Should councils ignore Eric Pickles’ letters?

To those that don’t already do so, ignoring the Secretary of State over the next six months while he’s making even more trouble than usual for councils might make good sense. His latest mischievous missive to local authorities tells them that by next April they have to publish the value of their council housing stock. Those that comply by then will provide convenient ammunition for Pickles when he’s in full election mode.

How does he justify it? Of course he’s not going to admit to being a troublemaker, so he claims he wants to ‘allow local communities to hold their councils to account’. To help them do this he’s forcing councils to publicise a completely meaningless figure – the open market value of their houses with no sitting tenants in them. It’s not hard to imagine headlines such as ‘Subsidised council tenants in Birmingham live in homes worth up to £500,000’. In fact, the clue to how the data will be used is already given by one of the headlines in the government’s own press release: ‘Multi-million pound properties’. Pickles thinks there is plenty of equity in ‘expensive empty properties’, the sole evidence for which seems to be the £3 million house sold off by Southwark more than a year ago.

He adds another little twist. Selling these expensive empty properties could reduce England’s staggering total of 635,000 empty homes, he claims. Except of course that even if councils sold off every empty house (and presumably stopped any tenants ever moving), it turns out there’d still be 608,000 empties, as practically all of them are in the private sector. No matter, it helps to spin a myth that empty property is local government’s fault.

With the apparent exception of the Secretary of State, most people know that if you own a house there are two ways to tap into its asset value. One is to sell it, which of course means you’ve lost the house. The other is to borrow against the asset value, which means you keep the house as well as get whatever else it is you want. Eric won’t approve of this idea though, as it would mean giving councils more borrowing freedom and he’d lose an opportunity to force them to sell even more council houses than he’s making them do already through right to buy.

We’re used to him ignoring what councils tell him about his proposals so it’s no surprise that he’s done it again. In this case, councils complained they could lead to misinformed debates about the real cost of their social housing stock rather than increase transparency. He’s going to address the complaint by putting a footnote to the figures explaining the differences between ‘existing use value as social housing’, and ‘open market value’. That should do the trick.

What the figures will show, of course, is that estates in central London are worth a fortune, and it will give further encouragement to councils to realise their value, regardless of tenants’ views. Red Brick has already tracked the story of the West Kensington and Gibbs Green estates in Hammersmith & Fulham, where an intention to sell by the previous Tory council is proving difficult to unravel now the borough has changed hands. It can only be a matter of time until Britain sees examples like one provided by a Red Brick reader in Australia. The New South Wales government has a highly contentious policy of flogging off its most valuable housing: it’s planning to sell 300 tenanted properties close to the central Sydney harbour front worth about $500 million. In theory, three new flats could be built in outer Sydney for every one sold at Millers Point, but the government has pointedly made no commitment to do so. Perhaps I should have hesitated though before using such an outrageous example, it will probably reappear soon in one of Mr Pickles’ press releases.

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2 Responses to Should councils ignore Eric Pickles’ letters?

  1. paul calland says:

    The coalition housing policy (sorry I mean the tory policy slavishly adhered to by the lib dems….btw thanks for the bedroom tax guys) did not appear in any meaningful way in any manifestos. What we have received so far is a rag bag of initiatives that at first glance may seem unconnected;

    cut grants (massively decimating new build)
    bedroom tax (to release under occupied houses….not)
    localism act to allow council’s to prioritise their housing registers (of course that means cut them)
    extending RTB discounts (selling less than half price)
    undo the homeless duty (so council’s can now discharge duty be housing in the private sector)
    use the RTB receipts for 1-1 replacement (now look hard chaps to find any)
    flexible tenancy ( fixed term limited security lapped up by gormless RLS’s to access grant)
    introduce affordable rents (they aren’t affordable but again the gormless RSL’s eagerly lap them up)
    localism act for planning (a charter not to build in the shires)
    HCA VFM regulation (charter to beat up RSL’s that don’t sweat their assets)

    So as a result, fewer affordable homes built, waiting lists slashed (see…there was never a problem), RSL’s chasing rent flexibilities (that means pushing rent UP), tenant set against tenant by the bedroom tax, and thousands affected, and the private sector booming (still they get £5 billion a year in tax breaks) and the UK now has an annual £25 billion and rising HB bill (fiscal lunacy)

    The sceptic in me believes all the above were connected….end social housing. Just look what they tried to get up to in Hammersmith and Fulham. So Eric the Transparent’s call for Council’s to value their stock on open market value (just listen to those words again….cos there are secure tenants living in them-for now- so they can’t be open market…doh!) is a precursor to the next raft of destruction if the UK is daft enough to elect them again. No social housing…that is their aim…be in no doubt. The tory economic policy is based on two twin pillars….indebtedness and insecurity. Ending the welfare (its proper title is social security thank you Mr Blair) safety nets, employment rights, access to legal redress and affordable secure housing is key to that strategy.

    Social Housing Sector….you have been warned!!!!!!!!!!!!

  2. danfilson says:

    Back in the late 1970s, but before the 1978 local elections, my then local authority Hammersmith & Fulham acquired a good number of terraced homes in poor condition for around £5k each. Obviously this was done on borrowed money. Not all had been modernised and brought into use by the time of the 1978 elections when Labour lost power to a Conservative-Liberal Coalition that held power on the Mayor’s casting vote for right years. The vacant properties were sold, at a profit given the rising market, and the remainder proved an invaluable housing stock in combatting the severe housing deprivation that then pertained, and those held to this day are worth 30 times what they cost. Then Right to Buy stripped away the garden flats and houses, with the council only able to apply the receipts to reducing council debt and not to acquiring or building replacement stock. In almost every case the acquisition debt including conversion costs was wiped out by the gross sale receipts. My point is that whilst councils do indeed own millons of housing stock – do the maths, say 10,000 units at £400,000 say – the debt with which they were acquired and modernised has long been dwarfed by the current value. Local councils have not defended noisily enough having debt of hundreds of millions by pointing out that the interest payments thereon was, and for all I know still might be, covered by housing subsidy and the debt was secured against a housing stock worth several multiples of the debt, and what is more that housing stock was saving each council vast amounts in B&B costs in housing the homeless and giving families the satisfaction and security of a roof over their heads and a home to live in.

    The same weakness in Labour politics also applies to the UK National Debt. Insofar as the debt is incurred on capital infrastructure projects, the debt is good debt represented by a tangible asset on the other side of the national balance sheet. The 43% rise in UK National Debt piled up by George Osborne since 2010, on the other hand, had been because his fiscal measures killed economic growth so that revenues don’t match revenue spending – this use of debt to fund revenue deficits is bad debt: there’s nothing to show for it.

    Therefore councils should use Pickles’ demand as an opportunity to demonstrate how their spending had produced valuable tangible assets worth several multiples of any outstanding debt whereas his government’s piling up of debt had been to no point. And we should send him the bill – c/o Conservative Central Office – for doing the valuation exercise when there is no local need for it, a waste of public money therefore.

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