All posts tagged: housing strategy
If the government wants to encourage larger housing associations it must also address stock rationalisation, argues Colin Wiles
One section of the recently published housing strategy caught my attention. On page 25, it states that the economic regulation and value for money regime for housing providers “could result in more sub contracting of services, partnership working and mergers”.
Ten years ago I wrote an article for the now defunct “Housing” magazine, called “Dawn of the Monster Age”, which looked at the rapid growth of larger housing associations. It seemed to me then that Thatcher, through the Right to Buy and stock transfer, had sought to break up large monolithic council housing departments, only to replace them with even larger (and less accountable) monolithic housing associations spread across, in some cases, scores of local authority areas. At that time the first 50,000 home landlord was some way off, but ten years on and we await the first 100,000 home landlord in England. Over the past decade growth has continued unchecked and the geography of stock ownership and management is now both stupid and unsustainable. Yet stock rationalisation to deal with this absurdity has been more or less ineffective to date. There have simply been no business or regulatory imperatives in place to make it happen.
Which is not to say that small is always beautiful either. Of 1,500 housing associations nationally, 1,100 own fewer than a thousand homes, mostly located in a specific geographical area. That fits well with the localism agenda and the provision of a responsive local service, but there clearly needs to be a balance between size and efficiency. With two thirds of tenants on housing benefit it means the taxpayer, and other tenants, are paying a disproportionate amount for the overheads and salaries of smaller providers. I know of one housing association where every tenant is paying the equivalent of £4 a week for the chief executive’s salary alone. That is neither rational nor ethical. My gut feeling is that the minimum size for housing associations should be around 2,000 homes. Housing staff and contractors driving hundreds of miles to distant properties makes no economic or environmental sense when an alternative smaller provider may have an office around the corner. If the revised economic regulatory regime aims to force smaller providers to merge it should also aim to force effective stock rationalisation, so that smaller providers can become more viable by taking on the local stock of absentee landlords.
Well, it’s not really a strategy, to begin with. A strategy is a master plan that identifies a problem, sets goals and marshalls the resources that will be needed to meet them. Within the strategy there will be a series of plans and tactics that contribute to the overall strategy.
A proper housing strategy for England would be a radical long-term vision, setting out how we restore balance to the failing housing market, how we green our homes and create sustainable and prosperous neighbourhoods, how we meet the needs of a growing population, how we reform the housebuilding and mortgage industries and how we provide housing to the most vulnerable. Today’s “housing strategy” does none of these things – it is merely a jamboree bag of short-term tactics that fail to address the big structural issues in housing. The strategy rightly identifies some of the problems with housing supply and it is great to see a Conservative-led government highlighting the economic benefits of housebuilding, but this is primarily a Treasury document that sees housing growth as a way to stimulate the economy. The strategy aims to “unlock the housing market” and get Britain building again, which rather ignores the fact that it was the housing market that got us into our present mess in the first place! Reviving a failing housing market is going to lead to the same old boom and bust.
The strategy says, “To kick start housebuilding we need demand from first time buyers and others.” No we don’t! Demand without supply merely creates inflation. Supply first, then demand.
But the proposals for increasing supply are mostly a re-hash of what has gone before with a dash of half-baked optimism. Underwriting 95% mortgages (Barclays already offers a 95% mortgage) will allow “up to” 100,000 households to buy. (That doesn’t build any new homes on its own.) The First Buy scheme will help “almost” 10,500 first time buyers into the market. (Ditto.) Releasing public sector land will provide capacity for “up to” 100,000 new homes (who will build them?) Cutting right to buy discounts is unlikely to produce 100,000 new affordable homes. It’s not clear how the Growing Places fund and the Get Britain Building Fund will increase housing supply. Is this public money? The strategy isn’t clear. Community right to build and neighbourhood plans are all covered in the Localism Act and the draft National Planning Policy Framework. One of the few new initiatives in the strategy is the proposal that developers should be able to re-negotiate section 106 agreements that were put in place during the boom years. That certainly won’t increase the supply of affordable homes!
The strategy points out that households are likely to grow by 232,000 per annum for the next twenty years. That means we should really be building 250,000 new homes every year to recover past under-supply and meet future demand. I don’t see anything in this strategy that will boost supply to those levels. The NPPF is our only hope, but that really needs to be backed up with regional or national housebuilding targets that are rigorously enforced by planning inspectors.
The strategy also says nothing about the principal problem of our housing system – the fact that we see housing as an investment, rather than as a commodity. In our hearts we know that house prices and rents need to experience a long-term decline so that we can start to invest our surplus cash in things that that actually help the economy to grow, rather than in meaningless bricks and mortar. I realise of course that no serious politician could ever propose such a long-term plan!
Moreover, the strategy says nothing about the monolithic housebuilding industry, which bears some responsibility for the current crisis. Mergers and acquisitions have created an industry that cares more about margins and profits than meeting demand. The number of smaller housebuilders has fallen significantly and the industry needs to be broken up and re-formed with assistance for smaller firms. The same applies to the mortgage industry, which needs to be broken up so that smaller lenders and greater competition are encouraged.
More analysis will follow in the coming days and months, but these are my initial thoughts.