There’ll be a boost to housing investment, but you’ll have to wait for it


‘I am doubling the housing budget’ said the Chancellor. But what he failed to add was that we’ll have to wait three years to see the extra money. In fact, more than a third of the extra won’t arrive until the next parliament. In the meantime, affordable housing investment will stay at just under £1 billion per year. As John Healey points out, in current prices this is barely 30% of what Labour was investing annually in housing. Even if it reaches £2.4 billion in 2020/21, this will only be a bit more than three-quarters of what Labour was spending before May 2010, calculated at current prices.

Despite this, Osborne claims to have created ‘the biggest house building programme by any government since the 1970s’. ‘We are the builders’ he says. Housing starts are at ‘a seven year high’. But this isn’t true. The DCLG’s own house building figures show 137,490 starts in the last twelve months, slightly under the previous year’s figure and a cool 46,000 lower than starts under Labour in 2007, before the recession hit. Only a fantasist could claim that completing only 135,000 houses in the last year is a roaring success, when we know we need to build at least 100,000 more homes than that.

But I suppose we should be grateful that spending is going up not down. However, it’s only doing so because Osborne is taking a huge gamble by shifting investment to starter homes and shared ownership, away from social rented housing and even from new build at ‘Affordable Rents’. The price is a high one. £2.3 billion of the new funding will go to fund ‘up to 60,000’ starter homes, suggesting a cost in grant of £38,000 each. This is about £14,000 more than the current cost of building a home that is let at Affordable Rent. With an inevitable proviso about right to buy, putting money into rented homes provided through social landlords is at least a semi-permanent investment that benefits a succession of families. Starter Homes can, however, be sold off after five years with the seller pocketing the full value, including the 20% discount. The grant money simply disappears into rising house prices. KPMG had a neat summary when they said that the scheme will, for everyone except the buyers, be ‘purely inflationary’:

‘It also will not create the amount supply the Government says it will, because it will in part cannibalise housing that would have otherwise been built, particularly social housing and rental stock. Such a populist strategy may work for the Government itself, but could cause more issues within the market during the next parliament.’

Delivering 400,000 starter homes sounds a lot, but not when it’s spread over several years and is at the expense of social housing and of conventional new build (since there is nothing to stop builders swapping starter homes for normal ones in order to claim the grant or get out of planning obligations).

Boosting shared ownership to deliver 135,000 units represents another gamble, since at any one time there are only about 100,000 households who currently have a part-share in their property. So for many it’s an unknown quantity that they struggle to understand, it’s not attractive financially in many areas and it becomes a potential liability if you need to sell a home that is still part-rented.

The ‘cannibalisation’ of social housing is evident from the OBR’s forecast of future investment by housing associations. At present, the OBR assumes all £0.96 billion spent in government grants goes to ‘social housing’ (as broadly defined by the Treasury), but forecasts that this will fall to only £130 million for each of the three years 2018/19-2020/21. Overall, housing associations’ investment plans (including capital repairs) are expected to fall to only a little more than half their current level by 2019/20, partly because of the planned cuts in social sector rents. These are potentially massive cuts, even if associations manage to partly compensate for them by getting a share of the action in promoting low cost home ownership.

The point is that with well over £30 billion already committed by this government and the coalition to stimulating the private market before this week’s announcements, they’ve only succeeded in getting developers to complete 23% more homes in the last 12 months than they built in the first year after Labour handed over power. ‘It’s time to do much more’ says the Chancellor. Well, at least we can agree with him on that.

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Going into hibernation

After 5 years and approaching 700 posts, Red Brick is going to have a winter rest. A hibernation? That sounds like a good phrase, implying a comeback with renewed vigour and energy. That will certainly be needed for the fight ahead. I’m off to New Zealand for two months to look restfully on high mountains, beautiful lakes, and stunning coastlines, from the tropical rainforest and volcanoes of the north to the glaciers and fjords of the south. There may be the occasional flurry: I might be moved to comment on something from afar, my brilliant colleague known here as Monimbo may have a few things to say, and, through the wonders of the internet, I will get any other submissions people care to offer – we have always tried to be an open forum. But we will be troubling your inbox less frequently between now and February. My apologies for those who would like to see more regular rants against the Housing and Planning Bill.

When Tony Clements and I hatched the idea of a ‘progressive’ housing blog five years ago, we were still in the early flush of the coalition. We thought housing would be a big part of the LibDem resistance within the Government – it wasn’t – and we thought housing would become central to a new Labour offer – it didn’t really do that either. We thought that Grant Shapps was a bit of a fool, a spin fetishist and a caricature of a Tory politician. Despite his PR-led approach, he proved to be a transformative figure, and I don’t just mean through his alter ego Michael Green. With a stroke of evil genius, he turned logic on its head by virtually doubling the rent of new social homes and calling his new unaffordable product ‘affordable rent’. Opponents never got past this as the Government and mayor of London constantly talked, usually unchallenged in the media, about their performance in providing affordable homes.

If the truth never reached the public it became common to talk about the policy as ‘Orwellian’. George Orwell’s essay ‘Politics and the English Language’ examined the connection between phrases used by politicians and the debasement of language. He could have been writing with Shapps in mind when he said that political language is about ‘the defence of the indefensible’ and ‘is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind.’ Shapps’ great achievement was to cover up George Osborne’s immediate cut in housing investment of over 60%, probably the most damaging single decision in the history of housing policy. There was scarcely a peep from the LibDems, setting the pattern for total complicity on housing for the rest of the Parliament.

Five years back, our first posts were also about the attack on security of tenure and the dangers of a high rent policy for the long term benefit bill. We argued the case, and still do, for the retention of security for social tenants – I won’t dally with the equally Orwellian term ‘lifetime tenancy’, a concept that doesn’t exist but is much discussed – and the extension of security for private tenants. We supported the ‘benefits to bricks’ approach which has been much debated since – as Tony wrote at the time, Coalition policy was ‘like a great big housing PFI – avoid the capital investment up-front, pay more in the long-term’.

In the early days, and indeed ever since, Red Brick was accused of scaremongering. In the election, Labour had been accused of whipping up unfounded fears about the Tories’ secret and malicious plans. David Cameron himself had personally rebutted claims that the Tories would hike social rents and abolish security of tenure, claiming it was part of a ‘scare campaign’ and that the Tories believed in the ‘security (that social housing) provides’. Nick Clegg joined in: also accusing Labour of scaremongering for saying that housing benefit cuts would compel people to move out of their communities. Yet even the wildest imaginings came to pass and Cameron learned that he could get away with the boldest of denials – as is now even more apparent due to his 2015 commitment not to take away tax credits for working people.

Cameron always reminds me of that old idiom ‘the louder he talked of his honour the faster we counted the spoons’. How does he get away with it? The only available answer lies in the politics of our media – an overwhelmingly right-wing written media and a broadcasting media that is led by the nose by the newspapers. There is a pattern, they destroyed Brown, they destroyed Miliband, and now they are destroying Corbyn (in all three cases with a little help from our own side). In housing, the media are obsessed with virtuous home owners and the stigmatisation of social tenants (unless of course they want to become home owners).

Our belief that the Tories had a secret housing agenda and policies that were hugely different from those set out in their rather benign 2010 manifesto was set out in a post called ‘Less Localism and More Localis’. We argued that the policies that Shapps was actually following were clearly set out in a pamphlet published by the right wing think tank Localis before the election. None appeared in the manifesto. But it was all there in their document: moving social housing towards market rents, removing security of tenure so that the sector would meet temporary and not permanent housing needs, letting housing benefit take the strain before cutting that as well. In short, the full marketisation of social housing. Five years on, it is the writings of Policy Exchange that seem to foretell Government policy.

That blog post also introduced another of our themes: the complicity of much of the housing sector and especially key people in the housing association movement. Two housing association chief executives were fully engaged in the development of the Localis policies. When the Government changed, the sector whinged about the policies but probably less vocally than it had done under Labour. They could have destroyed ‘affordable rent’ by refusing to deliver it on the Government’s terms. Instead, under the pretence of ‘accepting the inevitable’ and playing, in a favourite phrase of the time, ‘the only game in town’, it dawned on us that more than a few of the big associations saw this not as a disaster but as a historic opportunity to break free from regulation and become truly commercial and ‘independent’. They saw their future as really big developers, leaving behind their original mission, their charitable objectives, and the tradition of providing genuinely affordable social housing. They loved the world of big bond launches and mega land deals and wanted to break free from being told to house homeless people by local councils. Of course it is hard to generalise about the huge variety of associations, and many retain their original zeal for meeting housing need, but many of the biggest and most powerful players and their trade body the NHF are now almost beyond redemption.

Red Brick has covered social housing a lot but we have tried to take an eclectic view of the housing world. Just a little bit of training in economics led to the conclusion that the Government’s obsession with demand-side subsidies for home ownership would put prices up in the long run. The objective, better affordability for first time buyers, would continue to move out of reach but large amounts of public money, amounts that make the affordable housing programme look puny, would be spent or forgone or committed as guarantees. We identified the problems with housebuilding to lie less in demand and more on the supply side: in the business model of the existing volume housebuilders, the total failure of the land market, a reactive rather than proactive planning system, and the 35-year long removal of the biggest players, local authorities, from the game. We scoffed at the so-called localism agenda: a policy that moved in two directions at once – highly centralising that which the Government cared about most whilst decentralising what they couldn’t be bothered about. Even so, we found much to praise in the fact that they carried through John Healey’s proposed reform of council housing finance, a genuinely decentralising move that brought enormous potential benefits. After an encouraging start, even this policy has sadly beeen abandoned due to centrally-imposed rent cuts (to reduce housing benefit) and forced council house sales (to fund the right to buy).

Of course, writing ‘the Tories are bastards’ a couple of times a week is not satisfying after a while for any writer – how Mail journalists churn out their poison day after day is beyond me – and it has always been part of the Red Brick focus to look for good policies wherever they emerge, at home or overseas. Here are three regular refrains.

First, housing policy is economic policy, social policy, health policy and education policy rolled into one. Cutting public housing investment was like cutting the throat of the economy, and raising housing investment would have enormously beneficial multiplier effects (as recent work by the SHOUT campaign and by John Healey MP has shown). It is so beneficial that it knocks the case for austerity for six. Put simply, a decent home is the foundation for everything else and everyone should have a place to rest that fits their needs and their families.

Secondly, only a balanced and comprehensive approach to housing policy will do the job. It is pointless to obsess about one tenure, whether it is home ownership, social housing, or private renting. The fortunes of the tenures are closely inter-related and the housing story of the last 100 years can be seen in the chart showing the changing balance between them. The recent decline in both home ownership and social renting, contrasted to the rise in private renting, is, together with overall investment levels, the central housing story of our times. Recent work by Ipsos-Mori shows public support for more housing to be at its highest for many years, with people wanting both more housebuilding generally and more affordable homes, but it still isn’t a decisive issue for them.

Thirdly, it is vital to make the case for direct housing provision for people on low incomes. The mood music is that ‘trickle down’ somehow works in housing. It is a constant unstated assumption. We will have to build a huge number of homes for many years before we begin to see a price effect in terms of values and rents. Building a luxury home on the river or an executive mansion in a leafy area will never have the knock-on effect of helping people in housing need. Providing homes for first time buyers is a good thing to do but it will not release homes for people who will always need to rent because faster household formation amongst the slightly better-off will fill the space. The only reliable way to provide homes to people on low incomes is to build homes specifically for that purpose and to let them directly to people on the basis of need, on genuinely affordable rents and with the security that will allow them to build their lives. The idea of aspiration does not apply solely to home ownership; people on low incomes aspire to a decent home that works for them. The socialised model, whether councils or housing associations or other forms of tenure like co-operatives, is incredibly effective and an efficient use of resources. It works for people in low incomes, and the marketised model does not.

One feature of the blogging world, unlike mainstream journalism, is that it is not dog-eat-dog. Housing bloggers have a lot of respect for each other, even if their politics differ. Whilst Red Brick takes a little rest, there are other bloggers that you can follow if you do not already do so. The most reliable source of great information and analysis anywhere in housing is Jules Birch. He blogs regularly for Inside Housing but an even wider range of material features on his own blog. Also highly recommended is my colleague in SHOUT, Colin Wiles. He now blogs in many places, Inside Housing and the Guardian mainly, but he is always worth a read.

London’s blogging needs are well looked after by Dave Hill of the Guardian. Other blogs I regularly look at include the inspirational Municipal Dreams, the SHOUT campaign blog, the original and always challenging Joe Halewood, the Women in Housing blog, the LibDem Alex Marsh, the JRF’s Julia Unwin, and the many authors of the Shelter blog. It’s also always worth looking out for articles by Rob Gershon and Tom Murtha.

Most of them can also be found on Twitter, which will remain my primary source of news and opinion in the Antipodes. I will continue to tweet @stevehilditch

Thank you for reading. And let me be the first to say: Happy New Year.

Steve Hilditch

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Why are the Tories so sanguine about adding £60 billion to public debt?

Once upon a time, the reclassification of housing associations as ‘public non-financial corporations’ by the Office for National Statistics (ONS), which happened last Friday after years of speculation, would have been seen as a catastrophe. We therefore have to look behind the immediate issue to try to understand why the Government is so sanguine about the apparent disaster of having to add £60 billion of debt to the public balance sheet and why some housing association bosses see it as a great opportunity.

The long-term role of housing associations has been as the ‘third arm’ in housing, sitting between public and private sectors. This made them politically acceptable across the spectrum, sufficiently non-public to keep Tories happy and sufficiently non-private for Labour. Since 1988 they have been in the highly advantageous position of being able to borrow money as ‘private’ organisations, pay tax based on their charitable status, and receive grant from the public sector towards the building of low rent and low cost homes. In return for grant they accepted a regulatory regime governing their management, finances and performance, and were required to co-operate with housing authorities over issues like housing allocations and housing development. In many ways the model has been a great success, although in my view many associations have fallen well below what was possible.

Like flat caps and manual trades unions, Council housing never really fitted with New Labour. After 1997, housing associations – already the Tories’ favoured option – were confirmed as the primary bodies to deliver housing objectives under New Labour – not only building new homes but also accepting the transfer of hundreds of thousands of homes from councils. One reason was the Treasury’s obsession with a particular definition of public borrowing, different from any other European country, which meant that housing association borrowing did not appear on the public sector balance sheet whereas borrowing by councils for the same purpose did.

Extending a policy started by the Tories, the Labour Government saw an opportunity to reduce the level of grant needed to produce social housing, encouraging associations to ‘stretch their assets’ to get more homes for a set amount of public spending through housing association grant. The quid pro quo was that rents would be allowed to rise faster than inflation – in effect housing benefit took the strain. Labour tightened regulation, with associations for example becoming subject to inspection by the Audit Commission, raising the first queries about the ‘private’ classification that housing associations enjoyed within the public borrowing definitions.

Since 2010 the Tory Government has gone to new extremes, reducing grant hugely and forcing rents up towards market levels, thereby requiring housing benefit to take much more strain. Their approach to regulation has been entirely contradictory: they have deregulated in some areas with a fanfare, for example virtually ending oversight of service standards and ending the highly effective inspection regime, but have imposed their ideological priorities such as moving towards market rents (followed bizarrely by a recent rent cut), reducing security of tenure, virtually ending the provision of social rented homes, ‘pay to stay’ and the ‘right to buy’ with its associated forced sale of high value council houses.

It is therefore no surprise that ONS would fulfil their duty to review the classification within the public accounts of housing associations, determining on the basis of the evidence whether their borrowing should be regarded as ‘public’ or ‘private’.

Their review, however, appears to have had nothing at all to do with the recent fuss about right to buy for housing association tenants. One of the key arguments used to get associations to vote for the voluntary ‘deal’ on right to buy was the impending threat of an adverse ONS decision. It is clear from their published decision that their review was based on the legislation passed by Labour in 2008 and the Coalition’s 2011 Localism Act.

The ONS decision has been ‘on the cards’ for some time and it would astonish me if Government was not aware of the likelihood of this change. It is totally disingenuous of the Government to feign surprise. They have had time to think it through. I suspect that their initial public response – that they will bring forward deregulatory measures to return the sector to a private sector classification as quickly as possible – covers a more carefully worked out plan, or at least an ambition. They will not want to simply tip HAs over the line back into a private sector classification, they will want to shove them firmly into the real private sector. If they want to maintain their interfering policies on right to buy, pay to stay, and the rest, they may have to push the boat out a long way on other forms of regulation to change ONS’s balance of opinion.

What might this mean? HAs have already virtually ended the provision of genuinely affordable homes for social rent. They have been selling social housing assets on the market and ‘converting’ empty homes from social rent to much higher ‘affordable rents’ (at up to 80% of market levels). Some have argued consistently for ‘freedom’ to set their own rents and to break away from having to house local authority nominees. Now they are saying that even the ‘affordable rent’ model is unviable, and their other big product, shared ownership, is unviable in high value areas.

Big associations increasingly look like and sound like housing developers who are focused on their total output and the bottom line and much less on what they are building and for whom. They are potentially very useful to a Government which talks big on housing production but has delivered very little in practice. It would be very helpful for them to have a not-for-profit, tax-advantaged, sector providing mainly market homes and delivering one or two top priority programmes like ‘starter’ homes.

The whole movement is being de-linked from concepts of housing need and from the very notion of a housing strategy, because there isn’t one. A few housing association bosses have in the past expressed a desire to become PLC companies and there may be more than a thought or two in Government as to whether the possibility of real privatisation should be opened up.

It is the political and not the technical aspects of the ONS decision that will decide the future.

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The visit of President Xi was notable for more than Jeremy Corbyn’s white tie

Having visited China a few years ago, I found the debate about President Xi Jinping’s state visit difficult to assess. There were a lot of side issues that attracted attention – would Jeremy wear a white tie to the banquet seemed to be a fixation for some parts of the media – but the primary issue was human rights.

There are obviously so many abuses in China but there is a balance sheet to be drawn up. Freedom of speech is still ruthlessly suppressed, yet I found the people we met on our trip able to discuss politics openly. Our guide commented that his father absolutely revered Mao Tse Tung, he knew about him as a crucial historical figure, but his own son would be hard pressed to tell you anything about him at all. We discussed openly both the appalling excesses of Mao, the impact of the cultural revolution and the capitalist reforms.

It took Britain and the USA many more generations to move from a feudal economy, and in many respects China has sprinted past us. Huge strides have been made against poverty hunger and disease. They build new homes on a scale we simply cannot imagine. Of course the society still has many brutal elements, however it seems highly likely that political liberalisation will follow economic liberalisation, but at an unpredictable pace. That is why engagement is the best route forward.

DSCN1426Old and new homes side by side in Shanghai. Some campaigns to protect older residential areas have been successful, notably the traditional hutongs courtyard residences in Beijing.

Economic liberalisation, or the introduction of capitalism, has not been all good for China.  It seems that the rising tide of wealth has lifted most, but not all, boats, on the other hand some have been lifted to extreme heights. Millions of Chinese have become extremely wealthy and the opulence of their lifestyles and their growing detachment from the reality of the common people is as offensive as it is in the west. But just like Russian oligarchs, Oil Sheiks and rich Greeks before them, wealthy Chinese want to hedge their bets with their money in case domestic politics changes for the worse (as they see it) or in case the recent economic turbulence and stock market crashes become more permanent features of the Chinese economy.

DSCN0121China built hundreds of thousands of new homes on higher ground to facilitate the relocation of 1.24 million residents to enable the Three Gorges Dam project to proceed. The scale of Chinese ambition is extraordinary. 

Which brings us to housing. President Xi is carrying out further economic reforms, including making it easier for individuals to invest abroad. More than 60% of wealthy Chinese in a recent survey were looking to increase their foreign investment, and their most popular option was residential property. Increasing numbers of wealthy young Chinese go abroad for their education, and their families invest in property when they go. As in Britain, a large investment can also bring the right to reside in the country concerned (never hear UKIP complain about that one). London is a highly desirable destination, but so are other UK cities with good Universities. Despite the huge inflow, the UK is not yet the number one choice, it is still behind USA, Australia and Canada. But London is clearly the destination of choice within Europe, followed by our other University cities. Nearly half a million young Chinese went abroad to study last year, and the number is rising rapidly.

The impact of all of this in the UK is difficult to assess, but added to the supply of rich migrants from other countries it is an increasingly significant factor in the property market. UK property is accepted as a ‘safe haven’ generally, but the so-called ‘golden postcodes’ around good schools and universities and in inner London create property hotspots which in turn ripple out into the wider market. It certainly feeds the expectation of high prices. Developers like to market overseas because investors will buy ‘off plan’, boosting their cash flow. It is no surprise to see them marketing new homes vigorously in many countries and especially across China. It seems unfair to existing UK residents, but there are also suggestions that the London new build market is more fragile than people think and might be teetering on the brink of a downturn without this additional demand to compensate for the fact that so few domestic purchasers can compete at current price levels.

George Osborne has taken a few small steps to regulate this market, in particular by gathering stamp duty from property investors using a corporate structure. Much more action is needed against those who ‘buy to leave’ and foreign property investment would seem to be a good source of tax revenue to help bring the deficit under control. But the biggest lesson is that a housing policy that relies on high demand to encourage greater supply is doomed to chase its own tail. We need less planning liberalisation, as we see in the Housing and Planning Bill, and stronger powers to enable local councils to determine the mix of homes that will appear on particular sites. The only way to house people on very low incomes without recourse to huge housing benefit costs is through social housing, and the only way to have a long term impact in high value areas is to do more to control the cost of land. These are among the issues that the IPPR/Kerslake Commission on housing in London will turn its attention in the next few months. We will await their conclusions with interest.

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More and more, poverty and deprivation in London are driven by housing costs

As we head for next May’s crucial London mayoral election, the London Poverty Profile published by New Policy Institute and Trust for London shows both the depth of poverty in the capital and its changing nature.

Some crucial facts revealed by the study:

  • More than ever, the high level of poverty in London is closely associated with housing costs: 27% of Londoners are assessed as living in poverty after housing costs are taken into account, compared to 20% in the rest of England.
  • Poverty increasingly affects those in work: the majority of people in poverty are in a working family, and their circumstances are likely to deteriorate hugely if Osborne’s tax credit cuts go through. Despite low unemployment, 700,000 jobs in London pay below the London Living Wage, and the numbers are rising year on year.
  • The wealth disparity is huge, with the total wealth of a household on the 10th percentile amounting to only £6,300 compared to £1.1 million for a household on the 90th percentile.

The figures not only illustrate the importance of housing in driving people into poverty, but also how the housing market is changing. The biggest number of people in poverty are now in private renting (860,000), a transformation in the impact of tenure over the last 10 years. The number of children in poverty in the PRS has more than doubled in those 10 years. Not only are these families living in poverty, they are increasingly insecure: in 2014/15 there were 27,000 possession orders granted in London.

Homelessness is once again becoming a critical factor: 48,000 London households are living in temporary accommodation – three times higher than the rest of England put together. More than 15,000 have been placed outside their home borough and an estimated 2,700 have been placed outside London.

Government benefit chages are having a major impact: 10,500 families were affected by the overall benefit cap; if it is lowered as threatened a further 20,000 will be affected.
Given the current debate over tax credits, it is important to note that half of 0-19 year olds (1.1 million) in London live in a family that receives tax credits. Poverty is changing: the number of pensioners in poverty has declined over the last decade – by 30% – but the number of working age adults living in poverty has increased by 30%.

An excellent article this week by Alasdair Rae on The Conversation shows another way of looking at deprivation in London. Using clear maps, Rae compares the distribution of the 10% most deprived districts in London in 2004 with 2015. The index uses a broader range of indicators – relating to income, jobs, education, health, crime, housing and environment – than is used to measure poverty. Rae’s conclusion is that over the country as a whole, nothing much has changed – the places that were deprived in 2004 are still deprived today.

The major exception was London. In 2004, London had 462 of England’s 10% most deprived areas, by 2015 this had declined to 274. On the surface this might seem to be a good thing, but the conclusion is not that the deprivation has been eased to a major degree but that deprived people have been displaced, increasingly pushed by high housing costs and insecurity out to the suburban fringes – areas like Bromley show increases – or out of London altogether. Some boroughs, like Tower Hamlets and Hackney, show the biggest transformation. The conclusions will feed debates about gentrification in London and the need to protect traditionally mixed communities.

The big questions – what is London for? who is London for? what is our vision for its future? deserve to be widely debated as the mayoral election approaches.


(NB The full poverty profile data can be viewed here.)

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Death by regulation: the Housing and Planning Bill

I loved the comment of blogger Colin Wiles that the new Housing and Planning Bill is a ‘Bill of Wrongs’ ‘stuffed full of omissions’. I can’t recall a Bill where so much of the detail is to follow in ‘regulations’ to be made by the Secretary of State. The much-reduced department of communities and local government will have its work cut out to produce the mass of regulation and guidance which the Bill, if passed, requires.

It is an extraordinary Bill, a list of Tory obsessions and prejudices. Below is a quick run through of its key provisions. My apologies if I have missed something significant, especially in the Planning Parts with which I am less familiar. For any of you that like to read the real thing, the whole Bill can be found here  and the slightly more helpful DCLG explanatory notes can be found here, ‘explaining’ each section of the Bill.

For me the crucial points are:

  • The Bill reflects the Government’s increasingly narrow and unbalanced housing policy and its obsession with home ownership soundbites. It is bound to fail because it is still largely acting on the demand side, helping people to afford to buy in the hope this will generate supply. They cannot understand that demand side subsidies normally lead to price increases not reductions (and cost the taxpayer a lot of money). There is little point in having 20% off a Starter Home if the process increases the price of Starter Homes. The reality is that home ownership continues to fall, and has done every year since Cameron became Prime Minister, and there is little sign of the trend changing.
  • One way of apparently boosting home ownership is to denude the social rented sector through right to buy and other sales. The Government is still in denial that a large share of RTBs become private rentals after a while at hugely inflated rents. There is still no policy to deal with this. The Bill is a double whammy: housing association homes will be sold and the huge cost (up to £103,000 per property in London) will be borne by councils, forcing them to sell off their ‘high value’ council houses as they become vacant. Although there is supposedly a voluntary deal between housing associations and the Government to implement RTB, the Bill is clear that it is statutory really, it will just be enforced via the regulator. Only the 165 councils with retained stock will have to pay for the policy, which heaps insult on top of injury.
  • Mandatory high rents for social tenants with reasonable incomes (over £30,000 nationally, £40,000 in London) has also been dubbed the ‘right to buy incentive scheme’. What tenant would pay a rent up to market level when the alternative is to be given a subsidy of £103,000 to buy the home instead? For the first time to my knowledge, social landlords will collect detailed information on all of their tenants’ incomes, and they will share information with HMRC for verification purposes. This would include private companies undertaking social housing management. In my view, the bureaucracy involved in this will be burdensome and will detract from more important housing management tasks. Although HISTs (high income social tenants) will become part of the jargon, it is worth remembering that a couple, each earning £15,000 a year, will be caught by this. Hardly high income. Oh, and just to rub it in, any additional income received by councils will be remitted to the Treasury.
  • Again by regulation, housing associations will gain more ‘freedoms’. They think this is a prize and have been campaigning for it for some time. They largely want freedom to set their own rents and more freedom not to have to accept council nominees into their homes. Both move associations away from being part of the local strategic network and will distance them from the cause of meeting local housing need. We will see what the Government actually offers in the regulations.
  • The Bill removes councils’ specific duties to assess the needs of Gypsies and Travellers and to adopt a strategy. Provision will of course become even less satisfactory as a result and this is a sop to the nasty party.
  • The Government is showing some interest in better regulation of the private rented sector if this Bill and the Immigration Bill – described by Andy Burnham as “unpleasant and insidious” – are read together. As always they are motivated by the wrong things, for example the IB forces landlords inappropriately to become immigration officers. The H&P  Bill reminds me of the policy to have a ‘National Living Wage’ – take a popular policy, steal the words, implement something which is inadequate and does not reflect the original concept. Here they have picked up the concept of ‘rogue landlords’ and they will go on endlessly about how they are dealing with them despite the fact they are only edging along.

The Bill has 8 parts and briefly they are as follows.

Part 1 deals with ‘New Homes’. It sets out the Government’s policy on ‘Starter Homes’ for first time buyers under the age of 40. Planning authorities are put under a specific duty to promote Starter Homes. Starter Homes are new dwellings available at 20% below market price, up to a maximum price of £250,000 or £450,000 in London. Details will be set out in regulations (one of Colin’s ‘omissions’) but defined residential developments will only get planning permission if various requirements to include Starter Homes are met. Councils will not be allowed to have local policies contrary to the Government’s policy (whatever happened to devolution and localism?).

This part also places duties on councils to make sites available for ‘self-builders’ to meet demand.

Part 2 deals with ‘rogue landlords’ and Letting Agents. This introduces the idea of ‘Banning orders’ to prevent a person from letting or managing housing if guilty of offences which will be defined later. A banning order would prevent a person holding an HMO licence.

The Government will set up and operate a database of ‘rogue landlords’, which councils will keep up to date. Rent repayment orders can also be obtained against landlords who breach a banning order or commit other offences.

Part 3 changes the procedure for landlords seeking to recover premises which have been abandoned.

Part 4 deals with social housing.

  • Chapter 1 (bizarrely) sets out in statute the implementation of the ‘voluntary’ right to buy for housing associations. It empowers the Government to pay grant to cover the cost of discounts awarded under the scheme – these will actually be paid out by the HCA and the GLA in London. The regulator will monitor ‘compliance’ with ‘criteria’ set out by the Government. (How this is different from a statutory RTB I do not know).
  • Chapter 2 is the mechanism by which the Government will force councils to fund the RTB discounts by selling vacant high value housing. They will be required to make a payment to the Government calculated on the basis of the value of their property that becomes vacant. This will apply to the 165 stock-holding authorities, who will be under a duty to ‘consider’ selling the homes (but a duty to pay the levy to Government). There is also provision for the Government and councils to do a deal to use the money in some other way to provide housing. (There is no reference to non-stock-holding councils and the assumption must be that the 165 will be paying for the discounts of everyone else as well). The definition of becoming vacant excludes renewal of fixed term tenancies and successions. The precise calculations will be set out in regulations.
  • Chapter 3 gives the Government more powers to reduce regulation of private registered providers. Details will be in regulations. Housing associations have been campaigning for more ‘freedom’ to set rents and allocate housing on their own criteria.
  • Chapter 4 brings in ‘mandatory rents’ for high income social tenants (so-called ‘pay to stay’ for ‘HISTs’). Income thresholds will initially be £30,000 and £40,000 in London. All the detailed definitions, including how to calculate household incomes, will be in regulations. Tenants will be required to declare their incomes. Data will be shared between HMRC and landlords for verification purposes. Landlords will be obliged to charge rents on scales set by the Government and councils will have to pay the additional income to the Treasury. Enforcement will be through the regulator.

Part 5 removes the specific requirement on councils to assess the needs of Gypsies and Travellers and to have a strategy. In future they will be subsumed under the general requirement to assess housing needs. It also excludes people who are not entitled to remain in the UK from holding an HMO licence, allows for enforcement against estate agents to be delegated to local trading standards, and amends the way the price charged to a leaseholder for a lease extension is calculated.

Part 6 deals with Planning. It changes the arrangements for establishing neighbourhood planning areas and strengthens the power of the Secretary of State to amend local development plans. It changes arrangements for planning ‘permissions in principle’ and ‘permitted development’ and requires authorities to maintain a register of brownfield land.

Part 7 makes detailed changes to the process of making compulsory purchase orders.

Part 8 includes general provisions including transitional arrangements, regulations, commencement and short title. There are 11 Schedules.

And a filing cabinet full of ‘regulations’ to follow.


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Abandoning the poor (2)

It appears that the BBC’s Laura Kuenssberg, James Landale and co have swallowed the Tory Central Office press briefing wholesale. Her headline comments were all about David Cameron’s speech ‘parking his tanks on Labour’s lawn’, occupying ‘the Labour Party’s former ground while it is consumed by its own issues’. Other commentators like Jonathan Freedland joined in. He tweeted: ‘Tories don’t just want to own centre ground, but the centre left too’. ‘The heir to Blair’ said Pippa Crerar.

The Mirror’s Kevin Maguire was an honourable exception: ‘Cameron is the VW of politics. It was another masterclass in deception… Slick, shiny and smooth but lift the bonnet and the dodgy salesman’s flogging a toxic fiddle’.

The most revealing moments after the speech came in the interview by Andrew Neil with Michael Gove. Gove had no answer except ‘Labour crashed the economy’ to Neil’s pointed questions about the Government’s complete failure to stem the fall in home ownership, its ‘lamentable’ housebuilding record, and its determination to decimate tax credits for the working poor.

Neil’s questioning got to the point of the whole Cameron speech: the language of aspiration, equality and opportunity masks an increasingly right wing agenda NOT a drift to the imagined centre-left. There may be tanks, and they may be on Labour’s lawn, but they are only there to get a better shot at the poor.

I saw only one shaft of light in Cameron’s speech – his strong statements against discrimination and in favour of equality of opportunity. The strength of his statement (if not the policies backing it up) reflects the total victory of the so-called ‘loony left’ councils in the 1980s who first shouted these messages loud and proud – and were roundly condemned by Tories and media for doing so.

Cameron gained loud applause by revealing the truth about the housing association right to buy deal. He knows they have avoided a hugely difficult legislative process. He knows they have swerved past the many and growing number of Conservatives who are opposed to it. He knows that the housing associations underplayed their hand and were scared of their own shadows. ‘Some people said this would be impossible. Housing associations would never stand for it. The legislation would never pass. Let me tell you something. Greg Clark, our brilliant communities secretary, has secured a deal with housing associations to give their tenants the Right to Buy their home.’

Housing associations would never stand for it? ….instead, they handed it to the Tories on a plate.

The rhetoric of Cameron’s speech was what we have heard many times before. Only home ownership matters and they will do everything to promote it. Of course, they will ignore the inconvenient truth that there is now a long-lasting trend (a decade) for home ownership to fall and to be replaced by private renting.

Cameron’s big new housing policy announcement, widely trailed in the morning papers, was to change planning policy so that planning agreements will in future count ‘starter homes’ as affordable housing. Planning gain has been the source of most new social housing in the past few years, and a great deal of our new local infrastructure, so that will now go south. Some interpret the new policy to be preventing social housing being achieved in planning deals rather than just including starter homes amongst a range pf option. The so-called ‘affordable housing programme’ is widely expected to be a victim of the soon to be announced spending review, with what money is available also being focused on first time buyers.

With housing associations converting more social housing to higher rents or other tenures, the big question is the one that campaigner Tom Murtha asks time and time again – who will house the poor?

From the Government and from the leaders of our large housing associations, answer comes there none.

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Abandoning the poor (1)

The now infamous ‘deal’ between the National Housing Federation and the Government over the right to buy could be an important turning point in the history of housing associations and of social housing.

Many people on Boards say they have voted for the deal with a heavy heart, thinking they had no real option, that it makes sense for their organisations financially, that there will be one for one replacement of homes sold, and that they were fearful of being reclassified as public sector organisations (therefore much less able to borrow to build) if the Government went ahead with its legislation. It is clear to me, however, that some of the bigger associations voted for it with some enthusiasm because RTB sales bring in money to fund development, because the deal might lead to further deregulation, for example in rent setting and allocations policies, and, to be generous, because they have to anticipate emerging Government policy and do the best they can (next post is likely to comment on Cameron’s speech today). In my more cynical view some of them are quite happy to take another step towards getting out of the business of running social housing.

There are many arguments against the deal.
First, despite the claims that the ‘voluntary deal’ brings with it some important concessions, Secretary of State Greg Clark is insisting that the deal will deliver exactly the same as the legislation would have done. It is probably worse than that because the option of securing amendments to the legislation as it went through Parliament has been given up.

I think associations have misjudged the Government. As Clark told the Guido Fawkes blog,  “If they [housing associations] want to extend the right to buy to more people that is all well and good. My bottom line is that their proposal must match up to the ‘Right to Buy’ manifesto commitment and if they want to do it voluntarily they can start implementing it right away. There will be no compromise on introducing ‘Right to Buy’.” I suspect that the deal will become part of the regulatory framework and will be enforced through compliance – the Government will not allow it to be genuinely voluntary.

Second, associations have alienated local authorities big time. Most obviously this is because the deal will be funded by £billions of forced housing sales by local authorities – ‘asset stripping’ according to CIPFA. Associations seem indifferent to this – ‘nothing to do with us’ – what team players they are! Some councils, especially those with valuable property, will be hit so hard it will become impossible for them to meet their statutory duties. The defence that there will be ‘one for one’ replacement really does not hold water: it will never be ‘like for like’ and in the same area.

Councils’ annoyance is not only at forced sales but at the associated risk that housing associations might become free to set their own allocations policies and free to convert more social rent properties to other tenures. Councils depend on nominations to associations to meet their housing obligations. On top of forced sales, the loss of nominations is a big blow. Indeed, Philip Glanville, cabinet member for housing at Hackney Council, told Inside Housing that these relaxations were ‘as bad as the wider deal itself’, so that ‘You start questioning what housing associations are for if they’re inviting all these changes.’  In my view associations have been suckered into a trap: they think they can look after themselves knowing full well that it is at the expense not just of councils but of social housing as a whole. But they are making enemies and councils are enraged.

Third, the result is not as cast iron for the deal as NHF are spinning: the big developing associations held most sway and smaller associations were swept away in the voting methodology.  There is a growing divide between large associations, especially London’s G15, and the small and medium sized associations over the future of the sector. Even the Conservative Leader of the LGA, the pragmatic Lord Gary Porter, said “I think [the NHF proposal] could be the start of the end of the Nat Fed……. I think the G15 [group of London’s largest landlords] are getting their own way. A lot of the smallest providers, particularly the specialist providers, have been left out in the cold by the Nat Fed.”  The debate about the values and purpose of housing association, and whether they should do more to stay true to their roots (meeting housing need) will become even sharper.

Fourth, the deal may or may not protect them from the thing they dread: reclassification as public sector bodies. People who really understand these things say that a voluntary deal will not necessarily ‘save’ associations from being reclassified. There is not much difference between acceding to coercion to do the Government’s bidding, agreeing a system that may have to be backed up by statutory regulation, and having to comply with legislation. Our own Monimbo debated the issues involved earlier in the week on Red Brick.

Fifth, some associations seem to think that the deal will somehow make the Government nicer to them in future. ‘We scratch their back…….’  They should think again. The BBC thought they had bought some goodwill when they did their deal on the licence fee, agreeing to fund the concessionary licence fees out of their own income, only to find the Government saying it will make no difference to the negotiation on their Charter renewal. The Government plainly has its eye on housing associations’ balance sheets, and they will be back for more, starting today with a new planning policy that exclusively promotes home ownership.

And sixth, they seem not to have thought it all through, with the Charity Commission and others, like the rural associations, considering legal challenges. Previous attempts by the Conservatives to extend the right to buy to housing associations suffered because of the problems caused by charity law: making the scheme theoretically voluntary does not remove these issues.

The reason that this an important moment in the history of housing associations and not just another policy change is not so much financial as cultural. Normally in any big row with Government, associations have argued for what is best for social housing in general and what will help alleviate housing need in particular. This time, meeting housing need never got a mention. The arguments concerned the future ‘independence’ of the sector, generating extra income to support development – of homes which are rarely affordable in any common usage of the term. This may well go with the grain of Government policy, but most housing associations are charitable and they are meant to stand up for the poorest.

I can see parallels between large housing associations and the demutualisation of the building societies. A movement that had built up over many decades spied a potential golden future, the chance to become real players. Instead of doing a solid job collecting people’s savings and lending people money to buy homes, they wanted to eschew their traditional role and become banks. They were arrogant enough to think they would be better at it than the traditional institutions. Some people made money along the way but ultimately it was a disaster and they nearly all got gobbled up. The losers were the original beneficiaries, people wanting mortgages. Many big housing associations want to give up their historic mission of meeting housing need and to become developers instead. Wimpeys with a caring touch. They are less bothered by what they produce and for whom than they are about number and turnover.

A battle in the campaign to save social housing has been lost, but the war continues.

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A cunning ploy that will shift the argument

Greg Clark didn’t so much make an offer on right to buy that housing associations couldn’t refuse, as persuade them to make one he wouldn’t refuse. In doing so he’s probably saved Osborne and Cameron from dealing with the formidable institutional blockages to what had begun to look like a reckless manifesto promise made back in April. Now the argument will almost certainly have to shift to how it will be paid for and whether this sounds another death knell for council housing.

Ministers and friends of ministers have been lining up to pave the way for this deal by putting the frighteners on associations. First we had Osborne telling a Lords committee that their record on housebuilding is not particularly impressive. Then Cameron weighed in by referring to them during PMQs as ‘part of the public sector’ which needs to become ‘more efficient’. Chris Walker, from favoured think tank Policy Exchange, went further by suggesting that they might be sold off, apparently forgetting that the government doesn’t actually own them. In a transparent good cop/bad cop scenario, at the NHF conference Greg Clark then praised associations and called for a new ‘partnership’ that respects their independence, provided of course that they sign what he referred to four times as ‘David’s proposal’. Given the not even barely veiled threats, the fact that they face five more years of dealing with what would be an increasingly hostile government, and that the agreement gives them a bit more flexibility than they might otherwise get via legislation, it’s a racing certainty that sufficient associations will sign to allow the government to claim that the sector has seen the sense of letting tenants buy their homes.

While this probably does enough to get the government off two hooks – possible defeat in the Lords and a potential reclassification of housing association debt by the ONS – it shifts the argument onto aspects of the policy on which Labour can make damning criticisms. The first is how it will be paid for. Under the old right to buy, after giving the required discounts, councils typically get half the value of the property from the sale. Under the new right to buy, this means that every home sold will need roughly a 50% government subsidy, paid very soon after the sale. Once the scheme has been set up and even if take-up is limited, sales will start to happen quickly and government will have to reimburse associations for them. Currently, no money has been set aside for this. It’s expected to be financed from the proceeds of selling off ‘high value’ council houses but the time lag before this happens, and uncertainty about how many popular properties will fall vacant, mean that the arithmetic will be very tight.

Here’s why. Let’s take a very conservative forecast of what might happen – say only 50,000 sales in the first two years at an average market price of £150,000 (the average right to buy sale price for a council house is £126,000). That’s £7.5bn worth of sales for which associations receive 50% from the buyers with the rest (£3.75bn) needing to come from government funds. Let’s also suppose the high value sales scheme can be set up just as quickly, despite it not being in councils’ interests to co-operate in flogging off their stock. Although we don’t yet know what the high-value threshold will be, Policy Exchange thinks it will apply to 210,000 council homes worth an average £300,000 each. Allowing a conservative £20,000 for debt and admin costs reduces this to £280,000. Four London boroughs have looked at their turnover of higher value stock and say it is around 3.5% annually. If applied nationally, this would mean just over 7,000 sales each year producing some £2bn in receipts or £4bn over two years. So, with a fair wind behind it, flogging off council houses might just about generate enough to compensate associations. But any delays, which look inevitable, would mean the Treasury having to stump up cash to fill the gap.

What the sales do not provide is any money for the council houses to be replaced. The Tories might respond by widening the net for high-value sales – but this inevitably means bringing in lower value properties which will generate less receipts but cost just as much to replace with a new home. Or they might insist on councils selling every vacancy that occurs in high-value stock, including ones that allow for tenant transfers which give tenants the mobility to move jobs, escape the bedroom tax or provide care for their kids so they can go out to work. Whatever the government’s answer, it would be hard to find a clearer case of robbing Peter to pay Paul.

There needs to be concerted opposition here from Labour’s front bench, local authorities and tenants. Shadow housing minister John Healey has a clear argument – if the Tories want to provide a small number of tenants with an average lump sum of £75,000 each this should be paid for by taxpayers, not council tenants and potential council tenants. And why should these households get a huge lump sum when those assisted through its Help to Buy scheme only get an interest-free loan or a mortgage guarantee? Councils have to shout loud and clear (as Camden, Haringey, Enfield and Islington have begun to) about the effects on their estates and on their waiting list and transfers, and they have to get the LGA to take a tougher stance than it did last week. Tenants could start local campaigns to relet vacant properties on estates under threat, which are by definition going to be in each authority’s best stock. What price the Tories’ advocacy of allocating houses to people with strong local connections if all the vacant lettings in their estate have to be sold?

And finally, it’s not just the existing stock of social rented homes that is doubly threatened by the new right to buy, but the future stock too. This month sees a new round of warnings about the failure to replace homes sold under the ‘reinvigorated’ right to buy for council tenants. Worse still would be if the Tories fail to get their sums right on the new scheme and the Treasury forces DCLG to raid the Affordable Homes Programme to compensate housing associations for their sales. Not only would existing homes be lost, but future ones too. This is not only like robbing Peter to pay Paul, but returning to clean Peter out a second time, once he’s saved enough to replace all the stolen goods.

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Farron’s empty rhetoric

Good political speeches are seductive, and yesterday Tim Farron made a good speech. Coherent, passionate, with quite a lot of policy. It had quite a long section on housing.
He started by saying his interest was sparked by seeing ‘Cathy Come Home’ as a repeat 18 years after it came out (I saw it age 16 on original broadcast, and it certainly had a life-long effect on me). He said that he sees ‘Cathys’ in his surgery very week – ‘People in housing need, desperate for a home, desperate to be settled, desperate for dignity’.

He made the basic case for good homes in an effective way: ‘Access to affordable housing affects us all because it is the entry ticket to society, to security and stability, to work, health and community. Because without secure, affordable and stable housing how can you be sure that you can send your kids to the same school one term after the next? How can you be confident you can keep your children safe and warm? How can you apply for and hold down a job to feed and clothe them? And how can you have the peace of mind to concentrate on anything else? The worry and the burden of not knowing if you can pay the mortgage, pay the rent, stay in the same place for more than six months at a time, is devastating to millions and millions of British people.’

His policies included building 300,000 homes a year, letting councils build again, 10 new garden cities, and a housing investment bank. He promised to lead the opposition to the forced sell-off of housing association properties.

So far so good. But there was one sentence that he probably should not have uttered. He said: ‘We have had enough empty rhetoric on housing. We need action now.’

Empty rhetoric. I have commented before on Red Brick that if you only look at paper policies, the LibDems housing policy has been the best. As a party they have had a good progressive comprehensive policy for many years. I wish it had been Labour Party policy, and have had the wishful thought that the two parties should work together on housing. But the past policy and Farron’s speech are all empty rhetoric. Because they have been in Government for five years and they had the chance to follow their principles and to pursue their policies.

No LibDem that I have heard has attempted to explain or rationalise what contribution they made to housing policy under the Coalition. What happened was virtually the opposite of their policy. They supported every decision to undermine and move towards ending social rented housing. The backed demand subsidies for home ownership when the system was crying out for aggressive supply-side action. They failed to take action on private renting. They supported the caps and benefit policies that make it impossible for people on low incomes to live in areas of the country with high rents. They pretended that the ‘affordable rent’ product was affordable when everyone knew it wasn’t. And on and on.

A succession of weak LibDem junior housing ministers looked feeble and ineffectual, and they were. At DWP, LibDem Steve Webb looked and sounded competent but proved to be just a nicer version of his boss, Iain Duncan Smith.

A new leader makes a good speech, but the fundamental truth hasn’t changed. Farron should be forced to explain to Cathy why his party supported the extreme act of watering down of the homelessness safety net – because everything he said about homelessness is true. His phrase ‘empty rhetoric’ sums it up.

In housing and probably many other areas as well, the LibDems cannot now be allowed to move from the moral cess-pit to the moral high ground without serious challenge.

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