Do you recall the Abbey Habit? If you were born before 1990 you may remember a time when our High Streets were littered with building society branches. A century ago there were over 2,000 building societies. Only 45 remain and, apart from the Nationwide, most are small regional outfits. Does the disappearance of building societies hold any lessons for the affordable housing sector? I believe so.
The first building societies appeared in the late eighteenth century and tended to be “terminating” bodies – their members bought land to build homes and then liquidated the society once this had been achieved. But these were slowly replaced by “permanent societies”, taking deposits and lending to homebuyers over the long term. Their core values were based on mutuality and self help, and their rules limited what they could do as corporate bodies. Each member had a single vote and there were restrictions on mergers and takeovers. They were also prudent lenders, which helped to limit house price inflation. All slightly dull perhaps, but building societies were the main providers of mortgages for most of the twentieth century and responsible for a huge increase in home ownership – from 23 percent in 1918 to 70 percent by the end of the century. They did more to change the social fabric of the UK than any other financial institutions.
But all this changed with the 1986 Building Societies Act, which allowed them to offer retail banking services and to de-mutualise if 75 percent of their members voted for it. Banks were also allowed to offer mortgages. The distinction between banks and building societies became blurred. Does this sound familiar?
Over the next decade most of the largest societies voted to de-mutualise. Borrowers and depositors opted for a fast buck (I was one of them) without any real understanding of the wider consequences of demutualisation. Boards and executives were keen to privatise because their salaries soared and it offered opportunities for mergers and takeovers – the empire builders had arrived. Does this sound familiar?
The largest societies - Bradford & Bingley, Abbey National, Halifax, Alliance & Leicester, Northern Rock and The Woolwich – all became banks. Yet not one of them now exists as a separate legal entity – all of them have been swallowed up by Santander, Lloyds, Barclays and the other big banks. This agglomeration created banking behemoths that were “too big to fail” and paved the way for the credit crisis and the hit on the taxpayer when the whole structure collapsed.
So over a twenty-year period an entire sector virtually disappeared, and the vast majority of the British public is worse off as a result. In 2006 an all party Parliamentary report concluded that the demutualised societies offered less choice, were providing more expensive products and that the main beneficiaries of de-mutualisation had been executives and non-executives. Between 1993 and 2000 the total remuneration of chief executives in demutualised societies increased by 293 percent, compared to only 65 percent in mutual societies. And on top of this, the advisers, lawyers and bankers in the City picked up over £1 billion in fees. But the reckless lending following the 1986 Act also contributed to house price inflation.
If you believe it is far-fetched to think that this could happen to the affordable housing sector, think again. According to the HCA’s global accounts our sector has assets of £71 billion and annual turnover of £14 billion. These are big figures and an attractive meal ticket for the money men in the City. Our sector is being increasingly squeezed by reduced levels of grant and an increasing reliance upon private finance and market products. Not only will the City exert a growing influence but, it seems to me increasingly likely that some Boards and Executives, ever anxious to expand their empires, will be tempted to morph into private sector companies.
The recent heated debate about “that” Bromford open letter has highlighted a division within the sector between “traditionalists” and those who increasingly seek to ape the memes and mantras of the private sector. For the latter group, “old fashioned” social housing seems to be trailing somewhere in the background but, like Building Societies discarding mutuality, prudence and stability, if we discard social housing what are we for exactly? What then sets us apart form other private sector providers, who in most cases can do the private sector stuff much more efficiently and ruthlessly than we can?
So if I had a message for those who want to go down the private sector route it would be this. Don’t be seduced by the whizz and bang of the private sector. Stick to your core principles of social housing and a social purpose. Your equivalents in the building society movement forged ahead with the same degree of optmism and bravado as you, but they were defenceless against the big beasts of finance and they ended up leading their organisations over a cliff, albeit with a fat pension in their back pockets.
The example of the Nationwide should be an example to us all. They stuck to their principles, refused to demutualise and have just posted record profits. Being “dull” has its merits.
Note: With thanks to Tom Murtha who prompted the original idea for this blog.
Half a century ago, many keen borough engineers re-shaped their towns and cities by building inner ring roads and urban motorways. Their aim was to speed the progress of the motor car. Their watchwords were ‘innovation’ and ‘progress’. In the process, many close-knit communities were razed.
Today, many of those places rank among the least pleasant urban centres in England. If you have ever tried to navigate the inner parts of Coventry, Bristol, Huntingdon, Birmingham or Leicester by foot, bike or car you will know what I mean. By contrast, those places that resisted the temptation of urban motorways – Cambridge, Winchester, Sheffield – are better for it. By doing nothing, whether by design or tardiness, these cities were saved from harm, their assets were protected. In his book ‘God is Not Great’, Christopher Hitchens writes about the attitude of the church in occupied Europe towards the Nazis, and says, ‘to decide to do nothing is itself a policy and decision’.
Perhaps our housing sector would now have a different shape and reputation had it collectively decided to ‘do nothing’ at critical points in the past, instead of repeatedly jumping through hoops at the behest of the government of the day, in the name of ‘progress’ or ‘innovation’ or ‘growth at all costs’.
Take the Oxbridge colleges – they are some of the most influential and long-lived institutions in Britain. (Peterhouse in Cambridge, where I live, was founded in 1284). For all their perceived elitism they are registered charities and they profess a social purpose. Like housing providers, they have grown step by step and brick by brick, but they take a long-term view. They grow when they can and they wait when they can’t: but they are not prepared to compromise on their founding principles or to sell or devalue their assets. They rarely sell freehold land. Trinity College is reputedly the fourth largest landowner in the UK.
Which brings me to Mick Kent’s open letter to our sector. Two minor gripes about his language to begin with. His headline is, ‘Saying the unsayable’. Well, it’s not unsayable if it’s been said. Then he claims that ‘being different’ is in Bromford’s DNA. Will non-medical people please stop telling us what is in their DNA! As a metaphor it is lazy and factually wrong. DNA is in your DNA and nothing else.
I think Mr Kent is right to open a debate on this topic and he is partly right about dependency within social housing but he is wrong in his analysis of how this has come about. He claims that our current system of welfare has ‘produced very damaging long-term consequences – for individuals, families, society and the economy which will take generations, not just the life of one parliament, to turn around’. But this confuses causation with correlation – a schoolboy error.
The welfare system does not cause or produce dependency, it is the offspring of dependency. Dependency is caused by lack of work, by unaffordable rents and house prices, by low wages and high living costs. In 1968, for example, we built 352,000 homes in England – over three times our current level, unemployment was 2.5 per cent (it’s now 7.6 per cent) and an average house cost 2.6 times an average income – it’s now double that. Social housing rents then were far more affordable than they are now. Yet in 1968 the welfare bill was around 6 per cent of GDP, it’s double that now, and wages are shrinking. Back in 1968 many more people could afford to live a decent life without recourse to benefits. So these are the causes of dependency – the welfare system merely props up the consequences of dependency.
The people who rely on benefits are showing precisely the ‘enterprise, self-reliance, perseverance and skill’ that Mr Kent claims the welfare system has deprived them of. They are responding rationally to an irrational world. To suggest that more than a minority of social housing tenants do not want to work and instead want to live a life on benefits is patronising and wrong.
What’s more, Mr Kent and his colleagues, and those who preceded him, share a significant responsibility for this state of dependency. They are like the borough engineers I mentioned at the outset.
First, rents and house prices are high, and unaffordable, because we have failed to build enough homes. Our sector has failed to make an effective case for a boost in housing supply. But this is partly because we have colluded with other ‘reforms’ that have tarnished the brand and reputation of social housing (going back 40 years or more and not just the 20 years Mr Kent refers to), which has led to our message not being taken seriously.
Second, we colluded with allocations based on personal need rather than the wider needs of the community. We colluded with the notion of putting homeless people at the top of the housing queue, regardless of whether their homelessness was genuine. We colluded with the right to buy, allowing the best homes to be sold off at massive discounts and not replaced. We colluded with the introduction of private finance, piling debt on tenants and raising their rents. We colluded with stock transfer and mergers, creating a highly inefficient and illogical pattern of stock ownership. We colluded with a rent policy that increased rents above inflation year after year. And now we are colluding with the ‘affordable’ homes programme, which will condemn thousands of people to perpetual poverty. Admittedly, some of these ‘reforms’ would have been difficult to resist without legal sanctions, but others could have been resisted. (And to be fair, some providers have ‘done nothing’, for example by declining to take part in the ‘affordable homes’ programme, and all credit to them).
Bromford, and most other large providers, went along with all these changes and now they complain that tenants are dependent. It’s like the teenager who kills his parents and then seeks sympathy as an orphan. The definition of chutzpah.
What it comes down to is this. Do people like Mick Kent believe in the core principles of social housing, or not? Do they believe it is right and just that the state (and past generations of tenants, lest we forget) should continue to fund good quality housing at rents that are significantly below market rents in order to provide for those who cannot cope with, or choose to withdraw from, the vicissitudes of the market? Or do they believe that the sector should head towards a private sector model of provision, where we simply grow at all costs regardless of the affordability of the product we provide? If so, we may as well shut up shop, float ourselves off and become private companies - John Lewis-lite, open to all, just like The Ritz - and have done with it.
The problem is that too many people in our sector have been hyperactive in the wrong direction, jumping to the tune of their political and funding masters yet failing to protect the assets they have been entrusted with. Even now they are busy heading up a blind alley lined with irrelevant buzzwords like social media, ‘being different’, mission statements, customer excellence, social return on investment, you name it - when their core product and their core values are collapsing around them, brick by crumbling brick. It is fiddling while Rome burns. Portraying this as a ‘battle to repair deep rooted cultural damage caused by years of dependence on the state’ is disingenuous, at best.
So my message to people like Mr Kent is: policiticans and governments come and go. You could choose to follow the 800-year old example of Peterhouse College and take the long view. Calm down, relax, take your time, size isn’t everything. If you really believe in the value of social housing then please do nothing to compromise the assets that you hold in trust for past and future generations.
Because doing nothing is as viable an option as doing something. ‘They also serve who only stand and wait’.
A report out this week from Deloitte shows that London dominates more economic sectors than any other world capital. It leads the world in insurance, retail and investment banking, fund management, digital media, non-internet publishing, legal services, accounting, tax and payroll, architecture, engineering services, and management, scientific and technical consulting. London really is the world’s capital.
Yet the number of families being exported out of London has more than doubled over the past year, numberless thousands of poor people are living in beds in sheds, London house prices have soared by 9 percent over the past 12 months, the average private sector rent is £269 a week and the average London house costs £476,000. Millions of Londoners are spending up to half of their incomes on housing costs. The largely unregulated private rented sector has grown massively in recent years and a million people are on London’s waiting lists. London may be booming but the disparity between its economic wealth and its dysfunctional housing sector is stark, and it is going to get worse.
Meanwhile 75 percent of all newbuild properties and 49 percent of all properties in the £1 million plus bracket are being bought by foreigners. There is some debate about the impact this is having on London house prices, but developers, in attempting to capture this market, are providing too many upmarket properties at the expense of affordable homes. This latest report from Savils shows that the shortfall is greatest at the bottom end of the market with a glut of properties at the luxury end.
London’s new Community Infrastructure Levy, which will sit on top of the CIL set by the London boroughs (six boroughs have fixed their own CIL so far) is likely to squeeze the future provision of affordable housing even further. And even when affordable homes are provided can they truly be described as “affordable” when the average rent is £182 per week?
So the future for Londoners on low and middle incomes looks bleak. The big issue is, of course, supply. Only 18,000 homes were built in London last year (see Table 253) and a third were built by registered housing providers and councils. The Mayor has set a target of 400,000 homes over the next ten years, although Savils say that this needs to be upped to 50,000 homes a year - the equivalent of 18 Olympic villages every year. By 2030 there will be another 1.7 million people in London - and at an average current household size of 2.5 that means a need for an additional 680,000 homes. Spread this over 16 years and add in past deficits and the Savils’ estimate of 50,000 a year looks about right.
But London has fewer than 4,000 hectares of brownfield land and even if all of it was developed at relatively high densities (which would be a mistake) it would still leave a shortfall of up to 400,000 homes.
So what’s the answer? Assuming public funding stays where it is there are three structural solutions. One is to build upwards and achieve higher values. One hundred new tower blocks are already in the pipeline for London, mostly private schemes, but this only adds to the pressure on roads, tranpsort, schools and hospitals. Stories like this show that London’s infrastructure is creaking already. Another is to expand London’s footprint and build outwards, something I have advoctaed here and here. A third solution is a new generation of new towns to cream off some of London’s surplus population. The post-War Abercrombie plan of 1944 achieved this but it also caused considerable damage to London’s economy by exporting skilled workers. A subtle combination of all three options seems to me to be the best way forward.
As London’s housing withers its leaders dither. The Mayor produced a draft housing strategy nearly three years ago but it’s still not been published in its final form. Boris Johnson has to invest a great deal more energy into housing than he has of late because there is no bigger crisis facing London. When Harold Macmillan was appointed housing minister in 1951 he said the pledge to build 300,000 homes a year had to be treated as a “war job” and tackled “in the spirit of 1940″. If Boris wants to be become a future Prime Minister he could do well to follow the example of a former Premier and treat London’s housing crisis as if it was a “war job”.
In two previous blogs I have explored some of the uses to which land in England is put. I’ve written about horses and sheep, and highlighted, for example, the fact that horse-grazing takes up as much land as half of the built up area of England – enough for millions of new homes.
Why am I turning my attention to golf? I admit that I approach the subject with some trepidation because I know that many senior figures in our sector like their golf! But the fact is that this minority sport is an extremely greedy consumer of land. Per head of participants it takes up more land than any other sport.
This was brought home to me by reading reports of a recent High Court case about a proposed development in Surrey. In brief, last year Mole Valley District Council gave planning permission for the development of an 18-hole golf course and country club on the 150 hectare Cherkley estate in the Surrey Hills, the former home of Lord Beaverbrook. They made this decision against officer advice and the written planning consent made reference to the “need” for additional recreational facilities in the distirict. A group of local residents launched a legal challenge and High Court judge Mr Justice Haddon Cave has now found in their favour - and against the Council and the developer. Much of his judgement turned on the definition of the “need” for additional facilities in the area, as opposed to “demand”, an argument that will be familiar to many in our sector. Christopher Katkowski QC, for the developer, tried to argue that demand and need were one and the same but the judge rejected this. You can read his full judgement here but the followng extract is worth repeating:
“The developers argued that proof of private “demand” for exclusive golf facilities equated to “need”. This proposition is fallacious. The golden thread of public interest is woven through the lexicon of planning law, including into the word “need”. Pure private “demand” is antithetical to public “need”, particularly very exclusive private demand. Once this is understood, the case answers itself.” Well said!
(By the way, I have seen Mr Katkowski QC in action at a planning appeal in Cambridge. He is a fearsome advocate but on this occasion his arguments were comprehensively demolished by the judge. That is very pleasing).
The judge stated that Mole Valley District already has 11 golf courses and Surrey has 141 full-sized courses. It was also revealed that there are 192 golf courses within 20 miles of Cherkley and 627 courses within a 50 mile radius!
These figures astonished me, so I did some more digging and discovered that there are around 2,000 18-hole golf courses in England as well as hundreds of smaller 9-hole and pitch and putt courses, and at least 600 golf driving ranges. Each 18 hole course requires up to 90 hectares of land (including practice courses, clubhouses, car-parking etc) so my best estimate is that golfing establishments take up around 270,000 hectares in England – that’s 2 percent of England’s total land area of 13.4 million hectares. Accurate figures are hard to come by, so if anyone can contradict my figures I would be pleased to amend them. But by my reckoning English golf courses use an amount of land that is equivalent to one fifth of England’s total built up area (10 percent of England is built upon) and could provide at least 8 million homes.
Yet many golf courses are losing members. Mr Justice Haddon Cave quoted reports showing that 90 percent of golf clubs in the UK had membership vacancies and 80 percent no longer had a waiting list. What’s more, golf has an image problem. Of the 850,000 people who play golf regularly at least 75% are men and only 2% are non-white.
I’m not for a moment suggesting that golf does not give pleasure to many thousands of people, or that millions of new homes should be built across the golf courses of England! If groups of men wish to spoil a good walk by chasing a little white ball they are perfectly at liberty to do so. But it’s also worth bearing in mind that golf courses drink huge amounts of water, are not particularly brimming with wildlife and are generally closed to public access. Yet many countryside campaigners argue that we should not touch any greenfield land whatsoever, either because of its wildlife and amenity value or because we need every scrap of land to provide for our present and future food needs, or both. Well in the case of horses and golf the food argument is spurious, and in the case of golf the wildlife and amenity argument is tenuous, at best. Some golf courses spoil the landscapes they occupy.
At the risk of boring the readers of this blog I repeat: There is no shortage of land in this country. We have more than enough land to build the homes that we need and to stop the awful cramming, overcrowding and shortages of affordable, decent homes now blighting our towns and cities. We just need some facts to enter into the debate in order to counter some of the scaremongering and lies that pervades the subject of land use and development, and to have a grown-up discussion about the way we prioritise our use of land.
For the past two years The Daily Telegraph has been running a spurious ‘Hands off our land’ campaign aimed at developers and government ministers and egged on by the Banana wing of the countryside lobby. This started with the national planning policy framework and has continued intermittently. One of their main targets has been Nick Boles MP, a good planning minister who understands the nature and scale of the housing crisis and knows that we need to build many more homes if we are to become a modern, decent society. He also knows that our future housing needs cannot be met solely from brownfield land and that we will need to build many homes on greenfield land.
This has enraged some Conservative MPs who called for a backbench planning debate at Westminster Hall last week. You can read the transcript here and the Inside Housing story here. Some of these MPs even deny that there is a housing crisis, which does make you wonder.
The Telegraph used the following headline for its report on the debate: ‘Elderly to blame for housing crisis, indicates minister.’ I felt this was inaccurate and misleading. I tweeted to this effect and after an exchange with the Telegraph’s reporter he told me, ‘I just write down what is said in debates in Westminster’.
However, I don’t believe the Telegraph did just ‘write down what was said’.
Here’s the evidence. Mr Boles starts his speech by saying: ‘I need not start by underlining the scale of the housing crisis faced by this country, the extent of the need for housing or the grief and hardship that the crisis is visiting on millions of our fellow citizens.’
He goes on: ‘Our population has grown and we have not built enough houses to keep pace with it.
‘That growth in population has had two main sources. One, which is contentious in the house and elsewhere, is immigration, which was uncontrolled for a long time. We as a party rightly criticised that, and are now doing something to control it. However, it is important to remember that the majority – about two thirds – of the growth in population and in the number of households in the country has resulted not from immigration but from ageing.’
I don’t believe any reasonable person would conclude that Mr Boles had ‘blamed’ the elderly for the housing crisis. He makes it very clear that the ‘blame’ rests with our inability to build enough homes. The fact that the Telegraph chooses to use the flaky words ‘indicates minister’ in its headline rather than ‘says minister’ gives the game away, in my view. I felt this was a violation of the commission’s code, in particular article 1 (1), which you can read here.
However, headlines have consequences. If you have time to read some of the comments below this article you will see, as of today, almost a thousand postings from Telegraph readers, many of them making personal and offensive comments against Mr Boles or against immigrants. This is what we are up against, colleagues. But in my view many of these readers have been misled by the headline to the story.
Because of this, I decided to make a formal complaint to the Press Complaints Commission. It is unlikely to have any effect, but if it helps to tone down some of the intemperate language used by the Telegraph and its use of provocative and misleading headlines in the future all well and good.
There was an interesting article at Conservative Home last week about the 1950 Conservative conference, where (and I find this almost unbelievable) delegates pressured the leadership to adopt a target of building 300,000 homes a year in the UK. The post-war Labour government under Clement Atlee, from a standing start in 1945, was building 205,000 homes a year in the UK by 1950 but both political parties were competing with each other to do more.
The Conservative manifesto for the 1951 election duly carried these stirring words:
“Housing is the first of the social services. It is also one of the keys to increased productivity. Work, family life, health and education are all undermined by overcrowded homes. Therefore a Conservative and Unionist Government will give housing a priority second only to national defence. Our target remains 300,000 houses a year. There should be no reduction in the number of houses and flats built to let but more freedom must be given to the private builder. In a property-owning democracy, the more people who own their homes the better.
Harold Macmillan was made housing minister, even though he claimed to know nothing about the subject. He treated it as a “war job” and ensured that sufficient land and materials were directed towards the manifesto pledge. He also changed the name of the Ministry of Local Government and Planning to the Ministry of Housing and Local Government, to reflect the priority that Housing now took. (Eric Pickles take note!)
By 1954 housing production in the UK peaked at 354,130 of which 239,580 were council houses and only 92,420 were private. But the following Labour government did even better. The Labour manifesto for the 1964 election said this about housing – a pledge of sorts.
“Labour will also increase the building of new houses, both for rent and for sale. While we regard 400,000 houses as a reasonable target, we do not intend to have an election auction on housing figures.”
In fact, Harold Wilson’s government built 425,830 homes in 1968 of which 184,450 were council and a staggering 226,070 private. (Private housebuilders have never since exceeded this 1968 figure. For the whole of the post-war period, despite upturns and downturns in the housing market, they have averaged 154,000 a year in the UK, and this will never be enough on its own to meet our housing needs.)
In 1996 Environment secretary John Selwyn Gummer said we needed to build four million homes by 2016. In 2004, Kate Barker called for 250,000 homes to be built each year in England. In 2007 Gordon Brown promised 3 million new homes by 2020 and announced a programme of eco-towns. None of it has happened, or will happen.
Since 2004 we have averaged only 136,700 homes in England each year, so we have already built up a total backlog of 1.133 million homes against the Kate Barker target, and given recent increases in population even this target looks inadequate.
I have been going to housing conferences for over thirty years. I have seen a succession of ministers spout platitudes about the need for more housing supply but not one of them has ever delivered in the way that Macmillan and Wilson did. On Monday I listened to the latest “housing minister” Kris Hopkins going through the motions about the need for more homes. I’m afraid I don’t believe a word of it now.
Is it any wonder that house prices are shooting up across swathes of the country, that thousands of people are living in beds in sheds, that a whole generation has been priced out of a decent home at a price they can afford, and that almost 2 million households are on waiting lists?
Isn’t it time for some righteous anger about the state of housing in this nation?
On the day of the budget in March I wrote this about George Osborne’s help to buy announcement: ‘The danger is that Osborne’s initiatives, by boosting demand without any corresponding increase in supply, will just create yet another housing bubble.’
It’s now almost impossible to find a commentator who doesn’t believe that help to buy will push up house prices. The second phase starts tomorrow, and allows buyers to put down a 5 per cent deposit on new and existing properties worth up to £600,000, with the Treasury insuring 15 per cent of the price. It has set aside £12 billion of guarantees for up to £130 billion of mortgage lending and the scheme will remain open for three years to January 2017.
According to the Financial Times the average deposit in England will fall from £44,000 to £11,000 as a result of help to buy. So far, only Lloyds and Royal Bank of Scotland (both part-owned by the government) are offering help to buy mortgages.
Not surprisingly, this improvement in affordability has unleashed a huge level of pent up demand from ‘generation rent’. According to Santander 5 million Britons want to buy in the next 12 months and a third of them intend to use help to buy. A quick look at the figures for new supply and transactions shows that this will be a mathematical impossibilty.
For new build, the number of private starts on site in April to June increased by 6,000 on the same quarter last year. But it will take at least 12 months to see if the house builders are ramping up supply. They are notoriously slow to respond to increased demand but quick to stop building as soon as the market shows signs of a downturn.
House builders built 84,000 homes for sale in England in 2012/13 but this makes up a relatively small proportion of the overall level of transactions in the housing market as a whole. Just before the credit crunch in 2006 there were 1.4 million residential transactions a year in England. This has fallen to just over under 800,000 in the last year – sellers have deserted the market as well as buyers.
This is where psychology takes over. Many sellers have kept out of the market due to suppressed prices and low demand. Will they return? Many potential sellers will be looking to buy elsewhere and will be competing against others in the same situation, so they may decide to delay putting up the ‘For sale’ sign if the market is rising. Selling is an art in itself – the dream is to sell at the top of a rising market and buy as the market starts to fall. Yet the housing market may be too volatile for sellers to make sensible decisions. But even if they return to the market in the same volumes as 2006 there will still be an excess of demand stoked by help to buy, so the consequence will be an inevitable surge in house prices.
Mark Carney, governor of the Bank of England, has promised to keep a close eye on the bubble and says he has the tools to deal with it. Presumably one of these tools is the £600,000 cap. Yet in his speech last week George Osborne rather oddly suggested that help to buy was aimed at people in places like Nelson and Colne and Morecambe, rather than the south east. But average prices in these places are a fifth of the £600,000 cap, so why set the figure so high?
One final point. Robert Peston revealed this morning that the Treasury will be charging help to buy lenders up to 0.9 percent fee on the total mortgage, not just the insured element, to comply with EU rules on state aid. This could mean that mortgage rates for help to buyers could be double the rate for other applicants – up to 5.25 per cent.
For financially-stretched first-time buyers this could store up problems for the future. Mr Carney has said that interest rates will rise only when unemployment falls to 7 per cent. This housing boom will inevitably fuel an economic boom that will reduce unemployment. So a year from now we could see young people who bought under help to buy struggling to keep their homes as interest rates rise.
Yet again the housing market is being used to run the economy, the tail wagging the dog, and the consequences could mean misery for thousands of people.
Ed Miliband devoted 212 words to housing in his conference speech in Brighton. That’s about 2.3 percent of a 9,000 word speech. Disappointing perhaps, but he did make three significant pledges. I will use his exact words as posted on the Labour Party website to avoid any ambiguity in what follows.
“So we’ll say to private developers, you can’t just sit on land and refuse to build. We will give them a very clear message - either use the land or lose the land, that is what the next Labour government will do. We’ll say to local authorities that they have a right to grow, and neighbouring authorities can’t just stop them. We’ll identify new towns and garden cities and we’ll have a clear aim that by the end of the parliament Britain will be building 200,000 homes a year, more than at any time in a generation.
I will pass over “use it or lose it” because it is just empty rhetoric, but the pledge on the right to grow is to be welcomed. It’s a firming-up of the duty to co-operate, as set out in the NPPF, and is designed to tackle recalcitrant local authorities who refuse to allow expansion by neighbouring land-locked authorities. The North Hertfordshire and Stevenage case is often given as an example. Whether this will translate into an effective policy remains to be seen.
Despite its rather strange wording, the pledge to “identify new towns and garden cities” is something that I and others have been arguing for for a very long time and is to be welcomed. Whether this can be translated into a realistic policy (eco-towns anyone?) is another matter. It will only work well if land is purchased at sub-residential values and development funded through uplifts in land values.
But the pledge to build 200,000 homes a year is rather misleading. Had he been referring just to England the “more than at any time in a generation” would have been correct. But according to the CLG we built 205,050 homes in Britain in 2007/08 (218,530 if you include Northern Ireland to cover the whole of the UK). That is certainly less than a generation ago by my reckoning. The last time we built more than 200,000 in England was in 1988/89 when we built 202,930, which I guess is more than a generation ago. This is one of the problems with devolution – you can mix and match your countries and cause havoc with accuracy and understanding – a politician’s dream perhaps? Building 200,000 homes a year in Britain is nowhere near enough. We need to build 250,000 in England alone to meet demand and claw back past under-supply.
Miliband also said, “There are 9 million people in this country renting a home, many of whom who would like to buy. 9 million people - we don’t just have a cost of living crisis, we have a housing crisis too”. That seems a curious thing to say. If he is again referring to Britain and not England then I am assuming he just means those living in the private rented sector. Yet many in the social rented sector would also like to buy and many people living in the PRS do not want to buy. Odd.
But the fundamental point that the Labour Party have missed is that the “cost of living crisis” is fundamentally a housing crisis. They are not separate things but inextricably intertwined. Several recent reports have highlighted these issues, and I won’t rehearse them here, but when Londoners are having to find £64,000 to fund a deposit, when so-called “affordable rent” homes are being let at £180 a week and when Generation Rent is paying up to half of their wages in rent it is quite clear that tackling housing supply and afffordability would do more to improve the standard of living of millions of disadvantaged Britons than any other single measure.
The Labour Party has listed a number of steps that it will take to address this “cost of living crisis” including abolition of the bedroom tax, freezing energy prices, extending childcare and rasing the minimum wage. All well and good, but many of these are mere pinpricks in the bigger picture of housing supply and affordability across vast swathes of the country. The bedroom tax may be controversial but it affects relatively few people and, as Joe Halewood has pointed out, Labour has completely missed the point in its pledge to scrap the tax. Too often, our politicians chase public opinion rather than forming it by their vision and leadership.
Our present housing system damages the dreams and aspirations of millions of people, it creates a mighty chasm of inequality between our two housing nations, the haves and the have-nots. Is there any issue that should be a greater priority for One Nation Labour than housing? We need to shout it from the rooftops that the cost of living crisis is fundamentally a housing crisis.
A few weeks ago I wrote a blog about the amount of land in England occupied by horses (“Horse and House”). This week I’m writing about sheep. What has this to do with housing? I hear you cry. Bear with me.
In case you missed it, George Monbiot has been in the news recently over his attack on sheep farming in the UK. He claims sheep are one of the greatest threats to our countryside and describes them as “wooly maggots” and a “white plague”. He says their sharp hooves compact landscapes and cause landslides, and that their relentless nibbling destroys the native fauna that wildlife depends upon, creating sterile “bowling green” deserts in much of upland UK.
George may be flying a kite, because his long-term aim is to see more of upland Britain being “re-wilded”, but his polemic does raise a serious question about the way that we use land in the UK, something that I have been banging on about for years past.
If you look at the latest figures, there are 5.4 million cattle, 3.7 million pigs and 14.6 millon sheep in England. Of course these figures go up and down quite rapidly during the year – about 10 million lambs are slaughtered each year, for example.
Around 8.9 million hectares of England is devoted to agriculture of which 4 million hectares is used for livestock grazing – that’s 66 percent and 30 percent of England’s land mass, respectivley. (By contrast, 53 million of us live on just 10 percent of the land). Given that some of our livestock spends at least part of its life indoors, this amounts to a density population of around 4 to 5 animals to each hectare. Compare this to Islington, where there are 138 people to every hectare.
But just imagine, for a moment, that the land use map of England was reversed, like a negative image, so that towns and cities became countryside and countryside became cities and towns. 90 percent of England, that’s 12 million hectares, would be occupied by 53 million people at just 4.4 people to the hectare. This land would contribute virtually nothing towards GDP or employment and many of us would live alone in grounds of half an acre or more. Meanwhile, 16 million farm animals would be crammed into just 10 percent of the land, which would also produce over 99 percent of our GDP and provide much of our open space and leisure amenity.
It sounds absurd, but this is exactly what we have managed to achieve in reverse with our present land use policy. We, the people, are crammed into our towns and cities at ever-increasng densities, whilst agriculture occupies 66 percent of England’s land mass but contributes less than one percent to our GDP. In terms of sheep farming, in particular, the economics make no sense whatsoever. Around 60 percent of the sheep population comprises breeding ewes whose primary purpose is to produce lambs for slaughter and the odd fleece, which have a value of around £50 apiece. There is little consumer demand for hogget or mutton and my guess is that many of these ewes end up in pet food or are sent abroad. Monbiot points out that every Welsh hill farmer receives £53,000 in subsidy a year, but New Zealand lamb, which is unsubsidised, is still cheaper than UK lamb, because their farms are much larger and benefit from economies of scale. Why do we persist in trying to feed ourselves when we can buy food cheaper from elsewhere?
We do need to have a rational debate about how we use our most precious resource - land. What exactly is the countryside for and to what extent does it add to or detract from the sum of human happiness?
Yet the unfortunate truth is that the countryside lobby has completely hijacked this debate so that the press reacts like Pavlov’s dog at any any mention of building much-needed homes on the countryside. Take this recent story in The Telegraph, which arose as the result of a scaremongering press release put out by the CPRE. When you examine the facts you realise that the land involved represents a minuscule percentage of the green belt.
As I mentioned at the end of my last blog, our sector, and the wider housing industry, is repeatedy outflanked by the countryside lobby on this issue, which means that the space for a rational and meaningful debate about land use is almost impossible. But it’s not a case of choosing between sheep or shelter: just 2 percent of the land we devote to livestock could produce at least 3 million homes. That could mean a big programme of new settlements that would help to meet our housing needs for the next thirty years.
Well it’s here at last. After a few IT glitches, the government’s new streamlined planning guidance was published last week, and it’s potentially good news for housing. The new documents replace thousands of pages of previous guidance and arise from the review carried out by NHF CHair Matthew Taylor.
Back in April last year I commented on a little-noticed clause in the new National Planning Framework that gave cause for optimisim - the requirement for local authorities to look at market signals when casting their local plans. The exact wording reads as follows:“Plans should take account of market signals, such as land prices and housing affordability, and set out a clear strategy for allocating sufficient land which is suitable for development in their area, taking account of the needs of the residential and business communities.”
The new guidance puts meat on these bones and sets out how local authorities should plan for new supply. The starting point is the CLG’s household projections. But beyond, this, planning authorities will now need to look at local house prices and rents, employment growth, land prices and the appetite for self-buiid when they draw up their plans. Two key extracts from the section on future supply are worth quoting at length.
“Prices or rents rising faster than the national/local average may well indicate particular market undersupply relative to demand.”
“In areas where an upward adjustment is required, plan makers should set this adjustment at a level that is reasonable. The more significant the affordability constraints (as reflected in rising prices and rents, and worsening affordability ratio) and the stronger other indicators of high demand (eg the differential between land prices), the larger the improvement in affordability needed and, therefore, the larger the additional supply response should be.”
Simply put, this means that any upward divergence from national or “local” averages will require a boost in supply. It means that local authorities will need to have a clearer understanding of the housing and land markets in their area and plan for additional supply if the market is over-heating. It does not go quite as far as setting a target ratio of house prices to incomes but it is a good step forward. Assessments of housing need will have to be robust and will have to be based on a full understanding of the local housing market and follow the methodolgy set out in the guidance, and this will also give additional muscle to the Planning Inspectorate when bringing recalcitrant local authorities into line.
This will put pressure on local authorities in the south-east in particular. As I see it, local authorities with the largest ratio of house prices to incomes will have to make greater provision for new homes than those with lower ratios. In my Eastern region for instance, the NHF’s latest Home Truths sets out the ratio of median house prices to incomes for each local authority. The four authorities with the worst levels of affordability are Hertsmere (14.9), Three Rivers (14.7), Uttlesford (13.7) and St Albans (13.7) and they will all be expected to plan for more supply in order to redress the house price imbalance in their areas.
Of course, local authorities like these will argue that their areas are popular and that if they built across the entire district it would still not bring prices down. They will also argue the green belt will be put at risk by the new guidance. London boroughs are similarly constrained by a tight green belt. But there will be pressure to identify those areas of green belt land that have the least amenity or aesthetic value for future development and the “duty to co-operate” as set out in the NPPF means that tightly constrined local authorities will have to speak to their less constrained neighbours and plan accordingly. That means that places like North Herts and South Cambridgeshire will have to make cross-border plans with Stevenage and Cambridge respectively. The point is that no single authority should be allowed to evade their duties because they all have a part to play and if a single one opts out then it puts greater pressure on the rest.
A couple of caveats. The guidance is described as being in “test mode for 6 weeks” it’s not clear if this relates to the guidance itself or the new IT system that supports it. The guidance also has the fingerprints of Nick Boles all over it. I’ve written before about the threat to his postion from right-wing Tories and I hope he stays to see it through.
But here’s another thing. Why are we always outflanked by the countryside lobby whenever there are changes to planning or housing policies? The misanthropes at the CPRE rushed out a press release as soon as the guidance appeared and this was widely reported in The Telegraph (“Affordable housing rule threatens green belt”) and printed verbatim in many regional papers. From our sector, silence. Why did the HBF, NHF, the CIH and other housing bodies not issue press releases with headlines like “Planning changes offer hope for first-time buyers”? or “New planning rules provide hope for thousands of homeless people”? Why are we so slow off the mark? The result is that the whole housing supply agenda is dominated by the countryisde lobby. It makes me despair. The housing crisis is a serious business and we should treat it seriously.
“Those who cannot remember the past are condemned to repeat it.” “History repeats itself, first as tragedy second as farce.”
These were the two quotes that came to my mind in recent days as a series of reports showed that the housing market is on the lower slopes of yet another bubble. The Guardian reported a surge in buy-to-let mortgages and help to buy applications. The latest Halifax figures showed a 4.6 per cent increase in house prices over the past three months compared to the same period last year. The latest Royal Institute of Chartered Surveyers survey shows prices rising at their fastest rate since 2006 and first-time buyers are rushing to enter the market at the fastest rate since 2007. Asking prices are up and the gap between asking prices and sale prices is narrowing.
Yet for much of the popular press the rise in house prices is cause for celebration. The Express reported on ‘Booming Britain - ‘joy for millions as house prices rise.’ The Daily Mail followed suit, ‘Britain is booming’, viewing rising house prices as part of a good news story for the British economy.
This is what the Marxists used to call false consciousness. Rising house prices are good news for a tiny number of people – those trapped in negative equity. For the vast majority of the British people, a long-term fall in house prices and housing costs would do more to improve their standard of living than any other political measure.
This is a point made by Faisal Islam in this Observer article at the weekend, and I strongly recommend that you read it. He makes a further two points that are well worth repeating. The first is that the housing market is principally driven by cash and that whoever has the most cash generally gets the property they want. All the indicators show that cash is becoming more readily available and yet supply is increasing only slightly. Jules Birch highlighted this in his blog last week, pointing out that supply is still only meeting half of current demand. This will inevitably lead to rising prices as more cash competes for a fixed supply of homes.
The second point is that the housing market is very illiquid with only a few properties being traded at any time and each sale and purchase has high transaction costs. Government figures show that at the height of the last boom in 2006/07 there were 1.4 million transactions a year in England. This fell to 664,000 in 2008/09 and has risen to 800,000 over the last year. This means that even if transactions and supply rise slightly there will never be enough homes to satisfy rising demand. Paradoxically, any rise in transactions and supply will inevitably have an economic stimulus, which is exactly what George Osborne wishes to achive. Yet if this leads to a fall in unemployment to the Bank of England’s magic 7 per cent figure then interest rates will start to rise and all those new buyers who have stretched themselves to the limit will start to struggle with repayments. Result: boom followed by bust.
On the day of the Budget I wrote a blog predicting that help to buy would help to stimulate a demand-side spike in house prices and would do little to help supply or affordability. History should tell us that if you tinker with the housing market without addressing the underlying structural problems of supply, land and affordability then it will inevitably lead to problems. What we need is a political party that will make a long-term commitment to set rents and house prices at an agreed ratio of incomes and who will take the right steps to achieve their promise by planning for a proper supply of housing.
As Faisal Isalm points out, no political party has ever had the guts to deal with this issue, even though it would do more to improve our national living standards than any other single initiative.
What makes a house valuable? It may seem a stupid question but bear with me. Take this Georgian house in Bath’s Royal Crescent, built in 1770, which has been on the market for £3.2 million. A studio flat of just 19.5 square metres (that half a metre is so important!) is also on sale in the Crescent for a staggering £225,000. Yet the historic cost (and the present value) of the stone, bricks, timber, glass and the labour costs of the architect and the craftsmen who designed and built these properties are a tiny fraction of their current value. When we insure our house, the rebuild cost is usually much less than the value of the property. The difference is made up, of course, by the value of the underlying land, or more precisely the location of the land. Location, Location, Location.
This interesting article from Brian Green at Brickonomics highlights something that we surely all know to be self-evident – that the value of land as a percentage of house prices has rocketed. Back in the thirties, land could cost as little as 2 per cent of the sale price of the finished property. Many plotlanders in the twenties and thirties bought land at a pittance, cadged materials and used their own sweat equity to make a valued home. By the late fifties land accounted for around a quarter of house values but this has increased to 70 percent today. For me, this proves the point that land, or the lack of it, is the single most important issue in English housing today. Too little land and inadequate supply means rocketing house prices. I’ve consistently argued in these blogs that supply will only be boosted to reasonable levels when we end our obsession with protecting the countryside and hemming our people into towns and cities. We have plenty of land, and even if we built 3 million homes on the countryside it would take up less than one percent of England’s land area and we would still protect the best landscapes.
This chimes with an excellent new report from Shelter by Matt Griffith and Pete Jefferys which provides a forensic analysis of how we can reach the 250,000 homes a year that we need to build. It recognises that land policy is a critical element in boosting housing supply and that green belt swaps and a new town programme could produce 76,000 new homes a year – roughly three times the annual output of our sector. The report makes it clear that addressing the land issue is the only way that the current supply gap can be properly closed. This is big picture stuff, but it seems odd that it has to fall to a group like Shelter to state the obvious.
Yet the latest wheeze from the government completely ignores this key message about the need for more land. According to today’s Telegraph, Ministers want to cut red tape in the housebuilding industry but introduce a minimum size standard to end “rabbit hutch” Britiain. This is puzzling. Don’t Ministers undertand that our houses are some of the smallest in Europe because of the price of land and the lack of land supply? You cannot increase the footprint of the average home and maintain supply at exisiting levels if you don’t make more land available. If you don’t, it means fewer homes and higher prices. Nothing in this latest report indicates that more land will be released in order to meet the new standards and maintain or increase supply. I’m not arguing that a minimum size standard is wrong but the government really needs to think things through before they announce new policies.
Back to my original point. It’s land, stupid.
Nick Boles is the best planning minister we have had for years, but his position is being threatened by anti-growth Tories and he needs our support.
Boles may be a conservative – by instinct and tradition the natural home of the nimbys - but so was Harold Macmillan and he built more homes than any recent Labour administration. More importantly, Boles understands the key issues in planning and housing, through his background in Policy Exchange. He recognises that we have to build millions of new homes if we are to create a fairer and more civilised society. He also understands that the planning system must release more land in order to boost supply. In a speech last January he talked of our “decades-long failure to build enough houses. And the root cause of that is our decades-long refusal to release enough land for development.”
As Planning Minister, Boles oversees the National Planning Policy Framework and the Planning Inspectorate, which, of late, has been requiring many local authorities to increase their post-Localism Act housing targets. This is because the NPPF contains some key requirements that we, as a sector, should be defending at all costs. For example, it aims to “boost significantly the supply of housing” and says the Government’s key objective is “to increase significantly the delivery of new homes”. It requires local authorities to “prepare a Strategic Housing Market Assessment to assess their full housing requirements, working with neighbouring authorities where housing market areas cross administrative boundaries”.
This is all good stuff, but many traditionalist Shire Tories, including ex-ministers, don’t like it. In a recent Commons debate a gang of them lined up to attack the NPPF and Boles. They spouted the usual scraremongering stuff about “concreting over the countryside” and the imminent threat to the green belt. This comment from ex-prisons minister Crispin Blunt was typical:
“There is greenfield development in the green belt designated for my constituency at the behest of a planning inspector, rather than local people, which is evidence that our system is not working.”
But this is evidence that the system is working. The planning inspector is merely ensuring that local authorities do what is set out in the NPPF – a document created by the government that Blunt and his colleagues allegedly support. Eric Pickles has made it clear that localism is not a one-way street and that every local authority has to play their part in meeting housing needs. National and local politicians cannot assume that localism will allow them to evade their responsibilities to present and future generations, simply because a minority of vocal elderly home owners object to new homes being built, True Tories would understand this - their great philosopher Edmund Burke described society as a contract, “a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born”.
Failing to build the number of homes we need represents a breakdown of that partnership and is contemptuous of younger and future generations.
The NPPF needs time to bed down and to work effectively. The last thing that developers need, including housing associations, is yet more change in the planning system .
So my message to the sector is this. We need to defend the NPPF and Nick Boles. If he goes and the forces of reaction triumph it will put our cause back by years. So if you have any political influence at all please speak to your local councillors and MPs and express your support for Boles, Pickles, the NPPF and the critical role of the planning inspector. Say yes to homes.
Edmund Burke is also reputed to have said, “All that is necessary for the triumph of evil is that good men do nothing.” So please do something.
“You don’t know what you’ve got till it’s gone”, sang Joni Mitchell.
The creeping privatisation of social housing continues, but few people are noticing. One person who is, Steve Hilditch at Red Brick, has produced an interesting update on the so called “affordable rents” programme which, he claims, is “sucking the life out of social housing in London”. He reveals that five social housing properties are being converted to affordable rents for every property built. As he points out, “these new tenants are even more reliant on housing benefit. Not only have social rented homes been hijacked but also the pain will be felt through increased housing benefit payments for many years to come.”
For London, at least, it seems that every pound invested in the “affordable rents” programme is going to cost the taxpayer significantly more on the housing benefit bill, something that was completely ignored iin the CLG’s impact assessment. The CRS settlement suggests that the new average grant level for each “affordable home” will be £20,000, yet the average “affordable” rent in London will be £180 a week, leading to an HB bill of £9,360 a year for tenants on full benefit. So after just two years the the tax payer will be shelling out more in housing benefit than the initial up-front grant. Every year and for ever. As Steve Hilditch also points out, from 2015 for every £1 spent on grant, (administered by a large bureacracy - the HCA), the government will spend £20 on housing benefit. This is the economics of the asylum. Where is Margaret Hodge when you need her? It’s yet another brick removed from the wall of a sensible housing subsidy system.
One of my first jobs in Camden way back in 1980 was working as a tenant liaison officer, dealing with in-situ improvement works to blocks in King’s Cross and Camden Town. I dealt with many single tenants living in one-bed flats who were paying a rent of around £10 a week. That would be £36 a week today if rents had increased in line with general price inflation. But the actual rent of a one-bed council flat in Camden is now around £110 a week, so roughly three times general inflation. Nearly all the working-age tenants I dealt with were in work. I remember one man who worked as a gallery attendant in the National Gallery. The average gross salary in 1980 was £6,000 so his rent would have been around 10 percent of his salary, leaving him 90 percent of his wages to spend on other things, rather than wasting it on rent. Today someone in a one bed flat in Camden would have to be earning at least £66,000 to be paying 9 percent of his or her salary in rent.
Some of you may recall Sir George Young, the housing minister, in 1991, saying “housing benefit will take the strain”. It certainly has. Back in 1970 the housing support bill, (the equivalent of today’s Housing Benefit budget) was £22 million. That would be £288 million in today’s money, so the actual housing benefit bill, at £23 billion, is 80 times greater than it was in 1970.
In economic terms, Housing Benefit is a classic demand-side subsidy. Like Help to Buy, it does not boost supply;instead it allows rents to rise to the level of the subsidy, so it is inherently inflationary. It allows private landlords to milk the public purse and it allows affordable housing providers the chance to become lazy, as they receive a guaranteed government-set rent with very little effort. It also means that one government department (DWP) has had to pay for decisions made by another (CLG). Back in 1980 around 80 percent of housing subsidy went to bricks and mortar and 10 percent was personal. Today the ratio is 5 percent bricks and mortar and 95 percent personal.
Going back to 1946, the subsidy for council house building was £22 per house per year for 60 years – the Treasury contributed around 75 percent and councils put in 25 percent. Even allowing for inflation that subsidy would now be a tiny fraction of the value of the stock. Yet by switching it to rents, it becomes a burden on the taxpayer in perpetuity. Of course, the rental income for landlords would have been less if this switch had not taken place, but then their costs, particularly loan payments, would also have been less. There is a also a good chance that the sector would be less residualised than it is now because our tenants would be less reliant upon benefits to make ends meet. There would not exist the same problems of worklessness and all the social problems that go with it.
I think the history books will judge this switch of subsidy from property to people to be one of the most stupid policies of any government in any period, ever.
One of the frequent arguments put forward by countryside campaigners opposed to house building is that greenfield sites are needed for food production. According to this argument, new homes will endanger our ability to feed ourselves in the future.
The first response to this is that we don’t need to be self-sufficient in food. We are not a peasant economy. Of course, we need to think about air miles and local food production but short of a blockade by sea and air the UK is a modern trading nation that can import food from all around the world. Agriculture contributes less than one percent to UK GDP even though it takes up the vast majority of our land. We are much better at making and selling other thngs.
But if you look at a detailed analysis of land use in England you soon realise that there is another aspect to this argument. Ninety per cent of England is countryside – around 12 million hectares - but only 8.9 million hectares, or 74 percent, is actually used for agriculture, and around half of this is grazing land, mainly occupied by sheep and cattle. However, some of it is also occupied by horses. In fact, when you start to look at the statistics for the horse population some interesting figures emerge.
The estimate for the number of horses in England ranges from 600,000 to 1.1 million but no more than 20,000 of them are professional animals – i.e. involved in the horse-racing industry, eventing or dressage. According to the British Equestrian Trade Association an estimated 3.5 million people ride each year and the vast majority are leisure riders - and 75 percent of them are women and children. But there is also a problem with surplus and unwanted horses, with many reports of horses being dumped on land around the country.
According to the British Horse Industry Confederation, the average land grazed by each horse is one hectare. So even using a very conservative estimate, at least 600,000 hectares of England’s countryside is occupied by horses, and probably a lot more. To put this into context, this is almost HALF of the of the 1.3 million hectares of England that is built upon. What’s more, with the exception of a few rogue burgers, horses contribute precisely nothing to our food chain.
So just to be clear, horses occupy an area of land that is almost half the built up area of England. That is enough for 18 million homes! Most horses are grazed on land that may not be suitable for agriculture. In my previous blogs I have suggested that we need to build 3 million homes on greenfield sites over the next twenty years. In other words, just one seventh of the land currently used by horses could be built upon and it would have no impact upon food production whatsoever. This nails the argument that loss of greenfield land means loss of food production.
Now I have nothing against horses. I am sure they provide endless pleasure for millions of people, but we have to ask what our priorities are?
Drive around the north-east section of the M25 and you will see hundreds of horses grazing on scrubland that could accommodate thousands of new homes. Yet this is green belt land that is supposedly providing some kind of amenity value for Londoners. I don’t think so. Just a few miles away people are sleeping on the streets or in beds in sheds. You have to ask whether this is a wise use of resources. As I have argued before, one way to improve tackle affordability and homelessness in London would be to extend outwards towards the M25.
But this is not an argument about horses vs houses. Just a fraction of this unproductive land could meet our housing needs for generations to come.
“Housing is the soul of the Labour Party” says Jack Dromey, as he pledges that housing will be at the heart of Labour’s agenda for 2015. According to Dromey, Labour will “…rebuild this country, get our construction industry working again and give families a chance of owning a decent home for their children just like their parents did before them…because a decent home at a price people can afford is so essential to leading a healthy, happy life – and right now, too many people have to struggle too hard and too long to achieve that or it is simply out of reach.”
Ed Miliband has also evoked the memory of Clement Atlee in his ambitions for the next Labour government.
Two cheers for all of that. Unfortunately the rhetoric coming from the Labour Party is not matched by their thinking.
Take Ed Miliband’s latest wheeze that housebuilders who hoard land should have it taken away. “There are firms sitting on land, waiting for it to accumulate in value and not building on it. Land-owners with planning permission will simply not build.” he says.
There is little or no evidence for this. Kate Barker found no evidence for it nearly ten years ago and neither did the OFT more recently. House builders are sitting on land with around 3 years’ supply, which is quite normal given the protracted delays built into the planning process. What’s more, what would be the outcome of CPO action against housebuilders? It would tie the industry up in expensive legal action and who will develop the site at the end of the process? Another house builder? A housing association? In the meantime, nothing would be built. In fact, a Land Value Tax would be a far more effective way of shortening the timeline from acquisition to completion. But we also need a Royal Commission to look at the house-building industry as a whole, to investigate the cartel and to bring in more innovation and competition.
But the rhetoric coming from Miliband and Dromey obscures the fact that Labour is not putting forward any concrete proposals about public investment or showing any ambition about a massive boost to housing numbers, by announcing a programme of new settlements, for example.
What worries me more is that Hilary Benn, Dromey’s boss, has been spouting off about the planning system in a way that will have a completely negative impact on house building. Take this article in the Telegraph. Benn seems to think that a localist approach to planning will deliver the homes we need. He writes, “…we have to make localism really work. Local communities should decide where they want new homes and developments to go and then give their consent in the form of planning permission. It’s the difference between having a say and having it done to you…I don’t think that if given that power, communities will ignore the needs of young people and the nation as a whole”.
But this is precisely what communities always do! I’ve written here several times about the ingenious and well-organised campaigns run by nimbys against house building. Housing needs are rarely mentioned. Is Benn not aware of surveys showing that a majority of people do not see that there is a housing crisis in their local area? This recent poll from MORI, for example, shows that whilst 80 percent of people believe there is a national housing crisis only 44 percent believe there is a local crisis. Benn is deluding himself if he seriously believes that localism will deliver the 5 million homes we need to build over the next twenty years.
And why is he writing this nonsense in The Telegraph, home of the ludicrous “Hands off our Land” campaign, other than to appease the nimby vote?
Can you imagine a localist approach being applied to nuclear power stations or prisons? None would ever be built. New housing is barely more popular so why does Benn imagine that existing homeowners – who predominate in planning consultations and campaigns – will vote for new homes in their area? The fact is that there are times when governments have to govern in the national interest and make tough decisions that will not please all of the people all of the time. Putting the responsibility for new homes on communities is simply a short-sighted cop out. Nick Boles has shown a much greater degree of understanding of the realities of the planning system than Benn - to the extent that we now have the bizarre situation of a Tory Planning Minister being more hated by nimby campaigners than the Shadow Secretary of State. This is the world turned upside down!
Even more worrying is another story in The Telegraph where “Labour sources” say that a Labour government would abolish the NPPF. The shadow planning minister is also threatening to abolish CIL and section 106. This is bonkers. The NPPF is bedding in and all the evidence indicates that the Planning Inspectorate is taking a robust approach towards foot-dragging local authorities. Adding further uncertainty and delay into the planning system is the last thing that our sector needs.
Ed Miliband really needs to get a grip on his team. If he really wants to evoke the spirit of Clement Atlee and Aneurin Bevan he is not going to do it with Hilary Benn at the helm.
The latest affordable housebuilding statistics for 2012/2013 from the HCA and the GLA make for interesting but fairly grim reading.
As expected, the “affordable” homes programme is starting to make a significant impact. For 2012/13 it comprised just 19 percent of completions, against 39 percent for social rent. But the balance is switching fast. During 2012/13 “affordable” home starts-on-site comprised 64 percent of the total programme, compared to just 13 percent for social housing. (The four programme headings are affordable, social, intermediate and home ownership).
Interestingly, 36,000 homes in total were both started and completed in 2012/13 but this still represents a signigificant fall from previous years. There has been a 35 percent decline in the overall level of completions from two years ago, when 56,000 completions took place.
What I find puzzling, is the wide disparity between the HCA/GLA figures and the live tables produced by CLG. For 200/11 the CLG figures show that just over 22,000 “permanent” homes were completed by housing associations in England, compared to the HCA and GLA statistics showing 55,909 - i.e. more than double the CLG figure. Is this because the GLA and HCA are including renovations of existing properties and purchases of existing homes through First Buy? If so, the figures are rather misleading, as they are not adding to overall supply. If any statistics’ experts are reading this I would be grateful to understand the disparity.
The overall message is that the construction of traditional social housing is passing into history, and being replaced by a product that is probably unaffordable to most working people. A year or so from now some research should be commissioned on the impact of the “affordable” homes programme, in order to test a few key questions. How many of the tenants occupying “affordable” homes are of working age and able to work? How many have been dissuaded from entering work because of the high level of rent? How many are reliant upon housing benefits? Most importantly of all, what has been the impact on the housing benefit bill and would it have been cheaper to the public purse to put the subsidy into social housing rather than this more expensive (to the consumer) product? My guess is that, like the switch from bricks and mortar to personal subsidy, which has been a major cause of the housing benefot bill soaring to £23 billion, the affordable homes programme will prove to be a short-sighted and financially inept policy.
Sir Simon Jenkins is at it again. Having proclaimed “victory” in the battle over the NPPF last year (a hollow one as it turned out), the chairman of the National Trust now wants to extend rigid planning protection to even greater swathes of the English countryside.
In his latest Telegraph article Jenkins claims that “British planning has become a war zone to a degree I have not seen in my lifetime. This has nothing to do with growth and even less to do with housing need.” He calls for a grading system for ordinary greenfield sites and attempts to play down the extent of existing protection by claiming that, “Already some 15 per cent of England and Wales is national park, green belt or within areas of outstanding natural beauty.” This is simply not true! The true figure is 37 percent for England and around 20 percent for Wales. If you add in SSSIs a staggering 44 percent of England’s land mass is protected, and all of this land retains its protection under the NPPF, apart from a few tiny slivers of green belt. Why is Simon Jenkins allowed to spread untruths in a national newspaper?
Contrary to popular myth, only around 10 percent of England is built upon and much of this is open space and gardens. This leaves 46 of England as unprotected countryside. But let’s be absolutely clear – it is this 46 percent that Jenkins is talking about. He wants to grade land according to its “beauty”. How much land does the countryside lobby want? This would be the start of a very slippery slope and should be robustly resisted.
You may remember that Boris Johnson was slated when he claimed that coalition reforms could lead to Kosovo-style social cleansing in London. Yet Sir Simon Jenkins is proposing something similar in the countryside. Recently he said that young people growing up in rural areas had no right to live near their parents. They should move to the towns instead. “Are you going to say that people who have lived in the Windrush Valley [in the Cotswolds] for 100 years have a right to go on living there? No, I’m afraid they don’t. Sorry.”
I don’t know about you, but I resent being lectured on housing issues by multiple–home owners like Jenkins and his former Director General Dame Fiona Reynolds. It puts them on a par with intellectuals from the past like C.M. Joad, Sir Patrick Abrecrombie and Sir Clough Williams-Ellis. These people despised the urban masses, hated tinned food and bungalows and wanted to see the proles hemmed into urban areas so that the countryside could be enjoyed by the few and not the many. Nothing has changed. It is class war through the planning system.
Take the green belt. Its principal function is to to contain the urban population into towns and cities and prevent “sprawl”, but in the process it requires millions of people to commute millions of miles every year just to get to work. Yes, we need dense and compact cities but they must reflect economic and social realities. In 1875 Octavia Hill proposed a green belt around London. If it had been implemented it would have left our capital as a global backwater, with Cricklewood and Stratford stuck in countryside. The green belt is a denial of history – it stifles progress and causes more problems than it solves. Of course we must protect and preserve the best landscapes but a significant part of the green belt consists of land with little aesthetic or agricultural value.
At the risk of repeating myself, the countryside lobby is guilty of gross scaremongering and hyperbole when it describes the threat of new housebuilding. Most commentators agree that we need to build around 250,000 homes a year in England over the next 20 years to meet household growth and past under-supply. That’s 5 million new homes, of which no more than 2 million can be built on brownfield land. But how much countryside would the additional 3 million homes take in reality? At a conservative estimate of 30 to the hectare it would require 100,00 hectares or 1,000 square kilometers. That sounds a lot but it represents just 1.66 percent of the 60,000 square kilometres of “unprotected countryside I described above. And once those 5 million homes had been built guess how much of England would be built upon? It would increase from 10 percent to 10.7 percent, with almost 90 percent of England retained as countryside, much of it protected. So much for “concreting over the countryside”.
In the heated debate over housing and land we need facts and rational argument, not emotion and hyperbole. Jenkins and his ilk need to be challenged and bearded in their lairs, because they are the vanguard of Nimbyism and Nodamism (No Development after Mine). The truth is that every single person in this country lives in a place that was once countryside. As our brave Planning Minister, Nick Boles, has pointed out, “building homes brings more human happiness than preserving fields.” He’s right and we should repeat it loud and clear.
There’s a housing war going on in North Essex between Uttlesford District Council and the residents of Saffron Walden. Or at least that was the picture painted by the BBC in last night’s edition of “Town” with Nicholas Crane. It showed protestors lining up to condemn the Council’s draft local plan, which will see up to 1,200 homes being built on Saffron Walden’s eastern edge. The Council’s first stab at a plan had proposed a new settlement near Elsenham as a way of soaking up its housing targets, but residents there opposed it so Uttlesford switched tack to a policy of dispersal, requiring each major settlement to take its share of housing.
If you don’t know Saffron Walden (population 15,000 and named after the stigma of the crocus plant), it’s one of the finest medieval market towns in England, with excellent schools and a very high quality of life. And that is part of the problem – people are queuing up to live there. It is now more of a dormitory than a market town – thousands of its residents drive to London each day or drive to Audley End station, two miles west of the town, where they take a 50-minute train to the City. A local estate agent interviewed by Crane claimed that 50 percent of his buyers came from London. The shop at the station sells top quality wine, including £400 bottles, that are snapped up by returning commuters.
So, in a nutshell, a town that houses mostly incomers does not want any more incomers coming in to spoil their idyll. That is the nimby paradox laid bare. To be fair, the opposition group, called WeAreResidents, (what else could they be?) is well organised and their literature is simple and effective. They argue that the M11 and Audley End lie to the west of Saffron Walden so residents from the new homes will have to rat run through the town, causing gridlock and damage to the historic town centre. But like most nimby groups they largely ignore issues of housing need (other than to push for a new settlement elsewhere!) and clothe their opposition in fears about congestion, pollution and infrastructure when the naked truth is they simply want no development at all. Apparently, 99 percent of those who responded to the Council’s questionnaire opposed the new homes, although my guess is that most of these respondents were middle-class and older homeowners, the same demographic that tends to engage with the planning system nationwide.
Luckily, Crane was able to interview a couple of young people at the town’s skate park, which will be extended if the new homes go ahead. They were more positive about growth, claiming it would regenerate the town and bring more diversity. “We want everyone to enjoy the town…Saffron Walden is its own little bubble…a lot of people in the town are stuck in this market town ideal” they said (see 59.30). Yet voices like these are rarely heard in planning debates.
But the situation in Saffron Walden is typical of most prosperous towns in the south-east where development is proposed. The key issues are not just a lack of homes but an imbalance between homes and jobs exacerbated by the pernicious impact of the London employment and housing markets (too many jobs, too few homes) creating a commuter zone that stretches from the Isle of Wight to Lincolnshire and beyond.
This brings me to my main point. I sometimes hesitate to use the term nimby because it is a pejorative American import (and no sane person would support development in their actual back yard), but it has come to be used as a shorthand for selfishness and small c conservatism. Yet if I lived in Saffron Walden I am sure I would be torn between my knowledge of national housing issues and my desire to preserve the distinct identity of the town. But for now, the battle lines have been drawn, passions are aroused and there is probably little room for compromise on either side. For WeAreResidents the issues are about Council duplicty and incompetence, and arguments about the desperate need for new housing are not being heard. Yet surely there must be better ways of conducting national and local planning consultations in order to avoid these adversarial shouting matches? Government and local authorities need to think about new ways of engaging with all of their populations, and not just the usual suspects, about the need for new homes. Opponents of housing developments need to be persuaded to see the bigger picture – to be moved away from narrow nationalism towards internationalism if you like, and away from their own short term interests. All of us, after all, live in places that were once virgin countryside. Above all we need to do more to understand the psychology of nimbysim and to come up with better and more creative ways of facing up to it. This is something I shall return to in future blogs
I met with the Intergenerational Foundation last week. They were established to research inequalities between the generations and to campaign for government policies that are fair to all generations - whether old, young or those yet to be born.
Nowhere is intergenerational inequality more pronounced than in housing markets. Our man-made housing crisis is principally about supply, and hence affordability, but a secondary, and extremely worrying aspect of the crisis is the unfair distribution of accommodation and property between the young and the old.
Older people who bought their homes twenty or more years ago had the benefit of relatively low house prices and many received MIRAS until its abolition in 2000. But they also reaped the rewards of raging house price inflation, which has outpaced general inflation by a factor of four. My own history highlights the advantages enjoyed by many people of my generation. I bought a flat in Hackney in 1983 for £27,000 and sold it for £85,000 in 1988 buying a house in Cambridge for £79,000 that is now worth around £450,000. So in crude terms my initial investment has grown five-fold over a 30-year period. The younger generation has been largely excluded from this bonanza unless they have managed to secure very well paid employment or had the benefits of parental largesse. Back in the eighties, house prices were around three times the average salary, but average incomes are now £26,500 and the average house is priced at £235,000 – so a ratio of 9 times the average salary. The average deposit required to buy a home is now £27,000. Generation rent is the result of this growing level of house-price unaffordability.
But this gap between the generations is growing. According to the English Housing Survey the proportion of home-owning people aged under 35 has declined from 15 percent to 10 percent over the past ten years, and the proportion of owner-occupiers aged 35 to 44 has declined from 22 percent to 18 percent.
Savills estimates that the over-55s in England now own around 64 percent of all housing equity – amounting to £1.6 trillion, whereas the under-35s own less than 5 percent of total equity - about £110 billion. This is a scandalous level of inter-generational inequality. I am constantly surprised by the lack of anger and activism among the younger generation about their housing situation, although there are signs that this may be changing, as Jules Birch reported recently, and groups like PricedOut are growing in size and influence.
Elderly owner-occupiers are also more likely to “hoard” spare rooms and to occupy property that is much larger than their needs, with few incentives to downsize. But this inequality also exists in the social housing sector, where older people are also much more likely to under-occupy their properties to the disadvantage of those stuck in overcrowded properties or waiting on housing registers
This inter-generational divide is blighting the lives of millions of young people who are having to spend a much higher proprtion of their income on private rents. But it also puts pressure on the older generation who may feel guilty about their disproportionate levels of wealth and feel that their younger relatives are putting them under pressure to downsize or hurry up and die. It’s very Dickensian!
According to the Intergeneration Foundation, this disparity between the old and the young could be tackled by a range of policy initiatives, including changes to the planning system to increase the supply of smaller homes for older people, ending some universal benefits for wealthier older people, abolition of council tax concessions for single occupancy, ending stamp duty for those who downsize and a property or land value tax to encourage more efficient use of property. Whatever the answers, if policy and law makers wish to avoid rising levels of protest and civil unrest they should be paying more attention to this growing intergenerational divide.