Blog Post

We don’t believe you Mr Jenrick

Describing his controversial plans to scrap the contributions that developers make to affordable housing and other local infrastructure, Secretary of State Robert Jenrick told the BBC: “This isn’t giving more power to developers – we’re actually asking them to pay more.” As the interviewer Nick Robinson reminded him, he was asking an awful lot if he expects people to trust him on this issue, when not long ago he’d helped a Tory party donor avoid developer contributions on a major development in London. “You need to win people’s trust, Mr Jenrick,” he pointed out.

Ironically, developer contributions (“section 106” in the jargon) weren’t “a product of the 1940s Attlee government” as Jenrick told Today listeners, but of the Thatcher government, shortly before it came to its end in 1990. This is not the first time that the system has come under attack – the combined forces of George Osborne and Eric Pickles during the coalition government worked to erode its effects, pressured (as ever) by developers complaining about “red tape” and giving as their excuse for cutting it the need to revive housebuilding and the housing market after the global financial crisis.

But it did not work. Developer contributions went from strength to strength. Back in 2000/01 they provided only four percent of affordable housing in England, and under the last Labour government this barely changed, reaching less than six per cent by 2010/11. It was under the coalition and then Conservative governments that developer contributions really took off. By 2012/13 they provided a quarter of affordable housing output and by 2018/19 this had reached almost half of the total – all of them homes built without government grant. The harsh reality was that, because the government had cut the grants budget, developer contributions were vital if some reasonable level of affordable housing output was to be sustained.

Figure 1: Additional affordable housing supply started, agreed through S106 agreement 2015-2019, England
Source: The Incidence, Value and Delivery of Planning Obligations and Community
Infrastructure Levy in England in 2018-19 MCHLG, 2020

A report released quietly last week shows their importance even more sharply. The chart above is taken from the report and shows the recent growth in affordable housing supply resulting from section 106 agreements, broken down by tenure. The report says that contributions towards affordable housing alone were worth a total of £4.7bn in 2018/19; this was two-thirds of the total value of contributions, the remaining third going towards local infrastructure such as roads and schools.

To put this in perspective, the new Affordable Homes Programme announced by the Chancellor in March, and confirmed in his Summer Statement, is worth just £2.44bn annually, and this was flagged as a significant increase on the current programme, worth £1.95bn each year. In other words, what developers contributed to the delivery of affordable housing in 2018/19 is more than twice as much as the government paid out in grants.

The report has another statistic: 44,000 affordable homes were agreed in new planning obligations in 2018/19. This is a fall since 2016/17, but the value of this housing has increased over the same period due to an increase in house prices in many areas, with higher developer contributions. In 2018/19, the total of affordable homes built was 57,185, the highest in the last four years. Obviously the 44,000 new units arising from developer contributions will be spread over more than one year, but this comparison confirms their huge importance.

The new proposals would sweep away the existing section 106 agreements, which are negotiated locally, and replace them with a fixed national levy that would be based on the value of new developments. The amount would be set nationally but collected and used by local planning authorities.

What Mr Jenrick wants us to believe is that developers will pay more under this new system and that more affordable homes will be built as a result. He says the current system heavily favours the big volume housebuilders, which is true, and there is plentiful evidence of their finding ways to circumvent the system, not only by arranging to sit next to Mr Jenrick at Tory party fundraising dinners.

Indeed, his proposals do favour small builders, by proposing to exempt small developments of under 50 homes from the new levy that would replace section 106, at least for a limited period. But this worsens Mr Jenrick’s task, since small schemes currently do contribute to affordable housing. If he’s to be believed, and overall payments by developers towards affordable housing are to be even higher than the current £4.7bn, then big developers will have two extra burdens.

They’ll not only have to shoulder the contributions currently carried by small builders but will need to pay more on top of that. Developers have paid over £12 million to the Tory party since Boris Johnson took office: is this the return they expected for their investment?

<strong><span class="has-inline-color has-primary-color">Monimbó</span></strong>

Monimbó is a senior housing policy professional who has been a pseudonymous Red Brick contributor for many years. 


Growing racism requires a much stronger government response

brexit flags
Hate crimes have increased since the referendum and the biggest increases have been in areas that voted ‘leave’. Government has launched a new hate crime plan but, typically, rather than a proper strategy it’s largely a mish-mash of small schemes, many already taking place. There’s little questioning of why racism is on the increase, and no review of politicians’ own behaviour before and during the referendum. It’s as if increased hate crime is an unfortunate accident rather than the culmination of a viciously anti-immigrant campaign – preceded by the racist labelling of Sadiq Khan in the London mayoral vote and other openly provocative measures stretching back to Theresa May’s ‘go home’ vans two years ago.
In housing, we have seen the introduction of the right to rent, which could almost have been designed as the modern equivalent of those signs saying ‘No Blacks’ that used to be put in windows by landlords until the 1960s. (Coincidentally it was also the sort of discrimination practised in the US at the same time, it seems, by presidential candidate, UKIP supporter and former landlord Donald Trump). Evidence of discrimination in the right to rent pilot in the West Midlands, found by the Joint Council for the Welfare of Immigrants, was dismissed and the scheme simply rolled out across England last February. It joined the government’s rogue landlords and ‘beds in sheds’ schemes as seemingly as much about immigration control as they are about improving housing conditions.
Social landlords trying to engage with Muslim communities also have the ‘Prevent’ programme breathing down their necks, with housing staff now being trained to identify ‘radicalisation’. But does this merely bring all Muslim men with beards under suspicion, as one housing worker told me, and where is the community-sensitive help for Muslim families genuinely worried about the violent propaganda their young people might be subject to?
In short, many housing professionals and tenants are highly sceptical of the effectiveness of government schemes, whether to identify ‘illegal’ migrants or ‘radicalised’ Muslims, but are all too aware of their damaging effects on community relations.
Now social landlords have a fresh concern, given that two-thirds of social tenants voted against EU membership and all have been exposed to the ‘divisive, anti-immigrant and xenophobic rhetoric’ during the campaign, as the UN Committee on the Elimination of Racial Discrimination put it when blaming both politicians and the media. Fortunately, so far there seem to have been few housing-related hate incidents, although a Polish family was attacked in their home in Bristol and children in a Harrogate play area taunted an East European migrant.
The UK government said in response to the UN committee that it has a ‘zero tolerance’ approach to hate crime. ‘We have in place one of the strongest legislative frameworks in the world to protect communities from hostility, violence and bigotry. We keep it under review to ensure it remains effective and appropriate – and recently published a comprehensive new hate crime action plan to drive forward the fight.’
If the legislative framework really ‘protects’ communities, then how come that race hate crime is increasing or that (according to official crime surveys) the real number of incidents is at least twice what is being recorded by police? How come that organisations working with EU migrants report more fear of hate incidents, and Tell MAMA, which monitors Islamophobia, recorded a 300% increase in incidents even before the referendum and some of the recent events in France? If (as the government plan says) ‘we will only be able to drive down hate crime by tackling the prejudice and intolerance that fuel it’, where is the self-analysis by politicians of their own views and actions, that the UN committee thinks is lacking?
Both the Equalities and Human Rights Commission and the Race Equality Foundation have called for a more comprehensive approach to tackling hate crime related to race or religion. One possibility that was belatedly discussed at PMQs just before the vote was to revive Labour’s Migration Impact Fund. This has since been supported by a range of think tanks, albeit with calls for the initiative to be on a much bigger scale than Labour’s (which was peremptorily closed down by Eric Pickles as ‘ineffective’ within months of the 2010 election). However, the Tory manifesto proposal, to which David Cameron referred at PMQs, was for a ‘Controlling Migration Fund’ which would not only ‘help communities experiencing high and unexpected volumes of immigration’ but also ‘pay for additional immigration enforcement’, again mixing integration measures with immigration control.
If race and religion-related hate crimes are to be tackled effectively, and better community relations pursued, the government needs to begin with a close look at its own policies and public actions. Perhaps this is what Theresa May had in mind last week when she announced a review of how race equality is handled in public services. But if such a review has real importance, why did the news of it slip out on the Saturday of an August Bank Holiday weekend?

Is this how to deliver a ‘One Nation’ housing policy?

Will Policy Exchange still be the go-to think tank for housing policy under this government as it was for Cameron’s? The latest contribution to the post-Brexit housing debate comes from Alex Morton, formerly of PE and behind several of the ideas that the last government adopted, notably the sale of high-value council houses. When he left PE in 2013 he moved to No.10 as housing adviser, until April this year when he jumped ship to become a lobbyist.
His advice to Theresa May on delivering her One Nation housing policy will, however, probably be ignored. In a rambling piece that’s riddled through with his distaste for local government, Morton offers few new ideas and is largely negative. His first point, that ‘the key structures are broken’ is hardly an inviting one, especially as it turns out that the main villains of the piece aren’t (say) developers who build at a pace that suits their profits but are – yes you guessed it – local authorities. And their main failure is to create over-elaborate local plans that are invariably behind time and fail to prioritise housing. He claims that ‘over 300 councils failed to oversee delivery of housing need’, which means there are precious few that do.
This obvious exaggeration ignores the dual pressures that council planning departments face – to deliver plans and to administer development control – with steeply falling resources. In 2009/10, councils spent £2.3 billion on planning: spending is now less than half of that, at just over £1 billion. It is hardly surprising that many councils – particularly smaller ones – struggle to provide even the minimum service expected of them. Of course there is underperformance, and some councils have no doubt cut planning staff more than they should so as to maintain spending on, say, homelessness. But no government can expect to have a first class planning system when its resources have been decimated.
Morton’s ire is then turned on central government, for failing to introduce the reforms he thinks are needed. He offers grudging praise for some of the changes to the planning system ‘since 2015’, but doesn’t acknowledge that planning policies about housing (especially affordable housing) have been the subject of constant tinkering for the last five years, which has hardly helped to achieve consistent decision-making. In any case, firing random shots at the planning sector is hardly helpful to a government looking for ‘One Nation’ policies.
Morton’s dislike of councils extends, too, to housing associations, who are said to gobble up twice as much grant to build rented homes as the government now spends on shared ownership properties. He ignores the savings in housing benefit this achieves, despite there now being plentiful sources of research to remind him. But he gets his sums wrong anyway – the government is planning to spend £4.1 billion to build 135,000 homes for shared ownership, that’s an average grant of £30,000 a piece compared with £27,800 for Affordable Rent dwellings in the current programme that’s being run down.
To be fair, he makes the worthwhile point that stoking up demand (as the previous Chancellor did) is unlikely to stimulate more supply. But he seems to think that councils could secure much more private development even though there is little plausible evidence that councils in general (as opposed to specific cases) are frustrating developments that would otherwise take place.
At this point, Morton’s argument gets confusing, because although he seems to be opposed to measures that stimulate demand (like Help to Buy, presumably) he’s all in favour of more home ownership. This is because it is a) popular, b) what voters worry about and c) necessary for the very survival of the Conservative Party. He’s no doubt right about all these points. But a ‘One Nation’ policy surely (by definition?) has to be directed as much at those who can’t buy (however much they might like to) as to those who can, albeit with some help. The current policy is hugely unbalanced, as Red Brick has pointed out regularly, including as recently as last month. If Theresa May genuinely wants a policy that addresses a wide spectrum of needs, she needs to change the government’s priorities and recognise that many young households aren’t able to buy in any conceivable circumstances, in part because they have to spend so much on rent that they’ll never have the necessary deposit.
It just so happens that the new communities secretary, Sajid Javid, has the perfect excuse to reappraise the investment programme, given the likelihood of a post-referendum recession which will make it harder to sell market-oriented products and in which the construction industry may hit the doldrums. He’s just been sent detailed recommendations from the NHF and CIH on what could be done. Let’s hope he pays more attention to some of the advice he’s getting from those who want a more balanced programme and have experience of delivering one, even though their views are dismissed by Alex Morton as belonging to ‘vested interests’.


Councils could boost housing investment but they’ve been straitjacketed

While the prospects of a post-Brexit boost to public housing investment must have faded with Sajid Javid now in charge at DCLG, he could at least have a quick look at the mess that’s been made of council housing finance by departing Chancellor Osborne. In a report out yesterday, CIPFA and CIH show that the self-financing of council housing, which took place just over four years ago and was supposed to generate a huge boost in council house-building, has been systematically undermined by changes made by the Treasury that pay no regard to the promises made at the time.
Grant Shapps, the former housing minister, was much maligned by Red Brick, but at the same time we were always willing to give credit where it was due. Most importantly, he inherited the planned self-financing settlement for council housing from Labour minister John Healey, and he implemented it. Sure, some crucial features were changed, like the plan to let councils keep all capital receipts. But Shapps was strong enough to fight off the worst of the Treasury’s attempts to undermine the deal, and he rightly claimed the settlement was ‘intended to endure for the long term’. Soon afterwards, of course, he was replaced by a series of ministers who seemed to have little allegiance to the promises that had been made. Shapps himself – wittingly or otherwise – started the undermining process by ‘reinvigorating’ the right to buy. But much worse was to come, with a succession of changes to rents policy of which the worst was the latest – a cut of 1% in council rents last April, to be followed by three more 1% cuts at yearly intervals.
fig 6
The report shows how this has massively undermined the investment potential available to councils (see chart). In theory, if all of their spare capacity after 2012 had been invested in new housing, they could have built up to an average of 18,000 new homes per year, even within the borrowing caps that the Treasury imposed. But their capacity has been eroded, so soon after the settlement, to leave them able to build little more than 1,000 homes per year, more or less what they are doing now.
Of course this is a national picture but survey results confirm the trends at local authority level. Some LAs no longer want to build, and are prioritising paying off debt. But many councils, both big and small, are eager to add to the housing stock. Some are resorting to council-owned housing companies, outside their housing revenue accounts, as the only way to do so – but inevitably this means developing a mix of properties of which many will be let at higher rents or offered for sale. Building via housing revenue accounts is the best way to get new houses that can be offered at genuinely affordable rents.
If Theresa May’s government is minded to launch a public investment drive, it will find councils severely handicapped to help. Coinciding with the report, John Healey called for such an investment boost at this week’s CIPFA conference. He said there must be an end to constricting council’s capacity and ‘a change of direction that is both fast and fundamental’. Red Brick couldn’t agree more. The irony is many councils could respond if only their income were not being eroded by Treasury-imposed rent policies. While they would then increase their borrowing, it’s unlikely that they would need to breach the borrowing caps set in 2012. And they wouldn’t necessarily need grant, either. Fundamentally, council housing is still a self-financing business with a healthy income and low debts (much lower per unit for most authorities than is the case with developing housing associations). While councils cannot soon be expected to reach the dizzy heights of new building that many hoped for four years ago, they could certainly build at twice or three times their current level.
Red Brick has no idea if Grant Shapps is on speaking terms with Sajid Javid, but if he is he could pass on a quiet tip: get Phillip Hammond to quietly drop one of his predecessor’s many ill-thought-out policies, and you could spark a building programme by councils that will help tackle housing needs and boost local economies, with minimal impact on public funds.


Can this continue?

Briefing cover
More than £42 billion of government money to prop up the private housing market, and just £2 billion invested in affordable rented housing: even before Brexit this looked like a huge distortion, now it simply looks absurd.
Most readers of Red Brick will undoubtedly be focussed on wider political issues than housing finance just at the moment. But the analysis carried out for the latest UK Housing Review Briefing Paper is a reminder of what is at stake. The Tory government is so obsessed with restoring home ownership to previous levels, and with ensuring that public money sustains the housing market, that it has cut its support for below-market rented housing to a derisory figure. In fact, the sums only just cover the commitments made in the now defunct Affordable Homes Programme that was to have run until 2019/20. To replace it, we now have a ‘Shared Ownership and Affordable Homes Programme’ that will run until 2020/21. But this has virtually no provision for below-market rented housing: it will, as its name suggest, focus almost entirely on shared ownership. In parallel, we have the £2.3 billion devoted to Starter Homes, itself only part of the total commitment to build 200,000 of this new type of product, most of which will be delivered via planning gain. So instead of being a reliable, continuing source of homes to let at social rents (or, at worst, at Affordable Rents), the planning system’s ‘affordable’ housing output will soon be another variant of houses for outright sale.
Readers might be forgiven for thinking there is a ‘now you see it, now you don’t’ quality to these commitments, however, for a range of reasons. One is that the products are either untried (Starter Homes) or else have never been built on the scale now proposed (shared ownership housing). Other commitments like the Help to Buy ISA and the (new) Lifetime ISA are dependent on take-up and whether potential savers believe they will really help them overcome what the UK Housing Review calls the ‘deposit barrier’ to home ownership.
The Briefing Paper flags up two government targets that were difficult to meet before Brexit and may now prove wildly unrealistic. First is the aim to help an extra million new first-time buyers into the market. Even the last English Housing Survey showed numbers going down (564,000 in 2014/15, down from 617,000 the year before). As the Briefing says, ‘The reality is that younger households are less able and less willing to buy a first home.’ The Legal & General’s report The Bank of Mum and Dad suggests that home ownership in the UK will actually fall further, to only 55% by 2025.
The second government target is the aim of building one million new homes over the five years to 2020/21. Oddly, Brandon Lewis, who appears to still be the housing minister, denied that this was a target only yesterday, barely a week since (as part of the Remain campaign) he was talking about the target’s importance. Even the government website quotes Lewis referring to the ‘aim,’ ‘intention and ‘ambition’ of building one million new homes. (We might add that, by denying that these terms equate to setting a ‘target,’ he indulges in the sort of evasiveness that has helped undermine respect for politicians and deliver the referendum result.)
Overall, as the Briefing Paper says elsewhere, even this government’s massive market intervention represents only a relatively small part of total market activity, so that for example despite Osborne’s moves to make the tax system less favourable to buy to let landlords, the rented market is still a lucrative one for many would-be investors and is likely to continue to compete strongly for properties that might otherwise be available to first-time buyers.
Looming over the whole of the housing budget, especially those parts that have yet to come on-stream, is of course the referendum result and its likely effects both on the public finances and on the housing market itself. Brandon Lewis would have been received more warmly at this week’s Housing 2016 conference in Manchester if he’d been honest and said that an extra one million homes was the target, but he now simply has no idea if it can be delivered and, indeed, whether the £40 billion plus stimulus package can be maintained. To repeat an over-used cliché, we are in uncharted waters: how long before the government’s housing budget shares the fate of many other projects that the FT thinks are now likely to be ditched?


More evictions, more homelessness: what’s the government’s response?

Every new set of homelessness figures shows that the ending of a private tenancy is the biggest reason why people are losing their homes. It’s becoming a genuine emergency: in England it accounts for 30% of homelessness acceptances, rising to 40% in London. Ending of private tenancies accounts for practically all of the growth in homelessness since its last low point in 2009. What’s been the government’s response?
You would think it might try to find out why landlords see the need to force out over 12,000 more people from their homes than was the case only seven years ago. Or why over a third of a million were under threat of eviction last year. It’s not difficult to think of possible reasons: rents being raised faster than people’s ability to pay, social security cuts meaning that low-income tenants can no longer afford their rents, or greed by landlords who simply want to end a tenancy so they can get tenants who can afford higher rents. A reasonable response might be to investigate how to change landlords’ behaviour, using legislation if necessary, to give more time to tenants having payment difficulties and making it less easy for them to be converted into a responsibility (as homeless) for local authorities to deal with. After all, mortgage lenders are now better equipped than they used to be to help people deal with their debts, and this shows in record low mortgage repossession figures. In Scotland, landlords can no longer end tenancies on a whim but need specific reasons, like selling the property.
Another response would be to question whether further tightening the screw of so-called ‘welfare reform’ is really a good idea, since it’s pretty obvious that measures like the freezing of local housing allowance rates, further reducing the ‘benefit cap’ on out-of-work tenants, and withdrawing support completely from the youngest tenants will simply make matters worse as they take effect over the coming twelve months.
But no, the growing problem is being blamed on local authorities. After pressure from landlords, councils who insist on tenants waiting until they actually face eviction before they are recognised as homeless are being told to act much earlier on. Housing minister Brandon Lewis says he’s ‘working to prevent more people from becoming homeless’, but his priority is to get tenants who’ve become an inconvenience to private landlords to be rehoused quickly, thus relieving landlords of ‘significant costs’. It follows ‘a large amount of correspondence’ from landlords, complaining that ‘an alarming number of private tenants are being told by their local council to ignore eviction notices’. The National Landlords’ Association worries about ‘vulnerable tenants’ waiting for assistance from local authorities, but doesn’t ask whether perhaps their landlords share some of the blame for their vulnerability. The NLA will no doubt be opposed to Olly Grender’s Renters’ Rights Bill, currently in the House of Lords, which offers some of the protections for tenants that Brandon Lewis might consider supporting if he were seriously looking to tackle the main cause of homelessness.
Now of course it is also true that local authorities should help people as soon as possible and some are, no doubt, guilty of trying to minimise the numbers they are dealing with as homeless. But Lewis makes no acknowledgement at all of the extreme pressures they are under, especially in London, or of the extent to which their workload derives from private landlords’ actions. His letter makes not even a passing reference to these pressures, currently resulting in record use of temporary accommodation, and in more people being placed ‘out of area’ because of the shortage. London councils are spending nearly £700 million annually on temporary accommodation. If the available spaces are full, if councils have already exceeded their annual budgets, and if homeless families can only be put in expensive private lettings or else moved out of the area completely, some element of demand management is bound to be occurring.
While homelessness grows remorselessly, and private tenants are the ones most likely to be vulnerable to it, Brandon Lewis applies a sticking plaster to the haemorrhage. Meanwhile the Treasury has halted the Affordable Homes Programme, so as to switch all remaining funding away from social renting and into schemes to support home ownership and the private market. How many of the spending programmes announced since last year’s election will ‘prevent more people from becoming homeless’, which is what the minister says he wants to do? Does he think homeless families will rehouse themselves by buying starter homes?


Council housing’s brief Spring

There are not many words of praise for former housing minister Grant Shapps in the pages of Red Brick. But in comparison with current minister Brandon Lewis, the tenure of the coalition’s first housing supremo now almost looks progressive and enlightened. We don’t know if Lewis regards his Housing and Planning Act, just given Royal Assent, as his crowning achievement, but he must know that if his colleague Shapps offered the prospect of a new Spring for council housing, the Act will ensure that it quickly turns into a chilly Autumn.
Shapps’ achievement was to ensure that the deal under which council housing became self-financing, started by Labour minister John Healey, actually came to fruition only two years after the coalition took power. Admittedly the deal wasn’t as good as Healey’s would have been, but many were surprised that it was done at all and Shapps brought reluctant Tory councils into line, making them all restructure their debts on the same day in April 2012. The majority of councils took on new debt, a minority had debt paid off, and all were left with at least the potential to keep up their investment in their existing stock. A succession of reports, invariably discussed in Red Brick, began to explore the possibility of a very significant increase in the output of new council houses. Grant Shapps claimed that he’d made ‘a reform intended to endure for the long-term’.
It’s now obvious however that the undermining of the deal, though now severe and probably terminal, actually began under Shapps’ stewardship; it continued when Messrs Prisk and Hopkins briefly became his successors. It was Shapps that ‘reinvigorated’ the right to buy, raising discounts and reducing qualifying periods from the very date of the self-financing settlement itself. Sales accelerated, although in themselves they would only have damaged, not sunk, the settlement. But two other policy changes began which were to gather pace after the Tories won the 2015 election. The first, the following summer, was the ditching of the rents policy which underpinned self-financing and ensured councils’ ability to pay off the higher levels of debt that most of them now had. The second was welfare reform, with measures like the bedroom tax causing turmoil as tenants tried to downsize and others like the benefits cap making it difficult for tenants to avoid getting into arrears. Instead of increasing, council rental incomes started to look very uncertain.
When Brandon Lewis was reappointed in May 2015 almost his first act was to agree to the Treasury tightening rents policy still further, by requiring councils to make cuts of 1% each year for four years. He’d already agreed (presumably) to the Tory manifesto commitment to launch the right to buy for housing association tenants, with the deposits financed by forcing councils to sell off their better housing stock. When the Housing and Planning Bill came out last October, the two measures that were most damaging to the April 2012 settlement were already in it: the extended right to buy and the pay-to-stay scheme to penalise slightly better-off tenants and encourage more of them to opt for right to buy. Extra measures, such as the ending of properly secure tenancies, would be added later and while they didn’t further undermine the financial settlement they certainly added to the damage being done to council housing’s attractiveness as a tenure.
Then, unexpectedly, there was the announcement that housing associations were likely to be treated as public bodies for accounting purposes. Suddenly the government, which had been indulging in a campaign against associations, was forced into giving them more freedoms and widening the gap (which in April 2012 had been narrowed) between their status and that of council housing. It has to be said that the NHF then had no qualms about accepting a deal over right to buy which both had distinctly better terms than council housing’s right to buy and ensured that any financial penalty fell on the council sector, not on associations.
In these circumstances it’s hardly surprising that councils have retrenched. Soon after the Bill came out I spoke to a housing director of one of the largest authorities who was starting to look at the implications of the coming legislation combined with the rents freeze. He said they would try to buy time by using their reserves, but if policies continued as they were within two years they would be making severe cuts: and this is a council which badly wants to build large numbers of new homes. Already the evidence is that councils are borrowing less money, rather than more. This has started to be reflected in new build starts. In 2014, councils started building eight times as many new homes as they did in the final year of Labour’s last term of office. But by 2015 the number of starts, which should have been increasing year-on-year if the settlement was leading to a sustained increase in new output, had actually fallen by one-third. It now looks as if we might be passing through the (very modest) recent peak of council house-building.
The prospects for the financial health of council housing by the time of the next election look very bleak indeed. John Healey hoped to base his promised commitment to build 100,000 new social rented homes on several years of increasing capacity in the council sector, the experience of housing associations that were still building homes to let at social rents, and a planning system that could still be used to ensure that developers contribute to affordable housing supply. None of these conditions will now apply by 2020. A future Labour promise to build large numbers of genuinely affordable homes will be even more challenging to carry out than it would have been in 2015.


Government support for the private market is more than double its spending on affordable homes

Inside Housing's 'subsidy sandwich' for starter homes
Inside Housing’s ‘subsidy sandwich’ for starter homes

The new UK Housing Review 2016 puts together figures you won’t find anywhere else: the government’s investment plans for housing and how they split between supporting the private market and building affordable homes. They show that the different market-support packages like Help to Buy and starter homes now total £43 billion, whereas affordable investment totals only £18 billion. The CIH concludes that, as a result, investment in affordable renting ‘will fall to its lowest levels since the Second World War’.
Red Brick has already picked holes in the Chancellor’s ‘long-term economic plan’. Insofar as he has one, it seems to be unravelling before our eyes. But if at last he’s being criticised for robbing the poor to pay the rich, the criticism hasn’t yet affected his housing plans, where the shift away from affordable renting towards helping builders and would-be home owners becomes more marked each time one of his ‘long-term plans’ is scrapped and another put in its place. As the UK Housing Review reveals, whereas the current Affordable Homes Programme, that began last April and extends to 2018, was originally to have invested £2.9 billion, this has now been cut back to just £1.8 billion. The promises made in the 2013 Spending Review (another one of Osborne’s ‘long-term plans’) have been ditched, and what’s left of the programme is confined to schemes already committed by the HCA and GLA. The rest of the money has been scooped into the Chancellor’s pot for supporting home ownership (unless Boris Johnson succeeds in his apparent bid to keep some of it for ‘affordable’ renting).
One effect of past policies has, of course, been a remarkable shift towards homes let at so-called Affordable Rents. By April last year there were 123,264 of them, almost five per cent of housing association stock, of which less than a third were newly built and the rest were conversions or acquisitions. This has inevitably produced a big shift away from building homes to let at social rents. The result is that while in England there were 4,063,000 social rented homes in 2012, by 2015 this had dropped to 3,967,000, a fall of two per cent. CIH projects that by 2020 the loss will have reached 350,000, a nine per cent fall since 2012. This will be a result of further conversions, right to buy sales, demolitions (due to be ramped up if estate regeneration plans come to fruition) and sales of ‘high-value’ stock. Of course, the scale of some of these changes can, as yet, only be guessed at, and the figures will be refined as more details are revealed.
The odd thing is that, if Affordable Rent was a key part of an earlier ‘long-term plan’, it’s now been ditched. With the curtailing of the current Affordable Homes Programme, there is likely to be a drastic fall in output of sub-market rented homes over the next couple of years: Affordable Rent is due to follow social rent into the housing policy dustbin. The main replacement policy is, of course, the promotion of starter homes. The image of the ‘subsidy sandwich’ provided by Inside Housing earlier this month nicely captures how various layers of government money are being put together to construct this huge stimulus to developers and to house prices, all justified by labelling £450,000 starter homes as ‘affordable’. As Nicky Gavron commented recently, the Tories have made ‘affordable housing’ a meaningless term.
Unfortunately, the effects are not just rhetorical: starter homes and shared ownership properties can be substituted by developers for social and Affordable Rent dwellings when negotiating ‘section 106’ agreements as part of planning permissions. It so happens that section 106 is one of the last remaining sources of funding for new homes at social rents: even that source is now to be cut off. Although 2,410 social rented homes were started on site in 2014/15, it’s likely that starts in the year now ending will be lower and in the next year lower still. Soon, any production of homes let at social rent will depend on social landlords’ own funding – which is just being reduced as a result of the one per cent cut in rents that starts next month. If Osborne stays in charge, it seems his latest ‘long-term plan’ is not only to stop providing sub-market rented homes, but to get rid of those we still have as quickly as possible. As the UK Housing Review’s analysis and projections show, a dramatic shift in housing policy is about to begin.


A man without a plan

It’s well known that governments are much fonder of dealing with day-to-day ‘events’ than they are of planning for long-term change. But this government not only has an aversion to planning, it seems clueless as to what it might involve. Its much-lauded ‘long-term economic plan’ has resulted in so many missed targets that a full review of government finances has been needed four times (March, July, November and again on March 16) within twelve months, suggesting the plan is not so much long-term as quarterly. Even the government’s most obvious goal of starving public services of funds and cutting the size of the state is simply that, with no road map for how to get there or what public services should be left in place when it does. This was brought home most recently by the LGA’s call for an emergency plan for local government, as over the next five years in many areas it will simply fall apart. What is happening to local government now will happen to other services later, with (presumably) no contingency plans in place, let alone any sort of vision for the role of a smaller state.
By a telling coincidence, it’s not only local government that’s recently asked Cameron for a plan. Examples have come from all sides. For example in social care an emergency is in the offing that has led to the head of the NHS calling for a properly resourced plan to be in place by 2018. Yet government’s response is a bit of half-hearted fire-fighting around the edges, such as the one-year offer to protect housing support services from a devastating cut in income, that in any case only covers part of the threat to their viability. Public health plans are also in disarray because not only has funding been drastically cut, but government hasn’t yet told councils what their budgets are, seven weeks from the start of the financial year.
Another issue is energy, where lack of planning, ham-fisted cuts in subsidies and over-reliance on a dodgy nuclear deal threaten a huge supply gap by 2025. Government is not so much inactive as seemingly unaware that it has any role to play at all, beyond cutting what it thinks are unpopular subsidies for renewables and increasing tax breaks for oil and gas, just as markets (but not government ministers) may be getting the message that fossil fuels have no long-term future. Two other related areas have no discernible plans either – reducing carbon emissions and tackling fuel poverty. Both had targets and plans left by the last Labour government, and were the subject of countless ‘strategies’ under the coalition, but are now either given token attention or ignored. (The coalition’s Carbon Plan, published in 2011, was supposed to updated quarterly; the last update was in 2012.)
The existence of a government target isn’t necessarily evidence of any sort of plan to achieve it, of course. The infamous 100,000 per year net migration target is one such, where despite regular rounds of immigration legislation no one seems to have looked into whether any of the new punitive measures might actually work (‘right to rent’ checks by landlords being the latest). The NHS is still beset by targets, but as Jeremy Corbyn made clear in last week’s PMQs, there is a huge gap between these and the resources available to achieve them. Child poverty is to be redefined so that any target becomes meaningless, simply because government actions (including reducing the stock of affordable housing) have made the old target unachievable (as the government’s own child poverty commission has pointed out). Even where there has been some semblance of a plan – to radically overhaul means-tested benefits by bringing them into one universal credit – implementation has been incompetent and key objectives (like making work pay) undermined by the need to stay within arbitrary caps on welfare spending (which, having only just been set, will now be breached in three of the next five years). Labour was sometimes bad at planning too (John Prescott’s ‘ten year’ transport plan round aground within days of being published), but far better by comparison with the plan-free chaos that now persists across most public services, including of course transport itself.
In housing, a review by the Guardian of recent national housing plans, prompted by John Healey’s announcement of a commission led by Peter Redfern to look at the decline in home ownership, found that the notable examples (Barker, Callcutt and Lyons) were all instigated by Labour. Back in September, Brandon Lewis set a target of building one million homes by 2020. The plan to do this seems be the Housing Bill which, as Red Brick has pointed out, is largely devoted to dismantling social housing.
The target would mean doubling current output, so how is that to be done? Labour’s Lyons Review envisaged a bigger role for local authorities, whereas the present government seems determined to undermine the capacity it created in April 2012 when council housing became self-financing. It has attacked capacity in the housing association sector by cutting rents and turning off the subsidy for new rented housing, instead launching a huge stimulus for home ownership when all the evidence points to massive unmet demand for homes to rent, and even the leading provider of buy to let mortgages is calling for a long-term, comprehensive strategy that looks across the whole market not just at owner-occupation.
hamptons pie chart
Indeed, the chart by Hamptons summarises how much the government’s target for its own investment is distorted by these aims. Over 80% of publicly funded output will now be aimed at owner-occupation, via Starter Homes or shared ownership: the former is new and untried and, while the latter is well-established, in the last five years it has only delivered at about half the output now required. The tried and tested product, housing for below-market rent, is relegated to the ‘other’ category, contributing only 12% of output. Given such a drastic switch of resources, and the limited warning to the housing industry that it was about to happen, what chance is there of these housing targets being actually achieved?
As a former student of town planning I recall that the opposite of planning was represented by a school of decision-making known as disjointed incrementalism. Cameron is a man without a plan, whose model of government could well be this one. Disjointed incrementalism was first described in 1959 by social scientist Charles Lindblom. His other name for it was ‘the science of muddling through’.


Sticking it on the Bill

Is this England’s worst-ever Housing Bill? Quite possibly. Past legislation has often included useless measures (the rent-to-mortgage scheme in 1993 comes to mind) but they often sat alongside worthwhile ones (in that case, defining the welfare role of social housing). This one has nothing to offer the housing crisis, is malicious in intent and – as lawyers have pointed out – atrociously drafted. It was sketchy from the start and new measures have been tacked on since, worsening the backlog of details we’ve yet to see and making the full impact difficult to assess. It’s a truly noxious mix.
The Bill has just completed its passage through the Commons, so let’s recap. We’ll concentrate on the bits that are most damaging to social housing (and note in passing that there are indeed some useful measures aimed at private renting, even if councils will struggle to take advantage of them).
First, councils will have to sell off higher value stock when it falls vacant. They’ve been given no idea how this will be implemented only that – whether or not they actually sell the houses – they’ll have to pay the money across to the Treasury as if they had sold them. We don’t know if there’ll be any exemptions – for example, will tenant transfers still be allowed? We have a vague promise of two-for-one replacement in London, with no detail on how it will work. And why, if maintaining affordable housing in London is so important, does it have to be sold in the first place?
Second, better-off tenants – defined ridiculously narrowly – will pay much higher rents via pay to stay. Policy on rents has effectively been thrown to the winds, since both councils and housing associations will have to reduce their social rents for the next four years, and yet can still convert existing stock to much higher ‘affordable rents’ to provide income for new development. Associations – but not councils – can keep the money from ‘pay to stay’ (which is optional for associations, but not councils). Labour’s policy of ‘converging’ rents to give a logical rent structure across the social sector is, to put it mildly, a thing of the past.
Third, new social tenancies will now have to be offered on fixed terms – again, a measure that is compulsory for councils but optional for associations. The Tories had the gall to make this fundamental change to secure tenancies in an amendment to the Bill. Not only that, but they describe it as a measure to promote social mobility (well, I suppose being booted out of your home is mobility of sorts). And as the minister said in introducing the amendment, the change ‘may prompt people who may otherwise not have thought about purchasing their own home to do so where they feel they are able to’.
Fourth – and another measure which is optional for associations – is of course the much-weakened housing association right to buy, now only to be piloted and likely to result in only a few hundred sales in the first year. So a much-trumpeted election promise, rushed into the manifesto at the last minute, has effectively fallen apart. The Tories could have foreseen the difficulties themselves if they’d only looked back at what happened in the 1980s when they first tried it. Now they are stuck with a half-baked scheme, loosely connected in an undisclosed way to high-value council house sales, which will supposedly still pay the cost of discounts.
Fifth – and yet another measure which applies only to associations – is the weakened regulatory regime, made necessary by the ham-fisted introduction of right to buy and other changes. Here we have another set of amendments driven entirely by expediency, not by what is right for the sector. As CIH has said in looking at the whole issue of reclassification of housing association debt, the government’s blundering has led to the wrong debate about regulation, which should be driven by ensuring high quality services for tenants, not by the need to meet outdated accounting conventions and saving the Treasury’s face.
Sixth, and coming from right field, we have starter homes, noted here because the government thinks they constitute ‘affordable housing’ and should replace social and ‘affordable’ rented homes in new developments. Starter homes and their likely price levels led to one of the choicer exchanges in the debates on the Bill. New-boy Tory MP Chris Philp said that in ‘his’ borough of Croydon, the average 20% discount means a starter home will be ‘only’ about £220,000 or £250,000 which, he claimed, ‘is extremely affordable’. Sadiq Khan had a quick-fire response: ‘It usually takes a parliamentarian years to become out of touch, but the hon. Gentleman has done it in six months’. Starter homes trash the definition of affordability in two ways: they are too expensive, and they subsidise only the first buyer, not all subsequent occupiers like genuinely affordable homes.
It’s tempting to conclude that these six key measures show that the government as a whole is out of touch, but while this is true it doesn’t mean that their aims are unclear. And one of the clearest of those aims is to destroy council housing in its present form. (We might have said ‘social housing’ here, but housing associations – as we’ve seen – have been given a number of escape clauses.) The Bill reduces security for tenants, will push a lot of them out of the sector and will mean there are far fewer opportunities for new tenants to get good quality homes. It shows the Tories’ true contempt for council tenants: can anyone imagine similar punitive measures being taken against any other large segment of the population?
But its real significance is the way it links to the decisions in the July Budget and the Autumn Statement, which together undermine investment in the existing stock and will likely bring to a halt most councils’ plans for new building (certainly at social rents). Not only must councils cope with less rental income, but grant towards new rented homes has now been stopped (in favour of shared ownership schemes). The Bill further undermines the self-financing settlement (not yet fours old) by taking back into the Treasury the extra money from pay to stay and most of the receipts from high value sales. One housing director has already said she wouldn’t be surprised to see the ‘ring fence’ around council housing budgets disappear, given that it already has gaping holes in it. The Treasury, which hated self-financing from the start, is gleefully making the holes bigger.
Red Brick has pointed out before the dangers of social housing – and especially council housing – being reduced to what Mark Stephens calls ‘an ambulance service’, like social housing in Canada and the US. To achieve this, the Tories need to cut the size of the sector, remove tenants’ security, make tenancies turn over more quickly, let the stock deteriorate and stop adding to it. Until last summer they’d only begun the first of these: once the Bill becomes law, and the Autumn Statement starts to take effect, the attack will be launched on all fronts. Far from tackling ‘sink estates’ as Cameron recently claimed, isn’t it now clear that their real aim is to create them?