Another bad idea from Policy Exchange

PE freeing housing associations

Policy Exchange won’t be expecting a good reception from Red Brick for their latest housing proposals. Our opposition hasn’t stopped the coalition from adopting some of their past ideas, but their latest one is bad even by PEx’s standards.

It’s not surprising that Freeing Housing Associations has had a drumming, not least from Tony Stacey (presumably one of the housing association leaders they hoped to convince). It’s already been expertly dissected by Colin Wiles and Jules Birch, so Red Brick can step back from the detail and take a broader view.

The report’s starting point is the current development regime, in which new homes must be let at near-market rents and chunks of existing stock must also be let at higher rents. The report ignores the resultant decline in the social rented stock, exacerbated by rising right to buy sales, which has been highlighted in Red Brick and elsewhere. Some of the big housing associations – not, to their credit, all of them – have also been oblivious to these effects and are still willing to build houses on the government’s terms. And, surprise, surprise, they are the ones who also (perhaps behind the scenes) support Policy Exchange and its ideas. Key for them is a future in which they’ll have freedom to set their own rents and allocate their own properties. Given their powerful financial positions, they’ll happily pay the price of getting less new grant and having to buy out their old grant. As they see it, they’ll finally get the chance to break away from an irksome regulatory regime and cater for more profitable parts of the housing market.

Almost coinciding with the PEx report came one from JRF on what the housing market will look like in 2040. It asks who will house the poor, especially as absolute poverty has, since 2010, been rising for the first time. It points out that, if social rents were to rise to 65% of market levels, the housing benefit bill would increase by 125% and 1.5 million more people would be poor. JRF and NHF are producing a report in the New Year aimed at developing a genuinely affordable rent linked to earnings for those on low pay. They are calling this a Living Rent, and it will include costed proposals for how such rents would work. It will represent the polar opposite of the Policy Exchange proposals.

Freeing Housing Associations doesn’t address this crucial issue. Neither did the NHF’s response to the report, which insisted that associations ‘must’ be able to set their own rents and decide who to let their homes to. While David Orr welcomed ‘this critical debate’, his own stance was very clear. Tony Stacey and Placeshapers are quite right to point out that, in this respect at least, he doesn’t speak for all housing associations: but it’s pretty obvious he thinks he’s speaking for some of the big ones.

These associations think of themselves as dynamic businesses which can only prosper if they have more ‘freedom’. Yet for several years they’ve enjoyed a benign environment of guaranteed above-inflation rent rises, underpinned by HB paid directly to them, combined with low interest rates. How many businesses have that kind of certainty? Yet their surpluses don’t represent the sort of returns that major equity holders in a company would expect. Since the scrapping of the TSA they’ve also enjoyed light-touch regulation yet PEx claims they suffer from a ‘byzantine system of regulatory rules and financial constraints’.

To be fair to Policy Exchange’s supporters, we must admit that this debate was sidelined by the recent Lyons report, when it should have been central to it. Building 200,000 new homes per year is vital but equally important is ensuring that a high proportion of them are let at rents that can be paid by families on low to middle incomes. While Lyons called for 50,000 new homes from social landlords, he was much less clear on the implications for rents. Indeed, chapter 9 of his report hosts a mini-debate which anticipates some of the key PEx proposals. Arguments for flexibility over both rents and allocations are put forward and are contested, but Lyons ends up recommending ‘discussions’ with the sector over a new rent regime. It’s true the report then points to the disadvantages of high rents and the arguments for shifting spending ‘from benefits to bricks’. But it was the former, not the latter, that was turned into one of its recommendations.

My only disagreement with Tony Stacey and Placeshapers’ views of the report is therefore that they are too polite, ‘welcoming’ the debate that the report has provoked. The housing lobby might have its debate, but the conclusions will matter little to ministers. It’s more relevant to see the PEx ideas as part of a softening up process for fundamental changes to the housing association sector of which the NHF ought to be very wary. While we know the Lyons Review wasn’t part of this process, its equivocation inadvertently left openings that would have been better firmly closed, rather than giving further encouragement to the ‘debate’.

Why is this all so dangerous? As we’ve seen, the housing minister has already turned the unpopularity of the 2015 Affordable Homes Programme into a presumed acceptance by associations that they don’t need grant. And now the sector itself helps a right-wing lobby group make the case, in what might appear to be convincing detail. Let no one be mistaken, if we have a conservative government in six months time a ‘no grant/high rent’ regime for housing associations is firmly on the cards. Protests about the increasing housing benefit bill will fall on deaf ears, because most of the expenditure falls under the new welfare spending cap. In other words, rents will go up, but state helps towards paying them won’t.

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Northern Lights

The establishment of IPPR North a decade ago was a tremendously innovative piece of strategic funding by a group of north east foundations. It was an inspired choice to base it in Newcastle rather than the ‘usual’ Manchester. The UK looks different from a northern perspective; but the north looks different from a Newcastle perspective.

The Institute for Public Policy Research has made an important contribution to political thinking and policy development in Britain. It is a vital counterweight to the large number of extremely well-funded free market think tanks. Even for those of us from the north now based in London it is not always easy to remember that there are massive differences between the English regions. It is truer than ever that one size does not fit all.

IPPRNorth10years-141112

The founding of IPPR North coincided with the north east voting against a regional assembly in a referendum. In my view, the people were duped: Labour failed to make the case for its own policy and the opposition swayed the public with their constant refrain that it was an unnecessary tier of extra bureaucracy that would just cost people money and achieve nothing. Timidity meant that there was not enough proposed devolution from Whitehall and not enough reform below the regional tier to reassure people about duplication. But it would have been absolutely the right thing to do. Devolution to the degree we have seen in London was the answer to the ‘West Lothian question’, and could still be. The current ideas that are around for devolution to city regions are exciting (even when supported by George Osborne) but they have to work for more than Manchester/Leeds – we need stronger proposals for the more peripheral areas, including the north east and the south west, and more rural areas.

Proposals for an English Parliament of some kind are little more than a power grab by the Tories. It would be a joke to have another Parliament for 85% sitting within a Parliament for 100%. Much as I loathe Johnson in London, the mayoralty has gathered many more powers and provided a real focus for policy in the capital: the other regions need something similar.

IPPR North’s 10 year review report, which has just been published, highlights the continuing challenges facing the north and the appalling legacy of deindustrialisation. It shows how northern cities have been falling behind their counterparts in other European countries, a process that has intensified since the recession. There is some good news: growth in Manchester/Leeds is the best known, but the report also spotlights the relative economic success of rural areas like Cumbria and Cheshire. Government policy has not helped: a dramatic map showing the cumulative impact of cuts in local authority spending power demonstrates just how heavily the Tories have penalised the north in favour of the south east. However, this is not a simple reflection of the north/south divide. Much of London is hit just as badly as Hull or Liverpool: it illustrates how the Tories have (and will) penalise the poorer parts of the country in favour of the richer. The deprived areas of the capital – and there are still many of them – have more in common with the cities of the north than they do with the global riches of central London.

On housing, the report reinforces the point that there is not a single English housing market, but many. The regions could not be more different from each other, some have had an intense surge in property values, others face relative stagnation. Average property values in the north east are around one-quarter of those in London. House prices in the north east are therefore the most affordable, even in relation to incomes, but there is also a much higher percentage of owners facing negative equity. As IPPR North conclude, the housing statistics ‘highlight the futility of applying housing policy from the administrative centre across widely different housing markets: blunt instruments like monetary policy, mortgage regulation, and housing taxation have very different effects on different parts of England’.

The underlying feeling of optimism that emerges from reading the report is down to the changing politics, especially involving Labour Leaders. Traditional highly parochial attitudes are breaking sown and authorities are co-operating with each other over larger areas, especially the metropolitans. IPPR North say that a different type of leadership is emerging in the north and there are many new forms of collaboration. Even so, their key message is that the north needs yet more leadership and stronger voices, and it needs them now. Scotland’s independence debate has stirred people in a remarkable way, and the North’s future may depend on it finding similar common cause.

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They’re all the same. Oh no they’re not.

There are many of us in the Labour Party who would like the Party to adopt a more vigorous and less timid housing policy. Everyone I meet in the Party agrees that housing should be a key priority for an incoming Labour Government. There is an acute awareness that there is a severe housing crisis, which has developed over a generation and may take a generation of commitment to fix.

There is in my view a strong consensus amongst members on the direction that policy should go in: we should build many more social rented homes, make a big switch in policy ‘from benefits to bricks’, intervene far more in the private rented sector, curtail ‘buy to let’ and ‘right to buy’, and assist first time buyers by boosting supply rather than adding to demand. And that’s just for starters.

There is little doubt that Labour’s housing offer could be a lot stronger. But there is a world of difference between wanting Labour to adopt stronger policies and taking the view that there is ‘no difference’ between Labour and the Tories or between Miliband and Cameron. That was the issue in a recent Twitter exchange between myself and Alex Hilton, a former parliamentary candidate who has lost faith in the Party.

Even if Ed Miliband had no housing policies at all I would still prefer him to Cameron, whose approach to housing makes Thatcher look like a bleeding heart liberal. The Tories’ policies have been chronicled in these pages many times and don’t need repeating in detail. But their performance on housing supply has been pitiful, their cut of 60% in housing grant was vicious, their agenda is to end social rented housing, and they refuse almost every demand for intervention in the ‘free market’ of the private rented sector, apart from to pile in more support for ‘buy to let’. Their benefits policy is creating an ever bigger gap between incomes and rents for tenants in all tenures, in and out of work. Bedroom Tax has come to symbolize their ideology – attacking the poor, punitive, and uncaring about the consequences. I think many people will vote Labour even if its only housing policy is to abolish the Bedroom Tax.

Labour’s policies have also been recorded on Red Brick as they have emerged. Largely they have been welcomed for their general direction, but often with a wish that they could have gone further or been stronger – the Lyons report being the most recent example. Committing to 200,000 new homes a year is a crucial step: as Labour gets into Government, it will find that it needs more ‘policy’ to achieve the target, but the pressure will be in the right direction and they will pull out the stops to achieve this headline target. In relation to private tenants, Alex’s greatest beef, Jack Dromey spent most of his tenure of the shadow housing job talking seriously with people in the sector and developing a sensible and comprehensive plan: longer tenancies, more predictable rents, controls on agents’ fees, stronger controls on revenge eviction, licensing of landlords, stronger enforcement of standards, dealing with rogue landlords. I think many private tenants will welcome this package and Labour should campaign vigorously on it. Of course it’s not a policy that abolishes capitalism, it does not control the market and it does not bring rents down – only a much faster rate of housebuilding sustained over a very long period can do that.

One of Alex’s refrains is that Labour will do nothing to take the heat out of house price inflation and bring about house price deflation – the mechanism that will supposedly lead quickly to falling rents and the end of profiteering. He thinks this is because Labour does not wish to upset ‘Daily Mail reading swing voters in marginal seats’. However, one of the few things that Red Brick ever agreed with Grant Shapps about was when he made a thoughtful speech on the need for long term price stability, a gradual adjustment of house values against incomes (a speech since forgotten by the rest of the Tories). In my view this is exactly what Labour should be aiming for, as an objective of monetary policy as much as housing policy. It cannot be done quickly: far from solving the problems of private renters, a rapid fall in house prices would create chaos for even more people, as we saw on previous occasions when bubbles burst.

In his original rather personal attack on Miliband, Alex argued that ‘Austerity may be a necessity but our party, with our values, ought to be standing up for people.’ In my view that is pretty much the place that Milband (and Balls) are coming from. Alex has more in common with them than with me, because I do not accept the necessity of austerity and certainly not in the form that makes the poor and people on ordinary incomes pay the price for the collapse of the bankers’ casino. Rather than attacking people personally, we should spend our time making the strong case for housing and infrastructure-led growth creating real jobs and boosting tax receipts. The housing world should accept much of the blame for failing to make the case. It’s not just politicians.

But that is by-the-by. Alex has fallen into a bigger trap. We are now going through the most sustained attempt to undermine a Leader since the red smears against Harold Wilson. Jumping on the bandwagon is very damaging for the progressive cause. It is not an internal coup but the right-wing press taking revenge on Miliband for his stance on press behaviour – a stance the whole party strongly supported – by exploiting the anonymous words of a few permanent malcontents and endlessly repeating pictures of him eating a bacon sandwich. They hope to cause conflict, sap morale and feed disillusionment within the party. It is a time for anyone vaguely on the left to pull together to get rid of the Tories, and the only way to do that is to put Ed Miliband in Downing Street. My belief is that he is a principled man who will lead a good Labour Government which will achieve real improvements for ordinary people.

And even if you don’t believe that, if the only thing that voting Labour achieves is to wipe the smugness off the faces of Cameron Osborne and Duncan Smith, it will be all worthwhile.

And here are some pics that haven’t been repeated in the media day after day.

faragecameron obama

johnson eating

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Labour’s energy efficiency plan – an excellent start

end to cold homes

The good thing about Labour’s energy efficiency plan is that it’s a proper plan with costed and achievable targets. But does it go far enough?

Among the many failures of the coalition government, its inability to deliver energy efficiency and renewable energy to householders, especially those in fuel poverty, is one of its most serious. While the department responsible, DECC, has produced countless strategy documents (its energy efficiency action plan alone is 146 pages long) its achievements on the domestic front have been little short of pathetic. It closed down Labour’s successful Warm Front programme as well as the earlier versions of the obligations on energy companies, known as CERT and CESP. It abandoned Labour plans to put in place a successor to the Decent Homes Standard which would have focussed on energy efficiency. Instead, it launched the Green Deal as its flagship scheme, making all sorts of claims for it (including that it would achieve ‘near zero’ carbon emissions from housing by 2050). In fact, as Labour’s paper points out, it’s been a flop: although over a third of a million householders commissioned Green Deal assessments, less than 2,000 have actually completed the work so far. This means the coalition can’t meet its carbon targets on its current trajectory: as an example, the Committee on Climate Change said that 130,000 solid wall homes should have been insulated last year. But less than 25,000 were actually done.

Labour’s new plan is set out today in An End to Cold Homes. Like the coalition’s plans, much of it rests on payments by the energy companies. It would keep the size of the Energy Company Obligation (ECO) as it is now, but reuse the money in two ways. First, it would generate half a million free energy efficiency assessments for householders a year. These would be aimed not only at advising people what they need to do but at persuading them they need to do it. Then, 200,000 poorer households each year would be targeted for ‘whole house’ retrofit work, aimed at getting their homes to at least grade ‘C’ on the energy performance certificate scale (A, B and C are the highest grades, very poor properties are in grades F and G; 95% of families in fuel poverty live in houses graded D or lower). Work should cost an average of £4,750 per property, with an upper limit of £10,000. The work would be done by local authorities or other local agencies, building on the successful experience which many councils have with earlier programmes.

This programme is both bigger and more comprehensive than anything yet tried, and will be targeted at fuel-poor households. Its ‘whole house’ approach is particularly welcome, since ECO has so far aimed to install single measures like loft or wall insulation.

The third big element is a revamped Green Deal (and maybe we should revamp the name too). It would involve a guarantee to bring funding costs down, then subsidy to make the loans actually interest-free to the consumer. This should be a massive boost to the attractiveness of the scheme, with a target of making one million loans available in the next parliament. Neither this or the revised ECO would involve extra spending by the energy companies.

The fourth element toughens up the measures already going through which will raise energy efficiency in the private rented sector. At the moment, houses that are let or relet will, by 2018, have to reach EPC grade E. But, as Labour says, this is a very low standard. The plan is therefore to keep it but add a further requirement that houses have to reach grade C by 2027.

Finally, Labour wants to revert to its original plan for zero carbon new housing, without the compromises the coalition has introduced which have eroded the target. This is excellent, as building new homes that are not as energy efficient as possible is simply daft.

All this looks good, but does it go far enough? The coalition has stuck, albeit reluctantly, to the carbon emissions targets which Labour enshrined in the Climate Change Act 2008. This means we should be aiming to reduce emissions by 80% by 2050, with an interim target of 34% by 2020. These are tough targets. Translated into what’s needed in the housing sector, we not only need to stop building homes that aren’t ‘zero carbon’ but we need to upgrade all our existing stock. That translates into over 600,000 high-standard retrofits every year, or more than one a minute. With a programme of that scale, any delay at all means it’s doomed to failure.

Labour has chosen to make the most of the current levels of ECO funding – and its plan has a very good chance of doing that, especially having been set in advance and if it’s applied rigorously, not in the on-off manner of the coalition. But a lot more investment is still needed. Labour’s plan is an excellent start, but more money is needed to drive it even faster. For example, the UK Green Building Council has called for an infrastructure fund that would start off at half a million high-standard retrofits per year, end fuel poverty and get all houses up to at least a C grade by 2025. That sounds like an even better plan.

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Austerity not so welcome when it hits the rich

Labour has run into a little local difficulty with its Mansion Tax proposal. Perhaps the biggest problem is that, although the proposal is very popular amongst the general public, many of the people affected by it have easy access to the media – notably journalists themselves, so-called ‘celebrities’, and other powerful people. There are also large clusters of them in some inner London marginal Labour seats. So they can raise a stink in a few hours while it took months of extremely hard slog by a lot of people to get some coverage for the abomination known as the bedroom tax, which hit much poorer people much harder.

The latest ‘celebrity’ to get acres of coverage was the unutterably unfunny Griff Rhys Jones, who said he would leave the country if it is introduced. ‘Goodbye’ was the common Twitter response. This man made much of his money from the BBC at our expense and, although it appears he has carried out major improvement works to his home, its value (assessed at £7m by Zoopla) has risen with the tide of the property market rather than through his own efforts.  The media has been full of the notion that people owning very valuable properties do so because of their ‘hard work’ and ‘prudence’ rather than a taxpayer-subsidised and economically damaging inflation which has given them a windfall. And, unlike most people, Rhys Jones always has the option of living on his yacht.

Property taxation is in a mess. The exemption of primary residences from capital gains tax – the only major class of asset to be exempt – costs the Treasury an estimated £10bn a year and is the key ‘subsidy’ to home owners. Council tax stops rising on homes worth £320,000 and more, they are all banded together. It is not progressive, which creates the extraordinary outcome that tenants living in ordinary homes pay as much council tax as a Russian oligarch living in a £20m home in Chelsea. Not only is this unfair but the system as a whole feeds rather than manages house price inflation.

Mansion Tax is one effort to tackle extreme housing wealth inequality. It is aimed at tackling wealth that is largely unearned and, so far, untaxed. It is one way of demonstrating that we are ‘all in this together’ and the money will go towards saving the most popular British institution of them all, the NHS.

Labour has thought through how it might operate in practice to avoid some of the pitfalls that have been identified. The threshold will rise in line with the general increase in value of such properties so more and more properties should not become subject to the tax. It will be a banded system rather than depending on valuation of each individual property, making it easier to administer. Home owners who are asset-rich but cash-poor (incomes up to £42k) will be able to defer the charge until the property is sold. Paul Dimoldenberg, the Leader of the Labour Group on Westminster Council, has revealed that there are only 61 H-band council tax payers in the borough who currently receive Council Tax Benefit, so the size of the problem seems manageable and is significantly less than some of the scare stories.

Ed Balls has already made it clear that the tax will be applied progressively. Owners of properties worth £2-£3 million will pay around £3,000 a year but it will rise above that, so the biggest burden will be shouldered by those owning the most valuable properties. It seems that the rate for £2m-£3m properties will be close to what people would have to pay if the other alternative – adding extra bands to the Council Tax – were adopted instead.

My own preference would be for a more thorough-going reform of property and land taxation, as I have argued on Red Brick before. I would prefer to see a more progressive Council Tax regime with more bands, with the additional income being netted off the grant received by councils from central government (so the benefit could be applied nationally).

The argument that the Mansion Tax is unfair on London has been widely repeated. But I agree with Paul Wheeler on this point: ‘Yes the mansion tax is a ‘tax on London’ but only to the extent that Corporation Tax on Banks is a tax on London because that’s where the money is’. Labour should not resile from the principle that the owners of the greatest wealth and the most valuable properties should pay more tax. There is still room for debate about how it should be applied. For example, the £2m threshold could be re-set by apply the proposed inflation-link retrospectively. Mansion Tax was first mooted at £2m about 4-5 years ago. It could be raised to take account of inflation since, taking a significant number of the ‘just £2m’ properties out of the scope of the tax. This would reduce the initial tax take but I think it would be seen as fair and would take some of the sting out of the political debate.

Whilst of course welcoming the extra money for the NHS that will come from the Tax, I must admit to some disappointment that, as a property tax, it will not be reapplied to boost housing capital spending. Previous commitments to boost housing grant for affordable homes – a share of the 4G bandwidth sale and a share of the bankers bonus tax – have quietly disappeared. Labour’s only specific commitment to raising housing grant is to give housing higher priority within existing capital programmes. That just doesn’t seem robust enough to meet the party’s commitment to build 200,000 homes a year by 2020.

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Investing in housing will help save the NHS

In the third of our special series based on the contributions made to the London Labour Housing Group Conference on 25 October, Environmental Health campaigner and former President of the Chartered Institute of Environmental Health, Dr Steve Battersby MBE, looks at the vital links between housing and health.

BY Steve Battersby

Housing is a key social determinant of health and as such is crucial to tackling health inequity. Those lower down the social gradient of health are not only on lower incomes but have less control over their lives. That is particularly true for those living in the PRS and in the worst of the PRS.

Yet as the size of the PRS increases, the number of EH staff dealing with housing is reducing. EH is often ending up in “regulatory services” which do not make the link between housing and health, nor do they establish effective links on housing with the Directors of Public Health and the Health & Wellbeing Boards. Elected members have a role in making sure there are adequate resources.

The lack of resources means that officers deal only with complaints, which are least likely to come from those living in the worst conditions and who are most vulnerable. So there is a lack of any strategic approach to housing and health.

Enforcement of the provisions in the Housing Act 2004 is inadequate and is unlikely to get better. Even allowing for the faults in the drafting of the 2004 Act there are many provisions that are not used to best effect. I hear too often of the “informal approach” to getting landlords to do works. By all means councils should talk to landlords to decide the best course of action but they should not be strung along. It is better to act and then negotiate (especially if there is a statutory duty to act). Retaliatory eviction may be a concern but too often it is an excuse for inaction. With the right approach by local authorities and a more coherent approach to enforcement it is possible to reduce the risk of such evictions – as Liverpool have shown. It is also another reason why intervention should not be dependent on complaint.

The housing and health connection has been demonstrated by BRE using methodology based on the Housing Health & Safety Rating System - the system for assessing the risks from deficiencies in dwellings. BRE has shown that the real cost of poor housing to society could be in the order of £1.5bn per year.

If Category 1 hazards (as defined using the HHSRS and on which local authorities have a duty to take action under the 2004 Act) were reduced, savings to NHS would be £600 million per year (for the one off costs of remedial action which can sometimes be relatively cheap). In addition there are the social costs over and above the costs to the NHS that probably represents only 40% of total costs

Including the worst energy efficient homes (those with a SAP <41), interventions to improve heating and insulation gives potential savings to the NHS of a further £700 million p.a.

How much is it worth investing to keep people away from needing the NHS – that is reducing demands on the NHS?

To give some indication of the scale of the problem, the English Housing Survey indicates 3.1 million dwellings have at least one Cat 1 hazard and 500,000 have more than one such hazard. In the private rented sector around 780,000 have at least on Cat 1 hazard (19%).

The first criterion of the Decent Homes Standard is that any home should be free of Category 1 hazards. So the HHSRS applies to all sectors, it is only that local housing authorities cannot take legal action against themselves (so Part 1 of the Housing Act 2004 cannot be enforced by the council if it is the organisation in control of the house). That does not mean that the home cannot be inspected and hazards rated using the HHSRS. A Justice of the Peace for the area can even require that the Proper Officer carries out such an inspection and reports to the local authority itself.

To be clear, despite what is sometimes said, local housing authorities can enforce Part 1 of the Housing Act 2004 against housing associations in the same way as they should enforce against private landlords. Housing Association properties may be exempt from the HMO definition and those provisions in the Act, but they are not exempt from Part 1.

Finally, when it comes to housing the NHS 5 Year Forward View mentions housing only in the context of “Accelerating innovation in new ways of delivering care” saying ……” the refurbishment of some urban areas offers the opportunity to design modern services from scratch, with fewer legacy constraints – integrating not only health and social care, but also other public services such as welfare, education and affordable housing.” It does not mention the health impacts of existing homes, those that are crowded and lack space with mould or cold or containing falling hazards. Poor housing not only causes ill health, it prevents people being discharged from hospital.

More than this, if we are to address health inequalities we must look at housing. Think of crowding and lack of space (not the overcrowding standard from the 1930s) and its effect on children. It makes it more difficult to do homework, it affects behaviour at school as well as at home, so compromises educational attainment. The costs of poor housing are  exported and the task of addressing inequalities in health is made more difficult.

So local authorities should have a key role in improving health by action on poor housing. Too often this is not recognized but to put it in financial terms alone can be problem because the potential financial gain from action is accounted for elsewhere. We need a fresh approach, which is possible with the new public health structures, in which local authorities (who can charge for enforcement action) also get wider recognition of the public health improvements achieved by their interventions.

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Time to abandon the debased language of ‘affordability’?

One of the many powerful contributions to the London Labour Housing Conference on October 25 came from Madeleine Davis of the Peabody Ex-Crown Tenants Campaign.

In her speech, she first outlined what happened to the rents of tenants who transferred from the Crown Estate to Peabody Trust in 2011. She then drew some general conclusions about housing costs for people living in ‘intermediate’ housing, and concluded by questioning the current use of the concept of affordability, which has become debased.

The campaign can be followed on Twitter  @norentrises

BY Madeleine Davis

Introduction

I represent a rather specific group of tenants, those whose homes were bought by the Peabody Trust in 2011 from the Crown Estate (the Queen’s property company). We live in around 1200 homes in four different areas of London – Victoria Park (boroughs of Hackney and Tower Hamlets), Millbank (Westminster), Cumberland Market near Regents Park (Camden) and Lee Green in Lewisham.

Peabody bought all four estates for a knockdown price of around £140 million, after a very widely publicised tenant campaign with cross-party political support forced the Crown Estate to drop its asking price from £250m and impose various conditions on the sale.

We were widely thought to have got a good deal. The conditions of sale established protected rent ceilings for existing tenants at 60% of market levels, up to 80% for new tenants, and with a proviso that of every 10 new lets made by Peabody nine of them had to be to keyworkers. Steve Howlett, appearing before the GLA, made a public commitment that he was ‘absolutely committed to keeping these homes affordable and available to the key workers who are so crucial to London’s economy and quality of life’.

However, those of us who represented the tenants warned that any market-linked rent policy would quickly undermine that promise. And so it has proved.

Affordability and our communities: before and after

Let me quickly contrast what we had before the sale was first mooted, with what we have now. Under the Crown Estate (exempt from many of the laws and pressures affecting lesser mortals and indeed housing providers), a sort of benign neglect had prevailed and created something pretty unique. The Crown had run the estates with rents at similar levels to social housing, but with keyworker eligibility conditions attached. Resident turnover was as a result extremely low, in fact a quarter to a third of tenants were rent-act protected. Rent increases for others were at or just above inflation levels.

So what was at stake was housing of a type almost unheard of in the capital by 2010 – enclaves of decent, cheap, long term-rented homes, right in or near the centre of London, where people working in the key public sector jobs that keep the city going – emergency services, the NHS, police, education, transport – could bring up their families and plan a long term future. We had residents who had been in their homes for up to sixty years, families living close to each other, streets where neighbours look out for each other and feel safe. And what is more, this housing was NOT subsidised housing – it made a return for the Crown Estate of around £3m per year.

What we have now is different, and is of broader relevance as a concrete illustration of the nonsense, lies and muddle that that surrounds so-called affordable, sub-market or intermediate rents.

Not long before the decision to sell the Crown Estate had started talking about ceiling rents in relation to ‘market rents’ (they were less than half of those levels, however), and imposing higher annual rent increases. So when Peabody took over, they were able to present a market-linked rent policy as a continuation of that already in force. They immediately did a market valuation. Their plan was to charge 80% for new tenants (in line with the government’s affordable homes framework that also of course controversially extended this into the social rented sector) and to get existing tenants’ rents up as fast as possible to 60% of those levels by imposing increases of 9% per year. This was possible because they defined us as ‘keyworker intermediate’ rather than social housing.

This model (as we expected) is not working for anyone. Peabody found it couldn’t let flats to new keyworkers at 80%, and is now advertising them at 65%. Existing tenants have seen their rents rise by 36% in the last four years. Many –including working families – are now leaving their homes either because their rents are simply unmanageable or because they can no longer see any long term future on these estates (if for instance they have a child). We are seeing instances of people in real hardship. It’s not hard to see why, when Peabody is asking rents of £960 a month (£11520 a year) for a 2 bedroom flat in Victoria Park; or £1200 a month (£14,400 a year) for a 1 bed in Millbank. The blindingly obvious problem is the absurdity of the linkage of rents to market levels rather than income levels.

If instead we take a widely accepted definition of housing affordability – that it should account for a third or less of net income – then a single keyworker occupying a studio bedsit in Millbank would need to be earning £34,560 after tax to afford the rent. A family with one child under two occupying a two bedroom flat in Millbank would need to be taking home £52920 to afford the rent. Such a family is also likely to have to pay £14000 a year in childcare costs if both parents work full time.[1] A family with two children occupying a three bedroom house in Victoria Park would need a take home salary of £47268 to afford the rent.

To put this in some context, the average (full time, before tax) starting salary for a qualified teacher in inner London is £27,270, for a new recruit to the police force, £25,500, and for a registered nurse £25,665. [2]

Yet when we raise these issues with Peabody we are blandly told that rents are set at affordable levels, and in one worrying recent letter, that ‘the current rent on these properties is a long way below what it should be’. Complaints about hardship are met with offers of advice on benefit eligibility. And Peabody are also, we understand, trying to renegotiate the terms of sale with the Crown Estate to open up the housing to non-keyworkers, now they are finding that keyworkers can’t afford the keyworker accommodation they are providing.

We have therefore started actively campaigning again, noting the bitter irony of a situation in which a charitable and supposedly philanthropic body whose founding purpose is to ameliorate the condition of the poor and needy in London, is actually forcing people out of their homes and communities. So we would like to ask for the help of Labour members and politicians here today in publicising our campaign against these rent levels and helping us put pressure on Peabody as our landlord.

Lyons and the London housing crisis

Longer term, it’s the broader context that is of course critical. We are seeing a welcome proliferation of housing-related campaigning, from the E15 mothers to London Renters and Generation Rent. We are also seeing more recognition that these campaigns are different manifestations of a systemic housing crisis, and the development of a more joined up critique of the failure or unwillingness of all political parties to tackle it. Here is where the Labour party (of which, I should say, I am not myself a member), has a real opportunity to make the running, especially in London, where the crisis is most acute and where rents (and of course the house prices to which they are indirectly linked) are so obviously unsustainable.

Now here I am really disappointed with the Lyons report, which accurately diagnoses the roots of the crisis but fails to follow through by recommending adequate measures to tackle it. In relation to its treatment of renters, Lyons doesn’t do nearly enough to challenge the damaging obsession with owner-occupation as the gold standard. Renting is still largely seen as the preserve of the poorest and most vulnerable in the case of social housing, or as a stopgap for young professionals. There is not enough effort to push the idea (common in the rest of Europe) of long term renting as a secure and decent option for large swathes of the population, which it absolutely has to be in London. Instead the Lyons report talks about ‘improving the offer’ on shared ownership schemes, without any discussion of the downsides of these – for there is also a strong case to be made that these schemes (especially in London) are poor value and expensive, trapping people into massive debt in pursuit of a dream they are unlikely ever to realise.

Housing Associations are to have their potential and creativity unlocked – presumably that means that they will come to resemble private developers even more than they do already – on the doubtful Panglossian assumption that they’ll use this increased freedom to cross subsidise for the benefit of all (worth noting here Peabody’s 291million surplus last year) .

Also, the Lyons report continues to talk in the debased and now largely useless language of ‘affordability’, and while trying to persuade us of the benefits of a larger market rented sector, completely ducks the issue of rent control.

Housing for use not for profit

The fundamental issue, of course, is that Lyons continues to frame the whole question in terms of housing as investment rather than housing as an essential human need and shared resource. It doesn’t confront the issue of market failure, instead looking for ways by which the market-driven approach that got us into the mess can be manipulated, enticed and propped up to get us out of it.

So, are there any reasons to be cheerful? I hope that some of them might be in this room. If it’s perhaps too radical and utopian to hope that the Labour Party nationally might reconnect with some of its own radical and utopian traditions and try to reframe the debate in that way, then perhaps London can take a lead, and I know that this group has put forward a lot of useful proposals. At the risk of telling you what you already know, I’ll just highlight a couple of points by way of conclusion.

One useful step might be to abandon the language of ‘affordability’, since we all know it means pretty much nothing any more. We need a clear alternative – and here I notice that the idea of a Living Rent (inspired by successes of Living Wage) is already gaining traction, though at the moment different groups appear to mean different things by it. Certainly rent setting in relation to income and not the market is an extremely useful idea, but needs careful handling given that income disparities in the capital and in individual boroughs are so wide that ‘average’ levels might be very misleading.

Finally, I would like to make a plea for some honest discussion around the future of ‘keyworker’ schemes and so called ‘intermediate’ housing. The term intermediate has usually been used to cover shared-ownership type models aimed mainly at keyworkers, but there has also been a smaller intermediate rented sector, also targeted at keyworkers. These models have largely failed to help those they were meant to, because (as our Peabody example shows) the income levels that are increasingly required are way above those of public sector workers. Boris Johnson’s housing strategy moves away from keyworker eligibility for the First Steps programme, and the Lyons report also points in that direction, reasoning that restricted eligibility constrains supply and instead talking in much broader terms of low and middle income earners.

But think back to 2010. The element of our campaign that most captured political and media support was the idea of London’s essential workers being priced out of the capital – that’s the basis on which we got everyone from Boris Johnson to George Galloway onside. Yet at the moment no party is making any sort of case for keyworker schemes as such. Clearly, a massive investment in new social housing (of the kind that SHOUT is calling for) and greater regulation and control of the private rented sector (as argued for by London Renters, Generation Rent and others), if implemented, would – over time – close the affordability gap. But in the meantime, so called ‘affordable’ schemes are passing beyond the reach of groups of people that London really does need to house in order for it to function.

A ten yard stretch of the street where I live contains five flats that between them house two ambulance drivers, a nurse, a police officer, a teacher and a tube worker. All have families and most work shifts that mean they have to live within reasonable travelling distance of their work. If they are priced out, as is happening, London will be the poorer.

[1] http://www.familyandchildcaretrust.org/News/london

[2] Pay scale information retrieved from : http://www.rcn.org.uk/__data/assets/pdf_file/0020/530228/004405.pdf; http://www.nasuwt.org.uk/consum/groups/public/@salariespensionsconditions/documents/nas_download/nasuwt_012875.pdf; http://www.bbc.co.uk/news/uk-21027176

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SHOUT – the very cross-party campaign for social rented housing

Tim Morton of SHOUT spoke at the London Labour Housing Group Conference ’2015 – the Housing Election?’ – in Paddington on Saturday 25 October. This is what he said.

Tim Morton

Thank you for inviting me today

SHOUT is a cross party, some would say a very cross party, volunteer campaign that grew from Twitter conversations following John Healey’s Guardian blog last year when he wrote that social housing would be lost unless people stood up to defend it. A group of us found ourselves on Twitter and agreed a manifesto in the spring which we launched at the House of Commons with all party support in June.

John Healey spoke, alongside Gary Porter a Conservative councillor who grew up in council housing and built council houses under the Prescott challenge. John Leech, Lib Dem MP for Manchester Wythenshaw called for the removal of the borrowing cap and Natalie Bennett, leader of the Green Party and Camden resident called for the abolition of the right to buy. Lord Victor Adebowale a cross bench peer talked of his childhood when his family was refused housing in the private rented sector under the “No Blacks, No Irish No Dogs” policy.

My background is that I have spent 30 years working with social housing tenants around tenant control, governance and holding landlords and other agencies to account. I know that the people I work with are passionate about improving their neighbourhoods and ensuring that their providers deliver decent services. I have got increasingly angry at the media portrayal of who lives in social housing as I do not recognise the stereotypes regularly paraded on television and in the tabloid press.

Like everyone in this room SHOUT knows that there is a housing crisis in the UK, and that we need to build at least 200,000 new homes a year and half of those have to be for social rent whether built by councils or housing associations. The last time this country built such numbers was in 1968 and half of the homes were for social rent. The private sector simply cannot build enough homes to meet the need on its own.

How can this be achieved? By removing the borrowing cap for local authorities and changing the accounting rules on public sector borrowing to bring us into line with the rest of the world. The government needs to use public investment up front to enable Housing Associations to build homes at scale – in other words we need Bricks not Benefits.

What impact will this have? We can charge lower rents, and thus a lower housing benefit bill, alongside tenants having disposable income which they can spend in local economies creating more jobs.

We believe that Affordable Rent is a scam predicated on the idea that providers can build homes without subsidy. They may well build them, but they don’t rent them without massive housing benefit subsidy. While the idea was sold as renting to a different group of tenants, in practise the tenants are the same, it’s just that the Housing Benefit claims are bigger. Furthermore there have now been 40,000 conversions of social rented properties to higher Affordable Rent properties, but tenants living next door to each other get no different level of service, their housing officer doesn’t have shinier shoes or better buttons compared to the social rent officer. Finally the affordable rents are tied to the market rent – a market rent which rose 19% in London last year, so adding inevitably to the rise in the Housing Benefit bill.

SHOUT welcomed the Lyons Report as it is full of analysis and data about the housing crisis, we believe it assembles compelling evidence and much of its analysis is correct, but it swerves at the last in its recommendations and its final conclusions are wrong 50,000 social homes by 2020 is simply not enough to address the problem of affordability. We need to invest in bricks not benefits.

Finally what can you do as councillors and Labour Party members? Well the Labour Party is famously a resolutionary party so you could follow Cambridge, Gateshead and Sheffield City Councils and pass a resolution in support of SHOUT. You can continue to argue the case for more public investment and the lifting of the borrowing cap within the Labour Party, and crucially you can encourage tenants to register and to vote.

Thank you.

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Packed London LHG Conference hears Labour’s plans

A packed London LHG conference on Saturday heard Labour Shadow Housing Minister Emma Reynolds MP give a comprehensive review of Labour’s developing housing policy following the Lyons Review. Focusing mainly on getting building again, she also emphasised Labour’s plans to bring some order to the private rented sector.

IMG_1262Shadow Housing Minister Emma Reynolds MP addresses the conference.

The morning session concentrated on the work that campaign groups are doing and what Labour might learn from them. Fascinating speeches by Tim Morton from SHOUT, Alex Hilton from Generation Rent, Madeleine Davis from the Peabody ex-Crown Estate Tenants Group and Environmental Health campaigner Steve Battersby gave everyone a lot of food for thought, especially around the issues of housing costs and affordability.

The afternoon session involved four thoughtful contributions from councillors from London boroughs, Cllr Sarah Hayward Leader of Camden and Housing Cabinet Members Cllr Ahmet Oykener from Enfield, Cllr Lisa Homan from Hammersmith and Fulham and Cllr James Murray from Islington. Despite the many financial constraints and the appalling policies of London Mayor Johnson, all four councils are making significant progress, building more council homes and tackling the private rented sector.IMG_1272

IMG_1274

Top: Cllr Sarah Hayward speaks, flanked by Cllr Ahmet Oykener of Enfield and Cllr Lisa Homan of Hammersmith and Fulham. Bottom: Cllr James Murray of Islington

The day was rounded off by an impassioned speech from London LHG EC member Karen Buck MP - the conference was in her constituency and she highlighted some local issues and trends. The whole day was notable for the expert and robust contributions from a very knowledgeable audience.

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Lyons does 90% of the job

For housing development nerds the Lyons Housing Commission report, published today, is a cracking read. Commissioned by the Labour Party, and launched by Ed Miliband, it is a serious review of all the problems and challenges facing the Party if it is to achieve its ambition in Government of building 200,000 homes a year by 2020.

The report’s analysis is familiar. It sets out the failure to build new homes, which has now gone on for decades and which may take decades to fix. It lists the consequences for individuals: prices and rents rising faster than inflation and faster than incomes; and many people forced to rent privately and suffer insecurity when they would rather buy or rent from a social landlord. And the consequences for the country as a whole: volatility in the national economy and a serious drag on growth.

Lyons identifies two key causes of the crisis. First, not enough land is brought forward for new homes: he calls this ‘artificial scarcity’ which incentivises trading in land rather than building on it, and says that communities and local councils do not have enough powers to overcome it. Secondly, the capacity to build has shrunk: there are a small number of volume housebuilders and very few small and medium enterprises (SMEs) in the market, and the role of the public sector has been massively curtailed, with housing associations not managing to fill the gap.

To get a long term sustained increase, the report calls for ‘long term political leadership’ making housing a national priority. It argues for decisions to be taken locally but, crucially, ‘on the basis of clear commitments that housing need will be met’. That will not go down well in some places.

Delivery nationally will be through a new cross-Government Task Force and a beefed up Homes and Communities Agency (I’m not sure they’re up to the job) and the consolidation and devolution of existing funding streams to local authorities ‘in city and county regions’ – a vital step.

The land market gets a lot of attention. Lyons says it drives the business model for developers as well as restricting the flow of land for sites. Councils’ role should be strengthened and cross-boundary co-operation arrangements improved. It endorses Labour’s existing policies of the ‘Right to Grow’ and ‘Use it or Lose It’ calling for the ability to levy council tax on plots that are not built out and stronger back-up compulsory purchase powers.

Councils are seen as the key agents, with the report calling for them to take on a greater leadership role with stronger powers to act as lead developers. Housing Growth Areas should be established and a new generation of New Homes Corporations to act as delivery agencies, assembling sites and promoting infrastructure.

What gets built is also a crucial consideration. Homes are needed for people on all incomes and people of all ages. ‘Affordable housing’ it says ‘must be a priority for taxpayer funding as the fiscal position improves over time’, reflecting Ed Balls’ new fiscal stance – a key weakness of the plan in my view. The local authority housing revenue account borrowing cap will not be lifted but there should be ‘active management of the overall borrowing headroom by the Treasury’. That will require a revolution in the Treasury.

Lyons endorses the ‘brownfield first’ policy established by the last Labour Government but loosened by the Coalition. It also supports a new generation of Garden Cities, Garden Suburbs, and Expanded Towns, to be delivered by Development Corporations. Financial incentives and guarantees are proposed to help these new settlements get started.

The report contains a step by step ‘Road Map’ for the next Government to follow, including an early Housing and Planning Bill to bring in the various new powers relating to Housing Growth Areas, Corporations, compulsory purchase, unbuilt land tax, stronger strategic plans. Including a new ‘national spatial assessment’ within the national planning framework will also be an important step, but one that is more complex than it is made to sound. A lot will rest on the new Chancellor’s first Budget Statement which will have to deliver a raft of changes.

Despite the huge detail in the report and the careful consideration that lies behind it, it seems likely that the ensuing debate will focus on what will be done for first time buyers. This is a vital but not the only consideration: the obsession of the Government and the media with this one aspect of the housing market tends to distort policies in an unhelpful way (leading for example to demand subsidies which are self-defeating in the long term). Inevitably, Labour’s response to Lyons is also likely to have this focus, and the report makes some helpful proposals that a proportion of new homes should be ‘reserved’ for first time buyers for a period, and that sales to buy-to-let investors or speculators should be restrained.

For me the central debate needs to be around public investment. Labour’s commitment is to build 200,000 homes a year by 2020, and more thereafter. Even looking at the rather optimistic Road Map it is clear that some of the structural, legislative and cultural changes that are needed will take several years to deliver and more years to become effective. I doubt if a single home will be seen by 2020 from the Garden Cities programme, apart from the already-announced Ebbsfleet. The Treasury will need a bomb under it to take on the proactive role that is envisaged. There will continue to be resistance to new homes in many areas and the ‘UKIP factor’ – blaming housing shortage on immigration rather than housing market failure – has yet to peak. Even in areas where there is some commitment to new homes there will not be enough affordable homes.

The role of central Government grant is crucial in making sure that genuinely affordable housing – and by that I mean homes at target rents and not the Coalition phony ‘affordable rents’ – is provided in sufficient numbers. The report fails to meet the widespread demand for the ‘cap’ on HRA borrowing to be removed or at least raised, and instead goes for a more complex sharing arrangement and supports other models such as Local Housing Companies to increase borrowing for investment. But raising the cap and the other ideas for borrowing do not in themselves guarantee target rents, for that either grant or cross-subsidy is required. Here I think the report is weak and reflects the caution displayed by Ed Balls in his Conference speech and subsequently. It also in my view takes too benign a view of housing associations building for sale to cross-subsidise affordable homes; a good idea in principle but in my view many of the biggest associations are obsessed with growth for its own sake and not primarily as a mechanism to achieve more affordable housing. There is an important discussion of the downside of the ‘affordable rent’ model – higher rents leading to unaffordability and a growing demand for housing benefit – and the need for a ‘benefits to bricks’ policy. But ultimately the report fails to go where the logic of its argument takes it – there must be a significant increase in the level of Government capital grant if the Labour Party’s ambitions to build more genuinely affordable homes and to bring the cost of housing benefit down – are to be fully realised. Ed Balls promises that housing will have higher priority within Government capital spending, but we do not yet know how that will translate in pounds shilling and pence.

Leaving aside that central point, it must be said that Lyons has made a raft of recommendations that will assist Ed Balls – here is just a selection.

First, to review the wasteful and redistributive (but in the wrong way) New Homes Bonus. In my view it should be phased out and the money either restored to local government through general support or re-focused through additional housing grant.

Secondly, to ensure that the public sector benefits to a much greater extent from the increase in value of land following development. The report suggests mechanisms which will help ensure that the costs of affordable housing and infrastructure are covered by the uplift in land value.

Thirdly, it stresses that affordable housing is not just provided with the support from Government grant. It is also funded through planning gain, which has diminished greatly during the recession, and there are proposals to make the process of negotiating planning gain more robust. It considers how viability assessments should be conducted, a process used by developers to get out of their obligations despite growing (some might say excessive) profits. I am less convinced by the suggestion that there should be a new arbitration service between councils and developers (which looks like a recipe for delay rather than decisive action).

Fourthly, it supports ‘overage’ agreements, whereby the authority gains a share of the benefit of future value gains on the site.

So, in summary, my first reading of the report tells me that Lyons has done 90% of the job he was asked to do: he negotiates a practical route forward on most of the key issues. And the 10%? Unfortunately he falls into the common trap of using the term ‘affordable’ too loosely, often without definition. The term has become so debased under the Coalition that it is almost meaningless. He should have been more specific in his consideration of the need for ‘social rented’ housing and how much is required from grant and cross-subsidy to provide what is needed.

If the last Labour Government deserved around 4 out of 10 for its housing policies, and the Coalition deserves around 1/10, implementation of Lyons will push Ed Miliband’s Government up to around 6 or 7. It is a significant and welcome advance. But to go higher will require rather less caution from Ed Balls, and a very different view of the importance of capital investment with Government spending programmes.

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