Author: monimbó

Yet again we have the Policy Exchange to thank for a policy, fully incorporated into the Conservative Party Manifesto, aimed at destroying social housing. But with the plan to sell off high-value council houses they have plunged below even their low standards. What, if anything, can councils do about it?
The policy would require the top third in value of all council houses to be sold when they fall vacant, an estimated 15,000 sales per year. A report from a small group of London boroughs has looked at how this would work in more detail. It estimates they’d need to sell 3,500 houses and flats in the next five years. This gives a real measure of the scale of the disaster that’s about to befall those areas where these more valuable homes are located.
As Colin Wiles points out, the effects will be concentrated in certain areas rather than being pepper-potted, as the government is believed to be planning to define ‘high value’ regionally (so London will be one of the regions). In Westminster this would literally mean all relets – 400 units per year – being sold, with none being available to families on the waiting list (including, presumably, those waiting to downsize because of the bedroom tax).
In 2013/14 the number of council lettings to new tenants across England was already down to half what it was ten years earlier, and with rising right to buy sales, estate regeneration schemes and continuing low levels of council new build we could already expect this number to fall still further. But at least every dwelling that falls vacant currently can be relet. Although we don’t yet know the details of how the new scheme will work, presumably any potential relet of a property that appears on a (yet to be compiled) ‘high value’ list will have to be aborted and the property sold. Imagine the frustration of council staff and nearby tenants as – instead of immediately being let to a new family which has probably been waiting for many years for a home, often stuck in temporary accommodation – the most popular houses and flats are boarded up to await a sale.
Chances are that buyers will have no connection to the local area and will very likely be buy to let landlords who will immediately let the homes at much higher rents, with no pre-letting redecoration or the future maintenance they would have continued to get as council properties. What’s worse, in many cases this will happen to every vacancy that occurs in a particular estate, because all will be classed as high value.
At least with right to buy there is a sitting tenant in place while the sale goes through. With the new policy, houses will sit empty while (presumably) council surveyors try to get the best price. And of course there is nothing to stop the buyer themselves keeping properties empty and just using them as an investment. The waste involved simply through the turnover of stock and potential void periods is unconscionable.
Can anything be done to thwart these plans? Of course, we know that housing associations may well take legal advice on whether the government can really force through the linked policy of right to buy sales in their stock, but unlike councils they aren’t (yet) part of the public sector. Local authorities are creatures of government and much more constrained in how they can resist central direction. Much depends on the extent to which councils are willing to stand up collectively to defend their housing stock, and to look at the minutiae of any regulations to minimise the damage about to be inflicted. But surely, faced with a threat on this scale, they can’t just sit back and do as they are told?
The obvious initial tactics will be to amend the legislation and try to secure protection for certain cases. How about – as starters – rural villages where the social stock is below a certain percentage of the total, homes that have been adapted and those built in the last decade? What chances are there of getting a ceiling on sales on particular estates, to ensure that whole areas don’t lose their social housing? Can the formula for designating the high-value stock be challenged, so that boroughs like Westminster don’t lose every new letting?
Then there are the possibilities for legal challenge. How will councils decide if they have two conflicting statutory duties but can’t comply with both? How does the new obligation square with homelessness duties, for example? Doesn’t the obligation to rehouse trump the sales policy? What loopholes will emerge as the legislation and regulations are issued?
Given that there is no sitting tenant/buyer, what is to stop councils letting the property temporarily, for as long as the sale takes? This will at least alleviate the shortage of temporary accommodation and save some pennies that would otherwise be spent in placing the homeless in private sector lettings. Are there other opportunities to go slow – for example, if there is to be a register of high-value properties might it turn out to be a laborious task to prepare it and might designations be challenged by tenants’ associations so the list has to be reviewed before it can be put into effect? No doubt such practices will be challenged, as they were when RTB was originally introduced, but at least they might slow down the process.
Monitoring of what happens to properties that are sold will be vital. Supposing there is evidence that the initial sales in, say, Islington were predominantly to speculators or private landlords, data will be needed on the subsequent rents and if possible who the tenants are (e.g. does it turn out they might have been housed by the council, at much lower cost to the public purse?).
Finally, there must be scope for challenging the government through individual cases. If a council defies the rules and lets a high-value property to someone from the waiting list, using the argument that they had hundreds of people who needed the letting and they did so in pursuit of their housing act duties, what court would say they were wrong and should have sold the property on the open market instead?

What’s the best way of spending an extra £2bn to boost housing output? Is it really to give every first-time buyer couple a lump sum of up to £6,000?
George Osborne has committed future governments to spend £2,165 millions over the next five years to subsidise first-time buyers towards building their deposits. This is a new spending commitment: the Office of Budget Responsibility has already flagged it up as one of only five ‘very high risk’ Budget proposals, and it’s the most expensive of the five. The cost estimate is little more than a shot in the dark – if you’re giving money away from a supposedly bottomless pot, how can you possibly know how many people will want to dip into it?
It’s not as if this is the only ruse by the Chancellor which is stacking up commitments for future governments. As the UK Housing Review 2015 shows for the first time, the measures to boost the house market or subsidise developers were already due to clock up a massive figure over the period to 2020. The Budget give-away (sorry, ‘Help to Buy ISA’) brings the total commitment in terms of grants, loans and guarantees to a staggering £33bn. As Jules Birch asked in his live blog on the Budget, what would the reaction have been when the government first proposed equity loans (Help to Buy 1) and mortgage guarantees (Help to Buy 2), if it had said the next stage would be to give people free money?
It so happens that the sums now being allocated towards boosting the market are precisely double the total of grants, loans and guarantees for building affordable homes (£16.5bn). Furthermore, just looking at grants alone, the ISA scheme means that the government is now committed to direct spending over £2.7bn on the private market. To put this in perspective, this is equal to 58% of the commitment in grant over the same period to the Affordable Homes Programme (£4.7bn). Is Osborne really saying that handing over dollops of cash to first-time buyers can be justified, while the supposed need to tackle the deficit is forcing down direct investment in affordable house building to its lowest level for more than a decade?
This not only makes nonsense of government arguments about austerity, it also shows yet again that the government favours the better-off, as of course the scheme will dispense money in inverse proportion to need. Why? – because the lucky couples who have the incomes (or the bank of mum and dad) that enable them to save the maximum of £24,000 will hit the jackpot – £6,000 – in terms of government subsidy towards their deposit. It is not difficult to see that the scheme might be so attractive that it costs much more than the amount budgeted for it, perhaps forcing a cut in the already depleted Affordable Homes Programme.
And to make the most obvious point last, if a tranche of first-time buyers suddenly has access to bigger deposits, while supply of new housing continues to stagnate, the likely effect is a boost in house prices. In other words, while some lucky ISA holders will now get onto the property ladder, for those who can’t save as much it will be even more difficult than before to buy their first home. Given evidence from Zoopla that the current Help to Buy scheme is already feeding higher prices while having little effect on supply, this outcome seems inevitable. But perhaps this is just what Osborne quietly wants to achieve?
It’s perhaps not surprising in an election period that the government has given up on rational attempts to increase house building in favour of making promises of free money. But as Jan Crosby of accountants KPMG cryptically commented: “It would be better to have an ISA to help fund the building of new homes – not the buying of them.” Indeed. However, a future Labour government could do even better, it could put this money towards bringing housing investment back up to the levels achieved in 2010, as Red Brick has just argued. Someone has to call a halt to this housing market madness, who will have the guts to at least describe it as what it is?

Natalie Bennett’s incredibly awkward interview on LBC suggested either that the Greens don’t know how to fund their proposal to build 500,000 social homes by 2020 or that their leader hadn’t done her homework. Which is it?
In fact, the proposal is helpfully spelled out in a policy briefing issued this month which must have been unaccountably missing from Ms Bennett’s briefcase. Let’s look first at what the policy might cost. First, it’s clear that the homes are to be social rented (not let at the coalition’s higher Affordable Rents). Second, the promise appears to be to build them over the five years 2016-2020, i.e. 100,000 per year. Third, they estimate the cost in grant to be £60,000 per unit, or £6bn per year. This compares with current grant investment which they put at £1.5bn per year. So an extra £4.5bn is needed.
Are the costings correct? On the face of it, they are. The last Labour government’s programme was funding social rented homes at an average cost of £51,000; work by PwC for L&Q suggests that grant would now need to be £60,000 per unit if homes were to be let at social rents. There is a quibble about the phasing in of the extra investment though: the Greens suggest the full £6bn will not be available until 2017 which suggest that the 100,000 annual target won’t be met until at least 2018, so delivering half a million social rented homes by 2020 looks nigh on impossible (quite apart from capacity issues and lead-in times within the sector). However, let’s give them some leeway and focus on the 100,000 annual target and the extra £4.5bn it would require.
The Greens want to fund this principally from ending landlords’ tax relief on their mortgage interest payments (MITR). Generation Rent recently put this as worth £6.6bn although earlier estimates have suggested it’s more like £5bn. However, this is the size of the tax relief, not the loss to the Treasury in unpaid tax. The Intergenerational Foundation assessed the total cost to the Treasury of all landlord income tax reliefs to be a maximum of £5.2bn, assuming all landlords pay a marginal tax rate of 40% (and clearly not all do). Under half of this figure is due to MITR, so being optimistic the savings on this might give the Greens £2.5bn towards the £4.5bn extra they need. The problem is that ending MITR would be very unpopular and would probably drive a proportion of landlords out of the market.
So the potential tax savings have a number of question marks against them, not least because the Greens’ policy paper seems to miss the points made above. It’s true that they could get closer to and perhaps reach their £4.5bn target if they attacked other landlord tax reliefs such as the ‘wear and tear’ allowance, but their case would no longer benefit from the neat argument that owner-occupiers can no longer claim MITR so why can landlords do so?
The Greens also throw in modest savings from cuts in housing benefit spending. The problem here is that – as work by both PwC and John Healey MP has shown, while the savings are real they don’t clock up into significant figures unless you look ahead over 30 or 40 years, which doesn’t help to balance the books in cash terms now.
Finally, the Greens also want to remove borrowing caps on local authorities (hooray!) and expect more tax revenue to result from a bigger building programme. They’ve clearly been influenced by reports like Let’s Get Building, and this is all to the good. Overall, though, I conclude they deserve seven out of ten for their arithmetic, but it needs brushing up if they really do want to influence the next government.
However, there are two wider points to be made. One was well put by Colin Wiles when he argued that at least one party had read the SHOUT manifesto and wants to act on it. However we get there, the 100,000 social rented homes target is clearly a very good thing and deserves Red Brick’s support.
The second is that if Natalie Bennett really wants to advocate the policy she’d better read her own policy briefing and be able to answer a few simple questions on it (this post may help). She tripped up on basic points like whether Greens could really build houses for £60,000 each (answer: that’s just the grant needed), and indeed whether 500,000 of them wouldn’t cost rather more than £6bn (answer: that is the five-tear target while £6bn is the annual cost). The LBC presenter may have gone for Bennett’s jugular when he asked whether this meant the houses would be built of plywood, but who could blame him? The danger is that poor arguments don’t just ridicule the Green Party. They also damage the case for a very worthwhile policy that should, indeed, be adopted by Labour on the basis of a more rigorous assessment than the Greens have so far been able to do.

With levels of homeownership lower than for decades, is there nothing that the Tories will not do to stop the slide? Last week saw Duncan Smith’s batty idea of giving social homes away to previously unemployed tenants who get back into work for a year. This week a more subtle agenda is set by Natalie Elphicke in Conservative Home, following on from her rather insipid report to the housing minister in late January.
Elphicke starts her argument by saying Britain ‘has one of the worst records’ of ownership. She gets in a dig at Gordon Brown by implying that he was responsible for the slide, but this is flirting with small changes in the figures: English homeownership first rose above two-thirds of households in 1989, and stayed that way for two decades until just after the recession in 2009, never rising quite as high as 70%. Then in only three years it fell by more than two percentage points, to 64% in 2012 (definitive later figures aren’t yet available). The early rise in homeownership in the 1980s was undoubtedly due to right to buy, and it’s true that sales under Labour fell dramatically with the recession in 2008. But it’s also no coincidence that the plateau in owner-occupation occurred at the same time as the rise of buy-to-let from 1995 onwards, a development allowed by the Tories which saw the growth of private renting from 10% to 18% of households in a decade, largely fuelled by purchases from former homeowners.
Elphicke’s ‘worst record’ is justified by international comparisons. But we know that the highest ownership levels in Europe are in east European countries where state-owned properties were handed to tenants. In western Europe, the picture is much more mixed, with France and Germany both having lower ownership rates than Britain. Also, several countries with high rates – notably Ireland, Greece, Spain and Portugal – have had extreme economic problems to which the absence of any alternative to homeownership has contributed. Look at Ireland’s deserted new build estates, or Spain’s levels of repossessions (also drawn to public attention this week by the release of the Spanish film Near to your House).
Natalie Elphicke says that ‘the left may not like it’ but the advantages of homeownership have been proved in the United States. Well, we might ask if that means she’s fully signed up to the Tory view that the recession had nothing to do with the banking collapse, which began when the US sub-prime mortgage market imploded. If homeownership works so well States-side, how come the two agencies designed to promote it as far as possible down the income ladder, Fannie Mae and Freddie Mac, had to be rescued by the US government when they folded?
In the Elphicke view, we need ‘a more modern right to buy’ which she wants to rebrand ‘Own your Home’. Other than a snappier title, I’m at a loss to understand what is more modern about it. She sets various principles for her new scheme: affordability (nationally and to the individual), not ‘sub-prime’ (which seems to mean no dodgy mortgage terms) and respecting property rights. One wonders about the property rights of the landlords, who over the lifetime of right to buy have been forced to sell houses for an average discounted price of £20,000 each, and even then have had to give the Treasury chunks of the cash. Needless to say, Elphicke thinks discounts still aren’t generous enough (yet somehow higher ones must still meet her test that any scheme ‘must be capable of being funded within its own terms’).
Finally, her new scheme must be ‘modern and creative’. In a priceless piece of meaningless policy-speak, she says ‘We shouldn’t be afraid to consider and embrace new methods of ownership, new approaches to finance, and new ways to help people save in their home where they help with the purpose of people owning their own homes and saving for their future’. At this point she harks back to Keith Joseph and Nicholas Ridley, so we are still left wondering whether or not she believes that Duncan Smith is, like Joseph and Ridley, able to ‘think differently about meeting the housing and finance challenges of the day’.
Of course, the most ‘different’ of the Tory policy-makers in this field was Dame Shirley Porter, although her schemes to promote ownership and get rid of social housing at any cost weren’t sufficiently imaginative to escape the attentions of the District Auditor. Nevertheless, her desperation to drive up the numbers of owner-occupiers certainly has echoes in the Tories’ latest wheezes. Surely they have nothing to do with winning votes back from UKIP, do they?

What an unhappy coincidence that on the day the Residential Landlords Association chose to bleat about Labour’s planned rent controls, the private rented sector was fingered as one of the main reasons for the growth in the numbers of homeless families. The latest Homelessness Monitor, published by Crisis, shows that losing a private tenancy now accounts for almost one-third of official homelessness cases and is the reason behind most of the recent growth in caseloads. Private sector rent levels are also helping to drive up homelessness because they are often too high to be eligible for housing benefit. One effect is ‘the mass removal of benefit-dependent families from the private rented sector in parts of central London’.
Yet Alan Ward, RLA chairman, claims that three-quarters of landlords have been freezing or even cutting their rents, that three out of five will leave the market if they’re subject to rent controls, and the result would be ‘many tenants paying more than they do at the moment’. Let’s take a closer look at these three points.
If RLA members really have been freezing rents they must be in a minority. Indeed, we already know they are, because Britain has approaching 1.5 million private landlords, of whom just over one per cent (17,000) are RLA members. So even if all of them froze their rents, regrettably it wouldn’t make much difference. However, in another unfortunate coincidence for Alan Ward, this week saw the ONS correct its own figures for private sector rent increases and, surprise, surprise, they have been revised upwards. The new figures show that rents have been going up by just over two per cent annually since 2011. (RLA members must be bucking the trend.)
Disregarding for the moment these official figures, let’s look at Alan Ward’s odd claim that rent controls would lead to private tenants paying more than they do now. Is he saying that official limits would lead to faster increases than those decided by the market? He seems to be, as he cites figures showing that social sector rents have been increasing proportionately faster than private ones, although the link with private sector rent controls is unclear. But is he right? The UK Housing Review shows private and social rents as a percentage of average earnings, and by this yardstick council rents have grown in ten years from just over 10% of earnings to 13%; housing association rents have grown from 12% to nearly 14% (although Affordable Rents are 18% of earnings). Over the same time frame, average private rents have risen from 21% to 26% of earnings. So will rent controls mean that private tenants pay more? – I don’t think so.
Finally, we apparently face the prospect of three out of five landlords leaving the sector if rent controls are introduced. This sounds a bit like those celebrity threats to leave the country if top rate taxes are increased. However, even if it happened, would it matter? After all, practically all private landlords acquired their property by buying it (rather than building it). Assuming they wouldn’t have a collective fit of pique and leave their houses empty, they’d either be bought by other landlords or by first-time buyers. In the process, they might even bring house prices down a bit.
The RLA is not alone in perpetuating the myth that private landlords are propping up the housing market. Only last month, the chairman of the National Landlords Association (membership: three times that of the RLA) said that landlords are ‘keeping a supply of well-maintained homes on the market when previous governments have failed to incentivise or stimulate more housing.’ And they do this by ‘putting much needed money into rented homes’. On this logic, the next time there is a critical shortage of something (say, petrol), those people who rush out to stock up on it will be applauded for helping to keep up supply.
Don’t get me wrong. Red Brick is all for an active and well-functioning private rented sector. But the price for the sector’s massive growth in the last decade (unforeseen even by supposed housing experts) is surely some much-warranted attention by government to ensure that it’s working properly? Let’s bear in mind that the sector now houses more households than social housing, and that many of them are vulnerable. Let’s bear in mind too that private landlords get three times as much subsidy through housing benefit as they did a decade ago. As well they get tax relief on their borrowing and interest-only mortgages that are unavailable to first-time buyers, allowing them to plan for a zero tax bill. Next time they claim that governments shouldn’t influence their rents, they should be reminded how much effective subsidy is going into their pockets.
Of course the hyperactivity by landlord groups is not unrelated to the Tories’ claim that the future of the rented sector is now a ‘key battleground’. Housing minister Brandon Lewis somehow believes that rent controls are a tax that is passed on to tenants, so he too seems to think that constraints on prices do, perversely, lead to them going up. He also believes that ‘a larger rental sector cannot be achieved with unnecessary regulation that strangles industry in red tape’. Tenants might argue that, far from being unnecessary, a mechanism to restrain rents is absolutely vital. They might also ask Mr Lewis, if he is so averse to red tape, why he insists on landlords making complex checks on tenants’ immigration status, given that this is hotly opposed by landlords, whom he is anxious to please? Wasn’t it the Residential Landlords Association who called them bureaucratic and overly cumbersome? Be careful, Mr Lewis, so much extra red tape might drive landlords out of the sector.

The coalition’s new report on local authorities’ role in housing supply coincided with a warning from a leading parliamentary committee that council services will soon become ‘unviable’. But it’s clear that the review by Natalie Elphicke and Keith House had to tiptoe around the issue of the cuts to council services, which have decimated their planning and strategic housing roles.
It means their report is pretty bland and difficult to criticise, because it says very little that’s new. It’s already been overshadowed by the Lyons report, which for all its faults was a far more comprehensive assessment and produced a much fuller list of recommendations. Nevertheless both reports either duck certain key issues or fail to address them fully: cuts in capital programmes, the need to build homes at genuinely affordable rents, the effects of cuts in council housing services and why councils aren’t allowed to borrow more on the back of their council housing accounts.
The Elphicke-House report makes much of encouraging councils to develop stronger roles as ‘Housing Delivery Enablers’. It’s a change of language from talking about councils’ ‘strategic housing role’ but it amounts to the same thing. There’s little here that can’t be found in the Labour green papers published in 2000 and 2007, and the truth is that councils’ performance as ‘delivery enablers’ has always been mixed: many councils, including some small rural ones as well as big cities, have been excellent; others haven’t. But the erosion of resources and powers to secure affordable housing over the last five years have hardly helped. Councils’ housing services (not including their council housing) have been cut by 34% and their planning services by 46% in real terms: it is impossible to sustain this level of cuts and still to maintain adequate services. But on this issue, Elphicke-House are silent.
One effect of the cuts is that councils now find it much harder to draw in outside advice when they need it. One of the Elphicke-House proposals might help here. They want the government to set up a ‘Housing And Finance Institute’ to support both councils and business to work better together. If this could provide free consultancy services for councils to take new initiatives like setting up joint venture companies, to build a mix of market and affordable housing, this could be worthwhile. But will the government set up a new body that’s properly resourced?
Councils also need the ability to secure housing at the right quantity, scale and mix of tenures to suit local needs. Again, the coalition has been eroding councils’ role and Elphicke-House make no criticisms of the changes. Council’s ability to get the right proportion of affordable housing has been reduced by the paring back of the powers to require developers to provide affordable homes using ‘section 106’. Yet this key provision is barely mentioned in the report (despite evidence being submitted on the issue). The government has taken away councils’ ability to insist on proper space and other standards in new homes: another subject that’s barely touched on. And there is no mention either of levels of grant available and their effects on affordability. Indeed, the terms ‘social rent’ and ‘affordable rent’ only occur in the case studies, not in the main body of the report.
Then there is the issue which Gavin Smart called the ‘elephant in the room’: the caps on council borrowing. Elphicke-House weren’t allowed by their terms of reference to challenge the caps, but they say they aren’t a problem anyway, as councils can borrow outside their housing revenue accounts, with no restrictions. This is disingenuous. Councils are perfectly aware they can borrow to build market-rented housing, and some are doing so. But for many the priority is to build genuinely affordable housing, and they want to use their borrowing capacity and any available land to do just that, not just to build homes at prices that are almost at market levels. There’s also an irony in Elphicke-House encouraging councils to borrow prudentially outside their HRAs: if this is such a good idea, isn’t it an even better one to borrow within the HRA, where borrowing costs are lower, the income stream more secure and the outcome can be houses at really affordable rents?
The Elphicke-House report also coincided with a devastating study of the effects of right to buy in London. This offers evidence that, far from achieving one-for-one replacement after right to buy sales, London councils are losing three houses for every two new ones they build. In other words, their new build programmes aren’t even replacing houses sold, let alone adding to the stock. This is another issue on which Elphicke-House received evidence, and they do call on the government to allow more borrowing to facilitate replacement building – but of course only within the same borrowing headroom that’s already permitted. Yet in practice, as the government continues to jack-up right to buy discounts, the gap between numbers sold and numbers replaced is certain to get worse.
Overall, if the report is supposed to make us optimistic that a new Conservative government would take seriously the idea that councils should be ‘Housing Delivery Enablers’, it fails miserably. The one proposal that could make a difference – a new body to share experiences and develop skills – got a lukewarm reception from government. It ‘might’ be pursued, but only if it can give ‘value for money without creating unnecessary bureaucracy’. In other words, no new money will be spent and no staff we be employed. Or am I being unnecessarily cynical?

To those that don’t already do so, ignoring the Secretary of State over the next six months while he’s making even more trouble than usual for councils might make good sense. His latest mischievous missive to local authorities tells them that by next April they have to publish the value of their council housing stock. Those that comply by then will provide convenient ammunition for Pickles when he’s in full election mode.
How does he justify it? Of course he’s not going to admit to being a troublemaker, so he claims he wants to ‘allow local communities to hold their councils to account’. To help them do this he’s forcing councils to publicise a completely meaningless figure – the open market value of their houses with no sitting tenants in them. It’s not hard to imagine headlines such as ‘Subsidised council tenants in Birmingham live in homes worth up to £500,000’. In fact, the clue to how the data will be used is already given by one of the headlines in the government’s own press release: ‘Multi-million pound properties’. Pickles thinks there is plenty of equity in ‘expensive empty properties’, the sole evidence for which seems to be the £3 million house sold off by Southwark more than a year ago.
He adds another little twist. Selling these expensive empty properties could reduce England’s staggering total of 635,000 empty homes, he claims. Except of course that even if councils sold off every empty house (and presumably stopped any tenants ever moving), it turns out there’d still be 608,000 empties, as practically all of them are in the private sector. No matter, it helps to spin a myth that empty property is local government’s fault.
With the apparent exception of the Secretary of State, most people know that if you own a house there are two ways to tap into its asset value. One is to sell it, which of course means you’ve lost the house. The other is to borrow against the asset value, which means you keep the house as well as get whatever else it is you want. Eric won’t approve of this idea though, as it would mean giving councils more borrowing freedom and he’d lose an opportunity to force them to sell even more council houses than he’s making them do already through right to buy.
We’re used to him ignoring what councils tell him about his proposals so it’s no surprise that he’s done it again. In this case, councils complained they could lead to misinformed debates about the real cost of their social housing stock rather than increase transparency. He’s going to address the complaint by putting a footnote to the figures explaining the differences between ‘existing use value as social housing’, and ‘open market value’. That should do the trick.
What the figures will show, of course, is that estates in central London are worth a fortune, and it will give further encouragement to councils to realise their value, regardless of tenants’ views. Red Brick has already tracked the story of the West Kensington and Gibbs Green estates in Hammersmith & Fulham, where an intention to sell by the previous Tory council is proving difficult to unravel now the borough has changed hands. It can only be a matter of time until Britain sees examples like one provided by a Red Brick reader in Australia. The New South Wales government has a highly contentious policy of flogging off its most valuable housing: it’s planning to sell 300 tenanted properties close to the central Sydney harbour front worth about $500 million. In theory, three new flats could be built in outer Sydney for every one sold at Millers Point, but the government has pointedly made no commitment to do so. Perhaps I should have hesitated though before using such an outrageous example, it will probably reappear soon in one of Mr Pickles’ press releases.

Policy Exchange won’t be expecting a good reception from Red Brick for their latest housing proposals. Our opposition hasn’t stopped the coalition from adopting some of their past ideas, but their latest one is bad even by PEx’s standards.
It’s not surprising that Freeing Housing Associations has had a drumming, not least from Tony Stacey (presumably one of the housing association leaders they hoped to convince). It’s already been expertly dissected by Colin Wiles and Jules Birch, so Red Brick can step back from the detail and take a broader view.
The report’s starting point is the current development regime, in which new homes must be let at near-market rents and chunks of existing stock must also be let at higher rents. The report ignores the resultant decline in the social rented stock, exacerbated by rising right to buy sales, which has been highlighted in Red Brick and elsewhere. Some of the big housing associations – not, to their credit, all of them – have also been oblivious to these effects and are still willing to build houses on the government’s terms. And, surprise, surprise, they are the ones who also (perhaps behind the scenes) support Policy Exchange and its ideas. Key for them is a future in which they’ll have freedom to set their own rents and allocate their own properties. Given their powerful financial positions, they’ll happily pay the price of getting less new grant and having to buy out their old grant. As they see it, they’ll finally get the chance to break away from an irksome regulatory regime and cater for more profitable parts of the housing market.
Almost coinciding with the PEx report came one from JRF on what the housing market will look like in 2040. It asks who will house the poor, especially as absolute poverty has, since 2010, been rising for the first time. It points out that, if social rents were to rise to 65% of market levels, the housing benefit bill would increase by 125% and 1.5 million more people would be poor. JRF and NHF are producing a report in the New Year aimed at developing a genuinely affordable rent linked to earnings for those on low pay. They are calling this a Living Rent, and it will include costed proposals for how such rents would work. It will represent the polar opposite of the Policy Exchange proposals.
Freeing Housing Associations doesn’t address this crucial issue. Neither did the NHF’s response to the report, which insisted that associations ‘must’ be able to set their own rents and decide who to let their homes to. While David Orr welcomed ‘this critical debate’, his own stance was very clear. Tony Stacey and Placeshapers are quite right to point out that, in this respect at least, he doesn’t speak for all housing associations: but it’s pretty obvious he thinks he’s speaking for some of the big ones.
These associations think of themselves as dynamic businesses which can only prosper if they have more ‘freedom’. Yet for several years they’ve enjoyed a benign environment of guaranteed above-inflation rent rises, underpinned by HB paid directly to them, combined with low interest rates. How many businesses have that kind of certainty? Yet their surpluses don’t represent the sort of returns that major equity holders in a company would expect. Since the scrapping of the TSA they’ve also enjoyed light-touch regulation yet PEx claims they suffer from a ‘byzantine system of regulatory rules and financial constraints’.
To be fair to Policy Exchange’s supporters, we must admit that this debate was sidelined by the recent Lyons report, when it should have been central to it. Building 200,000 new homes per year is vital but equally important is ensuring that a high proportion of them are let at rents that can be paid by families on low to middle incomes. While Lyons called for 50,000 new homes from social landlords, he was much less clear on the implications for rents. Indeed, chapter 9 of his report hosts a mini-debate which anticipates some of the key PEx proposals. Arguments for flexibility over both rents and allocations are put forward and are contested, but Lyons ends up recommending ‘discussions’ with the sector over a new rent regime. It’s true the report then points to the disadvantages of high rents and the arguments for shifting spending ‘from benefits to bricks’. But it was the former, not the latter, that was turned into one of its recommendations.
My only disagreement with Tony Stacey and Placeshapers’ views of the report is therefore that they are too polite, ‘welcoming’ the debate that the report has provoked. The housing lobby might have its debate, but the conclusions will matter little to ministers. It’s more relevant to see the PEx ideas as part of a softening up process for fundamental changes to the housing association sector of which the NHF ought to be very wary. While we know the Lyons Review wasn’t part of this process, its equivocation inadvertently left openings that would have been better firmly closed, rather than giving further encouragement to the ‘debate’.
Why is this all so dangerous? As we’ve seen, the housing minister has already turned the unpopularity of the 2015 Affordable Homes Programme into a presumed acceptance by associations that they don’t need grant. And now the sector itself helps a right-wing lobby group make the case, in what might appear to be convincing detail. Let no one be mistaken, if we have a conservative government in six months time a ‘no grant/high rent’ regime for housing associations is firmly on the cards. Protests about the increasing housing benefit bill will fall on deaf ears, because most of the expenditure falls under the new welfare spending cap. In other words, rents will go up, but state helps towards paying them won’t.

The good thing about Labour’s energy efficiency plan is that it’s a proper plan with costed and achievable targets. But does it go far enough?
Among the many failures of the coalition government, its inability to deliver energy efficiency and renewable energy to householders, especially those in fuel poverty, is one of its most serious. While the department responsible, DECC, has produced countless strategy documents (its energy efficiency action plan alone is 146 pages long) its achievements on the domestic front have been little short of pathetic. It closed down Labour’s successful Warm Front programme as well as the earlier versions of the obligations on energy companies, known as CERT and CESP. It abandoned Labour plans to put in place a successor to the Decent Homes Standard which would have focussed on energy efficiency. Instead, it launched the Green Deal as its flagship scheme, making all sorts of claims for it (including that it would achieve ‘near zero’ carbon emissions from housing by 2050). In fact, as Labour’s paper points out, it’s been a flop: although over a third of a million householders commissioned Green Deal assessments, less than 2,000 have actually completed the work so far. This means the coalition can’t meet its carbon targets on its current trajectory: as an example, the Committee on Climate Change said that 130,000 solid wall homes should have been insulated last year. But less than 25,000 were actually done.
Labour’s new plan is set out today in An End to Cold Homes. Like the coalition’s plans, much of it rests on payments by the energy companies. It would keep the size of the Energy Company Obligation (ECO) as it is now, but reuse the money in two ways. First, it would generate half a million free energy efficiency assessments for householders a year. These would be aimed not only at advising people what they need to do but at persuading them they need to do it. Then, 200,000 poorer households each year would be targeted for ‘whole house’ retrofit work, aimed at getting their homes to at least grade ‘C’ on the energy performance certificate scale (A, B and C are the highest grades, very poor properties are in grades F and G; 95% of families in fuel poverty live in houses graded D or lower). Work should cost an average of £4,750 per property, with an upper limit of £10,000. The work would be done by local authorities or other local agencies, building on the successful experience which many councils have with earlier programmes.
This programme is both bigger and more comprehensive than anything yet tried, and will be targeted at fuel-poor households. Its ‘whole house’ approach is particularly welcome, since ECO has so far aimed to install single measures like loft or wall insulation.
The third big element is a revamped Green Deal (and maybe we should revamp the name too). It would involve a guarantee to bring funding costs down, then subsidy to make the loans actually interest-free to the consumer. This should be a massive boost to the attractiveness of the scheme, with a target of making one million loans available in the next parliament. Neither this or the revised ECO would involve extra spending by the energy companies.
The fourth element toughens up the measures already going through which will raise energy efficiency in the private rented sector. At the moment, houses that are let or relet will, by 2018, have to reach EPC grade E. But, as Labour says, this is a very low standard. The plan is therefore to keep it but add a further requirement that houses have to reach grade C by 2027.
Finally, Labour wants to revert to its original plan for zero carbon new housing, without the compromises the coalition has introduced which have eroded the target. This is excellent, as building new homes that are not as energy efficient as possible is simply daft.
All this looks good, but does it go far enough? The coalition has stuck, albeit reluctantly, to the carbon emissions targets which Labour enshrined in the Climate Change Act 2008. This means we should be aiming to reduce emissions by 80% by 2050, with an interim target of 34% by 2020. These are tough targets. Translated into what’s needed in the housing sector, we not only need to stop building homes that aren’t ‘zero carbon’ but we need to upgrade all our existing stock. That translates into over 600,000 high-standard retrofits every year, or more than one a minute. With a programme of that scale, any delay at all means it’s doomed to failure.
Labour has chosen to make the most of the current levels of ECO funding – and its plan has a very good chance of doing that, especially having been set in advance and if it’s applied rigorously, not in the on-off manner of the coalition. But a lot more investment is still needed. Labour’s plan is an excellent start, but more money is needed to drive it even faster. For example, the UK Green Building Council has called for an infrastructure fund that would start off at half a million high-standard retrofits per year, end fuel poverty and get all houses up to at least a C grade by 2025. That sounds like an even better plan.

At the Tory party conference all the housing talk is about getting people to buy, buy, buy. But are the new offers that have been put on the table any good? If I was a first-time buyer, I’d have nothing to do with either of them.
First up was Rent to Buy, which Eric Pickles ‘announced’ at the weekend before the conference started. This meant the scheme has now been announced three times, the first more than a year ago. It was put forward in the 2013 Spending Round last June, when it was welcomed by the Homes and Communities Agency. Then it was announced again in May, when the DCLG expected ‘huge interest’ in it. And – finally, perhaps – by Eric Pickles in the run up to this week’s conference, with the Telegraph taking the bait last Thursday.
It’s difficult to say anything good about the scheme, except perhaps that it might be better than the one David Cameron was to announce a day later (see below). Tenants will have to pay Affordable Rents at up to 80% of market rates, and will be able to buy after seven years. But how could a tenant who doesn’t have a deposit now save for one in seven years, while paying such high rents? The chances are the plucky tenants will remain just that – tenants – eventually creating a problem for the housing association who built the properties and whose finances may well require them to be sold. This is especially the case in London – to which half the money has been directed.
At least the houses will have been built by social landlords and will presumably be of good quality. Under the second scheme called ‘Starter Homes’, the houses will supposedly be 20% cheaper because they are exempt from Community Infrastructure Levy (used to pay for the roads, sewers, etc) and from section 106 obligations (used to require social housing to be included in the scheme or to require a payment in lieu). Local authorities ‘will still get the taxes which pay for the key infrastructure requirements these homes need – but not more’. But what taxes will these be? They’ll also be exempt from ‘future regulations’ like the zero carbon standard (and presumably other standards included in the recent Housing Standards Review). So the homes will – by definition – be sub-standard and will therefore very likely be of the minimum size and quality that builders can get away with.
Then they will be built on ‘brownfield land’ already zoned for development, that is no longer needed for industrial or commercial uses, including public sector sites. This land ‘costs less’ than other land, but isn’t normally made available to build houses on. Making it available will ‘make a saving’ which will be passed on to the buyer.
There is a whole lot of wishful thinking here. How many sites are there that meet these criteria? Has anyone checked? Will public bodies like the NHS really sell land cheaply? – it seems most unlikely. Are the would-be industrial sites contaminated (and needing expensive treatment)? Are any of them in suitable locations for housing developments? Or will the homes be stuck on the edge of town, remote from bus services and schools, and tagged onto business parks or industrial estates?
It’s amazing that the media soak up these stories without posing questions like these. They accept the 100,000 target figure, which appears to be plucked from the air, and don’t ask what kinds of compromise will be needed to make them profitable to builders, or whether local authorities will actually give planning permission for sub-standard houses on undesirable sites.
One can only conclude that the proposal – which carries no government financial support – is aimed solely at the conference goers and at the press. Whether any real first-time buyers will ever see the houses, or if they do whether they’ll want to buy one, is a question for another day.