Category: Blog Post

by Monimbo

Senior housing policy expert writing under a pseudonym.

This was the headline promise from the leaked version of Labour’s manifesto. How feasible is it?
Labour seems to have stepped back from a much more ambitious – arguably, far too ambitious – target of delivering 500,000 affordable homes over a five-year parliament. The new pledge – if it is included in the final manifesto – is still ambitious but appears much more realistic. It says ‘By the end of the next Parliament we will be building at least 100,000 council and housing association homes a year for genuinely affordable rent or sale’. Let’s have a closer look at what it would require.
Assuming for the moment that ‘genuinely affordable’ has the same meaning as under the coalition, the statistics show that neither Labour nor the coalition came close to delivering 100,000 units in recent years. DCLG’s live table 1000 shows that Labour’s peak output was 61,090 in 2010/11, and the coalition managed 66,700 in 2014/15. Output fell sharply in the following year, to only 32,630, because the end of the previous financial year had been the cut-off date for the previous Affordable Homes Programme.
The pre-election Tory government had a target of ‘delivering 275,000 new affordable homes between 2015 and 2020’, suggesting output of 55,000 per year, far below Labour’s new target but higher than current performance (albeit, of course, the definition of ‘affordable’ is now widening and its meaning in the this context isn’t defined). In crude terms, therefore, Labour is both aiming to almost double the Tories’ planned output and tighten the definitions to make affordability ‘genuine’.
Can it be done? The first and most obvious requirement is money. John Healey, Labour’s housing spokesperson, developed his ideas on a Labour building programme in reports for the Fabian Society and for the Smith Institute a couple of years ago. The chart shows how the programme would build up over 5 years, from about the level that it’s at now.

Roll this forward to start two years later, in 2017/18, and you get an idea of what Labour’s programme might be. Just over a fifth would be non-grant-funded, which now seems a little unambitious given that the NHF’s regular bulletins show about 40% of homes get no grant funding. Healey’s Smith Institute paper also forecast 16,000 homes coming from developer contributions, of which 80% would require grant: in fact, NHF figures suggest about 40% of homes come via developer contributions, most without grant funding. The proportions with nil grant and via developer contributions heavily overlap, and of course more grant would be needed if rents were to be ‘genuinely affordable’, but the NHF figures suggest that the Healey plan is far from unrealistic in its expectations of how much can be achieved without grant.
Healey’s costings rely heavily on savings in housing benefit, which of course are real but accrue over the long term, and the credibility of the plan when judged by bodies like the OBR and IFS hangs on the immediate capital and revenue costs. The main element of his plan would require grant levels of £60,000 per unit to deliver many more dwellings for let at social rents, rising to about 78,000 (out of the total 100,000 target) in the fifth year. This would cost about £4.6 billion in capital in the final year, without taking account of savings in the benefits bill.
How feasible is that level of expenditure? As it happens, it’s comparable to spending in the last year of Labour’s National Affordable Housing Programme, which invested an average £3 billion per year and reached close to £4 billion in 2010/11. After taking into account the limited inflation since then, there is hardly any difference between to two. Furthermore, as Red Brick readers know, the Tory government is currently investing a massive £50 billion in housing, via grants, loans and guarantees, over the period to 2020/21. Only some 16% of this is destined for affordable housing. Even with Labour’s apparent commitment to keeping the Help to Buy scheme, there is plenty of scope for redirecting more of this money into social housing.
Of course there are many other pieces of the jigsaw that need to be put in place, not all of which can be examined here. First, social landlords’ finances have to be stabilised, which means a coherent policy on social rents to replace the frequent changes and recent drastic cuts made by the Tories. Second, the council housing finance settlement, which John Healey pioneered as minister, needs to be reinstated as he originally intended (it has been ripped to shreds by the Tories). Third, reforms will be needed to achieve more planning permissions, developer contributions and land supply, building on the work of the Lyons commission. Fourth, especially following the EU referendum, there is a growing problem in the building industry of both capacity and standards. Fifth, there is urgent work needed on the Tories’ so-called welfare reforms to ensure that the worst elements are curbed and that tenants can pay their rents. And sixth, we must not (like the Tories) neglect the existing stock, which also needs massive investment to maintain and exceed Labour’s very successful Decent Homes Standard.
This is why building up to higher output over five years, making full use of housing associations, councils and developer contributions, is very sensible. It not only allows the financial contribution to be stepped up progressively but also gives time to tackle the other massive challenges of delivering such a big change in government housing investment priorities. But no one should argue either that the programme isn’t feasible financially or that it’s not needed. This programme is ambitious but, with care and effort by a new dedicated Minister of Housing, it could be delivered.

by Monimbo

Senior housing policy expert writing under a pseudonym.

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.

by Monimbo

Senior housing policy expert writing under a pseudonym.

If social housing provision in the United States is already highly marginalised and directed towards the very poor, it’s due to get worse under the next president as budgets are hacked back. And the appointment of the new secretary for housing could be the worst news of all.
Social housing in the US caters for barely one per cent of households, and is disproportionately occupied by the very poor, with one-third earning less than $10,000 per year. Nearly half of tenants are black, even though black people make up only 19 per cent of the population overall. But the Housing and Urban Development department, HUD, has a budget of $47 billion overall, because its housing voucher programme assists millions more poor households in the private rented sector. With the focus of its spending so strongly on the poorest and on black communities, it’s easy to see it as a potential target for Trump’s budget cuts.
Traditionally HUD has been a low-key cabinet post awarded to a competent administrator (the incumbent is Julian Castro, a Clinton supporter and former city mayor). Even previous Republican presidents usually put it in safe hands. But Trump has appointed the uniquely unqualified Ben Carson to be the new secretary, a man whom even his friends describe as having ‘no government experience’ or ability to run a federal agency. However, Carson does have one characteristic that may have suggested to Trump that he was right for the post: he’s black, and originally from a poor background. Perhaps because of this he was initially thought to be the only pick for the HUD position who had actually lived in a public housing scheme (it later turned out he hadn’t).
What he does have, apart from his ‘gifted hands’ as a highly competent brain surgeon, is a strong commitment to small government that means he’s hardly likely to fight for the bigger budget that HUD badly needs. At present, almost all new rented housing is created for middle-income earners and above. Despite being a person of colour, Carson’s on record as opposing Obama’s attempts to get HUD to put more social housing in wealthier neighbourhoods and to challenge discriminatory practices that the agency has tolerated. Obama, according to Carson, is guilty not just of social engineering but of failed socialism. In the UK we would call it trying to create mixed communities. In the US the principles are enshrined in the Fair Housing Act, and it would be an extraordinary irony if it were a black housing secretary that had to be taken to court for failing to observe this particular law, because of his belief that poor people must continue to live in poor areas.
Indeed, Carson’s priorities, if he follows them when he takes up the HUD post later this month, could hardly be more misplaced. Federal housing policy has in key respects been a disaster for the poor and for minorities in particular. The failed, state-backed mortgage giant Fannie Mae was guilty of leaving many poor households destitute as a result of the crisis in and collapse of the ‘sub-prime’ mortgage market in which it had had a major role. Empty homes that have been foreclosed (repossessed) are often mismanaged (see photo), especially those located in poor areas, making it more likely that the former owners are still in debt and unable to obtain new credit. Homelessness has surged: more than half a million people are living on the streets, in their cars or in official shelters. Several cities, such as San Francisco and St Louis, seem to have decided to launch a war on the homeless rather than on homelessness. At the same time, social housing is far too small a sector to cater for the millions in need who are, of course, now much less likely to ever become home owners. New housing policies, like those which Bill de Blasio is pushing in New York, are needed across the United States.
The incoming housing secretary, however, believes that ‘poverty is really more of a choice than anything else’. Oh, and he doesn’t believe in evolution either, or that abortion should be permitted in any circumstances, and he thinks that gun control in pre-war Germany may have fostered the rise of Hitler and produced the holocaust. He was also the would-be presidential candidate with an unusual theory about the origin of the pyramids, leading one person to tweet that ‘it’s amazing how one can be a neurosurgeon and a dimwit at the same time’. Welcome to the Department of Housing and Urban Development, Ben Carson.

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.

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?

by Monimbo

Senior housing policy expert writing under a pseudonym.

Spot the lies in this justification by the government of its pay-to-stay plans: ‘It’s simply not fair that hard-working people are subsidising the lifestyles of those on higher than average incomes’. Aside from the fact that it implies that social tenants aren’t hard-working (how else would they be earning more?), the two outright lies are that they receive taxpayer subsidies and that it is only those on above-average incomes who will pay more. In fact, all but the lowest ten per cent of earners will be within or very close to the pay-to-stay threshold, because DCLG have been forced to set a very low starting point (£31,000 outside London, £40,000 within) in order to increase the projected income from the scheme. And of course, the government never misses a chance to refer to social tenants as ‘subsidised’, even though those on slightly higher incomes with little or no dependence on housing benefit are among the least subsidised householders in the whole housing market.
Red Brick makes no apology for saying ‘we told you so’ on pay-to-stay since we were among the first to draw attention to the risks. Back in 2011, when first mooted by Grant Shapps, it would have applied only to so-called wealthy people who choose to live in council houses and whose combined earnings came to over £100,000. It was of course aimed at people like the late Bob Crow, who earned £145,000 and had the temerity to live in a housing association flat. In response to widespread criticism that, if set at that threshold, the scheme would cost far more than it would generate, DCLG shifted the starting point downwards. Red Brick predicted four years ago that this would be even more of a bureaucratic nightmare, since it would draw all tenants into having to declare their incomes and any changes to them. This point is now confirmed by Southwark council, who say that means testing tenants is an ‘expensive exercise in futility’ that could cost authorities millions to administer. If it has to be done, they want HM Revenue and Customs to do it for them.
And in any case, the extra red tape could now generate only £75 million annually, according to the LGA, rather than the £365 million that the government projects. This would add less than a paltry 0.8% to rental income, before admin costs are deducted, meaning the scheme could potentially produce no net income at all. As Jules Birch has pointed out, the government’s own assessment indicated that (at least in the first year) admin costs could be as high as £65 million, and Southwark’s warning shows that in practice this is very likely an underestimate, especially given the increasing variability of household earnings among those on modest incomes.
Even if the scheme does produce a small surplus, in a travesty of the principle that council housing is now self-financing, the money will have to be repaid to government. When council housing bought its financial independence in April 2012 by paying £7 billion to the Treasury, the government said this meant councils would ‘keep all the money they receive from rent’ and for tenants that ‘the level of rent you pay will continue to be a decision for your council’. It took barely a year for the government to issue the consultation paper which broke both these promises.
There are plenty more arguments against pay-to-stay too. It will be a disincentive to precisely those people who have jobs that pay modest salaries and who might want to try to earn more. It will encourage more tenants to exercise their right to buy, at which point of course they really will get a massive subsidy to help them buy their house, of a size unavailable to other first-time buyers. And it will lead to the further residualisation of social housing, eroding the mixed communities which were until recently an important aim of housing policy. As Natalie Bloomer commented on politics.co.uk, social tenants are now penalised for having too many bedrooms, penalised (by the benefits cap) if they don’t have jobs, and will soon be penalised if they do. The message to social housing tenants is: ‘If you don’t work, we’ll punish you. If you do work, we’ll punish you’. And as evidence of how struggling households will suffer, the Guardian has helpfully compiled some tenant stories of what the scheme’s consequences might be.
Fortunately, opponents of this daft policy appear to have an ally, someone who says that ‘while we continue to help the worst off we will also be focused on the millions of people for whom life is a struggle and who work all hours to keep their heads above water.’ She (and that’s a clue) has set up a powerful working group that will aim to make ‘life easier for the majority of people in this country who just about manage’. Yes, it’s Theresa May, whose newly stated policy aims appear to run counter to those of the pay-to-stay scheme, and it’s Sajid Javid, the communities secretary, who joins her on the new working group. Ditching pay-to-stay would be an excellent no-brainer for the group when it first meets. After all, ending it would cost practically nothing while saving the government from a potentially embarrassing policy failure.

by Tony Clements

Former policy advisor to Rt Hon John Healey MP during his tenure as Minister of State for Housing and Planning. Executive Director of Place for Ealing Council.

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This post also appeared on Progress Online.
Labour has gone big on helping private renters in recent months. And we’re right to. With ever more people forced to rent from private landlords, including 1 million families, we need to improve standards and give people greater security in their home.
However, we should remember that ‘Generation Rent’ still aspires to join our nation of homeowners. 77% of renters under 40 want to own their own home, but 64% believe they have no prospect of ever doing so.
Traditionally in Britain even those on moderate and low incomes have been able to buy their own home. That is less and less the case. Homeownership is increasingly restricted to older people and people with access to the bank of mum and dad. The rest are locked out. That is a cause and a consequence of greater inequality.
Helping people on moderate incomes buy their own home is a progressive policy. Financially, it means more people can own a valuable asset. Socially, it means more people have security and independence in the place where they live, can put down roots and be part of a community. These are hardly luxuries that should be confined to a shrinking number.
To expand the number of homeowners again we need to build more homes. People cannot buy because prices are too high and prices are too high because we have too few homes. No policy will succeed in the long-term if it doesn’t build more homes.
That’s where the Conservatives have failed. Their Help-to-Buy policy has made mortgages more available, but they’ve failed to build so prices are being driven upwards again – raising the bar ever higher for people on normal incomes.
So, what could an incoming Labour government do to support people into homeownership?
1) We could lift the artificial restrictions on local authorities from building their own homes. Council housing doesn’t just need to be for social rent; there’s no reason why it can’t be shared ownership or for sale. After more than two decades of restrictions, councils now have built-up capacity that they can put to use in economically difficult times.
2) We must change the rules of the game for the private development industry. At present developers benefit more from a lack of supply and high prices than they do from building more homes. Public policy needs to change those incentives; penalising those developers who hold on to land without developing it and making the market more competitive by supporting new firms to enter the market.
3) Councils, housing associations and the private sector could build more for rent now on long-term secure tenancies and give tenants the right to buy those homes or convert them into shared ownership when they are able. Tenants get the benefits security in their home right away and then build up their ownership over time.
Homeownership isn’t the only way to have a secure and good quality home and Labour’s right to improve the lot of Britain’s renters, private and social. However, to meet the aspirations of the majority of people we need a new model of homeownership and one that doesn’t fuel the inexorable house price rises of the past.
– For a different and far more intelligent version of “having more ordinary home owners is progressive”, try Toby Lloyd here.