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The Shared Accommodation Rate is prolonging homelessness

Image from Centre for Homelessness Impact

The Shared Accommodation Rate (SAR), the housing benefit rate available to childless, single people under 35, is creating a myriad of challenges for those seeking to move on from homelessness and for the authorities and providers trying to assist them.

Local Housing Allowance (LHA) rates are not universal. Entitlements vary depending on circumstance, and people under the age of 35 are (unless they qualify for an exemption) offered the SAR – which is calculated to cover the rent of a single room in a shared house or flat, rather than, for example, a self-contained one-bed flat. But as uncovered in No Access, No Way Out, a recent report commissioned by Commonweal Housing, and authored by Becky Rice, the SAR has become a significant barrier to combatting homelessness.

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Introduced by John Major’s Conservative Government in 1996, the then-SRR (Shared Room Rate) capped Housing Benefit for single under-25s at the 50th percentile – enough to cover rents of the bottom 50% of shared room lettings. Fifteen years later, George Osborne ignored the recommendations of the Social Security Advisory Committee and raised the age threshold to 35, whilst reducing the allowance to the 30th percentile (from the 50th) of local room rent averages. The reduction of social housing stock over this period has raised the importance of private routes out of homelessness, whether they exist or not.

For single under-35s, housing options at SAR rates increasingly do not exist. As No Access illustrates, the SAR is not routinely able to facilitate homelessness move-on. Recent London analysis (carried out by Savills) found the rental market totally divorced from LHA rates:

“Annual rental growth of 6.3% in London in 2023 led to the proportion of rental listings below LHA rates falling to a low of 3.1% of total listings by Q4 2023. The recent increase to LHA rates has pushed up the proportion of listings affordable to 5.0% of total listings in Q2 2024. While a slight recovery, this remains well below 30% of the market that is intended to be affordable on LHA.”

The same challenges are being observed all over the UK. The supply shortage is also changing behaviour in real time. Landlords, particularly those that specifically accommodate tenants on benefits, have taken advantage of the tilted playing field. Some are now only renting to claimants over 35 who can access the one-bed rate. Others are going further, with No Access interviewees (particularly those in London) reporting a wave of HMO to studio conversions, whereby houses of multiple occupation (shared accommodation stock, in other words) are split up into small studio apartments, often with shared facilities. This allows the landlord to charge the higher one-bed rate to tenants, and leaves those seeking to exit homelessness on the SAR with fewer, if any, options.

Article 4 directives, which force landlords to gain planning permission for conversion to HMO, are limiting the amount of newly available shared stock entering the market. In these circumstances, homelessness service providers are fishing from an ever-shrinking pond.

The effects of this unavailability are predictable and costly. Practitioners report being forced to use supported accommodation for clients under 35, who do not need such expensive services. As one provider reported,

“[Lack of move-on] blocks our … supported accommodation beds. They’re expensive and you need to keep them for those people that desperately need them. Unfortunately, you do have a case where they’re silted up with people who can’t move on.” (p. 53).

This matched other accounts:

“For under 35s my note says, ‘Nothing available.’ We basically have to go [to] supported accommodation for those people. So, we see a massive amount, we’re [seeing] 45% under 35 and so we know that it’s much harder, nearly impossible, to house in PRS for those under 35.” (p. 27).

Three months in supported accommodation provides one with an exemption from the SAR, but having to wait forces people to suspend hopes of long-term stability, and takes up a place others would benefit more from (not dissimilar to NHS beds being taken up by those healthy enough to leave, but with nowhere else to go). Homelessness support providers even report advising those close to turning 35 just to stay put before seeking move-on accommodation after their birthday.

It’s easy to frame this challenge as an inevitable result of a national housing shortage, exacerbated by landlord opportunism, clunky framework, and urban population growth driven by internal movement and immigration. What is harder to agree on is how to respond.

A potential solution would be to abolish the SAR altogether. This would provide more stability for those moving on from homelessness. Supported housing places would be freed up for those in genuine need, and councils would feel less inclined to hire private relocation companies to send homeless people to other parts of the country with more LHA supply. But tradeoffs are inevitable – the rental market is overheated as it is, and boosting demand to any significant extent would drive further price increases, which may fuel voter backlash.

A roll back option would be to reverse the Osborne measures – lowering the age threshold back to 25 and returning the benefit rate to the 50th percentile. The risk here would be the failure to help 18–24-year-olds, with further reform on the issue probably unlikely. Other measures worth considering include a widening of the exemption thresholds to ease current backlogs and finding a way to challenge excessive use of Article 4 directives. What is clear is the need for revision of some kind, and a halt to the escalating bidding wars between councils (and in some cases, between council departments) for the dwindling number of affordable units.

As is so often the case, issues like these cannot be discussed without returning to the question of general (and publicly owned) housing supply. No Access makes a range of timely recommendations, much broader than the SAR – including the urgent requirement for new homes delivered at scale. SAR revision or abolition, and reform of the LHA more generally, must be linked to this delivery, along with the wider protection of tenants (something Labour have wasted little time on). This Government remains the UK’s best chance at easing and fixing the housing crisis, helping homeless people of all ages move on, and delivering better outcomes for renters more generally. Reform of the SAR is a necessary step in that direction.

Fraser Maclean is Policy and Communications Manager at Commonweal Housing. No Access, No Way Out, researched and written by Becky Rice with Commonweal’s support, can be read here.

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Social housing needs the Streeting treatment

Prime Minister Keir Starmer NHS 10 Year Plan Consultation, image by No 10 licensed under CC BY 2.0

The health service is getting the Wes Streeting treatment of more finance and reform. The case for the same approach for social housing is compelling. Health and housing both determine our quality of lives. The two are interrelated, with homelessness and poor-quality housing costing the health service billions.

2024 saw the lowest Labour vote share among social renters since Ipsos began their election studies.

Also worryingly more social housing tenants said that they voted Reform than any other tenure.

Social renters were the tenure most likely to vote Reform UK

We need to convince tenants that we can make this tangible difference to their lives, by fundamentally changing the power relationship between social tenants and their landlords, drawing upon the insight that Tony Crosland offered about the inequality of decision-making power as far back as 1956 in his book The Future of Socialism.

There are two separate dialogues going on within social housing, one amongst those who manage social housing and another amongst those that live in it.

For councillors and housing professionals the issue is finance. There is simply not the money to make council housing safe and liveable, as highlighted in the Future of Council Housing Report by Toby Lloyd and Rose Grayston and the Labour Housing Group Briefing, Funding Social Housing. The issue for housing associations is that their only way to find the money for safety works is to slash their newbuild programmes, frustrating the Government’s ambition to accelerate the delivery of new affordable homes.

Conversely, at meetings of social tenants, the concern is about the culture of those managing their homes, with tenants feeling disrespected and stigmatised. Angela Rayner referenced this hurt in her 2024 Conference speech saying that she will not allow ‘people like me to be treated like this.’ Those of us responsible for decision-making in social housing think we are doing God’s work, but too often our tenants see us as the enemy.

This anger has intensified post-Grenfell. Pete Apps the author of Show Me the Bodies:How We Let Grenfell Happen has given me permission to share two photographs. The photographs contrast the residents of mixed ethnic origin who died, with the people who were questioned about their culpability who are overwhelmingly white.A representation of structural racism could not be starker.

Social housing is in the same place as the health service, most tenant satisfaction surveys report that the majority of users are satisfied, but a significant minority are not, which is not surprising given that both services are chronically underfunded. Very few people who use the health service and social housing question its existence, they just want the outcomes to be better.

What forces are feeding dissatisfaction?

The first is that housing workers are blamed for the chronic underfunding of the service we provide. We are the human face of a service that is not funded to meet the minimal expectation of tenants to live in a secure, safe and liveable home.

The second is stigmatisation. As the number of people living in council housing has reduced, an historic prejudice against council tenants has hardened into stigmatisation. Many people applying for and living in social housing have had substantial experience of disrespect, stigmatisation and racism. Those of us who work in housing need to be sensitive to these life experiences.

In his only reference to council housing Crosland wrote about how the improved standard of council housing that Labour had initiated in 1946 would reduce the prejudice against council housing. Unfortunately as the stock of council housing ages and the effects of chronic underfunding become more apparent the opposite is happening today.

Breaking down power inequality

As early as 1956 Tony Crosland worried about the power dynamic emerging in large public organisations, foreseeing the potential for those without a voice to resent those who make the decisions that impact on their lives. He described power as a “Stratifying Influence”.

Power is a status-confirming attribute, with a strong influence on collective feelings of superiority and inferiority.

Tony Crosland: The Future of Socialism page 128

He identified two forms of decision-making power, the first is the remote strategic power of those at the top of social housing organisations, who few tenants get to talk to:

Such power, being inevitably wielded to some extent in secret and without collecting the voices of those most affected, has a quality of remoteness and detachment which makes it a particularly fertile source of resentment, and hence, since the disparities between controllers and controlled are so wide of deep class consciousness.

Tony Crosland: The Future of Socialism page 129

The second is the face-to-face power of the person the tenant gets to meet who either makes or communicates important decisions. It might seem odd to the hard-pressed, underpaid worker in a homelessness unit or a call centre that they have power, but this is how it is experienced by the person who needs their help.

Another feature of large organisations is a diffusion of responsibility, which means that responsibility is usually shared, making it easier for those responsible to distance themselves from the consequences of their actions. The Grenfell inquiry has highlighted the catastrophic consequences. Those on the ground argued that they were following procedures or instructions made by those higher up; conversely those at the top claimed not to know what was happening and criticised those on the ground for not exercising reasonable judgement.

Whilst Grenfell was a catastrophic event, it is common to hear from social housing tenants frustrated that no-one within the organisation is taking responsibility for sorting their problem out.

This reluctance to take responsibility was evident at the top in the previous Government, with Michael Gove criticising social housing providers, creating the Social Housing Regulator to scrutinise organisational performance, and promoting a more assertive role for the Housing Ombudsman with a focus on complaints resolution, but without providing the necessary resources to improve performance and resolve complaints.

How can transformative change be achieved?

The challenges facing Wes Streeting to transform the NHS are immense. While the NHS is hardly a simple structure, Angela Rayner’s job of persuading, incentivising and cajoling hundreds of different social housing providers to work in the national interest involves an even more complex ecosystem.

Secondly, money is tight. It is more electorally popular to fund the universal health service than needs-based social housing. However, without adequate funding it is impossible to say that the failures of Grenfell “will not happen again”, as Building Safety Minister Alex Norris promised.

There are compelling moral and political arguments for more money. The Blair and Brown Governments found £32bn over 10 years for a Decent Homes programme for council housing. The requirement is now far more pressing.

The power relationship needs to be changed. The majority of tenants are too over-committed to want to be involved in decision-making. However, they want to know that people like them have a voice and that they can go to them when they have a problem. Doing so will affect the way that organisations operate and how decisions are made.

A low-cost and quick win is to create a national body to represent social tenants’ interests, an idea suggested by Crosland to introduce a little democracy into public services. A more long-term task is to create representative bodies at local and regional levels.

A second quick win is to revolutionise the training of everyone who works in social housing, from those on the ground to top decision-makers, as mentioned by Angela Rayner in her conference speech. This must involve the discussion of the structural issues described.

A more controversial proposal is for different housing providers to come together in urban areas to form Neighbourhood Management Boards, with tenant representation. Good housing management is a placed-based neighbourhood activity. Residents are more likely to participate if they can see that they are making a tangible difference to their neighbourhood. The tenants and officers making decisions will be local and accessible. The Right to Manage for council tenants offers an example of how local management could become more formalised, with each local social housing organisation contributing a management and maintenance allowance to the Neighbourhood Management Board.

Crosland understood that cultural change cannot be dictated by national government. Tough decisions will still need to be made, some of them will not be liked by tenants at the sharp end. However, the creation of Neighbourhood Management Boards will create a structure which facilitates positive change.

When Wes Streeting was asked about his political heroes, he replied:

I guess I’m in the modernising tradition of the Labour Party, so I’ve got up on my shelf to remind myself about Crosland’s book on The Future of Socialism which I think is always worth going back to when your party’s in trouble.

Hopefully, we can apply Crosland’s insight before we find ourselves in trouble.

Andy Bates is a member of the National LHG Executive and secretary of the London Branch. He is the retired Executive Manager of a tenant managed organisation (TMO), Leathermarket JMB. He is currently a Board member of Wenlock Barn (TMO). He is a TPAS and Community Led Housing London Associate and a tutor for the Chartered Institute of Housing. 

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How the New Zealand retirement village model might work for the UK

'Woman sitting by window' from the Centre for Ageing Better's age-positive image library

Around 53,400 older people chose to live in a retirement village in New Zealand, and 130 people move in each week. This is around 14% of the over-75 demographic nationally and retirement villages have moved from being boutique and misunderstood to a mainstream housing option for older people. For more information about the sector’s growth, market share and development pipeline, see Retirement Villages Market Review | 2024 | JLL Research

Why have villages been so successful? The village promise has four key components:

  • A warm, dry, age-appropriate place to live (houses in NZ are often large and expensive to maintain);
  • The opportunity to make new friends and try new activities;
  • A high degree of financial security (residents know to the last dollar what they pay to move in, know exactly what they’ll get back at the end, and if they’re living in one of the 70% of villages that offer fixed weekly fees, the cost of living in the village will never increase while they’re living there); and
  • A pathway to aged care if that’s required. 65% of villages have a care facility on the campus.

However, this promise isn’t free. The principal business model is called a “licence to occupy” (LTO) and consists of the payment of a capital sum to move in, the payment of a regular fee (often fixed for life) to cover village day-to-day costs, and when the resident dies or moves to care, the operator refurbishes their unit to bring it back to as-new and a new resident moves in. Once the operator has the incoming resident’s capital payment, the outgoing resident is re-paid their original capital sum less a Deferred Management Fee (DMF) that, amongst other things, is the operator’s return on investment.

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This graphic illustrates the model. The resident’s capital sum is protected in the retirement villages legislation and their right to live in the village protected by contract. The consumer protection balances residents’ rights with operators’ duties and responsibilities. The key detail in this model, which enables the operator to make the promises outlined earlier, is that the resident has no ownership interest in their unit or the village, and is therefore protected from the vicissitudes of property ownership – insurance, taxes, repairs and maintenance, and so forth. For many older people, the release from the responsibilities of owning property is a major reason to move.

It’s worth noting that while 70% of villages fix their weekly fee that covers the overheads and day-to-day operation of the village, the costs the fee covers continue to increase even if the income from the fee doesn’t increase. This means that the operator directly cross-subsidizes the residents’ day-to-day overheads from the deferred management fee and any gains in re-licensing the units. Only a retirement village offers this level of financial security for older people.

Another important reason to move is the release of equity in their family home. Retirement villages charge around 70% of the average freehold selling price in the area where they’re built, which allows a resident to sell their home, move to a village and often have substantial amounts of equity to add to their retirement savings. This can make a substantial improvement in the quality of their retirement and allows them to do things they’ve always wanted to but couldn’t afford.

Where an aged care facility is part of the village, the residents get first call on a bed over someone in the community, should they need one. Over the last 10 years or so the only care facilities built have been part of a retirement village, and often the cost of providing care is cross-subsidised by the revenue (and profit) from the village. This pathway to care is another important consideration for older people, and is a key benefit offered by a village.

With the demographics on our side, the retirement village sector has a lot going for it. However, with the governing Act now 20 years old, there are calls for its review, and some stakeholders maintain there’s an imbalance of power; the operators call the shots and residents have to take it or leave it. 

In fact, the regulations encourage the development of a very flexible business models that allow residents to chose from a variety of options – price, service levels, DMF rates, sharing capital gains, and so forth. 

The government has been reviewing the legislation and recently announced that they would focus on just three issues – the treatment of repairs and maintenance, a review of the complaints and disputes regime, and encouraging operators to refund residents capital sums sooner once they move out. 

Operators are relaxed about these reforms, provided the latter doesn’t result in mandatory buybacks and the financial risks that accompany such a move. However, the proposed changes reflect innovations the RVA has already led so most operators have them well in hand.

Possible learnings for the UK

The Older Peoples’ Housing Taskforce recently released their report into an extensive study of how older people might have more choice about where they live. Recommendation Five notes the need for homes that have good age-appropriate design, are affordable, are close to where the intending resident lives and yet are attractive to housing developers.

The Taskforce’s Recommendation Eight notes the importance of offering a range of different housing types with a clear understanding of fees and costs. Their “4 Key Messages” of “Think Housing, Address Ageing, Promote Well-being and provide Inclusive Communities” are at the heart of the NZ retirement village model.

You can access the Taskforce’s report here

Retirement villages are spread across the entire country – cities to provincial and rural towns. The business model works well anywhere, provided residents have the capital sum (and even that is negotiable). Retirement village operators are also the country’s largest home builders and the Retirement Villages Association estimates that around 5,500 family homes are released annually back into the housing market. Villages are significant contributors to easing the chronic housing shortage.

The financial security villages offer residents means a significant improvement in their well-being, general health, and personal sense of security. However, only villages can offer this because the operators continue to own the land and buildings and are responsible for their maintenance and upkeep. Specialist legislation to protect residents’ and operators’ interests is an effective way to allow villages to be built, but it’s essential that the legislation is sufficiently flexible to allow different business models to evolve as the market matures.

Appendix G in the Housing Taskforce’s report includes an outline of the consumer protections in the NZ retirement village-specific legislation. It’s worth noting that this legislation was passed by the Clark Labour Government in 2003 and has generally stood the test of time well.  

The transition to care is incredibly stressful for both the resident and their family. If care is part of the village package, the stress can be much less and the transition to care is effectively seamless.

Ultimately, villages work because the residents themselves have a vested interest in making them work. Villages that are resident-led (residents manage and run the activities rather than activity co-ordinators employed by the operator) tend to be more successful, popular and encourage new people to move in.

For more detailed information about the NZ Retirement Villages sector, see the RVA’s response to the Retirement Commission’s White Paper for a legislative review.

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Will the Renters’ Rights Bill transform the Private Rented Sector?

Image by Locksley McPherson Jnr licensed under CC BY-NC-SA 2.0

The Government must be congratulated on its resolve to enact the Renters’ Rights Bill at the earliest opportunity, in sharp contrast to the endless delays to the Conservatives’ Renters (Reform) Bill which finally bit the dust before the General Election.

It is important, though, to ensure that haste does not risk loopholes in this once in a generation chance to transform the experience of renting.

Abolishing Section 21 evictions to restore the security of tenure removed by the Thatcher Government is obviously a cornerstone to transformation.  But, after more than three decades of shorthold tenancies, it will take years before renters realise that their landlord cannot kick them out, and many will continue to leave when given notice before there is general awareness that renters can once again regard their tenancy as their home.

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The Bill does not introduce ‘rent controls’, though it does expand the opportunity for renters to challenge rent increases through the Property Tribunal.  Again, it will take years for renters to become aware of this, and many will remain too intimidated to act due to the power imbalance between them and their ‘Landlord’ (the title, like the relationship, hasn’t changed since feudal times). Renters may therefore have to wait for something approaching ‘affordable’ rents until the promised seismic increase in social rented homes reduces demand.

But most important of all, the Bill has the potential to ensure that renters’ homes are decent and safe. This is clearly the aim of the Housing Minister, Matthew Pennycook. With reference to extending Awaab’s Law to the PRS during the Bill’s Committee stage, he stated, “We need to go further and ensure that no tenant is forced to live in a home that places their health and safety at risk”.   So, bearing in mind that the most vulnerable renters who are often in the very worst accommodation and will rarely feel able to fight for their right to a decent and safe home, we must devise a way to ensure that these protections are provided from Day 1 and maintained throughout the tenancy.

The best way to achieve this is through the ‘Private Rented Sector Database’ to be introduced through Regulations, following enactment of the Bill. 

We know that landlords will be required to register themselves and their properties on the Database as a prerequisite for letting. However, details of the Database have not yet been published, but we can assume that there will be a consultation in due course.

London Labour Housing Group’s view is that, after a phasing in period, landlords must provide independent evidence of compliance with physical and management standards (based on a new Decent Homes Standard and Awaab’s Law) as a prerequisite for registration. This would include evidence of current requirements (gas and electrical safety, Deposit protection, Energy Performance, etc), plus an independent inspection report, based on a physical check of health and safety requirements. This model is based on the current requirement for owners of road vehicles to obtain an MOT certificate.

While there is broad acceptance of this model for the Database, some concerns have been expressed around the availability of suitably qualified inspectors to produce reports, and of their independence if inspectors are commissioned by landlords.

While assurances can be given to counter such concerns, an alternative approach could be considered.

This is prompted by the Government’s recent decision, in relation to the Leasehold and Freehold Reform Act 2024, to accredit property agents who meet objectively approved standards under the Regulation of Property Agents (ROPA).  ROPA accreditation will include letting agents managing properties on behalf of landlords, so it would be possible to exempt properties managed by ROPA-accredited agents from inspection in advance of registering for the Database. There is no data on the number of landlords who use high-standard letting agents to manage their homes, but the majority of those who do are those with the largest portfolios, so could account for around 40% percentage of rented homes.

Conveniently, and for the first time, the Bill provides for enforcement of standards under Selective Licensing, so it would be appropriate for local authorities to inspect and enforce these standards before a Licence is issued, charging fees that will cover the costs. Thus, Database registration for self-managing landlords would be restricted to those with an appropriate Licence. The increase in enforcement officers needed to ensure prompt inspections could be met by specific training for this task, based on the short course ‘Housing Conditions and Interventions’ currently provided by Middlesex University.

We must hope that this vital issue of ensuring standards is raised at the Bill’s Report Stage on 14 January, and that these important compliance issues are given further thought when the Bill passes to the House of Lords. If the Government can get this right, the private rented sector will truly be transformed.

Jacky Peacock, OBE, is the chair of Advice for Renters but is writing in a personal capacity.

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Is there hope for housing in the Lib Dems?

Ed Davey & SSEs Paul Smith by Department of Energy and Climate Change is licensed under CC BY-ND 2.0

2024 has been a year of unprecedented success for the Liberal Democrats. With the party seeing a record 72 MPs elected in July, the party has managed to quickly turn around a decade of difficulties since their time in the coalition government.

With this comes genuine power. The Lib Dems chair three parliamentary select committees, most notably the Health and Social Care Committee. Ed Davey has two regular questions at PMQs, allowing him an avenue to forge a national policy platform.

The Liberal Democrats are also in power across 68 local authorities across the country, covering over 6 million people.   

This success puts the party in an awkward space, and one which the British political system struggles to accommodate, as a true third party, well in advance of Reform or the Greens, but a fair distance from the official opposition.

Where the Lib Dems go next is up for debate. Are they the party of attention-grabbing stunts and comical bar-charts? Or are they a serious contender for government, needing to flip a mere 25 seats to overtake the Conservatives?

When it comes to housing, this duality runs deep.

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The detail

The Lib Dems had the most detailed housing proposals of any party at the election, with over 500 words on their plans across housing delivery and homelessness. Their headline pledges were as follows:

  • Building 380,000 a year across the UK, including 150,000 social homes a year, majoring on community-lead development
  • Banning no-fault evictions, making three-year tenancies the default, and creating a national register of licensed landlords
  • Giving local authorities, the powers to end Right to Buy in their areas.
  • Ending rough sleeping within the next Parliament
  • Abolishing residential leaseholds and capping ground rents to a nominal fee

The full plan is available here, with fair detail on ending rough sleeping and empowering social tenants.

A starkly divided party

Many will be familiar with the Liberal Democrats’ divides over housing delivery, most notably at coming to a head at the party’s 2023 conference, where members defeated a motion supported by the party’s leadership which would have abandoned their target of 380,000 homes.

Some decry the party as a hub for opportunistic ‘NIMBYs’ seeking to oppose all new housing. A quick search of “Liberal Democrats” and “housing” reveals a slew of local opposition to housebuilding since the election, including in the New Forest and South Leicestershire.

But it also brings up cases of Liberal Democrats pushing Labour councils to increase their affordable housing targets in Lambeth and Southwark, highlighting inaction on an abandoned development in Wiltshire, and even facing down opposition to new homes while in administration in  the Cotswolds.

The party’s main housing figures, Vicky Slade and Gideon Amos, also have real housing experience, as a council leader and town planner respectively.

The Lib Dems in Parliament and the delivery dividing line

While some opposition parties like the Conservatives, Reform UK or even the Greens have hit out hard against some of Labour’s housing announcements, the Liberal Democrats have been more reserved in their approach.

In Parliament they have been openly supportive several of the Government’s measures, including welcoming the Government’s Remediation Acceleration Plan and voting for the Renters’ Rights Bill.

The main dividing line which they have so far placed has been on housing delivery. While the party is supportive of increasing housing supply, they have been openly critical of ‘top-down’ housing targets and have instead favoured a community-led approach, with a primary focus of delivering 150,000 social homes a year.

This was reflected most recently in Amos’ response to the Government’s NPPF reforms:

“Top-down planning diktats risk a surge in speculative greenfield permissions of the kind that the Minister is concerned about, for homes that are out of people’s reach. Instead, let us fund, incentivise and focus on the social and affordable homes that we need…”

This may be a popular rallying cry, but it ignores the reality of the past few years.

Opposing ‘top-down’ targets ignores the reality that when the last Government abandoned targets, housebuilding collapsed, and that the new Government’s approach to reinstating these has been followed by new starts increasing.

A target of 150,000 social homes a year, while admirable, ignores the fact that, even going by the more generous measure of ‘affordable homes’,  fewer than a third of this goal are currently being delivered. Using this goal as a reason to oppose new housebuilding in general, without a firm plan to deliver it, is pure opportunism.

And suggesting community-led planning as an alternative ignores the fact that few people outside of a hyper-engaged, largely more privileged minority, get involved in the planning system as it is.

While the Liberal Democrats’ vision for housebuilding may be a principled one, it appears out-of-place amid its largely more pragmatic approach. More importantly, it allows space for MPs, including the party’s Deputy Leader Daisy Cooper, to opportunistically rally against building more homes in their local area.

Is there real hope for the Lib Dems?

Unlike the other opposition parties, the Liberal Democrats have a genuine plan to solve the housing crisis, with a broad policy platform with several good ideas.

In order to have a real impact, however, the party needs to moderate its anti-housing opportunists and play less into the populist rallying cries of more minor parties. Most importantly, it needs to acknowledge that any housing policy needs the keystone of a serious plan for delivery, which recognises both the scale of the challenge and the need for a top-down approach.

More in this series:

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Confessions of a baby boomer: How my generation contributed to our failing housing economy

Image from the Centre for Ageing Better's Age-positive image library

We don’t need to recite statistics to know that young people are struggling to afford to even rent the housing they need, let alone buy it. The root cause of the problem is that over the last thirty years house prices have risen faster than earnings. To break out of it we need a sustained period during which the cost of housing (to buy or rent) increases by less than people’s earnings.

The price of land

Land for housing ranges from between 47 times its agricultural value in the East Midlands to 163 times in the south-east, and more around major cities. What drives the price of land?  There are two distinct factors.  The first is its ‘existing use value’ based on the net revenues it generates. The second is known as the ‘hope value’ – the potential increase in value from any more profitable use it might have, dependent on potential changes in its planning status. 

The combination of these gives its speculative value, driving the price at which developers compete to purchase it.

Prior to the early seventies compensation to landowners in a compulsory purchase was based on the land’s ‘existing use value’ plus an incentive to sell of typically between 15% and 20%. The judgement in a court case in 1970 entitled the landowner to the full benefit of the ‘hope value’.[i]  

During the thirty years after the war New Town Corporations developed more than 30 ‘New Towns’, providing homes for 2.8 million people, and councils funded the replacement of bomb-damaged housing and slum clearance, using compulsory purchase.  The developed housing was worth more than it cost to buy the land and build the homes, roads, schools and other infrastructure. It was done at no cost to the treasury beyond meeting the cash flow requirements through borrowing which the resultant revenues were more than sufficient to repay.  The capture of ‘hope value’ by landowners brought that to a halt.  The price of building sites and consequently the cost of new development spiralled upwards, while the number of new homes plummeted. 

This was one of three factors that lead to a tripling of house prices during the seventies. The others were changes in the way property was taxed, aimed at promoting homeownership which was seen as aspirational, and the lifting of restrictions on borrowing.

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Taxation of housing

Until the sixties homeowners were taxed each year on the notional rental value of their home.[ii] They could offset the interest on their mortgage against it, so those with a large loan paid little if any. The tax gradually increased as rents rose and loan repayments reduced the interest payments offset against it.   The exclusion of an owner’s main residence introduced in 1963 meant rented housing became more heavily taxed than homeownership despite owners being generally better off than tenants.

A similar exemption was extended to Capital Gains Tax when that was introduced in 1965. When a home is sold the buyer pays stamp duty while the capital gain from the increase in its value is untaxed, unlike the sale of any other asset. That untaxed wealth either raises the inheritance we pass on to our beneficiaries, or inflates prices higher up the housing ladder.  At the very least stamp duty which discourages mobility should be abolished, replacing it with capital gains tax which would be unaffected by how often properties are sold. While both taxes are triggered by a sale, no matter how many times a property changes hands the tax taken on the capital gain would stay the same, based on the rise in value, while the amount collected in stamp duty goes up with every change in ownership.

The enhanced financial benefits of owning over renting meant that my generation did anything we could to get onto the housing ladder. The struggle was worth it.  In a competitive housing market, the only limitation on how much we paid was the amount we could borrow. Lending restrictions were eased at around the same time and house prices boomed. We became ‘the boomer generation’.  

Finance for home ownership

Previously, the funds that building societies could lend were limited by the saving deposits they received. Mortgages were restricted to three times a husband’s earnings plus half a wife’s. They had to be married to get it. The most a household could borrow was 75% of a property’s value, with a retention against any major repairs required to ensure that it was in good condition. The growth in house prices was limited by the loan finance available.

At the end of the seventies, the mortgage market was opened up to banks which raised additional funding from the bond markets and were less restrained in their lending. Within a generation a couple buying for the first time could borrow 90% of the value of a home on more than four times their joint incomes. 

Deregulation of banking in the ten years leading up to the financial crash of 2009 increased access to global capital enabling unprecedented growth in house prices relative to earnings.

The housing market failed to respond as a healthy market should, by increasing the supply of housing to meet the growing demand.  If more is invested in housing than is spent on construction and renovation, house prices inevitably rise.  The volume of housing being built fell in the seventies and again following the banking crisis and has never recovered since.

ONS UK Housebuilding and Nationwide House Prices since 1952

My generation’s contribution

I am part of the baby boomer generation, living rent free in a home which I own outright, having paid off my mortgage. Our generation is living longer and hanging onto large family homes with spare bedrooms while our grandchildren live in overcrowded properties. The government taxes mobility through stamp duty, while discouraging us from downsizing by discounting up to £1 million in inheritance tax on the value of our homes when we die.

Very little of the wealth my generation enjoys came from savings on earned income. Most of it is in our homes, which increased in value by far more than we paid to buy them including every penny we spent in interest on our mortgages. Over the last fifty years house prices rose at 1.6% pa more than the rate of interest we paid.[iii] 

Buying a home became a cashflow problem. It may have been a struggle meeting the costs but has been extraordinarily profitable for anyone who could raise enough to get onto the housing ladder. Homeowners profit by living rent free with an asset the value of which rises year by year.

By the time our children inherit from us they may be in their sixties with their own children becoming adults.  It will arrive too late to help meet the growing housing needs of their family. For some, it will make sense to rent out a house they inherit and do not need rather than sell it. 

A home is the only investment where the benefits are tax free.  Tax should be levied in relation to our ability to pay. Yet the housing costs of anyone who has owned their home for a few years are far lower than those who are renting, and since the mid-sixties none of that additional consumer spending power has been taxed. Most would be outraged at the thought that it might be.

The value of housing for rent derives from future rental revenues making growth of the private rental market less depended on rising property prices. Stimulating a stronger rental sector while improving tenancy terms would take some of the heat out of the housing market. 

The policies Labour is introducing are undoubtedly a step in the right direction but to tackle the fundamental problems making housing unaffordable to some whilst enormously profitable to others they need to go further. Developers will only build extra homes if there are sufficient buyers able to afford prices that make it profitable, and pause when prices fall. To achieve anything like the target of 1.5 million homes a large proportion of them will need to be for private rent supplying those unable to afford homeownership, and social housing funded by capturing hope value for the benefit of the community.  

See https://redbrickblog.co.uk for informed debate on Labour’s housing policies. In particular see  https://redbrickblog.co.uk/2019/03/evidence-to-affordable-housing-commission/ and https://redbrickblog.co.uk/2018/07/part-2-the-capture-of-hope/

[i] Under the 1961 Land Compensation Act. The case was brought be a landowner in a dispute over the compulsory purchase of land for the Milton Keynes New Town. 1970 Bernard Myers vs Milton Keynes Development Corporation

[ii] Schedule ‘A’ tax

[iii] House prices rose more than mortgage interest rates in 30 of the last 50 years, and by a median margin of 1.6% (Nationwide & BoE)

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The Government has a plan to build 1.5m homes – but what is the plan to heat them?

At time of writing the reformed National Planning Policy Framework has been published making clear Labour’s intention to move full steam ahead to get as many homes built as possible. As Ed Miliband likes to say, the Government needs to “move fast and build things”. The Government has been equally ambitious on the energy side; GB Energy, the National Wealth Fund, and lifting the ban on onshore wind are all hugely welcome steps. It is clear that ambition is not something holding the Government back.

However there is a glaring gap in the middle of this Venn diagram and that is the decarbonisation of heating. According to the Energy Systems Catapult, heating makes up nearly 40% of the UK’s emissions and gas heating is the greatest cause of skyrocketing energy as gas prices increased by 11 times between 2019 and 2022 – responsible for 96% of the increase in energy bills, according to Carbon Brief. If we want to lower energy bills and meet our climate targets, we need to move towards decarbonised heating systems.

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Despite this challenge there unfortunately seems to be a gap in the Government’s policy work. GB Energy is the Government’s flagship energy policy, but the Chair Jürgen Maier has indicated the state-owned company will only be a “power generator”, seemingly excluding the provision of low carbon heat. The 2024 manifesto only mentioned low carbon heating twice, as opposed to 19 mentions of power (in the energy sense). The £3.4bn committed towards the Warm Homes Plan in the Autumn Budget is absolutely a welcome step but only a fraction of that money will go directly to the installation of decarbonised heating systems. The Government has committed to clean power by 2030, but no such commitment exists for decarbonising heat. The Government is also yet to commit to the previous Government’s targets such as 600,000 heat pump installations and a phaseout of fossil fuel boilers.

We have seen through the debate on the winter fuel allowance payment that heating is an emotive and politically salient issue. Heat decarbonisation is not only important from a climate angle, but from a social justice angle as well. The heating sector has considerable union density across the industry, particularly through GMB-represented gas engineers. Making clear investments in heat decarbonisation now is the best way to protect those workers, by sending a signal to industry that they need to invest in the heat workforce – not in five or ten years – but now. These do not necessarily have to be sole traders operating out the back of vans, as technology like heat networks allow a proper site with real progression for those operating in the heating sector. Even better, growing heat decarbonisation technologies like geothermal offer a clear off-ramp with transferable skills for gas workers.

Clear policy support for decarbonised heating is good for the housebuilding sector as well: a stronger clean heat industry will mean more installers being hired, more heat networks being developed and more R&D funding going into building decarbonisation. By supporting the decarbonised heating sector, the Government can deliver brilliant outcomes for people around the country who desperately need a warm, green and secure home.

If we seize the heat decarbonisation challenge, we can, simply put, kill two birds with one stone. By mandating low-carbon heat network connections for properties where it is appropriate, commit to a phaseout of fossil fuel heating and investing in the clean heat workforce now, the Government can get ahead of the upcoming building blitz. The alternative is having to go back and do it all over again after these properties are built, with dire consequences for growth, workers, and the climate.

This Government is capable of being ambitious, we have seen it in housing, and we have seen it in clean power. Now we need to see the same level of ambition devoted to keeping us warm.

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Kemi Badenoch’s shift right bodes ill for housing

Kemi Badenoch MP (North West Essex, Conservative) by House of Commons is licensed under CC BY-NC-ND 2.0

The 2024 general election saw the worst result for the Conservative Party in terms of share of seats and votes since its formation in the nineteenth century.

But the Conservatives’ failure should not preclude their return. Only three Conservative leaders have failed to become prime minister, and some recent polls have already put them ahead of Labour. Even a minor swing could put them back in power, with Kemi Badenoch as prime minister.

Badenoch served as Shadow Secretary of State for Housing, Communities and Local Government between the election and her victory in the Conservative leadership contest, and so we know more about her housing positions than other aspects of her views. And her approach so far demonstrates a worrying drift to the right.

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Shifting right on renters’ reform

One of the biggest disappointments of the last Government was a failure to pass the Renters’ Reform Bill. In ending Section 21 ‘no fault’ evictions and bringing in new standards to the private rented sector, the legislation would have been life-changing for millions of private renters.

While Badenoch served in administrations which introduced this legislation, she quickly pivoted after the election to oppose Labour’s Renters’ Rights Bill, which is very similar to the Conservatives’ Bill.

Speaking at the Bill’s Second Reading, she parroted the talking points of landlord lobby groups that the bill would reduce the availability of homes in the private rental sector, while failing to discuss where those homes would go.

This potential tilt away from renters’ rights was further reinforced by Badenoch’s pick for Shadow Housing Minister: Kevin Hollinrake. Hollinrake was founder and chair of Hunters’ estate agents until 2021, and was reported to have numbered among the opponents of his own government’s Renters’ Reform Bill in 2023.

Shifting right on housing delivery

Can building homes be left or right wing? Seemingly under Kemi Badenoch it can be, as housing has become part of her wider ideological conflict with the left.

This has manifested in her blaming left wing administrations in urban centres and the bureaucratic ‘deep state’ for a failure to build the homes we need.

The former continues a long-standing trend of Conservatives trying to disproportionately focus construction in urban areas.

This is for a brazenly political reason: Conservatives have long abandoned metropolitan voters and are happy to concentrate in these areas the disruption caused by building more homes. Accordingly, in 2021 they introduced a somewhat arbitrary 35% “urban uplift” to the 20 most densely populated towns and cities outside of London, and, in 2024 Michael Gove launched a review of Sadiq Khan’s London Plan as a way to criticise the mayor for failing to deliver enough homes.

Badenoch has also continued this tradition, attacking Khan on a similar basis in three of her eight speeches as Shadow Housing Minister.

Similarly, while Badenoch has made pleas to protect the green belt, she has simultaneously started to champion a deregulatory planning policy with measures to “roll back the environmental laws, the diversity and social requirements”, blaming the bureaucratic state for the failures to build more homes.

This is a disappointing hallmark of the Conservatives’ housing policy. While the party failed to meet their own housing targets, before ditching them entirely to appease ‘NIMBY’ backbenchers, their only real solution for the lack of delivery in urban areas has been, and continues to be under Badenoch, to blame local leaders.

Shifting right on migration

A further worrying trend of Badenoch’s tenure as Shadow Housing Minister has been a shift to blame migration for the increase in rent levels, stating that “The only way to improve the lives of [private renters] is to control immigration and build more homes, particularly in high-demand areas like Inner London.”

This is not a far cry from Reform UK’s dishonest blaming migrants for the lack of social housing. Unlike Reform’s argument, which is based purely on falsehood, there is some truth to the idea that any new entrants into the private rental sector will increase demand, whatever their country of origin.

However, this is only part of the picture. Migrants already have significant barriers to renting privately, including language barriers, difficulty finding guarantors, and Right to Rent checks, and so landlords when surveyed admit that they are less likely to rent to someone without a British passport. As a 2017 briefing from the House of Commons Library states:

“Research suggests that new migrants often enter the PRS in areas of low demand, filling less desirable property left by individuals moving into better housing. This may be because some groups of migrants only have access to low-paid or insecure work, but it also reflects variations in perceptions of standards and personal priorities.”

As John Perry notes, this also means that foreign nationals are more likely to live in sub-standard accommodation, the regulation of which Badenoch strongly opposes.

While Badenoch is still new in position, the direction of her housing policy so far demonstrates a concerning shift to the right, with renters, migrants and the environment thrown under the bus. This divisive rhetoric is simply a distillation of the arguments made by the Conservatives in government, and a worrying sign that Badenoch has learned little from the lessons of the past.

More in this series:

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Creating neighbourhoods, not just chasing targets, must be our planning ambition

Image by vjurleit licensed by pixabay

If Keir Starmer was to pick one success story this Christmas, it might be the growing momentum behind his government’s ambitions for housebuilding and planning reform. But as the Centre for Social Justice (CSJ) showed in a new report last month, chasing housing targets cannot be the sole ambition. Creating neighbourhoods and communities matters as well.

This week we will get two major announcements on the government’s ambitions to build 1.5 million new homes. The first was announced on Monday: an overhaul of local planning committees to fast-track certain development. The second: confirmation on wide-reaching reforms to the National Planning Policy Framework (NPPF).

Much of this is to be welcomed. It is good news that the government is showing the political will and ambition that will be needed to deliver meaningful reforms to the English planning system. We urgently need to increase the supply of new homes, and the first step must be to reduce the chronic uncertainty, delays and costs associated with getting a planning application approved.

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The only thing missing is the same ambition to improve the quality of the built environment. Although the government has expressed a commitment to improving good design and quality, we have yet to see meaningful action to back up their words. What we do know is to expect confirmation of the removal of six references to beauty within the NPPF. This follows the closure of the Office for Place (the body set up to help local authorities create beautiful, successful and enduring places) last month.

It is understandable that Labour ministers cringe at legacy bodies like the Office for Place and seemingly subjective references to beauty left by the last government. However, the decision to scrap both are a missed opportunity to promote good quality and attractive development, as well as to increase public support for housebuilding.

CSJ polling finds that the public are suspicious of development and are generally negative on how well new build housing contributes to the existing community. 62 per cent of adults say they have no meaningful say in how their area develops over time. 52 per cent say that local people do not have enough power to block new housing development. Nearly half (49 per cent) say that architects and planners are out of touch with what local people want in their community.

An emphasis on place-making and beauty are not just conservative concerns. Neither are they NIMBYism (not in my back yard) in disguise. In fact, there is a rich socialist heritage to draw on that emphasises objective goods in our built environment. For example, spaces which contribute to community life, improve the living conditions of the most disadvantaged, and tackle inequalities like air pollution’s disproportionate impact on the most deprived areas. As the post-war Labour Minister, Nye Bevan, once said: “While we shall be judged for a year or two by the number of houses we build…we shall be judged in ten years’ time by the type of houses we build.”

Looking back over the last decade, the previous government’s record on housing can be judged a failure on both counts. There is an affordability and quality crisis. An unhealthy built environment is fostering social ills like the epidemic of loneliness that government data published last week, shows is worse than ever before. A record 3.1 million adults said they felt lonely often or always last year.

The built environment is fundamentally associated with loneliness. For example, CSJ analysis has found a statistically significant relationship between loneliness and access to green space. Over half of adults who have access to green space never feel lonely. But for adults who have no access to green space, this relationship reverses. Over half say they feel lonely.

Green spaces, walkable streets, community infrastructure and gentle density all contribute to a beautiful and socially connected built environment. These are exactly the features that should be prioritised in design codes as a way of giving certainty to developers. These are documents which contain design requirements for the physical development of a site or area and can be produced in consultation with local people.

If you meet the criteria outlined in locally produced design codes, the answer to development applications should be a resounding yes. Whilst government has indicated their enthusiasm for design codes as a way of increasing building, the closure of the Office for Place which was set up to help local authorities actually do this, appears inconsistent.

Alongside the positive announcements this week, we need to see a tangible guarantee that the government will improve the quality and design of new housing across the country. In particular, how the work of the Office for Place is going to be continued by the Ministry of Housing, Communities and Local Government. The government should not miss the opportunity to bring the public along with them on the journey to 1.5 million new homes. If not, the political and social ramifications could be huge.

The government’s proposals for housebuilding are centred on economic growth. This is understandable and important. But growth should not be the only aim. The government must consider its duty to support the creation of places that foster social connection, community and belonging. A decade of national renewal depends on it.

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A plan to boost construction industry capacity to deliver 1.5 million homes

Image by abakumada licensed by pixabay

Moving from such a low base in home building to achieve ambitious targets in a relatively short time frame will create challenges in every aspect of how the construction industry operates.

The government must engage with all the key sectors of the construction industry that will have a role in delivering their planned large-scale home building programme and develop a capacity boosting plan. Also, this plan’s success will rely on its alignment with a training and skills capacity boosting initiative

Any proposed capacity boosting plan should include two key aspects:

  • Delivery capacity building – How to structure the overall design and building of homes, neighbourhoods and towns.
  • Organisation capacity building – How to structure the development corporations and other entities charged with developing homes, neighbourhoods and towns.
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Delivery Capacity Building

How Development Corporations should be set up

To facilitate the large-scale home building programme, local development corporations will need to be created from new, as happened with the creation of the post-war New Towns. The effort and time to build such organisations simultaneously  should not be underestimated,  and a plan to adopt a ‘lean model’ corporate template set-up should be established.

In simple terms, a ‘lean model’ would mean that development corporations would outsource a sizeable amount of their workload to private sector specialist consultancies, allowing them to focus on their core mission.

Engaging consultancies could  leverage their existing skills base and know-how, and share responsibility for capacity building to the private sector, spreading risks associated with development.. This approach would enable more efficient and accelerated project completions.

How Master Planned Developments should be built out

To build at scale, larger master plan developments will be needed. Whether these will be development corporations or other entities such as housing associations, councils or private developers, an ‘enabler’ approach involving sub-developers for various asset types should be used.

An ‘enabler’ approach would involve the master developer selling on parts of an overall master plan development to sub-developers while still maintaining a level of control.

This will allow for the sharing of the delivery burden and development risks allowing the overall delivery to be expedited while still maintaining overall master developer control.

The key to maintaining overall control of what is designed and built is for the master developer to have a comprehensive design guide for all parties involved to adhere to. A comprehensive design guide provides criteria specific for private sector consultants, construction contractors and sub-developers to work to while still allowing for innovation and a broader range of products and ideas from these other partners.

Some of the master plan developments will be new towns by definition and will be developed in accordance with the planned ‘New Towns Code’.

How Statutory Authorities Involvement should be streamlined

Local authority involvement via planning and building control departments is a critical component of delivering a mass home building programme so it is essential that there is an increase in funding and staffing levels. This was acknowledged in the last budget with a GBP £500m boost in funding exactly for this purpose.

In addition, there should be a plan to significantly increase the volume of developments that can be processed by consolidating local authority workloads. This can be achieved if the current reform of the planning regulations simplifies planning by zoning or other similar proposals.

This entails a designated area being provided with a set of development criteria such as land usage, type, height, set back dimensions, etc. If developments are designed to meet these there should be no need for the local planning authority to assess each development individually.

Why its essential to incorporate Modern Methods of Construction (MMC)

Embracing all of the current Modern Methods of Construction (MMC) on a substantial scale will also enhance delivery capacity by increasing build speed, reducing costs and reducing the need for skilled labour on site. The offsite factory mass production of building components or partially assembled units has mostly worked in the past where a large volume of residential, educational, medical or other assets have been needed.

MMC has faced some difficulties in recent years, partly due to a lack of a steady product supply line, with innovation and choice not at the level of countries where this is more prevalent. The large-scale build program will resolve the supply issue, but the government’s plan should be to reinvigorate the sector with some expertise from countries where MMC is better developed such as Germany. This could be done by creating a centre of excellence or sponsoring partnership L&D programmes for UK companies to learn from foreign companies.

The plan should include ‘modular kit homes’ for self-builds by individuals, small builders or developers. While self-builds would not contribute to public housing, the UK has much potential to develop this sector, offering direct competition to the professional home building developer sector as well as adding overall housing supply.

Organisational Capacity Building

Making Development Corporations centers of delivery excellence and best practice

As noted earlier,’ establishing a wave of new development corporations will be a feat in itself, and the know-how and skillsets required for this in the current market will be limited. In addition to the ‘lean model’ , to attract the best skilled individual people in a competitive market, these new corporations should prioritise becoming ’employers of choice.’

Being an ‘employer of choice’ by having a work environment, benefits and culture that attracts the best new joiners and retains existing employees should be complemented by a substantial training programme for graduates. This should be supported by educational and professional institutions, to cultivate a high ratio of trainees across various business roles. Opportunities for upskilling and training of staff in general should be part of this, and the development corporations should aim to set the benchmark in the industry.

How to effectively monitor and control a large-scale home building programme while its being delivered by many organisations

As part of building capacity, there needs to be central monitoring and control of this large-scale home building program across all delivery entities and all local authority areas to ensure there is a level of uniformity in monitoring metrics across the board in terms of value-for-money, delivery outcomes, good design, timelines, quality products, etc.

A development corporation or any other type of delivery organisation will monitor their development work and pass on collected data to a central overarching body such as a dedicated unit within the Ministry of Housing, Communities and Local Government (MHCLG). This data is used to decide what is and is not working and can be continually assessed to enable strategy updating over the life of the programme.

To achieve this, when development corporations are established, a standardised set-up template encompassing all corporate aspects should be used to streamline the establishment of the many required development corporations and other delivery entities, ensuring synergy, avoiding disruptions, and expediting delivery. Additionally, a best practice residential development delivery template should be used, covering investment, procurement, design and construct stage gates, complete with a Project Management Office (PMO) setup for every delivery entity.