Blog Post

The strange case of a government housing policy that won’t happen

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

Writer on social housing. Research Director at Disruptive Innovators Network. Formerly founding CEO of HouseMark.

Everyone in the sector will recall the surprise late insertion into the 2015 Conservative election manifesto of a policy to extend the right to buy to housing association tenants – funded by the enforced sale of council assets.

I recall chairing a post-election consultation meeting between DCLG and housing association CEOs and local authority directors of housing in July 2015 – when DCLG asked for advice on how to implement the sale of council assets.

Over two years on, DCLG still hasn’t arrived at a formula setting out how it will calculate the value of assets to be disposed by each authority – let alone consult the sector on it.   There is a simple reason for this – developing the formula is extremely difficult and ensuring that all authorities will deem it ‘fair’ is simply impossible.

Then there is the issue that the bulk of asset sales are likely to fall on the London stock-retaining boroughs.  A flat rate formula (requiring say the top 5% in value of all English retained council stock to be sold when vacant) will not raise enough money to fund the extension of right to buy to associations, so any levy is likely to be tougher on London. The authorities most-affected will be Conservative controlled councils such as Kensington & Chelsea, Westminster and Wandsworth.   The leadership of these councils has indicated complete opposition to the government’s proposals.

It is unsurprising, therefore, that there was no reference in the 2017 Conservative election manifesto to housing association right to buy or forced council asset sales.

Post-Grenfell – and DCLG’s apparent refusal to support council (and housing association) reinvestment in fire safety – the concept of forced asset sales has become even more toxic.

Then there is the fact that the policy requires secondary Parliamentary approval before it can be enacted.  The government only has a simple majority with DUP support.  Inside Housing has reported that up to 15 Conservative MPS are prepared to either vote against the measure or abstain – presumably including members whose constituencies fall within Conservative-controlled London boroughs.  And as we have been recently reminded, DUP support for the government’s legislative programme does not extend to social or welfare legislation.

The simple fact is that the forced asset sales measure will never gain Parliamentary approval and will eventually go the way of the now discarded Pay to Stay proposals.    And if there are no forced asset sales there will be no extension of the right to buy to housing association tenants.

My advice to DCLG is ‘come clean’ and formally drop the policy – any further work is a waste of time.  Councils need to know where they stand as, according to senior sources in local government, the uncertainty is holding back their ability to invest in new housing, essential maintenance and fire safety remedial works.   It’s in no-one’s interest to maintain this facade any longer.

Blog Post

Nobody’s Perfect

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

Writer on social housing. Research Director at Disruptive Innovators Network. Formerly founding CEO of HouseMark.

“Nobody’s perfect” (Closing line of Some Like It Hot: Billy Wilder 1959)

Red Brick readers will be familiar with local authority concerns about the lack of alignment between new housing association supply and the social rent housing they need to meet their statutory obligations to those in housing need.

But the problem goes deeper.  New lets are only 12% of the quantum of social lettings each year.  The government-enforced conversion of social rent lets into higher ‘Affordable Rent’ lets is of equal concern.  Around 25% of housing association lets are now at the (so called) Affordable Rent.

The issue of affordability of housing association lettings is the primary reason that relationships between authorities and associations have deteriorated in recent years.  Yet few authorities have acted proactively by sitting down with housing association partners and defining what affordability means at a local level, across a range of housing products (rental and for sale) and what changes will be required to housing association rent policy to meet local needs.

In Building Bridges – A guide to better partnership working between local authorities and housing associations, we argue that authorities should take the lead by setting up Local Housing Affordability Frameworks which research the topic of affordability on a local authority or sub-regional basis and negotiate a deal with housing associations in respect of new supply and relets.    We propose that the cost of this work is shared equally by authorities and their housing association partners.

Authorities might be surprised by the commitment of the best associations – like Sovereign which refused ‘on principle’ to convert social rent lets into affordable rents or Family Mosaic (now merged with Peabody) which secured grant for Affordable Rent housing and then let it at social rents through extensive cross subsidy.

Building Bridges also explores the vexed issue of nominations and allocations.   Authorities are getting frustrated by associations refusing nominations because the applicant won’t be able to afford a (so called) Affordable Rent.   Authorities are alarmed by those associations that are letting new homes on Rightmove rather than making them available for council nominees.

But associations validly complain that housing registers are being restricted to the very poor or locally connected, when there is clear evidence of housing need and a desire for mobility amongst young professionals and aspirant working families and a need to jointly intervene in the private rented sector.  As a result, housing registers are no longer an accurate measurement of local housing need.  Authorities are failing to work together at a sub-regional level to ensure mobility across housing markets and are (perhaps understandably) focusing their housing strategy on social rent and neglecting demand for other housing ‘products’.

In Building Bridges, we propose a new tech-driven system of allocations (linked to the local affordability framework) that covers all housing products – social rent, Affordable Rent, market rent, low cost home ownership – and ensures a steady supply of appropriate nominations for each.  Again, we propose that the cost of this work is shared equally by authorities and their housing association partners.  We propose that this system is operated collaboratively – and can be led by the authority or, where capacity is limited, by a well-resourced regional housing association.  Midland Heart housing association is already operating such a scheme in the West Midlands.

Yet if authorities have valid criticisms about associations they should realise that its government funding policy that is the primary reason that associations aren’t supplying the homes and allocations that they need.  Sure, there is a quota of associations that see themselves as property developers rather than as part of the social housing sector but the vast majority of associations want a return to government funding of social rent.

Authorities should also recognise that (not everywhere but very often) their performance on planning needs to improve.  Only 41% have local plans which comply with the NHPPF.  And it’s the authorities without compliant plans that are worst offenders in helping bring new sites to market.  Only a minority of authorities have a planning strategy that makes sites available for genuinely affordable housing for five years.   This is completely indefensible.  Clearly, the 40% cut in planning staff in recent years and the loss of ‘enabling’ officers have contributed to this problem but why don’t authorities follow the example of mega-cash-strapped Bristol and increase investment in planning and enabling notwithstanding their financial pressures?

In Building Bridges, we propose a range of actions that authorities can take to maximise social rent housing provision, support development that can cross-subsidise non-grant-funded provision of social rent and combat developer attempts to undermine section 106 agreements – which currently account for 45% of new housing association supply.

The message for authorities in Building Bridges is simple.   If you engage proactively with associations on affordability and allocations, and manage the market, you are more likely to get what you need from associations.   And get your own act together on planning.

Building Bridges – A guide to better partnership working between local authorities and housing associations was published on 25 September by the Chartered Institute of Housing, sponsored by Vivid Homes and the Association of Retained Council Housing and written by Ross Fraser, John Perry and Gemma Duggan.  It is available online.

Blog Post

Tories try to steal Labour clothes

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

Senior housing policy expert writing under a pseudonym.

Investing in council housing was just one of the new policies that Theresa May pinched from Labour in her disastrous speech. Tackling student debt, mental health, energy prices and even organ donations all figured in the list of stolen policies she launched at the Tory conference. But there was another one that was uniquely Tory: putting an extra £10 billion into Help to Buy loans, which means the scheme will make over £22 billion worth of loans in total, all to help those already well up the income ladder.

How much difference will the £2 billion for social housing over five years actually make? First the positives. It raises the total allocated to ‘affordable’ housing investment to £9 billion over the next few years, or to £10 billion if other bits and pieces are taken into account. But as Red Brick pointed out recently, this compares with over £30 billion in support for the private market, and this was before the Tories added the extra £10 billion for Help to Buy. So the split between affordable and private market investment has just got worse – but at least there is more cash in the ‘affordable’ pot.

Second, it recognises that grant has to be higher if rents are to be kept down. An average grant of £80,000 (based on £2 billion generating 25,000 new homes) is higher than that being paid by Sadiq Khan for ‘London Affordable Rent’ units in the capital and probably quite a bit higher than is needed to build social rented homes elsewhere. Even if the grant level comes down, possibly leading to higher output, it should be enough to deliver a significant number of homes at genuinely affordable rents.

Third, the announcement is coupled with a new policy on rents to kick in in 2020. There are a number of caveats about this too, but at least there is recognition that higher grant alone won’t lead to more investment: stability of rental income is also important.

Now the downsides. First, if it produces 25,000 social rented units, that’s a drop in the bucket compared with the 122,000 already lost (through right to buy, and conversion to higher ‘affordable’ rent) since 2011. If output reaches 5,000 per year, it will only restore social rent building to the level of a couple of years ago and will be well below the peak years of Labour’s National Affordable Housing Programme when social rent output alone reached nearly 40,000 units.

Second, we don’t yet know the mix – will all these be new homes for social rent? Why not also improve the mix of the existing programme, to deliver more social rent (not permitted until this week’s announcement) alongside the other ‘products’? If the government is serious, it needs to re-evaluate its whole programme, not merely tag on a bit of new money.

Third, while this is billed as extra council housing, in practice housing associations are going to be much better placed to use the new money. Relations been them and local councils, already under strain, might be made worse. Why are they better placed? Because with the extra certainty of rising rents after 2020, and their already much greater development capacity, they can bid very competitively for the new cash. Just when collaboration between the two parts of the sector is most needed, it might only happen if the GLA and HCA specifically prioritise bids that give councils a role.

Finally, councils continue to be hamstrung by constraints over which they have little control unless the government steps in and makes additional changes. Right to buy sales continue, with heavy restrictions on the use of receipts (including a prohibition on combining them with grant aid). Borrowing caps are still in place, and councils have suffered more than associations have from the recent curbs on rent increases. Despite the government remaining silent on the promised right to buy for housing association tenants, the threat to force councils to sell their higher value stock hasn’t been removed: this has already made councils cautious about building more houses that might simply have to be sold off. And as well, councils have been hit more than associations by the need to invest in tower blocks following the Grenfell Tower fire, with no promise of government help.

Despite these reservations, the new money is better than a poke in the eye with a bent stick. Even if May’s stated ambition of a ‘new generation of council houses’ is hardly likely to result, it’s much better than the Cameron-Osborne attitude that council housing was obsolete and only served to create more Labour voters. The fact that Labour already has a plan to build much more council housing (and housing at social rents built by associations) is given added credibility by the Tory proposals, inadequate though they are. If the Tories are convinced that a Corbyn government will turn Britain into a ‘failed socialist state’ as Phillip Hammond suggested, why are they so keen to borrow the policy ideas that (according to them) will achieve exactly this outcome?

Blog Post

Where will the money come from for Labour’s housing plans?

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

Senior housing policy expert writing under a pseudonym.

Labour was under scrutiny at its conference last week for the announcement of supposedly costly policies that can only be funded by tax increases or extra borrowing. One such promise of course was to end PFI contracts, and it was immediately challenged by Margaret Hodge. However, PFI has continuing high costs and big profits are being made by the contractors: whether the annual cost of rescinding contracts will exceed that of leaving them in place will hinge on the terms of compensation. Ditching PFI could well be a good deal.
Labour’s plan to build up to 100,000 social rented homes is another commitment that needs costing but fortunately there is an argument that it could actually save money. In the long term, as shadow minister John Healey has shown (and, as Steve just reminded us, was confirmed by work by Capital Economics for SHOUT), building to let at low rents will pay for itself via savings in housing benefit. The problem is that the savings accrue over 30 years while the capital cost must be borne now.
Fortunately George Osborne pumped such large sums into housing, with commitments running years ahead, that there is plenty of scope for finding this money from the existing housing budget. None of this appeared in the government’s housing white paper earlier this year, of course, nor can we expect to see figures in Sajid Javid’s promised green paper on social housing. But the details – insofar as they can be pieced together from different government sources – are there in the September update of the annual UK Housing Review.
In a new estimate it says that, from now until 2020/21, some £8 billion will be spent on ‘affordable’ housing (mainly Affordable Rent and shared ownership), and most of this money is made up of the two concurrent Affordable Homes Programmes run by the HCA and GLA. However, far more money – the Review estimates it at over £31 billion – will be spent on propping up the private market (see pie chart).

This is largely Osborne’s legacy – a raft of Treasury-led initiatives aimed either at helping builders directly or helping people to buy. Much of the money is in the form of loans or guarantees rather than grants, but the costs are huge and in some cases will run on into the future, growing year-on-year. (This applies to the Help to Buy and Lifetime ISAs, which give cash payments to people when they buy a house, and will cost over £2 billion annually if allowed to continue beyond 2020.)
The NHF has already suggested that the money for Starter Homes (whose original allocation was £2.3 billion) could be better spent on building for social rent, and CIH has proposed that diverting £1.5 billion annually would allow a programme to build 28,000 social rented homes per year. The list of programmes that could be trimmed or ended is impressive, for example (in addition to Starter Homes):

  • Help to Buy equity loans (potentially over £12 billion, the white paper said £8 billion is already committed)
  • Help to Buy and Lifetime ISAs (£4.2 billion to 2020/21)
  • Home Building Fund (loan finance for developers – £3 billion)

Yet rather than cut such programmes, Sajid Javid has promised today (Sunday) that an extra £10 billion will be pumped into Help to Buy. We’ve yet to see how this will work (and if it is really new money), but if added to the total of private sector support it would reduce the proportion of government spending going to affordable housing from 21% to just 16%.
Of course if changes are made by Labour there will be squeals of rage that the party no longer wants to help first-time buyers, but there is surely scope to target the available money on those who really can’t afford a deposit (rather than those who could save the cash by waiting for another year or two) and release some of it for those who have no hope of buying and are stuck paying ever higher private sector rents.
The point is that Osborne’s schemes may have had individual targets but were not part of an overall plan for housing. The February white paper barely mentioned government spending and made no attempt at an overall appraisal of the different programmes. Untouched, Osborne ‘s legacy will represent a huge commitment for an incoming government. The builders will, of course, argue that the incentives are vital to keep them building, but the truth is that while they have become dependent on subsidy their output has hardly grown in proportion to the extra sums being spent each year. Labour’s Treasury team should commit to a review, alongside the housing ministry, of how the total spend of £40 billion plus can be reconfigured. The aim should be to ensure that much more of it is directed to helping those struggling to rent, not only those struggling to buy.

Blog Post

Who will pay to reclad the tower blocks?

Media coverage of the Grenfell Tower fire has been dogged by confusion as to where the money came from for the original work and who will pay for the remedial work now needed to the country’s tower blocks. This is understandable: council housing finance is complicated, but the danger is that the confusion could let the government off the hook.
The fact that Grenfell Tower is owned by a wealthy borough with buoyant council tax income is an important factor in the moral argument about how the fire could have been allowed to happen. But in accounting terms Kensington and Chelsea’s council tax is irrelevant, since its council housing finance (its Housing Revenue Account) is ring-fenced and can’t legally be subsidised through taxes on residents. Like any other council, K&C borrows the money for capital works such as recladding a tower block, and the costs are met either from rents, from the sale of homes under the right to buy (after the Treasury has taken its cut) or – if available – from government grant.
The last Labour government made substantial subsidy available to bring council housing up to its Decent Homes Standard, but this ended under the coalition. With the decline in funding for energy-efficiency work, councils now pay for refurbishment of most tower blocks and other council housing from the rents they receive from tenants. The financing of a project like cladding a tower block is also complicated by flats having been sold under the right to buy, now owned on leasehold, very likely by private landlords. Leaseholders have to pay their share of the cost of major works, often supported by loans from the council.
What are the implications for the massive remedial works now likely to be needed to the country’s tower blocks? Even local politicians, like Julie Dore, leader of Sheffield City Council, seem to misunderstand housing finance, saying that if councils fund the work themselves it will be at the cost school building and other infrastructure investment. However, without a significant change in legislation, councils won’t be able to tap into other capital budgets to get the work done: if their Housing Revenue Accounts won’t support it, their only other source is government grant.
This is where things get even trickier, because having initially appeared to promise financial support the government is now backtracking. It says there is ‘no guarantee’ of any money, that councils will have to look to their own funds first, and extra support will be on a ‘case by case’ basis. So let’s spell out what the options are.
First, councils and housing associations could in theory dip into their Housing Revenue Accounts, principally financed from rents. Council housing is self-financing, and like housing associations receives no day-to-day government subsidy. When councils made their self-financing settlement with the government in April 2012, it was on the basis that they’d be left with sufficient resources to meet foreseeable needs. There are two problems with this, however: the potentially huge volume of extra investment now required after the Grenfell fire was hardly foreseeable, and – as Red Brick has been pointing out – the Treasury has systematically undermined the self-financing settlement over the last five years. They’ve forced councils and housing associations to cut rents, not to help tenants but (as IFS has shown) largely to reduce Treasury spending on benefits. As a result, by 2020 councils will have lost the equivalent of 60% of their maintenance funding. Those that had built up reserves to deal with eventualities like Grenfell are eating into them to keep services going. And their capacity to borrow for new investment has been drastically reduced.
Second, councils might get ‘case by case’ help, as DCLG has suggested. But will this be extra money? DCLG might simply lift the caps that restrict councils’ borrowing (if not being able to borrow is the issue) or let them raise rents (if they need extra income to pay for the new investment). If not accompanied by government grant, this is simply another way of forcing the cost back onto tenants. Some suggest that extra money might come from the so-called Bellwin scheme. This could be useful, but it is only for emergency work (e.g. stripping off old cladding) not for new investment. Also, it is paid in arrears, so councils will be unsure whether they can recover their costs or not.
Third, the government might indeed offer some form of subsidy, which might or might not cover 100% of the extra costs. But beware of which pot this money comes from. If there is no increase in the government’s capital budget for housing, then it will be at the expense of building new affordable homes. It will be a while before anyone has a proper estimate of what the cost of remedial works might be. One expert says that to reclad an individual tower block costs about £1.2 million, and others have suggested that this means a total cost exceeding £600 million. If costs were were to be of this order, and had to be met from existing capital budgets, they would absorb over 40% of the new money earmarked for rented housing in the last Autumn Statement.
Why should tower blocks be reclad, anyway? Isn’t it better just to leave them unclad? Much has been made of Grenfell Tower being refurbished for cosmetic reasons, but of course the main reason for cladding is to improve the thermal insulation of the dwellings. This has led to stupid headlines such as Grenfell: Clad in Climate-Change Politics. However, only this week we have been reminded that fuel poverty will kill 80 elderly people every day this winter. Insulation is vital to help reduce fuel bills, providing of course that it is done properly. As Colin Wiles has pointed out, this means that unsafe cladding must be replaced by non-combustible materials installed according to thorough safety practices. A debate has already started in the insulation industry about the massive implications of the Grenfell fire for their work. And one lesson for government must surely be that it is much better to build homes to high energy-efficiency standards in the first place, rather than have to stick insulation on their outside walls at a later date.
Apart from the tragic consequences of the Grenfell fire for the residents affected, it’s clear not only that the effects are very reaching but also that we are only in the early stages of assessing what they might be, what will be the costs, and what changes will be required to policies and practice in housing design, housing management, fire safety, building regulations, energy efficiency work and other aspects of public administration. Many have said that the disaster is a ‘wake-up call’. One aspect that we must be wide awake to is how Grenfell’s aftermath is to be paid for across the social housing sector:  it mustn’t be paid for by tenants, and it mustn’t be paid for at the expense of new investment in affordable homes. Or as Steve said a week ago, ‘Central government should foot the bill, sharing the load. That’s why we all pay taxes.’

Blog Post

Ten good (housing) reasons for not voting Tory

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

Senior housing policy expert writing under a pseudonym.

The Tories have been a disaster for housing policy, pouring billions into trying – and failing – to prop up home ownership while neglecting the rented sector. Here’s why you should vote to keep them out of power on Thursday.

  1. They haven’t built enough homes

Disregarding the two years of the global crash, Labour presided over 186,000 net housing completions per year from 2001/02 while the Tories (from 2010/11) could only manage an average of 148,000. Obviously, a large part of the reason is their failure to stimulate the economy. They may bend over backwards to create a favourable climate for their friends the housing developers, but without a prosperous economy they simply won’t build the homes needed.

  1. They are obsessed with home ownership

The policy imbalance is nowhere clearer than in the Tories’ spending plans: over £50 billion being pumped into stimulating the housing market, almost all of it (84%) going into the private market. This is a legacy from George Osborne as chancellor which Theresa May’s government has barely changed. The outcome seems to be that the market becomes ever more dependent on government subsidies, even while the proportion of people who are home owners – especially in younger age groups – continues to fall.

  1. Renters are being neglected

In whichever sector you’re a tenant, your interests are not shared by those in government. Modest tax changes have (eventually) restrained the buy to let market and seem to have started to hold back the relentless rise in rents, but the rip-offs of large deposits and agents’ fees continue. The Tory government has only tinkered at the edges – trying to curb ‘rogue landlords’ with measures that will never be effective because local authorities don’t have the resources. Meanwhile, the bulk of renters live in a policy-free, virtually uncontrolled, market. Labour promises to change this via a ‘consumer rights revolution’ for private tenants.
The Tories also brought in higher ‘affordable’ rents and have presided over the decline in the social rented sector since 2011. Nearly 200,000 ‘social’ homes are now let at up to 80% of market rents. As we have seen during the election campaign, the Tories don’t even understand their own policies, with Theresa May promising a ‘new generation of homes for social rent’ and the Tory minister having to explain that she really meant homes let at higher, ‘affordable’ rents.

  1. ‘Municipal’ house building won’t recover from the Tories ditching the self-financing settlement

For all that Theresa May claims to want more ‘municipal’ housing, a few deals to create homes that will only be rented out for 10-15 years before being sold will hardly be attractive to councils, and especially not to applicants on their waiting lists. The truth is that the Tories, who (to be fair) implemented the self-financing settlement for council housing developed by Labour’s John Healey, went on to destroy it by rent cuts, the ‘reinvigorated’ right to buy, and much else. Labour, in contrast, have promised to build up to an annual programme of 100,000 genuinely affordable homes.

  1. Welfare cuts march relentlessly on

As Mrs May showed when confronted by people who’d suffered cuts in their welfare benefits, she’s totally unable to engage sympathetically with people in desperate need. That’s why, despite the change in welfare secretary, the cuts set in motion by Iain Duncan Smith continue, disregarding all the evidence of their devastating effects. In housing, this will manifest itself in more tenants being unable to pay their rents, further rises in homelessness, continued uncertainty over future provision of supported housing and a crisis in provision for under-35s who are (effectively) being denied housing benefit at levels sufficient to pay their rents.

  1. Austerity continues, local government pays the price

Mrs May wants to continue to shrink the state until it accounts for only 35% of GDP. As ever, it’s local government services that will be hit hardest. Related to housing, this has already affected planning and housing strategy services, homelessness and housing advice, housing support and help for the voluntary sector, all services that depend on government revenue grant which is to be rapidly phased out. Who will ‘prevent’ homelessness under the new legislation due to take effect in 2019, if there is no money to pay for staff or offices?

  1. Communities will continue to suffer

If local government can barely maintain services, the effects are even worse in the neighbourhoods where poorer people live, as cuts in youth services, community centres, Sure Start and just about every other local service are made not only by councils but by cash-starved local charities. This makes a nonsense of Mrs May’s claim after the terror attacks that she wanted to end segregation. The modest funding supplied by the last Labour government to promote integration in mixed-race areas has disappeared, English-language teaching has been cut, the government’s ‘hostile environment’ for migrants pits newcomers against long-standing residents, and its wider policies ensure that inequality will get even worse.

  1. Theresa May isn’t interested in tackling climate change

As we saw in her muted response to Trump’s withdrawal from the Paris Agreement, May isn’t motivated to address climate change. This is important for housing because – amazing as it may seem – to meet our legally binding carbon targets we need to comprehensively retrofit our housing stock at the rate of one house per minute. These obligations will still be there when we leave the EU, unless a right-wing government ditches them. And of course the climate will continue to change too, if no concerted action is taken. Housing is the place to start because energy efficiency saves on heating bills, too.

  1. Brexit is going to hit housing hard

Apart from its general economic effects, if there is a tough Brexit deal with much reduced European migration, key sectors to be hit will include construction and social care, which both depend heavily on EU workers (especially in London). Contrary to the superficial idea that reduced migration will help us solve our housing problems, it could actually make them far worse.

  1. Labour has a much better plan

As Steve pointed out earlier this week, Labour’s detailed housing policy manifesto may not be perfect but it is a hell of a lot better than anything on offer from the Tories. Just compare it with the January white paper – which amounted to 100 pages of not very much and with no extra money to pay for it anyway. Labour has a much better plan: let’s get them into office with a chance to implement it and start the transformation of England’s housing that is so urgently needed.

Blog Post

Hammond’s not for turning

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

Senior housing policy expert writing under a pseudonym.

From the Evening Standard

We normally look in vain for more housing investment in a Tory Budget, and this one had no surprises. Hammond ignored housing and in so doing merely confirmed what we already knew: he’d already made an almost imperceptible shift away from subsidising the private market towards more ‘affordable’ housing in his Autumn Statement last year. That was enough. Housing’s got what it’s going to get for the next four years, in addition to putting up with further, deeply damaging welfare cuts and reductions in rental income.
Along with the Budget, this week saw publication of the UK Housing Review, celebrating 25 years since it was first created as the Housing Finance Review by the Joseph Rowntree Foundation, and edited by Steve Wilcox ever since. One of its many virtues is that it painstakingly documents what the government spends on housing and enables us to get some perspective on what is currently happening.
This is a task made much more difficult since George Osborne was chancellor, as he bequeathed a bewildering array of initiatives, almost all to bolster the private market, and many spearheaded by the Treasury rather than DCLG. The new edition of the UK Housing Review has a necessarily huge table which is the only place where you can see these in full (go to the Review’s website, and look for the 2017 commentary chapters, table 2.4.1).
Comparison is not straightforward as different initiatives span different timescales, but the broad picture is that 84% of the money that the government is spending in this parliament on grants, loans or guarantees will prop up the private market via infrastructure, cheap loans to builders, support for first-time buyers, starter homes and other measures. The remainder consists of the conventional programmes aimed at affordable housing, but even these include substantial amounts for shared ownership and rent to buy, while leaving nothing for new building to let at social rents. Hammond’s earlier Autumn Statement did indeed shift the proportion going to affordable housing, from a measly 14% to a hardly more impressive 16%. But that still leaves a colossal £43 billion to be spent on schemes such as Help to Buy, ISAs for first-time buyers, starter homes and all the rest.
Even this doesn’t cover all the government’s incentives for home ownership, as it only takes in capital investment. To this we have to add right to buy discounts, what remains of the home renovation grant programme, income support for mortgage interest, and a range of tax incentives also documented in the Review. Despite this, as we saw in last week’s latest English Housing Survey, the proportion of households who are owner-occupiers is stubbornly resistant to government incentives to increase it.
And as we also saw last week, when the government has spare cash, affordable housing investment has a lower priority than making very modest contributions to reducing national debt. John Healey’s PQ showed that over £800 million of the receipts received via right to buy since it was ‘reinvigorated’ in April 2012 have gone to the Treasury. He calculates that this could have financed over 12,500 homes if councils had been allowed to keep the cash. I calculate that its contribution to reducing the national debt is roughly 0.05%.
This picture not only stands in contrast to Labour government housing investment programmes, but even to the coalition government at the time when it published its equivalent to the housing white paper in 2011. Laying the Foundations may have been lacking as the strategic document it claimed to be, but at least at that time government spending was more balanced. The coalition was still spending the bulk of Labour’s National Affordable Housing Programme, which together with the coalition’s first Affordable Homes Programme totalled some £4.7 billion. Initiatives to promote home ownership and stimulate the market, such as FirstBuy, came to a modest £2.7 billion. This means that, before Help to Buy and a load of other expensive stimulants to the private sector, almost two-thirds of government investment was going towards affordable housing, including of course still quite a significant proportion of homes for social rent. If Hammond had switched priorities in his Budget to those that applied just six years ago, he would have unleashed a bonanza of £32 billion of affordable housing investment, without spending an extra penny. Dream on.

Blog Post Uncategorized

The war on local government

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

Senior housing policy expert writing under a pseudonym.

What’s more depressing, the government’s current war on local government or the lack of a sufficiently outraged response to it? Or rather, why is the outrage being directed just where the government wants – at local authorities – rather than at Theresa May, Phillip Hammond and their refusal to do anything about the precipitous crisis created by their predecessors?
Authorities like Walsall are being pilloried for threatening to close art galleries and libraries: writer Philip Hensher tweeted ‘…if you want to live among intelligent people … move out of Walsall.’ But as Graham Chapman, Labour deputy leader at Nottingham has pointed out, the real philistine is the government, which has cut Walsall’s spending power per head by £543 since 2011. Urban councils in the north and Midlands have been worst hit by the cuts, then when the government has offered compensation they’ve missed out on that too. Cuts in council funding have also tended to coincide with the areas worst affected by welfare funding cuts, as Christina Beatty and Steve Fothergill have consistently shown. There can hardly have been a clearer enactment of the biblical prediction that ‘whoever does not have, even what he has will be taken away’.
Housing is showing several instances of the critical reduction or disappearance of services, with councils being lined up as the culprits. In the run up to Christmas, the annual concern about rough sleeping numbers is being turned on councils, with Birmingham blamed by the local press for the £10 million cut it’s making to homelessness services. While housing minister Gavin Barwell has admirably accepted that homelessness is a ‘moral stain’, he sticks to the coalition government’s propaganda that it is ‘protecting’ or ‘increasing’ funding to tackle it, when it is doing nothing of the sort. Yes, there are some protected pockets of funding, but these are insignificant when most services to tackle homelessness are financed by councils’ general funds and support for these will, according to the IFS, have been cut by 79% by 2019/20 compared with 2010/11. Birmingham, like everywhere else, is facing horrendous choices in making its budget for 2017/18, as its chief executive has explained this month. It is not surprising that, while there has been a cautious welcome for the new homelessness prevention duty likely to be imposed on councils, there is also widespread concern about expectations being raised that can only be dashed. As Steve has already pointed out in Red Brick, the biggest step to prevent homelessness would be for the government to recognise the devastating impact of its own policies, notably those resulting from welfare ‘reform’.
Red Brick has complained before that government housing policy often has more illusion than substance, but perhaps Sajid Javid isn’t one of our readers as he’s now at it again. This time it’s in relation to the crisis in social care, where in an apparent response to Jeremy Corbyn’s cornering of Theresa May on the issue, Javid has announced more funding. Except of course that he hasn’t: the ‘extra’ is to be found by cutting the New Homes Bonus, which is not just money that councils would have got anyway, but to crown it all was taken away from them in the first place! Councils will also be allowed to raise more in council tax, which has become a very regressive source of tax income and is due to become even more so as government funding for rebates is further reduced. And again, it’s councils in the poorer parts of the country that will be worst hit and where better social care is even more urgently needed. Javid is having to make the best fist he can of the Chancellor’s failure to even mention social care in last month’s Autumn Statement, because there is, in truth, simply no more money being made available. But he can count on May’s backing to blame the problem on ‘underperforming’ councils.
There is a similar story about councils’ local planning duties in relation to housing development, where the government continues to threaten action against ‘underperforming’ councils through its Neighbourhood Planning Bill. But even builders have been forced to agree that the main problems councils have in meeting their housing targets are lack of resources and insufficient planning staff, said to affect nine out of every ten local authorities.
Council housing was, of course, supposed to be protected from these cuts because (to its credit) the coalition government implemented Labour’s deal to make the service self-financing and allow councils to decide their own rents and keep the proceeds. Councils collectively took on £13 billion of extra debt to pay for this, and began to keep their side of the bargain by upping their investment programmes. But as Red Brick has reported several times, most recently in July, the previous Chancellor reneged on his promises and instead began to use council housing as a sort of milch cow for the Exchequer. Admittedly, Javid and Barwell have now stepped back from introducing ‘pay-to-stay’ rents and have delayed the horrendous policy of forcing councils to sell higher-value stock, but the cuts in council rents are still in place and have completely undermined investment plans by taking £2.6 billion out of councils’ housing revenue accounts.
The background to the war on local government is described in historical detail by Tom Crewe in the latest edition of the London Review of Books. It is a salutary reminder of all that we have had and what we are now losing. As Crewe points out, austerity is about far more than closing art galleries and libraries (lamentable though those cuts are). It is about services which are among the basic underpinnings of civilised life: as he puts it, government ‘…has wrecked the ability of elected local authorities to provide and administer many of the features and functions of the state as we understand them… . Councils today are caught in a web of obligations, helpless to fulfil them without outside help, and at the mercy of a government that might choose not to provide it.’
While devolution to places like Greater Manchester provides some respite, it can’t make up for the cumulative effect of what will be a decade of relentless cuts and it offers yet another chance for central government to pass the buck. Sajid Javid must be delighted about the cognoscenti having a go at Walsall council, because as Tom Crewe says ‘we fret and fume about this council here, that service there, while the whole system is sliding off a cliff’.

Blog Post

More on ‘troubled families’

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

Senior housing policy expert writing under a pseudonym.

‘A tale of Cameron’s prejudice and hubris’ was how Red Brick described this a couple of days ago, and subsequent events have shown Steve’s words to be correct even if the picture is a little more complicated than first appeared. If the official evaluation of the Troubled Families Programme wasn’t damning enough, one of the authors – Jonathan Portes of the NIESR – tore into the programme this week in his Not the Treasury View blog. He says the programme is ‘a perfect case study of how the manipulation and misrepresentation of statistics by politicians and civil servants – from the Prime Minister downwards – led directly to bad policy’.
Portes’ problem isn’t with the fact that the TFP tried to do something but heroically failed. As he says, if government intervention is always so tame as to be successful we’ll never try anything ambitious and learn from the mistakes. No, what he’s concerned about is the duplicity of politicians in never admitting that such a programme might not be the best thing since sliced bread: no nuance was allowed the cloud the impression that, indeed, 120,000 families had had their lives changed massively and permanently. This is how Portes summarises it:

‘… the key point here – and the indictment of politicians and civil servants – is not that the TFP didn’t achieve what it set out to do. That’s unfortunate of course… [but] If new programmes never failed to deliver the promised results, that would show government was not taking enough risks. That is should not be the issue. Indeed, many social policy experts thought that the basic principles underlying the programme made a lot of sense.   The point is that it was the government’s deliberate misrepresentation of the data and statistics that led to badly formulated targets, which in turn translated into a funding model that could have been designed to waste money.’

He blames not only government ministers for this, but also Louise Casey who runs the programme. He quotes her as saying, “If No 10 says bloody ‘evidence-based policy’ to me one more time, I’ll deck them”.
As it happens, Casey had her chance to get back at Portes on Wednesday when she and two other civil servants were grilled by the Public Accounts Committee. Listening to the proceedings gives an interesting glimpse of central government policy-making. Casey says Portes has misrepresented the evidence. Her argument seems to be that while they have piles of data that show (for example) the families’ school attendance is better and they’re resulting in fewer police call-outs, much of this doesn’t show up in the part of the evaluation on which Portes bases his case. However, it’s a little difficult for even the forceful Dame Louise to sound convincing when the key finding of the department’s published report is ‘the lack of evidence that [the scheme] has had an impact on the outcomes that it seeks to affect for families’.
Listening to the PAC discussion suggests an important reason why this happened. One of the original models was the Dundee Families Project, and indeed someone from it assisted the DCLG team. But that project invested £10,000 per family over a long term, at a time when local services were, if anything, growing rather than being cut. The Troubled Families Programme spent £4,000 per family and it coincided with other services being decimated. Phase 2 of the project, we are told, will have to manage on less than £2,000 per family.
Behind the hype there are real issues here and I guess Louise Casey knows this as well as anyone: where families do have multiple problems, they are going to need a range of co-ordinated interventions stretching over a significant period of time. Aiming to ‘turn them round’ in a couple of years or less can easily be a facile exercise. Whether wittingly or otherwise, the TFP has colluded with ministers (and here Eric Pickles must be identified, along with David Cameron) who wanted to apply a relatively cheap sticking plaster to a problem while continuing to disable the services like Surestart, Schools for the Future and, of course, genuinely affordable rented housing, that are really essential in tackling these issues. It’s difficult, if not impossible, for civil servants to point this out in a hostile political environment. You can understand them – and desperate local authorities – clutching at straws. But this shouldn’t let government off the hook, and that’s why Jonathan Portes’ views, however bluntly expressed, are very important.

Blog Post

Right to buy sales are not being replaced. Period.

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

Senior housing policy expert writing under a pseudonym.

Even Theresa May has now been rolled out to defend the highly dodgy claim by environment ministers that council homes sold under the right to buy are being replaced. But it patently isn’t true.
There is no dispute that actual sales under RTB vastly exceed replacements: in the first four years of the ‘reinvigorated’ right to buy, sales reached 41,755 while local authority replacements only totalled 5,239. But the government claims relate to the ‘additional’ sales that have occurred, over and above what would have happened if the scheme had not been ‘reinvigorated’. In the four years to April 2012, sales averaged only 2,660 per year, so they deduct a figure (actually rather in excess of that) to allow for sales which would have happened anyway and aren’t covered by the promise. They also point out that councils have three years to start replacements, so to factor this in they allow themselves four years of starts and acquisitions to offset the first year’s sales.
So on this basis, the ‘additional’ sales in the first year were just 3,054 of the total of 5,944 actually sold, and these additional sales were offset by 5,239 council starts or acquisitions over the four years April 2012 – March 2016. So – hey presto! – the target was actually exceeded by 2,185.
The obvious problem with this curious logic is that accounting for the first year’s sales has gobbled up not only year 1 starts but those for years 2-4 as well. Which creates a slight problem when trying to account for the replacement of year 2 sales, especially as by that year (2013/14) sales had almost doubled, to 11,261. Even allowing for DCLG’s deduction of sales that would have taken place under the old scheme, 7,879 replacements still have to be found, and they have to come from a combination of the 2,185 ‘spare’ replacements from the previous year (5,239 minus 3,054) plus whatever is started or acquired in 2016/17.
Here’s where the logic starts to fall apart, because DCLG therefore ‘needs’ 5,694 starts or acquisitions in the current year (2016/17), to catch up with sales back in 2013/14.
We don’t yet have the first quarter’s figures for 2016/17 (they come out later this month). But it will be a minor miracle if they come anywhere near the DCLG’s target figure. The reason is that, far from growing, starts and acquisitions actually went down slightly in the last financial year compared with the year before (they rose to 1,953 in 2014/15, but fell to 1,852 in 2015/16). To achieve the DCLG target and allow them to claim that homes sold in 2014/15 had been replaced, output would need to more than triple in the current twelve months. Yet the LGA has already warned that councils are finding replacement more difficult to achieve, not less, which is why they have slowed down their replacement rate.
The problem does, of course, get even worse in subsequent years. By next year (2017/18) DCLG will ‘need’ another 8,512 starts or acquisitions (the ‘additional’ sales that took place in 2014/15), and a very similar number in the year after that. Barring miracles happening very soon, the ‘replacement’ promise, even under the very limited terms defined by DCLG, is a dead duck.
The National Audit Office warned that this would happen back in March. Since then, the numbers have changed slightly as extra starts and acquisitions have bolstered the earlier years’ figures. But the NAO’s basic conclusion remains valid, that DCLG are quickly going to need over 8,000 starts or acquisitions to be achieved by councils annually, or they won’t meet their target. NAO forecast a big shortfall, and there is little reason to question their conclusion six months later, even with the benefit of updated figures.
There are all sorts of reasons for this, not only to do with the rules about sales receipts but resulting from the government’s reneging on just about all the promises it made when council housing became self-financing. Coincidentally, the starting date for these promises was the same (April 1st 2012) as those about right to buy replacements. It’s proving to have been a fateful date in the history of council housing. How long do we have to wait until Theresa May realises she inherited a bunch of promises 4½ years ago that she can’t keep, and does something about them?