See the complete shortlist here:
See the complete shortlist here:
With poor timing I suspect I’m about to get on the wrong side of history with this post, coming just a few days before the Leadership ballot result. But here goes anyway.
I’m in Labour because I believe that the Party in Government (national and local) has brought about nearly all the major social and economic advances in this country in the past seventy years. Of course I accept that there have been terrible disappointments and failures. I am also an unapologetic supporter of vigorous extra-parliamentary campaigning. However, I am unshakeable in my belief that the most important thing Labour does is win elections.
My conclusion that Owen Smith stands a better chance of winning a general election than Jeremy Corbyn has dictated my vote in the Leadership election. However I feel alone in not being very tribal about it – I think both candidates have abundant but different qualities – and abhore the attacks that have been made by both sides which have so diminished the standing of the Party as a whole.
The purpose of this post is to comment on an example of why elections matter so much. For the first time in a long time, this week I whooped in delight at a political announcement. It came from the Mayor of London. Generally speaking, the words ‘Boris Johnson’ and ‘Sadiq Khan’ should be enough in themselves to prove that winning an election changes things. But my example is something that most people won’t have heard of and many others will think is of little consequence. It concerns the seemingly obscure policy of ‘converting’ rents for social rented homes when they become empty to so-called ‘affordable rents’.
I have railed on Red Brick, sometimes in an almost incoherent rage, against the travesty of rents that are blatantly unaffordable being termed ‘affordable rents’. They are defined as rents that are up to 80% of market rents, compared to social rents which are historically nearer to 40% of market rents. As the Government and Boris Johnson moved to kill off social rented housing, mayoral grants for building new homes were restricted to supporting ’affordable rent’ homes only. The PR trick was to keep talking about the output of ‘affordable’ homes as if there was some great achievement going on. Last year, the new ‘real Tory’ Government went one step further and removed support for even these scandalously high rents by putting all the money into home ownership instead.
Back in 2013, because government grant had been cut to the bone, the then Housing Minister Mark Prisk and Mayor Johnson hit on the idea of getting tenants to put in far more money. As I commented at the time on Red Brick, rent is the new grant.
To get hold of some grant, housing providers (mainly housing associations) were required to sign up to selling some of their existing properties (it was called ‘asset management’) and ‘converting’ some of their homes from lower social rents to the much higher ‘affordable rents’ when they became available for letting. Some associations resisted, but others revelled in their freedom, volunteering to convert many or most of their homes when they became vacant.
By 2015 a total of 19,000 homes had been approved for rent conversion in London, making a huge (and largely unnoticed) contribution to the accelerating loss of social rented homes. On the basis of Freedom of Information requests that I submitted, it became clear that as many as 82,000 social rent properties might be affected nationally, a huge share of the ‘void’ properties that come available for letting.
In London, Khan has confirmed that the policy pushed rents up by as much as £5,500 a year, putting homes that were built with your money and mine to be genuinely affordable well out of the reach of people on typical London incomes. In a totally counter-productive way, the policy also pushed up the housing benefit bill. In my view the associations who embraced the policy betrayed their roots, their mission and their communities. (I forgive those who did it reluctantly but at least complained publicly about it).
Now, because he is in power, Sadiq has said he will end this practice. “He will work with housing associations to ensure it is not necessary to fund new affordable homes by raising rents on social rented properties.” As a result, many more homes available for reletting will be let at social rents which are within the reach of ordinary families. Sadly, I presume the policy in the rest of the country will continue, and if Zac Goldsmith had won it would still apply in London.
Whoever wins on Saturday, this example illustrates for me the vital importance of keeping the political focus in the Labour Party on winning elections – because, as Sadiq shows, Labour administrations actually change people’s lives.
Even Theresa May has now been rolled out to defend the highly dodgy claim by environment ministers that council homes sold under the right to buy are being replaced. But it patently isn’t true.
There is no dispute that actual sales under RTB vastly exceed replacements: in the first four years of the ‘reinvigorated’ right to buy, sales reached 41,755 while local authority replacements only totalled 5,239. But the government claims relate to the ‘additional’ sales that have occurred, over and above what would have happened if the scheme had not been ‘reinvigorated’. In the four years to April 2012, sales averaged only 2,660 per year, so they deduct a figure (actually rather in excess of that) to allow for sales which would have happened anyway and aren’t covered by the promise. They also point out that councils have three years to start replacements, so to factor this in they allow themselves four years of starts and acquisitions to offset the first year’s sales.
So on this basis, the ‘additional’ sales in the first year were just 3,054 of the total of 5,944 actually sold, and these additional sales were offset by 5,239 council starts or acquisitions over the four years April 2012 – March 2016. So – hey presto! – the target was actually exceeded by 2,185.
The obvious problem with this curious logic is that accounting for the first year’s sales has gobbled up not only year 1 starts but those for years 2-4 as well. Which creates a slight problem when trying to account for the replacement of year 2 sales, especially as by that year (2013/14) sales had almost doubled, to 11,261. Even allowing for DCLG’s deduction of sales that would have taken place under the old scheme, 7,879 replacements still have to be found, and they have to come from a combination of the 2,185 ‘spare’ replacements from the previous year (5,239 minus 3,054) plus whatever is started or acquired in 2016/17.
Here’s where the logic starts to fall apart, because DCLG therefore ‘needs’ 5,694 starts or acquisitions in the current year (2016/17), to catch up with sales back in 2013/14.
We don’t yet have the first quarter’s figures for 2016/17 (they come out later this month). But it will be a minor miracle if they come anywhere near the DCLG’s target figure. The reason is that, far from growing, starts and acquisitions actually went down slightly in the last financial year compared with the year before (they rose to 1,953 in 2014/15, but fell to 1,852 in 2015/16). To achieve the DCLG target and allow them to claim that homes sold in 2014/15 had been replaced, output would need to more than triple in the current twelve months. Yet the LGA has already warned that councils are finding replacement more difficult to achieve, not less, which is why they have slowed down their replacement rate.
The problem does, of course, get even worse in subsequent years. By next year (2017/18) DCLG will ‘need’ another 8,512 starts or acquisitions (the ‘additional’ sales that took place in 2014/15), and a very similar number in the year after that. Barring miracles happening very soon, the ‘replacement’ promise, even under the very limited terms defined by DCLG, is a dead duck.
The National Audit Office warned that this would happen back in March. Since then, the numbers have changed slightly as extra starts and acquisitions have bolstered the earlier years’ figures. But the NAO’s basic conclusion remains valid, that DCLG are quickly going to need over 8,000 starts or acquisitions to be achieved by councils annually, or they won’t meet their target. NAO forecast a big shortfall, and there is little reason to question their conclusion six months later, even with the benefit of updated figures.
There are all sorts of reasons for this, not only to do with the rules about sales receipts but resulting from the government’s reneging on just about all the promises it made when council housing became self-financing. Coincidentally, the starting date for these promises was the same (April 1st 2012) as those about right to buy replacements. It’s proving to have been a fateful date in the history of council housing. How long do we have to wait until Theresa May realises she inherited a bunch of promises 4½ years ago that she can’t keep, and does something about them?
Spot the lies in this justification by the government of its pay-to-stay plans: ‘It’s simply not fair that hard-working people are subsidising the lifestyles of those on higher than average incomes’. Aside from the fact that it implies that social tenants aren’t hard-working (how else would they be earning more?), the two outright lies are that they receive taxpayer subsidies and that it is only those on above-average incomes who will pay more. In fact, all but the lowest ten per cent of earners will be within or very close to the pay-to-stay threshold, because DCLG have been forced to set a very low starting point (£31,000 outside London, £40,000 within) in order to increase the projected income from the scheme. And of course, the government never misses a chance to refer to social tenants as ‘subsidised’, even though those on slightly higher incomes with little or no dependence on housing benefit are among the least subsidised householders in the whole housing market.
Red Brick makes no apology for saying ‘we told you so’ on pay-to-stay since we were among the first to draw attention to the risks. Back in 2011, when first mooted by Grant Shapps, it would have applied only to so-called wealthy people who choose to live in council houses and whose combined earnings came to over £100,000. It was of course aimed at people like the late Bob Crow, who earned £145,000 and had the temerity to live in a housing association flat. In response to widespread criticism that, if set at that threshold, the scheme would cost far more than it would generate, DCLG shifted the starting point downwards. Red Brick predicted four years ago that this would be even more of a bureaucratic nightmare, since it would draw all tenants into having to declare their incomes and any changes to them. This point is now confirmed by Southwark council, who say that means testing tenants is an ‘expensive exercise in futility’ that could cost authorities millions to administer. If it has to be done, they want HM Revenue and Customs to do it for them.
And in any case, the extra red tape could now generate only £75 million annually, according to the LGA, rather than the £365 million that the government projects. This would add less than a paltry 0.8% to rental income, before admin costs are deducted, meaning the scheme could potentially produce no net income at all. As Jules Birch has pointed out, the government’s own assessment indicated that (at least in the first year) admin costs could be as high as £65 million, and Southwark’s warning shows that in practice this is very likely an underestimate, especially given the increasing variability of household earnings among those on modest incomes.
Even if the scheme does produce a small surplus, in a travesty of the principle that council housing is now self-financing, the money will have to be repaid to government. When council housing bought its financial independence in April 2012 by paying £7 billion to the Treasury, the government said this meant councils would ‘keep all the money they receive from rent’ and for tenants that ‘the level of rent you pay will continue to be a decision for your council’. It took barely a year for the government to issue the consultation paper which broke both these promises.
There are plenty more arguments against pay-to-stay too. It will be a disincentive to precisely those people who have jobs that pay modest salaries and who might want to try to earn more. It will encourage more tenants to exercise their right to buy, at which point of course they really will get a massive subsidy to help them buy their house, of a size unavailable to other first-time buyers. And it will lead to the further residualisation of social housing, eroding the mixed communities which were until recently an important aim of housing policy. As Natalie Bloomer commented on politics.co.uk, social tenants are now penalised for having too many bedrooms, penalised (by the benefits cap) if they don’t have jobs, and will soon be penalised if they do. The message to social housing tenants is: ‘If you don’t work, we’ll punish you. If you do work, we’ll punish you’. And as evidence of how struggling households will suffer, the Guardian has helpfully compiled some tenant stories of what the scheme’s consequences might be.
Fortunately, opponents of this daft policy appear to have an ally, someone who says that ‘while we continue to help the worst off we will also be focused on the millions of people for whom life is a struggle and who work all hours to keep their heads above water.’ She (and that’s a clue) has set up a powerful working group that will aim to make ‘life easier for the majority of people in this country who just about manage’. Yes, it’s Theresa May, whose newly stated policy aims appear to run counter to those of the pay-to-stay scheme, and it’s Sajid Javid, the communities secretary, who joins her on the new working group. Ditching pay-to-stay would be an excellent no-brainer for the group when it first meets. After all, ending it would cost practically nothing while saving the government from a potentially embarrassing policy failure.
Hate crimes have increased since the referendum and the biggest increases have been in areas that voted ‘leave’. Government has launched a new hate crime plan but, typically, rather than a proper strategy it’s largely a mish-mash of small schemes, many already taking place. There’s little questioning of why racism is on the increase, and no review of politicians’ own behaviour before and during the referendum. It’s as if increased hate crime is an unfortunate accident rather than the culmination of a viciously anti-immigrant campaign – preceded by the racist labelling of Sadiq Khan in the London mayoral vote and other openly provocative measures stretching back to Theresa May’s ‘go home’ vans two years ago.
In housing, we have seen the introduction of the right to rent, which could almost have been designed as the modern equivalent of those signs saying ‘No Blacks’ that used to be put in windows by landlords until the 1960s. (Coincidentally it was also the sort of discrimination practised in the US at the same time, it seems, by presidential candidate, UKIP supporter and former landlord Donald Trump). Evidence of discrimination in the right to rent pilot in the West Midlands, found by the Joint Council for the Welfare of Immigrants, was dismissed and the scheme simply rolled out across England last February. It joined the government’s rogue landlords and ‘beds in sheds’ schemes as seemingly as much about immigration control as they are about improving housing conditions.
Social landlords trying to engage with Muslim communities also have the ‘Prevent’ programme breathing down their necks, with housing staff now being trained to identify ‘radicalisation’. But does this merely bring all Muslim men with beards under suspicion, as one housing worker told me, and where is the community-sensitive help for Muslim families genuinely worried about the violent propaganda their young people might be subject to?
In short, many housing professionals and tenants are highly sceptical of the effectiveness of government schemes, whether to identify ‘illegal’ migrants or ‘radicalised’ Muslims, but are all too aware of their damaging effects on community relations.
Now social landlords have a fresh concern, given that two-thirds of social tenants voted against EU membership and all have been exposed to the ‘divisive, anti-immigrant and xenophobic rhetoric’ during the campaign, as the UN Committee on the Elimination of Racial Discrimination put it when blaming both politicians and the media. Fortunately, so far there seem to have been few housing-related hate incidents, although a Polish family was attacked in their home in Bristol and children in a Harrogate play area taunted an East European migrant.
The UK government said in response to the UN committee that it has a ‘zero tolerance’ approach to hate crime. ‘We have in place one of the strongest legislative frameworks in the world to protect communities from hostility, violence and bigotry. We keep it under review to ensure it remains effective and appropriate – and recently published a comprehensive new hate crime action plan to drive forward the fight.’
If the legislative framework really ‘protects’ communities, then how come that race hate crime is increasing or that (according to official crime surveys) the real number of incidents is at least twice what is being recorded by police? How come that organisations working with EU migrants report more fear of hate incidents, and Tell MAMA, which monitors Islamophobia, recorded a 300% increase in incidents even before the referendum and some of the recent events in France? If (as the government plan says) ‘we will only be able to drive down hate crime by tackling the prejudice and intolerance that fuel it’, where is the self-analysis by politicians of their own views and actions, that the UN committee thinks is lacking?
Both the Equalities and Human Rights Commission and the Race Equality Foundation have called for a more comprehensive approach to tackling hate crime related to race or religion. One possibility that was belatedly discussed at PMQs just before the vote was to revive Labour’s Migration Impact Fund. This has since been supported by a range of think tanks, albeit with calls for the initiative to be on a much bigger scale than Labour’s (which was peremptorily closed down by Eric Pickles as ‘ineffective’ within months of the 2010 election). However, the Tory manifesto proposal, to which David Cameron referred at PMQs, was for a ‘Controlling Migration Fund’ which would not only ‘help communities experiencing high and unexpected volumes of immigration’ but also ‘pay for additional immigration enforcement’, again mixing integration measures with immigration control.
If race and religion-related hate crimes are to be tackled effectively, and better community relations pursued, the government needs to begin with a close look at its own policies and public actions. Perhaps this is what Theresa May had in mind last week when she announced a review of how race equality is handled in public services. But if such a review has real importance, why did the news of it slip out on the Saturday of an August Bank Holiday weekend?
Whenever I’ve met John McTernan, which isn’t often, I’ve found him to be a clever and even charming man. It therefore amuses me to see him make his mark as one of a number of Labour right wing pantomime villains invited onto TV shows to argue with the pantomime villains of the left. The parody of political argument that then takes place only makes sense in a Labour Perty which has been so simplistically divided between ‘Trots’ on the one hand and ‘Red Tories’ on the other.
Of course it suits the media to set up these ‘debates’ which mainly involve the trading of the well-crafted insults and stereotypes that make up the relevant ‘narrative’. Jeremy Corbyn and Owen Smith are both exceptional people in their own way, and both deserve better than this. It is like mass hysteria: people I have known and respected for many years have been caught up in it all, tweeting the most incredible rubbish about one or other of the candidates. For the vast majority of Labour members like me who exist somewhere in the very large space between Momentum and Progress, despair is the most common emotion the campaign has provoked. I will vote for Owen because I think he is more likely to win an election – for me, the most important criterion – but I am happy to defend Jeremy from the more banal attacks on him.
But I digress from my main purpose. What got my interest was that John has pronounced on the issue of housing in his Financial Times column, ‘A failure of imagination blights Britain’s housing policy‘ and I wanted to take him to task on a couple of points. (NB you can sign up for some free FT articles despite the paywall).
First, where he is right: if Theresa May listened to the public, she would focus her attention on housing. Sadly, many in her Party have concluded that housing is an immigration problem, and then come to wrong conclusions (like leaving the EU). Undoubtedly the Blair Governments encouraged immigration to promote growth and to create what they liked to call a ‘flexible’ labour market, and their failure was that they did not properly consider the policies that were needed to minimise the possibility of social tensions, and in particular housing supply. John is also right about housing becoming an insider/outsider issue: those owning homes like having ever more valuable assets even if it means that the next generation are excluded altogether.
Where John goes wrong starts with the phrase ‘The UK already has a massive stock of social housing…’. He argues that the policies of ‘the left’ are predictable – build more council houses – and not a solution. And then, he falls into superficiality: ‘For all the romanticisation of social housing, modern consumers do not want to live in the massive monocultural housing estates of the past’.
So where has John been for the last 30 years? Social housing has been in serious decline as a tenure, quite deliberately so as Governments have encouraged home ownership and private renting. It is the rapid decline in social renting that is at the heart of the housing crisis facing people on low incomes, and it is about to get much worse if the Housing Act is implemented. The millions on housing waiting lists are also consumers and they want to consume a genuinely affordable rented home from a responsible social landlord. Why should their wishes be discounted?
The systemic bias in favour of private solutions has obscured the catastrophic failings of the market tenures. The ‘private sector smartness’ that John so admires is just not enough: it takes tough public sector operators like Ken Livingstone and Sadiq Khan to encourage, mould, cajole and force the profit-hungry development industry into making a real contribution to tackling the housing crisis. John seems to have missed the fact that the mantra of ‘mixed communities’ has been shared across the housing world for decades now – we just argue about the mix that is required and the overriding need to match the affordability of homes with the incomes of the people who need to live in them. Numbers matter, but what is built and for whom matters a lot as well.
And finally John lauds Michael Heseltine’s London Docklands Development Corporation and ‘the one figure with the breadth of vision’ Lord Andrew Adonis. Despite its many other achievements, LDDC delivered very little for people in housing need in the East End, and Adonis’ support for the redevelopment of council estates in inner London (although I think he has pulled back a bit from his original analysis) would take us on the same path: more homes, but not for the poor.
Sadly, proud true Blairites like John still fail to acknowledge that it was a catastrophic error not to build more social housing in the decade after 1997. The Tories have done even worse, but that’s not the lesson Labour should draw. New Labour was mesmerised by private sector solutions that did not deliver good outcomes. Above all, the hostility towards the very idea of council housing was one of New Labour’s most dreadful blunders – a blunder that must not be repeated.
Will Policy Exchange still be the go-to think tank for housing policy under this government as it was for Cameron’s? The latest contribution to the post-Brexit housing debate comes from Alex Morton, formerly of PE and behind several of the ideas that the last government adopted, notably the sale of high-value council houses. When he left PE in 2013 he moved to No.10 as housing adviser, until April this year when he jumped ship to become a lobbyist.
His advice to Theresa May on delivering her One Nation housing policy will, however, probably be ignored. In a rambling piece that’s riddled through with his distaste for local government, Morton offers few new ideas and is largely negative. His first point, that ‘the key structures are broken’ is hardly an inviting one, especially as it turns out that the main villains of the piece aren’t (say) developers who build at a pace that suits their profits but are – yes you guessed it – local authorities. And their main failure is to create over-elaborate local plans that are invariably behind time and fail to prioritise housing. He claims that ‘over 300 councils failed to oversee delivery of housing need’, which means there are precious few that do.
This obvious exaggeration ignores the dual pressures that council planning departments face – to deliver plans and to administer development control – with steeply falling resources. In 2009/10, councils spent £2.3 billion on planning: spending is now less than half of that, at just over £1 billion. It is hardly surprising that many councils – particularly smaller ones – struggle to provide even the minimum service expected of them. Of course there is underperformance, and some councils have no doubt cut planning staff more than they should so as to maintain spending on, say, homelessness. But no government can expect to have a first class planning system when its resources have been decimated.
Morton’s ire is then turned on central government, for failing to introduce the reforms he thinks are needed. He offers grudging praise for some of the changes to the planning system ‘since 2015’, but doesn’t acknowledge that planning policies about housing (especially affordable housing) have been the subject of constant tinkering for the last five years, which has hardly helped to achieve consistent decision-making. In any case, firing random shots at the planning sector is hardly helpful to a government looking for ‘One Nation’ policies.
Morton’s dislike of councils extends, too, to housing associations, who are said to gobble up twice as much grant to build rented homes as the government now spends on shared ownership properties. He ignores the savings in housing benefit this achieves, despite there now being plentiful sources of research to remind him. But he gets his sums wrong anyway – the government is planning to spend £4.1 billion to build 135,000 homes for shared ownership, that’s an average grant of £30,000 a piece compared with £27,800 for Affordable Rent dwellings in the current programme that’s being run down.
To be fair, he makes the worthwhile point that stoking up demand (as the previous Chancellor did) is unlikely to stimulate more supply. But he seems to think that councils could secure much more private development even though there is little plausible evidence that councils in general (as opposed to specific cases) are frustrating developments that would otherwise take place.
At this point, Morton’s argument gets confusing, because although he seems to be opposed to measures that stimulate demand (like Help to Buy, presumably) he’s all in favour of more home ownership. This is because it is a) popular, b) what voters worry about and c) necessary for the very survival of the Conservative Party. He’s no doubt right about all these points. But a ‘One Nation’ policy surely (by definition?) has to be directed as much at those who can’t buy (however much they might like to) as to those who can, albeit with some help. The current policy is hugely unbalanced, as Red Brick has pointed out regularly, including as recently as last month. If Theresa May genuinely wants a policy that addresses a wide spectrum of needs, she needs to change the government’s priorities and recognise that many young households aren’t able to buy in any conceivable circumstances, in part because they have to spend so much on rent that they’ll never have the necessary deposit.
It just so happens that the new communities secretary, Sajid Javid, has the perfect excuse to reappraise the investment programme, given the likelihood of a post-referendum recession which will make it harder to sell market-oriented products and in which the construction industry may hit the doldrums. He’s just been sent detailed recommendations from the NHF and CIH on what could be done. Let’s hope he pays more attention to some of the advice he’s getting from those who want a more balanced programme and have experience of delivering one, even though their views are dismissed by Alex Morton as belonging to ‘vested interests’.
You need all your fingers and toes to count the number of Ministers of Housing we have had in the last 30 years. The short term nature of occupancy of the job is one of the reasons we have had so few attempts to create an effective long term housing policy, just short-term stunts and attempted quick fixes. Under Labour, people shuffled in and out rapidly and the Tories have made an art of changing the Minister pretty much every year.
Now its Gavin Barwell, MP for Croydon Central, one of Theresa May’s last appointments on Sunday. Are there any grounds for optimism apart from noting he’s not Brandon Lewis or Kris Hopkins or Grant Shapps? Turning to trusty old Wikipaedia, he has at least a little bit of a track record in his new subject, but, worryingly, largely at Conservative Party headquarters and as a Party apparatchik. He worked on housing and was special adviser to John Gummer when he was Secretary of State for the Environment before moving on to wider political duties. He was also a Croydon councillor for 12 years. A genuine achievement as an MP was his sponsorship of the private members’ Bill to outlaw some forms of discrimination against people with a history of mental health problems, which became law in 2013.
Mostly a loyalist, Barwell has gone along with the policies of his predecessors. Some people have seen some hope of a slight change in direction in Theresa May’s speech outside Number 10, where she highlighted the need to unite ‘all our citizens, every one of us, whoever we are and wherever we’re from’. She promised to fight against injustice, and to promote the interests of ‘ordinary working class families’. Regrettably, her only mention of housing was the cost of paying a mortgage. And the cynics amongst us will remember Thatcher’s first words on the steps of No 10, quoting from St Francis of Assisi’s prayer: ‘Where there is discord, may we bring harmony……..’ So, Prime Ministerial first words are often the opposite of what follows.
Barwell’s first tweets raised some hope of a more cooperative and considered approach to the job: ‘Look forward to working with councils, housing associations, developers & investors to ensure we build the homes people need and deserve…’. But they all say that, don’t they?
The Government now has not a One Nation housing policy but a One Tenure housing policy
As Monimbo has showed clearly on Red Brick recently, (here and here), the Government now has not a One Nation housing policy but a One Tenure housing policy, committing vast sums to try to reverse the downward decline in home ownership, largely by boosting subsidies to demand rather than supply.
This short-term, expensive and economically illiterate approach is throwing away the opportunities that exist to use the resources and powers available to create a balanced housing policy which looks to achieve a much faster rate of housebuilding across the board – market homes, intermediate homes including shared ownership, and social rent.
Thinking along those lines is the only way that Theresa May and Gavin Barwell have a hope of tackling the increasingly intense housing injustices that disfigure our country.
Will they rise to the challenge or will it be more of the same? My money, sadly, is on the latter.
While the prospects of a post-Brexit boost to public housing investment must have faded with Sajid Javid now in charge at DCLG, he could at least have a quick look at the mess that’s been made of council housing finance by departing Chancellor Osborne. In a report out yesterday, CIPFA and CIH show that the self-financing of council housing, which took place just over four years ago and was supposed to generate a huge boost in council house-building, has been systematically undermined by changes made by the Treasury that pay no regard to the promises made at the time.
Grant Shapps, the former housing minister, was much maligned by Red Brick, but at the same time we were always willing to give credit where it was due. Most importantly, he inherited the planned self-financing settlement for council housing from Labour minister John Healey, and he implemented it. Sure, some crucial features were changed, like the plan to let councils keep all capital receipts. But Shapps was strong enough to fight off the worst of the Treasury’s attempts to undermine the deal, and he rightly claimed the settlement was ‘intended to endure for the long term’. Soon afterwards, of course, he was replaced by a series of ministers who seemed to have little allegiance to the promises that had been made. Shapps himself – wittingly or otherwise – started the undermining process by ‘reinvigorating’ the right to buy. But much worse was to come, with a succession of changes to rents policy of which the worst was the latest – a cut of 1% in council rents last April, to be followed by three more 1% cuts at yearly intervals.
The report shows how this has massively undermined the investment potential available to councils (see chart). In theory, if all of their spare capacity after 2012 had been invested in new housing, they could have built up to an average of 18,000 new homes per year, even within the borrowing caps that the Treasury imposed. But their capacity has been eroded, so soon after the settlement, to leave them able to build little more than 1,000 homes per year, more or less what they are doing now.
Of course this is a national picture but survey results confirm the trends at local authority level. Some LAs no longer want to build, and are prioritising paying off debt. But many councils, both big and small, are eager to add to the housing stock. Some are resorting to council-owned housing companies, outside their housing revenue accounts, as the only way to do so – but inevitably this means developing a mix of properties of which many will be let at higher rents or offered for sale. Building via housing revenue accounts is the best way to get new houses that can be offered at genuinely affordable rents.
If Theresa May’s government is minded to launch a public investment drive, it will find councils severely handicapped to help. Coinciding with the report, John Healey called for such an investment boost at this week’s CIPFA conference. He said there must be an end to constricting council’s capacity and ‘a change of direction that is both fast and fundamental’. Red Brick couldn’t agree more. The irony is many councils could respond if only their income were not being eroded by Treasury-imposed rent policies. While they would then increase their borrowing, it’s unlikely that they would need to breach the borrowing caps set in 2012. And they wouldn’t necessarily need grant, either. Fundamentally, council housing is still a self-financing business with a healthy income and low debts (much lower per unit for most authorities than is the case with developing housing associations). While councils cannot soon be expected to reach the dizzy heights of new building that many hoped for four years ago, they could certainly build at twice or three times their current level.
Red Brick has no idea if Grant Shapps is on speaking terms with Sajid Javid, but if he is he could pass on a quiet tip: get Phillip Hammond to quietly drop one of his predecessor’s many ill-thought-out policies, and you could spark a building programme by councils that will help tackle housing needs and boost local economies, with minimal impact on public funds.
More than £42 billion of government money to prop up the private housing market, and just £2 billion invested in affordable rented housing: even before Brexit this looked like a huge distortion, now it simply looks absurd.
Most readers of Red Brick will undoubtedly be focussed on wider political issues than housing finance just at the moment. But the analysis carried out for the latest UK Housing Review Briefing Paper is a reminder of what is at stake. The Tory government is so obsessed with restoring home ownership to previous levels, and with ensuring that public money sustains the housing market, that it has cut its support for below-market rented housing to a derisory figure. In fact, the sums only just cover the commitments made in the now defunct Affordable Homes Programme that was to have run until 2019/20. To replace it, we now have a ‘Shared Ownership and Affordable Homes Programme’ that will run until 2020/21. But this has virtually no provision for below-market rented housing: it will, as its name suggest, focus almost entirely on shared ownership. In parallel, we have the £2.3 billion devoted to Starter Homes, itself only part of the total commitment to build 200,000 of this new type of product, most of which will be delivered via planning gain. So instead of being a reliable, continuing source of homes to let at social rents (or, at worst, at Affordable Rents), the planning system’s ‘affordable’ housing output will soon be another variant of houses for outright sale.
Readers might be forgiven for thinking there is a ‘now you see it, now you don’t’ quality to these commitments, however, for a range of reasons. One is that the products are either untried (Starter Homes) or else have never been built on the scale now proposed (shared ownership housing). Other commitments like the Help to Buy ISA and the (new) Lifetime ISA are dependent on take-up and whether potential savers believe they will really help them overcome what the UK Housing Review calls the ‘deposit barrier’ to home ownership.
The Briefing Paper flags up two government targets that were difficult to meet before Brexit and may now prove wildly unrealistic. First is the aim to help an extra million new first-time buyers into the market. Even the last English Housing Survey showed numbers going down (564,000 in 2014/15, down from 617,000 the year before). As the Briefing says, ‘The reality is that younger households are less able and less willing to buy a first home.’ The Legal & General’s report The Bank of Mum and Dad suggests that home ownership in the UK will actually fall further, to only 55% by 2025.
The second government target is the aim of building one million new homes over the five years to 2020/21. Oddly, Brandon Lewis, who appears to still be the housing minister, denied that this was a target only yesterday, barely a week since (as part of the Remain campaign) he was talking about the target’s importance. Even the government website quotes Lewis referring to the ‘aim,’ ‘intention and ‘ambition’ of building one million new homes. (We might add that, by denying that these terms equate to setting a ‘target,’ he indulges in the sort of evasiveness that has helped undermine respect for politicians and deliver the referendum result.)
Overall, as the Briefing Paper says elsewhere, even this government’s massive market intervention represents only a relatively small part of total market activity, so that for example despite Osborne’s moves to make the tax system less favourable to buy to let landlords, the rented market is still a lucrative one for many would-be investors and is likely to continue to compete strongly for properties that might otherwise be available to first-time buyers.
Looming over the whole of the housing budget, especially those parts that have yet to come on-stream, is of course the referendum result and its likely effects both on the public finances and on the housing market itself. Brandon Lewis would have been received more warmly at this week’s Housing 2016 conference in Manchester if he’d been honest and said that an extra one million homes was the target, but he now simply has no idea if it can be delivered and, indeed, whether the £40 billion plus stimulus package can be maintained. To repeat an over-used cliché, we are in uncharted waters: how long before the government’s housing budget shares the fate of many other projects that the FT thinks are now likely to be ditched?