Monday, 27 March 2017

Inside edge

All posts from: October 2014

Keeping it in the family

Fri, 31 Oct 2014

How would the government’s own policies fare under the new families test?

The test published by Iain Duncan Smith will apply to all new laws and policies ‘to make sure they support strong and stable families’. It follows a speech by David Cameron in August promising family impact assessments of all domestic policies as part of a wider speech about family-friendly policy.

As I blogged at the time, Cameron was careful to avoid giving the impression that he only meant traditional families. However, his speech exposed a huge gap between rhetoric and reality on everything from the benefit cap to the bedroom tax, out-of-area homelessness placements to the private rented sector and troubled families to wider welfare reform.

So who better to set out the detail than a secretary of state famed for his ability to believe he is right regardless of the inconvenient facts? Have a look at the six tests proposed by IDS and a quick think about the policies introduced in the last four years that affect housing:

  • What kind of impact might the policy have on family formation? (What about the benefit cap and the way that a new relationship or extra child can leave you unable to pay your rent? What about failure to ensure affordable house prices or stable family-friendly tenancies?)
  • What kind of impact will the policy have on families going through key transitions such as becoming parents, getting married, fostering or adopting, bereavement, redundancy, new caring responsibilities or the onset of a long-term health condition? (To take just one example, what about those who cannot share a bedroom because of a medical condition but still get charged the bedroom tax?)
  • What impacts will the policy have on all family members’ ability to play a full role in family life, including with respect to parenting and other caring responsibilities? (What about the way homeless people are being sent miles away from family support networks because of housing benefit caps?)
  • How does the policy impact families before, during and after couple separation? (Severely when it comes to separated parents facing the bedroom tax on the room they keep for when their children stay over. Work and pensions minister Steve Webb told Daily Politics earlier that they would have had an exemption under a family test.)
  • How does the policy impact those families most at risk of deterioration of relationship quality and breakdown? (Do I need to go on?)

None of this means that the new family test has no value. The questions are pertinent and worth asking before any new policy is announced. All of it could provide a useful way of looking at policy, at least in theory. In practice, of course, policies like Help to Buy could be seen through pro-government glasses as helping families on to the housing ladder and through anti-government ones as excluding many more by propping up unaffordable prices. 

The definition of a ‘family’ way in accompanying guidance for government departments is admirably inclusive and careful to embrace all kinds of family unit and all kinds of family members. However, Iain Duncan Smith must have forgotten that families include same sex couples, lone parents and step parents before he penned an article on ‘why we must support marriage’ for the Daily Mail. ‘I believe part of the problem lies in politicians shying away from promoting strong family relationships, at the heart of which lies marriage – for fear of being thought judgmental,’ he says.

What are civil servants used to preparing impact and equality impact assessments that are routinely delayed, published at the last minute or ignored to make of its call to ensure that the family test should not be reduced to ‘a “box ticking” exercise or bureaucratic hurdle’?

And how can the rest of us listen to the sanctimonious IDS proclaiming that ‘this is the truest representation of government on the side of hard-working families in Britain’ without reaching for the sick bag?

Or better still having a read of today’s fifth report from the Real Life Reform project that tracks the impact of IDS’s own policies. Three-quarters of these real families are in debt, that debt has increased by 72 per cent since September 2013 and almost half do not know if they will ever be able to repay it. The average family in the study spends just £3.28 per day on food and four out of ten have nothing left at the end of the week.

Then think about the impact of the extensions to welfare reform that have already been announced by the Conservatives (reducing the benefit cap to £23,000, freezing most benefits and tax credits for people of working age for three years) let alone the billions of pounds worth of cuts that have not yet been spelled out (including the proposed cuts to ESA that leaked this week). 

Keeping it in the family

Fri, 31 Oct 2014

How would the government’s own policies fare under the new families test?

The test published by Iain Duncan Smith will apply to all new laws and policies ‘to make sure they support strong and stable families’. It follows a speech by David Cameron in August promising family impact assessments of all domestic policies as part of a wider speech about family-friendly policy.

As I blogged at the time, Cameron was careful to avoid giving the impression that he only meant traditional families. However, his speech exposed a huge gap between rhetoric and reality on everything from the benefit cap to the bedroom tax, out-of-area homelessness placements to the private rented sector and troubled families to wider welfare reform.

So who better to set out the detail than a secretary of state famed for his ability to believe he is right regardless of the inconvenient facts? Have a look at the six tests proposed by IDS and a quick think about the policies introduced in the last four years that affect housing:

  • What kind of impact might the policy have on family formation? (What about the benefit cap and the way that a new relationship or extra child can leave you unable to pay your rent? What about failure to ensure affordable house prices or stable family-friendly tenancies?)
  • What kind of impact will the policy have on families going through key transitions such as becoming parents, getting married, fostering or adopting, bereavement, redundancy, new caring responsibilities or the onset of a long-term health condition? (To take just one example, what about those who cannot share a bedroom because of a medical condition but still get charged the bedroom tax?)
  • What impacts will the policy have on all family members’ ability to play a full role in family life, including with respect to parenting and other caring responsibilities? (What about the way homeless people are being sent miles away from family support networks because of housing benefit caps?)
  • How does the policy impact families before, during and after couple separation? (Severely when it comes to separated parents facing the bedroom tax on the room they keep for when their children stay over. Work and pensions minister Steve Webb told Daily Politics earlier that they would have had an exemption under a family test.)
  • How does the policy impact those families most at risk of deterioration of relationship quality and breakdown? (Do I need to go on?)

None of this means that the new family test has no value. The questions are pertinent and worth asking before any new policy is announced. All of it could provide a useful way of looking at policy, at least in theory. In practice, of course, policies like Help to Buy could be seen through pro-government glasses as helping families on to the housing ladder and through anti-government ones as excluding many more by propping up unaffordable prices. 

The definition of a ‘family’ way in accompanying guidance for government departments is admirably inclusive and careful to embrace all kinds of family unit and all kinds of family members. However, Iain Duncan Smith must have forgotten that families include same sex couples, lone parents and step parents before he penned an article on ‘why we must support marriage’ for the Daily Mail. ‘I believe part of the problem lies in politicians shying away from promoting strong family relationships, at the heart of which lies marriage – for fear of being thought judgmental,’ he says.

What are civil servants used to preparing impact and equality impact assessments that are routinely delayed, published at the last minute or ignored to make of its call to ensure that the family test should not be reduced to ‘a “box ticking” exercise or bureaucratic hurdle’?

And how can the rest of us listen to the sanctimonious IDS proclaiming that ‘this is the truest representation of government on the side of hard-working families in Britain’ without reaching for the sick bag?

Or better still having a read of today’s fifth report from the Real Life Reform project that tracks the impact of IDS’s own policies. Three-quarters of these real families are in debt, that debt has increased by 72 per cent since September 2013 and almost half do not know if they will ever be able to repay it. The average family in the study spends just £3.28 per day on food and four out of ten have nothing left at the end of the week.

Then think about the impact of the extensions to welfare reform that have already been announced by the Conservatives (reducing the benefit cap to £23,000, freezing most benefits and tax credits for people of working age for three years) let alone the billions of pounds worth of cuts that have not yet been spelled out (including the proposed cuts to ESA that leaked this week). 

Double vision

Tue, 28 Oct 2014

Universal credit came under scrutiny on TV and radio last night and whether you look from above or below things are not looking good.

Dispatches on Channel 4 covered the problems from below by looking at the experience in Warrington, where the job centre was one of the first to pilot the new all-in-one benefit. We heard from a succession of people whose claims were delayed, or processed wrongly or were simply not told what was happening and from Golden Gates Housing Trust on the problems this has caused.

The pilots are of course only meant to cover the simplest cases. However, single people don’t necessarily stay single: Jay moved in with his girlfriend and baby and found himself in a nightmare of delayed payments and rent arrears. ‘Me, my partner and my child will be homeless and you just don’t know what’s going on,’ he said. Jay started off as a fan of universal credit but they survived on coffee and crisps until the problems were sorted out.

And contrary to claims by the DWP and the amount of staff time devoted to the pilot there seemed to be a lack of information and support for people in the system. One claimant received a large universal credit payment without being told he had to pay his rent out of it. Peter Fitzhenry from Golden Gates Housing Trust told the programme that, contrary to claims by the DWP, only one or two of its tenants had been given personal budgeting support.

A survey by the programme showed that nine out of ten tenants on universal credit were in rent arrears and more than a third had faced some form of eviction action. However, it was not clear who was surveyed or how much of this was caused by differences between the way rent is charged and universal credit is paid.

Much more worrying were the leaks about how the system is creaking at the seams inside job centres. One manager wrote a memo headlined ‘Ideas please: sinking’. She only sent it to her own team but it was a pretty damning verdict on what is meant to be a ‘flagship’ reform. See more in The Guardian here.

Some of these problems could be seen as examples of the DWP learning from experience of course. That’s the whole point of pilots and all the people in the programme did have their problems resolved in the end. However, the standard DWP response to criticism – this reflects how things were before we made changes – has become all too wearily familiar.

Analysis on Radio 4 reviewed what’s happening from above. The presenter, Jonathan Portes, was chief economist at the DWP until 2008 and so well placed to put universal credit in the broader context of welfare reform. He highlighted the continuities with what was happening under Labour (‘in some respects maybe we were too cautious’) and the broad support for the new system at the outset. ‘Everybody thinks it’s sensible and has done for years,’ said Labour MP Margaret Hodge, chair of the public accounts committee.

The programme interviewed supporters of IDS like Spectator editor Fraser Nelson, who argued that he was right to be ambitious and that he will be seen as the most effective reformer under the coalition government.

But did he bite off more than he could chew? The Treasury thought universal credit was risky and expensive. Experts warned the timetable was wildly over-ambitious. The DWP was pushing through major changes in disability benefits at the same time that in some ways make universal credit look good: delays and other implementation problems mean around £3 billion a year in promised savings have not been delivered. Hodge predicted that the DWP will admit to a £500 million write-off for IT costs on the universal credit – but only after the election.

Behind the scenes, according to the programme, IDS was trying to blame the problems on Robert Devereux, his permanent secretary. Former head of the civil service Gus O’Donnell said that, in contrast to the micro-management of Tony Blair, David Cameron had adopted a hands-off approach that meant problems only became clear later in the process.  

Portes concluded the programme: ‘Maybe we did go too slowly with welfare reform in the 2000s. But the experience of the last four years suggests that being cautious is not the worst mistake you could make.’ His piece for The Guardian yesterday was much more trenchant.

Next week sees IDS face another grilling at work and pensions questions on Monday and a joint appearance with Robert Devereux before the work and pensions committee on Wednesday. No doubt we’ll face the usual dismissal of every criticism as based on out-of-date information.

For tenants and landlords all this means it’s impossible to know what’s really going on beyond an impression of chaos from above and below. As Brian Wernham points out on his blog on the two programmes, universal credit exists in a foggy world where it’s hard to separate fact from anecdote. Quite apart from the system itself and whether it works on the ground, crucial details like the extension of the sanctions system and the proposed extension of the waiting period will also have a major impact.

The ‘accelerated roll-out’ to every job centre in the country will now ‘start’ (whatever that means) in February 2015, though presumably this will still only be for the simplest cases and still using the same Heath Robinson temporary IT system as the pilots. However, Dispatches showed only too clearly that the simplest cases have a habit of becoming more complex and Analysis shows just how dysfunctional things are at the DWP as it struggles to get the national system back on track.

Until May 2015 the ‘careful roll-out’ will continue and everything will be of course on time and on budget. After the election, depending on who wins and who becomes secretary of state, it will be time to take stock in ways that were planned all along or time to blame Iain Duncan Smith for the shambles. 

Double vision

Tue, 28 Oct 2014

Universal credit came under scrutiny on TV and radio last night and whether you look from above or below things are not looking good.

Dispatches on Channel 4 covered the problems from below by looking at the experience in Warrington, where the job centre was one of the first to pilot the new all-in-one benefit. We heard from a succession of people whose claims were delayed, or processed wrongly or were simply not told what was happening and from Golden Gates Housing Trust on the problems this has caused.

The pilots are of course only meant to cover the simplest cases. However, single people don’t necessarily stay single: Jay moved in with his girlfriend and baby and found himself in a nightmare of delayed payments and rent arrears. ‘Me, my partner and my child will be homeless and you just don’t know what’s going on,’ he said. Jay started off as a fan of universal credit but they survived on coffee and crisps until the problems were sorted out.

And contrary to claims by the DWP and the amount of staff time devoted to the pilot there seemed to be a lack of information and support for people in the system. One claimant received a large universal credit payment without being told he had to pay his rent out of it. Peter Fitzhenry from Golden Gates Housing Trust told the programme that, contrary to claims by the DWP, only one or two of its tenants had been given personal budgeting support.

A survey by the programme showed that nine out of ten tenants on universal credit were in rent arrears and more than a third had faced some form of eviction action. However, it was not clear who was surveyed or how much of this was caused by differences between the way rent is charged and universal credit is paid.

Much more worrying were the leaks about how the system is creaking at the seams inside job centres. One manager wrote a memo headlined ‘Ideas please: sinking’. She only sent it to her own team but it was a pretty damning verdict on what is meant to be a ‘flagship’ reform. See more in The Guardian here.

Some of these problems could be seen as examples of the DWP learning from experience of course. That’s the whole point of pilots and all the people in the programme did have their problems resolved in the end. However, the standard DWP response to criticism – this reflects how things were before we made changes – has become all too wearily familiar.

Analysis on Radio 4 reviewed what’s happening from above. The presenter, Jonathan Portes, was chief economist at the DWP until 2008 and so well placed to put universal credit in the broader context of welfare reform. He highlighted the continuities with what was happening under Labour (‘in some respects maybe we were too cautious’) and the broad support for the new system at the outset. ‘Everybody thinks it’s sensible and has done for years,’ said Labour MP Margaret Hodge, chair of the public accounts committee.

The programme interviewed supporters of IDS like Spectator editor Fraser Nelson, who argued that he was right to be ambitious and that he will be seen as the most effective reformer under the coalition government.

But did he bite off more than he could chew? The Treasury thought universal credit was risky and expensive. Experts warned the timetable was wildly over-ambitious. The DWP was pushing through major changes in disability benefits at the same time that in some ways make universal credit look good: delays and other implementation problems mean around £3 billion a year in promised savings have not been delivered. Hodge predicted that the DWP will admit to a £500 million write-off for IT costs on the universal credit – but only after the election.

Behind the scenes, according to the programme, IDS was trying to blame the problems on Robert Devereux, his permanent secretary. Former head of the civil service Gus O’Donnell said that, in contrast to the micro-management of Tony Blair, David Cameron had adopted a hands-off approach that meant problems only became clear later in the process.  

Portes concluded the programme: ‘Maybe we did go too slowly with welfare reform in the 2000s. But the experience of the last four years suggests that being cautious is not the worst mistake you could make.’ His piece for The Guardian yesterday was much more trenchant.

Next week sees IDS face another grilling at work and pensions questions on Monday and a joint appearance with Robert Devereux before the work and pensions committee on Wednesday. No doubt we’ll face the usual dismissal of every criticism as based on out-of-date information.

For tenants and landlords all this means it’s impossible to know what’s really going on beyond an impression of chaos from above and below. As Brian Wernham points out on his blog on the two programmes, universal credit exists in a foggy world where it’s hard to separate fact from anecdote. Quite apart from the system itself and whether it works on the ground, crucial details like the extension of the sanctions system and the proposed extension of the waiting period will also have a major impact.

The ‘accelerated roll-out’ to every job centre in the country will now ‘start’ (whatever that means) in February 2015, though presumably this will still only be for the simplest cases and still using the same Heath Robinson temporary IT system as the pilots. However, Dispatches showed only too clearly that the simplest cases have a habit of becoming more complex and Analysis shows just how dysfunctional things are at the DWP as it struggles to get the national system back on track.

Until May 2015 the ‘careful roll-out’ will continue and everything will be of course on time and on budget. After the election, depending on who wins and who becomes secretary of state, it will be time to take stock in ways that were planned all along or time to blame Iain Duncan Smith for the shambles. 

Brave new world

Mon, 27 Oct 2014

Guess what the total value of government financial instruments to support new homes will be by 2021.

The answer that leapt off the page at me in a report on the department’s performance published by the National Audit Office (NAO) last week is a cool £24 billion. And that is just the direct support that comes under the DCLG and its agencies.

Perhaps the figure should not come as a surprise. After all, ever since the financial crisis we’ve grown used to the government adopting new ways of financing things that do not rely on conventional spending or borrowing.

The three programmes that make up the £24 billion are £10 billion for financial guarantees to housing associations and the private rented sector to help build new homes, £9.7 billion for the Help to Buy equity loan scheme (HTB1) and £4.2 billion for other loans and investments such as Build to Rent and the large sites scheme.

It’s still relatively early days for many of these schemes (HTB1 was only extended to 2019/20 in the 2014 Budget) but they are already hugely significant. The NAO notes in its report that:

‘The [Homes and Communities] Agency has already moved to a point where the March 2014 valuation of its available for sale financial investments (£1,554 million) exceeded its payment of grants during 2013-14 (£1,052 million).’

All of these schemes will be familiar to readers of Inside Housing. But it’s only when you put them together that you realise the scale of the shift from old-style grant funding for housing to new-fangled financial instruments. To put that £24 billion into perspective, the total value of construction output on new housing is currently running at £25 billion a year.

Consider too what’s happening elsewhere in housing that does not come under the DCLG. Add the direct impact of another £12 billion for Help to Buy mortgage guarantees (HTB2) and the indirect effect of hundreds of billions of pounds worth of Funding for Lending and quantitative easing on mortgage payments and house prices. Look at the novel forms of equity investment that are being developed within local government – and schemes devised by governments in other parts of the UK.

And the total value of financial instruments seems set to grow even further in the rest of this decade. All of the main parties are committed to deficit reduction plans with little scope for more conventional public investment and borrowing. As I blogged last week, for example, Labour’s Lyons Review included proposals for Help to Build loan guarantees for small builders, more loan guarantees for housing associations, equity loans for private landlords and equity investments of public land. The Independent reported on Sunday that shadow ministers are already holding talks with the banks on how Help to Build would work.

The scale of the shift to financial instruments is obvious when you stop to think about it. What’s more surprising (to me at least) is how the shift has happened with relatively little public debate about its advantages and disadvantages. True, the merits or otherwise of HTB2 came under very close scrutiny but that is just part (and so far a small part) of what we’re talking about.

The upsides for the government are not hard to see. Financial instruments like guarantees do not count as public spending and borrowing. Some of them could result in healthy profits for the taxpayer: the Financial Times calculated in May that the government could make a £4.5 billion profit on Help to Buy equity loans. Commercial fees are charged for many of the guarantees and loans. And is it conceivable that ‘available for sale financial investments’ could actually be sold by a future government?

The obvious downside is that the taxpayer could suffer losses if house prices fall or a housing market crash leads to large-scale defaults against loans or developers going bust and guarantees being called in. Relying on guarantees and loans increases risks for housing associations and others. The existence of the instruments could drive policy elsewhere (for example by giving the government even more of a stake in ever-rising house prices). How much of the activity being guaranteed would have happened anyway? How much of the benefits will disappear into the pockets of shareholders in the major housebuilders? And might there be better ways of using the public sector balance sheet to support new housing?

The NAO’s job is to scrutinise the financial performance of central government. Its report on HTB1 in March highighted the potential impact on borrowing by low-income households but also noted that it was a ‘long-term commitment with uncertain returns’ and the objectives did not include any value for money criteria. Last week’s report also analyses the risks and notes that the DCLG and HCA have responded to its concerns by recruiting more staff with the skills to administer HTB1 and its other financial instruments.

Closer to home, the HCA’s regulation committee is well aware of the risks too, hence the new regulatory regime covered by Carl Brown this week’s Inside Housing. As Julian Ashby put it in April:

‘With less grant and a greater emphasis on support through financial instruments, development of new housing will require substantial levels of debt at a time when some associations are coming closer to covenant boundaries. This leads to diversification into commercial activities and to a desire to circumvent constraints in a variety of innovative (but potentially risky) ways.’

Further away from home, the same thing is happening across Whitehall, from the £40 billion in infrastructure guarantees being issued by the Treasury to the financing of Hinckley C nuclear power station to the shift from direct funding to student loans in higher education. It’s a brave new world that deserves much more scrutiny that it is getting.  

Brave new world

Mon, 27 Oct 2014

Guess what the total value of government financial instruments to support new homes will be by 2021.

The answer that leapt off the page at me in a report on the department’s performance published by the National Audit Office (NAO) last week is a cool £24 billion. And that is just the direct support that comes under the DCLG and its agencies.

Perhaps the figure should not come as a surprise. After all, ever since the financial crisis we’ve grown used to the government adopting new ways of financing things that do not rely on conventional spending or borrowing.

The three programmes that make up the £24 billion are £10 billion for financial guarantees to housing associations and the private rented sector to help build new homes, £9.7 billion for the Help to Buy equity loan scheme (HTB1) and £4.2 billion for other loans and investments such as Build to Rent and the large sites scheme.

It’s still relatively early days for many of these schemes (HTB1 was only extended to 2019/20 in the 2014 Budget) but they are already hugely significant. The NAO notes in its report that:

‘The [Homes and Communities] Agency has already moved to a point where the March 2014 valuation of its available for sale financial investments (£1,554 million) exceeded its payment of grants during 2013-14 (£1,052 million).’

All of these schemes will be familiar to readers of Inside Housing. But it’s only when you put them together that you realise the scale of the shift from old-style grant funding for housing to new-fangled financial instruments. To put that £24 billion into perspective, the total value of construction output on new housing is currently running at £25 billion a year.

Consider too what’s happening elsewhere in housing that does not come under the DCLG. Add the direct impact of another £12 billion for Help to Buy mortgage guarantees (HTB2) and the indirect effect of hundreds of billions of pounds worth of Funding for Lending and quantitative easing on mortgage payments and house prices. Look at the novel forms of equity investment that are being developed within local government – and schemes devised by governments in other parts of the UK.

And the total value of financial instruments seems set to grow even further in the rest of this decade. All of the main parties are committed to deficit reduction plans with little scope for more conventional public investment and borrowing. As I blogged last week, for example, Labour’s Lyons Review included proposals for Help to Build loan guarantees for small builders, more loan guarantees for housing associations, equity loans for private landlords and equity investments of public land. The Independent reported on Sunday that shadow ministers are already holding talks with the banks on how Help to Build would work.

The scale of the shift to financial instruments is obvious when you stop to think about it. What’s more surprising (to me at least) is how the shift has happened with relatively little public debate about its advantages and disadvantages. True, the merits or otherwise of HTB2 came under very close scrutiny but that is just part (and so far a small part) of what we’re talking about.

The upsides for the government are not hard to see. Financial instruments like guarantees do not count as public spending and borrowing. Some of them could result in healthy profits for the taxpayer: the Financial Times calculated in May that the government could make a £4.5 billion profit on Help to Buy equity loans. Commercial fees are charged for many of the guarantees and loans. And is it conceivable that ‘available for sale financial investments’ could actually be sold by a future government?

The obvious downside is that the taxpayer could suffer losses if house prices fall or a housing market crash leads to large-scale defaults against loans or developers going bust and guarantees being called in. Relying on guarantees and loans increases risks for housing associations and others. The existence of the instruments could drive policy elsewhere (for example by giving the government even more of a stake in ever-rising house prices). How much of the activity being guaranteed would have happened anyway? How much of the benefits will disappear into the pockets of shareholders in the major housebuilders? And might there be better ways of using the public sector balance sheet to support new housing?

The NAO’s job is to scrutinise the financial performance of central government. Its report on HTB1 in March highighted the potential impact on borrowing by low-income households but also noted that it was a ‘long-term commitment with uncertain returns’ and the objectives did not include any value for money criteria. Last week’s report also analyses the risks and notes that the DCLG and HCA have responded to its concerns by recruiting more staff with the skills to administer HTB1 and its other financial instruments.

Closer to home, the HCA’s regulation committee is well aware of the risks too, hence the new regulatory regime covered by Carl Brown this week’s Inside Housing. As Julian Ashby put it in April:

‘With less grant and a greater emphasis on support through financial instruments, development of new housing will require substantial levels of debt at a time when some associations are coming closer to covenant boundaries. This leads to diversification into commercial activities and to a desire to circumvent constraints in a variety of innovative (but potentially risky) ways.’

Further away from home, the same thing is happening across Whitehall, from the £40 billion in infrastructure guarantees being issued by the Treasury to the financing of Hinckley C nuclear power station to the shift from direct funding to student loans in higher education. It’s a brave new world that deserves much more scrutiny that it is getting.  

Poverty prism

Wed, 22 Oct 2014

Who said this? ‘What is currently happening in the housing market epitomises our concerns about Britain becoming a permanently divided nation.’

This is not a quote from a housing pressure group or a think-tank or even an article in Inside Housing. Instead it is the verdict in a report published on Monday by an official government body: the Social Mobility and Child Poverty Commission.

The advance headlines ahead of its annual State of the Nation report were about the ‘under-30s being priced out of the UK’ and much of the coverage after that went to the commission’s criticism of Labour’s plans on the minimum wage and its proposal to ban unpaid internships. However, read as a whole the report gives a fresh perspective on problems that are all too familiar to anyone in housing.

That perspective comes from its unusual status as an advisory non-departmental public body with a remit to advise the government and others on child poverty and social mobility. It was established under the last government’s Child Poverty Act 2010, which set binding targets on future governments to eliminate child poverty by 2020.

The coalition’s record on child poverty is mixed so far and how you consider housing makes a big difference. The most commonly used measure, relative poverty (that is, relative to other incomes) before housing costs, improved in the three years to 2012/13 thanks to rising employment and the fact that benefits were stable at a time when real wages were falling. However, progress on this has stalled and high housing costs dragged an extra 1.4 million people into relative poverty after housing costs were taken into account.

The Commission concludes that ‘changes in the housing market are already increasing poverty and are threatening to become a major impediment to social mobility’. The number of children in absolute poverty (unable to afford a basic standard of living) after housing costs has risen by 450,000 since 2009/10. This has been ‘almost entirely driven by an increase in working poverty’ and the Commission says the biggest factor in this is the shift of families with dependent children from owner-occupation to the more expensive private rented sector. The proportion renting privately has doubled in the last ten years.

The report sees four implications in these ‘startling changes in the housing market’:

  • Lower relative living standards for some families, with private renters paying 40 per cent of their average income in rent but mortgage holders paying 20 per cent.
  • A rising proportion of the population not benefitting from record low interest rates
  • Reduced stability for families: in 1999/2000 three-quarters of those with children who were renting had a social tenancy but in 2012/12 less than half did.
  • A delayed transition to adulthood and increased inequality between generations as young people are locked out of ownership and parental help becomes ever more important to getting on to the housing ladder.

The Commission argues that what’s happening in housing challenges ‘the very terms of the debate’ about child poverty and social mobility:

‘Changes in the housing system complicate what social mobility means, with risks that, even if children from less advantaged backgrounds do well at school and find a good job, they will find themselves trapped for the long-term in shared, expensive and insecure private rented accommodation, unable to start a family and worse-off than both their parents and their peers from more advantaged backgrounds.’

And it says the next government must give housing greater priority: ‘The new objective for housing policy should be that it contributes to more social mobility and less child poverty’. There should be action to make longer-term tenancies the norm, boost housing supply and make shared ownership a real option for people who are priced out of the market without assistance from their families. Private renters are missing out on both security and asset accumulation and face support for housing costs becoming detached from actual rents and it’s unclear to the Commission whether the current voluntarist approach is having much impact on longer-term tenancies. 

All of these points will be familiar to people working in housing but they take on a different meaning when put through what the report calls a ‘social mobility prism’. The Commission sees action on housing as one of five key recommendations to meet the ‘2020 challenge’. The others are credible plans for deficit reduction, recoupling earnings and economic growth, boosting growth in the regions and setting out a ten-year ambition for the UK to become a Living Wage country by 2025.

However, to view that through a housing prism, the Living Wage assumes that families with children have access to social housing. That makes it curious that the report does not say more about boosting supply of social housing or protecting what already exists.

As things stand, progress towards the 2020 child poverty target is about to go sharply into reverse. This report only measures progress up to 2012/13. That means it does not reflect all the cuts in benefits and tax credits that applied from April 2013. Publication of the 2013/14 data is currently scheduled for June 2015, a convenient month after the next election.

And we are still only halfway through austerity. The Commission argues:

‘It is hard to see how savings on this scale can be made without seriously affecting the public services that aim to level the social playing field and the income transfers that have propped up families in work and out of work. Yet there seems to be an emerging consensus between the main political parties that fiscal consolidation on this sort of scale will be necessary between 2015 and 2020.’

That is a matter for each of the political parties but:

‘What appears hard to square, however, is their shared desire to reduce poverty and speed up mobility with their eye-wateringly tight fiscal plans. None of the main political parties has made much effort to reconcile the social ends they say they want to achieve with the fiscal means to which each of them is committed. There is a need for more honesty about the implications of planned public spending cuts from all the political parties.’

The report warns that protecting benefits for pensioners will make the cuts far worse for everyone else. With most working-age benefits now rising by just 1 per cent a year (and the Conservatives pledging a freeze to follow that) poverty is set to worsen in the rest of this decade.

Far from eliminating child poverty, experts predict we are now on course for the first decade since records began in which absolute child poverty increased. And a housing system that will become the symbol of a permanently divided nation.

Poverty prism

Wed, 22 Oct 2014

Who said this? ‘What is currently happening in the housing market epitomises our concerns about Britain becoming a permanently divided nation.’

This is not a quote from a housing pressure group or a think-tank or even an article in Inside Housing. Instead it is the verdict in a report published on Monday by an official government body: the Social Mobility and Child Poverty Commission.

The advance headlines ahead of its annual State of the Nation report were about the ‘under-30s being priced out of the UK’ and much of the coverage after that went to the commission’s criticism of Labour’s plans on the minimum wage and its proposal to ban unpaid internships. However, read as a whole the report gives a fresh perspective on problems that are all too familiar to anyone in housing.

That perspective comes from its unusual status as an advisory non-departmental public body with a remit to advise the government and others on child poverty and social mobility. It was established under the last government’s Child Poverty Act 2010, which set binding targets on future governments to eliminate child poverty by 2020.

The coalition’s record on child poverty is mixed so far and how you consider housing makes a big difference. The most commonly used measure, relative poverty (that is, relative to other incomes) before housing costs, improved in the three years to 2012/13 thanks to rising employment and the fact that benefits were stable at a time when real wages were falling. However, progress on this has stalled and high housing costs dragged an extra 1.4 million people into relative poverty after housing costs were taken into account.

The Commission concludes that ‘changes in the housing market are already increasing poverty and are threatening to become a major impediment to social mobility’. The number of children in absolute poverty (unable to afford a basic standard of living) after housing costs has risen by 450,000 since 2009/10. This has been ‘almost entirely driven by an increase in working poverty’ and the Commission says the biggest factor in this is the shift of families with dependent children from owner-occupation to the more expensive private rented sector. The proportion renting privately has doubled in the last ten years.

The report sees four implications in these ‘startling changes in the housing market’:

  • Lower relative living standards for some families, with private renters paying 40 per cent of their average income in rent but mortgage holders paying 20 per cent.
  • A rising proportion of the population not benefitting from record low interest rates
  • Reduced stability for families: in 1999/2000 three-quarters of those with children who were renting had a social tenancy but in 2012/12 less than half did.
  • A delayed transition to adulthood and increased inequality between generations as young people are locked out of ownership and parental help becomes ever more important to getting on to the housing ladder.

The Commission argues that what’s happening in housing challenges ‘the very terms of the debate’ about child poverty and social mobility:

‘Changes in the housing system complicate what social mobility means, with risks that, even if children from less advantaged backgrounds do well at school and find a good job, they will find themselves trapped for the long-term in shared, expensive and insecure private rented accommodation, unable to start a family and worse-off than both their parents and their peers from more advantaged backgrounds.’

And it says the next government must give housing greater priority: ‘The new objective for housing policy should be that it contributes to more social mobility and less child poverty’. There should be action to make longer-term tenancies the norm, boost housing supply and make shared ownership a real option for people who are priced out of the market without assistance from their families. Private renters are missing out on both security and asset accumulation and face support for housing costs becoming detached from actual rents and it’s unclear to the Commission whether the current voluntarist approach is having much impact on longer-term tenancies. 

All of these points will be familiar to people working in housing but they take on a different meaning when put through what the report calls a ‘social mobility prism’. The Commission sees action on housing as one of five key recommendations to meet the ‘2020 challenge’. The others are credible plans for deficit reduction, recoupling earnings and economic growth, boosting growth in the regions and setting out a ten-year ambition for the UK to become a Living Wage country by 2025.

However, to view that through a housing prism, the Living Wage assumes that families with children have access to social housing. That makes it curious that the report does not say more about boosting supply of social housing or protecting what already exists.

As things stand, progress towards the 2020 child poverty target is about to go sharply into reverse. This report only measures progress up to 2012/13. That means it does not reflect all the cuts in benefits and tax credits that applied from April 2013. Publication of the 2013/14 data is currently scheduled for June 2015, a convenient month after the next election.

And we are still only halfway through austerity. The Commission argues:

‘It is hard to see how savings on this scale can be made without seriously affecting the public services that aim to level the social playing field and the income transfers that have propped up families in work and out of work. Yet there seems to be an emerging consensus between the main political parties that fiscal consolidation on this sort of scale will be necessary between 2015 and 2020.’

That is a matter for each of the political parties but:

‘What appears hard to square, however, is their shared desire to reduce poverty and speed up mobility with their eye-wateringly tight fiscal plans. None of the main political parties has made much effort to reconcile the social ends they say they want to achieve with the fiscal means to which each of them is committed. There is a need for more honesty about the implications of planned public spending cuts from all the political parties.’

The report warns that protecting benefits for pensioners will make the cuts far worse for everyone else. With most working-age benefits now rising by just 1 per cent a year (and the Conservatives pledging a freeze to follow that) poverty is set to worsen in the rest of this decade.

Far from eliminating child poverty, experts predict we are now on course for the first decade since records began in which absolute child poverty increased. And a housing system that will become the symbol of a permanently divided nation.

In the wake of Lyons

Mon, 20 Oct 2014

So what clues does the Lyons Review offers us about housing up to 2020? Here are some more thoughts. 

The review is important in its own right as one of the most significant political reports on housing in the last ten years. However, it also gives us a much more detailed impression of what life will be like under a Labour government in the second half of this decade to add to the outlines of what we can expect under the Conservatives.

I argued in my blog last week that Lyons is good on housebuilding but offers little to supporters of social housing. If you judge the review by what it was asked to do (provide recommendations to Labour on how to get to 200,000 new homes a year in England by 2020) your verdict will tend to be positive. If on the other hand you ask whether recommendations made within these constraints are enough to solve the housing crisis you will be much more negative (for example, see this blog by Alex Hilton.).

The same pattern was evident in Andrew Neil’s interview with Emma Reynolds on Sunday Politics yesterday (watch again here from about 15 minutes in). Neil showed his ignorance of how housebuilding works but he also put the shadow housing minister on the spot when he asked her why we will still be building fewer homes than we need in 2020 and what being ‘a priority’ for investment really means.

Here are seven more talking points that illustrate what I mean about the two different ways of looking at Lyons:

1) A national priority

The way forward: The review boldly states that ‘the government must provide long-term political leadership by making housing a national priority’. Housing will be championed by the prime minister, chancellor, communities secretary and ‘housing minister attending Cabinet’ plus a cross-departmental task force and other advisory bodies. Funding will be devolved to city and county regions.

The worry: The housing minister had ‘attending Cabinet status’ at the end of the last Labour government, a period when we were still under-achieving on new homes. If housing really is that much of a national priority, why not give it full Cabinet and departmental status? Once housing funding streams are consolidated into the economic development fund devolved to city and county regions, where is the guarantee they will actually spend it on housing?

The real test will come if (when?) there is a downturn in private housebuilding (perhaps when interest rates rise). One of the most important recommendations in the report is that: ‘Government in 2015 should provide confidence that in future, counter-cyclical demand side measures will be implemented when needed’. One of the biggest housebuilders, Bellway, said last week that 200,000 homes will be impossible without additional government investment in affordable homes.

2) Avoiding change for the sake of it

The way forward: The report argues that the government should avoid the short-lived initiatives that have plagued housing policy in the past and use primary legislation sparingly. That’s all good but there are also recommendations to reverse coalition tinkering: changing the definition of ‘affordable’ in the NPPF back to one that refers back to incomes; reversing the exemption from the zero carbon standard for small housing developments; and scrapping the proposed minimum threshold for affordable housing section 106;

The worry: Some of this runs counter to the review’s emphasis on supporting small builders. And what about two other coalition changes? The evidence so far indicates that the New Homes Bonus is a mechanism for transferring funds from North to South for homes that would have been built anyway and that the ‘reinvigorated’ right to buy is not producing anything like one for one replacement. Why timidly call for a review of them rather than be bold and scrap them too?

3) Are locals ready to be led?

The way forward: Plans for new housing will be ‘locally led’ but there would be new powers for the secretary of state to intervene. As things stand, a fifth of local authorities have still not even published a local plan let alone adopted one. The review proposes a range of measures to speed things up strategic housing market plans across administrative boundaries and a ‘right to grow’ into neighbouring authorities.

The worry: Some local authorities – think Milton Keynes, where the report was launched – are already promoting new homes. Others are doing the minimum possible. Action to ‘empower local communities to make their own decisions’ sounds great but what if that decision is ‘no thanks’? The local/national issue is already a problem under the existing system but could ‘the right to grow’ turn into political guerrilla warfare? How will South East councils feel about meeting London’s housing need? For a preview of that, see the way that Eric Pickles is already proclaiming the Labour threat to the green belt. 

4) Can local authorities cope?

The way forward: Local authorities would ‘play a much more energetic role’ in leading housing development and will have greater powers to act through housing growth areas, new homes corporations on land assembly and infrastructure. Where councils do not have the expertise they should share it between them.

The worry: ‘A strong leadership role from local government to intervene where the market does not provide by itself and a more energetic and active role in assembling land and driving development through partnership to deliver the type, number and quality of homes their communities need’ sounds great in theory. In practice though, local authority services have already been cut to the bone and more austerity is on the way. If councils are already struggling to deliver statutory responsibilities like adult social care, what will be left for planning and housing?

5) Borrowed time

The way forward: The report tells us that ‘as a nation we only consistently built 200,000 homes or more at times in the past when local authorities were building a good number of them’. It goes through the convincing arguments for allowing local authorities to borrow to invest for switching back from benefits to bricks and mortar. It does not follow through with any recommendations, although it’s not the Lyons Review’s fault that Ed Balls has ruled out extra borrowing for housing investment.

The worry: Labour’s caution is evidently driven by fear of giving ammunition to the Conservatives. However, different forms of borrowing are everywhere in the report. There will be Help to Build loan guarantees for small builders, loan guarantees for housing associations, equity loans for private landlords and equity investments of public land. It seems it is ok for councils to raise bonds for housing companies outside of the HRA. There are recommendations on ‘active management of the overall council housing borrowing headroom by the Treasury’ and an assessment of ‘the distribution of the receipts from right to buy’. As with existing policies like Help to Buy, any form of borrowing seems to be ok so long as it does not actually count as borrowing.

6) Mobilising housing associations

The way forward: Lyons says the government ‘will need to work actively’ with associations to mobilise surpluses and borrowing headroom on the balance sheets. This applies especially to the largest ones in London and the South East to leverage them to parts of the country where there isn’t the same ‘capacity and willingness to invest’. Nick Duxbury reports on this in more detail here. Lyons also proposes a ‘re-tasking’ of the Homes and Communities Agency. Responsibility for investment will transfer to the DCLG and then down to city and county regions, as the HCA becomes an investment aggregator and enabler for development in much the same way as the old English Partnerships.

The worry: This sort of talk, and mention of opportunities for mergers, has led to concerns at the National Housing Federation about housing association independence. As Alex Marsh argues, if the government takes intervention too far it could ultimately find that associations’ borrowing will be reclassified as public borrowing and if it pushes risk too far it could be storing up big problems for the future. The review considered moving regulation away from the HCA too but concluded that would ‘risk delay and uncertainty’. However, does an agency whose main focus would be commercial make for the best regulator of social housing? And what about the interests of tenants?

7) The future of social housing

The way forward: There is an unresolved dilemma at the heart of the report. While there is extensive discussion of the problems that affordable rent poses for landlord borrowing capacity, tenant affordability and the housing benefit bill, higher rents mean more homes for the same public subsidy. Lyons envisages that output by councils and housing associations will double by 2020 compared with 2013. With investment limited despite that vague promise of housing being ‘a priority’, will a Labour government really choose fewer homes with lower rents over more homes with higher rents? 

The worry: Labour’s caution on borrowing and investment and the target of 200,000 by 2020 indicate to me that we will see a development of what we have now rather than a break with it. When that’s combined with the universal credit, the end of direct payment and continuing austerity, what does that mean for the most vulnerable tenants and those who most need social housing? The tensions between landlords’ commercial focus and social mission can only intensify and the temptation to go for better-off tenants paying higher rents can only grow. That’s precisely why investment has to be a priority. 

In the wake of Lyons

Mon, 20 Oct 2014

So what clues does the Lyons Review offers us about housing up to 2020? Here are some more thoughts. 

The review is important in its own right as one of the most significant political reports on housing in the last ten years. However, it also gives us a much more detailed impression of what life will be like under a Labour government in the second half of this decade to add to the outlines of what we can expect under the Conservatives.

I argued in my blog last week that Lyons is good on housebuilding but offers little to supporters of social housing. If you judge the review by what it was asked to do (provide recommendations to Labour on how to get to 200,000 new homes a year in England by 2020) your verdict will tend to be positive. If on the other hand you ask whether recommendations made within these constraints are enough to solve the housing crisis you will be much more negative (for example, see this blog by Alex Hilton.).

The same pattern was evident in Andrew Neil’s interview with Emma Reynolds on Sunday Politics yesterday (watch again here from about 15 minutes in). Neil showed his ignorance of how housebuilding works but he also put the shadow housing minister on the spot when he asked her why we will still be building fewer homes than we need in 2020 and what being ‘a priority’ for investment really means.

Here are seven more talking points that illustrate what I mean about the two different ways of looking at Lyons:

1) A national priority

The way forward: The review boldly states that ‘the government must provide long-term political leadership by making housing a national priority’. Housing will be championed by the prime minister, chancellor, communities secretary and ‘housing minister attending Cabinet’ plus a cross-departmental task force and other advisory bodies. Funding will be devolved to city and county regions.

The worry: The housing minister had ‘attending Cabinet status’ at the end of the last Labour government, a period when we were still under-achieving on new homes. If housing really is that much of a national priority, why not give it full Cabinet and departmental status? Once housing funding streams are consolidated into the economic development fund devolved to city and county regions, where is the guarantee they will actually spend it on housing?

The real test will come if (when?) there is a downturn in private housebuilding (perhaps when interest rates rise). One of the most important recommendations in the report is that: ‘Government in 2015 should provide confidence that in future, counter-cyclical demand side measures will be implemented when needed’. One of the biggest housebuilders, Bellway, said last week that 200,000 homes will be impossible without additional government investment in affordable homes.

2) Avoiding change for the sake of it

The way forward: The report argues that the government should avoid the short-lived initiatives that have plagued housing policy in the past and use primary legislation sparingly. That’s all good but there are also recommendations to reverse coalition tinkering: changing the definition of ‘affordable’ in the NPPF back to one that refers back to incomes; reversing the exemption from the zero carbon standard for small housing developments; and scrapping the proposed minimum threshold for affordable housing section 106;

The worry: Some of this runs counter to the review’s emphasis on supporting small builders. And what about two other coalition changes? The evidence so far indicates that the New Homes Bonus is a mechanism for transferring funds from North to South for homes that would have been built anyway and that the ‘reinvigorated’ right to buy is not producing anything like one for one replacement. Why timidly call for a review of them rather than be bold and scrap them too?

3) Are locals ready to be led?

The way forward: Plans for new housing will be ‘locally led’ but there would be new powers for the secretary of state to intervene. As things stand, a fifth of local authorities have still not even published a local plan let alone adopted one. The review proposes a range of measures to speed things up strategic housing market plans across administrative boundaries and a ‘right to grow’ into neighbouring authorities.

The worry: Some local authorities – think Milton Keynes, where the report was launched – are already promoting new homes. Others are doing the minimum possible. Action to ‘empower local communities to make their own decisions’ sounds great but what if that decision is ‘no thanks’? The local/national issue is already a problem under the existing system but could ‘the right to grow’ turn into political guerrilla warfare? How will South East councils feel about meeting London’s housing need? For a preview of that, see the way that Eric Pickles is already proclaiming the Labour threat to the green belt. 

4) Can local authorities cope?

The way forward: Local authorities would ‘play a much more energetic role’ in leading housing development and will have greater powers to act through housing growth areas, new homes corporations on land assembly and infrastructure. Where councils do not have the expertise they should share it between them.

The worry: ‘A strong leadership role from local government to intervene where the market does not provide by itself and a more energetic and active role in assembling land and driving development through partnership to deliver the type, number and quality of homes their communities need’ sounds great in theory. In practice though, local authority services have already been cut to the bone and more austerity is on the way. If councils are already struggling to deliver statutory responsibilities like adult social care, what will be left for planning and housing?

5) Borrowed time

The way forward: The report tells us that ‘as a nation we only consistently built 200,000 homes or more at times in the past when local authorities were building a good number of them’. It goes through the convincing arguments for allowing local authorities to borrow to invest for switching back from benefits to bricks and mortar. It does not follow through with any recommendations, although it’s not the Lyons Review’s fault that Ed Balls has ruled out extra borrowing for housing investment.

The worry: Labour’s caution is evidently driven by fear of giving ammunition to the Conservatives. However, different forms of borrowing are everywhere in the report. There will be Help to Build loan guarantees for small builders, loan guarantees for housing associations, equity loans for private landlords and equity investments of public land. It seems it is ok for councils to raise bonds for housing companies outside of the HRA. There are recommendations on ‘active management of the overall council housing borrowing headroom by the Treasury’ and an assessment of ‘the distribution of the receipts from right to buy’. As with existing policies like Help to Buy, any form of borrowing seems to be ok so long as it does not actually count as borrowing.

6) Mobilising housing associations

The way forward: Lyons says the government ‘will need to work actively’ with associations to mobilise surpluses and borrowing headroom on the balance sheets. This applies especially to the largest ones in London and the South East to leverage them to parts of the country where there isn’t the same ‘capacity and willingness to invest’. Nick Duxbury reports on this in more detail here. Lyons also proposes a ‘re-tasking’ of the Homes and Communities Agency. Responsibility for investment will transfer to the DCLG and then down to city and county regions, as the HCA becomes an investment aggregator and enabler for development in much the same way as the old English Partnerships.

The worry: This sort of talk, and mention of opportunities for mergers, has led to concerns at the National Housing Federation about housing association independence. As Alex Marsh argues, if the government takes intervention too far it could ultimately find that associations’ borrowing will be reclassified as public borrowing and if it pushes risk too far it could be storing up big problems for the future. The review considered moving regulation away from the HCA too but concluded that would ‘risk delay and uncertainty’. However, does an agency whose main focus would be commercial make for the best regulator of social housing? And what about the interests of tenants?

7) The future of social housing

The way forward: There is an unresolved dilemma at the heart of the report. While there is extensive discussion of the problems that affordable rent poses for landlord borrowing capacity, tenant affordability and the housing benefit bill, higher rents mean more homes for the same public subsidy. Lyons envisages that output by councils and housing associations will double by 2020 compared with 2013. With investment limited despite that vague promise of housing being ‘a priority’, will a Labour government really choose fewer homes with lower rents over more homes with higher rents? 

The worry: Labour’s caution on borrowing and investment and the target of 200,000 by 2020 indicate to me that we will see a development of what we have now rather than a break with it. When that’s combined with the universal credit, the end of direct payment and continuing austerity, what does that mean for the most vulnerable tenants and those who most need social housing? The tensions between landlords’ commercial focus and social mission can only intensify and the temptation to go for better-off tenants paying higher rents can only grow. That’s precisely why investment has to be a priority. 

Lyons made

Thu, 16 Oct 2014

The Lyons Review is the most significant report on new housing supply in years but it’s much more convincing on private sector housebuilding than social housing.

Lyons picks up where Barker left off on housing in 2004 (and on planning in 2007) but with two added bits of context. First, we’ve gone backwards in the last ten years: annual output is around half what we needed and the backlog of unmet need is mounting by the day. Second, any solutions have to operate under severe political and financial constraints.

So anyone reading the report whose priority is more social housing will come away disappointed with the recommendations for a future Labour government. There will be no change in the borrowing rules for council housing and no increase in the borrowing caps except for potential swapping between authorities. The case for continuing and increased grant subsidy is accepted but subject to overall constraints on public spending in which social housing will be an unspecified ‘priority’ for more money.

And anyone hoping for a shift in the political obsession with aspiration and ownership rather than homes will already have been disappointed by the advance coverage. The Labour Party’s spin has been all about first-time buyers and ‘homes for locals’ even though they get relatively minor mentions in the report itself.

However, as with the launch setting of Milton Keynes the report offers solid grounds for optimism too. Here at last is consensus on a long-term strategy in place of the short-term gimmicks we’ve seen ever since the financial crisis.

The military overtones in the report’s title – ‘Mobilising across the nation to build the homes our children need’ – are one indication of its comprehensive range. Another is the review’s acceptance that the main aim of the report – how to deliver Labour’s pledge of 200,000 homes a year by 2020 – is only a starting point in meeting need now estimated at 260,000 a year. The recommendations reach well beyond one parliament.

The mobilisation will have to be across all tenures and all types of housing organisation. Here’s the review’s delivery grid of who should be producing the 200,000 homes in England by 2020:

200k

What’s interesting here is that Lyons believes that volume housebuilders can only do so much. They will build half of the 200,000 homes in 2013 and increase output by 50 per cent on 2013 levels. However, the plan involves all the other actors – housing associations and local authorities, small builders, custom builders, private rental developers – at least doubling the number of homes they provide. That 200,000 target may be less than is needed but it will still be extremely challenging.

That’s why the meat of the report is a series of recommendations on wholesale institutional change designed to promote increased supply. At national level there would be:

  • A housing minister restored to attending Cabinet status and supported by a cross-government taskforce, independent advisory Housing Commission and national Housing Observatory.
  • An immediate statement of national targets for housebuilding moving beyond 200,000 and covering the next 20 years plus early publication of a housing and planning white paper and draft Bill
  • A ‘re-tasking’ of the Homes and Communities Agency as a national delivery agency with key roles as the sole agency for disposal of government land and assets and as a development partner and manager of government guarantees. Grant funding responsibilities would transfer to the DCLG and then be consolidated with economic development funds and devolved to city or county region authorities.

At a local level, the report recommends a series of changes on planning, with new powers for the secretary of state to intervene where there is persistent under-delivery, plus a series of new delivery mechanisms including:

  • Groups of local authorities co-operating on strategic housing market plans (these would also be the mechanism for the ‘right to grow’ for authorities that cannot expand at the moment)
  • Giving local authorities new powers and incentives to take a proactive approach to land assembly and development in Housing Growth Areas – either as individual authorities or working with others.
  • Allowing councils to create New Homes Corporations to respond to specific needs across local markets (these would be like urban development corporations but accountable to local communities)
  • Garden cities and garden suburbs brought forward by local communities and backed by a revamp of the New Towns legislation and Treasury guarantees and financial incentives to unlock development and infrastructure.

These changes at national and local government level would be matched by reforms to increase housebuilder capacity including ‘use it or lose it’ measures to ensure planning permissions are implemented, support for small firms and development of the construction skills base.

Crucially, there would be changes to the way the land market operates too. To ensure greater transparency, the Land Registry would open up information on land ownership and housebuilders and others would be required to register land option agreements, transactions and prices.

And many of the new institutional arrangements would be backed up by updated compulsory purchase legislation to unlock development. Where land is designated for a garden city or housing growth area, compensation would be based on current use value plus a premium to ensure a generous return to the landowner but ensuring that the infrastructure can be funded from the land value uplift.

These recommendations represent a growing consensus about the way forward and they come from people right across the housing and housebuilding world. However, political and financial constraints mean that the report is weaker when it moves away from market homes for sale.

Councils would get a key role in facilitating development in their areas, endorsement of innovative ideas like local housing companies and the prospect of limited flexibility on their borrowing caps. But there is but nothing yet that amounts to a rebirth of council housing let alone a change in the borrowing rules.

Housing associations are offered the prospect of new flexibility on how stock transfer homes are valued and potential new freedoms on rents. There would also be discussion of how to mobilise surpluses and headroom across the sector to unlock further investment.

And the report is also timid when it comes to other crucial issues for social housing. The right to buy would be reformed to enable ‘genuine one-for-one replacement’ and the government would assess the distribution of sales receipts as part of that. However, the policy itself would merely be left to an ‘early review’.

As for affordable rent, the report has extensive discussion of the long-term costs and the impact on housing association borrowing. It endorses analysis that bricks and mortar investment offers better value for money than higher spending on housing benefit. However, moving back to social rent would mean higher grant and fewer homes at a time when Lyons wants to double output. The report does not specify the mix of a future development programme and several times talks about ‘social and affordable rent’.  

The aim is to ‘move away from models of affordable housing that are solely grant dependant and shift our approach to public funding based on investment rather than consumption’. That’s a reference to mechanisms such as long-term loans and land but the report concludes:

‘The review recognises that constraints on public spending and debt mean that the scope for increased capital spend is likely to be severely limited in the immediate term. However it is clear that without further capital support there will be a limit to the amount councils and housing associations are able to do to meet the need for affordable homes. This is therefore an issue that government will need to return to in future and should ensure that investment in housing is better reflected as a priority for government in future decisions on public spending.’

Even if Labour wins in 2015 and even if it achieves its target of 200,000 homes by 2020, there is unfinished business. 

Lyons made

Thu, 16 Oct 2014

The Lyons Review is the most significant report on new housing supply in years but it’s much more convincing on private sector housebuilding than social housing.

Lyons picks up where Barker left off on housing in 2004 (and on planning in 2007) but with two added bits of context. First, we’ve gone backwards in the last ten years: annual output is around half what we needed and the backlog of unmet need is mounting by the day. Second, any solutions have to operate under severe political and financial constraints.

So anyone reading the report whose priority is more social housing will come away disappointed with the recommendations for a future Labour government. There will be no change in the borrowing rules for council housing and no increase in the borrowing caps except for potential swapping between authorities. The case for continuing and increased grant subsidy is accepted but subject to overall constraints on public spending in which social housing will be an unspecified ‘priority’ for more money.

And anyone hoping for a shift in the political obsession with aspiration and ownership rather than homes will already have been disappointed by the advance coverage. The Labour Party’s spin has been all about first-time buyers and ‘homes for locals’ even though they get relatively minor mentions in the report itself.

However, as with the launch setting of Milton Keynes the report offers solid grounds for optimism too. Here at last is consensus on a long-term strategy in place of the short-term gimmicks we’ve seen ever since the financial crisis.

The military overtones in the report’s title – ‘Mobilising across the nation to build the homes our children need’ – are one indication of its comprehensive range. Another is the review’s acceptance that the main aim of the report – how to deliver Labour’s pledge of 200,000 homes a year by 2020 – is only a starting point in meeting need now estimated at 260,000 a year. The recommendations reach well beyond one parliament.

The mobilisation will have to be across all tenures and all types of housing organisation. Here’s the review’s delivery grid of who should be producing the 200,000 homes in England by 2020:

200k

What’s interesting here is that Lyons believes that volume housebuilders can only do so much. They will build half of the 200,000 homes in 2013 and increase output by 50 per cent on 2013 levels. However, the plan involves all the other actors – housing associations and local authorities, small builders, custom builders, private rental developers – at least doubling the number of homes they provide. That 200,000 target may be less than is needed but it will still be extremely challenging.

That’s why the meat of the report is a series of recommendations on wholesale institutional change designed to promote increased supply. At national level there would be:

  • A housing minister restored to attending Cabinet status and supported by a cross-government taskforce, independent advisory Housing Commission and national Housing Observatory.
  • An immediate statement of national targets for housebuilding moving beyond 200,000 and covering the next 20 years plus early publication of a housing and planning white paper and draft Bill
  • A ‘re-tasking’ of the Homes and Communities Agency as a national delivery agency with key roles as the sole agency for disposal of government land and assets and as a development partner and manager of government guarantees. Grant funding responsibilities would transfer to the DCLG and then be consolidated with economic development funds and devolved to city or county region authorities.

At a local level, the report recommends a series of changes on planning, with new powers for the secretary of state to intervene where there is persistent under-delivery, plus a series of new delivery mechanisms including:

  • Groups of local authorities co-operating on strategic housing market plans (these would also be the mechanism for the ‘right to grow’ for authorities that cannot expand at the moment)
  • Giving local authorities new powers and incentives to take a proactive approach to land assembly and development in Housing Growth Areas – either as individual authorities or working with others.
  • Allowing councils to create New Homes Corporations to respond to specific needs across local markets (these would be like urban development corporations but accountable to local communities)
  • Garden cities and garden suburbs brought forward by local communities and backed by a revamp of the New Towns legislation and Treasury guarantees and financial incentives to unlock development and infrastructure.

These changes at national and local government level would be matched by reforms to increase housebuilder capacity including ‘use it or lose it’ measures to ensure planning permissions are implemented, support for small firms and development of the construction skills base.

Crucially, there would be changes to the way the land market operates too. To ensure greater transparency, the Land Registry would open up information on land ownership and housebuilders and others would be required to register land option agreements, transactions and prices.

And many of the new institutional arrangements would be backed up by updated compulsory purchase legislation to unlock development. Where land is designated for a garden city or housing growth area, compensation would be based on current use value plus a premium to ensure a generous return to the landowner but ensuring that the infrastructure can be funded from the land value uplift.

These recommendations represent a growing consensus about the way forward and they come from people right across the housing and housebuilding world. However, political and financial constraints mean that the report is weaker when it moves away from market homes for sale.

Councils would get a key role in facilitating development in their areas, endorsement of innovative ideas like local housing companies and the prospect of limited flexibility on their borrowing caps. But there is but nothing yet that amounts to a rebirth of council housing let alone a change in the borrowing rules.

Housing associations are offered the prospect of new flexibility on how stock transfer homes are valued and potential new freedoms on rents. There would also be discussion of how to mobilise surpluses and headroom across the sector to unlock further investment.

And the report is also timid when it comes to other crucial issues for social housing. The right to buy would be reformed to enable ‘genuine one-for-one replacement’ and the government would assess the distribution of sales receipts as part of that. However, the policy itself would merely be left to an ‘early review’.

As for affordable rent, the report has extensive discussion of the long-term costs and the impact on housing association borrowing. It endorses analysis that bricks and mortar investment offers better value for money than higher spending on housing benefit. However, moving back to social rent would mean higher grant and fewer homes at a time when Lyons wants to double output. The report does not specify the mix of a future development programme and several times talks about ‘social and affordable rent’.  

The aim is to ‘move away from models of affordable housing that are solely grant dependant and shift our approach to public funding based on investment rather than consumption’. That’s a reference to mechanisms such as long-term loans and land but the report concludes:

‘The review recognises that constraints on public spending and debt mean that the scope for increased capital spend is likely to be severely limited in the immediate term. However it is clear that without further capital support there will be a limit to the amount councils and housing associations are able to do to meet the need for affordable homes. This is therefore an issue that government will need to return to in future and should ensure that investment in housing is better reflected as a priority for government in future decisions on public spending.’

Even if Labour wins in 2015 and even if it achieves its target of 200,000 homes by 2020, there is unfinished business. 

Taxing problems

Tue, 14 Oct 2014

Could we invent a worse system of taxing housing than the one we have now?

As modest attempts at reform are made to howls of protest from those who stand to lose out, it’s worth standing back a moment to reflect on what we tax (and why) and what we don’t.

We have an annual tax on the value of all homes but the council tax in England and Scotland is based on property values as they were in 1991 with a top band of just £320,000. The owner or tenant of a modest semi in Wolverhampton can end up paying more than an oligarch with a multi-million pound home in Westminster. The system was designed to narrow the differences between the top and the bottom from the start but failure to uprate it in line with house prices has amplified the distortions.

We have the bedroom tax for social housing tenants on housing benefit who are judged to be under-occupying their homes but people living on their own can still claim a 25 per cent discount from the council tax.

Meanwhile the hundreds of billions of pounds worth of unearned wealth that existing owners have locked up in their homes are exempt from capital gains tax. True, the exemption only applies to principal residences but, as the MPs’ expenses scandal showed, there are all kinds of ways of avoiding it if you have a second home or a buy-to-let investment. The exemption also encourages people to buy more housing than they need given that all other forms of investment are subject to CGT.

Instead we impose stamp duty on the buyers of homes. This is the sort of transaction tax that economists hate because it is effectively a tax on labour mobility. That’s complicated even more by the current slab structure, which means a huge increase in duty on the whole sale once homes are worth above £250,000, £500,000 and so on. However, stamp duty has become a huge earner for the Treasury, with receipts rising forecast at £12.7 billion in 2014/15, and it is hard to avoid now that loopholes on ownership through companies have been closed.

We rightly exempt new homes from VAT but we continue to charge it at 20 per cent on most conversions and renovations of existing homes. This is a major barrier to bringing empty homes back into use and to increasing the space in existing homes.

Then we have section 106 requirements and the community infrastructure levy. These are presented by housebuilders as taxes on new homes but in reality they are imperfect taxes on land value uplift. Cutting ‘red tape’ by cutting the requirement for new homes may make some sites viable at the margin but the aggregate effect is simply to increase profits for housebuilders on land they already own and to increase the price they will pay for land in future.

And what about the windfall profits driven by major projects like Crossrail? Anyone lucky enough to own a home close to a station on a new train line will make substantial gains that are entirely driven by public investment. Under our current system they are also tax-free.

As I’ve blogged before, we can at least console ourselves that we did manage to get rid of the most absurd example of housing taxation of all. Mortgage tax relief, a subsidy that fed directly into increased house prices, was finally abolished in 2000. However, it had survived for more than 30 years after the tax it was relieving (schedule A income tax on the imputed rental value of a home) was abolished.

And what are all these taxes for? Raising money for the Treasury and for local services and community infrastructure are of course important aims. However, they seem to come a long way ahead of promoting a better housing system or reducing house price volatility or fostering local democracy.

However, the debate raging about property tax reforms that are already on the table shows the opposition that any proposal for reform will face.

Labour and Lib Dem plans for a mansion tax on homes worth over £2 million in England have faced a predictable attack from upmarket estate agents but there also seem to be growing doubts from MPs and mayoral candidates worried about the number of people who will be affected in London. The Labour version of the mansion tax involves an annual charge whereas the Lib Dems have been dropping hints about creating extra council tax bands instead. However, we’ve yet to see much detail on who would pay and who would be exempt and the relationship between a mansion tax and inheritance tax and council tax.

In Scotland, meanwhile, the government has just published plans to replace stamp duty with a land and buildings transaction tax. This would replace the slab structure with a marginal and more progressive one that the Scottish government says will mean that 90 per cent of buyers will be better off or no worse off. Given that the change will be revenue neutral, buyers of more expensive homes will pay significantly more.

A furious assault backlash from vested interests peaked in reports this morning that the new tax will hit the ‘squeezed middle’. Estate agents normally exaggerate the value of what they are selling so that tiny flats become bijoux and wrecks ‘would benefit from modernisation’. In this context, the language works the other way around so that four-bed detached homes in Morningside and The Grange (two of the most exclusive parts of Edinburgh) become ‘modest family homes’.

The reform seems set to create a fairer system but it still has the disadvantages inherent in a transaction tax. For more on the issues involved see this blog by Mark Stephens, who argues that the critics are talking rot but the real test will come with the reform of council tax, and this by Ken Gibb, who highlights the precedent that it will set for future devolution.  

Kate Barker’s new book Housing: Where’s the Plan (full review to come soon) includes a great summary of how we’ve arrived at such an imperfect system and an analysis of why the options for reform are so problematic. In particular, she recounts the history of attempts to tax land value uplift and how they have been frustrated by landowners’ ability to sit tight and wait for a change of policy from a new government. Her own favoured solution is to extend capital gains tax to principal residences.

The most comprehensive set of proposals for reform came from the Mirrlees Review for the Institute of Fiscal Studies in 2011. Recommendations included a housing services tax, a land value tax and reform of tax on rented housing to create a level playing field with owner-occupation.

With austerity set to continue for the rest of this decade, no government will be able to ignore housing as a source of new revenue. Squeezing more from the current dysfunctional system may avoid controversy but at the price of distorting our housing system even further. All of the options for reform present their own problems but any of them would be an improvement on what we have now. 

Taxing problems

Tue, 14 Oct 2014

Could we invent a worse system of taxing housing than the one we have now?

As modest attempts at reform are made to howls of protest from those who stand to lose out, it’s worth standing back a moment to reflect on what we tax (and why) and what we don’t.

We have an annual tax on the value of all homes but the council tax in England and Scotland is based on property values as they were in 1991 with a top band of just £320,000. The owner or tenant of a modest semi in Wolverhampton can end up paying more than an oligarch with a multi-million pound home in Westminster. The system was designed to narrow the differences between the top and the bottom from the start but failure to uprate it in line with house prices has amplified the distortions.

We have the bedroom tax for social housing tenants on housing benefit who are judged to be under-occupying their homes but people living on their own can still claim a 25 per cent discount from the council tax.

Meanwhile the hundreds of billions of pounds worth of unearned wealth that existing owners have locked up in their homes are exempt from capital gains tax. True, the exemption only applies to principal residences but, as the MPs’ expenses scandal showed, there are all kinds of ways of avoiding it if you have a second home or a buy-to-let investment. The exemption also encourages people to buy more housing than they need given that all other forms of investment are subject to CGT.

Instead we impose stamp duty on the buyers of homes. This is the sort of transaction tax that economists hate because it is effectively a tax on labour mobility. That’s complicated even more by the current slab structure, which means a huge increase in duty on the whole sale once homes are worth above £250,000, £500,000 and so on. However, stamp duty has become a huge earner for the Treasury, with receipts rising forecast at £12.7 billion in 2014/15, and it is hard to avoid now that loopholes on ownership through companies have been closed.

We rightly exempt new homes from VAT but we continue to charge it at 20 per cent on most conversions and renovations of existing homes. This is a major barrier to bringing empty homes back into use and to increasing the space in existing homes.

Then we have section 106 requirements and the community infrastructure levy. These are presented by housebuilders as taxes on new homes but in reality they are imperfect taxes on land value uplift. Cutting ‘red tape’ by cutting the requirement for new homes may make some sites viable at the margin but the aggregate effect is simply to increase profits for housebuilders on land they already own and to increase the price they will pay for land in future.

And what about the windfall profits driven by major projects like Crossrail? Anyone lucky enough to own a home close to a station on a new train line will make substantial gains that are entirely driven by public investment. Under our current system they are also tax-free.

As I’ve blogged before, we can at least console ourselves that we did manage to get rid of the most absurd example of housing taxation of all. Mortgage tax relief, a subsidy that fed directly into increased house prices, was finally abolished in 2000. However, it had survived for more than 30 years after the tax it was relieving (schedule A income tax on the imputed rental value of a home) was abolished.

And what are all these taxes for? Raising money for the Treasury and for local services and community infrastructure are of course important aims. However, they seem to come a long way ahead of promoting a better housing system or reducing house price volatility or fostering local democracy.

However, the debate raging about property tax reforms that are already on the table shows the opposition that any proposal for reform will face.

Labour and Lib Dem plans for a mansion tax on homes worth over £2 million in England have faced a predictable attack from upmarket estate agents but there also seem to be growing doubts from MPs and mayoral candidates worried about the number of people who will be affected in London. The Labour version of the mansion tax involves an annual charge whereas the Lib Dems have been dropping hints about creating extra council tax bands instead. However, we’ve yet to see much detail on who would pay and who would be exempt and the relationship between a mansion tax and inheritance tax and council tax.

In Scotland, meanwhile, the government has just published plans to replace stamp duty with a land and buildings transaction tax. This would replace the slab structure with a marginal and more progressive one that the Scottish government says will mean that 90 per cent of buyers will be better off or no worse off. Given that the change will be revenue neutral, buyers of more expensive homes will pay significantly more.

A furious assault backlash from vested interests peaked in reports this morning that the new tax will hit the ‘squeezed middle’. Estate agents normally exaggerate the value of what they are selling so that tiny flats become bijoux and wrecks ‘would benefit from modernisation’. In this context, the language works the other way around so that four-bed detached homes in Morningside and The Grange (two of the most exclusive parts of Edinburgh) become ‘modest family homes’.

The reform seems set to create a fairer system but it still has the disadvantages inherent in a transaction tax. For more on the issues involved see this blog by Mark Stephens, who argues that the critics are talking rot but the real test will come with the reform of council tax, and this by Ken Gibb, who highlights the precedent that it will set for future devolution.  

Kate Barker’s new book Housing: Where’s the Plan (full review to come soon) includes a great summary of how we’ve arrived at such an imperfect system and an analysis of why the options for reform are so problematic. In particular, she recounts the history of attempts to tax land value uplift and how they have been frustrated by landowners’ ability to sit tight and wait for a change of policy from a new government. Her own favoured solution is to extend capital gains tax to principal residences.

The most comprehensive set of proposals for reform came from the Mirrlees Review for the Institute of Fiscal Studies in 2011. Recommendations included a housing services tax, a land value tax and reform of tax on rented housing to create a level playing field with owner-occupation.

With austerity set to continue for the rest of this decade, no government will be able to ignore housing as a source of new revenue. Squeezing more from the current dysfunctional system may avoid controversy but at the price of distorting our housing system even further. All of the options for reform present their own problems but any of them would be an improvement on what we have now. 

The H word

Thu, 9 Oct 2014

Nick Clegg’s failure to mention housing in his leader’s speech feels like a suitably downbeat conclusion to the final party conference season before the election.

As I blogged earlier in the week, on paper the Lib Dems have the best housing policies of any of the mainstream parties. A target of 300,000 homes a year, a housing investment bank and powers for local authorities to suspend the right to buy will please most people reading this. A succession of MPs, including all three of Clegg’s potential successors, made all the right noises about housing on the conference floor and in countless fringe meetings.

So does it matter that Clegg failed to use the H word? On one level, no: if Clegg had added a paragraph saying how building new homes is a priority and supporting first-time buyers a passion it would have told us nothing more than we already know about the party’s policies. Earlier in the conference, Clegg did make a significant housing announcement with support for ten new garden cities. And in any case both he and the Lib Dems may be obliterated into irrelevance after the election.

On a more basic one, yes it does. This was not just the last party conference season before the election, it was also one in which mentioning or not mentioning something in a leader’s speech took on an extra significance. Ed Miliband forgot to talk about the deficit and it confirmed what many people thought about him and Labour. David Cameron said nothing about climate change and it made everyone remember the phony PR man of Hug a Husky.

I wouldn’t put Clegg – or housing – in the same bracket. However, given what happened at the Labour conference, it seems a reasonable bet that his advisers will have pored over his speech for anything important that was missing.  There were plenty of opportunities for Clegg to make a brief link between housing and the ‘opportunity for everyone’ theme of his speech. Draw your own conclusions.

And not just about the Lib Dems. In blogs in the last couple of weeks I’ve noted a lack of focus from Labour on housing and gimmicks and more cuts from the Conservatives.

At much the same time as Clegg was speaking, Eric Pickles, the Cabinet minister theoretically responsible for housing, was thanking housebuilders ‘for your hard work in getting Britain building again’ and claiming the ‘sharpest increase in private building for 40 years’. That’s certainly an upbeat way of presenting the recovery from the lowest rate of housebuilding in peacetime for 90 years but it doesn’t change the fact that England is still building half the new homes needed.

In a blog yesterday, David Orr of the National Housing Federation summed up his sense of unease and frustration about the conference season as a whole. Housing fringe meetings were packed and 84 Homes for Britain events were held but he concludes that ‘the penny hasn’t dropped’ about the housing crisis and that the general assumption was that we have time when we don’t:

‘The overall sense was that in housing, as well as many other areas, the thing really lacking wasn’t just that critical sense of urgency. It felt like a lack of leadership, not just from those who are the leaders of the parties but from the parties collectively. If we are to end the housing crisis in a generation and if we are to be able to house our children (and what a shameful reality it is that we might not) we need our politicians to do more than be in power. We need them to lead.’

Grainia Long of the Chartered Institute of Housing was more optimistic that housing is being taken seriously and that politicians may finally be giving it the priority it deserves, ‘but I’m still not sure they really grasp the urgency of the situation’.

Perhaps in an election year this is inevitable. All the campaigning about the crisis has increased the salience of housing (or at least of new homes) as an election issue but not by enough to affect the result. Power is what matters.

But what then? The conference season suggests that the best we can hope for is a crisis that gets worse more slowly. At worst, the divide between housing haves and have-nots will continue to grow and so will the deficit in new homes. The effects of this will be felt by individuals, by communities and by the economy as a whole.

Maybe the clue is in the very notion of a conference season and an electoral cycle. In an editorial last weekend, The Observer concluded that our housing problem can be fixed but the politics of reform are toxic:

‘To be credible, politicians need to demonstrate they are willing to pursue reform with deeply unpopular consequences, not to mention a personal financial hit.’

There still seems to be a collective unwillingness to recognise that private housebuilders can only do so much, that the land market needs radical reform and that ‘good’ borrowing for social housing now could produce homes that generate a return and a long-term reduction in the deficit. Or that something as important as housing needs more than a weak sponsoring department with a revolving door for ministers and a semi-detached secretary of state. 

There are politicians in all three main parties who know this. Danny Alexander’s startling revelation at the Lib Dem conference that the Treasury has been considering a role as a direct commissioner of new homes shows that some in the most powerful department in government are thinking along the right lines. So too was Labour when it commissioned the Lyons review of how to get to 200,000 new homes by 2020. Hopefully the party will act on the report’s recommendations when it is finally published.

However, ahead of what looks seems set to be another close election, where are the votes in the H word? The housing crisis requires long-term solutions that have short-term costs and may only pay off once the government of the day has lost power. 

The H word

Thu, 9 Oct 2014

Nick Clegg’s failure to mention housing in his leader’s speech feels like a suitably downbeat conclusion to the final party conference season before the election.

As I blogged earlier in the week, on paper the Lib Dems have the best housing policies of any of the mainstream parties. A target of 300,000 homes a year, a housing investment bank and powers for local authorities to suspend the right to buy will please most people reading this. A succession of MPs, including all three of Clegg’s potential successors, made all the right noises about housing on the conference floor and in countless fringe meetings.

So does it matter that Clegg failed to use the H word? On one level, no: if Clegg had added a paragraph saying how building new homes is a priority and supporting first-time buyers a passion it would have told us nothing more than we already know about the party’s policies. Earlier in the conference, Clegg did make a significant housing announcement with support for ten new garden cities. And in any case both he and the Lib Dems may be obliterated into irrelevance after the election.

On a more basic one, yes it does. This was not just the last party conference season before the election, it was also one in which mentioning or not mentioning something in a leader’s speech took on an extra significance. Ed Miliband forgot to talk about the deficit and it confirmed what many people thought about him and Labour. David Cameron said nothing about climate change and it made everyone remember the phony PR man of Hug a Husky.

I wouldn’t put Clegg – or housing – in the same bracket. However, given what happened at the Labour conference, it seems a reasonable bet that his advisers will have pored over his speech for anything important that was missing.  There were plenty of opportunities for Clegg to make a brief link between housing and the ‘opportunity for everyone’ theme of his speech. Draw your own conclusions.

And not just about the Lib Dems. In blogs in the last couple of weeks I’ve noted a lack of focus from Labour on housing and gimmicks and more cuts from the Conservatives.

At much the same time as Clegg was speaking, Eric Pickles, the Cabinet minister theoretically responsible for housing, was thanking housebuilders ‘for your hard work in getting Britain building again’ and claiming the ‘sharpest increase in private building for 40 years’. That’s certainly an upbeat way of presenting the recovery from the lowest rate of housebuilding in peacetime for 90 years but it doesn’t change the fact that England is still building half the new homes needed.

In a blog yesterday, David Orr of the National Housing Federation summed up his sense of unease and frustration about the conference season as a whole. Housing fringe meetings were packed and 84 Homes for Britain events were held but he concludes that ‘the penny hasn’t dropped’ about the housing crisis and that the general assumption was that we have time when we don’t:

‘The overall sense was that in housing, as well as many other areas, the thing really lacking wasn’t just that critical sense of urgency. It felt like a lack of leadership, not just from those who are the leaders of the parties but from the parties collectively. If we are to end the housing crisis in a generation and if we are to be able to house our children (and what a shameful reality it is that we might not) we need our politicians to do more than be in power. We need them to lead.’

Grainia Long of the Chartered Institute of Housing was more optimistic that housing is being taken seriously and that politicians may finally be giving it the priority it deserves, ‘but I’m still not sure they really grasp the urgency of the situation’.

Perhaps in an election year this is inevitable. All the campaigning about the crisis has increased the salience of housing (or at least of new homes) as an election issue but not by enough to affect the result. Power is what matters.

But what then? The conference season suggests that the best we can hope for is a crisis that gets worse more slowly. At worst, the divide between housing haves and have-nots will continue to grow and so will the deficit in new homes. The effects of this will be felt by individuals, by communities and by the economy as a whole.

Maybe the clue is in the very notion of a conference season and an electoral cycle. In an editorial last weekend, The Observer concluded that our housing problem can be fixed but the politics of reform are toxic:

‘To be credible, politicians need to demonstrate they are willing to pursue reform with deeply unpopular consequences, not to mention a personal financial hit.’

There still seems to be a collective unwillingness to recognise that private housebuilders can only do so much, that the land market needs radical reform and that ‘good’ borrowing for social housing now could produce homes that generate a return and a long-term reduction in the deficit. Or that something as important as housing needs more than a weak sponsoring department with a revolving door for ministers and a semi-detached secretary of state. 

There are politicians in all three main parties who know this. Danny Alexander’s startling revelation at the Lib Dem conference that the Treasury has been considering a role as a direct commissioner of new homes shows that some in the most powerful department in government are thinking along the right lines. So too was Labour when it commissioned the Lyons review of how to get to 200,000 new homes by 2020. Hopefully the party will act on the report’s recommendations when it is finally published.

However, ahead of what looks seems set to be another close election, where are the votes in the H word? The housing crisis requires long-term solutions that have short-term costs and may only pay off once the government of the day has lost power. 

Paper tigers?

Tue, 7 Oct 2014

As so often before the Lib Dems look like going into the next election with the best housing policies. On paper anyway.   

Admittedly the competition is not high given the caution from Labour and divisiveness and hints about the end of grant from the Conservatives. However, the policies emerging from the Lib Dem conference in Glasgow look like they’ve been tested on a focus group consisting of people who care about housing.

This morning the party passed a motion calling for 300,000 homes a year, a new deal for renters, a housing investment bank and new powers for local authorities and housing associations to build plus measures to secure land at lower prices and remove barriers to house price stability. That was promptly amended to include a new power for local authorities to suspend the right to buy.

The rhetoric from Lib Dem MPs was good too. Tim Farron called on the party to have the courage to build more homes: ‘There are plenty of votes in opposing new homes but there are more votes still – and there is honour – in delivering them.’ This morning’s papers were briefed on Nick Clegg’s support for ten new garden cities, including five along a new rail link between Oxford and Cambridge.

Most promisingly of all, in two speeches this morning Vince Cable not only attacked Tory plans for yet more spending cuts and warned of the inequalities caused by the housing crisis but also supported higher government borrowing for infrastructure and housing:

‘When interest rates are so low, borrowing for investment is a no brainer and is nothing to do with deficit reduction. Of course we need to protect the next generation from too much public (as well as private) debt, but the next generation would certainly not thank us for a legacy of underinvestment, over-stretched infrastructure and unaffordable homes.’

With five years of continuing austerity in prospect whoever wins the election, that seems an essential precondition for increased investment in new homes that will reduce spending on housing benefit over the longer term. It’s a policy that senior Labour politicians seemed reluctant to endorse explicitly last month despite previous positive signals.

So far, so good except that there are reasons why I said the Lib Dem policies look the best on paper. The traditional one – that the party has no chance of power and it doesn’t matter what it says – seems less relevant now in spite the current state of the opinion polls.

The new one is what the party has actually done with power. To the obvious charge sheet of colluding with the bedroom tax and collaborating with other welfare reforms, a critic might add rolling over to have its tummy tickled by Grant Shapps. One Lib Dem council leader speaking this morning accused the party of ‘falling in behind a Tory housing minister determined to marginalise social housing’ while a London councillor raised the latest mockery of ‘affordable’ rent. 

Policies like affordable rent, the removal of security of tenure and allowing the discharge of the homelessness duty into an unregulated private rented sector definitely did not feature in the last Lib Dem manifesto and weren’t in the coalition agreement either. And just as Lib Dem ministers seem unable to stop pleading fairness to private tenants as a justification for the unjustifiable bedroom tax, so Tim Farron this morning was unable to resist boasting that the coalition has built more ‘social’ housing than Labour.    

Lib Dem supporters can point to some minor successes on housing policy, a more substantial list of Tory policies they’ve blocked and to the recent sharpening of criticism of their coalition partners. However, the party’s problems date back to decisions taken right at the start of the coalition. Accepting George Osborne’s prescription on the deficit made them prisoners of a long-term economic plan they now say is designed to destroy the welfare state. And traditional Lib Dem enthusiasm for ‘localism’ allowed the Conservatives to undermine national rights for social tenants and homeless people and strengthen the hand of local objectors to new homes.

It seems a reasonable assumption that the party will play its hand better in any future coalition negotiations. However, will policies on housing be red lined or still be pre-determined by bigger decisions elsewhere? Cable’s speech and suggestions by Danny Alexander of a direct Treasury role as a commisioner of housing offer grounds for hope. However, the reports of Clegg’s garden cities this morning says that they would follow construction of the new rail line that ‘would be provided once the structural deficit has been eliminated by 2018’. That seems to accept George Osborne’s timetable: why not start straightaway and fund the rail line from the uplift in development values or from borrowing instead?

And all that is before we get to that target of 300,000 new homes a year. Labour’s Lyons Commission is still wrestling with the problem of how to achieve only 200,000 a year by 2020. The Lib Dems are rightly more ambitious and their policies look good on paper but can they really deliver?  

Paper tigers?

Tue, 7 Oct 2014

As so often before the Lib Dems look like going into the next election with the best housing policies. On paper anyway.   

Admittedly the competition is not high given the caution from Labour and divisiveness and hints about the end of grant from the Conservatives. However, the policies emerging from the Lib Dem conference in Glasgow look like they’ve been tested on a focus group consisting of people who care about housing.

This morning the party passed a motion calling for 300,000 homes a year, a new deal for renters, a housing investment bank and new powers for local authorities and housing associations to build plus measures to secure land at lower prices and remove barriers to house price stability. That was promptly amended to include a new power for local authorities to suspend the right to buy.

The rhetoric from Lib Dem MPs was good too. Tim Farron called on the party to have the courage to build more homes: ‘There are plenty of votes in opposing new homes but there are more votes still – and there is honour – in delivering them.’ This morning’s papers were briefed on Nick Clegg’s support for ten new garden cities, including five along a new rail link between Oxford and Cambridge.

Most promisingly of all, in two speeches this morning Vince Cable not only attacked Tory plans for yet more spending cuts and warned of the inequalities caused by the housing crisis but also supported higher government borrowing for infrastructure and housing:

‘When interest rates are so low, borrowing for investment is a no brainer and is nothing to do with deficit reduction. Of course we need to protect the next generation from too much public (as well as private) debt, but the next generation would certainly not thank us for a legacy of underinvestment, over-stretched infrastructure and unaffordable homes.’

With five years of continuing austerity in prospect whoever wins the election, that seems an essential precondition for increased investment in new homes that will reduce spending on housing benefit over the longer term. It’s a policy that senior Labour politicians seemed reluctant to endorse explicitly last month despite previous positive signals.

So far, so good except that there are reasons why I said the Lib Dem policies look the best on paper. The traditional one – that the party has no chance of power and it doesn’t matter what it says – seems less relevant now in spite the current state of the opinion polls.

The new one is what the party has actually done with power. To the obvious charge sheet of colluding with the bedroom tax and collaborating with other welfare reforms, a critic might add rolling over to have its tummy tickled by Grant Shapps. One Lib Dem council leader speaking this morning accused the party of ‘falling in behind a Tory housing minister determined to marginalise social housing’ while a London councillor raised the latest mockery of ‘affordable’ rent. 

Policies like affordable rent, the removal of security of tenure and allowing the discharge of the homelessness duty into an unregulated private rented sector definitely did not feature in the last Lib Dem manifesto and weren’t in the coalition agreement either. And just as Lib Dem ministers seem unable to stop pleading fairness to private tenants as a justification for the unjustifiable bedroom tax, so Tim Farron this morning was unable to resist boasting that the coalition has built more ‘social’ housing than Labour.    

Lib Dem supporters can point to some minor successes on housing policy, a more substantial list of Tory policies they’ve blocked and to the recent sharpening of criticism of their coalition partners. However, the party’s problems date back to decisions taken right at the start of the coalition. Accepting George Osborne’s prescription on the deficit made them prisoners of a long-term economic plan they now say is designed to destroy the welfare state. And traditional Lib Dem enthusiasm for ‘localism’ allowed the Conservatives to undermine national rights for social tenants and homeless people and strengthen the hand of local objectors to new homes.

It seems a reasonable assumption that the party will play its hand better in any future coalition negotiations. However, will policies on housing be red lined or still be pre-determined by bigger decisions elsewhere? Cable’s speech and suggestions by Danny Alexander of a direct Treasury role as a commisioner of housing offer grounds for hope. However, the reports of Clegg’s garden cities this morning says that they would follow construction of the new rail line that ‘would be provided once the structural deficit has been eliminated by 2018’. That seems to accept George Osborne’s timetable: why not start straightaway and fund the rail line from the uplift in development values or from borrowing instead?

And all that is before we get to that target of 300,000 new homes a year. Labour’s Lyons Commission is still wrestling with the problem of how to achieve only 200,000 a year by 2020. The Lib Dems are rightly more ambitious and their policies look good on paper but can they really deliver?  

Starter's orders

Fri, 3 Oct 2014

Given the effort that goes in to honing a conference speech to get the messages exactly right, and the fact that the prime minister was reading from an autocue rather than speaking without notes like Ed Miliband, it seems safe to assume that he meant exactly what he said. Here’s what he told the Conservative conference this week:

‘For those wanting to buy a home, yes – we will help you get on that housing ladder…but only if we take on the vested interests, and build more homes – however hard that is.’

It was part of a section near the start of the speech where he offered his audience a series of choices about taxes, jobs and pensions before he concluded: ‘It’s pretty simple really: a good job, a nice home, more money at the end of the month, a decent education for your children, a safe and secure retirement.’

The equivalent of the housing ‘vested interests’ was ‘only if’ we stick to the long-term economic plan, keep on cutting the deficit and work a bit longer and save a bit more. And Cameron offered a very similar formula for education: ‘but only if we keep taking on everyone who gets in the way of high standards’.

Except that it’s much clearer who he thinks is getting in the way here (teachers and the educational establishment) than with new homes. Just who are the vested interests?

Some clues came later on in the specific section about home ownership:

‘In a country that everyone is proud to call home, you should be able to buy a home – if you’re willing to save. It shouldn’t be some impossible dream. But we inherited a situation where it was. Young people watched Location, Location, Location not as a reality show – but as fantasy.

‘We couldn’t solve this housing crisis without some difficult decisions. The planning system was stuck in the mud – so we reformed it…and last year, nearly a quarter of a million houses were given planning permission. Young people needed massive deposits they just couldn’t afford…so we brought in Help to Buy. Of course there were those who criticised it…usually speaking from the comfort of the home they’d bought years ago. But let’s see what actually happened. They said Help to Buy would just help people in London…but 94% of buyers live outside the capital. They said it would help people with houses already…but four-fifths are first-time buyers. They said it would cause a housing bubble…but as the Bank of England has said, it hasn’t.’

You get the idea. The housing crisis is all the last government’s fault. Even more audaciously, this government has solved it. The ‘vested interests’ seem to be the people who criticised it ‘usually from the comfort of they’d bought years ago’. Never mind the fact that many of the critics of Help to Buy were precisely the priced-out renters that Cameron says he it is helping or the fact that the increase in house prices since it was launched has benefitted sellers rather than buyers. Cameron went on:

‘So here’s our renewed commitment to first-time buyers: if you’re prepared to work and save, we will help you get a place of your own. This conference, we have announced a landmark new Policy. It’s called Starter Homes. We’re going to build 100,000 new homes – and they’ll be 20% cheaper than normal. But here’s the crucial part. Buy-to-let landlords won’t be able to snap them up. Wealthy foreigners won’t be able to buy them. Just first-time buyers under the age of 40. Homes built for you, homes made for you – the Conservative Party, once again, the party of home ownership in our country.’

Given that he says it is the ‘crucial part’, Cameron seems to be implicitly accepting that ‘wealthy foreigners’ and ‘buy-to-let landlords’ are the vested interests stopping first-time buyers getting on to the ladder. That’s a much tougher message than we’ve heard from Conservative politicians before. Before the speech Cameron also said that the scheme will prevent homes being ‘flipped around in a quick sale’, perhaps suggesting that some sort of covenant will be involved.

From the detail we have so far, we know that the starter homes will be sold at 20% less than the market rate and that this will be achieved by building on brownfield land and relaxing requirements on affordable housing and community infrastructure and zero carbon.

So here’s vested interest number two: the bureaucrats who’ve imposed the ‘red tape’ that blocks cheaper homes. This is very much the view of the major housebuilders and the coalition has already granted them billions of pounds worth of concessions while asking for next to nothing in return. The crucial point here is what is meant by brownfield land: contaminated sites that are usually more, rather than less, expensive to develop, or industrial land that would not normally get residential planning permission and will therefore be cheaper? We could end up with cheap boxes built on old industrial estates on the edges of towns and cities or on precious public land so that they are instead of, rather than additional to, existing plans for affordable homes.

Either way it looks like another very nice little earner for the housebuilders that many people would identify as one of the biggest vested interests of all. The very same housebuilders who have relied on advance sales to overseas and buy-to-let investors.

So who else could Cameron mean? In his conference speech two years ago he was much more explicit about this:

‘There are those who say “yes of course we need more housing”…but “no” to every development - and not in my backyard. Look - it’s OK for my generation. Many of us have got on the ladder. But you know the average age that someone buys their first home today, without any help for their parents? 33 years old. We are the party of home ownership - we cannot let this carry on.’

Given that many of the nimbys who are already on the housing ladder are members of his own party and were in the audience, that was quite an important statement. However, seven months out from a general election and with Nick Boles no longer blazing a trail on planning, the language has been toned down in Cameron’s speech this time. The rhetorical commitment to new homes may stil be there but ‘vested interests’ was ambiguous – and deliberately so.

Communities secretary Eric Pickles told the conference earlier in the week that: ‘The thing I’m most proud of – and it’s been the most difficult to deliver – is what we’ve achieved in housing.’

Labour ‘gave us regional spatial strategies, top-down planning, ticky-tacky boxes with no parking or garages, and no room for our kids to play’ and housebuilding at its lowest level in peacetime since the 1920s. The coalition has delivered affordable housing, the reinvigorated Right to Buy, Help to Buy and many more triumphs.

Except of course that the coalition has been in power for more than four years. Housebuilding fell even lower than under Labour and is still barely half what is needed. If any homes look likely to be ticky-tacky boxes it’s the starter homes that will be built under Cameron’s new plan. And for millions of renters a world where everyone ‘should be able to buy a home – if you’re willing to save’ looks as impossible a dream as ever. 

Perhaps the search for vested interests should start with politicians who make premature claims that they have solved the housing crisis. 

Starter's orders

Fri, 3 Oct 2014

Given the effort that goes in to honing a conference speech to get the messages exactly right, and the fact that the prime minister was reading from an autocue rather than speaking without notes like Ed Miliband, it seems safe to assume that he meant exactly what he said. Here’s what he told the Conservative conference this week:

‘For those wanting to buy a home, yes – we will help you get on that housing ladder…but only if we take on the vested interests, and build more homes – however hard that is.’

It was part of a section near the start of the speech where he offered his audience a series of choices about taxes, jobs and pensions before he concluded: ‘It’s pretty simple really: a good job, a nice home, more money at the end of the month, a decent education for your children, a safe and secure retirement.’

The equivalent of the housing ‘vested interests’ was ‘only if’ we stick to the long-term economic plan, keep on cutting the deficit and work a bit longer and save a bit more. And Cameron offered a very similar formula for education: ‘but only if we keep taking on everyone who gets in the way of high standards’.

Except that it’s much clearer who he thinks is getting in the way here (teachers and the educational establishment) than with new homes. Just who are the vested interests?

Some clues came later on in the specific section about home ownership:

‘In a country that everyone is proud to call home, you should be able to buy a home – if you’re willing to save. It shouldn’t be some impossible dream. But we inherited a situation where it was. Young people watched Location, Location, Location not as a reality show – but as fantasy.

‘We couldn’t solve this housing crisis without some difficult decisions. The planning system was stuck in the mud – so we reformed it…and last year, nearly a quarter of a million houses were given planning permission. Young people needed massive deposits they just couldn’t afford…so we brought in Help to Buy. Of course there were those who criticised it…usually speaking from the comfort of the home they’d bought years ago. But let’s see what actually happened. They said Help to Buy would just help people in London…but 94% of buyers live outside the capital. They said it would help people with houses already…but four-fifths are first-time buyers. They said it would cause a housing bubble…but as the Bank of England has said, it hasn’t.’

You get the idea. The housing crisis is all the last government’s fault. Even more audaciously, this government has solved it. The ‘vested interests’ seem to be the people who criticised it ‘usually from the comfort of they’d bought years ago’. Never mind the fact that many of the critics of Help to Buy were precisely the priced-out renters that Cameron says he it is helping or the fact that the increase in house prices since it was launched has benefitted sellers rather than buyers. Cameron went on:

‘So here’s our renewed commitment to first-time buyers: if you’re prepared to work and save, we will help you get a place of your own. This conference, we have announced a landmark new Policy. It’s called Starter Homes. We’re going to build 100,000 new homes – and they’ll be 20% cheaper than normal. But here’s the crucial part. Buy-to-let landlords won’t be able to snap them up. Wealthy foreigners won’t be able to buy them. Just first-time buyers under the age of 40. Homes built for you, homes made for you – the Conservative Party, once again, the party of home ownership in our country.’

Given that he says it is the ‘crucial part’, Cameron seems to be implicitly accepting that ‘wealthy foreigners’ and ‘buy-to-let landlords’ are the vested interests stopping first-time buyers getting on to the ladder. That’s a much tougher message than we’ve heard from Conservative politicians before. Before the speech Cameron also said that the scheme will prevent homes being ‘flipped around in a quick sale’, perhaps suggesting that some sort of covenant will be involved.

From the detail we have so far, we know that the starter homes will be sold at 20% less than the market rate and that this will be achieved by building on brownfield land and relaxing requirements on affordable housing and community infrastructure and zero carbon.

So here’s vested interest number two: the bureaucrats who’ve imposed the ‘red tape’ that blocks cheaper homes. This is very much the view of the major housebuilders and the coalition has already granted them billions of pounds worth of concessions while asking for next to nothing in return. The crucial point here is what is meant by brownfield land: contaminated sites that are usually more, rather than less, expensive to develop, or industrial land that would not normally get residential planning permission and will therefore be cheaper? We could end up with cheap boxes built on old industrial estates on the edges of towns and cities or on precious public land so that they are instead of, rather than additional to, existing plans for affordable homes.

Either way it looks like another very nice little earner for the housebuilders that many people would identify as one of the biggest vested interests of all. The very same housebuilders who have relied on advance sales to overseas and buy-to-let investors.

So who else could Cameron mean? In his conference speech two years ago he was much more explicit about this:

‘There are those who say “yes of course we need more housing”…but “no” to every development - and not in my backyard. Look - it’s OK for my generation. Many of us have got on the ladder. But you know the average age that someone buys their first home today, without any help for their parents? 33 years old. We are the party of home ownership - we cannot let this carry on.’

Given that many of the nimbys who are already on the housing ladder are members of his own party and were in the audience, that was quite an important statement. However, seven months out from a general election and with Nick Boles no longer blazing a trail on planning, the language has been toned down in Cameron’s speech this time. The rhetorical commitment to new homes may stil be there but ‘vested interests’ was ambiguous – and deliberately so.

Communities secretary Eric Pickles told the conference earlier in the week that: ‘The thing I’m most proud of – and it’s been the most difficult to deliver – is what we’ve achieved in housing.’

Labour ‘gave us regional spatial strategies, top-down planning, ticky-tacky boxes with no parking or garages, and no room for our kids to play’ and housebuilding at its lowest level in peacetime since the 1920s. The coalition has delivered affordable housing, the reinvigorated Right to Buy, Help to Buy and many more triumphs.

Except of course that the coalition has been in power for more than four years. Housebuilding fell even lower than under Labour and is still barely half what is needed. If any homes look likely to be ticky-tacky boxes it’s the starter homes that will be built under Cameron’s new plan. And for millions of renters a world where everyone ‘should be able to buy a home – if you’re willing to save’ looks as impossible a dream as ever. 

Perhaps the search for vested interests should start with politicians who make premature claims that they have solved the housing crisis. 

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