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The five Australian housing system frailties laid bare by COVID-19

by Peter Mares and Hal Pawson

Much as in the UK, the past few weeks in Australia has seen housing policy innovation and emergency expenditure on a remarkable scale. State governments that have historically treated street homelessness as a low priority issue have suddenly found tens of millions of dollars to create pop-up accommodation or book rough sleepers into hotel rooms. Since March literally thousands have been rescued into temporary shelter.

Similarly, panicked by the vision of abrupt mass unemployment triggering a new homelessness crisis, state governments across the country have legislated evictions moratoria.

Federal government has also bolstered the ability of households to meet their housing costs, through the crisis by temporarily doubling the rate of the normally miserly Jobseeker unemployment benefit, and introducing a temporary Jobkeeper wage subsidy to help struggling employers retain staff.

But the need for such short-term fixes also highlights the entrenched failings of Australia’s housing system. This crisis has laid bare five major vulnerabilities.

The need for short-term fixes highlights the entrenched failings of Australia’s housing system. Read how this crisis has laid bare five major vulnerabilities in the latest #redbrickblog

1. Street homelessness has become a significant problem

Before the pandemic, street homelessness in Australia was affecting about 8,000 people on any given night, as indicated by census data, and up 20% in the last five years. But this is almost certainly an underestimate.

Recent UK research showed the number of people sleeping rough in any given year was five times as many as captured in census-type snapshots. There’s no reason to think it’s much different in Australia. And many more people are on the fringe of street homelessness — couch surfing, for example.

2. More than a million pushed into rental stress

Australia’s second housing system vulnerability is the body of people – far larger again – living in insecure and unaffordable rental housing. Even before this current crisis, unaffordable housing costs had pushed around 1.3 million into poverty. After paying rent they didn’t have enough money left for essentials like food and electricity.

Now many of these renters will have lost jobs or work hours. Government schemes like JobKeeper and JobSeeker will temporarily help only some — temporary migrants and many casual workers are excluded.

Measures like the moratorium on evictions are welcome (provided they prove robust). The same goes for mortgage pauses by the banks, which might help property owners avoid having to sell if tenants can’t afford the rent.

But these are only stopgap efforts.

3. A shrunken social housing sector

The third vulnerability is the shrivelled state of Australia’s social housing, a sector only a quarter the size of its UK counterpart. With virtually no new construction for most of the past 25 years, stock levels have flatlined. Proportionately, it has shrunk from 6% to a meagre 4% of all housing. More importantly, relative to population, the number of properties let by public housing agencies and community housing providers has halved since 1991.

Across most of Australia, waiting lists for social housing are huge. In most jurisdictions the sector lacks the capacity to offer long-term housing to all the rough sleepers and others currently in hotels. Other than through emergency unit acquisitions or head-leasing of privately owned properties, it is hard to see how this will be possible.

4. A mountain of debt

Australia’s fourth housing system vulnerability is the scale of housing-related debt. If the pandemic-induced downturn persists and unemployment stays high, this could make the recession much worse.

In the early 1990s household debt equated to about 70% of disposable household income. In March 2019, the Reserve Bank of Australia warned the debt-to-income ratio had risen to 190%. The increase was mostly due to increased borrowing to buy homes and investment properties.

Even before the pandemic, one in five mortgage holders were struggling to meet repayments. If large scale unemployment were to force mass property sales, this could compound the crash as homes flood the market. Given that Australian banks are more highly exposed to residential property than their counterparts in other OECD countries, this also poses a wider financial risk.

We know from the GFC experience in the USA, Ireland, Spain and elsewhere that a sharp fall in property prices can have severe and long-lasting economic consequences that worsen inequality. In the USA, vulture landlords stepped in to buy up large numbers of distressed properties and create rental property empires. Renting from owners of this kind is not an attractive prospect.

5. An unbalanced housing system

Australia’s housing system is vulnerable to shocks because – much more than in the UK – it is unbalanced, our fifth system frailty. Residential construction depends almost entirely on private developers building for sale to individual buyers.

These buyers are highly sensitive to the outlook for property values. The resulting herd mentality magnifies booms and slumps – a particular problem when they are totally dominant in the market. A magnified downturn can bring residential construction to a grinding halt. And while quick to shed labour, construction is slow to re-employ because of risk and long project lead times.

Construction normally employs more than 1 million Australians with a range of skill levels. It generates many more jobs through the building materials supply chain as well as in real estate, property management and financial services. This helps to explain why the traditionally antagonistic Master Builders Australia and the building union CFMEU have united in a call to government to invest in building 30,000 social housing units as part of Australia’s post-COVID recovery.

The need for a national strategy

Australia’s housing system needs more than a one-off crisis boost. The pandemic policy jolt is an opportunity to put Australia’s housing on more stable footings through a Commonwealth-led bipartisan, long-term, national housing strategy.

A key part of this should be routine social housing construction on a scale that at least keeps pace with population growth. That’s up to 15,000 homes a year – around five times the current number. This may sound ambitious, but it’s below the levels regularly achieved between the mid-1950s and the mid-1970s.

And this doesn’t have to mean a return to the post-war approach when state authorities provided public housing. Not-for-profit community housing organisations can now take on the major new supply role.

But we do need a post-war level of ambition. Government has two immediate roles to play in linking housing to a post-pandemic recovery.

The first is to help avoid a house price crash that will deepen an economic slump. Co-ordinating action with mortgage lenders could help minimise repossessions and avoid a glut of discounted properties on the market. Governments may also need to take on distressed projects from private developers. The New South Wales government has already flagged such action.

The second immediate role for government is to support residential construction as the motor of economic revival by investing in social housing as the central plank of a stimulus package. Government-owned sites and developer-owned landbanks can be used to kick-start activity more quickly than other major infrastructure projects. Community housing providers – especially some larger faith-based players – also have shovel-ready sites.

These should be the prelude to a national housing strategy, something that has been – remarkably – absent in Australia since 1945.

A key strategic objective should be to diversify both housing supply and demand. Alongside a greater role for community housing providers, this could include a build-to-rent sector commissioned by institutional investors to build market rental blocks as long-term, income-generating assets. This development – currently impeded by tax inequities – would benefit tenants and the economy, by smoothing the boom-bust cycle of residential construction.

As we argue in our recent books, a national housing strategy must also thoroughly overhaul national, state and territory tax settings. Many of these have greater housing policy impacts than any spending program.

Reform of this kind – especially to phase down the vast and untargeted tax subsidies enjoyed by small-scale landlords, and to replace stamp duty with a broad-based land tax – could make Australia’s housing system both fairer and more efficient. It could dampen the speculation that fuels rising prices and debt, while raising the revenue needed to provide decent, affordable housing for all Australians.

This is an edited version of an article that originally appeared in The Conversation (Australian edition). Read the original article here.

<strong>Hal Pawson</strong>
Hal Pawson

Hal Pawson is Professor of Housing Research and Policy at the University of New South Wales, Sydney. He retains a Visiting Professor position at Heriot-Watt University, Edinburgh where he was based until 2011. He is also an associate of Sheffield University’s Department of Urban Studies and Planning, and a Managing Editor of the international journal, Housing Studies. His latest co-authored book ‘Housing Policy in Australia: A case for system reform’ was published in 2020.

<strong>Peter Mares</strong>
Peter Mares

Peter Mares is program director at Monash University’s Cranlana Centre for Ethical Leadership and a contributor to Inside Story magazine. Peter is the author of three books: No Place Like Home: Repairing Australia’s Housing Crisis (2018); Not Quite Australian: how temporary migration is changing the nation (2016) and Borderline (2001). The former brodcaster for ABC releases his 4-part radio series, Housing the Australian Nation, on Earshot via ABC Radio National. Available from Saturday 30 May.

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UK’s private rental sector – growing but not grown up

What can we learn from Germany?

One of the biggest changes in housing over the last 20 years has been the huge, unplanned growth of the private renting sector (PRS). But its unfettered growth has come at a price – which is paid for by some of our newly lauded key workers in the NHS and care sectors and the vulnerable – who are sacrificing their life chances, trapped in insecure, unstable, expensive accommodation.

Can Germany, which has the largest PRS in the EU, offer some lessons on a better way of doing things?

This is what I set out to explore last year when I got a Churchill Fellowship to carry out research on lessons we can learn from housing in Germany. The report Private Rented Housing: a broken system in Britain? Lessons to help fix it from 3 cities in Germany has just been published.

Can Germany, which has the largest PRS in the EU, offer some lessons on a better way of doing things? #redbrickblog

The PRS has grown enormously in the UK. It has doubled to 4.7million – i.e. 1 in 5 households – over the last 20 years, and in England it now houses more tenants than the social housing sector. It is a diverse sector with accommodation ranging from high end to housing of last resort. It is no longer a rite of passage for the young and transient – it is a sector that millions will live in for life.

It houses those who are unable to afford to buy, including many key workers and those in ‘Generation Rent’, and many families who in previous years would have qualified for social housing. The difference is they can be charged four times as much for a private rent as a social rent in areas like London. Sometimes for a neighbouring flat on the same council estate! And unlike their neighbours who rent from a social landlord, private tenants in England have to live with the threat of losing their home on the whim of a landlord as they have Assured Shorthold Tenancies.

The PRS was never designed to fulfil such a major role in UK housing and it needs to change to meet the real needs of our communities.  

The picture is very different in Germany. Germany has the largest PRS in Europe – 40% of households rent and this rises to 70% in major cities. Renting is affordable and mainstreamed – not stigmatised.

Overall Germany has a better PRS. ‘Better’ in the sense that it gives tenants greater security of tenure, more affordable rents, higher standards and a stronger voice to advocate for their rights and represent their interests.  And it is ‘better’ as a sector that supports and incentivises good landlords for the long term, thus improving local housing provision and sense of community. Crucially, Germany’s local government is stronger and better resourced and this helps Germany to build twice as many homes, including affordable ones, as the UK.

Obviously we cannot transplant another country’s housing system onto our own. Not least because each country’s housing market has grown in different cultural, historical and political environments. However, I found 5 factors that offer some important and transferable lessons for the UK. These are:

  • Stable and secure tenancies – We all value a stable and secure home – never more so than in the current lockdown. Yet, notwithstanding the current temporary ban, most private tenants in England can be evicted with 2 months notice for no reason, and this will apply after the ban. In contrast Germany, and most of the developed world, have secure, open ended tenancies where the grounds for eviction are based on breaking the rules eg rent arrears etc. Scotland introduced open ended tenancies in 2017 with no reported adverse effects on landlords or supply – so why not England?
  • Tools for regulating the PRS – Rent levels are more affordable and stable largely because they are regulated. There is data transparency – everybody knows the average rent in their area as they are published in a comprehensive local Rent Index (Mietspiegel). This information is used to help regulate rents effectively. It means rents in Berlin are typically 50% of equivalent lets in London.
  • A stronger voice for tenants –Tenants have greater access to advice and advocacy through a national network of self-funded tenants associations (Mieterverein). This also gives tenants a strong political voice and more power.
  • Better support for landlords– One of the surprises in my research was that landlords were as supportive of the German rent regulation system as tenants. They find it provides transparency, encourages good tenants and a more stable long-term rental stream. The system also provides more incentives to good landlords through tax breaks and subsidies.
  • Growing the supply of affordable housing – a strong local vision translated into building affordable homes and communities – To ensure the PRS works well it needs to be underpinned by an adequate supply of affordable housing. Local Government in Germany is better placed to drive this as it has more powers and is better resourced than councils in the UK. I looked at 3 cities in Germany and found that each had developed its own different, but effective, housing strategies to provide affordable housing and support mixed, vibrant communities in their local areas. The result – stronger neighbourhoods and overall more housing built. Since the end of the 2nd World War Germany (West and East) has built twice as many homes – 30 million compared to 16 million in the UK.

These are all things we can learn from and implement in the UK.

Most economic and social changes occur after times of war and crisis. After 1945 Britain introduced massive changes, such as the NHS and welfare system. After the 1st World War the Government introduced the Wheatley Act, which led to extensive council house building programmes. Changes we have reason to be grateful for today.

When we come out of this national Coronavirus crisis we will need to rebuild a better Britain – a new normal.

The current crisis has exposed the unfairness and fragility of our current broken housing system. We clap for the NHS, care and other key workers every week. But the average wage for a nurse is £25k pa. So with London rents averaging £1450 per month this would eat up 84% of their take home pay. They can get a handclap but they struggle to afford a decent home.

It’s good to see the G15 group of large housing associations joining together on the ‘Homes fit for Heroes’ initiative to tackle this. And good to see London’s Deputy Mayor Tom Copley convening a housing taskforce to tackle the challenges Covid-19 poses.

Let’s make fixing Britain’s broken housing system and building homes fit for our new heroes and heroines a priority.  So that it serves everybody fairly and establishes the building blocks to a healthier, happier and better-housed society.

To find out more and read the report – Private Rented Housing: a broken system in Britain? Lessons to help fix it from 3 cities in Germany click on https://www.morehousing.co.uk/

The report is also published by the Winston Churchill Memorial Trust and is available on https://www.wcmt.org.uk/fellows/reports/lessons-germany-prs

<strong><span class="has-inline-color has-accent-color">Maureen Corcoran</span></strong>
Maureen Corcoran

Mo Corcoran started in housing as a tenant and community activist in the area where she was born – Waterloo in London – including being a chair of a local housing co operative and a member of the successful Coin Street campaign in London’s South Bank. 

She went on to work professionally in housing, rising up the ranks from being a front line housing officer to become Head of Housing in the Audit Commission where she ran the housing inspection regime.

She has also taught on the housing and community studies degree at Birkbeck College and served on several housing association boards. She currently continues to serve as a board member and works as a London Blue Badge Tourist Guide, specialising in tours on social history, housing and the suffragettes.

Mo is a Churchill Fellow.

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Domestic Abuse #MakeaStand

<strong><span class="has-inline-color has-accent-color">by Alison Inman</span></strong>
by Alison Inman

Alison was President of the Chartered Institute of Housing (CIH). She is a Board Member at Saffron Housing Trust, Colne Housing Society, TPAS, and is a co-founder of SHOUT. Her previous roles include being Chair of Colchester Borough Homes and the NFA. Alison is a former member of the Labour Housing Group’s Executive Committee.

I’ve spent the past few years talking to the social housing sector about domestic abuse, why it’s an issue for them, and what they can do about it. The starting point for any discussion is usually that an average of two women a week are killed by a partner or ex-partner in England and Wales, a figure that hasn’t really budged for years. Or, it hadn’t until a few weeks ago. Since the lockdown started domestic homicides have soared, and the number of reports of abuse made to the charity Refuge has increased by 49%. This pattern is being repeated around the world; domestic abuse is itself reaching pandemic proportions and we must make sure that social landlords play their part in tackling it.

It has taken the lockdown to persuade the Government to agree with a coalition of homelessness charities, the women’s sector, the Chartered Institute of Housing, the NHF and many more, that survivors of domestic abuse and sexual violence should automatically qualify for priority need when applying for housing. Good news, but too late for too many women who have had no choice but to return to their abuser rather than face life on the streets.

It is hard to completely disentangle domestic abuse from the wider housing crisis. Acute housing stress means that people often start living together far earlier than they would if there were other, affordable options. And when a relationship breaks down lack of alternative accommodation means people are forced to stay together. Labour’s commitment to a massive programme of social house building will help but there is so much more we need to do. And many women and children do not have the luxury of time.

Work done by the domestic abuse charity Safe Lives for the Sunderland social landlord Gentoo (2018) estimates that approximately 13% of all repair jobs, and 21% of repairs spend, could be attributable to domestic abuse. This shows the business case for Councils and Housing Associations stepping up and making domestic abuse their business. It’s shocking that most victims of abuse first come to the notice of their landlord when they are themselves reported as a perpetrator of noise nuisance. Just think about that for a minute. And almost two thirds of women with significant rent arrears are experiencing abuse in the home. Domestic Abuse really is a housing issue.

The work of the Domestic Abuse Housing Alliance has been key to the understanding of the relationships between physical, emotional and financial abuse and the housing system. They have free resources on their website and their eight stage accreditation guides landlords through a whole range of issues from case management to dealing with perpetrators. The CIH #MakeaStand campaign has hopefully shone a light on the issues for the sector, DAHA accreditation will make sure that local authorities and housing associations adopt the very best practice.

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From social mobility to social justice: How a simple policy announcement started a small war

Most people reading or watching the media during the last few days would have been left with the impression that Jeremy Corbyn had launched a major attack on the last Labour Government. In fact, he made a forward-looking speech to teachers on moving away from an emphasis on social mobility to talking about wider social justice instead.

Jeremy Corbyn (Photo: Guardian)

It got little coverage, no surprise there, until it was attacked by Tony Blair with a video and a fanfare, after which Corbyn was widely denounced for disparaging the last Labour government. Much of the vitriol was not in response to what he actually said, or even his own tweets on the issue, but to a strange and incoherent tweet from Momentum in reply to Blair’s video, saying in effect that austerity was Blair’s legacy. A little bit of displacement was all that was needed to make the charge that Corbyn had had a go at the last Labour government.

Blair’s video is a hallmarked example of the spin at which he is so adept (a political talent Corbyn lacks). He takes one line from the social mobility speech – “for decades we have been told that inequality does not matter” – adds in a couple of quotes carefully selected from other speeches in the past, then claims Corbyn is constantly attacking the last Labour government and ‘enough is enough’, before laying out some of Labour’s relatively good record on taking people out of poverty, spending on public services (focusing on health and education), throwing in Labour’s excellent performance on overseas aid as well. So far as I know, none of these are disputed by Corbyn, indeed I frequently hear him attack the Tory record by quoting Labour’s achievements in these areas.

But the facts of Labour’s record was not what this was about. The media skirmish that ensued was remarkable for the lack of nuance. An exception was Sean Fitzsimons‏ who tweeted “My take on the Blair/Brown Government. Solid performer on most fronts. Excellent on NHS, education, and improving incomes of pensioners and middle/low pay with children. Poor on house building, class and wealth inequalities, and North/South divide. 7.5/10.”

For virtually everyone else it was either 0/10 or 10/10. Hatred of Blair on the one hand and hatred of Corbyn on the other. The result of this madness will be no Labour government at the next election.

So, what about the substance of what Corbyn said? He was talking about inequality not just tackling poverty and he was talking about the weaknesses of the social mobility idea. Blair counters by saying inequality diminished under Labour. He compares the bottom decile with the top decile, but it is the top 1% that has become detached from the rest of society and that is what Corbyn concentrates on. Then again, this was not mentioned in his speech. Whether inequality rose or fell largely depends on which figures you pick, and it depends whether you include wealth as well as income. Blair also stresses that social mobility improved under Labour, rather missing Corbyn’s central point.

Whether it is fair to include 1997-2010 in the ‘30 years in which we were told inequality doesn’t matter’ or ‘dropping 40 years of political consensus’ is of course a matter of judgement, but in my view it is fair because it has proved possible to reduce poverty (normally measured by comparing the poorest with the average) without reducing inequality. Andy Burnham on Marr yesterday used a similar rhetorical flourish, saying  that governments have ‘failed the north for many decades’ including when he was in government. Is he to be denounced? Another expert in rhetorical flourishes, Peter Mandelson, probably did the most damage to Labour’s reputation in this area with his notorious comment that he was “intensely relaxed about people getting filthy rich as long as they pay their taxes”.

The idea of social mobility relies too much on counting how many people born into poor circumstances ‘make it’ into the richest group or into political power. Media often reduce it to whether someone born into poverty could become prime minister or find a ‘route out’ though football or boxing – the topic of many a film. It is often associated with the idea of ‘meritocracy’ and has been used to justify a wide range of both progressive and reactionary policies – including grammar schools and paid-for places in private schools, both of which are said to improve ‘social mobility’.

Corbyn was building intelligently on a substantial debate about social mobility in recent months, including important reports by IPPR and by CLASS think tanks.  There has also been debate in and around the current Social Mobility Commission, which has  commented on issues to do with inequality, warning that without major reform social and economic divisions within Britain’s society are set to widen. One of the current Commissioners,  tweeted that “I would personally welcome a shift of political narrative away from upward mobility for some and toward a greater emphasis on inequality, individual flourishing, and tackling the reproduction of privilege.”

I suppose I’m a good example of social mobility, brought up on a council estate in a one-illness-away-from-poverty family and ending up with degrees and well-paying jobs. But nearly all of the young people I grew up with left school at 16 and did not have the luck that came my way. In my view, the social mobility approach focuses on people like me and ‘the ladder out’, changing nothing structural, whereas the social justice approach cares about all the rest and how to create a rising tide that lifts all boats.

Corbyn plans to replace the social mobility commission with a social justice commission, sponsored by the Treasury, which would have a wider brief to undertake audits and impact assessments of policy and suggest changes to legislation.

The quote that caused the uproar was taken from this part of Corbyn’s speech:

“For decades we’ve been told that inequality doesn’t matter because the education system will allow talented and hard-working people to succeed whatever their background. But the greater inequality has become, the more entrenched it has become.”

“The idea that only a few talented or lucky people deserve to escape the disadvantage they were born into, leaving in place a social hierarchy in which millions are consigned to the scrap heap, results in the talents of millions of children being squandered.”

I think this is uncontroversial, not worthy of the fuss that’s been made, yet grounded in reality, and the right way to go.

And the legacy of past Labour governments was fairly judged by shadow education secretary Angela Rayner, speaking with Corbyn, who said

“The Tories like to talk about people like me who had a difficult start but got on in life as evidence that anyone can succeed on their own. But actually my life shows the exact opposite. Any success I have had is thanks to Labour governments that provided the council house, minimum wage, tax credits and Sure Start children’s centre that enabled me to achieve it. That is social justice.”

Rayner also published an article making the case for the change in New Statesman.

So, despite the fury and the apparent division, this shift in emphasis away from social mobility towards social justice is actually something the whole Labour Party should be capable of uniting around.

There are many battlegrounds within the party, but this shouldn’t be one of them. 

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Labour’s ‘Land Grab’

In the middle of all the fawning over Trump, the newspapers got their teeth into a Labour story this morning. According to the Daily Mail it was about “the policies of Venezuela” and “Labour’s garden tax: Party unveils new Corbyn cash-grab on your private green space and force the sale of vacant land on the cheap.” The Daily Express said “Jeremy Corbyn proposes ‘bombshell’ tax RAID on hard-working homeowners who have a garden.” The Telegraph’s slightly more moderate headline but equally inaccurate story was: “Jeremy Corbyn unveils plans for ‘progressive’ tax raid on homes and gardens of the middle class.”

Such disgraceful behaviour by Corbyn and the Labour Party attracted my interest, but when I tracked the actual report down I found it was a detailed and thoughtful analysis and set of recommendations around an issue which has huge implications for people who want affordable homes.

Called ‘Land for the Many’: Changing the way our fundamental asset is used, owned and governed it was produced for the Labour Party by seven contributors* including George Monbiot and Laurie Macfarlane – whose work we have covered on Red Brick before. Land is the hidden issue behind the housing crisis and the full report is well worth a read – because if you rely on media portrayals you might get the wrong impression of it.

George-Monbiot

Monbiot sets out his stall in a powerful preface, worth quoting at some length:

Dig deep enough into many of the problems this country faces, and you will soon hit land. Soaring inequality and exclusion; the massive cost of renting or buying a decent home; repeated financial crises, sparked by housing asset bubbles; the collapse of wildlife and ecosystems; the lack of public amenities – the way land is owned and controlled underlies them all. Yet it scarcely features in political discussions.

The sense that even in discussing land we are trespassing is so strong that this critical issue remains off the agenda. Yet we cannot solve our many dysfunctions without addressing it. This report aims to put land where it belongs: at the heart of political debate and discussion. It proposes radical but practical changes in the way land in the UK is used and governed. By these means, it seeks to make this a nation that works for everyone, with a better distribution of wealth and power, greater financial stability, economic security and environmental quality, greater participation in the decisions that affect our lives, an enhanced ability to create our own homes and neighbourhoods and a stronger sense of community and belonging.

Despite the hysterical headlines, the report is not yet Labour policy: it contains proposals that will considered between now and the general election. But the reaction shows what a mountain of bias and misrepresentation Labour has to climb to get a serious debate going on this vitally important topic.

Is any of hysteria justified? Let’s look at the key proposals

  • free and open access to data on land ownership
  • an explicit government goal to stabilise house prices to improve the long-term house-price-to-income ratio.
  • redirect bank lending to productive sectors and reduce speculative demand for land.
  • proposals for a Common Ground Trust to buy land underlying a house, to reduce house prices and bring in the idea of socialised land rents.
  • major reforms to private renting with a cap on rent increases and an ambitious social housing programme.
  • replace council tax with a progressive property tax payable by owners not tenants – with surcharges for empty and second homes and non-UK residents.
  • phase out stamp duty land tax for owner occupiers.
  • replace business rates with a commercial Land Value Tax.
  • new Development Corporations buy sell and develop land to crate new towns.
  • enable public bodies to buy land at closer to current use value, estimated to be able to reduce the cost of affordable housing by 50%.
  • remove permitted development rights that allow offices to be converted to homes without needing planning permission.
  • stronger public involvement in planning.
  • proposals to promote community ownership and control of land and buildings.
  • greater provision of parks and stronger use of the public realm. And a stronger right to roam.

It’s a detailed report, an instructive read, and in my view spot on in its analysis. It follows on from a lot of good work on the land question done by others in the recent past and covered on Red Brick, see Dave Treanor here, London Assembly Housing Committee here and Josh Ryan-Collins, Toby Lloyd and Laurie Macfarlane for the New Economics Foundation here.

The Monbiot et al report is a serious contribution to a genuine debate, so it is enlightening to see how it is treated by the media. Most of it was hugely hostile, and I couldn’t find a word about it on the BBC News or Sky News website. Let’s see if Channel 4 can do a little better. But it shows the real difficulty Labour has in promoting progressive policies for wider debate, and the inherent bias in the mainstream media against leftish proposals, even when they are as strong and beneficial as these.

When the headlines say ‘an end to council tax’ or ‘an end to stamp duty’ then the public might have a chance of understanding what it’s about.

 

* The seven authors are : George Monbiot (editor), Robin Grey, Tom Kenny, Laurie Macfarlane, Anna Powell-Smith, Guy Shrubsole, Beth Stratford.

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How many council houses should Labour plan to build?

<span class="has-inline-color has-accent-color"><strong>by Monimbo</strong></span>
by Monimbo

Senior housing policy expert writing under a pseudonym.

Labour’s programme for the next general election needs to be bold and radical but also practical and achievable. There are a number of different estimates of how many affordable homes are needed and of what type. Here we try to unravel the figures and ask – how many council homes should Labour plan to build?

A new group called Labour Campaign for Council Housing aims to ‘radicalise Labour’s housing policy to ensure our party tackles the housing crisis when in government’. Fair enough. It rightly says that there is a crisis of availability of affordable housing, and that Labour’s priority should be to build social rented homes. It wants councils to build ‘at least’ 100,000 of these, with an extra 55,000 contributed by housing associations. It argues for £10 billion grant a year to fund councils to build them, or £100,000 per home.

No one can argue that this isn’t ambitious. The government currently spends less than £2 billion annually on building affordable homes, and few of these are let at social rents. Labour’s green paper, Housing for the Many, promises a programme of 100,000 affordable homes annually of which ‘the majority’ will be for social rent. It would finance this, in part, by raising grant to £4 billion annually, the level achieved by the last Labour Government in its final years. But the new campaign believes this is not enough: ‘these commitments would not meet the scale of ambition needed to solve our housing crisis’.

So they call for 155,000 social rented homes to be built, and expect two-thirds of these to be new council housing. The target comes from a Shelter report published earlier this year, A Vision for Social Housing. However, the report was out of step with other projections of housing need. For example, Crisis and the NHF published a detailed assessment by Glen Bramley showing the annual need for new social rented homes to be 100,000 across Great Britain, with 90,000 needed in England. There are various differences in the ways the two projections were done. Bramley’s assesses a much bigger existing backlog of unmet need, for example. But the main difference is that Shelter assumes that all new needs in the categories it identifies have to be met by building more social housing, whereas Crisis provides a dynamic assessment in which new building influences the whole housing market – as indeed it would in practice – changing the behaviour of landlords and renters as more affordable homes are provided. As might be expected from someone who has been modelling housing needs for years, Bramley’s model gets closer to the real dynamics of the housing market.

Another report calling for a similar level of social rented output came from Capital Economics, written for SHOUT and the National Federation of ALMOs. They argued that building 100,000 social rented homes a year would be justifiable in terms of savings in benefits and the wider effects of the extra construction activity on the economy and on government incomes. Essentially, while Crisis addressed the demographics and affordability, Capital Economics shows the feasibility of the programme. Both, in broad terms, back up Labour’s target.

Let’s have a closer look at the target suggested by the new campaign. For housing associations to contribute 55,000 homes would mean a huge shift away from affordable rent and shared ownership, but at least they have built close to that overall number in the recent past. But in calling for 100,000 new council houses to be built annually the new campaign seems to take little account of councils’ capacity. The last time they built as many as 100,000 homes per year was in the mid-1970s: in fact, you have to add up all the council houses built since 1985 before you get a figure exceeding 100,000, amounting to over 30 years of councils’ output.

Of course, many local authorities are now gearing up to bigger building programmes, taking advantage of the government’s removal of the caps on their borrowing last November. The government believes that within a few years they might build 10,000 units annually, as compared to fewer than 5,000 now. This looks a reasonable assessment, but any progress beyond that depends on overcoming a number of serious constraints. These include access to land, having the skills to run a large new-build programme and being able to finance the extra borrowing involved from rental income. But the biggest constraint is access to grant. Labour’s plan to increase grant to £4 billion annually would help enormously if the money were to be refocussed on social rented homes. Councils could also continue to make use of developer contributions, which already finance nearly half of affordable housing output. Nevertheless Labour’s 100,000 affordable homes target is already an ambitious one, especially if the social rented element is to be close to 90,000 annually.

Now the new campaign argues for a target more than 50% higher, and one which relies much more on councils building than on housing associations. They want to raise the affordable homes budget to £10 billion annually, with grants of £100,000 per unit. The ambition is commendable, but why set a target that many will regard as far too high, and one which bears no relation to the sector’s capacity – especially that of local authorities? Do they really expect an incoming Labour chancellor to set a housing budget which is five times its current level and to be able to spend it from virtually a standing start?

The advantage of the target set in ‘Housing for the Many’ is that it is realistic, costed and grounded in reality: it’s rightly ambitious without being pie in the sky. With strong commitment, it’s capable of being delivered over a five-year period. The new campaign arguing the case for council housing is warmly welcome, but we have to make sure that Labour is able to deliver its current target before we set an even higher one that might be a step too far.

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Converting offices into rabbit hutches is a bad idea

<span class="has-inline-color has-accent-color"><strong>by Monimbo</strong></span>
by Monimbo

Senior housing policy expert writing under a pseudonym.

Five years ago Eric Pickles made one of the biggest blunders of his term as Secretary of State in charge of housing: he allowed offices to be converted into flats without any need to get planning permission. By classifying such conversions as ‘permitted development,’ Pickles deprived local authorities of any oversight of the process including not only whether the buildings were suitable for residential use, but also of the standards to which they were converted. Furthermore, normal rules applying to new building, like the requirement to provide a proportion of affordable accommodation as part of the deal, were thrown out of the window.

The result was a predictable disaster, and a new report by the RICS provides the evidence to show just how big a disaster it is proving to be. The strength of the report is in the quality of the evidence it provides: the researchers have not only collected the data but have visited converted buildings and documented the outcomes on site, in Camden, Croydon, Leeds, Leicester and Reading. It exposes the flaws in the government’s own impact assessment conducted in 2013.

The researchers find that some of the conversions were done to good standards. But many more are inadequate, and in many cases pretty shocking. Here are some instances of what the RICS found:

  • ‘studio’ flats of just 15 or 16 square metres in floor area (and overall less than one-third of them meeting national space standards)
  • no access to private or communal amenity space
  • buildings with barely any changes done to convert from office to residential use
  • residential developments in the middle of industrial estates
  • 77% of units in the case studies providing ‘studio’ or one bedroom flats, only catering to a very narrow segment of the residential market.

Author comparisons with Glasgow and Rotterdam, where similar conversions would require planning permission, show that much higher quality units could have been produced (and still, presumably, have been economically viable).

These projects affect not only those who buy or rent flats but the wider community, since the developer makes higher profits, pays no planning fees and – most importantly – makes no ‘developer contribution’ to affordable housing in the area. The authors calculate than in the case study areas alone this led to a potential loss of income of £10.8 million and of 1,667 affordable housing units, compared to the position if the same developments had been subject to local policies on providing affordable housing.

It’s not surprising that the office-to-residential scheme is summarised as a ‘fiscal giveaway’ from the state to private real estate interests. It’s left a legacy of poor quality housing that would have been avoided if the projects had needed full permission and the planning system had been properly applied.

None of this is surprising and perhaps from Eric Pickles’ point of view the scheme has still been successful because of the number of units it produced. After all, it was one element in the ripping up of regulations that characterised his period as Secretary of State. This saw a wider erosion of planning powers in general and of section 106 requirements in particular (the bit of legislation that requires developers to provide affordable housing), of which office conversions were only one element.

While there must be wider culpability for the weakening of building regulations that was an important factor in the Grenfell Tower disaster, there is no doubt that the fire was in part an outcome of the general contempt for ‘red tape’ that characterised the coalition government and has yet to be rectified under Theresa May.

Building regulations are now being reviewed via one of the wider inquiries following the fire. Indeed developer contributions, together with the ‘Community Infrastructure Levy’ (which these office conversions also enable developers to avoid), are under separate government review. The risk is that better regulation is restored only for narrow safety reasons, while wider standards relating to space, energy efficiency, wheelchair access and security continue to have gaping loopholes like the ones exposed by the RICS. This exemplary study shows that if developers are allowed to set their own low standards, and a pressured housing market allows the resultant flats to be sold or let, then rabbit hutches will be the result.

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When will the LGA say ‘enough is enough’?

<span class="has-inline-color has-accent-color"><strong>by Monimbo</strong></span>
by Monimbo

Senior housing policy expert writing under a pseudonym.

Another statement from the Chancellor, another failure to recognise the looming crisis in local government spending. It’s less than a week since the National Audit Office issued its report on the financial state of local councils, which even the LGA acknowledged was a ‘stark’ warning. But although the LGA says the government must ‘urgently address’ the funding gap, complaining that councils face a cliff-edge, the Chancellor obviously believes that most councils will simply put the brakes on and avert a catastrophe, and if a few overshoot the cliff-edge he can blame it on their incompetence.

The NAO report shows that councils are in a hard game of robbing Peter to pay Paul. Councillors know that, come what may, they have to try to keep social care functioning, the bins being emptied and the streets lit at night. Some of these services have even seen a small increase in funding (children’s care has been increased by 3.2% in real terms). The consequences for other areas of council work are indeed stark, and housing is one of them.

The report shows that spending in two areas – planning and development and housing services – fell respectively by almost 53% and 46% in real terms over the period 2010/11-2016/17. These two broad service areas have been those hit hardest by reductions in funding under the coalition and Tory governments.

But these figures hide even bigger falls in some aspects of those services. For example, spending on housing-related support has fallen by 69%. Many of these services met a range of needs, including those of homeless clients. Of course they include several services that help people in groups that the government claims to prioritise, such as those with mental health problems or who are victims of domestic violence. They provide the help that numbers of people need to sustain their tenancies and avoid homelessness. Spending on private sector renewal is another victim – it has been cut by 63%. Development control – which among other things helps secure a flow of housing land for new building – has suffered a 53% cut. Expenditure on temporary accommodation, however, has rocketed by 57%, because most councils that don’t have enough homes for the homeless are inevitably often forced to place them in high-cost private lettings.

Councils will soon face higher costs, because they will take on a new set of obligations when the Homelessness Reduction Act takes effect in April. The legislation is welcome, but massively underfunded: some £61 million is being allocated outside London and £11 million in the capital. No one thinks this is enough.

Council housing, in the meantime, as not been subject to the same cuts because it is paid for entirely from tenants’ rents. But of course it has been pushed to absorb more and more costs of services that should be paid from general funds, with tenants seeing service reductions as a result. Councils can hardly be blamed for looking for ever more ingenuous ways to cross-subsidise services but neither should tenants be expected to be complacent about what their rents are used for.

One leader of a local government body, Jonathan Carr-West of the Local Government Information Unit, has spoken up: ‘Councils are running out of money fast’ he says, ‘We have already seen one county council go under and others may soon follow unless the government takes action now’. The LGA wrings its hands and urges the government ‘to provide the financial sustainability and certainty needed to protect the local services our communities rely on’. John McDonnell got it right when he said in response to the Chancellor, ‘We face – in every public service – a crisis on a scale we’ve never seen before… Our public services are at breaking point and many of our local councils are near bankruptcy’. He criticised the ‘indefensible spectacle’ of a chancellor ‘failing to lift a finger’ to help struggling local authorities. From Philip Hammond the looming catastrophe brought not a single word.

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Right to buy is not the biggest reason for the fall in social renting

<span class="has-inline-color has-accent-color"><strong>by Monimbo</strong></span>
by Monimbo

Senior housing policy expert writing under a pseudonym.

Why did the number of homes let at social rents fall by 150,000 in the last five years? Surprisingly, although right to buy was a big factor, it wasn’t the biggest. From April 2012 until the same month in 2017, right to buy led to 55,000 council houses sales and 20,000 by housing associations (the latter is because of the ‘preserved’ right to buy kept by tenants if their homes are transferred to a new landlord). So half the net loss can be explained by such sales.

But there were two much bigger factors behind this recent assessment by the Chartered Institute of Housing of the losses in social rented stock. First, new build would easily have offset right to buy sales if output of social rented homes had continued at the same rate as in the previous four years: from 2008/09-2011/12, thanks to the investment made under Labour’s National Affordable Housing Programme (NAHP), 142,000 social rented homes were built, over 35,000 per year. Had this continued, social landlords would have built two new homes at social rent for every one sold, even after right to buy was ‘reinvigorated’ with bigger discounts from April 2012. As it is, the Tories are clearly poised to fail in their much more limited promise to replace the extra houses sold as a result of the right to buy being ‘reinvigorated’, and of course the replacements are all likely to be let at higher, ‘affordable’ rents.

Nevertheless, some new homes are being built for social rent. Adding together new homes built by housing associations and by local authorities, these total just over 50,000 over the five years. Not only is this far lower than achieved under Labour’s NAHP but numbers are now down to only 5,000 per year, with little prospect of their being revived. So in mathematical terms the biggest reason for the loss of social rented homes is failure to build: if Labour had still been in power, continuing a similar programme to its NAHP, around 125,000 more social rented homes would have been built than has been achieved by the coalition/Tory governments.

Increase in stock of ‘affordable’ rented homes, 2012-2017

Source: HCA, Private registered provider social housing stock in England 2016-2017.

So selling off the stock wasn’t the biggest reason for the loss of social rented homes, it was the failure to build. Oddly enough, right to buy wasn’t even the second biggest reason. The candidate for this status can be seen in the graph. From 2011 onwards, the coalition government set out to make a heavy dent in the provision of social rented housing in two ways. First, as we have seen, it built homes for ‘affordable’ rent instead of social rent, constructing about 90,000 up to April 2017. But second, it converted homes from social rent to ‘affordable’ rent at an even faster pace, with 102,000 conversions in total by the same date (shown purple in the graph, the green columns show the total AR stock from conversions plus new build). It forced associations to do this to give them extra rental income, to offset the loss of government grant (it fell from around £60,000 per new home built under Labour to less than £20,000 under the Tories). This is therefore easily the second most important factor in the decline of social rent.

Right to buy, whether for councils or housing association properties, is therefore the third biggest factor. But even this isn’t the whole story: both councils and housing associations have been demolishing social rented stock (for example, in regeneration schemes), and these losses run at around 4,000 per year.

In addition to these recent attacks on the social rented stock, it faces two more potential dangers: the new right to buy for housing association tenants, and the enforced sales of ‘high value’ council properties. At the moment, the first of these is only going ahead as a pilot scheme in the West Midlands, and will be funded by government. But the prospect of enforced sales of council houses, now less likely after the Grenfell Tower disaster, is still ‘on the books’ and is inhibiting many councils from taking on more ambitious investment plans. If right to buy for association tenants were to go ahead across the country, someone would have to fund the discounts and at the moment the only money potentially available is from forcing councils to sell off their better stock.

In this situation, Labour’s priorities should be clear: not only does it need an even more ambitious new build programme than it had when it was last in power, but this needs to focus strongly on building for social rent, as John Healey has promised. And the haemorrhaging of the existing stock must be halted too. This will mean, first, either suspending council tenants’ right to buy or at the very least making the discounts they receive much less attractive; second, rescinding the promise to housing association tenants that they can buy their homes and calling off ‘high value’ council sales; third, ending the conversion of properties to higher rents and, finally, ensuring that any regeneration schemes provide for at least one-for-one replacement of any social rented homes that are to be demolished.

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No new money will be made available for post-Grenfell works

<span class="has-inline-color has-accent-color"><strong>by Monimbo</strong></span>
by Monimbo

Senior housing policy expert writing under a pseudonym.

“Fund it yourselves” was the clear message from communities secretary Sajid Javid to the Communities Select Committee and then again in response to an emergency question from John Healey last Thursday. Red Brick had already outlined the options available to the government to help authorities make their tower blocks safe, and before that we called on the government to foot the bill. Javid has now made it clear he has no intention of doing so.

Of course he found some warm words with which to give the impression he was bending over backwards to help. “What we will absolutely do with every local authority,” he said to the committee, “is work with them closely and make sure that, through that work with them and the financial assistance that we can provide and the financial flexibilities, they are able to pay for any essential works that they deem necessary.” But he went on to say “we are not planning grants” and that his assistance is limited to “financial flexibilities that can provide the funding.”

The options appear to be twofold. Either councils will be allowed to borrow more, if they would otherwise hit the borrowing caps that apply to their council housing finances. Or they will be allowed to make transfers from their General Funds, for example from reserves, to bolster their Housing Revenue Accounts. The latter could mean that council tenants are not burdened with extra costs, unless of course (as seems likely) such a transfer only covers part of the costs of fire prevention work, and some still has to be paid from rental income. The first option, relaxed borrowing caps, offers nothing to councils at all, except the ability to spend more of their tenants’ money. Either way, local people – whether just tenants or a combination of tenants and council taxpayers (which include tenants too, of course) – will be meeting the cost of the work, not central government. The “financial assistance that we can provide” turns out to be zilch.

These options are those foreseen by Red Brick in July. We said that, in all probability, the government would force councils to pay for remedial works from tenants’ rents, perhaps offering “help” in the form of looser borrowing caps or (we speculated) permission to raise rents. Even if extra subsidy were offered in the form of grant, we suggested that the government would simply take this from its existing capital programmes. In the event, it’s not even going that far.

Why is this important? Council housing accounts are already under severe pressure. A four-year period of compulsory rent cuts still has two years to run, arrears are shooting up as universal credit and other ‘welfare reforms’ are rolled out, right to buy continues apace and councils are still faced with the threat of having to sell off their highest value properties, even though this may well now not happen. Furthermore, councils have already been told there will be no more government money to keep houses at the Decent Homes Standard, even though a stubborn 15% of the stock has failed the standard over the last four years. If they divert money to post-Grenfell safety works, this will almost certainly be at the expense of their obligation to meet the DHS.

Furthermore, it is only a short time since the prime minister was promising a new generation of council houses. For the councils that have a significant volume of post-Grenfell work, the pressures on rental income that were already intense look set to get worse. Now that Sajid Javid has explained that his “flexibilities” will offer them no extra cash, the prime ministerial promise looks vacuous.