Right to Buy (RTB) – argued to be the most successful transfers of wealth since its introduction in April 1980. Yet despite successfully giving aspirational working-class families the ability to participate in the property-owning democracy it once again is under scrutiny.
Incredibly over 1.9 million homes have been sold through RTB since its inception, a take-up that demonstrates its sheer popularity. Once commonplace under Local Authorities the offer has now been made to tenants of Housing Association (HA). But for many this is a step too far.
Labour, Guido Fawkes and Shelter condemn the proposal
On the right, we have seen Guido Fawkes condemn the “buy a house on benefits” scheme as a “stupid idea”. Shelter has claimed extending RTB “couldn’t come at a worse time”. While also suggesting “the government should be building more social homes, not selling them off”. Shadow Secretary of State for Levelling Up, Housing and Communities, Lisa Nandy, recently called into question Boris Johnson’s announcement.
She challenged Johnson over the feasibility of allowing people to use housing benefit towards a mortgage. Tweeting recently whether lenders are “on board” with the Prime Minister’s first proposal after his disastrous vote of no confidence. Nandy also claims the new proposal would “make the housing crisis worse”.
Questions over feasibility and acceptance by the market
The scheme could help 17,000 families a year according to the report on the pilot published in February 2021. However, it found half of the homes under the scheme weren’t replaced despite promises of “one-for-one” replacement. Those “replaced” were often found to be as a more expensive form of tenure. This in large part driven by a Tory grant programme favouring such forms of tenure. Arguably fair kop to call into question.
Notwithstanding the above, we have seen the rise of the for-profit registered provider backed by private equity and institutions. Who have been piling into the sector lured in by government backed income in a supply constrained market. Whether social or affordable rent, or controversial shared ownership, the private sector has been licking its lips.
If these capital providers can accommodate such government-backed income streams, why cannot lenders?
But the proposals actually spur on new supply
Secondly, the argument around the need for one-for-one replacement seems one based on a lack of understanding of basic arithmetic. For those on the left, many feel a tenancy for life forms part of housing as a human right. On that basis, whether an aspirational working-class family lives in a social rented home, or one where they have exercised the Right to Buy, morally this principle holds true. Under RTB total housing stock does not deplete and new build from recycled capital ultimately still contributes to new supply.
The family who can now use their in-work benefits towards a mortgage become the beneficiaries directly of the subsidy. Not the HAs who fail to do repairs and pay their executives investment banker wages. At a time where the National Housing Federation announces an independent panel to review the poor-quality homes endemic under its watch, why would we want to prevent aspirational working-class families from the opportunity to fix and maintain their own home, if they have the means to do so. Ultimately giving them an opportunity to escape the ever-lasting trap of poor housing management they currently endure under HAs.
But how, after all, in a supply constrained housing system does adding new housing stock make the housing crisis “worse”?
Global market headwinds make opportune timing to support demand
All sides have now sought to strawman the Right to Buy, blaming it for the loss of much needed social housing stock. The debate has not become one of supply. Instead some argue these recent measures merely add to demand-side pressures, which an already distorted market does not need. Yet in a time of globally increasing interest rates and a recession, when else is there a better time to broaden access to those on low incomes and counter market forces.
Furthermore, HAs often have low levels of debt against them with the homes valued on the books at Existing Use Value (EUV). Such a low level of debt allows the Government to provide meaningful discounts and unlock wealth for working class families. Of course, the HA lobby and HM Treasury will have kittens if they have to sell their silver, but ultimately who benefits?
Boris Johnson is playing to the aspirational working class
Whatever your politics, broadening access to an affordable home or home ownership should be the end goal. Yes, the Labour Housing Group has taken a stance to abolish Right to Buy. But I argue this policy is targeted at those Labour must seek to win back from the Tories. Boris Johnson is sending a key message to the millions of tenants living under often dreadful Housing Association conditions, that he cares about them.
Meanwhile, Labour and much of the left-leaning housing industry, condemns what has previously been a hugely successful policy for those who have benefitted from it. Right to Buy and the need to provide more social rented homes are not mutually exclusive.
Without means-testing tenancies how else can we recycle capital from those in social housing who can afford to buy?
Many of those who will exercise their right will be those who can afford to, who are still living under the benefits of a social tenancy. These include the members of Parliament who remain in their social rented flat, while earning a top 10% salary in the Commons, as well as the 117,000 households (16%) in London living in social rented accommodation resided in by the top 40% of earners in the capital.
But if we are not to bring in means testing of social rented accommodation throughout a tenancy, is not recycling capital from sales into the provision of new homes an admirable end goal?
I certainly think so if the sellers can keep the receipts. We can argue about whether we “replace” less than half with social or affordable rent. Or we can recognise the use of the benefit systems ability to increase the overall level of stock in a housing market beholden to NIMByism. After all an election message to aspirational working-class families that they have a chance at closing their own personal wealth inequality gap is compelling.
Christopher Worrall
Chris is the Editor of Red Brick blog and sits on the Labour Housing Group Executive Committee.
He currently is Chair of Poplar and Limehouse CLP, co-hosts the Priced Out podcast and is the Local Government and Housing Member Policy group lead for the Fabian Society.
Schuetz argues we have baked a lack of supply into our land use practices, especially for lower cost rental housing. She stated we don’t build enough smaller moderately price homes and that places with the highest rents are building the least amount of housing. Sadly, much like in the UK, the US has also designed a system that makes this an inevitable outcome.
The zoning system in the US differs somewhat from the UK discretionary planning system to some degree. For example, zoning in most parts of the US, including in large cities, reserves two-thirds to three-quarters of land for detached single family homes. Yet this system does allow you to build as of right. Effectively setting out a straight-forward set of rules on things such as size of lot and the height of building. If these follow rules can get permission without having to go through an extensive public process.
Long, complicated and uncertain processes provide significant barriers to housing affordability
For detached houses this is the norm. Should you want to build apartments or other types of housing then you must go through an additional approval process. It is this process that requires developers and housebuilders to show up in front of community meetings. Present plans, receive feedback, and requires formal approval from a local government body. Often a long, complicated, and uncertain process that provides a significant barrier to housing affordability.
Sound familiar?
Discretionary approval processes translate into much higher costs for housing that is approved and proposals often get stopped along the way. It is this element of the process that takes more time and costs more money. All because the existing process is set up to favour existing residents, in particular long-term homeowners.
For example, someone who may have lived locally for 30 years and doesn’t want their community to change. Schuetz argues these opinions are given more weight than someone who doesn’t currently live in the community. Meanwhile the person who shows up and says I would love to live here, but I can’t afford to move in so a new apartment would be great for me has their voice diminished.
Discretionary approval processes unfairly favour homeowners and existing residents
Dr Schuetz believes it is these approval processes that by design do not give equal weight to people who show up and talk at community meetings. She argues that suburban communities can often be where the problems are most acute. In these suburbs you find very large homes on large lots that are short distances away from public transit. Often where the median lot size is half an acre that only a single family can occupy. The only way to add more housing is to replace these single-family homes with more dwelling units. Under the current zoning system in the US such changes are explicitly prohibited.
But Schuetz isn’t just arguing for more large-scale apartment blocks. As this construction costs for these types of homes in such locations are often prohibitive. Instead, she argues for more row houses or condominiums that can be three, four, even up to six storeys where such methods of construction are feasible. In essence, the argument is to build more homes on those single-family plots. One of the nice things about this strategy is it does not require much land assembly from developers.
Schuetz also argues this kind of human scale development does not change the character of the community that much and offers substantial cost savings over new single-family homes. It is a strategy that can work in many places as doesn’t require big parcels of land or large-scale developers. Effectively it provides family sized businesses projects they are capable of delivering quickly.
Places in the US are exploring new ways to reduce barriers to housing affordability
Minneapolis provides an example of places exploring new ways to reduce barriers. In this city they effectively legalised duplexes in the Autumn of 2018. While in Oregon it also allowed state-wide reform for accessory dwelling units and duplexes. For apartment buildings the approach focuses on transit and commercial corridors. So, for six, eight, and ten storey apartment buildings, Massachusetts last year passed a state-wide rule recommending all localities allow apartments within certain distances of commuter rail stations.
Dr Schuetz noted how localities often find back-door rules to effectively not build things they do not want to build. The way zoning works is in the first instance the state can either prohibit apartment buildings or legalise them. If the state says they must legalise, then what dimensional requirements do you set? If a state decides it will only allow two storey apartment buildings, despite not being unviable, effectively it has prevented new homes from materialising. Other requirements include minimum parking standards that come with additional costs to each new unit of housing.
Legalising housing development is just the first step
There is an infinite number of restrictions to make it financially infeasible for developers states and localities can put in place. To achieve a flexible zoning system legalising apartments and middle housing is the first step. However, the further regulations will require attention as well if we want to see a meaningful response. State governments have a lot more authority over land use than the Federal government. They create local governments and designate their land use powers and fiscal authority.
Local governments fund services like schools based on local property taxes. Local finances impact decisions concerning new homes, as the are often assessed on local homeowners property values. States effectively can push back on localities if they want to do so. Meanwhile Federal government has very limited authority and few direct policy levers at its disposal to force the contrary.
Political opposition from locals who oppose change are the primary major barrier preventing moderately price housing
Unfortunately, effective policy solutions face steep political opposition and the politics on the ground is very similar in the US as it is in the UK. Long-term homeowners like the neighbourhoods the way they are and haven’t fully internalised how expensive it is to buy property today. They are often reluctant to change and are protective of their property values. All these personal, political, and financial incentives that reinforce the behaviour of long-term homeowners who carry a lot of weight in the political process.
Yes, there are tiny green shoots of promise in several cities and states. In place that have managed to achieve relatively small-scale reforms tinkering around the edge of the process. But we need to build more promising political coalitions against long-term homeowners. And yes, these coalitions must go much further if we are ever to get meaningful reform passed and more moderately priced homes.
Interested in housing development economics, property taxes and local public finance relationships in the US, incentives for zoning, and the politics behind it? Find out more in Dr Jenny Schuetz new book called “Fixer Upper How to Repair America’s Broken Housing System”.
Christopher Worrall
Chris is the Editor of Red Brick blog and sits on the Labour Housing Group Executive Committee.
He currently is Chair of Poplar and Limehouse CLP, co-hosts the Priced Out podcast and is the Local Government and Housing Member Policy group lead for the Fabian Society.
Progressive Labour politicians should be leading the way on the delivery of gentle density and missing middle housing, not calling for bans on modest flats and apartment schemes.
Labour is missing a trick not leading on the creation of walkable urban living in communities dominated by single-family homes. Known as the ‘Missing Middle’, these housing options represent a whole variety of built forms. Built form that is compatible in size and scale with lower density neighbourhoods. It also provides diverse housing options that supports local shops, public transport and community-serving amenities. Middle housing would form part of a sustainable approach to the growing demand for walkability in our communities and the social need for housing.
What is ‘missing middle housing’?
Daniel Parolek argues for the reintroduction of these concepts in one of Planetizen’s top planning books ‘The Missing Middle’. Described as ‘middle’ because it sits in between mid-to-high-rise apartment buildings and your typical terraced, semi-detached, or detached homes. But many of these housing options have since gone ‘missing’, disappearing from new building stock figures or not being measured at all.
Whether young couples, teachers, paramedics, single professional women or baby boomers, many seek ways to live in a walkable neighbourhood. Many people also seek to live without the cost and maintenance burden of a terraced, semi-detached, or detached home. Or simply cannot afford to live in one. The ‘Missing Middle’ solves the mismatch between what is currently available in UK suburbia and the desire for walkable neighbourhoods.
Sadly, both Labour and the Conservatives are lacking in leadership in support of this type of built form. Instead, as we have seen from Croydon to Churchfields, local parties are kowtowing to NIMBYs in focus groups. These people trick them into believing that the real enemy is the person living in what are often the most affordable forms of accommodation. Flat dwellers and those residing in sub-divided houses.
We are preventing homes for those without children
Record numbers of women are reaching the age of 30 child-free, more than half (50.1 per cent) of women in England and Wales born in 1990 were without a child in 2020. This is almost three times higher than the figure in 1941 where 17.9 per cent of women were child free. Bearing this in mind we know that more households will be without children. Ignoring middle housing means we fail to provide for those who cannot afford to live in a family-sized house on their own.
But are young, highly educated, technology-driven millennials who desire mobile, walkable lifestyles that are prepared to exchange space for shorter commutes and mixed-use neighbourhoods a cause for concern? And does building new maisonettes, sub-divided townhouses, courtyard apartment schemes, or two to four storey apartment blocks really undermine the character of an area?
The correct answer is no if constructed to decent home standards. Politicians purporting to support policies that just focus on the three-bed family home are simply out of touch. Failing to address the needs of a shifting demographic, all based on an outdated myopic view of the world.
For the most part of the last century multi-unit or clustered housing types have been considered compatible with our communities. Often missing middle housing types have consisted of smaller units. This achieves higher density while maintaining connection to the streetscape without needing costly items such as lifts. Construction of such nature can come at a lower cost and increases build efficiency. It allows the creation of gentle density neatly placed into current residential and mixed-use development patterns.
Labour must not ban flats under any circumstances
To achieve real housing affordability, Labour cannot be standing on myopic outdated views such as “build houses, not flats”. The simple fact is we do not have enough of missing middle housing, which includes flats and sub-divided housing.
All too often apartment blocks with four to eight flats over four floors are said to be “too big”. Cited by those already well housed and more privileged than their broader communities. But we must choose our target base and we must draw the line somewhere. If we want to win elections should we be courting “would be” Labour voters who really want nothing other than to prevent change, or should we ask ourselves are these converts to our values, or are we traitors to ours?
If Labour wants to win marginals it needs to appeal to those who have Labour values inside them. Not by dragging out its stall to those who fail to recognise the damage caused by making our housing shortage worse. After all the middle aged, not the middle class are the real swing voters.
Housing wealth inequality is a key driver in the reduction of social mobility.
Every child deserves a chance of economic success, no matter what their background. In England inheritance has become an ever-growing share of national income since the 1970s. It is these inheritances that are to blame for increasing wealth inequality between those with richer and poorer parents. We know there are substantial inequalities in the distribution of housing wealth in Britain. Often related to social class an income.
Sadly, stringent restrictions on new housing supply effectively limit the number of workers who can access the opportunities to create this wealth.
This article explores to what extent attempts to reduce housing wealth inequality can tackle these issues and help win Labour soft Tory votes?
Neighbourhood factors and wealth distribution make or break upward mobility
We know from studies in the United States that if a child moves to a wealthier neighbourhood, it increases the likelihood that the child would go to college. It also increases earnings on average by over 30% by the time they reached their mid-20s. We do not know exactly what the causal factor is in these studies, whether it be going to better schools or engaging with families with higher socio-economic status. But what is clear is that keeping people in places where earnings and job opportunities are not as good hampers social mobility and exacerbates wealth inequality.
Living in England means parental wealth is distributed extremely unequally. One fifth of people born in the 1980s have parents with wealth ‘per-heir’ of less than £10,000. Yet a quarter of people have per-heir parental wealth of £300,000 or more, while one in ten have £530,000 or more. Education and region are strong predictors of parental wealth. Children of Londoners have parents with over twice as much wealth, on average, as those with parents living in the North East such as my own.
Land use regulation is linked to house price increases, restricts the movement of labour, and is a causal factor of rising wealth inequality
It goes without saying policies that successfully redistribute these inheritances would have large effects on inequality and social mobility for later-born generations. The OECD recognises that land use determines health, environmental, social and economic outcomes. Arguing that rising inequality in recent decades is explained by “rising land and property prices”.
Even small changes in valuations of land and property can have major consequences on the distribution of wealth. Meanwhile we know increases in land and property prices tend to benefit older and wealthier households. This often comes at the expense of younger and poorer households.
For most of the 20th century workers moved to areas where new industry and opportunities were emerging, with farmers and the like moving from rural settings to cities. In the Great Migration of the United States some six million African-American workers left the South for factory jobs in cities like Chicago.
Yet when housing supply is highly restrictively regulated in certain areas, house prices are higher and population growth is smaller relative to the level of demand. Professor Edward Glaeser of Harvard University and Professor Joseph Gyourko of Wharton Business school make this argument. It is this tight regulation of land markets, often in a country’s most productive places, that leads labour to locate in places where wages and prices are lower.
NIMBYism and stringent restrictions on building new housing holds back the economy, harms workers, and hampers social mobility
In turn reducing a country’s overall economic output in the process. In arguably the single most influential article ever published on housing regulation, Chang-Tai Hsieh and Enrico Moretti’s “Housing Constraints and Spatial Misallocation” determines such these restrictions that have held by the US economy by over 36% of Gross Domestic Product between 1964 and 2009.
The rise of the property-rights revolution that is “Not In My Back Yard” has reduced the construction of new homes tremendously. In particular where the economy has been strongest and most productive. This is not just an American phenomenon. In England we know the impact of supply constraints have a substantive impact on house prices. A fact we cannot choose to ignore.
The Social Mobility Commission released it’s “State of the nation 2021: Social mobility and the pandemic report” earlier this year in July 2021. It acknowledges that recent trends have shown wealthier families increasing levels of second home ownership and an apparent increase in intergenerational wealth transmission.
Its own findings highlight “as inheritance of these houses comes into play, we will see stark rises in inequalities”. The increasing sizes of inheritances received by those from wealthier backgrounds sets to limit the prospects of upward mobility for those from poorer backgrounds.
Labour needs to ask itself: does it care more about the preservation of housing wealth or the affordability of housing
As Michael Gove starts his new role as the Secretary of State for Levelling Up, Housing and Communities we must look back to his views on the matter. For example, he acknowledges in his 2013 Keith Joseph Memorial Lecture that “access to home ownership has become the preserve of those with family wealth”. In England, with reference to superstar cities like London, we know that two-thirds of house price versus rent increases between 1997 and 2018 can be explained by labour demand shocks and supply constraints.
A strong labour market is one a full employment and where employers must compete for workers. This makes an area more desirable to potential migrants and increases one’s willingness to pay for housing in an area. If the Labour Party is to be the party for labour, it must understand its role alongside supply constraints.
This means finding ways to allow labour to go to move to where the jobs are. We currently limit the number of workers who have access to such high productivity. But this is why we must build houses there to allow more workers to create wealth of their own.
Labour voters should care more about housing affordability than protecting housing wealth
Interestingly, Labour Party voters feature as an instrument in research methods to identify planning restrictiveness. On average, voters of the Labour Party have below-average incomes and housing wealth. Thus, it is expected that we should care less about the protection of housing wealth. Instead more about the affordability of housing.
Campaigners are fighting for planning reform to make housing more affordable
Sadly, in England we have seen the housing wealth preservers successfully lobby Government into submission. This has come much to the horror of campaigners for affordable house prices. Director of Priced Out, Anya Martin, said:
“We are horrified that Government is u-turning on planning reforms.”
“Renters have faced decades of rising costs because of our failure to build enough homes, and our planning system is at the heart of this failure.”
Priced Out finds itself alongside the National Federation of Builders. Who also have cried out they won’t forgive Conservative backbenchers for derailing the planning proposals. To note, smaller builders used to deliver 40% of homes during the 1980s, but now that figure is just 12%. This is in large part blamed on the current systems barriers to entry.
While some on the left deem the reforms a “ferocious attack on democracy”, they find themselves standing shoulder to shoulder with the wealth preservation lobby of some of the most affluent areas of the country.
Maidenhead, where the house price to earnings ratio is 12.7x, see its MP Theresa May having led the Tory revolt against planning reforms. Theresa Villiers MP for Chipping Barnet, where the household income needed to buy is £140,000, railed against the alleged reduction of democratic involvement in the planning system.
Both of whom see the ability to veto new homes in their local areas as the holy grail. Sadly, ignoring the fact local plans are politically led community consulted processes in themselves.
Labour needs to think about how they can win Tory safe seats like the Isle of Wight
Other Tory backbench MPs, such as Isle of Wight’s Bob Seely, have vociferously made the case against the “planning revolutionaries”. He represents an area with one of the worst levels of child poverty in the South East. Boasting below average incomes and weak productivity.
Average disposable household income on the Isle of Wight languishes below the UK average at £18,366 (-13% lower). The constituency has 2,149 households on its social housing waiting list. You would think with such demographics it would present itself as a target Labour seat for Keir Starmer.
Yet the Isle of Wight boasts a Tory majority of over 21,000 votes. Labour, being the party of tackling wealth inequality, needs to think about how people like Bob are effectively challenged. Last time Labour ever came close to winning Bob’s seat was in 1945. The year the Attlee government put housebuilding at the heart of its agenda.
Backbench Tory MPs block homes to preserve wealth off the backs of working people
The case of Bob Seely epitomizes how wealth preservers hamper housebuilding and damage equality of opportunity for his constituents. The wealth preservation lobby on the Isle of Wight are challenging the housing targets set for it by Government, with Bob Seely at the helm.
There are concerns about how the island will handle the additional 400 new homes per year. Most of which arising from the latest housing need calculation. This comes on top of the 640 calculated using the meagre standard method. Shockingly, the Isle of Wight has a price-to-earnings ratio of over 8x the average income. But this bears no relevance to the Tory preservation lobby, no doubt as they directly benefit.
Construction provides jobs, wages, and keeps income in the community. It improves the local economy as workers employed on each project have wages to pass onto other local businesses. The Isle of Wight is crying out for such opportunities. But those hell bent on preserving wealth continue to deny them the opportunity.
But the issue goes much further than the island itself. For example, the ONS states that those living in neighbouring Central Hampshire have an average annual disposal income of £26,302 (+24.6% higher than the UK average).
For those looking across the water for opportunities from the Isle of Wight the outlook is bleak. New Forest District Council, next to the Isle of Wight, is only delivering half as many homes as it needs. In effect pricing out poor islanders who may wish to move to this more productive part of the country.
Backing meaningful planning reform means creating more opportunities for workers. Only then will wealth become redistributed more evenly.
Changes to land use regulations can form part of the biggest redistribution of wealth under a Labour government
Historically, local economic booms matched with local building booms. Prior to 1946 building was lightly regulated and housing was allowed to be built in areas of high demand. For example, there were 80,000 new build homes created in London in a single year of 1930 alone. Over 2.5x the net number of new homes delivered in 2017/18. A year that marked a decade long high, mostly by the private sector subsidised by government.
We know extensive restrictions on land use and building leads to higher house prices, rather than more homes and workers. If Labour is to be once again the party of the worker, it must deliver more homes. People used to move from poor places to richer places. However, due to restrictive land use regulations this pattern is on the decline.
We must allow the population to seek work in wealthier places. These are places where demand is strong and productivity is high. In doing so we will avoid unequal mobility and poverty traps created by a lack of new housing.
We must counter the NIMBY property-rights revolution to improve prosperity for all – and say ‘Yes In My Back Yard’
For constituencies like Bob’s to prosper, we must tackle the misallocation of labour. This means allowing workers to cross the Solent to the New Forest West and building more homes. While wealth inequality starts at home, it ends with allowing others to access creating that wealth of their own.
Thus, Labour needs to present the country with a vision for prosperity. It must do this by challenging the NIMBY property-rights revolution. One steeped in a world of draconian regulation, high prices, and ever more entrenching wealth inequality. In allowing more families to build wealth through the property owning democracy, it can create one that will become less unequal.
Labour must focus on improving opportunities for the workforce through land regulation. By redistributing wealth more fairly through building more homes in high demand areas it can achieve this. After all we know that data on wages shows big cities do bring prosperity to their wider areas.
By moving to “Yes In My Back Yard” (YIMBY) Labour can tackle wealth inequality and become once again the party of aspiration. Equipped with this vision it will can attract soft Tory voters, while at the same time putting labour back at the core of its policy-making.
Christopher Worrall
Chris is the Editor of Red Brick blog and sits on the Labour Housing Group Executive Committee.
He currently is Chair of Poplar and Limehouse CLP, co-hosts the Priced Out podcast and is the Local Government and Housing Member Policy group lead for the Fabian Society.
ITV’s releases ‘Surviving Squalor: Britain’s Housing Shame’ on Sunday at 10:15pm. Unquestionably highlighting some of the most horrific housing conditions endures by people and families living in social housing in the UK.
Red Brick has long forewarned about the return of squalor. The national scandal that has been the neglect of housing. But as housing associations and local authorities are the only owner operator game in town, is it time for a rethink?
For many, these conditions are everyday norms. The perpetrators are not rogue private landlords, but housing associations and local authorities. And calls for regulatory intervention are falling on deaf ears.
Some of the worst offenders are receiving the most funding
The need for social housing has never been starker. So stark even the Tory Government has made an allocation to fund 30,000 new social homes. Notably following a recent funding announcement under the Affordable Homes Programme. In London, Sadiq Khan has seen £3.46bn distributed. The bulk of the funding is conditional on an emphasis towards social rent.
This funding comes with new conditions attached. These include all new buildings requiring sprinklers and that no combustible materials exist in the facades. Nevertheless, it must be noted that the biggest beneficiary for funding affordable housing in the capital was not a local authority. Instead Europe’s largest housing association, Clarion Housing will receive £240m to deliver 2,000 homes, of which 1,250 are for social rent.
Previous concerns over controversial mega mergers are coming home to roost
Clarion Housing was a merger between Affinity Sutton and Circle Housing Group in 2016. This occurred under the then Minister of State for Housing and Planning Gavin Barwell. Two of the housing associations in the Circle group had chronic problems with its repairs and maintenance services.
Circle had found itself downgraded as a result of ‘serious issues of disrepair’. Nevertheless, the mega merger went ahead. This was despite John Biggs, the Mayor of Tower Hamlets, condemning the lack of local accountability in the transfer to Clarion of Old Ford (Circle). The original stock transfer from the local authority crucially had this as a term in the original transfer agreement, which was completely disregarded.
Highlighting local concerns about the merger, and lack of local accountability, Labour MP for Bethnal Green and Bow, Rushanara Ali questioned the Government. In response, Barwell argued that the housing associations involved believed the merger “will create a more efficient organization”.
Red Brick has long argued for the Mayor to undertake a full audit of board membership of housing associations. While not against those with private sector experience, we need to balance this with expertise in social housing, alongside experiences of tenants and residents.
Clarion Housing continues to dodge regulator judgement despite serious controversies
Clarion Housing have been constantly in the news for all the wrong reasons. Not least down to the tireless campaigning of those affected, particularly across London. ITV Political Correspondent, Daniel Hewitt, has been legendary in his journalism. In particular through coverage of the appalling conditions on a housing estate of 500 homes in South London.
It appears too many residents in 2021 are living in squalor. In this situation finding themselves infested with vermin and plagued with damp issues. The scale of the most recent case prompted consideration whether Clarion Housing breached standards by the Regulator for Social Housing (RSH). The RSH had cleared Clarion just three months prior following an investigation into a major repairs scandal 5 years before. That time concerning buildings in Tower Hamlets.
But that is only the tip of the iceberg, red tape and bureaucracy in the Housing Ombudsman is holding back a tide of cases
Last November, Clarion featured in another investigation, this time by the BBC, investigating how they manage complaints handling and service charges. To date, further action has been actively delayed by the Housing Ombudsman, giving excuses such as not being able to take it on given the different tenures of those effected within a group complaint. The Housing Ombudsman is the ultimate gatekeeper to the RSH.
Still to this date, both shared owners and social tenants continue to pursue their case with the Housing Ombudsman. Almost three years after originally raising concerns with the landlord. Yet these recent regulatory judgements do not fill them with much hope.
But what does this achieve? Cases with the Housing Ombudsman can take up to in excess of a year to process. Even after having to slog through a complaints process that can be manipulated to take over a year in itself. Experiences all too familiar for those whose landlord is Clarion Housing. Along with other dysfunctional housing associations and local authorities.
For those living in the rat infested damp ridden flats that don’t even break social housing regulations, they are left to despair. For those currently living in temporary accommodation, or those who have been made homeless for weeks on end, after repeated leaks and floods of sewage water, lack of action from the Housing Ombudsman or RSH evaporates any sense of hope.
Clarion Housing Resident, Tower Hamlets 2021
Sector needs to do more to prioritise existing housing conditions
But what is the sector doing to tackle the problem of poor housing conditions? The short answer is not enough. Co-Founder of the Social Housing Under Threat campaign (SHOUT), Tom Murtha, aptly pointed out something did not quite sit right as to why housing conditions were not even on the agenda at the Chartered Institute of Housing’s ‘Housing 2021’ annual conference. This was an event that Housing Minister Christopher Pincher could not be bothered to attend in person. Coupled with Daniel Hewitt’s lack of invitation to speak, as pointed out by Tom Murtha below:
Wondering why this is not on the agenda at #housing2021 and why @DanielHewittITV wasn’t invited to speak? Are we not concerned that some tenants are forced to live in unsafe and unfit homes and their voices are ignored? #housing21https://t.co/quahLmdW57
What was on the agenda was housing’s role in health and wellbeing. In addition to this was a panel featuring the RSH’s new Director of Consumer Regulation. Since January 2021 Kate Dodsworth has taken up the mantel. She has also talked about “the road to consumer regulation”, Although called for housing associations to fix their issues now and to “not wait for the regulator to come round in a couple years”.
Perhaps after ITV’s ‘Surviving Squalor’ is released they should come knocking somewhat sooner.
Lacking transparency, Housing Ombudsman statistics are massaged to cover the backs of its largest members
Kate is the former CEO of Gateway Housing, who topped the tables in the Housing Ombudsman own “complaints failures index”. This is despite only having found to be 9 times at fault between 2017/18 and 2019/20. Clarion Housing in comparison were at fault a staggering 129 times.
Determinations by Housing Ombudsman 2017/18 to 2019/20
Oddly, the index weights the number of determinations by how many homes each social landlord manages. In a way, this makes larger landlords appear lower down the rankings, despite having higher total numbers. Larger organisations claim they are more efficient – as aforementioned by Lord Barwell. But if true, bigger organisations should be indexed more heavily based on size. As opposed to the other way round.
In the latest landlord performance data published by the Housing Ombudsman, complaints received on Clarion Housing about complaint handling has seen a 250% increase in 2019/20 compared to 2017/18. Over the past three years Clarion Housing has received 1,899 complaints, of which 42.5% are related to property conditions.
What is not transparent from these figures is the number of tenant’s and leaseholders impacted by the complaints. By way of example, over 500 homes were affected in the ITV investigation, but these are not logged as individual complaints. Nor are they split out by tenure.
Social media is making prevalence of cases harder to ignore
In Channel 4’s ‘Grenfell: The Untold Story’ the poor treatment of residents by both landlord and local politician was all too revealing. It revealed how the then MP Victoria Borwick urged a mother concerned about being without water for days to “take baths with people next door”. This exemplifies the growing sense of the “us and them” society that we know is so deeply corrosive to our cohesion as a nation.
This remarkable footage emerged from a meeting concerning repairs and maintenance. It provides such crucial evidence of the plight put forward by many residents, many of whom are no longer around.
Snippets from this weekend’s ‘Surviving Squalor’ also highlight the ineptitudes of some local authorities too. Chronically ill Mehdi was living with water leaks contaminated with “significant faecal contamination”.
His landlord?
Lewisham Homes – a recent nominee for the Tpas England Awards Shortlist. While TPAS expressed their shame at the conditions some tenants are having to endure, they highlighted that their awards cover a range of categories. Admittedly, not just “managing homes”.
Real capitalism in the interest of humanity can help solve our low-income housing issues
So herein lies Sadiq’s funding conundrum. At present grant can only be provided to local authorities or housing associations. Some of which face reputational damage resulting from serious causes of concern and ESG related controversies.
Under the Labour-led Wheatley Act 1924 we as a country subsidised private builders to create homes for those on low-incomes. If we are to provide grant to the private sector conditional on owner operation at social rent levels, we would enable funding packages to be less reliant on those guilty of such poor management. Instead, we see the lion’s share of London’s funding for example go to a housing association with the most complaint determinations against its name. Clarion Housing.
At present we are dealing with the inability of the country to meet the heavy burdens now placed upon it. Back in 1924 private enterprise had little to no interest investing money in houses for letting purposes. Yet today we see operators indeed willing to invest. Whether this be through the burgeoning Build-to-Rent sector, or the nascent Single Family Rental sector, the local authority and housing association is no longer the only possible investment partner to bear these costs.
At the time, John Wheatley described his socialist housing funding proposals as “real capitalism – an attempt to patch up, in the interests of humanity, a capitalist ordered society”. Yes you read that correctly. The first socialist Labour government knew it had to patch up these interests through what it described “real capitalism”. For this reason, it is not outside Labour principles to fund housing at social rent levels for direct provision by the private sector. Nor has it ever been.
We need to diversify who owns and operates social housing
At present, only Registered Social Landlords can own and operate affordable housing under the eye of the regulator. Often forward funding from housebuilders and developers who do not have a long-term interest in the construction of the property. We have seen Clarion Housing’s own Group Director of Development highlight the “lack of commerciality in the sector”. It comes as no surprise that we see just as many issues with new build social housing, as we do with buildings coming to the end of their life.
In America federal states fund the construction of affordable rental housing for those on low-incomes through conditional tax credits. They provide this to both for-profit and not-for-profit owner operators through its Low-Income Housing Tax Credit (LIHTC) programme. By being sector agnostic both state and federal government drive competition, and thus commerciality, into funding programmes.
We should explore progressive innovative new funding models of low-income rental housing. For those on the left we cannot shun the private sector. We must work progressively with it to provide more options for those in most housing need. This will allow government to be less reliant on some of the worst offenders to deliver housing for those on low-incomes.
The ultimate goal?
To make fewer people have to survive squalor.
Christopher Worrall
Editor of Red Brick.
He sits on the Labour Housing Group Executive Committee, is Chair of Poplar and Limehouse CLP, and co-hosts the Priced Out podcast.
In the last election Conservatives ran on a manifesto targeting the Gypsy, Roma, and Traveller community. They sought to give police new powers to arrest and seize the property and vehicles of trespassers who set up unauthorised encampments – in “order to protect our communities”. But at what cost and where will these families go?
Unauthorised encampments yet another symptom of a failing planning system
The recent Government consultation on ‘Strengthening police powers to tackle unauthorised encampments’ closed on the 4th March. The Home Office is due announce its findings very soon. These callous changes could have far reaching consequences, resulting in persecution for those living with unmet housing needs.
England is already facing a systemic housing shortage where building new homes is illegal without prior permission. On one hand, the heavy hand of the law seeks to punish minority groups whose nomadic way of life our system fails. While on the other, bias, racism, and political failure to tackle the systemic shortages endemic in our planning system.
Current land use regulations leave the travelling community bottom of the list for unmet needs. Both Government and local authorities have failed to address the needs of the Gypsy, Roma, and Traveller community. The proposed criminalisation of their a way of life does nothing to solve the issues.
Consultation on whether to persecute most disadvantaged communities
Former Home Secretary Sajid Javid previously had plans on unauthorised encampments, in particular to amend sections 61 and 62A of the Criminal Justice and Public Order Act 1994. Priti Patel seeks to lower the criteria for police to be able to direct people away from unauthorised sites by changing this legislation.
Trespass is currently a civil offence requiring landowners or local authorities to seek a court order to evict people if they are occupying private or public land. Some describe the process as tiresome and slow. Out of the 23,000 traveller households in England, it is thought that 14% live on unauthorised sites, equating to around 3,200.
Sadly, lowering the criteria for permitting new sites for homes, or pitches for the Gypsy, Roma, and Traveller community seems to be a political hot potato. The recent planning reforms set out to consult on what new criteria might be required.
It could be a missed opportunity for the traveling community as local plans, which could be substantially consulted on, could outline potential pitches for authorised encampments. Instead of futile attempts at persecution.
Solution is to authorise new encampments
Research by Friends Families and Travellers (FFT) shows that 1,035 traveller caravans are located on unauthorised encampments in England, although this is widely considered to be an underestimate. Many have living arrangements that could currently result in them facing prison, a fine, or having their family’s home taken away from them.
Labour’s last manifesto offered nothing to the Gypsy, Roma, and Traveller community. It did not seek to protect the human rights of those who have the “crime” of having nowhere else to go. This is a community who have lived in England and practised a nomadic way of life since before the 16th century. We have witnessed some local authorities buckle under political pressure, having allocated funding for new sites, only to U-turn.
NIMBYism Leading to Local Authority Persecution of Gypsy, Roma, and Traveller Communities
Milton Keynes Council now seeks to extend the town’s two current sites and put any new ones on hold. Our current planning system caters for the ‘Not In My Back Yard’ (NIMBY), rather than those most in need. The recent story of Bethany Rose, who has been waiting for a pitch for over a year, highlights how the “NIMBY culture” has resulted in the West Sussex’s plan for 50,000 new homes being agreed with not a single authorised travelling pitch.
Attitudes need to change on planning, as well as how we accept others way of life. In England only 13 permanent sites have any available pitches for Gypsy, Roma, and Traveller families, out of a total of 59. Almost 1,700 households are on waiting lists for pitches on traveller sites. This illustrates a severe shortage of pitches available of people living on unauthorised encampments.
Manufactured housing: lessons to be learned from the United States
We must recognise that manufactured housing associated with mobile homes on such parks are considerably cheaper to build than typical bricks and mortar. These can be energy efficient and produce much less waste than traditional site-build construction, with considerably less embodied energy. This results in much more affordable rents.
Permanent sites often demonstrate how small lot sizes can result in high population densities. Market urbanism expert, Nolan Gray, has written for Strong Towns on how planners can learn from US ‘trailer parks’. Gray argues that a more permissive approach to such types of housing settlement should be taken. Primarily to not undermine access to affordable housing. But back here in England our planning system is failing to tackle the inequalities faced by these communities.
Tory persecution of the most disadvantaged affects education
We know Gypsy, Roma and Traveller children leave school at a much earlier age than any other ethnic group. They also have worse attainment standards from early-years onwards. Only a handful ever recording having attended university. Shelter’s report shows us the devastating impact of not having a permanent home. In particular on the ability of a child to participate in school successfully.
Government must stop treating low-income communities such as the Gypsy, Roma, and Traveller community as objects of contempt. We cannot continue to subject them to top-down paternalistic planning. It prevents families from putting down roots. Nor can we accept the unjust criminalisation of a communities nomadic way of life. Especially, not without offering a credible preventative alternative to such criminalisation.
Ultimately this is a failure of our planning system to effectively plan for some of the most disadvantaged groups. It comes as no surprise that the Tories have the Gypsy, Roma, and Traveller community in their sights. Simply because they lack political representation. With nowhere else to go, this criminalisation is nothing short of a targeted attack on the community.
Labour must recognise this and commit to ending the shortage of authorised sites, mandate designated sites, and embrace manufactured housing, if we are to truly commit to a more fair and just society.
Christopher Worrall
Editor of Red Brick. He is currently an Investment Manager at Guild Living, a Non-Executive Director of Housing for Women, and is on the Labour Housing Group Executive Committee.
Chris also co-hosts and produces the PricedOut UK Podcast.
Under Corbyn, Labour announced its bid to combat high rents through old-style rent ceilings. If we look back across history we see these have had many unintended consequences. Often we have found the introduction and continuance of rent controls have done more harm than good. So should Labour continue to embrace such a policy?
We know rent legislation cannot cure housing shortages. Rather, regulations such as rent ceilings merely mitigate the effects by giving comfort to sitting tenants – at the expense of prospective tenants. All too often we see false views on rent control spill over from popular misconceptions into apparently learned debates. It is for this reason why Labour must resign rent ceilings to housing history and focus on the real problems at hand.
History shows Rent Controls are Bad
In Britain we have recognised the damage done by rent controls as far back as The Rent Act in 1957. Where at the time we witnessed expensive properties freed from such regulations. Why? Because old-style rent ceilings foster dilapidation of housing stock, encourage immobility, and distort land-use patterns. It simply makes housing worse.
Originally the introduction of rent ceilings sought to protect tenants from rent rises caused by war-time shortages. Often caused by bombing. Yet many places have seen them retained and enforced ever since. Their perception as a temporary measure were often short lived, almost always becoming destructively permanent.
Late Swedish socialist economist Assar Lindbeck once said “rent controls appears to be the most efficient technique presently know to destroy a city – except for bombing”
An unsurprising statement when the average waiting time for a rent-controlled unit in Sweden is 11 years. In Sweden keeping rents low for a small section of renters sees tenants hold onto property they no longer wish to live in. Rent regulation incentivises lucky rent regulated tenants to sublet in the black market, often for a significant profit. One would argue this is hardly a socialist panacea.
Price Signals Allow Markets to Respond
Back in 1906 an earthquake hit San Francisco. Subsequent fires destroyed thousands of acres of buildings in the heart of the city. It resulted in 225,000 people becoming homeless. The city of 400,000 lost more than half its housing in three days. Yet market driven construction of new homes put roofs over many earthquake victims heads. In effect developers were able to respond to market demand through rising price signals.
Nevertheless, each remaining household still had to shelter 40% more people than it did before the quake. So what do you think the first local paper observed following the earthquake – a huge housing shortage surely? No, in fact the first San Francisco chronicle following the earthquake made no mention of housing shortage at all.
The market had responded and there was over three times more homes available to rent than advertised for sale. Just goes to show what can be achieved by the market without rent controls having distorting effects on new supply.
Rent Controls Deter New Construction
Contrast this to 1946, where the San Francisco population had increased from 635,000 by 200,000. All over a six-year period. By comparison, the number of dwellings had only increased by a fifth. While in 1906 the city had to shelter 40% more people than before the earthquake, by 1946 the city only had to accommodate around 10-12% more than before the war. This did not stop the Governor at the time going on record to describe the housing shortage “as the most critical problem facing California”. But what was so different?
In 1906 higher rents could signal to the market to build new construction. However, by 1946 imposing rent ceilings made this method of stimulating supply for rental homes illegal. The result? 730 houses listed for sale for every 10 homes listed for rent. The absence of a ceiling on selling homes, in conjunction with a ceiling on rents, had considerably distorting effects. It meant that prices were to rise as a large and increasing demand encountered a relatively fixed supply.
This meant many landlords ended up selling at inflated market prices, rather than renting to tenants with a price ceiling. Rentals effectively become almost impossible to find. At least at legal rent levels. Rich people with money still found plenty of homes to buy. Ceilings on rent provide the rich an advantage to satisfy their housing needs. Restrictions on rent only make this condition worse. We must also recognise that during this time incomes in San Francisco had doubled in comparison to levels before the war. This allowed people to pay more in rent even though legally they did not have to, exacerbating the proliferation of the black market.
Rent Controls Reduce Mobility and Increase Unemployment
Research by Joseph Schumpeter on unemployment recognises the correlation between lack of labour mobility and structural unemployment. In turn, rent controls artificially create more pressures on cities, notably because inhibiting rent increases puts a brake on the natural drift out to towns. We know more people leave London for the rest of the UK, than move from other places in the country to the capital. This is primarily due to relative affordability.
Studies from San Francisco by Stanford University shows rent control limits renters’ mobility by 20% and lowers displacement, which comes at the expense of a reduction in rental housing supply by 15%. Rent controls lead to a less mobile workforce, more structural unemployment, and less supply. No doubt hampering the economy and increasing state borrowing unnecessarily.
Rent Controls are Denigrated Across the Political Spectrum
Notwithstanding the above, rent control is considered the least contentious area of economics and is widely denigrated by economists from around the world. The agreement cuts across the political spectrum, from Hayek and Friedman agreeing on the “right”, to architect of the Swedish Labour Part’s welfare state Gunnar Myrdal on the “left”. It has literally been no longer a debate within the profession for a considerable length of time.
Rent Stabilisation is Ineffective
Maureen Corcoran has reflected on Germany’s rent regulation through its local rent index, arguing regulation improves affordability and transparency. But we have seen since Germany has moved to stricter rent control, with a 5-year rent ceiling, finding new rental property has become increasingly difficult. Rent stabilisation typically has more flexibility and freedom around having an ability to change tenant than old style rent ceilings. For example, if you make repairs, you can increase rents. Labour has mooted such types of control in the past, but we know these too still do more harm than good.
In New York rent stabilisation has ‘luxury de-control’, akin to the 1957 Rent Act in the UK. If a rent gets to a particular level, then it can leave the rent stabilisation regime all together. Professor Ingrid Ellen of NYU argues that outside of Manhattan rent stabilisation does not have that big of an effect on the market. She argues apartments can often be as close as $200 a part in terms of median market rental levels, in comparison to rent stabilised rents. This suggests even modern versions of rent ceilings remain ineffective for the most part.
The Evidence is Overwhelming: Rent Ceilings are Bad
Developers essentially end up wanting to build less, which can’t be a good thing. The rules in New York meant you typically did not have rent stabilised levels on new lettings, which was one way the rules tried to avoid such an issue. But still, what you saw in post-war New York was the conversion of a lot of rental apartment blocks into condominiums for home ownership. Once again, resulting in a net loss of rental stock. Lower supply means higher prices.
Thankfully, recent studies continue to put the rent control question to bed. In August 2020 by Thao Le, Edward Coulson, and Lily Shen published ‘Tenant Rights, Eviction, and Rent Affordability’. The paper demonstrated that for every one-unit increase in the toughness of rent control, evictions are reduced by almost 9%. It found rental housing costs becomes 6% more expensive where tenants have more protection against landlords through regulation. While a higher Tenant-Right Index is also negatively associated with a decrease in housing supply and an increase in the homeless rate. When we put ideology before evidence, empirically we see rent controls lead to worse outcomes.
Gauche Caviar?
Hanchen Jiang, Luis Quintero, and Xi Yang recently released their paper ‘Does Rent Regulation Affect Tenant Unemployment? Evidence from New York City’. It found that often the beneficiaries are those who are more well off and such regulation denotes a significant transfer of wealth to those on higher incomes. Rent-stabilised tenants are empirically more likely to be unemployed than private market-rate tenants, particularly if you are white and highly skilled. To what extent this could ever be seen as a progressive outcome still remains to be seen.
If Labour is to continue to encourage the proliferation of rent-controlled property it should achieve this through the construction of new social housing. Not blanket market distorting rent regulation. Rent control is great if you get it. However, it merely comes at the price of greater inequality for future generations.
Rent ceilings offer no cure to the housing shortage, and in combination with a planning system currently disconnecting local housing supply from local demand, demand-side rent regulations merely create more problems than they solve.
Christopher Worrall
Editor of Red Brick. He is currently an Investment Manager at Guild Living, a Non-Executive Director of Housing for Women, and is on the Labour Housing Group Executive Committee.
Chris also co-hosts and produces the PricedOut UK Podcast.
What do bribery, conflicts of interest, opaque lobbying, weak oversight, curiously timed donations, excessive hospitality, and the revolving door all have in common? They are all corruption risks inherent within our discretionary planning system.
We should be worrying aboutthe findings made by anti-corruption organisation Transparency International, who found many local authorities lack the necessary safeguards to prevent corruption in our planning system.This begs the question – why is the left not demanding more from planning reform?
‘Permission Accomplished‘shows us why because of corruption we should be sleeping with one eye open
Discretion, as opposed to rules, is arguably at the heart of our planning system. This creates inherent risks within the framework designed to provide democratic oversight to the development of our built environment. Not one of the responses to the Planning for the Future consultation made available to date, nor the Select Committee, have focused on the need for planning reform to combat corruption.
The definition of corruption according to Transparency International is “the abuse of entrusted power for private gain”. Corruption can come in many forms. It can be in the form of political donations to local branches of a political party around the same time as a planning application. Or it could be payments for the tuition fees of local councillors’ children.
There have been some high-profile cases in the past few years that have shed light on the flaws of our planning system. Transparency International case studied many of these in their report ‘Permission Accomplished’. By way of example, the report includes an investigation in Liverpool by the Serious Fraud Office (SFO) involving multi-million-pound developments where no minutes of meetings between developer, councils, and officials had taken place.
Assessing corruption risks requires us to look closely at how it occurs in the first place
A case study covered in the report looked at how a Conservative Chair of a London planning committee had become embroiled in allegations of impropriety. He was receiving excessive gifts that had not always been declared. By March 2018, following media pressure, the local councillor had referred himself to the Monitoring Officer. His self-referral warranted formal investigation.
The Investigating Officer found the volume and frequency of hospitality and gifts declared by the individual as “extraordinary”. Important to note that no evidence proved the hospitality had influenced any planning decisions. However, the council did find the actions breached their code of conduct.
Another case study in the report highlighted findings from an investigation by The Daily Telegraph. A Liberal Democrat councillor employed by a public affairs company was said to be using a range of lobbying tactics to secure planning consents for their clients. The councillor told the Daily Telegraph that the firm employed numerous former or present councillors at any given time.
If other councillors refused to talk to lobbyists about a particular planning permission certain ‘tricks of the trade’ could be used to get around this. For example, he claimed he could use contacts to try and replace difficult councillors on local authorities’ planning committees, with more agreeable ones to help secure permissions for clients.
We cannot expect every local authority leader to be followed by the eyes of Argus
Shortly after the Independent Mayor of Tower Hamlets was removed from office for election fraud, a fixer was recorded allegedly requesting a £2m bribe for four incumbent councillors. In addition, the individual allegedly also requested a £15,000 a month retainer for high-end hospitality from a developer seeking planning permission.
Below is an excerpt from a recording produced by the Sunday Times back in December 2017, having regard to an ongoing case noted in Permission Accomplished. The recording demonstrates the inherent weakness and lack of democratic oversight systemic within highly discretionary English planning system.
“We are lobbying certain members to try and approve this development. But of course, then there is the additional bit that we will be doing behind the scenes, and this is where the premium covers that.”
“The site doesn’t have planning on it. As soon as you buy, your team will have to put the application in, and the gatekeepers will bless it. End of.”
“Well it’s the elected members. Politicians that have a show of hands. You have seven people, in this case about seven. If you take out the deputy it is six key votes, six elected members, members that have been elected by people, by the public, they make the final decision”
Sunday Times Recording, December 2017
Labour Mayor John Biggs, who ran on an anti-corruption ticket, called in accountancy firm Ernst and Young to undertake a full and independent investigation of the developer’s claims of corruption. Since becoming Mayor, Biggs says he has fought hard to clean up the borough, and to tackle the corruption and wrongdoing of the past.
The whistle blowers’ allegations of bribery in connection with a planning application was swiftly considered by a Queen’s Counsel (QC) experienced in addressing bribery and corruption cases. Following the QC’s advice, the Chief Executive reported the allegations to the Serious Fraud Office. The case has since been referred to the National Crime Agency where it remains still under investigation.
Panelisation of planning decision-making removes consenting authority of councillors in beady-eyed Australia
In some places in Australia, legislation removes councillors from exercising any consent authority functions. Instead Australia in many places constitutes mandatory local planning panels, namely under the Planning Panels Act 2018. Mandatory local panels were argued to “bring expertise, transparency, and integrity” to the process of assessing planning applications. Planning authorities across Australia had exemplified the use of local planning panels from as far back as 1997.
Local planning panels have become a more conducive structure for development and industry in Australia. In particular following the success of Joint Regional Planning Panel (JRPP) introduced in 2009. These regional panels would be responsible for developments more than $20 million capital value. In effect removing local councillors from the decision-making process. This instead favours an independent decision-making body for regionally significant development applications, significantly reducing the risk of corruption.
Research reveals local authorities lack twenty-twenty vision over corruption risks
In their report Transparency International assessed 50 of 317 local authorities across the countries that have planning responsibilities in England. It found 32 councillors across 24 authorities holding critical decision-making positions in their local planning system, while at the same time also working for or on behalf of developers. This poses the question are we electing local representatives or political lobbyists?
Transparency International assessed how each local authority prevents, protects, and pursued corruption in planning decisions by local councillors. In it they judged these authorities against best practice standards. Developed by Transport International, and using evidence from their research, they built on existing work by the Committee on Standards in Public Life (CPSL) and the Local Government Association (LGA).
Local authorities were scored between zero and 100. 100 being seen to meet good practice. By this measure, not a single local authority taken from the 15 per cent sample demonstrated either a top or second quintile performance. This suggests local authorities are leaving themselves open to serious allegations of improper conduct by democratically elected representatives.
@TransparencyUKfound many local authorities lack sufficient safeguards to prevent corruption.Labour should be demanding more from planning reform.
The corneal erosion of institutional checks and balances make the planning system fertile ground for abuse
The report found inadequate oversight to ensure probity in the planning process. It went insofar as to highlight major corruption risks relating to councillors’ involvement in planning decisions in the current system. Low levels of transparency, poor external scrutiny, networks of cronyism, reluctance or lack of resource to investigate alleged wrongdoings, and the sums of money involved provide a fertile environment for those entrusted to make planning decisions abuse it for private gain.
We have seen an erosion of institutional checks and balances on this behaviour. Independent audits of local authorities have been abolished. A universal code of conduct for councillors abandoned for local defined standard. All in combination with the capacity of our media having been watered down. Labour needs to continue picking up the mantle in tackling corruption, as has been the case lately following calls for tougher regulation of suspected money-laundering activities.
Lines between lobbyists and elected local representatives remain terribly blurred
Bob Colenutt, in his book ‘The Property Lobby: The Hidden Reality Behind the Housing Crisis’, makes a good point. He highlights to us the revolving door between local authorities, consultants, and developers is of equal importance to developers lobbying government . Many councillors have second jobs working as lobbyists and advisers to developers and housing associations. Often working in their own or adjoining areas.
Bob pointed to the case of Southwark in 2017. Here 20 per cent of the local authority’s 62 councillors were employed as lobbyists. Almost one in ten councillors in London either work for a property business or have received hospitality from them. Nearly 100 councillors have links to property companies or lobbying and ‘communications’ consultancies involved in planning.
The local councillor is a denizen of the English planning system. It is the discretion of these individuals over decisions that shape our built environment. Is it just a coincidence that our democratic planning system encourages so many councillors to work in lobbying for developers. Or does this need to change?
Local authorities can be more eagle-eyed if they reinforce recommended guidance and best practice
We need to increase transparency, tighten rules to protect the planning process from abuse for personal gain, and to strengthen oversight over councillors to deter behaviour that would bring the integrity of the planning process into question. Transparency International made the following ten recommendations:
Minute and publish all meetings with developers and their agents for major developments
Prohibit those involved in making planning decisions from accepting gifts and hospitality that risk undermining the integrity of the planning process
Increase transparency over gifts and hospitality
Stronger leadership from the industry on ethical lobbying
Improved management of financial interests, which include the repeal of Section 31 of the Localism Act
To be replaced with a new requirement removing councillors from decisions where it can be reasonably regarded that they hold a significant conflict of interest that could prejudice their judgement
Prohibit all councillors from undertaking lobbying or advisory work relating to their duties on behalf of clients
This should prohibit members from lobbying councils on behalf of paying clients
Prevent councillors from providing paid advice on how to influence councils
Manage the revolving door between elective office and private business
Prohibit those who have recently worked as lobbyists for developers from sitting on planning committees
Or receiving executive responsibilities relating to planning
Provide clear guidance and boundaries for councillors so they can better understand what is and is not acceptable behaviour
Provide a meaningful deterrent for serious breaches of the code
Increase transparency over investigations and enforcement actions
Transparency International’s report raises yet again alarm bells about risks that remain very real. Sadly, local authorities still remain ill-prepared to address them. Labour should give these anti-corruption recommendations serious consideration, put anti-corruption at the heart of its agenda, particularly when it comes to planning reform.
Christopher Worrall
Editor of Red Brick. He currently works in land acquisition for Guild Living. Chris currently sits as a Non-Executive Director of Housing for Women and is a member of the Labour Housing Group Executive Committee.
For a significant number of young and low-income people housing affordability is getting worse. Housing affordability, or the lack thereof, is a concept widely understood by those living in the United Kingdom. Or is it?
On 8th July 2020, a ground-breaking new book was published by Bristol University Press. ‘Understanding Affordability: The Economics of Housing Markets’, by Professor Geoffrey Meen (Reading University) and Professor Christine Whitehead (LSE). The book sets out to unpick the complex forces exacerbating the endemic unaffordability of UK Housing. Thankfully, it offers insight and recommendations to improve our country’s dire situation.
Using ‘price-to-earning’ ratios and ‘housing expenditure’ indicators are not the right approach
When discussing housing affordability we often use ‘price-to-earnings’ ratios. Although questions remain about whether this metric is even at all suitable. This is because affordable ‘for whom’ is a question consisting of several interrelated elements, which beyond price should include physical adequacy and overcrowding.
Some argue that using such metrics will not produce any significant improvement in affordability. This is primarily because social norms and demand-side behaviours we find play a crucial role in price determination. We must recognise demand remains a key factor in determining housing affordability.
Meen and Whitehead argue that looking at expenditure indicators alone can be highly misleading. Affordability concepts have their roots in 19th century studies of household budgets. For example, at the turn of the century the USA used the 25 per cent rule of thumb for affordability. This was based on one week’s pay for one week’s rent. Rules like this have informed both mortgage lending and housing policy alike.
More sophisticated approaches using the ‘Lorenz Curve’ tell us more about affordability
The book claims that more complex approaches recommended in academic literature have often been overlooked. This is particularly prevalent in housing policy arena and contemporary political discourse.
“We all know that this country does not have enough homes… the median house price in England is eight times higher than median gross annual earnings; in London, it is 12.3 times higher”
Minister for Housing, Christopher Pincher MP – March 2020
Source: Hansard
Price-to-earnings ratios sadly provide no information on the distribution of outcomes across household types and income levels. The authors are critical of how such flawed basic measures make it into planning policies. For this reason they say it is “worrying that it is still widely used”. Housing expenditure indicators such as rents and mortgage payments relative to incomes are also heavily criticised.
Ratios for example cannot distinguish between households with different income levels adequately. Are these metrics providing us with useful information to make meaningful policy recommendations? They suggest not. It is the distribution of incomes and wealth relative to the distribution of house prices that determines who can afford what. Not metrics that make use of averages such as the price-to-earnings ratio.
Research on affordability undertaken in the first chapter estimated affordability for First Time Buyers (FTBs). In it the authors based their research on variations of a ‘Lorenz Curve’. This approach uses a graphical distribution of the equality of affordability, which easily shows what proportion of FTBs can afford what proportion of housing stock. A quick look on Hansard results in not a single reference to such terminology in the past 10 years.
Measures of inequality still require closer attention despite painting a clearer picture
Research in the book suggests the use of a Gini coefficient to account for regional inequality. This is an index that measures inequality created by Italian statistician Corrado Gini. We can compare how distribution of income in a society compares with another if everyone earned the same amount. A Gini coefficient of zero means everybody is equal. If we measure a Gini coefficient of 1 it shows a single person earning all the income.
Despite being technically sound, using Gini coefficient’s is still criticised by some. Summer and Cobham argue that it does not adequately capture changes in the top 10% of the income distribution, nor the bottom 40%. In turn, due to the under sensitivity of the measure at the extremes, they consider the Palma ratio more suitable. For example, if the richest 10% have five times more income than that of the bottom 40% then the Palma ratio would be 5.
When undertaking a more rigorous analytical approach we find housing affordability issues persist across the country, even in the North East
The Gini coefficient in the South East is 0.70, thus displaying a high degree of inequality. In this region a household with a median income would be unable to afford to purchase a property without paying more than 30% of their income on housing costs. There are no surprises there, but it does highlight where housing affordability is most acute.
By comparison existing homeowners who wish to move, even those in the lower income ranges, could afford to move to higher value properties without paying more than 30%. Some people in this group are effectively able to make hay much easier than those without accumulated equity.
On this more complex indicator, the research shows that to afford a property in the first decile (lowest 10%) of property prices in the South East, you still would need to earn over the median income. The difference between the ‘haves’ and the ‘have nots’ is demonstrably clearer when using such methods.
Yet in the North East, where inequality is much lower considering its Gini coefficient of 0.30, there are still significant proportions of households who cannot afford to buy properties in the lowest decile. This means that after considering the full distribution of incomes, rather than just averages, affordability for FTBs is not just a problem for the South of England.
Forward thinking Local Authorities should be reflecting on these new affordability indicators to assess the distributional consequences of policy changes. A key takeaway is to recognise that housing affordability is not just a South of England phenomenon.
When determining housing policy we need to better understand demand-side factors
The book reflects international comparisons of the average annual growth in real house prices between 1970 to 2015. Over this period Germany had -0.3% growth in house prices while the UK had more than +3.5%. Yet looking at the comparison relative to wages suggests there is more than meets the eye. In this context house price growth in Germany was -1.9%, while in the UK +1.3%.
Since 1970, German housing stock growth relative to incomes has proven relatively constant, suggesting supply is less of an issue. We think this because even after factoring in incomes relative house prices were even lower. This is despite the rate of growth in housing stock remaining constant.
In the UK levels of growth in housing stock relative to incomes have fallen by around 1.5% per annum. This means wages have been outpacing growth in housing stock. From a fundamental economic standpoint, it is no wonder house price growth has been going one way. Clearly we must acknowledge that worsening affordability and rises in real prices in the UK relative to Germany are as much a result of demand-side factors, as it is a lack of supply.
The British psyche of wanting to own one’s own home may play a pivotal role in explaining why we may have had different house price growth to that found in Germany. Our willingness to spend more on housing costs as our incomes increase, perhaps to achieve social norms such as home ownership, is alluded to as an explanatory factor.
The nature of UK housing demand means prices respond quickly to growth in incomes
Low-interest rates can exacerbate housing market price volatility. But it does not explain the long-run trend of increasing price-to-earnings ratios. Historically the UK’s housing stock has grown at a slower rate than income. Professor Meen and Professor Whitehead argue that price-to-earnings ratios can only be constant over the long-run if household incomes grow at the same rate as growth in housing stock.
We must acknowledge that we have a stronger responsiveness to demand pressures in the UK, than in say Germany. Understanding this can help us deconstruct some of the price drivers behind making affordability worse. It is difficult to tackle the issue of affordability with supply alone when the demand impact from incomes is so strong. As a result the UK is prone to faster deterioration of affordability.
Understanding this is a key factors of the counterargument to Ian Mulheirn’s claim there is no housing shortage. Mulheirn’s own paper had a peer review by this book’s author, namely Professor Geoff Meen. In the peer review he explained that it is neither population nor the number of households that affects demand; rather demand needs backing by income to impact house prices.
Surprisingly, Ian’s claims still seem to be gaining traction, most recently by Stephen Bush, who has become “increasingly persuaded” by Mulheirn’s claim that supply has not contributed to the growth in price-to-earnings ratio since the 1990s.
Conventional wisdom is that rises in real house prices reflect a shortage of homes and that the current planning system plays a significant role. The book also demonstrates that increases in housing supply can improve affordability, but that changes need to be large and sustained to produce a noticeable effect. They also acknowledge that a general expansion in private supply does not necessarily filter down to those on low incomes.
The UK demand drivers see income growth translate into higher prices more readily
Fundamentally Meen and Whitehead argue that income growth (and its distribution) reflects demand, whereas housing stock reflects supply and is affected by conditions and policy in land markets. Meen and Whitehead reaffirm that in making such statements, demand must be backed up by income to influence house prices.
In the UK, the demand drivers see income growth translate into higher demand for housing services, which is more likely to translate into owner occupation. This is a sector where the quality of housing stock is generally higher than in the private rented sector.
The book does not deny the unassailable fact we need more funding for social housing. But also acknowledges the total supply of land for housing has been severely restricted. This has led to increased land values off the back of strong demand-determined increases in house price, exacerbated, of course, by easy credit. It is after all the trend which investors and developers have followed all along.
We need to re-calibrate the balance of concerns when discussing supply, demand, and characteristics of investment behaviour
Some have pointed to investor behaviour, low cost of capital, and attitudes of housing being an investment asset as causes of our problems. However, while there is no doubt these have contributed to the trends in price in recent years, research in the book demonstrates that this alone cannot account for the strong growth rate of 3.5% per annum since 1969.
We must accept that rising real house prices are not only a question of supply and investment demand but that it is also very much related to consumption demand.
To stress the point, the authors do not say that supply and investment characteristics are unimportant, rather that there has been a distortion of the balance of concerns. We cannot say it is just supply, or solely interest rates, which has led to this crisis of affordability. Thus, whenever we are framing the narrative, we must not forget to consider demand.
If we keep this in mind when looking to use more sophisticated ways of measuring affordability, while avoiding shallow rule-of-thumb metrics, we may be able to truly understand exactly who in our housing market is being failed by Government. Only then will we be able to devise policy to address it.
Chris Worrall
Editor of Red Brick. He currently works in land acquisition for Guild Living. Chris currently sits as a Non-Executive Director of Housing for Women and is a member of the Labour Housing Group Executive Committee.
Previously Investment and Finance Manager at both Quintain and Thor Equities. Chris has expertise in developing new residential investment strategies, real estate development finance, and the investment and development of affordable housing. He writes in a personal capacity.
On the 6th August 2020 the Conservative Government announced a change to the standard method for calculating the housingneed requirement. The debate had up until this point shifted from the ‘numbers’ question. Towards the ‘how’ and ‘where’. Now the proposed new method seeks to achieve a ‘fair share’ under Boris Johnson’s ‘levelling-up’ agenda. But is this the right approach?
The Government’s housing targets have come under fire for contradicting its ‘levelling-up’ agenda.
Analysis by the LGA found under the new formula lower growth in housing stock would be expected in Northern regions. London on the other hand would see a 161% rise in homes built. An increase of 57% is expected in the South East. 39% in the South West. For those in the North East proposed targets are 28% lower. While 8% lower in the North West.
On average the house price-to-earnings ratio across the UK stands at 10.7. However, price-to-earnings ratios are still below their previous 2007 peaks in the North East, North West, Yorkshire and Humber, and Wales. In London, the price-to-earnings ratio has worsened by over 50% since 2008. Similarly, the South East, South West, East, and the East and West Midlands have all surpassed their Pre-Covid19 crisis peak. Surely adopting this approach makes sense for these targets to be reduced. Or does it?
On new projections the housing targets are well below what we really need, and fall short in basic economic terms.
On the new proposed standard method it is estimated to be 337,000 – so an annual increase of 1.4%. Currently the Tory housebuilding target of 300,000 accounts for an annual increase of 1.2%. Compared with the two decades between 1931 and 1951 housing stock grew on average at 2.85% per year.
Labour should be attacking the Tories over their lack of ambition. To achieve the levelling-up agenda we need greater supply responsiveness to house prices and housing stock to grow faster than incomes. Only then will we achieve a less volatile housing market. But how could we achieve this?
The Bank of England targets inflation at 2%. As at April 2019 the total number of dwellings was 24.4 million. In effect to ensure growth in housing stock exceeds growth in full-time earnings. Thus, we should be setting the national target closer to 490,000. Somewhat 45% higher than the Tories current level. If we achieved the growth in housing stock at rates seen between 1931 and 1951 this figure would be closer to 696,000.
The average house price-to-income ratio now stands at a whopping 18 times the average salary in London. In London housing supply targets have either been based on land capacity. As seen in the recent Draft London Plan. Or in times gone (and still to date) by projections based on ‘nonsense demographics’.
It makes sense for the Government to require those areas that are seeing the most demand. And demonstrably so in areas that have increasingly high price-to-earnings ratios. Even the North West, North East, and Wales have seen increases in price-to-earnings ratios from their Pre-Covid19 crisis trough. Housing supply should remain an important policy concern for all when considering the ‘levelling-up’ agenda.
It is no surprise why house prices have rocketed in London, the growth in housing stock has not exceeded incomes.
For the period 2009 to 2019 housing in London stock grew by merely 8.6% in aggregate (0.8% p.a.). While full-time earnings grew at 16.9% (1.6%). Almost double the rate. A ten-year target set at the anticipated growth rate in wages, using the inflation rate as a proxy, would see London housing stock need to grow by 2% p.a. or 21.9% in aggregate.
By the end of 2019 London the total number of dwellings across all the tenures reached 3.6 million. London would need 786,700 net additional stock delivered over the following decade. Sadiq Khan would need to increase his original annual target from 65,000 homes per year up to 78,700. This would see London take its fair share of the levelling-up agenda.
London has not seen such levels built, largely by the private sector may I add, since 1935. This is a time that pre-dates the permanent protection of London’s antigrowth local land regulation, namely the ‘Green Belt’. And the tortuous Town and Country Planning Act, which has poisoned London’s well of supply ever since.
Figure 1: New build homes in Greater London, 1871 to 2018
Sadiq had his own target reduced by the naysayers. An independent review said his small-site target was unachievable. This reduced the original target of 65,000 to 52,000. Still more than Boris Johnson’s 41,882. Yet considerably lower than the proposed new standard method of 93,532. A figure London has never built in its history.
Targets set under the Housing Delivery Test (HDT) over the three years between 2016 to 2019 required one home for every 80 residents on average. Or 38,400 annually. Output would need to increase by 200% to increase housing stock at the same pace as income to hit a target of 78,700. Or 243% to hit the levels set out using the proposed new standard method.
The race to the bottom of build cost and quality is a symptom of a broken land market.
The endemic cladding scandal has left over 3 million in worthless flats. Economic incentives of landowners under the current planning system have led to economic growth and value from cost cutting measures absorbed by land values. The result? A race to the bottom on build quality to pay the highest price.
Our land market has been so constrained that the economic interests driven by the current planning system has seen build quality deteriorate. Literally to the point where basic fire safety has too often become hard to achieve.
Housing targets under the Tories remain a tabula rasa, only Labour has the ambition to level up our nation.
Levelling-up the land market requires planning reform and appropriate housing targets. And densifying cities. Only then will we re-balance the see-saw between land values and build quality. Liberal socialist John Rawls has advocated a move from a broken system of welfare state capitalism, to a property-owning democracy. Where everyone can participate in the productivity gains of a nation.
If every British citizen had a stake in a sizeable amount of property, access to capital and the productive decisions of society, then we can put power in the hands of the many and not the few. In China, the homeownership rate is as high as 90%. We should try to emulate this ambition. And while no silver bullet, revolutionary rent-to-buy schemes such as Rentplus could provide one such solution.
The levelling-up agenda will require a significant amount of homes at social rent levels for those on low-incomes. Particularly in big cities. Labour needs to ensure housing targets are driven on the premise we need to make homes more affordable. This can only be achieved by committing to more supply. And a huge, huge amount of it.
Chris Worrall
Editor of Red Brick. He currently works in land acquisition for Guild Living. Chris currently sits as a Non-Executive Director of Housing for Women and is a member of the Labour Housing Group Executive Committee.
Previously Investment and Finance Manager at both Quintain and Thor Equities. Chris has expertise in developing new residential investment strategies, real estate development finance, and the investment and development of affordable housing. He writes in a personal capacity.
