Monday, 27 March 2017

Inside edge

All posts from: August 2014

Falling short

Thu, 21 Aug 2014

Today’s house building figures show welcome progress but four years after taking power the coalition is still many miles away from matching its bold promises.

The good news is that starts in the second quarter (April to June) of 2014 were up 18 per cent on a year ago. Completions are up 7 per cent on the same basis. The UK as a whole is also identified as the housing market with the fastest growth in starts in 2013 in a report by Deloitte Real Estate

But as everyone is pointing out today the 114,590 homes completed over the last 12 months is still less than half the benchmark of 250,000 that we need to meet demand. Even when the 137,620 starts over the last year feed through into completions we will still be well short.

The 250,000 is a rough extrapolation of the figure that Kate Barker said was needed to stop our house prices rising faster than the European average so it’s hardly surprising that the affordability crisis continues to get worse.

However, these figures also show what has happened under the four years of the coalition and provide a chance to match ministers’ rhetoric with reality.

The time lags involved in construction make it difficult to be precise about direct comparisons between the policies or this government and the last. The coalition took power part way through the second quarter of 2010 and there have now been four years since then. Here’s what’s happened to starts, with the 12-month rolling total for the second quarter of each year highlighted:


The graph shows solid progress over the last year and some support for minsters’ claims that they are ‘getting Britain building’ in the wake of the introduction of Help to Buy. Starts are now 27 per cent above the level when the coalition took power but still well down on pre-recession levels.

However, you can’t live in a start. As the next graph shows, the picture on completions is much flatter:


The total for the last 12 months of 114,590 may be up on a year ago but it is still below the level the coalition inherited from Labour and even below what it was two years ago.

That doesn’t seem much to show for all the time and support poured into housebuilding or for the burgeoning profits of the major housebuilders – or for the bolder promises made by ministers. 

Remember how in opposition the then shadow housing minister Grant Shapps said that he was going to turn us into ‘a nation of homebuilders’ rather than nimbys? That claim was echoed more recently by current housing minister Brandon Lewis when he claimed that a welcome shift in public attitudes to housebuilding means that nimbys have had their day.

Thanks to the cleansing of the Conservative Party website you won’t be able to find the Shapps speech anymore but the key elements are preserved in my blog from October 2009. Rather than top-down Stalinist planning targets, the Tories would trust the people and introduce ‘incentives and planning reforms to build more homes’.

It was a bold – but vague – promise. However, Shapps was much more explicit when he was questioned by the Labour chair of the communities and local governemnt committee in 2010. Clive Betts asked him whether success for the government would be ‘building more homes per year than were being built prior to the recession, and that failure will be building less’. The former housing minister replied: ‘Yes. Building more homes is the gold standard on which we shall be judged.’

As I blogged in January, that looks a distant dream given that there were 177,000 completions in 2007 before the impact of the credit crunch compared to 115,000 in the last 12 months.

The more modest target of building more homes than Labour also looks unattainable – even if you only make a comparison between the 2005 and 2010 Labour government to allow for the exceptional circumstances following the credit crunch in 2007.

Labour presided over 695,820 housing starts between 2005 Q3 and 2010 Q2. The first four years of the coalition have seen 462,050 starts, leaving a shortfall of around 232,000 to make up in the next 12 months.

On completions, the contrast is even starker. The coalition has managed 448,250 in its first four years. That is more than 300,000 short of the 749,970 completions in five years under Labour.

As I blogged yesterday, the example of France (which is building 300,000 homes a year but sees that as a crisis) shows that supply alone may not be the panacea that many believe it to be. However, taking the ubiquitous 250,000 homes a year as a benchmark, we should have seen 2.5 million homes built under both governments between 2005 and 2015. With one year to go, the total currently stands at 1.2 million. 

Falling short

Thu, 21 Aug 2014

Today’s house building figures show welcome progress but four years after taking power the coalition is still many miles away from matching its bold promises.

The good news is that starts in the second quarter (April to June) of 2014 were up 18 per cent on a year ago. Completions are up 7 per cent on the same basis. The UK as a whole is also identified as the housing market with the fastest growth in starts in 2013 in a report by Deloitte Real Estate

But as everyone is pointing out today the 114,590 homes completed over the last 12 months is still less than half the benchmark of 250,000 that we need to meet demand. Even when the 137,620 starts over the last year feed through into completions we will still be well short.

The 250,000 is a rough extrapolation of the figure that Kate Barker said was needed to stop our house prices rising faster than the European average so it’s hardly surprising that the affordability crisis continues to get worse.

However, these figures also show what has happened under the four years of the coalition and provide a chance to match ministers’ rhetoric with reality.

The time lags involved in construction make it difficult to be precise about direct comparisons between the policies or this government and the last. The coalition took power part way through the second quarter of 2010 and there have now been four years since then. Here’s what’s happened to starts, with the 12-month rolling total for the second quarter of each year highlighted:


The graph shows solid progress over the last year and some support for minsters’ claims that they are ‘getting Britain building’ in the wake of the introduction of Help to Buy. Starts are now 27 per cent above the level when the coalition took power but still well down on pre-recession levels.

However, you can’t live in a start. As the next graph shows, the picture on completions is much flatter:


The total for the last 12 months of 114,590 may be up on a year ago but it is still below the level the coalition inherited from Labour and even below what it was two years ago.

That doesn’t seem much to show for all the time and support poured into housebuilding or for the burgeoning profits of the major housebuilders – or for the bolder promises made by ministers. 

Remember how in opposition the then shadow housing minister Grant Shapps said that he was going to turn us into ‘a nation of homebuilders’ rather than nimbys? That claim was echoed more recently by current housing minister Brandon Lewis when he claimed that a welcome shift in public attitudes to housebuilding means that nimbys have had their day.

Thanks to the cleansing of the Conservative Party website you won’t be able to find the Shapps speech anymore but the key elements are preserved in my blog from October 2009. Rather than top-down Stalinist planning targets, the Tories would trust the people and introduce ‘incentives and planning reforms to build more homes’.

It was a bold – but vague – promise. However, Shapps was much more explicit when he was questioned by the Labour chair of the communities and local governemnt committee in 2010. Clive Betts asked him whether success for the government would be ‘building more homes per year than were being built prior to the recession, and that failure will be building less’. The former housing minister replied: ‘Yes. Building more homes is the gold standard on which we shall be judged.’

As I blogged in January, that looks a distant dream given that there were 177,000 completions in 2007 before the impact of the credit crunch compared to 115,000 in the last 12 months.

The more modest target of building more homes than Labour also looks unattainable – even if you only make a comparison between the 2005 and 2010 Labour government to allow for the exceptional circumstances following the credit crunch in 2007.

Labour presided over 695,820 housing starts between 2005 Q3 and 2010 Q2. The first four years of the coalition have seen 462,050 starts, leaving a shortfall of around 232,000 to make up in the next 12 months.

On completions, the contrast is even starker. The coalition has managed 448,250 in its first four years. That is more than 300,000 short of the 749,970 completions in five years under Labour.

As I blogged yesterday, the example of France (which is building 300,000 homes a year but sees that as a crisis) shows that supply alone may not be the panacea that many believe it to be. However, taking the ubiquitous 250,000 homes a year as a benchmark, we should have seen 2.5 million homes built under both governments between 2005 and 2015. With one year to go, the total currently stands at 1.2 million. 

Crisis? Quelle crise?

Wed, 20 Aug 2014

The French housing market is ‘in meltdown’ after housing starts plunged to the crisis level of double what we are managing in the UK.

President Francois Hollande reconvenes his Cabinet today after returning from holiday with ministers working on a recovery package topped by measures to stimulate the construction industry.

Syria rather than housebuilding may be the reason why David Cameron cut short his holiday in Cornwall but the economic mood here could hardly be more different. House prices are up 10.2 per cent in the last year and ministers claim that their ‘long-term economic plan is getting Britain building again’.

There are no prizes for guessing which of the two countries saw 306,654 housing starts in the year to June and which will be lucky to manage 160,000 over the same period.

It’s true that French starts were down 11% on the previous year and 23% on the year before that (there were just under 400,000 in the year to June 2012). Starts have also hit their lowest level for 16 years.

But contrast that with what’s happened in the UK (which has roughly the same population as France). In 2012/13 we managed a mere 125,460 starts and far from being the worst for 16 years (when we had 200,000 starts) we were still flirting with the lowest output in peacetime since the 1920s.

The latest available figures show that starts in England saw a strong recovery from these lows to 133,650 in 2013/14 (this was hailed as a triumph for Help to Buy) while figures for Scotland, Wales and Northern Ireland are not yet available. However, the UK total seems set to be between 150,000 and 160,000. [EDIT: New figures published on Thursday show 145,000 starts in England, Wales and Northern Ireland - Scotland managed 13,000 the year before]. 

The contrast between the two nations is even greater when you look over a longer period. Over the last five years housing starts in the UK total around 680,000. France has seen 1.8 million. Over the last ten years, we’ve started 1.7 million homes while the French have managed 3.9 million.

However, the sense of crisis in France seems real and the fall in housebuilding is seen as a key reason why the economy as a whole has not seen the recovery prematurely proclaimed by Hollande last year.

As Reuters and Bloomberg report, property developers and building materials firms say a new housing law introduced this year to give extra protection to renters and home buyers is partly to blame. 

Whatever the truth of that, the law offers another fascinating contrast with the UK. There will be caps on letting agent fees, caps on rents in new contracts (to no more than 20 per cent above the median for the area) but also tax breaks for landlords in areas with a housing shortage. Paris is also planning to fine landlords who leave office buildings empty for too long to encourage them to convert them into homes. See reports by Fergus O’Sullivan here and here for more.

Hollande’s recovery package will reportedly include a package tackling taxation, regulatory and financing issues for construction as well as tax breaks for the low paid. It remains to be seen whether that will include the housing law.

Back in the UK, the Conservatives will be eager to highlight Hollande’s struggles and make the comparison with Ed Miliband and Labour’s milder proposal for rental reforms.

However, while all the main parties support an increase in housebuilding, housing starts remain half of the levels that are seen in France as a meltdown. Perception seems to be all when it comes to a crisis.

And perhaps not just for a crisis. If supply alone is a panacea, as is widely believed in the UK, then why have housing costs in France escalated to the point where the government is imposing rent caps?

Comparisons can be difficult (and even within the UK the different indices disagree about prices). However, according to a survey of global prices by The Economist earlier this year, prices in France and Britain look similarly overvalued against both rents and incomes despite their very different build rates. In all but nominal terms, the long-term trends look very similar too. 

 

Crisis? Quelle crise?

Wed, 20 Aug 2014

The French housing market is ‘in meltdown’ after housing starts plunged to the crisis level of double what we are managing in the UK.

President Francois Hollande reconvenes his Cabinet today after returning from holiday with ministers working on a recovery package topped by measures to stimulate the construction industry.

Syria rather than housebuilding may be the reason why David Cameron cut short his holiday in Cornwall but the economic mood here could hardly be more different. House prices are up 10.2 per cent in the last year and ministers claim that their ‘long-term economic plan is getting Britain building again’.

There are no prizes for guessing which of the two countries saw 306,654 housing starts in the year to June and which will be lucky to manage 160,000 over the same period.

It’s true that French starts were down 11% on the previous year and 23% on the year before that (there were just under 400,000 in the year to June 2012). Starts have also hit their lowest level for 16 years.

But contrast that with what’s happened in the UK (which has roughly the same population as France). In 2012/13 we managed a mere 125,460 starts and far from being the worst for 16 years (when we had 200,000 starts) we were still flirting with the lowest output in peacetime since the 1920s.

The latest available figures show that starts in England saw a strong recovery from these lows to 133,650 in 2013/14 (this was hailed as a triumph for Help to Buy) while figures for Scotland, Wales and Northern Ireland are not yet available. However, the UK total seems set to be between 150,000 and 160,000. [EDIT: New figures published on Thursday show 145,000 starts in England, Wales and Northern Ireland - Scotland managed 13,000 the year before]. 

The contrast between the two nations is even greater when you look over a longer period. Over the last five years housing starts in the UK total around 680,000. France has seen 1.8 million. Over the last ten years, we’ve started 1.7 million homes while the French have managed 3.9 million.

However, the sense of crisis in France seems real and the fall in housebuilding is seen as a key reason why the economy as a whole has not seen the recovery prematurely proclaimed by Hollande last year.

As Reuters and Bloomberg report, property developers and building materials firms say a new housing law introduced this year to give extra protection to renters and home buyers is partly to blame. 

Whatever the truth of that, the law offers another fascinating contrast with the UK. There will be caps on letting agent fees, caps on rents in new contracts (to no more than 20 per cent above the median for the area) but also tax breaks for landlords in areas with a housing shortage. Paris is also planning to fine landlords who leave office buildings empty for too long to encourage them to convert them into homes. See reports by Fergus O’Sullivan here and here for more.

Hollande’s recovery package will reportedly include a package tackling taxation, regulatory and financing issues for construction as well as tax breaks for the low paid. It remains to be seen whether that will include the housing law.

Back in the UK, the Conservatives will be eager to highlight Hollande’s struggles and make the comparison with Ed Miliband and Labour’s milder proposal for rental reforms.

However, while all the main parties support an increase in housebuilding, housing starts remain half of the levels that are seen in France as a meltdown. Perception seems to be all when it comes to a crisis.

And perhaps not just for a crisis. If supply alone is a panacea, as is widely believed in the UK, then why have housing costs in France escalated to the point where the government is imposing rent caps?

Comparisons can be difficult (and even within the UK the different indices disagree about prices). However, according to a survey of global prices by The Economist earlier this year, prices in France and Britain look similarly overvalued against both rents and incomes despite their very different build rates. In all but nominal terms, the long-term trends look very similar too. 

 

Mind the gaps

Mon, 18 Aug 2014

Spot the gaps between rhetoric and reality in the speech by David Cameron about family-friendly policies.

The prime minister spoke on Monday about how he will put families at the centre of new domestic policy-making. He asked three questions on this, none of which are directly housing issues but all of which touch on housing: How can we help families come together? How can we help families stay together? And how can we help troubled families and those children who don’t even have families?

Cameron also promised to introduce a family test as part of the impact assessment of all domestic government policies. That has to be good news even if the government has a track record of ignoring inconvenient evidence from impact assessments. However, it also prompts the obvious question of how existing government policies would fare under the test.

There are two glaring examples in the speech itself. First, there’s a section acknowledging that not everyone conforms to the traditional husband, wife and children model. This at least is progress on previous ‘Broken Britain’ rhetoric even if he still manages to imply that a single parent household is not a proper family:

‘Let’s also be clear that there are some couples for whom splitting up is the right thing in the circumstances, however difficult the decision. In addition, there are also cases of domestic violence where what matters is making sure people are safe, rather than keeping a family together.’

However, what would a family test say about the government’s policies on domestic violence and keeping people safe? Earlier this month, charities warned that refuge provision is at crisis point due to a combination of local authority attitudes, funding cuts and competitive tendering.

Cameron goes on to cite examples of the failures of the past where the family has not been central to policy making:

‘So you get a whole load of policy decisions which take no account of the family and sometimes make these things worse. Whether it’s the benefits system incentivising couples to live apart or penalising those who go out to work - or whether it’s excessive bureaucracy preventing loving couples from adopting children with no family at all.’

Can a benefits system that incentivises couples to live apart by any chance be related to the one with a benefit cap

How would the family test regard a £500 a week cap for a couple that covers not just housing benefit but a whole series of family-friendly benefits including carer’s allowance, child benefit, child tax credit and maternity allowance? And what about the incentive for the couple to split up? A single parent with children has their benefits capped at £500 a week. A single adult whose children don’t live with them is capped at £350 a week. Would further restrictions to the cap make it more family-friendly?

Those are just two examples of the contradictions between Cameron’s rhetoric and the reality of his government’s policies. I could name any number of examples of the impact of austerity on families but here are some more that directly affect housing.

Take the many pernicious effects of the bedroom tax, for example. How about the way it penalises separated parents who want their children to be able to stay overnight? How about the reduction in funding for new family accommodation in England, where 77 per cent of new affordable homes in the next programme will have one or two bedrooms?

How would a family test regard the soaring number of homeless families sent to temporary accommodation outside their locality? Or bedroom caps and the benefit cap that encourage people to move away from family support networks?

Back with Cameron’s three questions, none of this promises to do much to help families come together or keep together. A housing policy combining high house prices and low building does at least do the second but only in the sense that it keeps adult children living at home with their parents for longer than either of them would like. Lack of action on short-term tenancies in the private rented sector keeps families on the move. 

However, the reality gap is perhaps most evident when it comes to the troubled families programme. Cameron hailed the expansion of the programme from 120,000 to 500,000 families that was originally announced in the spending review last year.

It’s now well known (see my blogs here and here) that the 120,000 figure did not originally refer to ‘troubled’ families at all but to research from 2004 on families suffering from multiple deprivation. This was defined as having five or more of these characteristics:

  • No parent in the family in work
  • Family lives in overcrowded housing
  • No parent has any qualifications
  • Mother has mental health problems
  • At least one parent has a long-standing limiting illness, disability or infirmity
  • Family has low income (below 60 per cent of median income)
  • Family cannot afford a number of food and clothing items.

The troubled families programme applied completely different criteria (anti-social behaviour, children not in school, adult on out-of-work benefits and causes high costs to the public purse) and mysteriously came up with precisely the same 120,000 total.

Sleight of hand that turns a measure of deprivation into a measure of the behaviour of people who are poor looks on the face of it more troubling than the families. However, as I argued in my other blogs, a case can still be made for it as a pragmatic way of protecting funding for family intervention work by tailoring it to the prevailing government rhetoric of the time.

But where do the extra 400,000 families come from? Stephen Crossley blogged earlier this month about the government’s repeated refusal to respond to his Freedom of Information requests. The DCLG argued that disclosure could have adverse effects on the policy by giving a potentially inaccurate and misleading impression of the programme, while the Information Commissioner’s Office referred to the danger of ‘lurid headlines’. If that’s the case, nobody seems to have told this morning’s headline writers about ‘500,000 scum families’ who ‘cost £30 billion’.

In the continuing absence of any official explanation of either figure, the best candidate comes from the final report of the Riot Communities and Victims Panel into the 2011 riots. This recommended extending the troubled families programme to 500,000 ‘forgotten families’ to help turn their lives around. The source for that was the same research on multiple deprivation from 2004 and refers to people with three or four of the factors I listed above rather than five.

A family test might conclude that four years of austerity have increased the number of families on low incomes and the numbers attending food banks, leaving them only one factor short of being ‘troubled’. A government impact assessment would no doubt claim that policies like the bedroom tax are tackling overcrowding while welfare reform is getting people back to work.

However, as Zoe Williams argued in The Guardian this morning, the bigger question is a political one: whose fault is poverty? In that context, Cameron’s rhetoric is the reality.

Mind the gaps

Mon, 18 Aug 2014

Spot the gaps between rhetoric and reality in the speech by David Cameron about family-friendly policies.

The prime minister spoke on Monday about how he will put families at the centre of new domestic policy-making. He asked three questions on this, none of which are directly housing issues but all of which touch on housing: How can we help families come together? How can we help families stay together? And how can we help troubled families and those children who don’t even have families?

Cameron also promised to introduce a family test as part of the impact assessment of all domestic government policies. That has to be good news even if the government has a track record of ignoring inconvenient evidence from impact assessments. However, it also prompts the obvious question of how existing government policies would fare under the test.

There are two glaring examples in the speech itself. First, there’s a section acknowledging that not everyone conforms to the traditional husband, wife and children model. This at least is progress on previous ‘Broken Britain’ rhetoric even if he still manages to imply that a single parent household is not a proper family:

‘Let’s also be clear that there are some couples for whom splitting up is the right thing in the circumstances, however difficult the decision. In addition, there are also cases of domestic violence where what matters is making sure people are safe, rather than keeping a family together.’

However, what would a family test say about the government’s policies on domestic violence and keeping people safe? Earlier this month, charities warned that refuge provision is at crisis point due to a combination of local authority attitudes, funding cuts and competitive tendering.

Cameron goes on to cite examples of the failures of the past where the family has not been central to policy making:

‘So you get a whole load of policy decisions which take no account of the family and sometimes make these things worse. Whether it’s the benefits system incentivising couples to live apart or penalising those who go out to work - or whether it’s excessive bureaucracy preventing loving couples from adopting children with no family at all.’

Can a benefits system that incentivises couples to live apart by any chance be related to the one with a benefit cap

How would the family test regard a £500 a week cap for a couple that covers not just housing benefit but a whole series of family-friendly benefits including carer’s allowance, child benefit, child tax credit and maternity allowance? And what about the incentive for the couple to split up? A single parent with children has their benefits capped at £500 a week. A single adult whose children don’t live with them is capped at £350 a week. Would further restrictions to the cap make it more family-friendly?

Those are just two examples of the contradictions between Cameron’s rhetoric and the reality of his government’s policies. I could name any number of examples of the impact of austerity on families but here are some more that directly affect housing.

Take the many pernicious effects of the bedroom tax, for example. How about the way it penalises separated parents who want their children to be able to stay overnight? How about the reduction in funding for new family accommodation in England, where 77 per cent of new affordable homes in the next programme will have one or two bedrooms?

How would a family test regard the soaring number of homeless families sent to temporary accommodation outside their locality? Or bedroom caps and the benefit cap that encourage people to move away from family support networks?

Back with Cameron’s three questions, none of this promises to do much to help families come together or keep together. A housing policy combining high house prices and low building does at least do the second but only in the sense that it keeps adult children living at home with their parents for longer than either of them would like. Lack of action on short-term tenancies in the private rented sector keeps families on the move. 

However, the reality gap is perhaps most evident when it comes to the troubled families programme. Cameron hailed the expansion of the programme from 120,000 to 500,000 families that was originally announced in the spending review last year.

It’s now well known (see my blogs here and here) that the 120,000 figure did not originally refer to ‘troubled’ families at all but to research from 2004 on families suffering from multiple deprivation. This was defined as having five or more of these characteristics:

  • No parent in the family in work
  • Family lives in overcrowded housing
  • No parent has any qualifications
  • Mother has mental health problems
  • At least one parent has a long-standing limiting illness, disability or infirmity
  • Family has low income (below 60 per cent of median income)
  • Family cannot afford a number of food and clothing items.

The troubled families programme applied completely different criteria (anti-social behaviour, children not in school, adult on out-of-work benefits and causes high costs to the public purse) and mysteriously came up with precisely the same 120,000 total.

Sleight of hand that turns a measure of deprivation into a measure of the behaviour of people who are poor looks on the face of it more troubling than the families. However, as I argued in my other blogs, a case can still be made for it as a pragmatic way of protecting funding for family intervention work by tailoring it to the prevailing government rhetoric of the time.

But where do the extra 400,000 families come from? Stephen Crossley blogged earlier this month about the government’s repeated refusal to respond to his Freedom of Information requests. The DCLG argued that disclosure could have adverse effects on the policy by giving a potentially inaccurate and misleading impression of the programme, while the Information Commissioner’s Office referred to the danger of ‘lurid headlines’. If that’s the case, nobody seems to have told this morning’s headline writers about ‘500,000 scum families’ who ‘cost £30 billion’.

In the continuing absence of any official explanation of either figure, the best candidate comes from the final report of the Riot Communities and Victims Panel into the 2011 riots. This recommended extending the troubled families programme to 500,000 ‘forgotten families’ to help turn their lives around. The source for that was the same research on multiple deprivation from 2004 and refers to people with three or four of the factors I listed above rather than five.

A family test might conclude that four years of austerity have increased the number of families on low incomes and the numbers attending food banks, leaving them only one factor short of being ‘troubled’. A government impact assessment would no doubt claim that policies like the bedroom tax are tackling overcrowding while welfare reform is getting people back to work.

However, as Zoe Williams argued in The Guardian this morning, the bigger question is a political one: whose fault is poverty? In that context, Cameron’s rhetoric is the reality.

Feeling the pinch

Fri, 15 Aug 2014

Mark Simmonds is not getting much sympathy after claiming that MPs’ expenses make it ‘intolerable’ to live in London but has he also revealed a deeper truth about our housing system?

The MP for Boston and Skegness resigned as a minister on Monday and will leave parliament at the next election after claiming that he can’t find anywhere to rent in the capital on his £35,000 a year housing allowance.  

Simmonds and his family do not exactly sound like they are one of the ‘housing pinched’. These are the 1.6 million households identified in a report by the Resolution Foundation as spending more than 50 per cent of their net household income (after tax and benefits) on their rent or mortgage.

Three things leapt out at me from the report. First, these are the seriously squeezed households, there are 3.9 million who spend more than a third of their disposable income on housing. Second, the numbers would be even higher if interest rates were not at a record low and will be for many people with mortgages once they rise. Third, 990,000 of the ‘housing pinched’ are working households.

The significance of this third point is underlined by figures out this week showing rising employment, falling unemployment but falling average earnings. And, as I blogged on Thursday, this is what lies behind the 63 per cent increase in the number of working households who need housing benefit under the coalition. Iain Duncan Smith claimed this week that his policies are getting people back into work and ending a welfare dependency culture. The truth is rather different.

As the Resoultion Foundation points out:

‘For those “housing pinched” households remaining out of work, entering employment will be the best route to easing housing cost pressures. By contrast, “housing pinched” households who are in work likely represent a more structural challenge.’

So what has any of this got to do with Mark Simmonds? After all, far from feeling the pinch, he earns £89,435 as a minister and pays his wife up to another £25,000 to be his office manager. He already owns a £1.2 million home in his constituency and gets another £35,375 a year housing allowance (£27,875 plus £2,500 for each of his three children) to rent somewhere in London.

As Dawn Foster pointed out earlier this week, there are plenty of homes that he could afford to rent for that (though Brixton and West Norwood will seem like the wrong side of the tracks for a Tory MP) – and that’s without having to dip into any of his salary.

Simmonds himself argues that:

‘If MPs want to get into the business of travelling extensively from Westminster to the outer reaches of London to rent a flat then that’s up to them. But it’s not the lifestyle I want and not the lifestyle I have chosen.’

It seems more than a bit rich for a politician who enthusiastically supports the idea that nobody should get more in benefits than average earnings to complain about getting far more than that in what is effectively housing benefit for MPs.

The bigger point for me though is the system itself. At the height of the expenses scandal, there was outrage that MPs could claim the interest on the mortgage of their second home but then take all of the profit when they sold.

Some of them (including, to his credit, deputy prime minister Nick Clegg) repaid the money. Most (like chancellor George Osborne) seem to have banked it. Simmonds reportedly made more than £500,000 on a house in Putney that he bought for £650,000 in 2001 and then sold for £1.2 million in 2009 with the taxpayer picking up the bill for £2,000 a month in mortgage interest.

The new system introduced in the wake of the expenses scandal will only pay for MPs to rent a second home. It seems a cleaner, more puritanical system but is it really the best one? In the case of Mark Simmonds, it seems to cost half as much again to pay the rent or hotel bill for somewhere he doesn’t want to live as it did to pay his mortgage interest on somewhere he did.

These two inadequate ways of running MPs housing allowances are more than a little reminiscent of the mistakes that have been made in housing policy in general. Where once we gave people mortgage tax relief on a non-existent tax, now we pay billions of pounds in housing benefit to subsidise the property empires of private landlords. And all the while house prices and rents keep escalating: how many London MPs could afford to buy a family home in their constituency on their parliamentary salary plus their £3,760 per year London Area Living Payment?

Why not change the MPs’ expenses system again? The state could pay the mortgage interest rather than the rent on a second home but with the crucial difference that it would also gain a share of the profits when the property is sold. Why not just give them equity loans? If they’re good enough for everyone else under Help to Buy (and do not count as public spending) why not for MPs? It seems crazy to pay more in rent with all the profits going to private landlords. Or why not build them apartments close to parliament in the same way that we build them offices?

Which brings me back to the housing pinched. According to the Resolution Foundation, 830,000 of the working households spending more than 50 per cent of their disposable income on housing have incomes below the national medium. It estimates that they were left with an average income of just £60 a week after paying for their accommodation.

But the housing pinched are just part of a much bigger group of people who are housing squeezed. Housing benefit prevents the problems from getting even worse but only at a current cost of £5.1 billion a year for working households. Perhaps it might just be better to build some more affordable homes? Not to mention homes of all kinds.

Our current system works for landlords and anyone lucky enough to have got on the housing ladder a while ago. From MPs to the working poor, it’s failing just about everyone else. 

To read more about the private rented sector click here.

Feeling the pinch

Fri, 15 Aug 2014

Mark Simmonds is not getting much sympathy after claiming that MPs’ expenses make it ‘intolerable’ to live in London but has he also revealed a deeper truth about our housing system?

The MP for Boston and Skegness resigned as a minister on Monday and will leave parliament at the next election after claiming that he can’t find anywhere to rent in the capital on his £35,000 a year housing allowance.  

Simmonds and his family do not exactly sound like they are one of the ‘housing pinched’. These are the 1.6 million households identified in a report by the Resolution Foundation as spending more than 50 per cent of their net household income (after tax and benefits) on their rent or mortgage.

Three things leapt out at me from the report. First, these are the seriously squeezed households, there are 3.9 million who spend more than a third of their disposable income on housing. Second, the numbers would be even higher if interest rates were not at a record low and will be for many people with mortgages once they rise. Third, 990,000 of the ‘housing pinched’ are working households.

The significance of this third point is underlined by figures out this week showing rising employment, falling unemployment but falling average earnings. And, as I blogged on Thursday, this is what lies behind the 63 per cent increase in the number of working households who need housing benefit under the coalition. Iain Duncan Smith claimed this week that his policies are getting people back into work and ending a welfare dependency culture. The truth is rather different.

As the Resoultion Foundation points out:

‘For those “housing pinched” households remaining out of work, entering employment will be the best route to easing housing cost pressures. By contrast, “housing pinched” households who are in work likely represent a more structural challenge.’

So what has any of this got to do with Mark Simmonds? After all, far from feeling the pinch, he earns £89,435 as a minister and pays his wife up to another £25,000 to be his office manager. He already owns a £1.2 million home in his constituency and gets another £35,375 a year housing allowance (£27,875 plus £2,500 for each of his three children) to rent somewhere in London.

As Dawn Foster pointed out earlier this week, there are plenty of homes that he could afford to rent for that (though Brixton and West Norwood will seem like the wrong side of the tracks for a Tory MP) – and that’s without having to dip into any of his salary.

Simmonds himself argues that:

‘If MPs want to get into the business of travelling extensively from Westminster to the outer reaches of London to rent a flat then that’s up to them. But it’s not the lifestyle I want and not the lifestyle I have chosen.’

It seems more than a bit rich for a politician who enthusiastically supports the idea that nobody should get more in benefits than average earnings to complain about getting far more than that in what is effectively housing benefit for MPs.

The bigger point for me though is the system itself. At the height of the expenses scandal, there was outrage that MPs could claim the interest on the mortgage of their second home but then take all of the profit when they sold.

Some of them (including, to his credit, deputy prime minister Nick Clegg) repaid the money. Most (like chancellor George Osborne) seem to have banked it. Simmonds reportedly made more than £500,000 on a house in Putney that he bought for £650,000 in 2001 and then sold for £1.2 million in 2009 with the taxpayer picking up the bill for £2,000 a month in mortgage interest.

The new system introduced in the wake of the expenses scandal will only pay for MPs to rent a second home. It seems a cleaner, more puritanical system but is it really the best one? In the case of Mark Simmonds, it seems to cost half as much again to pay the rent or hotel bill for somewhere he doesn’t want to live as it did to pay his mortgage interest on somewhere he did.

These two inadequate ways of running MPs housing allowances are more than a little reminiscent of the mistakes that have been made in housing policy in general. Where once we gave people mortgage tax relief on a non-existent tax, now we pay billions of pounds in housing benefit to subsidise the property empires of private landlords. And all the while house prices and rents keep escalating: how many London MPs could afford to buy a family home in their constituency on their parliamentary salary plus their £3,760 per year London Area Living Payment?

Why not change the MPs’ expenses system again? The state could pay the mortgage interest rather than the rent on a second home but with the crucial difference that it would also gain a share of the profits when the property is sold. Why not just give them equity loans? If they’re good enough for everyone else under Help to Buy (and do not count as public spending) why not for MPs? It seems crazy to pay more in rent with all the profits going to private landlords. Or why not build them apartments close to parliament in the same way that we build them offices?

Which brings me back to the housing pinched. According to the Resolution Foundation, 830,000 of the working households spending more than 50 per cent of their disposable income on housing have incomes below the national medium. It estimates that they were left with an average income of just £60 a week after paying for their accommodation.

But the housing pinched are just part of a much bigger group of people who are housing squeezed. Housing benefit prevents the problems from getting even worse but only at a current cost of £5.1 billion a year for working households. Perhaps it might just be better to build some more affordable homes? Not to mention homes of all kinds.

Our current system works for landlords and anyone lucky enough to have got on the housing ladder a while ago. From MPs to the working poor, it’s failing just about everyone else. 

To read more about the private rented sector click here.

Housing benefit and the coalition

Thu, 14 Aug 2014

What has happened to housing benefit in the four years since the government inherited a system it claimed was ‘out of control’?

New housing benefit statistics published this week cover the period up to May 2014. They reflect not just successive government cuts but a changing pattern of claims and changing tenure over the last four years. Here are five things that struck me:

1) The housing benefit bill continues to grow despite all of the coalition’s reforms. The May 2014 figures show just under five million claims for an average of £92.69 a week, a total of £24.0 billion. That compares with £20.8 billion in May 2010 (4.8 million claims averaging £84.20 a week).

The coalition never claimed that its reforms would reduce the total bill, just that they would reduce the rate of growth from previous forecasts. The bill has grown by 15.4 per cent over the last four years. However, the annual increase has slowed from 6.2 per cent in 2010/11 to 1.3 per cent in 2013/14.

2) Rents and housing benefit claims. The total bill has risen still risen in the last year (from £23.7 billion in May 2013 to £24.0 billion) despite a fall in the number of claims (they peaked at just under 5.1 million in May 2013). That’s because the average claim has risen by 3.2 per cent.

Successive coalition cuts (LHA bedroom caps, shared room rate, bedroom tax, benefit cap etc) have been based on restricting eligibility for housing benefit to below the level of actual rents. These stats obviously only show housing benefit claimed rather than actual rents or shortfalls against them.

The impact of the cuts on LHA claims seems to show up clearly. The average LHA claim peaked at £115.13 week in April 2011 and fell to a low of £105.88 in February 2013, a fall of 8 per cent over two years. However, LHA claims have since started to rise again and averaged £107.28 in May 2014. That means the average LHA claim has fallen by 5.6 per cent since the coalition came to power. Some of that could be down to the adoption of the LHA in different areas, or perhaps a growth in partial claims by people in work (see below), but the impact of the cuts seems pretty clear (or at least it does on claims, it’s much less clear what’s happened to rents and tenant moves).

Social sector rents increase each year based on an inflation-plus formula that helps to underpin new development. So it’s not surprising that social sector housing benefit claims have increased too. The average claim has risen by 17.5 per cent over the last four years from £72.88 a week to £85.66 - and this is before much impact from affordable rent.

3) Claims by people in work. The number of households who are in employment and receiving housing benefit increased from 650,551 in May 2010 to 1,058,569 in May 2014, an increase of 63 per cent. The housing benefit bill for people in employment has risen from £2.9 billion (14 per cent of the total) to £5.1 billion (21 per cent).

The total number of working claims continues to rise (and will carry on rising, according to the Office for Budget Responsibility) even as the number of claims from unemployed people slowly falls. This is consistent with yesterday’s figures showing rising numbers of people in employment and falling unemployment but it also shows the impact of stagnant and even falling earnings on the housing benefit bill. Despite all the government rhetoric about hardworking families and benefit dependency, the stats show the true cost of the boom in low-paid work or (as Joe Halewood points out) the true cost of the subsidy to low-paying employers.

4) Claims broken down by type of tenant. The pattern of housing benefit claims has also changed over the last four years when you look at them broken down by the type of tenant and landlord. Claims by all types of tenants fell slightly in the last year but over the period as a whole the biggest increase has been in claims by private tenants on the local housing allowance followed by housing association tenants. Claims by council tenants, non-LHA private tenants and private regulated tenants have slowly fallen in line with the continued decline in the number of tenancies.

Within the social sector, this clearly reflects the continued growth of the housing association sector but it could also be the product of higher rents for new development. The increase in private sector claims is the result not just of the continued growth of the sector in the last few years (overtaking social housing in 2012) but of a greater need for help with the rent from families who would once have been housed in the social sector. Both also reflect the stagnation in earnings as rents keep rising.

Finally, take a look at the 2014 total for non-LHA tenants and private regulated tenants. The government keeps arguing that the bedroom tax is fair because the housing benefit of private tenants was already restricted in a similar way under the LHA. This is wrong since the system works differently and it never applied to existing tenants: the stats show that there are still 247,000 who are not on the LHA.



5) The impact of the bedroom tax. The stats reveal that 481,603 households lost an average of £14.90 to the bedroom tax in May 2014: a total of £373.1 million. That compares with 547,341 claims in May 2013, the month after the coalition began what it called removing the ‘spare room subsidy’.

We’ve rightly become used to seeing the bedroom tax as a Northern problem. The North and Midlands of England plus Scotland and Wales have the largest numbers of bedroom tax victims (though Scotland is now mitigating it in full with discretionary housing payments) and the biggest problems with a mismatch of stock.  

However, the south of England has its own bedroom tax problem: the stats show that tenants in London and the South East are suffering the largest reductions in their housing benefit (presumably because they pay higher rents to start with). The top 20 local authorities by size of weekly bedroom tax reduction include not just the predictable central London boroughs but some parts of outer London and well-heeled parts of the Home Counties too:

  1. Wandsworth £24.06
  2. Westminster £22.52
  3. Kensington & Chelsea £22.46
  4. Elmbridge £22.39
  5. Lambeth £22.10
  6. Camden £22.01
  7. Tower Hamlets £21.92
  8. Kingston £21.82
  9. Brent £21.73
  10. Harrow £21.67
  11. Reigate and Banstead £21.66
  12. Islington £21.48
  13. West Berkshire £21.38
  14. Windsor & Maidenhead £21.26
  15. Croydon £21.25
  16. Hammersmith & Fulham £21.15
  17. Spelthorne £21.12
  18. Richmond £21.07
  19. Bromley £21.07
  20. Redbridge £20.91

Housing benefit and the coalition

Thu, 14 Aug 2014

What has happened to housing benefit in the four years since the government inherited a system it claimed was ‘out of control’?

New housing benefit statistics published this week cover the period up to May 2014. They reflect not just successive government cuts but a changing pattern of claims and changing tenure over the last four years. Here are five things that struck me:

1) The housing benefit bill continues to grow despite all of the coalition’s reforms. The May 2014 figures show just under five million claims for an average of £92.69 a week, a total of £24.0 billion. That compares with £20.8 billion in May 2010 (4.8 million claims averaging £84.20 a week).

The coalition never claimed that its reforms would reduce the total bill, just that they would reduce the rate of growth from previous forecasts. The bill has grown by 15.4 per cent over the last four years. However, the annual increase has slowed from 6.2 per cent in 2010/11 to 1.3 per cent in 2013/14.

2) Rents and housing benefit claims. The total bill has risen still risen in the last year (from £23.7 billion in May 2013 to £24.0 billion) despite a fall in the number of claims (they peaked at just under 5.1 million in May 2013). That’s because the average claim has risen by 3.2 per cent.

Successive coalition cuts (LHA bedroom caps, shared room rate, bedroom tax, benefit cap etc) have been based on restricting eligibility for housing benefit to below the level of actual rents. These stats obviously only show housing benefit claimed rather than actual rents or shortfalls against them.

The impact of the cuts on LHA claims seems to show up clearly. The average LHA claim peaked at £115.13 week in April 2011 and fell to a low of £105.88 in February 2013, a fall of 8 per cent over two years. However, LHA claims have since started to rise again and averaged £107.28 in May 2014. That means the average LHA claim has fallen by 5.6 per cent since the coalition came to power. Some of that could be down to the adoption of the LHA in different areas, or perhaps a growth in partial claims by people in work (see below), but the impact of the cuts seems pretty clear (or at least it does on claims, it’s much less clear what’s happened to rents and tenant moves).

Social sector rents increase each year based on an inflation-plus formula that helps to underpin new development. So it’s not surprising that social sector housing benefit claims have increased too. The average claim has risen by 17.5 per cent over the last four years from £72.88 a week to £85.66 - and this is before much impact from affordable rent.

3) Claims by people in work. The number of households who are in employment and receiving housing benefit increased from 650,551 in May 2010 to 1,058,569 in May 2014, an increase of 63 per cent. The housing benefit bill for people in employment has risen from £2.9 billion (14 per cent of the total) to £5.1 billion (21 per cent).

The total number of working claims continues to rise (and will carry on rising, according to the Office for Budget Responsibility) even as the number of claims from unemployed people slowly falls. This is consistent with yesterday’s figures showing rising numbers of people in employment and falling unemployment but it also shows the impact of stagnant and even falling earnings on the housing benefit bill. Despite all the government rhetoric about hardworking families and benefit dependency, the stats show the true cost of the boom in low-paid work or (as Joe Halewood points out) the true cost of the subsidy to low-paying employers.

4) Claims broken down by type of tenant. The pattern of housing benefit claims has also changed over the last four years when you look at them broken down by the type of tenant and landlord. Claims by all types of tenants fell slightly in the last year but over the period as a whole the biggest increase has been in claims by private tenants on the local housing allowance followed by housing association tenants. Claims by council tenants, non-LHA private tenants and private regulated tenants have slowly fallen in line with the continued decline in the number of tenancies.

Within the social sector, this clearly reflects the continued growth of the housing association sector but it could also be the product of higher rents for new development. The increase in private sector claims is the result not just of the continued growth of the sector in the last few years (overtaking social housing in 2012) but of a greater need for help with the rent from families who would once have been housed in the social sector. Both also reflect the stagnation in earnings as rents keep rising.

Finally, take a look at the 2014 total for non-LHA tenants and private regulated tenants. The government keeps arguing that the bedroom tax is fair because the housing benefit of private tenants was already restricted in a similar way under the LHA. This is wrong since the system works differently and it never applied to existing tenants: the stats show that there are still 247,000 who are not on the LHA.



5) The impact of the bedroom tax. The stats reveal that 481,603 households lost an average of £14.90 to the bedroom tax in May 2014: a total of £373.1 million. That compares with 547,341 claims in May 2013, the month after the coalition began what it called removing the ‘spare room subsidy’.

We’ve rightly become used to seeing the bedroom tax as a Northern problem. The North and Midlands of England plus Scotland and Wales have the largest numbers of bedroom tax victims (though Scotland is now mitigating it in full with discretionary housing payments) and the biggest problems with a mismatch of stock.  

However, the south of England has its own bedroom tax problem: the stats show that tenants in London and the South East are suffering the largest reductions in their housing benefit (presumably because they pay higher rents to start with). The top 20 local authorities by size of weekly bedroom tax reduction include not just the predictable central London boroughs but some parts of outer London and well-heeled parts of the Home Counties too:

  1. Wandsworth £24.06
  2. Westminster £22.52
  3. Kensington & Chelsea £22.46
  4. Elmbridge £22.39
  5. Lambeth £22.10
  6. Camden £22.01
  7. Tower Hamlets £21.92
  8. Kingston £21.82
  9. Brent £21.73
  10. Harrow £21.67
  11. Reigate and Banstead £21.66
  12. Islington £21.48
  13. West Berkshire £21.38
  14. Windsor & Maidenhead £21.26
  15. Croydon £21.25
  16. Hammersmith & Fulham £21.15
  17. Spelthorne £21.12
  18. Richmond £21.07
  19. Bromley £21.07
  20. Redbridge £20.91

Working it out

Tue, 5 Aug 2014

As Labour and the Conservatives renew hostilities about the housing benefit bill, which of them will do something about it?

In the latest round of Labour’s The Choice summer offensive, shadow work and pensions secretary Rachel Reeves released figures from the House of Commons Library showing that the total bill is set to rise to £27 billion by 2018/19.

Within that, she highlighted the soaring number of claims by people in work from 617,000 at the last election to 962,000 now and 1.2 million by 2018/19. That doubling in working claims will cost a total of £12.9 billion or £488 for every household in Britain between 2010/11 and 2018/19.

As for the politics behind this, Patrick Wintour argues in The Guardian that the speech is part of a Labour effort to convince voters that the benefits bill relates to people in work as well as the unemployed. Reeves will say that:

‘The number of working people claiming housing benefit is set to double because the Tory government has failed to tackle low pay, insecure work and the cost-of-living crisis. That’s meant thousands more people have been forced to rely on housing benefit to make ends meet.’

The Conservative response, reported by Matthew Holehouse in the Telegraph, is that Labour is ‘being hypocritical’ because it has opposed all of the coalition’s attempts to cut the bill. According to welfare minister Mark Harper:

‘We inherited an out-of-control housing benefit system from Labour that created a culture of dependency. But Labour haven’t learnt their lesson. They voted against our housing benefit cap, they voted against our overall cap on benefits and they still plan to borrow and spend more by restoring the spare room subsidy – landing future generations with more debt than they can ever hope to repay.’

A coalition aide says that the rise in working claims is actually the result of the success of its policies in getting people into work. ‘Far better that people are in work, paying taxes and contributing in part to their rents, than languishing on out-of-work benefits,’ she says.

However, none of this should come as much surprise to anyone familiar with the long-term trends under both parties. DWP figures show that the housing benefit bill almost doubled in real terms in the six years after the Conservatives decided to let it ‘take the strain’ of higher rents in 1991. The bill stabilised in the first ten years of Labour government after 1997 but then rose by 25 per cent in real terms in the wake of the global financial crisis.

Since 2010, the coalition has reduced the rate of growth (11 per cent up to 2014/15) rather than cut the total bill. For example, the DWP continues to claim in today’s papers that the bedroom tax will save the original £480 million when its own latest figures say more like £350 million (itself a questionable figure which takes no account of discretionary housing payments or the costs transferred to local authorities and social landlords).

The Office for Budget Responsibility published forecasts up alongside the Budget in March showing that the total bill will reach £26.9 billion by 2018.19. As I blogged at the time, it said that ‘the largest driver of the rise in spending has been caseload growth in the private rented sector’ and that the proportion going to private tenants/landlords would rise from 30 per cent in 2007/08 to 40 per cent in 2008/09. It went on:

‘The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth relative to rent inflation. This explanation is supported by DWP data, which suggest that almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.’

In other words, the DWP’s own data directly contradicts DWP ministers’ statements about the housing benefit bill being ‘out of control’ and the result of a ‘culture of dependency’. Instead it will continue to rise despite all the cuts so far and those yet to come including 1 per cent uprating of private sector claims.

That is the more or less inevitable result of low pay, casualised work, reliance on a deregulated private rented sector, the shift to affordable rent and the inflation-busting formula for increases in social rents.

Advance reports of Reeves’s speech suggest that she will promise to ‘raise the minimum wage, introduce living wage contracts and get 200,000 homes built a year by 2020 to tackle the housing benefit bill and ensure working people can make ends meet’.

Rising wages will help cut the housing benefit bill for people in work as may longer-term private tenancies with predictable rent rises but beyond that much will depend on how many of those 200,000 homes are at genuinely affordable rents. The rhetoric on this from shadow housing minister Emma Reynolds in a speech last week sounded promising even if there are no commitments yet:

‘It’s economic madness that 95 pence in every pound of Government spending on housing goes on benefits and only 5 pence goes on building homes. The Government thinks the opposite. That’s why it cut the Affordable Homes Programme by an eye-watering 60 per cent. They said they could deliver affordable homes on the cheap. But in fact, it was just a cheap trick. The Government’s notion of affordability, at 80 per cent of market rent, is costing tenants and taxpayers more. It is crucial that councils and housing associations build more genuinely affordable homes.’

Back with the Conservatives, chancellor George Osborne appeared on the Today programme this morning to pledge his enthusiastic support for a plan to invest in new train lines in the north of England. Leaving aside the fact that he has not actually committed any money, he argued that it was good to invest in infrastructure but bad to spend money on benefits. The trouble is that he doesn’t seem to get the same case for investing in new homes to spend less on housing benefit. 

Osborne has already committed to another £12 billion of cuts in benefits after the next election and it’s hard to think that housing benefit will escape – or that Labour will not face some uncomfortable choices. 

Working it out

Tue, 5 Aug 2014

As Labour and the Conservatives renew hostilities about the housing benefit bill, which of them will do something about it?

In the latest round of Labour’s The Choice summer offensive, shadow work and pensions secretary Rachel Reeves released figures from the House of Commons Library showing that the total bill is set to rise to £27 billion by 2018/19.

Within that, she highlighted the soaring number of claims by people in work from 617,000 at the last election to 962,000 now and 1.2 million by 2018/19. That doubling in working claims will cost a total of £12.9 billion or £488 for every household in Britain between 2010/11 and 2018/19.

As for the politics behind this, Patrick Wintour argues in The Guardian that the speech is part of a Labour effort to convince voters that the benefits bill relates to people in work as well as the unemployed. Reeves will say that:

‘The number of working people claiming housing benefit is set to double because the Tory government has failed to tackle low pay, insecure work and the cost-of-living crisis. That’s meant thousands more people have been forced to rely on housing benefit to make ends meet.’

The Conservative response, reported by Matthew Holehouse in the Telegraph, is that Labour is ‘being hypocritical’ because it has opposed all of the coalition’s attempts to cut the bill. According to welfare minister Mark Harper:

‘We inherited an out-of-control housing benefit system from Labour that created a culture of dependency. But Labour haven’t learnt their lesson. They voted against our housing benefit cap, they voted against our overall cap on benefits and they still plan to borrow and spend more by restoring the spare room subsidy – landing future generations with more debt than they can ever hope to repay.’

A coalition aide says that the rise in working claims is actually the result of the success of its policies in getting people into work. ‘Far better that people are in work, paying taxes and contributing in part to their rents, than languishing on out-of-work benefits,’ she says.

However, none of this should come as much surprise to anyone familiar with the long-term trends under both parties. DWP figures show that the housing benefit bill almost doubled in real terms in the six years after the Conservatives decided to let it ‘take the strain’ of higher rents in 1991. The bill stabilised in the first ten years of Labour government after 1997 but then rose by 25 per cent in real terms in the wake of the global financial crisis.

Since 2010, the coalition has reduced the rate of growth (11 per cent up to 2014/15) rather than cut the total bill. For example, the DWP continues to claim in today’s papers that the bedroom tax will save the original £480 million when its own latest figures say more like £350 million (itself a questionable figure which takes no account of discretionary housing payments or the costs transferred to local authorities and social landlords).

The Office for Budget Responsibility published forecasts up alongside the Budget in March showing that the total bill will reach £26.9 billion by 2018.19. As I blogged at the time, it said that ‘the largest driver of the rise in spending has been caseload growth in the private rented sector’ and that the proportion going to private tenants/landlords would rise from 30 per cent in 2007/08 to 40 per cent in 2008/09. It went on:

‘The rising proportion of the renting population claiming housing benefit may be related to the weakness of average wage growth relative to rent inflation. This explanation is supported by DWP data, which suggest that almost all the recent rise in the private-rented sector housing benefit caseload has been accounted for by people in employment.’

In other words, the DWP’s own data directly contradicts DWP ministers’ statements about the housing benefit bill being ‘out of control’ and the result of a ‘culture of dependency’. Instead it will continue to rise despite all the cuts so far and those yet to come including 1 per cent uprating of private sector claims.

That is the more or less inevitable result of low pay, casualised work, reliance on a deregulated private rented sector, the shift to affordable rent and the inflation-busting formula for increases in social rents.

Advance reports of Reeves’s speech suggest that she will promise to ‘raise the minimum wage, introduce living wage contracts and get 200,000 homes built a year by 2020 to tackle the housing benefit bill and ensure working people can make ends meet’.

Rising wages will help cut the housing benefit bill for people in work as may longer-term private tenancies with predictable rent rises but beyond that much will depend on how many of those 200,000 homes are at genuinely affordable rents. The rhetoric on this from shadow housing minister Emma Reynolds in a speech last week sounded promising even if there are no commitments yet:

‘It’s economic madness that 95 pence in every pound of Government spending on housing goes on benefits and only 5 pence goes on building homes. The Government thinks the opposite. That’s why it cut the Affordable Homes Programme by an eye-watering 60 per cent. They said they could deliver affordable homes on the cheap. But in fact, it was just a cheap trick. The Government’s notion of affordability, at 80 per cent of market rent, is costing tenants and taxpayers more. It is crucial that councils and housing associations build more genuinely affordable homes.’

Back with the Conservatives, chancellor George Osborne appeared on the Today programme this morning to pledge his enthusiastic support for a plan to invest in new train lines in the north of England. Leaving aside the fact that he has not actually committed any money, he argued that it was good to invest in infrastructure but bad to spend money on benefits. The trouble is that he doesn’t seem to get the same case for investing in new homes to spend less on housing benefit. 

Osborne has already committed to another £12 billion of cuts in benefits after the next election and it’s hard to think that housing benefit will escape – or that Labour will not face some uncomfortable choices. 

Going the extra mile

Tue, 5 Aug 2014

How far should the government go to buy off local opposition to new garden cities?

Deputy prime minister Nick Clegg said over the weekend that ministers would consider options including council tax reductions and house price guarantees to ensure that local communities do not lose out. He told the BBC’s Countryfile programme (watch from about eight minutes in): ‘What I’m saying is we’re actively looking at things like that to show that we will go the extra mile to allay those concerns of people who feel that their property, or the price of their home, might be affected. We don’t want people to lose out.’

He went on: ‘We could maybe give deductions on their council tax for the period of time during which the garden city is being built. We could possibly also say to those homes where they think the price of their home will be affected, we will guarantee the price of their home by buying it, if you like, up front.’

From a political perspective, these ideas look like an obvious way to minimise opposition to new development. But what about the wider considerations for a country that is only building half the number of homes needed to meet demand? Here a few that spring to mind:

Why the implicit assumption that it’s only local home owners that should have a say? How close would you have to be to be eligible for compensation/bribes? What about the tenants who will be affected? What about the people elsewhere condemned to poor and expensive housing if we fail to build enough homes? What about future generations?

Will bribes to local residents work anyway? The new homes bonus has not turned out to be much of a ‘powerful new incentive’ (though this was offered to councils not individuals). The government’s offer of millions of pounds in incentives to communities that accept fracking led to calls to apply the same principles for new homes.

However, this assumes that opposition to development is motivated by financial considerations alone. Emotional attachment to the countryside and a desire to preserve things as they are may be just as powerful but people may also respond to a well-argued case based on the national interest. A famous study in Switzerland looked at public attitudes to the siting of a potential nuclear waste depository. When people were asked if they would support it if parliament said their area was the best place, 51 per cent said yes. When they were asked if they would approve if parliament offered substantial compensation, support fell to just 25 per cent.

What about the land? The garden cities model works by capturing the uplift in the value of the land between existing use and residential development use. If home owners are to be compensated at the full residential market value, why not land owners too? That would undermine the whole model. 

What about other projects? Clegg went on to say that we already have procedures that apply to big infrastructure schemes. For example, the government will pay market value plus 10 per cent to owners of homes closer than 60m to the proposed HS2 train line. However, there are well-established principles for the compulsory purchase of land and property. Offering enhanced terms to residents near garden cities could have costly implications for all other infrastructure projects - and other housing developments.

All of these considerations came up in the submissions for the Wolfson Economics Prize on garden cities that were shortlisted earlier this year. The contestants were asked ‘how would you deliver a new garden city which is visionary, economically viable and popular?’

As I blogged at the time, the answers to the popularity question were as much about creating a vision for the future community as how to compensate landowners and existing residents. The entries had some very different ideas about compensation too: the proposed premium on existing use value to landowners ranged from ‘slightly enhanced values’ to plus 20 per cent to 20 times the agricultural value.

However, many of the entries also talked about ‘patient investors’, landowners willing to forgo cash now in return for a long-term equity stake in the project. One talked about the way the great estates of London were developed in the 18th and 19th century by retaining the freehold and taking a return over time rather than taking a capital sum at the outset. Others proposed offering existing residents preferential terms to buy shares or bonds in the new community – or even a choice between compensation now or a share in the future proceeds.

Nick Clegg has raised a vital question for the future: how to balance the interests of local home residents against a clear national need for more homes. However, the answers have to be about more than just buying off local opposition.

Back in the present, the chances of any genuine garden cities (beyond reheated versions of existing developments) going ahead under a coalition government that includes Eric Pickles look somewhere between slim and zero.

And housing and planning minister Brandon Lewis did not exactly sound like he was fully behind Clegg’s ideas when he told the BBC that they were ‘an interesting contribution’ to the debate. His description of the bidding process as ‘still open for communities with proposals for ambitious, locally led developments that have the backing of existing residents’ does not exactly sound visionary either.

To read more about garden cities click here.

Going the extra mile

Tue, 5 Aug 2014

How far should the government go to buy off local opposition to new garden cities?

Deputy prime minister Nick Clegg said over the weekend that ministers would consider options including council tax reductions and house price guarantees to ensure that local communities do not lose out. He told the BBC’s Countryfile programme (watch from about eight minutes in): ‘What I’m saying is we’re actively looking at things like that to show that we will go the extra mile to allay those concerns of people who feel that their property, or the price of their home, might be affected. We don’t want people to lose out.’

He went on: ‘We could maybe give deductions on their council tax for the period of time during which the garden city is being built. We could possibly also say to those homes where they think the price of their home will be affected, we will guarantee the price of their home by buying it, if you like, up front.’

From a political perspective, these ideas look like an obvious way to minimise opposition to new development. But what about the wider considerations for a country that is only building half the number of homes needed to meet demand? Here a few that spring to mind:

Why the implicit assumption that it’s only local home owners that should have a say? How close would you have to be to be eligible for compensation/bribes? What about the tenants who will be affected? What about the people elsewhere condemned to poor and expensive housing if we fail to build enough homes? What about future generations?

Will bribes to local residents work anyway? The new homes bonus has not turned out to be much of a ‘powerful new incentive’ (though this was offered to councils not individuals). The government’s offer of millions of pounds in incentives to communities that accept fracking led to calls to apply the same principles for new homes.

However, this assumes that opposition to development is motivated by financial considerations alone. Emotional attachment to the countryside and a desire to preserve things as they are may be just as powerful but people may also respond to a well-argued case based on the national interest. A famous study in Switzerland looked at public attitudes to the siting of a potential nuclear waste depository. When people were asked if they would support it if parliament said their area was the best place, 51 per cent said yes. When they were asked if they would approve if parliament offered substantial compensation, support fell to just 25 per cent.

What about the land? The garden cities model works by capturing the uplift in the value of the land between existing use and residential development use. If home owners are to be compensated at the full residential market value, why not land owners too? That would undermine the whole model. 

What about other projects? Clegg went on to say that we already have procedures that apply to big infrastructure schemes. For example, the government will pay market value plus 10 per cent to owners of homes closer than 60m to the proposed HS2 train line. However, there are well-established principles for the compulsory purchase of land and property. Offering enhanced terms to residents near garden cities could have costly implications for all other infrastructure projects - and other housing developments.

All of these considerations came up in the submissions for the Wolfson Economics Prize on garden cities that were shortlisted earlier this year. The contestants were asked ‘how would you deliver a new garden city which is visionary, economically viable and popular?’

As I blogged at the time, the answers to the popularity question were as much about creating a vision for the future community as how to compensate landowners and existing residents. The entries had some very different ideas about compensation too: the proposed premium on existing use value to landowners ranged from ‘slightly enhanced values’ to plus 20 per cent to 20 times the agricultural value.

However, many of the entries also talked about ‘patient investors’, landowners willing to forgo cash now in return for a long-term equity stake in the project. One talked about the way the great estates of London were developed in the 18th and 19th century by retaining the freehold and taking a return over time rather than taking a capital sum at the outset. Others proposed offering existing residents preferential terms to buy shares or bonds in the new community – or even a choice between compensation now or a share in the future proceeds.

Nick Clegg has raised a vital question for the future: how to balance the interests of local home residents against a clear national need for more homes. However, the answers have to be about more than just buying off local opposition.

Back in the present, the chances of any genuine garden cities (beyond reheated versions of existing developments) going ahead under a coalition government that includes Eric Pickles look somewhere between slim and zero.

And housing and planning minister Brandon Lewis did not exactly sound like he was fully behind Clegg’s ideas when he told the BBC that they were ‘an interesting contribution’ to the debate. His description of the bidding process as ‘still open for communities with proposals for ambitious, locally led developments that have the backing of existing residents’ does not exactly sound visionary either.

To read more about garden cities click here.

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