Author: monimbó

A hundred of Britain’s ‘most dilapidated and poverty-ridden housing estates’ are to be redeveloped, promises David Cameron. Some will be demolished and rebuilt from their foundations. Just as the last economic crisis had nothing to do with the bankers, it now seems that the cause of the 2011 riots has been pinned down to ‘decades of neglect in rundown housing estates’. But don’t worry, Cameron is going to ‘tear down’ the ‘brutal high-rise towers’ to tackle drug abuse and stamp out gangland culture. Indeed, he’s so serious about it that he’s put aside £140 million to do the job.
Only ten days after writing a blog on the government’s illusionary policies, I didn’t expect a new and even worse example to come along quite so soon. This one’s so bad it’s difficult to know where criticism should begin. Perhaps the old-fashioned physical determinism of assuming that people’s problems are caused by high-rise blocks would be a good start since – if he’d spoken to people who live in them or the councils that manage them – Cameron would have learnt immediately that many provide pleasant homes. Even where they don’t, management problems these days are often down to the fact that ownership is fragmented, with many flats having been sold to absentee private landlords uninterested in anything except getting the rent. And where there are gangs or drug abuse, it’s easier to blame these on the building or on the councils that manage them than to look at wider issues about society that might cast uncomfortable light on government’s spending priorities.
Let’s make the daring assumption that this programme might produce some action on the ground – rash, I know, given what has happened with so many other government housing initiatives. But if so, the biggest thing on which Cameron will need to be pinned down is his commitment to work with tenants – as many as 100,000 of them, he says. So let’s assume he’ll set aside any paternalistic assumptions that he (or a consultant or developer) knows what’s best for them, and that he’ll really start to listen to what tenants want for their estates.
Oddly enough, their likely first priority is unwittingly flagged up by Cameron himself, in the opening words of his Sunday Times article: he says ‘it all comes back to one word: security’. He wants to bring security to families ‘who currently have none at all’. Well this might produce an interesting discussion. He clearly expects this will mean talking about the poor design of estates and tenants’ wish to live in ordinary streets not high-rise blocks. There might be some tenants who want that, but my bet is that most will define ‘security’, or lack of it, in very different terms. Here’s a shot at a few possible answers: community policing by officers we know, that has now disappeared; community centres that catered for young people, now closed; people who are benefit-dependent having very little or no money and getting withdrawn, depressed or worse; most jobs being insecure and offering low wages. And of course, he is highly likely to find tenants worrying about the ending of secure tenancies, or about higher rents that will drive out better-off tenants, or about Greg Clark’s scheme to sell off the best bits of their estates.
The problem with any list like this is that they’re all problems that Cameron’s governments have either created or made worse. And where they haven’t made them worse yet they plan to do so soon. If a tenant says that what worries him sick is not ‘concrete slabs dropped from on high’ but the prospect of being forced to move out of the flat he regards as home, will Cameron listen? If she says that her security comes from having neighbours who are friends and going with them to Friday-night bingo (as a friend who lives in an Islington estate was telling me recently), will Cameron promise that their community will be preserved along with the essential facilities that bring neighbours together?
Conservative governments are not alone in having high-minded views on what the problems and solutions are in poor communities, that bear little relation to experience on the ground. But residents are going to be instantly suspicious of a programme where the solution seems to have been drawn up in advance: knock down the high-rise blocks and build new homes in ‘streets’. Like Lord Adonis and his proposal for City Villages, already demolished (forgive the pun) in Red Brick both by Steve and by Duncan Bowie, the new report views estates as public assets whose value can be better maximised by redevelopment than by keeping the existing homes. (Strangely, I can find no reference in the new report from Savills to the earlier, similar one from ippr).
Both reports have a major failing – well identified by Duncan Bowie – in seeming to forget that these estates are currently providing very affordable housing to tenants who can’t pay higher rents. Before any plan to reconfigure an estate is drawn up, the first consideration must be: how can we keep these tenants here, and continue to give them good homes and secure tenancies, without rents having to be increased and the community being broken up? It’s not as if these issues are new ones: in London especially they are highly topical, as a scan through articles by Dave Hill will demonstrate. Yet Cameron betrays how out of touch he is by failing to mention them.
Also largely ignored is the current role of local authorities, who happen to be the owners of the estates. Cameron says they’ve neglected the estates for decades. Well if that’s the case, who is struggling to run planned maintenance programmes within available budgets, meet the now-forgotten Decent Homes Standard and try to ensure that tenants live in warm and easier-to-heat homes (none of these issues are mentioned in the new report)? The clue that councils are not going to be offered a big role is in the size of the funding package: £140 million won’t buy much regeneration in a single estate, let alone a hundred. As he says, his kind of regeneration will ‘will work best in areas where land values are high’, which is shorthand for developers coming in and making a killing. Stand by for more schemes like Barnett’s West Hendon or Southwark’s Heygate. Not forgetting to mention, of course, the still-pending jewel in the crown: Capco’s redevelopment of Hammersmith and Fulham’s West Kensington and Gibbs Green. As Cameron aptly concludes, ‘together we can tear down anything that stands in our way’.

What matters to an illusionist is how something is perceived, rather than how it actually is. Owen Jones, writing last month, was describing what he called the government’s ‘political sorcery’. He only briefly touched on housing policy. He pointed out that the prime feature of the government’s renegotiation of our EU membership – depriving recent EU migrants of in-work benefits, including their access to housing benefit and social housing – is based on the perception that millions of them are playing the system. But the truth, shown in the chart on tax credit claims from NIESR, is that relatively small numbers claim in-work (as opposed to out-of-work) benefits. In other words, it plays to people’s prejudices about migrants but has little or nothing to do with real problems.

Jones catalogues other issues which the government has successfully portrayed to their advantage in the same ways – the deficit, its cause, the compelling need to scale back the state. All these are examples of illusionary politics. As he notes, politics is now about sentiments and emotions, even more than about concrete problems. Sentiments are fed not by facts but by emotionally compelling stories of abuses of the system which in the public mind become a general picture of what’s wrong with state benefits and public services.
The same sorcery applies in housing. Council housing is ‘taxpayer-subsidised’, its lucky occupants enjoy ‘lifetime tenancies’, ‘local’ people can’t get houses when they are relet and many occupants are abusing the system by enjoying low rents while they are on ‘higher incomes’. Red Brick has consistently debunked these myths, most recently in Steve’s latest piece and in my July post, but it doesn’t stop the government from perpetuating them. While council housing is beyond the pale, housing associations also came under unjustified attacks designed to secure their acceptance of right to buy (since when the attacks have ended). There are always one or two examples to back up any of these smears, enabling any refutation to be easily dismissed. In any case people have already absorbed the message from the media headlines and pay little attention to any evidence which contradicts it.
As Owen says, this because few voters are political geeks interested in policy details or whether one policy contradicts another. So, for example, the Localism Act promised to give local homes to local people by allowing councils to impose stiff residency tests (cutting London waiting lists by one-third in just two years). But just as prospective tenants thought they might be able to move in next to their in-laws, the government now plans to insist on compulsory sales of high-value council houses that might mean no new lettings at all on the most popular estates (and private landlords buying vacant homes to let to higher-paid tenants who of course aren’t even on the waiting list). Has the clear policy contradiction ever been mentioned by mainstream media?
The biggest illusion of all is surely that the government plans to address the housing shortage. We are the builders, says George Osborne, introducing a Spending Review and a Housing Bill that instead will push up house prices and offer further subsidies and favourable rule changes to developers, who will probably respond by raising output slightly but above all will ensure that their already high profits soar even higher. He constantly draws attention away from his own policy failures: official statistics show private builders completed 125,000 homes per year on average under Labour governments from 1997-2010, while since then they have managed an average 90,000 per year. In Labour’s best two years for private building, 2006-2007, more private homes were built than in three years under the coalition, 2011-2013. Who are the real builders, then?
There will be one million more home owners said the DCLG after the Autumn Statement, while the numbers buying a home with a mortgage have fallen by half a million since 2010. Both before and after the election the government has put the new right to buy for housing association tenants on a policy pedestal, just as critics have pointed out that only small numbers will benefit, at huge cost per household in subsidy. The government now admits it will have to phase in the scheme to avoid an additional burden on public spending, meaning that only a few hundred tenants are likely to benefit in the first year. But what matters is the illusion, not the detail.
There are so many examples of illusionary housing policies that it would be difficult to make a complete list of the government’s doublespeak. Social housing rents are being cut to help those on low incomes, whereas the IFS showed that the main beneficiary is the Treasury. Councils are being empowered to build more homes whereas their capacity is actually being reduced. Housing investment will provide ‘the largest housing programme by government since the 1970s’ even though it won’t get anywhere near doing so. In any case, most of the increase will arrive after the end of this government’s fixed term of office. ‘Increased central funding’ for tackling homelessness ignores the fact that local government will, according to the IFS, have taken an overall 79% cut in its revenue budgets by 2019/20 compared with 2010/11. Government meets its self-imposed ‘welfare cap’ by the same date, but only because the costs of temporary accommodation for homeless households are to be shifted out of the welfare budget and onto local councils. In February, landlords across England will have to start making immigration checks to stop ‘illegal’ migrants from getting new lettings, even though there is little evidence that they are or that the checks will be a deterrent to undocumented migration.
With only a few notable recent exceptions like tax credits, evidence that proves government policy is an illusion is ignored by the media. Even the campaign to maintain tax credits was successfully exploited by Osborne, who stopped the tax credit cuts only to retain them for universal credit applicants, with the same long-term effects. The media (and the Opposition) allowed him to get away with this blatant sleight of hand.
The point is that Cameron/Osborne are carrying out illusionary politics on a grand scale. While Gordon Brown as Chancellor might have set out headline policies for the tabloids while quietly getting on with real policy changes such as bringing council housing up to the Decent Homes Standard, Osborne runs the whole gamut of illusion from macro-economic policy down to the fine detail of ending ‘lifetime’ tenancies, introducing ‘pay to stay’ and ‘cutting’ rents. Nothing escapes his sorcerer’s eye.

Owen Jones argues that Labour urgently needs to address this new way of making and presenting policy, not by copying it but by devising its own effective counter-strategy. It needs to find much better ways to appeal to people’s emotions. In the same way as the Tories have successfully dangled the false hope of getting on the property ladder, Labour needs a coherent housing message that (Jones says) ‘can easily be turned into a pub conversation’. A starting point could be the aspirations of millions of younger households who’ve again be promised home ownership but by 2020 will still be tenants, paying high rents and still unable to save for a deposit. A distinctive set of policies is needed, with a convincing explanation of how they will be funded and carried out, framed so that real households can visualise how they personally (or their sons and daughters) might benefit. This might just do the trick after another five years of Tory illusions.

Affordable housing is growing ‘at its fastest rate since 1993’, claims the government, with this week’s publication of a fresh set of statistics. But the same figures offer even more evidence of the inexorable decline of social renting. Yes, it’s true that last year’s output of more than 66,000 affordable homes is a significant achievement, but it came about principally because of the rigid cut-off date for the outgoing Affordable Homes Programme (AHP) at the end of March. Less than 10,000 of the new homes built last year were for social rent, and a fifth of those were funded from the remaining stages of the last Labour government’s programme. Overall, looking back to the start of the coalition, nearly four times as many new homes for social rent were built in 2010/11 than were built last year. And if we look ahead to the output from the current AHP that began this April, we can expect few if any new social rented homes to be built from now on.
And new construction is in any case only part of the story of the last four years. It just so happens that the total new build for social rent from all programmes – at 75,810 – was almost exactly matched by the numbers lost through lettings being converted from social rents to higher, Affordable Rents, as they fell vacant. There were 76,259 such conversions. In other words, for every social rented home built, an existing one had its rent put up to anything approaching 80% of market rents to help pay for the overall investment programme. And this is before we consider the effects of losses from right to buy and other causes: right to by alone disposed of over 44,000 social rented homes in those four years. So the outcome is that, while the coalition government built over 75,000 new social rented homes, mainly from programmes bequeathed by Labour, there was a likely net loss from the stock of at least 50,000 social rented lettings in the four years up to April 2015.
Yet even with the reinvigorated right to buy it is too soon to write the social rented sector’s obituary. The stock is still sizeable. But now there will be far fewer new homes being built, and more still will be converted under the government’s current AHP. Shortly, of course, right to buy for housing association tenants will begin to run alongside council right to buy. If and when replacements are built, they’ll no longer be at social rents. As if this were not enough, we also have to contend with the sale of high-value council houses, with details yet to be revealed as part of the Housing Bill.
But with the publication of the Spending Review and of its assessment by the Office for Budget Responsibility, it’s clear that the brief flowering of the government’s alternative rented product, Affordable Rent, will be just that. Originally, the AHP that began in April was to have run for five years, delivering 55,000 units annually to 2019/20, most of them for Affordable Rent. This will no longer happen, despite government claims to have ‘doubled’ housing investment. First, the OBR makes clear that changes like the government-imposed cuts in social landlord rents mean that output from housing associations has already peaked. By 2017/18 it will be down to around 23,000 units annually. Although OBR hasn’t assessed local authority capacity, we already know that many councils have reassessed or even abandoned their building plans because of the rent cuts and other factors. Nevertheless, for the next three years most of the building that does take place will be for letting at Affordable Rents.
But when the government’s investment plans take off, in 2018/19, a huge switch takes place. As Red Brick said last week, practically all the new investment is destined to support home ownership, whether through starter homes or shared ownership schemes. OBR says that associations’ spending on ‘social sector’ new build will fall to only £130 million annually for those three years. This compares to almost £1 billion annually under the current AHP.
By the end of April this year associations had just over 123,000 Affordable Rent dwellings in their stock, from new build and conversions under the previous AHP. By April 2018, this might have grown to perhaps something under 400,000 dwellings, or a bit more than ten per cent of social landlords’ rented stock. After that, under current plans there’ll be little further growth in what was until recently the Tory Party’s favoured form of ‘affordable’ housing. And right to buy will, of course, still be eroding the social rented stock held both by councils and housing associations. It’s not a happy prospect for the provision of housing at below market rents, or for those who can’t jump on the home ownership bandwagon.

‘I am doubling the housing budget’ said the Chancellor. But what he failed to add was that we’ll have to wait three years to see the extra money. In fact, more than a third of the extra won’t arrive until the next parliament. In the meantime, affordable housing investment will stay at just under £1 billion per year. As John Healey points out, in current prices this is barely 30% of what Labour was investing annually in housing. Even if it reaches £2.4 billion in 2020/21, this will only be a bit more than three-quarters of what Labour was spending before May 2010, calculated at current prices.
Despite this, Osborne claims to have created ‘the biggest house building programme by any government since the 1970s’. ‘We are the builders’ he says. Housing starts are at ‘a seven year high’. But this isn’t true. The DCLG’s own house building figures show 137,490 starts in the last twelve months, slightly under the previous year’s figure and a cool 46,000 lower than starts under Labour in 2007, before the recession hit. Only a fantasist could claim that completing only 135,000 houses in the last year is a roaring success, when we know we need to build at least 100,000 more homes than that.
But I suppose we should be grateful that spending is going up not down. However, it’s only doing so because Osborne is taking a huge gamble by shifting investment to starter homes and shared ownership, away from social rented housing and even from new build at ‘Affordable Rents’. The price is a high one. £2.3 billion of the new funding will go to fund ‘up to 60,000’ starter homes, suggesting a cost in grant of £38,000 each. This is about £14,000 more than the current cost of building a home that is let at Affordable Rent. With an inevitable proviso about right to buy, putting money into rented homes provided through social landlords is at least a semi-permanent investment that benefits a succession of families. Starter Homes can, however, be sold off after five years with the seller pocketing the full value, including the 20% discount. The grant money simply disappears into rising house prices. KPMG had a neat summary when they said that the scheme will, for everyone except the buyers, be ‘purely inflationary’:

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

Delivering 400,000 starter homes sounds a lot, but not when it’s spread over several years and is at the expense of social housing and of conventional new build (since there is nothing to stop builders swapping starter homes for normal ones in order to claim the grant or get out of planning obligations).
Boosting shared ownership to deliver 135,000 units represents another gamble, since at any one time there are only about 100,000 households who currently have a part-share in their property. So for many it’s an unknown quantity that they struggle to understand, it’s not attractive financially in many areas and it becomes a potential liability if you need to sell a home that is still part-rented.
The ‘cannibalisation’ of social housing is evident from the OBR’s forecast of future investment by housing associations. At present, the OBR assumes all £0.96 billion spent in government grants goes to ‘social housing’ (as broadly defined by the Treasury), but forecasts that this will fall to only £130 million for each of the three years 2018/19-2020/21. Overall, housing associations’ investment plans (including capital repairs) are expected to fall to only a little more than half their current level by 2019/20, partly because of the planned cuts in social sector rents. These are potentially massive cuts, even if associations manage to partly compensate for them by getting a share of the action in promoting low cost home ownership.
The point is that with well over £30 billion already committed by this government and the coalition to stimulating the private market before this week’s announcements, they’ve only succeeded in getting developers to complete 23% more homes in the last 12 months than they built in the first year after Labour handed over power. ‘It’s time to do much more’ says the Chancellor. Well, at least we can agree with him on that.

Greg Clark didn’t so much make an offer on right to buy that housing associations couldn’t refuse, as persuade them to make one he wouldn’t refuse. In doing so he’s probably saved Osborne and Cameron from dealing with the formidable institutional blockages to what had begun to look like a reckless manifesto promise made back in April. Now the argument will almost certainly have to shift to how it will be paid for and whether this sounds another death knell for council housing.
Ministers and friends of ministers have been lining up to pave the way for this deal by putting the frighteners on associations. First we had Osborne telling a Lords committee that their record on housebuilding is not particularly impressive. Then Cameron weighed in by referring to them during PMQs as ‘part of the public sector’ which needs to become ‘more efficient’. Chris Walker, from favoured think tank Policy Exchange, went further by suggesting that they might be sold off, apparently forgetting that the government doesn’t actually own them. In a transparent good cop/bad cop scenario, at the NHF conference Greg Clark then praised associations and called for a new ‘partnership’ that respects their independence, provided of course that they sign what he referred to four times as ‘David’s proposal’. Given the not even barely veiled threats, the fact that they face five more years of dealing with what would be an increasingly hostile government, and that the agreement gives them a bit more flexibility than they might otherwise get via legislation, it’s a racing certainty that sufficient associations will sign to allow the government to claim that the sector has seen the sense of letting tenants buy their homes.
While this probably does enough to get the government off two hooks – possible defeat in the Lords and a potential reclassification of housing association debt by the ONS – it shifts the argument onto aspects of the policy on which Labour can make damning criticisms. The first is how it will be paid for. Under the old right to buy, after giving the required discounts, councils typically get half the value of the property from the sale. Under the new right to buy, this means that every home sold will need roughly a 50% government subsidy, paid very soon after the sale. Once the scheme has been set up and even if take-up is limited, sales will start to happen quickly and government will have to reimburse associations for them. Currently, no money has been set aside for this. It’s expected to be financed from the proceeds of selling off ‘high value’ council houses but the time lag before this happens, and uncertainty about how many popular properties will fall vacant, mean that the arithmetic will be very tight.
Here’s why. Let’s take a very conservative forecast of what might happen – say only 50,000 sales in the first two years at an average market price of £150,000 (the average right to buy sale price for a council house is £126,000). That’s £7.5bn worth of sales for which associations receive 50% from the buyers with the rest (£3.75bn) needing to come from government funds. Let’s also suppose the high value sales scheme can be set up just as quickly, despite it not being in councils’ interests to co-operate in flogging off their stock. Although we don’t yet know what the high-value threshold will be, Policy Exchange thinks it will apply to 210,000 council homes worth an average £300,000 each. Allowing a conservative £20,000 for debt and admin costs reduces this to £280,000. Four London boroughs have looked at their turnover of higher value stock and say it is around 3.5% annually. If applied nationally, this would mean just over 7,000 sales each year producing some £2bn in receipts or £4bn over two years. So, with a fair wind behind it, flogging off council houses might just about generate enough to compensate associations. But any delays, which look inevitable, would mean the Treasury having to stump up cash to fill the gap.
What the sales do not provide is any money for the council houses to be replaced. The Tories might respond by widening the net for high-value sales – but this inevitably means bringing in lower value properties which will generate less receipts but cost just as much to replace with a new home. Or they might insist on councils selling every vacancy that occurs in high-value stock, including ones that allow for tenant transfers which give tenants the mobility to move jobs, escape the bedroom tax or provide care for their kids so they can go out to work. Whatever the government’s answer, it would be hard to find a clearer case of robbing Peter to pay Paul.
There needs to be concerted opposition here from Labour’s front bench, local authorities and tenants. Shadow housing minister John Healey has a clear argument – if the Tories want to provide a small number of tenants with an average lump sum of £75,000 each this should be paid for by taxpayers, not council tenants and potential council tenants. And why should these households get a huge lump sum when those assisted through its Help to Buy scheme only get an interest-free loan or a mortgage guarantee? Councils have to shout loud and clear (as Camden, Haringey, Enfield and Islington have begun to) about the effects on their estates and on their waiting list and transfers, and they have to get the LGA to take a tougher stance than it did last week. Tenants could start local campaigns to relet vacant properties on estates under threat, which are by definition going to be in each authority’s best stock. What price the Tories’ advocacy of allocating houses to people with strong local connections if all the vacant lettings in their estate have to be sold?
And finally, it’s not just the existing stock of social rented homes that is doubly threatened by the new right to buy, but the future stock too. This month sees a new round of warnings about the failure to replace homes sold under the ‘reinvigorated’ right to buy for council tenants. Worse still would be if the Tories fail to get their sums right on the new scheme and the Treasury forces DCLG to raid the Affordable Homes Programme to compensate housing associations for their sales. Not only would existing homes be lost, but future ones too. This is not only like robbing Peter to pay Paul, but returning to clean Peter out a second time, once he’s saved enough to replace all the stolen goods.

John Healey is back on the front bench as shadow cabinet minister for housing and has immediately promised to hold the government to account ‘week in, week, out’. Here are some of the arguments that he might deploy.
First, he may well have wrong-footed ministers this week by calling for more action on homeownership, and he was right to judge that this is one of their weak points. It’s also one where he can focus on young people and the barriers to their housing aspirations – the main one being their needing an average deposit equal to 76% of their income (or 126% in London). When John Healey left the housing ministry after the previous election, Britain was still recovering from recession yet 59% of private renters expected to buy a home soon, with 16% having considered applying for a mortgage. With economic recovery supposedly assured, these official figures have got worse not better (56% and 10%). Now half a million fewer households are buying with a mortgage than in 2010. Yet all this is despite the coalition and the new government throwing more than twice as much money at the private market as is being invested in affordable housing.
Second, it’s not as if their investment of over £50 billion in grants, loans and guarantees has boosted housing output. Under the Labour government, housebuilding averaged over 145,000 per year, including the worst years of the recession. The coalition managed an average of 114,000. Labour’s achievement of 170,000 completions in the year before they were hit by the economic crisis now looks like a giddy aspiration under the Conservatives. The coalition plan, Laying the Foundations, was so unsuccessful that one of the new government’s first tasks was Fixing the Foundations. The Tories’ reappointed minister Brandon Lewis wasn’t even responsible for the new policy – it came out of the Treasury. Healey can rightly point to Labour’s much more substantive Lyons Review as a document which sets a target for housebuilding and how to achieve it – rather than simply taking an axe to any regulations that builders find inconvenient, committing irresponsible amounts in financial guarantees, flogging off public sector assets cheaply and hoping that developers will prioritise investment in new housing rather than feeding their ever-growing profits.
Third, Healey will need no urging to bring the focus firmly back onto the costs of renting and the escalating benefits bill. Here he can quote the government’s own social mobility commission as pointing out that housing costs have dragged families with 1.4 million children into poverty over the last five years. In concentrating their action on curbing benefits costs, not only has the government failed on its own terms as costs have continued to rise but the numbers with unaffordable proportions of their income devoted to housing have increased even faster. As with new housebuilding, it’s hardly surprising that private landlords put profits first. Jeremy Corbyn has called not only for limits on rent increases but for rents to be brought down in regions where they are well out of line with incomes. Despite inevitable threats from landlords, this could be an attractive policy package if it can developed in detailed and turned into a robust plan.
Fourth, producing more genuinely affordable rented housing is already one of Healey’s known priorities and he is bound to find Shadow Chancellor McDonnell more flexible in his attitude towards the extra borrowing that will be required. The economic case has been made by Healey himself, strengthened by the recent report for SHOUT. Healey can point to his own track record here – the self-financing settlement that he announced for council housing prior to the May 2010 election, if it had been adopted by his successor, would have provided far higher numbers of new houses than are now being built.
The availability of social rented housing will be a crucial issue in the first major test for the new shadow team – fighting the forthcoming housing bill. John Healey will need a coherent alternative to the Tory package of extending right to buy, selling off high-value council houses, charging better-off tenants higher rents and cutting social landlords’ income. On the last of these, my sense is that he will be on firmer ground if he concedes that social rents have increased too fast, since that would be consistent with his broader argument about why the benefits bill is increasing. But of course the government plans to do nothing to fill the investment gap, even though it is spinning a line that selling off the stock will allow more building.
While the case it made when it published its manifesto in April was extremely weak, civil servants will have had time to strengthen it. Instead of high-value sales funding two lots of replacements, paying off debt and even financing brownfield regeneration sites, we might expect a pared-down scheme, perhaps promising less than one-for-one replacement of the sold-off stock. Healey will need to be ready to expose the injustice of helping fewer than 150,000 tenants become homeowners while closing off the future options for many more who are currently renting privately. Yes, with the help of a hefty government subsidy a bunch of tenants will become owners, but half the properties sold will soon be bought by landlords and they’ll join the landlord bonanza created by selling off vacant council houses. And this from a government which boasts its credibility in managing the public finances and in curbing the cost of welfare.
If Jeremy Corbyn has brought young people back into the Labour fold then John Healey has an excellent chance to put forward policies which reflect their priorities and not those of some older Tory voters. A huge generational gap has opened up in housing. This extends from the half of those approaching their 40^th birthday who can’t afford to be homeowners (as the Daily Mail complains), to the one-third of private renters who are now families with children, to the 275,000 households now facing homelessness and the 7,600 already sleeping rough on London streets. For the moment the Tories may be judged by the electorate to be better managers of the economy, but on housing their reputation is in tatters and it’s Labour’s job to make sure the public sees that too.

One of the issues opened up by the Labour leadership debate is whether and how to boost investment through a new version of quantitative easing. It’s a debate that began in 2012 and to which Red Brick added its voice. Jeremy Corbyn has called for a people’s quantitative easing to be used for infrastructure investment, including housing, while Yvette Cooper has said it would be the wrong time to do it. As in other areas, Corbyn has provoked a lively debate. The FT doesn’t like his policy but has at least looked at it in some detail. (Its assessment concludes with an unfavourable comparison with Venezuela: Corbyn might wish he had that country’s oil revenues, even if they have recently fallen off sharply.)
A form of QE for the people was put forward by three economists in May: their idea is for the Bank of England literally to release money to households. There is a near-precedent for this in the US where tax rebates have been used as an economic stimulus. This isn’t quite what former Federal Reserve chairman Ben Bernanke once suggested – dropping money from helicopters – but it isn’t far short.
As Paul Mason points out, Yvette Cooper’s criticism of Corbyn actually included two advantages of the policy: higher inflation and a weaker pound. In a situation where Britain has a worryingly large trade gap (or at least people used to worry about it, before the media decided that the real economic problem was the deficit), a weak pound would be beneficial. And as Mason says, while inflation may also have been regarded historically as a key economic problem, having none of it at all is actually quite problematic: the value of debt doesn’t decline over time, it stays annoyingly at the value at which you incurred it. Given Britain’s sovereign debt and especially its far more serious levels of personal debt, the fact that debt is not being eroded adds to the economic risks.
Mason also says that a low inflation/low interest rate economy deprives governments or central banks of one of their tools – cutting interest rates – which is probably why Mark Carney is so keen on raising them (so they can be cut if things get more difficult). Mason quotes another economist, Stephen King, as saying that after six years of glacially slow recovery the world economy is like the Titanic with no lifeboats: when it hits the inevitable iceberg, what policy instruments will be available? China has created a lifeboat – devaluing its currency – to stimulate growth, and as Mason points out the effects are not unlike those of QE (but may be more effective than the very large but in the end almost toothless QE created by the Bank of England under the coalition government).
This writer is no economist, but it seems to me that Corbynomics has some distinct advantages. In contrast to dropping fivers from a helicopter, it would lead to long-term assets being created, including housing as well as transport infrastructure. Given that we have a clear investment deficit in housing – whether in building new ones or in bringing the existing ones up to the standards we need to achieve in order to tackle fuel poverty and meet our carbon targets – directing QE into this sector appears to make sound economic sense. The argument looks even stronger if you consider that (unlike consumer spending) building houses doesn’t suck in huge imports and is labour-intensive, so it creates UK jobs and has beneficial effects on the wider economy. In fact, the case has just been set out in the excellent report by Capital Economics for SHOUT and the National Federation of ALMOs. It’s true that there may currently be problems of shortages of labour and building materials, but these obstacles have been faced and dealt with in the past.
Perhaps the biggest advantage of Corbynomics is that it takes the argument onto the Tories’ own ground. They’ve successfully convinced much of Britain that the economy is like a household’s finances, and has to be reined in when times are bad. Doing as Osborne wants, aiming to run a budget surplus, might be sound practice when considering family finances but in a national economy will effectively mean there is less money for people to spend themselves. Corbyn’s case that we need to get the economy moving by investing for the future not only makes far greater economic sense, it starts to look like a plausible argument to convince the man and woman in the street and to challenge Osborne’s self-serving homilies.

There is much that Red Brick would criticise about housing associations – their acceptance of higher (‘affordable’) rents and low grant rates would come top of the list. But the sweeping attack they have been subjected to this week is really an attack on social housing as a whole.
The pieces in the Spectator and The Times both launch into the inflated salaries which are paid to some of the sector’s chief executives, and Red Brick is certainly not going to defend those (although notes in passing that public and social sector salaries get far more scrutiny than those in private firms). But the Spectator in particular accuses associations of being the main cause of our housing problems: that compared to the private sector they are failing to build, they are over-provided with grant and even so are building more expensively than private developers. In short, it is associations, not the private sector or the government, who have ‘no answer’ to the housing crisis.
Inside Housing has already done a fact check of the Spectator piece and there is no need here to list all the things it gets wrong. Apart from their misuse of statistics, the magazine’s language in deriding social housing is what stands out. Housing associations are supposedly ‘managing the remnants of social housing left behind after Mrs Thatcher’. Their stock is really ‘a pile of ex-council houses given to them on a plate and which were once managed by a clerk of works and a team of rent-collectors on no more than £30,000 a year’. As well as being based on a fundamental misunderstanding about where housing association stock comes from (only around half is from transfers), the Spectator clearly has an even lower opinion of council housing than it does of associations.
Let’s be clear that these attacks are all part of a softening up process in which social housing is recast as a contributor to the housing crisis rather than part of its solution. Why throw more money at housing associations when they are incompetent in comparison with the private sector? Why maintain council housing when both the people who run it and those living in it are beneath contempt? In the world inhabited by those who write for the Spectator and The Times, it’s assumed that all sensible people want to be home owners, and social housing is just getting in their way. Sell it off as quickly as possible and perhaps the stalled growth in owner-occupation, which is the real housing problem the country is facing, will be put back on track.
In quick succession the government has presented us with the breaking of a ‘ten-year’ commitment on social housing rents, a simultaneous breach of the three-year old settlement of council housing finances, the extension of right to buy to associations, enforced sales of high-value council houses, a plan to penalise tenants on modestly decent salaries if they don’t move out, and yet another threat to secure tenancies.
Insiders are making clear (if it wasn’t in any case obvious) that this is all part of a deliberate plan. This government is only interested in home ownership and doesn’t give a stuff about tenants, whichever sector they are in. Within this overall perspective, its attitude to housing associations is not unlike its approach to the BBC: like the Corporation, associations are difficult to get rid of, but by cutting their income and having them ridiculed in the right-wing press we can persuade them to sing from our song sheet, or else… . The message is: kick up a fuss about right to buy, especially if you challenge the legislation in the courts, and you’ll see what happens next. Already the DCLG has been told to reappraise its spending programmes to concentrate far more on promoting home ownership: how long before there is an announcement that the Affordable Homes Programme’s rental output is to be suspended?
Even this government will find it difficult to eradicate social housing by 2020, but we can already see that what happened to council housing in the 1980s is being dished up again, with a few differences, for what the Spectator calls the ‘remnants’ of the sector. Investment cuts, enforced sales, jeopardised business plans, falling credit ratings and – of course – lampooning of chief executives, are all on the menu. People who live in social housing will be branded even more as failures than they have been so far and, of course, by implication those who work in the sector (the ‘clerks’ and ‘rent collectors’) will be seen as losers too. How soon before Cameron dusts off the plans he started to form under the coalition, to reintroduce the disastrous and totally ineffective ‘compulsory competitive tendering’ for housing management that Margaret Thatcher tried and failed to implement?
This week it was confirmed that, because of his new policies, the Chancellor is faced with the threat that housing association borrowing might be brought into the public sector. Having £60 billion added to the national debt will be mightily inconvenient. But, if it happens, won’t the quid pro quo be even more severe attacks on housing associations? Won’t they get the blame (rather than Osborne) for having the temerity to disrupt the government’s ‘long-term economic plan,’ and be made to pay the price for their insouciance?

Social housing is ‘subsidised’ to the tune of £13 billion annually said George Osborne in his Budget. So ‘it’s time to act’ on the higher earners who use these taxpayer-funded subsidies. In the Guardian, Zoe Williams says that his message is that the state is for losers. In the Sun, Osborne retorts that it’s a simple matter of fairness.
Let’s deal first with the dubious claim that social housing costs the taxpayer £13 billions per year. This calculation is based on social rents being on average £3,500 below market rent levels. But calling this a subsidy is to assume that it would make economic sense to raise rents to market levels. Not only would much of the saving be absorbed by increased housing benefits, but there would be a severe work disincentive effect. In other words, the potential savings are fictional. That this is obvious is clear from another Budget measure, to bring down social rents by one per cent per year. On the same logic as the ‘subsidy’ calculation, this should require even more tax-payer subsidy. But it turns out that the Office for Budget Responsibility thinks this will save money: indeed it will be ‘the largest single measure’ in savings in the housing benefit budget apart from the overall benefits freeze. What it will do, of course, is deter social landlords from building, but perhaps we are meant to be grateful that the threat of even more ‘tax-payer subsidised housing’ has been successfully thwarted by the Chancellor.
The pay-to-stay measure has another particularly nasty twist: while housing associations will be able to keep any extra income they collect, councils will have to pay it to the Treasury. While this may well be chicken feed, along with the enforced sale of high-value properties it is yet another way in which councils are being undermined. It adds a tenth point to my recent list of government threats to social housing. Indeed, it also directly undercuts Grant Shapps’ council housing finance reforms of three years ago, when he promised in Inside Housing that from now on council housing would cease to be controlled by central government, and that councils would have the freedom to make local decisions and no longer have to ‘pay their council house rents to Whitehall’. Even the coalition’s official announcement on self-financing said that ‘councils are best placed to make decisions about how they spend money they raise locally’. Can promises made while in coalition now be broken with impunity by the new government?
But Zoe Williams puts in the wider domain a thought which must preoccupy all those who support SHOUT’s campaign for social housing: that the government’s aim is to whittle away at the sector until only a rump remains, fit only for ‘losers’. Under this scenario, better housing association property will be let at near-market rents to those who are earning half-decent incomes, but council housing that hasn’t been sold off will be let at low rents aimed at those who will never learn their lessons from Iain Duncan Smith on how to stop being feckless.
One respected housing policy commentator said immediately on hearing Osborne’s proposals that if we were going to adopt means-testing for social housing, the logical next step would for rents to be set as a percentage of incomes as in Canada and other countries where social housing is a residual sector. He added: ‘…which is also where we now look to be heading’.
In a prescient article on the role of social housing back in 2008, Mark Stephens described it as providing a ‘safety net’ in England rather than having the wider ‘affordability’ role that it has in several Northern European countries. While many housing professionals wanted social housing to cater for a broader range of income groups, the threat was a move in the opposite direction, to provide only an ‘ambulance service’. As he pointed out, in several English-speaking countries (USA, Canada, Australia and the Republic of Ireland) the social sector is much smaller as a proportion of the stock, is specifically aimed at low-income families (often with some degree of means-testing) and may even cater especially for those with support needs (e.g. what the Tory government calls ‘troubled families’). As the name suggests, the aim of an ambulance service is to move the patient on as quickly as possible, in this case into the private sector. Of course in England such an aim is undermined by so-called ‘lifetime’ tenancies, which is why another of Osborne’s proposals is to look into how they can be scrapped.
When pay-to-stay was originally proposed there was an excellent analysis of its effects by the Swindon Tenants Campaign Group. They called it a ‘petty and stupid proposal’ which would turn social housing into a tenure ‘only for the poor’. Tenants don’t want this, nor do councils or housing associations. Creating a totally false label that it is ‘tax-payer subsidised housing’ when other housing sectors are all subsidised is not accidental, it is a deliberate step towards reducing social housing to the ‘ambulance service’ that Mark Stephens warned us about. If less than a month ago it looked like social housing as we know it might be faced with either a slow death or a killer blow, after July 8 the prognosis looks even worse.

Requiring governments to run budget surpluses earned the headlines from the Chancellor’s Mansion House speech. But few noticed that he also wants to ditch the principle that borrowing is the best way to fund capital investment.
The reasons for borrowing to invest are obvious: it enables the project to be done now, when it’s needed, and the costs are spread over the project’s life, with accountants following familiar rules to ensure that expected income will more than meet the costs of the debt. Gordon Brown enshrined the principle in the term ‘prudential borrowing’, which has applied in local government since 2003. The rules then encoded by CIPFA have been followed for 12 years without any apparent breach. Any council investment must follow the CIPFA code, with council housing uniquely limited since April 2012 by additional, Treasury-imposed borrowing caps. Nevertheless, the system has begun to produce results for housing. In the three years since that date, 5,640 new council houses have been started. In the previous three years, there were 3,440 starts, and in the three before that, less than 700.
All this is threatened by Osborne. Whatever the merits of legislating to run a budget surplus ‘in normal times’, no past chancellor, and no other modern government as far as I’m aware, has ruled out borrowing for capital investment. If the new rule extends to capital as well as revenue spending, there will be two big consequences. The first is that government (whether central or local) will have to run budget surpluses to build up an investment fund before it can embark on a housing project or infrastructure investment, leading to years of delay. The second is, of course, that governments will turn to private investors to fill the gap, because they won’t be restricted by the daft rules to be imposed on the public sector. To be able to turn rental income into investment, councils will again be tempted along the routes of stock transfer or PFI deals; otherwise they’ll be forced to limit themselves to building the handful of houses each year that can be paid for from revenue surpluses.
Of course we don’t yet know the details of what is proposed and sense may prevail when the full implications sink in (not least because of what it would mean for favoured schemes like new roads and bridges). Nevertheless, it adds to a growing list of threats to council housing in particular and social rented housing in general. My list of the most recent ones is this:

1. The new Affordable Homes Programme (AHP) – which precludes building for letting at social rents.
2. Conversions – the last AHP (which ended in March) led to 80,000 homes being built but at the cost of converting more than 80,000 existing homes from social rents to ‘Affordable Rents’. Even more conversions will be needed for the new AHP.
3. Right to buy sales – council starts (see above) have been vastly exceeded by sales and the gap will grow as discounts are increased.
4. Right to buy 2 for housing associations – like RTB1, it will see social rented homes sold and (perhaps) replaced by units at Affordable Rents.
5. Planning gain (section 106) – numbers of units delivered will fall as more loopholes open up, allowing obligations to be reduced or avoided completely.
6. Estate redevelopment – with encouragement from the housing minister, more homes will be demolished and the new units will be less affordable and fewer still will be let at social rents.
7. Welfare reforms – the next wave will hit social housing even harder, making it especially difficult to house larger families and pushing more low-income tenants out of their homes.
8. Discretionary housing payments – helping to mitigate the effects of the bedroom tax and other ‘reforms’, are being cut year-on-year.
9. High-value council house sales – yet-to-be-defined plans will force councils to sell off their most valuable properties as they fall vacant; if replaced, they will be with homes at Affordable Rents.

If we add the possible end of prudential borrowing to this list, it starts to look like a concerted attack on social housing (and particularly on council housing). At the very least, the combined effects of RTB1, sales of high-value property, welfare reform and the threatened borrowing changes are likely to make most councils think twice about their council house building programmes. Yet only recently the new secretary of state was proudly pointing to the increase in council house building over the last five years, and even Grant Shapps thought he’d unleashed a significant amount of house building with council housing finance reform in April 2012. Who would have thought that those 170 new council housing business plans, drawn up with the encouragement of Conservative ministers, would turn to dust after three short years?
There has been a vigorous debate recently about the threats to social housing, involving bloggers Tom Murtha, Colin Wiles and Joe Halewood being opposed by the more optimistic Hannah Fearn. They’ve rightly focussed on issues like the planned cut in the overall benefit cap and RTB2. The list above shows how the threats are accumulating, and the problem is that it seems any list will soon be out of date. Whether what’s happening is a ‘slow death’ or a ‘killer blow’, talk of the mortuary no longer seems premature.