That may reflect the fact that help to buy mortgages are relatively expensive compared to the rest of the lending market and that prices in much of the South East are already too far out of reach for many first-time buyers.

It may also explain the curiously muted government spin this morning. The last time HTB2 statistics were released they came complete with case studies and personal appearances by David Cameron. The flipside of fears not being realised so far is that HTB2 has not actually helped many people to buy so far either.

Little wonder that Cameron’s press release this morning concentrates on the aggregate figure for both versions of Help to Buy. So far at least, the supposedly smaller HTB equity loan scheme (HTB1) has seen more sales per month than HTB2.

As he brought forward the launch of HTB2 in October 2013 George Osborne supposedly told the Cabinet: ‘Hopefully we will get a little housing boom and everyone will be happy as property values go up.’ So far his plans for May 2015 seem on course without much obvious help from Help to Buy.

David Cameron said this morning that: ‘As Britons, home ownership is in our blood - it’s about aspiration, planning for the future and laying down roots.’

The bigger picture is that home ownership is shrinking faster than he is helping people on to the ladder (see David Boyle’s apocalyptic warning at Hay yesterday). High and rising house prices mean that the patient expecting a blood transfusion is actually being bled dry.

Tax year

Wed, 28 May 2014

A year on and the evidence is stacking up about the impact of the bedroom tax.

Over and over again we’ve heard from ministers that tenants affected by what they call the removal of the spare room subsidy have choices: they can downsize; or they can take in a lodger; or they can get a job. And the safety net of discretionary housing payments (DHPs) is there to help the most vulnerable.

Over and over again, landlords, tenants and others have argued that it’s not so simple: smaller homes are just not available; jobs are not so easy to come by and may be impossible for many tenants with disabilities; few will want to take a stranger into their home; and DHPs are woefully inadequate to meet the scale of need.

A year on from its introduction evidence is emerging of the impact of the bedroom tax and of the sorts of behavioural change that the DWP found impossible to quantify in its impact assessments.

Looking at today’s report by the National Housing Federation, and here are what tenants told IPSOS Mori were their most common responses to bedroom tax.

Poll

The headlines were understandably taken by the 58 per cent of tenants who said they had spent less on food or heating and energy since being affected. Even more starkly on the ‘heating or eating’ numbers, tenants with a disability were almost twice as likely (31 per cent) as those without a disability (18 per cent) to say that they have spent less on heating and energy.

The percentage of affected tenants saying that they were in arrears most or all of the time has risen from 6 per cent to 31 per cent since the introduction of the bedroom tax. Among those who reported regularly running out of money, 57 per cent had made up the shortfall by borrowing from families and friends, 25 per cent by going without meals and 19 per cent by reducing their energy bills.

What also really struck me though were the tiny numbers of tenants who had taken the DWP’s choices.

Only 10 per cent had applied for a discretionary housing payment. Even discounting for the fact that these are tenants’ perceptions and some may have been helped by their landlord to apply without realising it, I find that a shockingly low number.

Just 6 per cent had looked for a job but before anyone thinks this is about workshy tenants the report also includes a more detailed analysis comparing the attitudes of tenants affected and unaffected by the bedroom tax. There was virtually no difference in the proportions saying they had looked for a job, taken new training, looked for an additional job or increased their hours. Ipsos Mori concludes:

‘For each of these activities there were no significant differences with non-affected tenants suggesting that the introduction of the size criteria had not resulted in any significant changes in employment behaviours at this stage.’

And only 5 per cent had looked at moving to another social tenancy, the same proportion who had borrowed money from friends or families, not paid their rent arrears and not paid other bills and gone into debt. The option of taking a lodger does not register at all in the polling.

If those answers give the lie to ministers’ complacent statements ahead of implementation, they might also give landlords pause for thought. Why hadn’t more tenants applied for DHPs – did they need more support? And why is there no mention of appealing against housing benefit determinations – as many tenants have successfully done on grounds including room size and use?

A second report on the bedroom tax a year on was published last week by Grand Union Housing. This found that 70 per cent of the 1,070 tenants affected by the bedroom tax in April 2013 were still affected a year later. Of the 317 others, 15 per cent had moved, 8 per cent stopped claiming housing benefit (implying they found work), 3 per cent had gained a new household member and 2 per cent had reached pension age and become exempt. However, some 286 new tenants had joined those affected since April 2013, so the overall numbers have not gone down by much.

Away from those headline numbers, two things leapt out of the report for me. First, on DHPs, it quotes the example of a tenant who applied and got asked why they needed an internet connection. She got help after her landlord intervene but it begs the question of how many others could have been denied on the basis of an internet connection that they already need to look for work and will need to claim the universal credit.

Second, there’s the whole issue of who gets the homes freed up by tenants who move because of the bedroom tax. If they really are going to other tenants who are overcrowded and in housing need, then it might be possible to see a very rough kind of justice at work.

However, the bedroom tax happened at the same time as local authorities were able to change their allocations policies and restrict who can apply to be on the register. The report says that many associations are seeing a drop in demand on three-bed homes because fewer people are being allowed to bid on them.

One association has had to re-advertise three-bed homes because there were no suitable applicants with three-bed need and then take people who qualify for two bedrooms but can afford the larger tenancy without relying on housing benefit. Under-occupation therefore continues but with a different family.

Another has seen 2,000 families removed from the registers by local authorities and is now letting homes to lower priority applicants as a result. One council has only 12 applicants eligible for a three-bed house compared to 400 before the change.

A year on and not many of the impacts of the bedroom tax predicted by ministers seem to have materialised. Many if not most of the fears expressed by critics have been borne out. And the unintended consequences of a pernicious policy keep mounting up. 

Tax year

Wed, 28 May 2014

A year on and the evidence is stacking up about the impact of the bedroom tax.

Over and over again we’ve heard from ministers that tenants affected by what they call the removal of the spare room subsidy have choices: they can downsize; or they can take in a lodger; or they can get a job. And the safety net of discretionary housing payments (DHPs) is there to help the most vulnerable.

Over and over again, landlords, tenants and others have argued that it’s not so simple: smaller homes are just not available; jobs are not so easy to come by and may be impossible for many tenants with disabilities; few will want to take a stranger into their home; and DHPs are woefully inadequate to meet the scale of need.

A year on from its introduction evidence is emerging of the impact of the bedroom tax and of the sorts of behavioural change that the DWP found impossible to quantify in its impact assessments.

Looking at today’s report by the National Housing Federation, and here are what tenants told IPSOS Mori were their most common responses to bedroom tax.

Poll

The headlines were understandably taken by the 58 per cent of tenants who said they had spent less on food or heating and energy since being affected. Even more starkly on the ‘heating or eating’ numbers, tenants with a disability were almost twice as likely (31 per cent) as those without a disability (18 per cent) to say that they have spent less on heating and energy.

The percentage of affected tenants saying that they were in arrears most or all of the time has risen from 6 per cent to 31 per cent since the introduction of the bedroom tax. Among those who reported regularly running out of money, 57 per cent had made up the shortfall by borrowing from families and friends, 25 per cent by going without meals and 19 per cent by reducing their energy bills.

What also really struck me though were the tiny numbers of tenants who had taken the DWP’s choices.

Only 10 per cent had applied for a discretionary housing payment. Even discounting for the fact that these are tenants’ perceptions and some may have been helped by their landlord to apply without realising it, I find that a shockingly low number.

Just 6 per cent had looked for a job but before anyone thinks this is about workshy tenants the report also includes a more detailed analysis comparing the attitudes of tenants affected and unaffected by the bedroom tax. There was virtually no difference in the proportions saying they had looked for a job, taken new training, looked for an additional job or increased their hours. Ipsos Mori concludes:

‘For each of these activities there were no significant differences with non-affected tenants suggesting that the introduction of the size criteria had not resulted in any significant changes in employment behaviours at this stage.’

And only 5 per cent had looked at moving to another social tenancy, the same proportion who had borrowed money from friends or families, not paid their rent arrears and not paid other bills and gone into debt. The option of taking a lodger does not register at all in the polling.

If those answers give the lie to ministers’ complacent statements ahead of implementation, they might also give landlords pause for thought. Why hadn’t more tenants applied for DHPs – did they need more support? And why is there no mention of appealing against housing benefit determinations – as many tenants have successfully done on grounds including room size and use?

A second report on the bedroom tax a year on was published last week by Grand Union Housing. This found that 70 per cent of the 1,070 tenants affected by the bedroom tax in April 2013 were still affected a year later. Of the 317 others, 15 per cent had moved, 8 per cent stopped claiming housing benefit (implying they found work), 3 per cent had gained a new household member and 2 per cent had reached pension age and become exempt. However, some 286 new tenants had joined those affected since April 2013, so the overall numbers have not gone down by much.

Away from those headline numbers, two things leapt out of the report for me. First, on DHPs, it quotes the example of a tenant who applied and got asked why they needed an internet connection. She got help after her landlord intervene but it begs the question of how many others could have been denied on the basis of an internet connection that they already need to look for work and will need to claim the universal credit.

Second, there’s the whole issue of who gets the homes freed up by tenants who move because of the bedroom tax. If they really are going to other tenants who are overcrowded and in housing need, then it might be possible to see a very rough kind of justice at work.

However, the bedroom tax happened at the same time as local authorities were able to change their allocations policies and restrict who can apply to be on the register. The report says that many associations are seeing a drop in demand on three-bed homes because fewer people are being allowed to bid on them.

One association has had to re-advertise three-bed homes because there were no suitable applicants with three-bed need and then take people who qualify for two bedrooms but can afford the larger tenancy without relying on housing benefit. Under-occupation therefore continues but with a different family.

Another has seen 2,000 families removed from the registers by local authorities and is now letting homes to lower priority applicants as a result. One council has only 12 applicants eligible for a three-bed house compared to 400 before the change.

A year on and not many of the impacts of the bedroom tax predicted by ministers seem to have materialised. Many if not most of the fears expressed by critics have been borne out. And the unintended consequences of a pernicious policy keep mounting up. 

Flagship sunk

Fri, 23 May 2014

While UKIP has taken all the election headlines, in housing terms it’s hard to look beyond the Conservative defeat in the party’s flagship council of Hammersmith & Fulham.

The West London borough dubbed ‘David Cameron’s favourite council’ has pursued a radical strategy of cutting the council tax and cutting spending since it won power in 2006.

But it is of course also the birthplace of what I’ve come to think of as the third Conservative housing revolution. If the first was the right to buy and the second private finance for housing associations and deregulation of private renting, the third is about changing the nature of social housing completely.

The manifesto was of course the 2009 report for Localis called Principles for Social Housing Reform. Co-written by former Hammersmith & Fulham leader Stephen Greenhalgh, it argued that:

‘The current social housing is warehousing poverty in the core of our great cities – cities which need to be the very engines of economic growth. With fundamental reform, social housing would continue to be available to those who cannot house themselves and would provide properly for them, but the system would provide a hand up rather than a hand out to people who work hard and play by the rules.’

The report recommended the end of security of tenure and a national allocations framework for social housing, putting all tenants on near-market rents and the end of all capital subsidy for new homes.

Much of that agenda went on to be implemented under the coalition. The Localism Act allowed landlords to introduce fixed-term tenancies and change their allocation policies and subsidy was cut alongside ‘affordable’ rents. This may be a more moderate and voluntary version of the Localis agenda but the links are clear.

Back in West London, the council has used the new freedoms to change its allocations policy and slash its waiting list and favour intermediate rent and home ownership while selling off a proportion of social housing as it becomes vacant. And perhaps most controversially of all it’s pursued a regeneration strategy that includes the demolition of existing council estates like West Kensington and Gibbs Green as part of the Earl’s Court development and the creation of ‘decent neighbourhoods’ of high-priced homes.

Greenhalgh himself has since moved on from Hammersmith & Fulham to become London deputy mayor for policing and crime but the mantle of reform was taken up by Cabinet member for housing Andrew Johnson. As he put it in 2012:

‘We want to incentivise residents to make the most of their lives. Council housing can be a great safety net to help get people back on their feet — but it should be a springboard not a destination. The current system does not promote personal aspiration or provide tenants with any incentive to try to move into home ownership and does not make the best use of the housing we have.’

The idea of social housing as ‘a springboard not a destination’, as a form of A&E for people in temporary difficulty rather than a permanent home for people in need, mirrors the coalition’s wider programme of welfare reform. It’s a prescription that, as many people have blogged many times, amounts to the end of social housing as we’ve known it.

But now the Conservative revolutionaries of Hammersmith & Fulham have lost. Andrew Johnson was among the councillors who lost their seat in yesterday’s election though Conservative Home blogger Harry Phibbs kept his (see his reaction here). 

Labour regains control of the council after eight years out of power in which its councillors and local MP Andy Slaughter have campaigned vociferously against the Conservative housing policies.

Three of the five early pledges made by Labour ahead of the election featured housing:

  • Save our hospitals. The Conservative council plans to demolish Charing Cross Hospital to build flats for overseas investors. Labour will block this and defend our hospitals.
  • Homes for residents, not overseas investors. Conservative councillors approve more new homes for overseas investors than local people. Labour will reverse this and ensure homes are built that residents can afford and support social and private tenants
  • Put residents first, not property speculators. The Conservative Council puts property speculators first and ignores residents. Labour will give residents a real say with new powers.

The election was obviously about far more than just housing (see Dave Hill’s blog from Wednesday) but it will be fascinating to see what changes in Hammersmith & Fulham as a result.

Most immediately, what does the Labour victory mean for the residents of the West Kensington and Gibbs Green estates? Only on Wednesday they were appealing to David Cameron to intervene to save their homes. Now they have fresh hope – the scheme got planning permission last month but as Pete Apps reports this morning campaigners are optimistic about plans to transfer ownership of the homes to residents.   

Flagship sunk

Fri, 23 May 2014

While UKIP has taken all the election headlines, in housing terms it’s hard to look beyond the Conservative defeat in the party’s flagship council of Hammersmith & Fulham.

The West London borough dubbed ‘David Cameron’s favourite council’ has pursued a radical strategy of cutting the council tax and cutting spending since it won power in 2006.

But it is of course also the birthplace of what I’ve come to think of as the third Conservative housing revolution. If the first was the right to buy and the second private finance for housing associations and deregulation of private renting, the third is about changing the nature of social housing completely.

The manifesto was of course the 2009 report for Localis called Principles for Social Housing Reform. Co-written by former Hammersmith & Fulham leader Stephen Greenhalgh, it argued that:

‘The current social housing is warehousing poverty in the core of our great cities – cities which need to be the very engines of economic growth. With fundamental reform, social housing would continue to be available to those who cannot house themselves and would provide properly for them, but the system would provide a hand up rather than a hand out to people who work hard and play by the rules.’

The report recommended the end of security of tenure and a national allocations framework for social housing, putting all tenants on near-market rents and the end of all capital subsidy for new homes.

Much of that agenda went on to be implemented under the coalition. The Localism Act allowed landlords to introduce fixed-term tenancies and change their allocation policies and subsidy was cut alongside ‘affordable’ rents. This may be a more moderate and voluntary version of the Localis agenda but the links are clear.

Back in West London, the council has used the new freedoms to change its allocations policy and slash its waiting list and favour intermediate rent and home ownership while selling off a proportion of social housing as it becomes vacant. And perhaps most controversially of all it’s pursued a regeneration strategy that includes the demolition of existing council estates like West Kensington and Gibbs Green as part of the Earl’s Court development and the creation of ‘decent neighbourhoods’ of high-priced homes.

Greenhalgh himself has since moved on from Hammersmith & Fulham to become London deputy mayor for policing and crime but the mantle of reform was taken up by Cabinet member for housing Andrew Johnson. As he put it in 2012:

‘We want to incentivise residents to make the most of their lives. Council housing can be a great safety net to help get people back on their feet — but it should be a springboard not a destination. The current system does not promote personal aspiration or provide tenants with any incentive to try to move into home ownership and does not make the best use of the housing we have.’

The idea of social housing as ‘a springboard not a destination’, as a form of A&E for people in temporary difficulty rather than a permanent home for people in need, mirrors the coalition’s wider programme of welfare reform. It’s a prescription that, as many people have blogged many times, amounts to the end of social housing as we’ve known it.

But now the Conservative revolutionaries of Hammersmith & Fulham have lost. Andrew Johnson was among the councillors who lost their seat in yesterday’s election though Conservative Home blogger Harry Phibbs kept his (see his reaction here). 

Labour regains control of the council after eight years out of power in which its councillors and local MP Andy Slaughter have campaigned vociferously against the Conservative housing policies.

Three of the five early pledges made by Labour ahead of the election featured housing:

  • Save our hospitals. The Conservative council plans to demolish Charing Cross Hospital to build flats for overseas investors. Labour will block this and defend our hospitals.
  • Homes for residents, not overseas investors. Conservative councillors approve more new homes for overseas investors than local people. Labour will reverse this and ensure homes are built that residents can afford and support social and private tenants
  • Put residents first, not property speculators. The Conservative Council puts property speculators first and ignores residents. Labour will give residents a real say with new powers.

The election was obviously about far more than just housing (see Dave Hill’s blog from Wednesday) but it will be fascinating to see what changes in Hammersmith & Fulham as a result.

Most immediately, what does the Labour victory mean for the residents of the West Kensington and Gibbs Green estates? Only on Wednesday they were appealing to David Cameron to intervene to save their homes. Now they have fresh hope – the scheme got planning permission last month but as Pete Apps reports this morning campaigners are optimistic about plans to transfer ownership of the homes to residents.   

Doubts about Dave

Tue, 20 May 2014

How do David Cameron’s claims this morning about home ownership and new housing in his own constituency measure up to scrutiny?

It’s a measure of the growing political importance of housing took top billing in his Today programme interview sandwiched between reaction to the conviction of Abu Hamza and Britain’s relationship with Europe. Listen again here from about 1:30 in.

The interview was notable for me for two things: first an unequivocal claim to the old Tory mantle of the ‘property owning democracy’; and second a denial that Tory councils are nimbys made with specific reference to West Oxfordshire (Cameron’s Witney constituency has the same boundaries).

On the first, Cameron said ‘yes absolutely’ when John Humprhys asked him if he considered the right to own your own home to be ‘a sacred right’. The prime minister went on: ‘It’s a deep, natural human instinct. That’s what Help to Buy is all about and what putting rocket boosters under Right to Buy is all about.’

He was of course speaking in the context of mounting concern about the impact of rising house prices, with comments in the last few days from both Mark Carney and Vince Cable. He also said that he would consider action on Help to Buy if it was recommended by the Bank of England. However, given that he seems relaxed, even chillaxed about the prospects of four more years of rising prices, don’t hold your breath on that one.

But ‘a sacred right’? Cameron was laying claim to the ‘home owning democracy’ mantle of Thatcher, Eden and Skelton but he is presiding over a continuing fall in mortgaged ownership and increase in private renting. What’s happening is looking more and more like a property-owning plutocracy than a democracy.

It’s true that Help to Buy is helping some people on to the housing ladder but rising house prices are excluding many more. The latest ONS house price index out today says prices rose 8 per cent in the UK in the year to March and by 17 per cent in London.

Similarly the Right to Buy is helping more tenants to own their own home but there is not much sign yet of the promised one for one replacement affordable homes (even allowing for the caveat that the pledge only applies to additional sales).

On the second point, Cameron used his own constituency as an example of why Tory councils are not nimbys. ‘We’ve been building in West Oxfordshire more houses than was actually set out under our plan,’ he said. ‘So I don’t accept that all these councils are nimbys.’

To declare a slight interest here, I was born in West Oxfordshire and lived in Woodstock and Bampton until I was seven. Bampton has since becomes famous as the location for Downton Abbey and it is also at the centre of a major row about new homes between developers, planners and local resident groups. This prompted headlines about a ‘nimby revolt’ in the Sunday Times last year and a ‘Downton demo’ in the local paper. The council approved one locally controversial application for 160 homes in March but turned down another for 127 homes in December.

Cameron’s specific claim was that West Oxfordshire has been building more homes than set out in its plan. Presumably that’s based on something but the DCLG housebuilding statistics do not seem to bear him out.

The council’s 2012 draft local plan accepted a need for 5,500 new homes between April 2011 and March 2029 (305 per year). However, is that enough? The latest strategic housing market assessment (SHMA) from Oxfordshire County Council says that the district needs between 635 and 685 new homes a year between 2011 and 2031.

West Oxfordshire is currently in the middle of a consultation on the new local plan with its Cabinet member for planning Cllr Warwick Robinson arguing that the SHMA ‘does not of itself set the housing target’.

However, as the graph below shows, the district’s actual performance on housebuilding is well short of those numbers.

What it shows first is the dramatic impact of the credit crunch, with starts slumping from over 180,000 in 2007 to just 75,000 in mid 2009. A recovery followed in the wake of Labour’s housebuilding schemes.  Completions inevitably lag starts and show a delayed and less volatile trend. 

In phase one of the completion, starts and completions both proved impervious to all government attempts to kickstart them. Up to the end of 2012 they flatlined and even drifted lower than the levels the coalition had inherited.

A strong recovery in starts began from the end of 2012 and has accelerated through 2013 and the first quarter of 2014. The launch of Help to Buy 1 in April 2013 has to be a factor but it’s difficult to separate out its impact from that of previous schemes such as Funding for Lending and the general recovery in the economy.

So far, so good for Pickles and Hopkins. The surge in starts (the March quarter total is 31 per cent up on a year ago) reflects obvious confidence from housebuilders that they will be able to sell their homes and completions too have at last begun to rise (12 per cent on a year ago, even though the March figure is actually down 3 per cent on the previous quarter).

Look at the graph again though and you’ll see that the recovery so far is actually no stronger than the Labour bounce in 2009 and 2010. Comparing what’s happened under the two governments, the first 15 quarters of the coalition have now seen the completion of around 420,000 homes. However, Labour’s last 15 quarters saw 475,000.

And then compare that to the new homes that are needed to meet demand and keep house price inflation in check. To meet the ubiquitous 250,000 a year target (which may now be an underestimate) the last 15 quarters should have seen completion of more than 900,000 homes. The new homes deficit has therefore grown by another half a million homes under the coalition.

On the assumption that the recovery will continue, the current starts and completions will almost certainly see further increases in the months to come. Savills forecasts that completions could rise to around 167,000 by 2018, which will be back to just below the peak seen before the credit crunch. However, that will still be well short of 250,000.

As I’ve blogged before, the government is helping some people to buy but rising prices are excluding many more from ownership. Figures also out today from the Council of Mortgage Lenders show that the number of first-time buyer mortgages is up 24 on a year ago. However, house purchase loans to buy to let landlords are up 46 per cent.

Far from ‘ensuring that anyone who works hard and wants to get on the property ladder will be able to do so’, the government’s record on housebuilding will send the ladder even further out of reach. 

Eric’s ladder

Thu, 15 May 2014

The boast from ministers is that Help to Buy really is getting Britain building - but is it enough?

The narrative according to Eric Pickles is that the coalition ‘inherited a situation where builders couldn’t build, buyers couldn’t buy and lenders wouldn’t lend’. Now, thanks to Help to Buy and the reinvigorated Right to Buy, ‘we’re ensuring that anyone who works hard and wants to get on the property ladder will be able to do so’.

Not to be outdone, housing minister Kris Hopkins said the housebuilding figures for the March quarter of 2014 were the result of a ‘massive government effort’ and even took credit for a 23-year high in council house building. And the DCLG press release comes complete with a statement from Stewart Baseley of the Home Builders Federation that the extension of Help to Buy 1 ‘is allowing the industry to plan ahead, rebuild capacity lost in the downturn and deliver the homes the country needs’.

The truth, as ever, is a bit more complicated. The graph below shows what’s happened to starts and completions since the end of 2006. I’ve used quarterly 12-month rolling totals to reflect the trend.

What it shows first is the dramatic impact of the credit crunch, with starts slumping from over 180,000 in 2007 to just 75,000 in mid 2009. A recovery followed in the wake of Labour’s housebuilding schemes.  Completions inevitably lag starts and show a delayed and less volatile trend. 

In phase one of the completion, starts and completions both proved impervious to all government attempts to kickstart them. Up to the end of 2012 they flatlined and even drifted lower than the levels the coalition had inherited.

A strong recovery in starts began from the end of 2012 and has accelerated through 2013 and the first quarter of 2014. The launch of Help to Buy 1 in April 2013 has to be a factor but it’s difficult to separate out its impact from that of previous schemes such as Funding for Lending and the general recovery in the economy.

So far, so good for Pickles and Hopkins. The surge in starts (the March quarter total is 31 per cent up on a year ago) reflects obvious confidence from housebuilders that they will be able to sell their homes and completions too have at last begun to rise (12 per cent on a year ago, even though the March figure is actually down 3 per cent on the previous quarter).

Look at the graph again though and you’ll see that the recovery so far is actually no stronger than the Labour bounce in 2009 and 2010. Comparing what’s happened under the two governments, the first 15 quarters of the coalition have now seen the completion of around 420,000 homes. However, Labour’s last 15 quarters saw 475,000.

And then compare that to the new homes that are needed to meet demand and keep house price inflation in check. To meet the ubiquitous 250,000 a year target (which may now be an underestimate) the last 15 quarters should have seen completion of more than 900,000 homes. The new homes deficit has therefore grown by another half a million homes under the coalition.

On the assumption that the recovery will continue, the current starts and completions will almost certainly see further increases in the months to come. Savills forecasts that completions could rise to around 167,000 by 2018, which will be back to just below the peak seen before the credit crunch. However, that will still be well short of 250,000.

As I’ve blogged before, the government is helping some people to buy but rising prices are excluding many more from ownership. Figures also out today from the Council of Mortgage Lenders show that the number of first-time buyer mortgages is up 24 on a year ago. However, house purchase loans to buy to let landlords are up 46 per cent.

Far from ‘ensuring that anyone who works hard and wants to get on the property ladder will be able to do so’, the government’s record on housebuilding will send the ladder even further out of reach. 

Making the case

Tue, 13 May 2014

Why do we need social housing? The answer may seem obvious on this website but too often elsewhere the one you’ll get is ‘we don’t’. 

It’s a theme I’ve blogged about repeatedly over the last few years as social housing has been eroded from within and overtaken from without by the relentless rise of private renting. As coalition ministers never cease to remind us, the sector shrank by 420,000 in England under the last Labour government, but their own policies are merely accelerating the decline while they blur the distinction between affordable and social.

Former housing minister John Healey summed it up bluntly like this in December: ‘If social housing’s own won’t stand up and speak out loudly, then present policy will prevail by default.’ As my fellow IH blogger Colin Wiles has explained, social housing professionals formed the campaign group SHOUT (Social Housing Under Threat) in response. It’s already made a submission to the Lyons Review arguing that half of Labour’s promised 200,000 homes a year should be social housing. If you’re not already, you can follow the campaign on Facebook and on Twitter

In the meantime though, relentlessly negative coverage continues on TV. The intro to last night’s flagship 7pm news programme on Channel 4 was its controversial ident of the Aylesbury estate. Channel 4 News would not tolerate distortions like the artificially inserted clothes lines, shopping trolley full of rubbish and Sky dishes but Channel 4 itself continues to resist a campaign by residents to #changetheident and show their alternative more positive version.

Channel 4 is of course also the home of shows like Benefits Street and How to Get a Council House. Three housing professionals in Wales were so annoyed about the second series of HTGACH that they set up the Council Home Chat campaign to counter the stereotypes. If you’re not already, you can follow the campaign on Twitter and read myth-busting blogs by people who live, work and believe in social housing here.

Campaigns defending the principle of social housing and fighting back against negative images of it are in some ways two sides of the same coin. But there is also a deeper battle of ideas that the people who would answer my initial question with ‘we don’t’ think was won long ago. For them social housing is either old-fashioned or politically and morally undesirable or just economically inefficient. It may be a minority view but this is the thinking that lies behind both the slow death of social housing and the negative images on TV and it badly needs debunking.

A good place to start is with the two latest policy essays from the Chartered Institute of Housing from Steve Hilditch and Keith Exford. Between them, and coming from different angles, they make some important points.

As a housing campaigner and editor of the Red Brick blog, Steve’s staunch defence of social housing will come as no surprise. However, he also confronts many of those anti-social housing arguments in explaining how we got from a position of ‘the housing crisis is nearly solved’ at the start of his career in 1976 to a new crisis now. Perhaps above all:

‘We have failed to match the distribution of prices and rents in the housing system to the distribution of incomes. Inequality has grown and so has insecurity: the number of people with very low incomes in the “flexible labour market” with zero-hours contracts, casualised labour, irregular self-employment, and part- time work. The correct housing policy response to these changes is that homes need to be cheaper not more expensive.’

Steve explains what’s gone wrong in housing policy over that period and the rise of the perceived wisdom that social housing tenants are ‘subsidised’ even as the actual subsidy goes to ‘the least efficient and lowest value-for-money sector, private renting’. Along the way he raises questions about the commercialisation of larger housing associations and who social housing should be for. He concludes that: ‘Over the last 35 years it has had the life squeezed slowly out of it by ideology and bad policy. But it can be reinvented. And the benefits of doing so could be great.’

Keith Exford’s essay starts by asking why housing policy in general, and policy on affordability and rents in particular, is such a mess. As chief executive of Affinity Sutton, he quotes the example of one of its estates in Islington where the amount tenants pay varies from an £80 per week ‘fair rent’ to a £290 per week ‘affordable rent’.

But he also makes the point that ‘it is arguably impossible to improve affordability through rent levels alone. If for political and economic reasons we are prepared to countenance low incomes then high housing costs can only be defrayed through subsidising rents.’ And he argues that the ‘obsession in some quarters’ with expanding private renting ignores the fact that British pay rates are too low to make market prices affordable without housing benefit.

With no official government policy on affordability and rents, Affinity Sutton commissioned its own research to help it frame an affordable rent policy. ‘It is already clear that devising a market rent-related rent policy to help those on the lowest incomes is challenging to say the least,’ he says. ‘The “target rent” approach, which takes into account the housing market and lower incomes, may not be perfect but it at least offers a sensible starting point for a more logical approach.’

Other research shows that supply-side subsidy for social rents offer the best long-term deal for tenants, taxpayers and providers. He argues that a mix of social rents, affordable rents and market rents is the way forward in contrast to current policy. And drawing on the IPPR’s work on bricks and mortar subsidies he concludes: ‘Spending 95p of every housing pound on benefit just doesn’t make sense, does it?’

Both essays are worth reading in full. The detail of their argument may differ in some respects but both make the crucial link between housing and the labour market, rents and people’s ability to pay them. What both show, I think, is that the underlying case for social housing is not just as strong as ever but even stronger now than it was in an era of full employment and high wages. 

Why do we need social housing? The answers are there. Now people beyond this website need to hear them. 

Making the case

Tue, 13 May 2014

Why do we need social housing? The answer may seem obvious on this website but too often elsewhere the one you’ll get is ‘we don’t’. 

It’s a theme I’ve blogged about repeatedly over the last few years as social housing has been eroded from within and overtaken from without by the relentless rise of private renting. As coalition ministers never cease to remind us, the sector shrank by 420,000 in England under the last Labour government, but their own policies are merely accelerating the decline while they blur the distinction between affordable and social.

Former housing minister John Healey summed it up bluntly like this in December: ‘If social housing’s own won’t stand up and speak out loudly, then present policy will prevail by default.’ As my fellow IH blogger Colin Wiles has explained, social housing professionals formed the campaign group SHOUT (Social Housing Under Threat) in response. It’s already made a submission to the Lyons Review arguing that half of Labour’s promised 200,000 homes a year should be social housing. If you’re not already, you can follow the campaign on Facebook and on Twitter

In the meantime though, relentlessly negative coverage continues on TV. The intro to last night’s flagship 7pm news programme on Channel 4 was its controversial ident of the Aylesbury estate. Channel 4 News would not tolerate distortions like the artificially inserted clothes lines, shopping trolley full of rubbish and Sky dishes but Channel 4 itself continues to resist a campaign by residents to #changetheident and show their alternative more positive version.

Channel 4 is of course also the home of shows like Benefits Street and How to Get a Council House. Three housing professionals in Wales were so annoyed about the second series of HTGACH that they set up the Council Home Chat campaign to counter the stereotypes. If you’re not already, you can follow the campaign on Twitter and read myth-busting blogs by people who live, work and believe in social housing here.

Campaigns defending the principle of social housing and fighting back against negative images of it are in some ways two sides of the same coin. But there is also a deeper battle of ideas that the people who would answer my initial question with ‘we don’t’ think was won long ago. For them social housing is either old-fashioned or politically and morally undesirable or just economically inefficient. It may be a minority view but this is the thinking that lies behind both the slow death of social housing and the negative images on TV and it badly needs debunking.

A good place to start is with the two latest policy essays from the Chartered Institute of Housing from Steve Hilditch and Keith Exford. Between them, and coming from different angles, they make some important points.

As a housing campaigner and editor of the Red Brick blog, Steve’s staunch defence of social housing will come as no surprise. However, he also confronts many of those anti-social housing arguments in explaining how we got from a position of ‘the housing crisis is nearly solved’ at the start of his career in 1976 to a new crisis now. Perhaps above all:

‘We have failed to match the distribution of prices and rents in the housing system to the distribution of incomes. Inequality has grown and so has insecurity: the number of people with very low incomes in the “flexible labour market” with zero-hours contracts, casualised labour, irregular self-employment, and part- time work. The correct housing policy response to these changes is that homes need to be cheaper not more expensive.’

Steve explains what’s gone wrong in housing policy over that period and the rise of the perceived wisdom that social housing tenants are ‘subsidised’ even as the actual subsidy goes to ‘the least efficient and lowest value-for-money sector, private renting’. Along the way he raises questions about the commercialisation of larger housing associations and who social housing should be for. He concludes that: ‘Over the last 35 years it has had the life squeezed slowly out of it by ideology and bad policy. But it can be reinvented. And the benefits of doing so could be great.’

Keith Exford’s essay starts by asking why housing policy in general, and policy on affordability and rents in particular, is such a mess. As chief executive of Affinity Sutton, he quotes the example of one of its estates in Islington where the amount tenants pay varies from an £80 per week ‘fair rent’ to a £290 per week ‘affordable rent’.

But he also makes the point that ‘it is arguably impossible to improve affordability through rent levels alone. If for political and economic reasons we are prepared to countenance low incomes then high housing costs can only be defrayed through subsidising rents.’ And he argues that the ‘obsession in some quarters’ with expanding private renting ignores the fact that British pay rates are too low to make market prices affordable without housing benefit.

With no official government policy on affordability and rents, Affinity Sutton commissioned its own research to help it frame an affordable rent policy. ‘It is already clear that devising a market rent-related rent policy to help those on the lowest incomes is challenging to say the least,’ he says. ‘The “target rent” approach, which takes into account the housing market and lower incomes, may not be perfect but it at least offers a sensible starting point for a more logical approach.’

Other research shows that supply-side subsidy for social rents offer the best long-term deal for tenants, taxpayers and providers. He argues that a mix of social rents, affordable rents and market rents is the way forward in contrast to current policy. And drawing on the IPPR’s work on bricks and mortar subsidies he concludes: ‘Spending 95p of every housing pound on benefit just doesn’t make sense, does it?’

Both essays are worth reading in full. The detail of their argument may differ in some respects but both make the crucial link between housing and the labour market, rents and people’s ability to pay them. What both show, I think, is that the underlying case for social housing is not just as strong as ever but even stronger now than it was in an era of full employment and high wages. 

Why do we need social housing? The answers are there. Now people beyond this website need to hear them. 

Discretion and discrimination

Mon, 12 May 2014

Shocking new figures published by Inside Housing reveal yet again the holes in the safety net provided by discretionary housing payments.

On one level it beggars belief that in the last financial year councils turned down 70,000 requests for help from tenants facing cuts in their housing benefit and returned £9 million of DHP funding to central government.

On another, it’s no surprise that a system devolved to local authorities facing their own budget cuts has experienced problems or that one based on local discretion has varied so much between different areas.

I have two big problems with the system but neither is the one today’s Daily Mirror highlights from IH’s report: the north-south divide in the help given to Westminster and Liverpool. All kinds of government funding is tilted in favour of the well-heeled Conservative south of England but in this case it seems to reflect the fact that DHPs do not just cover the bedroom tax. High-rent areas of London face the biggest impact from the bedroom caps and benefit cap.

My first problem is perhaps an inevitable consequence of a discretionary system. A national benefits system based on rights and entitlement becomes a local one based on value judgments about who deserves help.

Is it a coincidence, for example, that North Lincolnshire spent the lowest proportion of its DHP budget in the country (just 15 per cent) and refused the second highest proportion of claims (63 per cent) when it had a policy of refusing grants to tenants who make the wrong ‘life choices’?  As Cllr Rob Waltham, chair of the health and wellbeing committee, told the BBC last year:

‘We all make life choices, whether we go to work, or we can or can’t go to work. What we ask them to do is to reprioritise their spending. If their spending includes satellite television, if it includes smoking then what we say to you is we can’t give you extra taxpayers’ money to support you to continue to make those life choices.’

The data attached to Pete Apps’s Inside Housing story reveals that another two councils in the same county – North East Lincolnshire and West Lindsey – spent the second and third lowest proportions of their DHP budgets.

However, Vale of White Horse in Oxfordshire turned down an even greater proportion of claims (66 per cent) than North Lincolnshire, while East Hampshire took third place with 61 per cent of claims refused.

At the other end of the scale Cheshire West managed to spend all of its DHP allocation plus a bit more and turned down nobody for help. Another three councils – Craven, Stratford on Avon and Derbyshire Dales – turned down less than two per cent of applicants.

In between there is huge variation between different councils which I’m guessing is based not just on their treatment of spending but also income, and in particular whether councils disregard disability benefits or not. 

Politics does seem to come into this too. Analysis by Jed Meers for his PhD thesis shows the political make-up of a local authority does makes some difference to its treatment of bedroom tax victims. Conservative councils appear to be spending less per bedroom tax case than Labour ones. However, the picture is complex: councils with no overall control were more generous than Labour ones; and both North Lincolnshire and Cheshire West are Conservative-controlled.

Jed also highlights the fact that many authorities also apply elements of conditionality to DHP awards, such as a commitment to seek work or alternative accommodation or to reduce spending. ‘in appealing to a form of localised knowledge the government have also appealed to some extent to a localised morality and politics,’ he says. To me this bears more than a passing resemblance to the system that existed before the post-war welfare state.

My second problem is not so much with the DHP system itself as with the attitude of senior judges towards it. While many first tier tribunals have found in favour of tenants, both the High Court and Court of Appeal have found for the DWP. Judges ruled that the bedroom tax does discriminate against disabled people but that the secretary of state had justified the discriminatory effect of the policy and their needs were being met through DHPs.

The DWP will no doubt stick to its line that the DHP system is appropriate and designed to respond flexibly to local circumstances. However, these new figures show that what is presented as flexibility from above looks very different from below.

How long the courts will continue to accept the system at face value remains to be seen. Significantly, the all-party work and pensions committee recognised the same inadequacy in a report published last month calling for significant new exemptions from the bedroom tax. The MPs argued that local discretion ‘is resulting in access to DHP funding depending heavily on where a claimant lives’.

Local discretion is of course being turned to national political ends in Scotland. With permission from Westminster, the Scottish Government is using DHPs plus its own resources to mitigate the impact of the bedroom tax in full. While that may not be quite as simple as it sounds (what happens to tenants who need DHPs to make up for other cuts in housing benefit, for example?), will tenants in the rest of the UK continue to face a postcode lottery?

Discretion and discrimination

Mon, 12 May 2014

Shocking new figures published by Inside Housing reveal yet again the holes in the safety net provided by discretionary housing payments.

On one level it beggars belief that in the last financial year councils turned down 70,000 requests for help from tenants facing cuts in their housing benefit and returned £9 million of DHP funding to central government.

On another, it’s no surprise that a system devolved to local authorities facing their own budget cuts has experienced problems or that one based on local discretion has varied so much between different areas.

I have two big problems with the system but neither is the one today’s Daily Mirror highlights from IH’s report: the north-south divide in the help given to Westminster and Liverpool. All kinds of government funding is tilted in favour of the well-heeled Conservative south of England but in this case it seems to reflect the fact that DHPs do not just cover the bedroom tax. High-rent areas of London face the biggest impact from the bedroom caps and benefit cap.

My first problem is perhaps an inevitable consequence of a discretionary system. A national benefits system based on rights and entitlement becomes a local one based on value judgments about who deserves help.

Is it a coincidence, for example, that North Lincolnshire spent the lowest proportion of its DHP budget in the country (just 15 per cent) and refused the second highest proportion of claims (63 per cent) when it had a policy of refusing grants to tenants who make the wrong ‘life choices’?  As Cllr Rob Waltham, chair of the health and wellbeing committee, told the BBC last year:

‘We all make life choices, whether we go to work, or we can or can’t go to work. What we ask them to do is to reprioritise their spending. If their spending includes satellite television, if it includes smoking then what we say to you is we can’t give you extra taxpayers’ money to support you to continue to make those life choices.’

The data attached to Pete Apps’s Inside Housing story reveals that another two councils in the same county – North East Lincolnshire and West Lindsey – spent the second and third lowest proportions of their DHP budgets.

However, Vale of White Horse in Oxfordshire turned down an even greater proportion of claims (66 per cent) than North Lincolnshire, while East Hampshire took third place with 61 per cent of claims refused.

At the other end of the scale Cheshire West managed to spend all of its DHP allocation plus a bit more and turned down nobody for help. Another three councils – Craven, Stratford on Avon and Derbyshire Dales – turned down less than two per cent of applicants.

In between there is huge variation between different councils which I’m guessing is based not just on their treatment of spending but also income, and in particular whether councils disregard disability benefits or not. 

Politics does seem to come into this too. Analysis by Jed Meers for his PhD thesis shows the political make-up of a local authority does makes some difference to its treatment of bedroom tax victims. Conservative councils appear to be spending less per bedroom tax case than Labour ones. However, the picture is complex: councils with no overall control were more generous than Labour ones; and both North Lincolnshire and Cheshire West are Conservative-controlled.

Jed also highlights the fact that many authorities also apply elements of conditionality to DHP awards, such as a commitment to seek work or alternative accommodation or to reduce spending. ‘in appealing to a form of localised knowledge the government have also appealed to some extent to a localised morality and politics,’ he says. To me this bears more than a passing resemblance to the system that existed before the post-war welfare state.

My second problem is not so much with the DHP system itself as with the attitude of senior judges towards it. While many first tier tribunals have found in favour of tenants, both the High Court and Court of Appeal have found for the DWP. Judges ruled that the bedroom tax does discriminate against disabled people but that the secretary of state had justified the discriminatory effect of the policy and their needs were being met through DHPs.

The DWP will no doubt stick to its line that the DHP system is appropriate and designed to respond flexibly to local circumstances. However, these new figures show that what is presented as flexibility from above looks very different from below.

How long the courts will continue to accept the system at face value remains to be seen. Significantly, the all-party work and pensions committee recognised the same inadequacy in a report published last month calling for significant new exemptions from the bedroom tax. The MPs argued that local discretion ‘is resulting in access to DHP funding depending heavily on where a claimant lives’.

Local discretion is of course being turned to national political ends in Scotland. With permission from Westminster, the Scottish Government is using DHPs plus its own resources to mitigate the impact of the bedroom tax in full. While that may not be quite as simple as it sounds (what happens to tenants who need DHPs to make up for other cuts in housing benefit, for example?), will tenants in the rest of the UK continue to face a postcode lottery?

Control speak

Fri, 2 May 2014

Labour’s bold move on private renting seems to be working as politics. Will it work as policy?

I’ve never been to Venezuela or Vietnam but, with due deference to Grant Shapps’s expertise on their housing systems, I do have a few observations to offer.

The Conservative chairman compared Ed Miliband to Hugo Chavez in a ludicrously overblown reaction to the Labour leader’s speech yesterday. Free market think tanks like the Institute of Economic Affairs and right-wing commentators like Fraser Nelson and Harry Phibbs joined him in condemning Labour’s supposed plans to introduce rent controls.

A quick glance at what Labour is actually proposing reveals that it owes far more to Ireland and Germany than Venezuela and Vietnam:

  • A ban on the outrageous fees letting agents charge to tenants, which Labour says will save them an average of £350.
  • A default three-year tenancy, from which tenants can give one month’s notice after the first six months
  • The rent to be freely negotiated at the start of the tenancy with annual increases after that based on a benchmark such as average market rents.

This demonstrably does not amount to the ‘rent controls’ described by Shapps and the right-wing think tanks. Nor will it necessarily lead to a fall in supply: the private rented sector in Ireland grew rapidly after it introduced very similar four-year tenancies with annual rent reviews based on market rent in 2004. And it’s actually more timid than the policies advocated by German chancellor Angela Merkel in last year’s elections. 

As for ‘rent control’ what about the way that the market already operates for the eight million households who currently rent their home in England?

The rents of four million social housing tenants rise by a formula linked to inflation (currently CPI plus 1 per cent). That could definitely be described as rent control but far from restricting new supply it is a vital mechanism underpinning it. Over the last few years social rents have actually risen faster on average than private rents.

In the private sector, there are still a dwindling number of tenants on pre-1989 regulated rents (120,000 in 20087/08, the most recent figure I can find). The Conservative-led coalition has introduced caps on the rents eligible for housing benefit of another 1.6 million private tenants. The bedroom size caps were explicitly designed to reduce the rents charged by private landlords.

So, depending on your point of view, the rents of around 5.7 million tenant households are controlled in some form. ‘Rent control’ has many forms. You could even argue that it applies to the remaining 2.3 million households on assured shorthold tenancies and not on housing benefit. As Duncan Stott pointed out on twitter yesterday, his rent is set and cannot be increased for the duration of his six-month tenancy.

Politically, the row about rents is part of a more fundamental division between the parties about intervention in markets. The Conservatives prefer to subsidise ownership (and boost house prices) through Help to Buy. My guess is that Labour’s new policies will resonate with younger voters who are private tenants. As two indications, see these blogs by Tim Stanley in the Telegraph and Daniel Knowles in The Economist. Neither publication is known for its support for Labour or rejection of free markets, but both are broadly supportive of Labour’s announcement.

It remains to be seen whether this will amount to the big electoral boost for Labour envisaged by its more optimistic supporters – they will have to be registered to vote first – but it does have political appeal. As with capping energy prices, the Conservatives can’t seem to decide where this is Marxism or a gimmick but they may find it is also popular.  

But will it work as a policy? On the economics of interventions in rental markets, see this excellent blog by Alex Marsh. On the history, I’m planning a separate blog soon. Here are a few thoughts about the policy issues in the meantime.

It was noticeable that, unlike previous Labour policy documents on private renters, there were no endorsements from people in the property industry. There was even an embarrassing intervention from the RICS denying that is working on the benchmarks that the Labour press release implied would be the basis of rent setting. Hostile reactions from the landlord organisations and letting agents were only to be expected but like the energy companies before them they will come across as self-interested.

The more serious threat is the one to investment. When it came to office in 1997 one of the reasons Labour was careful to say that it had no plans for major changes on private renting was that it feared spooking the institutional investors supposedly considering a move into the sector.

Exactly the same argument is being made now at a time when Build to Let at last shows some signs of getting off the ground. One of the most thoughtful reactions from the industry has come from Ian Fletcher of the British Property Federation:

‘There are many institutions investing in UK housing, or on the cusp of it, that will be feeling extremely nervous this morning. Those who are investing already are very receptive to offering longer tenancies and many are doing so and the Labour Party’s aspiration on that in itself is not objectionable, but the rent control aspect of this announcement makes no sense. Good landlords will be getting a perverse message that if you are providing a premium product the most you can expect is the ‘average’, whilst bad landlords with sub-standard accommodation can find another justification for charging over the odds.’

That is a genuine concern and it will raise fears that Labour could go further in future. However, any damage to confidence has probably already been done. And the counter-argument – that Labour should do nothing for fear of spooking investors – is exactly what has led to the rise of buy to let and insecurity for tenants.

As Ian Fletcher goes on to say, it also means Labour has to be more forthcoming about how its new policies will work. This is the crucial point: any new system will involve a compromise between protecting tenants and allowing the market to operate and the question is where it is struck. The similar policies proposed by Eric Pickles last year signalled that he knows there is a problem but seem unlikely to achieve much because they are voluntary.

In contrast, Labour plans to legislate for the new tenancies and to ban letting agent fees. However, the detail that has emerged so far includes important flexibilities. The three-year tenancy will begin with a six-month probation and the landlord will be able to terminate the contract for reasons such as rent arrears or anti-social behaviour. After that landlords will be able to terminate with two months’ notice on the same grounds or if they want to sell, refurbish or change the use of the property.

However, some shorter-term tenancies will continue. New tenants like students and people on temporary contracts will be able to request shorter lets with the landlord’s agreement. Landlords contractually obliged to offer short tenancies by the terms of their buy-to-let mortgage will be able to continue to offer them if the mortgage was taken out before the start of the new system.

All of these seem sensible provisions that should go some way to allay the fears of landlords and others in the property industry. However, it’s not hard to see that they could also be the basis of some gaping loopholes in the legislation. What would happen, for example, if banks simply refused to change the terms of their buy-to-let mortgages because they want quick possession? What’s to stop a landlord lying about sale or refurbishment plans or not so subtly implying to a new tenant that they should ‘request’ a shorter let.

The politics of this will be fascinating over the next 12 months. If they help Labour win, the devil will be in the policy details. 

Control speak

Fri, 2 May 2014

Labour’s bold move on private renting seems to be working as politics. Will it work as policy?

I’ve never been to Venezuela or Vietnam but, with due deference to Grant Shapps’s expertise on their housing systems, I do have a few observations to offer.

The Conservative chairman compared Ed Miliband to Hugo Chavez in a ludicrously overblown reaction to the Labour leader’s speech yesterday. Free market think tanks like the Institute of Economic Affairs and right-wing commentators like Fraser Nelson and Harry Phibbs joined him in condemning Labour’s supposed plans to introduce rent controls.

A quick glance at what Labour is actually proposing reveals that it owes far more to Ireland and Germany than Venezuela and Vietnam:

  • A ban on the outrageous fees letting agents charge to tenants, which Labour says will save them an average of £350.
  • A default three-year tenancy, from which tenants can give one month’s notice after the first six months
  • The rent to be freely negotiated at the start of the tenancy with annual increases after that based on a benchmark such as average market rents.

This demonstrably does not amount to the ‘rent controls’ described by Shapps and the right-wing think tanks. Nor will it necessarily lead to a fall in supply: the private rented sector in Ireland grew rapidly after it introduced very similar four-year tenancies with annual rent reviews based on market rent in 2004. And it’s actually more timid than the policies advocated by German chancellor Angela Merkel in last year’s elections. 

As for ‘rent control’ what about the way that the market already operates for the eight million households who currently rent their home in England?

The rents of four million social housing tenants rise by a formula linked to inflation (currently CPI plus 1 per cent). That could definitely be described as rent control but far from restricting new supply it is a vital mechanism underpinning it. Over the last few years social rents have actually risen faster on average than private rents.

In the private sector, there are still a dwindling number of tenants on pre-1989 regulated rents (120,000 in 20087/08, the most recent figure I can find). The Conservative-led coalition has introduced caps on the rents eligible for housing benefit of another 1.6 million private tenants. The bedroom size caps were explicitly designed to reduce the rents charged by private landlords.

So, depending on your point of view, the rents of around 5.7 million tenant households are controlled in some form. ‘Rent control’ has many forms. You could even argue that it applies to the remaining 2.3 million households on assured shorthold tenancies and not on housing benefit. As Duncan Stott pointed out on twitter yesterday, his rent is set and cannot be increased for the duration of his six-month tenancy.

Politically, the row about rents is part of a more fundamental division between the parties about intervention in markets. The Conservatives prefer to subsidise ownership (and boost house prices) through Help to Buy. My guess is that Labour’s new policies will resonate with younger voters who are private tenants. As two indications, see these blogs by Tim Stanley in the Telegraph and Daniel Knowles in The Economist. Neither publication is known for its support for Labour or rejection of free markets, but both are broadly supportive of Labour’s announcement.

It remains to be seen whether this will amount to the big electoral boost for Labour envisaged by its more optimistic supporters – they will have to be registered to vote first – but it does have political appeal. As with capping energy prices, the Conservatives can’t seem to decide where this is Marxism or a gimmick but they may find it is also popular.  

But will it work as a policy? On the economics of interventions in rental markets, see this excellent blog by Alex Marsh. On the history, I’m planning a separate blog soon. Here are a few thoughts about the policy issues in the meantime.

It was noticeable that, unlike previous Labour policy documents on private renters, there were no endorsements from people in the property industry. There was even an embarrassing intervention from the RICS denying that is working on the benchmarks that the Labour press release implied would be the basis of rent setting. Hostile reactions from the landlord organisations and letting agents were only to be expected but like the energy companies before them they will come across as self-interested.

The more serious threat is the one to investment. When it came to office in 1997 one of the reasons Labour was careful to say that it had no plans for major changes on private renting was that it feared spooking the institutional investors supposedly considering a move into the sector.

Exactly the same argument is being made now at a time when Build to Let at last shows some signs of getting off the ground. One of the most thoughtful reactions from the industry has come from Ian Fletcher of the British Property Federation:

‘There are many institutions investing in UK housing, or on the cusp of it, that will be feeling extremely nervous this morning. Those who are investing already are very receptive to offering longer tenancies and many are doing so and the Labour Party’s aspiration on that in itself is not objectionable, but the rent control aspect of this announcement makes no sense. Good landlords will be getting a perverse message that if you are providing a premium product the most you can expect is the ‘average’, whilst bad landlords with sub-standard accommodation can find another justification for charging over the odds.’

That is a genuine concern and it will raise fears that Labour could go further in future. However, any damage to confidence has probably already been done. And the counter-argument – that Labour should do nothing for fear of spooking investors – is exactly what has led to the rise of buy to let and insecurity for tenants.

As Ian Fletcher goes on to say, it also means Labour has to be more forthcoming about how its new policies will work. This is the crucial point: any new system will involve a compromise between protecting tenants and allowing the market to operate and the question is where it is struck. The similar policies proposed by Eric Pickles last year signalled that he knows there is a problem but seem unlikely to achieve much because they are voluntary.

In contrast, Labour plans to legislate for the new tenancies and to ban letting agent fees. However, the detail that has emerged so far includes important flexibilities. The three-year tenancy will begin with a six-month probation and the landlord will be able to terminate the contract for reasons such as rent arrears or anti-social behaviour. After that landlords will be able to terminate with two months’ notice on the same grounds or if they want to sell, refurbish or change the use of the property.

However, some shorter-term tenancies will continue. New tenants like students and people on temporary contracts will be able to request shorter lets with the landlord’s agreement. Landlords contractually obliged to offer short tenancies by the terms of their buy-to-let mortgage will be able to continue to offer them if the mortgage was taken out before the start of the new system.

All of these seem sensible provisions that should go some way to allay the fears of landlords and others in the property industry. However, it’s not hard to see that they could also be the basis of some gaping loopholes in the legislation. What would happen, for example, if banks simply refused to change the terms of their buy-to-let mortgages because they want quick possession? What’s to stop a landlord lying about sale or refurbishment plans or not so subtly implying to a new tenant that they should ‘request’ a shorter let.

The politics of this will be fascinating over the next 12 months. If they help Labour win, the devil will be in the policy details. 

Decision time

Thu, 1 May 2014

It’s May 8, 2015. A new government takes office promising that housing will be a priority. But can we be sure they will deliver?

They may have different means in mind but all of the major parties are apparently committed to the same end: Yes to Homes. Whoever wins in a year’s time faces an uphill struggle to boost output from the current miserable levels.

A report published today by Shelter and KPMG sets out a road map for how the new government can get from there to the promised land of 250,000 new homes a year by 2021. It begins with two significant and symbolic acts by the new prime minister on day one - the appointment of the housing minister to the Cabinet and a declaration that building more homes is a ‘national priority’ - and it continues with a programme for the first 50 and 100 days and each year of the new government. The full report is here and a shorter web version here.

Housing is plagued by simplistic solutions. We’re told that the crisis can be resolved if only we liberalise planning, or build new garden cities or bring empty homes back into use. The truth is that, whatever the merits of each of these proposals, none of them will be enough on their own. A silver bullet may be enough to stop a vampire but don’t expect it to solve the housing crisis without liberal doses of garlic, nails to hammer down the coffin and plenty of money, bricks and mortar.

It’s a point that applies in spades to the politics of housing since there’s nothing that politicians love better than simplistic solutions, preferably ones that can be communicated in (sound) bite-sized chunks. Vague promises made during election campaigns and in housing strategies and white papers usually turn out not to count for very much when the election comes round again. And the problem is amplified by the disconnect between the long timescales required for solutions to work and the short ones dictated by the five-year electoral cycle. What politician wants solutions that only reap political dividends for the next government?

The report from Shelter and KPMG does not pretend that tackling the housing shortage will be easy or simple. Real action means tough choices – not the empty ones that feature in political rhetoric but real ones about the policies and resources needed to get more new homes. But the alternative is worse. The headline warning is that house prices could quadruple within 20 years and half of the under-35s could be living with their parents if the new government fails to act.

In a message addressed to David Cameron, Nick Clegg and Ed Miliband, the report warns:

‘If the next government shies away from showing the strong leadership needed, having a home of your own to rent or buy affordably will become a distant dream for an increasing number of people in this country. rents will rise and homelessness will increase.the economic recovery will be held back by high housing costs, an immobile workforce and unstable housing markets.’

The plan is one of the most comprehensive I’ve seen and gets to the heart of some crucial issues that get ignored or glossed over in the rush for simplistic solutions. Here are some that caught my eye:

Land is the crucial issue not planning. The report proposes that planning authorities be given the power to designate New Homes Zones where development will happen with no taxes on the site and on land acquired at closer to existing use value than residential value. The land market should be opened up with far more data on who owns it and the prices they paid for it.

Garden cities are important – but they won’t contribute much in the next five years. The report calls for five of around 30,000 homes each with construction to start within the lifetime of the next parliament. But each will have a development period of 15 years and they will only begin to contribute around 5,000 homes a year by the end of it.

We need a new housebuilding model. Delivery has become ever more concentrated in the hands of a few large housebuilders with little incentive to increase output. The report rightly links that to the residual land value model, under which the price of existing homes dictates the price firms pay for land, increasing the price they pay and reducing quality. It calls for new incentives for small and medium sized builders, including Help to Build guarantees diverted from Help to Buy, and sites in New Homes Zones and garden cities set aside for small developers and custom builders.

Design standards will level the playing field. In contrast to the current rhetoric about cutting ‘red tape’, the report argues that clear national rules on the minimum size of new homes will help developers by giving them confidence that rivals will not be able to bid more for land by squeezing in as many smaller homes as possible.

Investment in affordable housing is crucial. On top of the familiar arguments about the wider economic benefits and returns to the Treasury, the report points out that increased spending will have an immediate impact on the ground. It calls for an extra £1.2 billion a year of public spending matched by private funding and the existing AHP to bring total investment to £15 billion over the next parliament. Half would be for social rent, a quarter for intermediate rent and a quarter for affordable home ownership. The money could come from soaring stamp duty receipts, tackling tax evasion by private landlords and reforming the new homes bonus.

So are new ways to finance house building. The report recommends a Dutch-style Housjng and Infrastructure Bank plus joint venture land deals and institutional investment. One intriguing proposal is a Housing ISA, where depositors would get a state-guaranteed tax-free return and the money would be let out as low cost, long term loans to affordable housing providers.

We need the rebirth of council housing. We’ve never come close to 250,000 homes a year since local authorities were prevented from borrowing after 1979. After bi-partisan moves to loosen the restrictions, the report recommends gradually raising HRA borrowing caps and eventually reforming the borrowing rules on European lines.

Green belts don’t have to stay as they are. That doesn’t mean abolishing them either. The report argues green belt swaps and reviews have huge potential to deliver more homes.

I’m guessing that almost everyone will find some things to quibble with in this report. One of mine would be the implicit assumption that funding for affordable housing can be scaled back once we reach 250,000 homes a year. That was the figure that the Barker report said was needed to bring house price increases back to the European average, not bring them down. Affordability will continue to be a problem.

However, taken as a whole, this is a blueprint (or redprint or yellowprint) for what all the parties say they want to achieve after 2015. Some proposals will appeal to some parties more than others but the fundamental question remains. How serious are they about the housing crisis?

Decision time

Thu, 1 May 2014

It’s May 8, 2015. A new government takes office promising that housing will be a priority. But can we be sure they will deliver?

They may have different means in mind but all of the major parties are apparently committed to the same end: Yes to Homes. Whoever wins in a year’s time faces an uphill struggle to boost output from the current miserable levels.

A report published today by Shelter and KPMG sets out a road map for how the new government can get from there to the promised land of 250,000 new homes a year by 2021. It begins with two significant and symbolic acts by the new prime minister on day one - the appointment of the housing minister to the Cabinet and a declaration that building more homes is a ‘national priority’ - and it continues with a programme for the first 50 and 100 days and each year of the new government. The full report is here and a shorter web version here.

Housing is plagued by simplistic solutions. We’re told that the crisis can be resolved if only we liberalise planning, or build new garden cities or bring empty homes back into use. The truth is that, whatever the merits of each of these proposals, none of them will be enough on their own. A silver bullet may be enough to stop a vampire but don’t expect it to solve the housing crisis without liberal doses of garlic, nails to hammer down the coffin and plenty of money, bricks and mortar.

It’s a point that applies in spades to the politics of housing since there’s nothing that politicians love better than simplistic solutions, preferably ones that can be communicated in (sound) bite-sized chunks. Vague promises made during election campaigns and in housing strategies and white papers usually turn out not to count for very much when the election comes round again. And the problem is amplified by the disconnect between the long timescales required for solutions to work and the short ones dictated by the five-year electoral cycle. What politician wants solutions that only reap political dividends for the next government?

The report from Shelter and KPMG does not pretend that tackling the housing shortage will be easy or simple. Real action means tough choices – not the empty ones that feature in political rhetoric but real ones about the policies and resources needed to get more new homes. But the alternative is worse. The headline warning is that house prices could quadruple within 20 years and half of the under-35s could be living with their parents if the new government fails to act.

In a message addressed to David Cameron, Nick Clegg and Ed Miliband, the report warns:

‘If the next government shies away from showing the strong leadership needed, having a home of your own to rent or buy affordably will become a distant dream for an increasing number of people in this country. rents will rise and homelessness will increase.the economic recovery will be held back by high housing costs, an immobile workforce and unstable housing markets.’

The plan is one of the most comprehensive I’ve seen and gets to the heart of some crucial issues that get ignored or glossed over in the rush for simplistic solutions. Here are some that caught my eye:

Land is the crucial issue not planning. The report proposes that planning authorities be given the power to designate New Homes Zones where development will happen with no taxes on the site and on land acquired at closer to existing use value than residential value. The land market should be opened up with far more data on who owns it and the prices they paid for it.

Garden cities are important – but they won’t contribute much in the next five years. The report calls for five of around 30,000 homes each with construction to start within the lifetime of the next parliament. But each will have a development period of 15 years and they will only begin to contribute around 5,000 homes a year by the end of it.

We need a new housebuilding model. Delivery has become ever more concentrated in the hands of a few large housebuilders with little incentive to increase output. The report rightly links that to the residual land value model, under which the price of existing homes dictates the price firms pay for land, increasing the price they pay and reducing quality. It calls for new incentives for small and medium sized builders, including Help to Build guarantees diverted from Help to Buy, and sites in New Homes Zones and garden cities set aside for small developers and custom builders.

Design standards will level the playing field. In contrast to the current rhetoric about cutting ‘red tape’, the report argues that clear national rules on the minimum size of new homes will help developers by giving them confidence that rivals will not be able to bid more for land by squeezing in as many smaller homes as possible.

Investment in affordable housing is crucial. On top of the familiar arguments about the wider economic benefits and returns to the Treasury, the report points out that increased spending will have an immediate impact on the ground. It calls for an extra £1.2 billion a year of public spending matched by private funding and the existing AHP to bring total investment to £15 billion over the next parliament. Half would be for social rent, a quarter for intermediate rent and a quarter for affordable home ownership. The money could come from soaring stamp duty receipts, tackling tax evasion by private landlords and reforming the new homes bonus.

So are new ways to finance house building. The report recommends a Dutch-style Housjng and Infrastructure Bank plus joint venture land deals and institutional investment. One intriguing proposal is a Housing ISA, where depositors would get a state-guaranteed tax-free return and the money would be let out as low cost, long term loans to affordable housing providers.

We need the rebirth of council housing. We’ve never come close to 250,000 homes a year since local authorities were prevented from borrowing after 1979. After bi-partisan moves to loosen the restrictions, the report recommends gradually raising HRA borrowing caps and eventually reforming the borrowing rules on European lines.

Green belts don’t have to stay as they are. That doesn’t mean abolishing them either. The report argues green belt swaps and reviews have huge potential to deliver more homes.

I’m guessing that almost everyone will find some things to quibble with in this report. One of mine would be the implicit assumption that funding for affordable housing can be scaled back once we reach 250,000 homes a year. That was the figure that the Barker report said was needed to bring house price increases back to the European average, not bring them down. Affordability will continue to be a problem.

However, taken as a whole, this is a blueprint (or redprint or yellowprint) for what all the parties say they want to achieve after 2015. Some proposals will appeal to some parties more than others but the fundamental question remains. How serious are they about the housing crisis?

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