More family silver up for sale

Daily Telegraph: Britain's ‘most expensive council home’. Photo: Hannah Mckay/National Pictures.

Daily Telegraph: Britain’s ‘most expensive council home’. Photo: Hannah Mckay/National Pictures.

‘Sell expensive council houses’ says the Telegraph headline. The HCA’s Prospectus for its 2015-18 programme, also published yesterday, couldn’t be more blunt. They ‘expect bidders to explain how many properties they are planning to sell… and why they have chosen not to dispose of more’.

The ostensible reason for flogging off even more of the family silver is to enable providers to build more homes with less grant. But I think there are two other reasons. One is that it feeds the myth that councils are irresponsibly sitting on properties that the average punter can only dream of buying. The Telegraph story was illustrated by yet another picture of what is claimed as Britain’s most expensive council home. At the moment it’s a pair of houses recently sold by Southwark. Not long ago it was a gatekeeper’s lodge in Kentish Town. Either way, readers will have their prejudices confirmed, that ‘subsidised’ tenants are living in palatial homes, and that council housing is run by people who couldn’t get a receptionist job in an estate agents.

The other underlying reason is that this is all part of the war on social mix. There are now so many examples of policy acting against mixed communities and – specifically – of the rights of people on low incomes to live near jobs in central London, that it is pretty obviously intentional. Bedroom tax, the benefits cap, shipping homeless families out of London, the Mayor’s indifference to his own affordable housing requirements, the redevelopment of big chunks of social housing to create expensive new flats – all these are grist to the mill. If, at the age of 83, Dame Shirley Porter still keeps up with politics, she must be delighted that her ‘homes for votes’ scam has now been adopted as official government policy.

Even taken at face value, the policy can be seen as endorsement of the Policy Exchange idea of selling off as much valuable stock as possible. Their 2012 report Ending Expensive Social Tenancies was analysed in Red Brick by Tony Clements, and his argument that it represented both bad economics and bad social policy still holds. But it now presumably has the backing of PE’s former housing specialist Alex Morton, described (with no apparent irony) as one of the jewels in the think-tank’s crown, who has just been recruited to the Downing Street policy unit.

Just to prove that the No.10 policy unit is a hot-bed of housing policy ideas, its former head Paul Kirby popped up last month with the suggestion that selling the family silver should not only underpin the HCA programme but could sort out the whole housing market. In his version, councils would sell off every house that fell vacant, and part of the proceeds would be turned into grant for replacement homes. In the process, he seems to ignore both the debt on the house that’s sold and the new borrowing on the one that’s built, which would both become a charge to the rents of the remaining tenants.

When, at the age of 91, Harold Macmillan inveigled against selling the family silver he didn’t mention council homes. But since his governments built so many of them he would certainly have been entitled to do so. He was making the point that selling off valuable assets in times of financial trouble may well be a mistake. It’s one that I discussed in Red Brick when looking at arguments made two years ago in Stuart Lowe’s book The Housing Debate. Social housing is a very valuable commodity, and while we might want to (and indeed should) use its value creatively, there are always plenty of people who simply want to run it down and at the same time strip it of its best assets. Right to buy did this in spades; now that it’s a policy that has largely run its course, new ways of disposing of the family silver are evidently required.

Red Brick readers have a better idea: keep as much social housing as we can, let at its current rents, because demand is high from large parts of the population who simply can’t afford anything more expensive. Furthermore, as well as being valuable in themselves, council homes in particular have very low debt levels (only £17,000 per unit). Let’s use this asset value to build more of them at similar rents. This will need subsidy, but this is much better value than hiking rents up to ‘affordable’ levels and having to pick up the tab through housing benefit.

If anyone in the No.10 policy unit doubts that this case stacks up, let them look at the calculations by accountants PwC in their 2011 report The Numbers Game. They clearly show the long-term value of using capital grant to build new houses for letting at social rents, as against using less grant, letting them at higher rents and allowing housing benefit to take the strain. Given their subtitle, ‘increasing housing supply and funding in hard times’, it’s a conclusion that might even have been endorsed by that nice Mr Macmillan.

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5 Responses to More family silver up for sale

  1. James says:

    I, like many, have a similar gut reaction to a policy which would inevitably lead to more segregation. On the face of it, it seems to be very problematic to build more social housing in poor areas. However, when you start asking why, you soon run into problems. One might answer that high densities of poorer tenants exacerbates the problems of poverty. Again, this seems like a common sense gut reaction. If you turn to the research which has been done in this area, it is exceptionally difficult to find any strong evidence that mixed income communities benefit the poor. The JRF published a report on this a few years back by the LSE economist Paul Cheshire. If you acknowledge the findings of many of the studies he reviews, then it becomes harder to argue that the market-oriented segregation which is likely to result from the policy is bad for the poor. This is not an opinion or a value, it just seems to be what the evidence we have so far on the topic suggests. I’d be interested to read any studies which suggest the opposite.

    Of course this has nothing to do with the business case against the policy – that it makes sense to use one’s most valuable asset to raise money for more development. This argument still makes sense to me, regardless of the evidence on mixed communities.

    • monimbo99 says:

      I agree that the evidence for the benefits of mixed communities is itself mixed. However, of the various studies which JRF did around 2005, some did appear to show clear benefits, e.g. ‘Mixed tenure, Twenty Years On’ which looked at three long-established areas, and also a similar study of Bournville. The report ‘A Good Place for Children?’ suggested that they were indeed good for children. So the gut instinct argument for mixing is not necessarily disproved, but a lot depends on how the mixing is done (the Demos study by Ben Jupp showed this too). However, the case against selling the family silver only hangs partly on this, since it would apply too to ‘unmixed’ estates in high-value areas. It’s not necessary to favour mixed developments to see the sense of the argument that a proportion of social housing should form part of the stock in Westminster, K&C, etc., simply on grounds of access to jobs, if nothing else. I’m pretty sure that much of the social stock in these boroughs, and others, will be vulnerable to this new policy requirement.

      • James says:

        Thanks for your response. I hadn’t come across those studies but I’m not sure, after having a brief look at them, whether they offer the kind of evidence I was talking about. I think the kind of research needed in this area are studies which ask questions like

        “Do people living in mixed communities have better health, education, employment prospects (etc) than those living in unmixed communities, with all other things being equal?”

        or

        “Does the nature of the neighbourhood in which someone lives exhibit a relationship with the individual’s health, education and other outcomes, when controlling for all other factors?”

        and then to answer these questions quantitatively using regression analysis. Longitudinal analysis would be incredibly useful. Unfortunately it’s all very expensive, lengthy and challenging. Qualitative studies and descriptive statistics are very useful for providing us with perceptions and for developing theory but they cannot test whether the link is actually there.

        The whole thing rather makes me think of IDS and marriage (strangely). Personally, I rather wish IDS would stop going on about marriage being beneficial to children, to couples and important for reducing poverty. No doubt IDS could produce many qualitative studies (or conduct them) which show how couples, children and communities value marriage and believe it makes them stronger or healthier or happier or richer and so on. That’s fine. But the reason I wish he would stop going on about it is because when you actually test the assumptions, (as the IFS has done here http://www.ifs.org.uk/publications/4823, for example) there is often no relationship once other things are controlled for. But if I’m justified in telling IDS to stop going on about it, he could, if he wished, tell others to stop talking about the importance of neighbourhood effects – because in the same way there is plenty of evidence of the perception of them and their importance but very little for their actual existence.

        The point about the access to jobs is a good one. I think I recall the Policy Exchange report providing evidence that within a 30 mile radius areas within most regions don’t show statistically significant different levels of unemployment. This looked very surprising indeed when I first read the report and I would be interested to look at other studies into this. (I think I’d question whether unemployment rate is the right way of measuring lack of employment opportunities – you could use vacancy rates for example.) I do recall the North East being an exception to the report’s finding anyway in a fairly major way with something like a 10% difference, so one could argue that the policy should not be enacted in the North East for this reason even based on PE’s own analysis.

  2. argotina1 says:

    Reblogged this on Benefit tales and commented:
    The selling off of council homes

  3. Paul Smith says:

    This policy could be disasterous for rural areas which already lack social and affordable housing. Social housing in attractive rural areas could be moved from serving the local populous into the second home market further unbalancing the rural economy.

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