Thursday, 05 March 2015

Market stalls

From: Inside edge

Fascinating and contrasting moves on housing this week from two of the most important politicians in London.

First, Stephen Greenhalgh announces he is standing down as the Conservative leader of Hammersmith & Fulham leader and hoping to pioneer a new neighbourhood budget for the White City Opportunity Area. 

Then Ken Livingstone reveals another two planks in his platform as Labour candidate for Mayor of London: a campaign for a London living rent; and a London-wide lettings agency. He explains more in a piece for Inside Housing here

Both are interesting in their own right. Greenhalgh is not just an influential council leader but one of the theorists behind much Conservative market-based housing policy thanks to his co-authorship of the Localis pamphlet Principles for Social Housing Reform in 2009. He became the pantomine villain of that year’s Labour party conference. 

And Livingstone clearly believes housing can be a powerful weapon in his campaign to regain the mayoralty from Boris Johnson and his questionable claims about affordable housing.Put them together though and you have starkly contrasting visions of the future of housing both in the capital and in the nation as a whole.

The White City Opportunity Area is a huge regeneration project that includes industrial land north of the Westfield shopping centre, the old BBC television centre and a potential new university campus as well as council estates. It’s the second most deprived neighbourhood in the borough and a far cry from the well-heeled Town ward that Greenhalgh represents.

More than half of the housing is social rented compared to just under a third in the borough as a whole.The housing strategy promises ‘no net loss of social rented housing in the area’ though the intention seems to be to break up the estates into more mixed residential areas. Hammersmith & Fulham’s statement on Greenhalgh’s departure refers to £70m - or £17,000 per household - being spent in the area per year. 

Greenhalgh says: ‘I do not think the people of White City are getting value for money out of that £70 million, nor do I think are wider taxpayers. I want to focus that money on getting much better outcomes for people living there and ensuring that the neighbourhood is fully involved in how that money is spent.’

What better testing ground could he find for the belief stated in the Localis pamphlet that ‘council estates have become the very things that they were designed to replace – social ghettos – trapping their residents in a vicious circle of dependency’?

Today’s statement by Ken Livingstone is an attempt to open up a new front in the battle with Johnson, this time focussing on the squeezed middle of hundreds of thousands of Londoners who do not qualify for social housing and cannot afford to buy. So he will establish a campaign for a London Living Rent - a benchmark that people should pay no more than a third of their income on rent.

In more than half of London boroughs Londoners are paying on average over 50 per cent of their incomes. We should be doing everything we can to get that number down. Many people in reasonably well-paid jobs are seeing their incomes absorbed into their housing costs.

Learning from the success of the London Living Wage in arguing, cajoling, intervening and collaborating, the Living Rent Campaign will be a new way of making City Hall work for ordinary Londoners.

That would be backed up with a new London-wide lettings agency that ‘will put good tenants in touch with good landlords across the spectrum of private renting so that both can benefit from security of tenure and reduce the costs of letting’.

It would work with councils, landlords and tenants to develop a strategy to tackle rogue landlords, drive up standards and cut unscrupulous letting agents out of the market.It’s good to see a major politician from any party look to tackle what’s happening in the private rented sector but it’s not at all clear how the Living Rent plan would work. Johnson’s camp told the BBC that the mayor has no powers to introduce it and that in any case it would lead to fewer homes being built and disinvestment by landlords but he’s clearly felt moved to respond with his own plan to accredit 100,000 London landlords by 2016.  

However, Livingstone is promising to ‘campaign for’ a Living Rent - not actually introduce one. Just as Greenhalgh will be putting his theory that council housing breeds deprivation to the test with market-based solutions, so Livingstone’s pledge is a first, tentative challenge to the view that the market can be left to its own devices. 

Readers' comments (15)

  • F451

    Just the reverse Melvin; Blair begged the Mayor to become a Labour one after Livingstone destroyed Labour in the ballot box.

    Ken remains the only Independent Mayor of London, which is probably why he backed the now Independent Mayor of Tower Hamlets so strongly.

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  • Jon Southall

    The private rented sector is the pantomine villain isn't it?

    Social housing and private rented housing are two separate products.

    The Government wants to meddle with Private Rented and turn it into social rented housing - or at least try and converge it towards that. It will not work, and seems quite an unjust way off putting up a smokescreen, to hide quite a big failure.

    That failure is by social housing providers, for not increasing supply to meet demand. And what are the causes of that failure? Hardly individuals in the private sector.

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  • F451

    Absolutely Jono, private landlords far from being the cause are the beneficieries. That was always the intention and plan of government to so dilute, and wreck the social sector that however bad or expensive the private sector would move towards being viable.

    Now the private sector is such a large recipient of tax payer sourced funds, it is only logical that government bean counters will be let loose on them too.

    The easiest way for the private sector to avoid such invasion is to stop supping at the social funded cup.

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  • Jono seems to think that social landlords have an endless pot of money to spend on building new homes, improving old ones and bringing all up to Decent Homes standard. I work for a social landlord and there is no such pot of money. We spend as much as we can within the confines of governement grant levels, cost of borrowing, cost of managing estates, and expenditure necessary to keep communities together.

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  • Jon Southall

    "The easiest way for the private sector to avoid such invasion is to stop supping at the social funded cup."

    F451 - how would the Private Sector go about that? Perhaps it should not make homes available to benefit claimants - but I don't think you'd be in support of that action.

    Tolerated trespasser - You are saying that social landlords are not able to provide good homes and services, and expand supply as required. They need help from the Government to do so, you say, but are otherwise doing everything they can.

    If that is so, you must accept that the supply of social housing is at its maximum possible. There should be an end to protest at what is happening to market rents - as the Government cannot afford to allieviate demand, neither can social landlords.

    The use of force against private landlords to affectively force them to provide social, sub-market rents is not legitimate. The result will be fewer homes - something I think that none of us want.

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  • F451

    Actually Jono I would - now who would blink first, the government by acting to build house and regulate rents, or the parasites to make up their lost £Billions.

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  • Jon Southall

    I imagine the newly homeless would be the worst hit...

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  • F451

    No - they would be homeless, so no worse off than either being homeless or being a cashcow for a private landlord.

    Odd that you are wanting protectionism for the 'free marketers' Jono.

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  • Jon Southall

    But in order to cease 'supping', private landlords would have to evict all current benefit claimants living in their homes, and unless you have a couple of hidden cities tucked away somewhere, they would be made homeless.

    You should know me well enough that I have no desire to protect one collective or any another. I have expressed the view previously that benefits are bad and distort markets and it appears you now agree with me. The benefits are claimed by individuals who are eligible - it is that eligibility that gives rise to the claims we are seeing. Protecting that eligibility (as all those who were opposing the caps etc were doing) actually protects those private landlords who profit from it. Those private landlords profiteer from a benefit, the withdrawal of which is regarded as unethical. Creates a tough situation politically.

    So what is the solution? Changing the eligibility terms - by introducing upper limits on claims etc, so no claimant is affording costlier residences than the average employed person can, is one such way.

    My choice would be to scrap all housing benefits. Not overnight though. Personally I think a contract should hold unless breached - therefore changes to benefits should affect new claimants only; withdrawal of benefits would occur gradually over time as existing claimants become independent or sadly die.

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  • F451

    The benefit contract is renewable on a weekly (arguably daily) basis Jono - so scrapping a benefit is not a contractual matter. Otherwise you would still qualify for the scale of health care and welfare support that you did when you were issued with your NiNo, which clearly you are not.

    Again you are suggesting support for the notion that the way to deal with the excessive rents charged by the private sector is to remove the funds from those in need. It is not those in need who have the greed Jono.

    If the supposed aim of reducing top up payments to the lowest paid is to influence rents and so make them lower, why not take the more direct (and less damaging) approach and set a maximum value for the rent that may be supported.

    Why is the person in need of benefit being punished because of the monopoly supplier of the service that they need is overcharging. And it is akin to monopoly supplier for if the person in housing need refuses to accept the offered home then they lose their access to housing, and if the Council fail to offer the home they fail their legal duty. The tenant is subject to the law, the Council is subject to the law, the only party not subject to regulation in this matter is the landlord - therin is the problem, and benefit capping is not addressing the problem.

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  • Jon Southall

    F451 - I think you can understand my point; that the introduction of caps or different eligibility terms, should be introduced to new claimants and not applied to existing claims that were determined on separate terms.

    If the rents are excessive, and tenants are claiming to match them, then those claims become excessive in equal measure. Capping claims to what is reasonable ensures tenants who do claim, do not pay excessive rents.

    How is preventing excessive claims an attempt to hurt claimants? By preventing them, you also influence the behaviour of some private landlords, or even their existence as a provider.

    Whilst I support withdrawal of welfare support including housing benefit (not just, but mainly because the state has a very poor track record), this is not to harm those who need support, but to free up those who are willing and able to help them to do so.

    I can't help but think you are refering to private landlords with short lease agreements with LAs, or via HAs in particular. I hate these schemes too - but again the leases are much to blame and who created them?

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  • F451

    It is hurting claimants as they either lose their home, or use their noted low income to make up the gap. If that income could bridge such a gap then the benefit would not have been needed.

    Only when sufficient people are left on the streets will this effect rent values - whilst the properties remain full the policy will be creating an underclass and worse.

    What is so very wrong with achieving the reduction by saying to a landlord - sorry but that £290 per week you are charging is a little excessive, could you reduce it to £275 so we can all be happy, thanks old chum! I mean, it is not as if they would be asked to reduce the rent to the social £100 or so, is it.

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  • Joe Halewood

    All 'markets' operate under conditions and there is no such thing as a totally free market. For those that diagree with that statement please provide an example of a totally free market.

    As it relates to this discussion: -

    Grant Shapps the housing minister has repeatedly refused to regulate the private rented sector and the recent Housing Strategy was a chance to change that, yet it didn’t. The reasons why it should be regulated are numerous (as anyone who watched the recent Channel 4 week-long programmes will agree) yet I will focus on just the cost of non-regulation as the facts below fly in the face of Shapps assertions that regulating the PRS will cost more.

    The official HB figures released 14 December 2011 show 1,582,830 HB claimants live in the private rented sector (PRS). This figure comprises:
    1. 43,990 REGULATED tenancies (2.8%) that each receive £80.30pw in benefit as a national average,
    2. 1,305,400 UNREGULATED tenancies (82%) that receive £112.01 in LHA and
    3. 232,560 UNREGULATED tenancies (15.2%) that receive £102.80 in HB.

    These figures show each unregulated LHA property (2) receives £31.71pw more than (1) and unregulated (3) receive £22.50 more than regulated (1) and so UNREGULATED properties in the PRS receive £2.43billion more per year in benefit that the equivalent number of REGULATED properties.

    We the taxpayer, pay out £2,432,921,588 more per year to these unregulated properties than we do for regulated ones.

    The regulated tenancies at £80.30pw HB must make money else they would not still be offered for rent and so why do we all pay this huge ADDED COST for these unregulated (ie unchecked, un-monitored) properties than we do for regulate ones.

    The cost of not regulating the private rented sector is therefore over £2.43 billion per year to the taxpayer as at December 2011 HB figures which state the position at end of September 2011.

    These unnecessary costs in context – or what would £2.43bn+ pay for

    1. It would pay the yearly dole costs of 690,778 people

    With JSA/IS set at £67.50 pw or £3522 per annum and with 1.6m unemployed and claiming dole that is 43% of the national yearly dole bill

    2. It would pay the support costs of 1.5m vulnerable people for 18 months

    The yearly SP bill is £1.6bn and so we spend 50% more each year paying additional profit to unregulated private landlords than we do to support homeless persons, those fleeing violence, those with mental health, drug, alcohol, learning, physical and sensory disabilities and older persons in sheltered housing.

    3. It would pay for an additional 18,500 NHS beds in hospitals at £360 per day

    4. It would fully pay for an additional 37,500 new council houses per year at £65k build cost which in turn would save a further £80m per year in HB costs

    Remember the alternatives above are just for the ADDED costs we pay for unregulated private properties over the cost of regulated ones.

    There is no justification for the added costs we the taxpayer hand out to private sector landlords and Shapps has no justification not to regulate yet provides no explanation for his errant and off-hand assertion that it would cost the public purse more.

    5. The added costs of not regulating mean that every taxpayer in the UK is paying £110 MORE per year in tax just to pay these added and unnecessary profits of Shapps friends’ the unregulated private landlord.

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  • Jon Southall

    "What is so very wrong with achieving the reduction by saying to a landlord - sorry but that £290 per week you are charging is a little excessive, could you reduce it to £275 so we can all be happy, thanks old chum!"

    But you aren't asking 'could you reduce it to £275' - you are saying 'you may not charge more than £275'. The difference is one includes choice - the other doesn't. What is stopping a prospective tenant from negotiating £15 off of the rent?

    Joe - you'll need to clip your posts I fell asleep after the first paragraph.

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  • F451

    "What is stopping a prospective tenant from negotiating £15 off of the rent?"

    How do you negotiate with a parasite - try saying to a leech ' could you suck a little less blood this week ' it will not respond - it needs to be removed and preventative measures introduced to prevent the little sucker getting another foothold.

    Where are the private landlords promoting lower rents as their part of social responsibility - no instead we have the bleating and moaning that they can't afford to make a living if they don't get the maximum rent, and that they need to put them up, get higher deposits and key money etc.

    Please Jono - produce the landlords who behave as per your ideal world.

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