Two recent surveys show how much concern there is among housing professionals about the failure to replace houses lost through right to buy. First, in March, in responding to the LGA’s housing self-financing survey, 71% of authorities said that the rules about capital receipts fail to let them build sufficient houses. Then a recent CIH member survey showed that one of their top three demands was to be able to make better use of right to buy receipts (see the graphic above). This is hardly surprising when the latest figures show sales to have risen to over 10,000 over the twelve months to last September (in DCLG live table 691), compared with just 4,000 for the twelve months before that. Over the same period when councils were forced to sell more than 10,000 homes, they were able to build less than 1,000.
The government’s pledges to replace right to buy sales were always qualified as applying only to the sales generated by higher discounts, which for the past two years have been at a maximum of £75,000 outside London and (for the past year) £100,000 in London. Furthermore, local authorities were expected to finance no more than 30% of the cost of a new house from receipts, funding the rest from other sources. The final twist was that replacement units have to be let at Affordable Rents, so they are not really replacements at all.
Even so, one-for-one replacement now looks like a sick joke. And what has been the government’s response to the haemorrhaging of social-rented stock? – to further promote the right to buy. It wants to reduce the qualifying period from five to three years through the coming Deregulation Bill. It’s going to appoint right to buy agents to facilitate sales and waste £100m in the process. And Eric Pickles wants to increase the maximum discounts still further and ensure that in future they keep pace with inflation.
As CIH pointed out in commenting on the original plans to ‘reinvigorate’ the right to buy, the problem with setting ever higher discounts, combined with the complex rules about reusing them, is that there simply isn’t enough money left in the pot to pay for replacement housing at local level. Apart from the rather blatant evidence provided by the new build statistics, the predictions made by CIH are also supported by the latest figures on capital receipts.
DCLG live table 692 shows that receipts in the past year (the money that came in after allowing for discounts) totalled £665m. Given that councils can build a house for an average cost of £125,000, these receipts could have financed over 5,000 new homes. They won’t of course, because the Treasury siphons off a hefty proportion of receipts and also imposes the rules noted above about replacements. The effect is to give far more priority to repaying debt than to building new homes. In other words, the right to buy offers the perfect combination for the coalition government: it helps to reduce government debt, it promotes home ownership and it cuts the numbers of council homes by ensuring that the best ones are sold off at knock-down prices. A better Tory housing policy is difficult to imagine.
Category: Uncategorized
Today Ed Miliband rides to the rescue of ‘Generation Rent’ – taking the boldest of steps and bringing together a number of Labour’s big themes – by promising thorough reform of the private rented sector.
Tackling the cost of living crisis, taking on vested interests, intervening in a hugely dysfunctional market, extending the core rights of consumers, and tackling the cost of benefits by sensible reform – all in one new policy which matches his energy prize freeze as a spectacular initiative.
For years now, people have been saying ‘something must be done’ about the private rented sector, and now ‘something’ is on the agenda. It’s the right thing to do, it’s audacious, it’s imaginative, and it’s not before time. And it will come under sustained attack from the Tories and from the less enlightened end of the landlord lobby. Already the lead Tory buffoon Grant Shapps has called it ‘Venezuela-style’. He has apparently never heard of Germany or Ireland, where rules similar to these have been successful and led to a much more stable private rented sector. I suspect Shapps knows next to nothing about Venezuelan housing policy and is ignorant of the great success of the late Hugo Chávez’s Great Housing Mission, which aimed to build 350,000 houses in 2011 and 2012 – a target actually exceeded by nearly 25,000. Shapps can only dream of matching Venezuela’s housing achievements, or even those of Angela Merkel.
No other major UK industry has been left in such a mess for so long. Despite being a supposed ‘free market’, private renting is a major cost to the taxpayer: it benefits from a patchwork of subsidies, guarantees and tax reliefs and is the main driver behind the escalation in housing benefit costs. Encouraging private renting rather than building social housing has been one of the biggest policy blunders of the last 25 years. A hugely expanded sector is here to stay but it must be brought into the modern world where there is a greater equivalence between the power of the producer and the rights of the consumer. As with Labour’s energy reforms it is the role of Government to step in and provide regulation when the producer gets their own way for too long, benefiting both tenants and landlords although, crucially, not letting agents.
By making a longer-term tenancy the ‘default’ position in a letting contract (with suitable exemptions), with capped rent rises during the term, Labour is dragging the sector into the 21st century. Labour has learned from some of the more successful examples abroad, where private renting is seen as a stable long-term investment rather than a ‘get rich quick’ hedge bet. And before the Tories and the vested interests get their arguments running, let us be clear that this is not ‘old fashioned’ or ‘blunt’ rent control which is blamed for bringing the private rented sector almost to extinction in the decades up to 1988. It is a modern approach, tempering the market and cooling price increases whilst giving occupants – who increasingly are families with children – a greater sense of commitment to their home and some security on which to build the rest of their lives.
The three elements of the reform package are:
- three year tenancies to be the norm, with suitable exemptions (eg a mortgage covenant and students) and a 6 month probationary period.
- an upper limit on rent increases during a tenancy.
- scrapping extortionate letting agent fees to tenants, saving tenants an average of £350 for each letting.
Miliband plans to deal with some of the usual criticisms made of longer tenancies and greater security: that landlords may need to sell their property or may need it for their own use. These will be reasons for regaining possession, but ending a tenancy to get a higher rent (the letting agents’ favourite) will not be.
Ed Miliband said: “One of the biggest causes of the cost of living crisis in our country is the price of renting or buying a home. People simply can’t afford it, they’re priced out, saving for a deposit year after year, decade after decade, or having to look for somewhere to live further and further away from where they go to work or where the kids have always gone to school.”
Coming on top of the commitment to build 200,000 homes a year by the end of the next Parliament, and the growing interest in developing a strong ‘benefits to bricks’ policy to curb housing benefit spending, Labour’s housing policy is beginning to take shape.
Categories
Obituary: Richard Crossley OBE
The first chief executive of the National Tenant Voice, set up by Labour but abolished by the Coalition Government shortly after the last election, has died of the rare peritoneal cancer aged 64. We were friends for 42 years.
Having worked at the front-line of community development for his entire career, Richard was seconded from the Priority Estates Project (PEP) to the Communities and Local Government Department to work on neighbourhoods policy before being asked to project manage the setting up the new National Tenant Voice (NTV), designed to make social tenants much more influential in the development of policy at local and national level.
Richard’s networking and people skills – honed on estates around the country – were crucial in negotiating the minefield of civil service rules and procedures, and getting the Treasury and Cabinet Office behind the project – a quango run by tenants wasn’t a concept they entirely understood. Richard made it happen but he also made sure that the tenants’ movement stayed in firm control of the project. Following its establishment, which involved bringing together tenants from all over the country into a National Tenant Council, Richard was appointed as the first chief executive. Regrettably, he was hardly in post before the incoming Coalition Minister, Grant Shapps, abolished the NTV and pushed tenants out into the policy wilderness again.
Richard’s career was unusual because he had no intention of climbing the greasy pole. He loved working with tenants on the ground and realising the untapped potential of community leaders in some of the country’s most deprived communities. His first job, a rare step for a civil engineering graduate from Nottingham University, was with Cambridge Cyrenians, followed by a four year stint doing community work in North Paddington. Then on to Stonebridge Estate in Brent, setting up the Charteris Neighbourhood Management Co-op in Islington and the tenant management scheme on Belle Isle Estate in Leeds (both still successful after 20-30 years). He then worked for PEP until his Government secondment, helping and advising tenants on estates all over the north of England.
Richard’s decision to leave London and return to Yorkshire in 1984 was a watershed moment for him. He was a real, but not stereotypical, son of Yorkshire – West Yorkshire to be exact. Born and raised in Halifax, the son of a monumental mason, the area was in his blood. From there he could easily reach his beloved Yorkshire Dales and even the Lake District to indulge his other passion – walking the fells. He settled in Leeds with his partner Jane Williams, conveniently almost within touching distance of the cricket ground.
In Headingley Richard and Jane set about building a new community spirit, with a range of projects on the go at any one time. With others they formed the hugely successful Headingley Development Trust which now runs a series of projects including HEART, a large social enterprise centre packed with activities. Amongst other things, Richard loved organising the film club, with the selection of films decided by the members.
In 2012 Richard achieved one of his life ambitions, to go trekking in the Himalayas. His high point was Gokyo Ri, a peak 5200m above sea level commanding an astonishing view of the Everest range and much more. To get there he had to endure snow, severe temperatures of -20c and the effects of altitude. He took it all in his stride and, as a regular runner (having competed, for example, in the Great North Run) he seemed to be at the peak of his fitness.
Within a year of the trek Richard had fallen ill, had a bowel operation and then been diagnosed with a rare and incurable cancer of the peritoneum. Intensive treatments followed at ‘Jimmy’s’ hospital in Leeds and the Christie in Manchester, but, as his health declined, Richard launched a new adventure. He started writing the most extraordinary blog, detailing his illness and treatment, but also his reflections on life and death: he was a humanist and did not believe in the afterlife. He praised the wonderful staff of the NHS and reflected on his career and housing policy, and on his love of the dales and mountains. He criticised the language of cancer: I’m not battling an external force called cancer, he would say, I’m living with it: when I die, it doesn’t win, it dies too. He wrote movingly and inspiringly, completing his last entry days before his death.
Richard’s blog stands as a testament to a uniquely strong and emotionally literate person, full of compassion and empathy but with the competitive streak of an activist. A long-term supporter of CND, his politics were a mix of red and green, but his distinctive contribution was as the unwavering advocate of much-maligned social tenants. He had an enduring belief in the ability of ordinary people to work collectively to take greater control over their lives and environments.
In January 2014 Richard received an OBE for services to neighbourhoods and tenants. It was a just award, even for a committed republican. But it took a superhuman effort (by him and his family) to come to London for the Investiture in March 2014. Despite his now extreme ill-health and weakness, Richard refused a wheelchair and walked the whole event, taking the family for a celebratory coffee and cake afterwards. He even managed to talk to Prince Charles about the advantages of tenant management.
Richard’s wish was to spend his final days at home, which he achieved with the loving care of his partner Jane, daughter Emma and son Alex, and many other family and friends.
Richard Crossley OBE, born 11 January 1950, died 21 April 2014.
Steve Hilditch
It’s a long time since waiting lists did what they say on the tin. But the changes resulting from the latest DCLG guidance mean they will soon be more a barometer of local politics than of housing need.
Back in the good (or bad?) old days, anyone could put their name down on the waiting list for a council house and many people used to do so as an insurance policy. The last Labour government arguably had contradictory lines on this. In its quest to reverse the 1996 Tory homelessness legislation, its Homelessness Act in 2002 made waiting lists open to anyone (except those ineligible because of their immigration status). However, it later began to backtrack and encourage councils to adopt a ‘housing options’ approach to housing applicants. Some councils implemented this enthusiastically, notably Portsmouth who by reviewing old applications cut their waiting list from 12,500 to 2,500. Nevertheless, the 2002 requirements stayed in place.
The coalition saw the rise in waiting list numbers over recent years in England as resulting partly from these open lists, which in its view encouraged people to register even when they had ‘no real need of social housing’. The Localism Act 2011 introduced the concept of ‘qualifying persons’ who would be eligible to apply for housing, and gave considerable discretion to local authorities to decide who they should be. That said, the initial guidance wasn’t very different from the previous government’s: both emphasised a ‘housing options’ approach.
This changed last December when the government more specifically encouraged councils to give preference to local people, or those who have ‘a close association with the local area’. Its recommended ‘residency requirement’ is now two years. As a result of the various changes different councils have been trimming their lists (while equally some have done nothing). For example, Bournemouth seemed to follow similar practices to neighbouring Portsmouth in cutting its list from 9,425 to 3,177.
There is a difference between applying a residency test for entry to the list, and applying one before an allocation is made. It’s relatively common, for example, to have a local connection test like Dover’s which requires applicants who get an offer to show that they’ve lived there for three out of the last five years.
However, the changes seem to have launched a war of attrition in London, with various Boroughs implementing increasingly tough criteria before people can even get onto the list. Most now have a three-year test. But last year both Hammersmith & Fulham and Brent introduced five-year residency requirements for entry to the list. In Hammersmith’s case, this enabled them to cut its numbers by a gigantic 90% to only 768 applicants. Then Hillingdon upped the ante by introducing a ten-year residency requirement. Barking and Dagenham have just followed on by also adopting a ten-year test.
It is interesting to read the paper to B&D’s cabinet meeting on 8 April on its housing allocations review. Officers put forward options of having two-, five- or ten-year residency tests. In their assessment of the variable impacts, they judged even the five-year test would have a disproportionate impact on BME residents (they form three-quarters of those affected), with other affected groups being young people and those with jobs. Nevertheless officers recommended a five-year test.
They appeared very concerned about the impact of a possible ten-year test, because of those who would then qualify 80% would be white British – even though they now form only an estimated 40% of B&D’s population. Their equalities impact assessment indicated that it would not only disproportionately affect BME groups, but that these are also (on average) in greater housing need. It concluded that there was a potential impact on community cohesion in the borough as well as risk of a legal challenge.
Guess what Barking & Dagenham’s brave councillors decided to do? – they went for the ten-year test. Facing UKIP challengers in all wards in the coming elections, they decided a policy change was needed which would (on the advice of their own officers) give clear preference to white British housing applicants over the majority of the borough’s population.
We’ll have to see if the more extreme residency tests remain in place after next month’s polls. But whether they do or not, it’s clear that housing need is again becoming a political plaything. Of course local politicians should be able to decide their waiting list criteria and allocations policies, but they shouldn’t be able to throw objective tests of housing need out of the window. Surely the best response to UKIP is to get out the black, young and working voters who’ll be penalised by the sort of policies they’ll introduce if they get into power?
On the first occasion I appeared in the 24 Housing ‘Power List’ my son commented that he couldn’t imagine that I would want to be in any list where Grant Shapps was number one. Last year the stars of both Grant and myself waned, and we dropped out (I’m not suggesting any connection). This year we are both back as minor players, but now I’m ahead of him. I wish our relative power in the real world was that way round; unfortunately not.
The Power Player List is a bit of fun and has a highly selective constituency but most people would be quite pleased to be on it rather than off it. Deservedly at the top of both last year’s and this year’s lists is David Orr of the National Housing Federation. Despite having a difficult membership to please, David consistently gets good coverage on the need for more affordable housing and is the most effective of the housing professionals/lobbyists. CIH’s Grainia Long remains near the top but Julia Unwin of the Rowntree Foundation is coming up fast on the rails. JRF have had a good year especially on making the links between housing and poverty – and the Resolution Foundation’s Gavin Kelly might deserve to be there as well given their recent hugely influential work. Campbell Robb of Shelter has disappeared off the list, which may mean that the organisation continues to punch below its weight, or it may just reflect the disgracefully low place that homelessness now occupies on the housing agenda.
It’s hard to know how and whether to nominate politicians for the list, especially people like George Osborne who has a considerably wider brief. But he makes it up from 4th to 2nd and displaces Lord Freud as the top politician. I guess Lord Fraud, as he was announced in the House of Lords this week, has had a quieter year and his boss, the biggest fraud of them all, Iain Duncan Smith, has leapfrogged him.
You would expect the Housing Minister of the day to feature. Shapps certainly did, and Mark Prisk made it to 5th last year, despite being a fairly anonymous figure. So what does that tell us about the current incumbent, Kris Hopkins, who only makes it to 13th, behind the noisier Nick Boles and a new entrant, the man behind the scenes at No 10, housing and planning adviser Alex Morton (he of the notorious ‘sell off the expensive social homes’ policy).
It’s interesting that the top Labour politician, shadow housing minister Emma Reynolds, makes it to 15th, exactly the same as last year’s spokesperson, Jack Dromey. In fact she is the only national Labour figure to feature; this is a little surprising given that Ed Balls has made several important housing speeches in the recent past and is the key person in deciding what will happen to housing investment if Labour wins in 2015. Karen Buck drops out this year, largely due to having a more backroom (but probably more influential) role as Ed Miliband’s PPS. The most prominent non-party politician remains Lord Richard Best, who continues to have significant influence on events from his seat in the House of Lords. He is the nearest thing in housing to a national treasure.
Reynolds is one of 12 women in the list, the same as last year.
Of the London politicians, Boris Johnson has slipped down the list from 5th to 35th, heading towards well deserved obscurity, and is now only one place ahead of his new nemesis on the GLA, the very energetic rising star Tom Copley. I can only spot one other local politician in this year’s list, Islington Labour’s James Murray, who has done more than most to launch a new generation of affordable council houses.
It may tell us more about the voting constituency than anything else, but a rather large number of housing association chief executives feature. Several deserve the accolade but it’s overcooked: there are 20 in the list. I do hope there’s no conspiracy involved. This year, South Yorkshire’s Tony Stacey is a nose ahead of Riverside’s Carol Matthews, who was the top CE last year, followed by Steve Stride of Poplar, David Montague of L&Q, Paul Tennant of Orbit and Geeta Nanda of Thames Valley. That’s a good selection and mix. Three ALMO people feature, Eamon McGoldrick of NatFedALMOs, Sue Roberts the current NFA chair, and former chair Alison Inman, who is also heavily involved in CIH, TPAS and now SHOUT, the campaign for social rented housing.
In an industry that was once dominated by powerful Directors of Housing, this year I can only spot one council officer in the top 50, Carmarthenshire’s Robin Staines. 20 housing association CEs and one Director of Housing tells its own story.
Not surprisingly, civil servants and regulators feature. Julian Ashby of the HCA regulation committee is in at 12. Terrie Alafat, Director of Housing Growth at CLG, takes over from her boss, Sir Bob Kerslake, at the highest ranked civil servant.
And a final word about bloggers. Jules Birch is deservedly top blogger in the list. Next year, I expect to see Colin Wiles climbing high, not just for his excellent blogs but also because he has been the driving force behind SHOUT. I also think Hannah Fearn should feature for her consistently excellent writing, in the Guardian and elsewhere.
I’m not sure if my 29th place is a pat on the back for Red Brick or London Labour Housing Group (which contributes 3 of the 50). Whichever, belief must be suspended by the fact that I am immediately followed by the Governor of the Bank of England Mark Carney and Grant Shapps, and ahead of both Boris Johnson and his sidekick, Deputy Mayor for Housing Richard Blakeway. As I intimated above, the power list is not meant to be taken too seriously. It is meant to be fun and the methodology is plainly flawed. Because in the real world, those four have a lot more power than is good for us.
Housing’s top 50 Power Players are revealed in the April edition of 24housing magazine out today.
*Jimmy Breslin Notes from Impeachment Summer, 1975
The new London Housing Strategy from the Mayor of London is half a great document. The analysis is broadly sound and it is quite well written and clear. The critical weakness is that the policy prescriptions just don’t match up to the problems identified and the proposals fall apart under scrutiny.
The strategy revolves around a classic Boris Johnson trick. As you’d expect, the document identifies the need for additional housing, concluding there is a requirement for market, intermediate and social rented homes. It estimates that just short of 16,000 homes for social rent are needed each year. Then it switches to how the Mayor will provide these homes. Now you see it now you don’t, suddenly the phrase ‘social rent’ disappears and is replaced by ‘Affordable Rent’. You want juicy apples at 40p each! I’ve got dry oranges, £1 a go.
Unaffordable ‘Affordable Rent’ is of little use to London. Under the current programme (2011-14) rents are far too high and the programme is partly paid for by selling existing social rented homes on the market and ‘converting’ many others from social rent to ‘Affordable Rent’ when they become vacant. The desperate attempt to keep up the headline number of ‘affordable homes’ being built is at the expense of ever more social rented homes being removed from the stock. It is a disgrace but it is also a con. What used to be called ‘intermediate rent’ levels under Ken Livingstone – sub-market homes targeted at key workers – is now the main offer to people on very low incomes in acute housing need (assuming they are not diverted into the private rented sector first).
Now, to give Johnson a little credit, he has realised the error of the Government’s ways in relation to ‘Affordable Rent’. So he has edged back towards the Livingstone categorisation of affordable rented homes into ‘social rent’ and ‘intermediate rent’ but without admitting it. In the new programme (2015-18) 40% of the affordable homes he hopes to provide will be shared ownership and 60% will be ‘Affordable Rent’. But the AR component will be split into two: half of it (ie 30% of the programme total) will be capped at 50% of market rents and the other half will be pushed up to the top of the range, ie 80% of market rents. He regards the former as being targeted to vulnerable people, downsizers, tenants affected by regeneration, or people on benefits; and the latter towards people ‘in work’. This division is a nonsense due to the very low incomes of many people in work. Rents at 80% of London market rates are so high that they push more and more people in work onto housing benefit, so they face very high marginal rates of tax and benefit withdrawal – the very opposite of ‘making work pay’.
To be helpful in the extreme, it could be argued that the ‘capped’ programme is vaguely equivalent to social rent. Johnson’s own analysis concludes that there is a need to build 16,000 homes for social rent a year for at least 20 years. So what will his strategy deliver? He claims it ‘seeks to deliver 45,000 affordable homes over 3 years’, or 15,000 a year. Of these, 30% will be at ‘capped’ rents, around 4,500.
So Johnson’s strategy fails before it starts. Instead of the needed 16,000 social rented homes, on a generous interpretation he will provide 4,500 homes for ‘capped affordable rents’.
The strategy makes much of how many affordable homes Johnson has delivered so far. And here lies the second trick. It takes a long time to finance, plan and build homes. Johnson inherited Ken Livingstone’s 2008-11 programme, funded in full by Gordon Brown’s Government until 2010. It was a big part of Labour’s National Affordable Housing Strategy. This one Labour programme delivered a huge slice of what Johnson now claims as his achievement – 11,500 homes in 2008/09, 12,600 in 2009/10, 12,500 in 2010/11, 15,400 in 2011/12, and as many as 6,800 in 2012/13, 5 years into Johnson’s mayoralty. Nearly two-thirds of these homes were for social rent.
Johnson’s main programme, cunningly called the Affordable Housing programme, took 3 years to get running. It produced 265 affordable homes in 2011/12, 671 in 2012/13, and 1,582 in 2013/14 (11 months up to end of February). Around 560 of these were for social rent.
So there we have it. Johnson’s fine strategy is a cover for a total failure in delivery. Most of his claims to have produced affordable homes turn out to be the achievements of Ken Livingstone and Gordon Brown. His own programme has been characterised by delay and confusion and failed delivery. When some supposedly affordable rented homes come through, we find that they are at unaffordable rents. And when he announces his new strategy, with a fanfare, a whole five years into his mayoralty, we find it plans for an even more serious deficit of homes at social rents or their equivalent into the future.
Fail, fail, and fail again.
Given reports of the difficulties councils face in replacing houses they are forced to sell, shouldn’t the right to buy be curtailed before it does even more damage?
A survey by the LGA reports that four out of five councils are finding it hard to replace on a one-for-one basis the houses they’ve sold through right to buy. There is a range of obstacles. For nearly three-quarters, the biggest problem is that they can’t finance enough replacements from the capital receipts they’re able to keep. There are various reasons for this and the arrangements are complex, and this is why the LGA is calling for the restrictions to be dropped in an amendment to the Deregulation Bill now going through parliament. The government is of course unlikely to accept this amendment, because it would prevent them getting a share of RTB receipts to help bring down debt. But what’s more important, a tiny reduction in debt or ensuring that the RTB doesn’t result in a loss of rented housing stock?
One of the virtues of the UK Housing Review, extolled in Red Brick on various occasions, is that it provides the data on which we can take a long-term view of policies like RTB. The 2013 edition showed that, across Britain, RTB sales since 1980 had reached over 2.5m homes. It also showed that total receipts from those sales were slightly under £50bn. In other words, the RTB has been a prolonged fire sale in which houses and flats have been sold at an average price of only £20,000. This might be excellent value for buyers, especially when many of them later sell the property to a private landlord, but it represents dreadful value for the public sector. Even if more recent sales are likely to have produced higher average receipts, it’s hardly surprising that a combination of high new build costs and being forced to share the receipts with the Treasury means that one-for-one replacement is extremely hard to achieve.
We all know what the consequences have been, and one of the most important has been the impact on social rented stock. Back in 1981, across Great Britain this stood at over 6.5m dwellings (councils and associations added together). It’s now fallen to 4.8m, even though we’ve been building an average of 35,000 new social rented homes per year over the intervening 33 years. In other words, successive governments’ building programmes have made up less than half of the loss in stock: it’s hardly surprising that we’ve got such a huge backlog of housing need.
Supporters of RTB will of course protest that the houses haven’t been ‘lost’ they are still there. And even if they hadn’t been sold, the tenants who bought them would likely have used them for the rest of their lives in many cases. Both of these points are true, but the failure to reinvest means that we now have a much smaller social stock to meet the needs of those on low incomes (quite apart from the ambition we might have had to continue catering for middle-income households in social housing, as was the case before 1980).
Ending the right to buy may not be an election winning strategy (although it seems to have done no harm in Scotland). But three reforms would curtail its worst effects. One would be to restore maximum discounts and other safeguards to what they were before 2010. This would be a perfectly reasonable move, given current demand for social housing. The second would be to ensure that all receipts are used for new building, if necessary dedicating part of the HCA’s budget to the (possibly fairly small) grant that would be needed to top up the receipt. Of course, Red Brick would add to this a third reform – that borrowing controls on councils should be eased or preferably removed.
An indication of the potential that would be released by fairer rules is given by other responses to the LGA survey. They confirm replies to a recent one by ARCH which show that councils are currently planning to build 4-5,000 houses per year. LGA suggest the potential with different rules could be extra output of 48,000 units over five years. There is now a run of studies in the two years since council housing became self-financing that point to the extra capacity waiting to be unleashed. If the government’s review of the role of councils in housing supply, confirmed this week, doesn’t take up this challenge, will Labour’s Lyons Review?
Like many others I sit and look at the pile of paper I have about my pension scheme and a fog descends. I was considering sorting it out and buying an annuity last year, but put it off because the process involved using up more brain cells than I felt I could afford.
It turns out for once that laziness and procrastination has a dividend. The Government’s Budget announcement seems to offer me better alternatives than a miserable annuity and opens up the possibility of taking most or all of the whole pension pot and doing something else with it.
So I am in the camp that says that more flexibility is a good thing and I will not weep for the annuities industry losing some of their share value. However I am no better than anyone else at predicting how long I will live and for how long I will need an income. Having the money in the hand could well prove a temptation, even putting to one side LibDem Minister Steve Webb’s ludicrous comment about buying Lamborghinis. Labour has been attacked for making points that are blatantly obvious – if people spend their money early, they may be left with insufficient income and be more dependent on the State later. David Cameron mocks such genuine concerns as being ‘patronising’ but it just shows how out of touch he is with the really difficult decisions that ordinary people have to make.
In his blog for the Financial Times, John McDermott raised an interesting point about what the Coalition is up to. Alongside general concerns that the policy will lead to short-termism and that there may be scope for new charlatans to operate in the market, he wonders how much this liberalisation of pensions has to do with paying for social care.
Sometimes two otherwise benign policies can collide in an unfortunate way, but with this Government more malevolent motivations should always be expected. They want to cap the costs of some aspects of care to avoid people having to sell their homes to pay for it. But now they can sell their pension entitlement instead. By foregoing a regular annuity income they may have capital sitting in the bank or in investments – waiting to be assessed. Even with the cap, care is expensive, and some costs, such as general living costs in a care home, are not included within the cap. ‘Goodbye annuities, hello social care accounts’ says John.
Julia Unwin of the Joseph Rowntree Foundation was one of several charity leaders to also raise concerns about a pensions reform that could lead to people incurring social care costs which they would otherwise have avoided. As I understand it, someone with assets of less than £118,000, or £27,000 excluding their home, will have all their care costs paid. A pension being received in the form of an income from an annuity would be disregarded but a lump sum taken out of their pension pot could take them over the limit.
This flexibility over pensions does not come free. Any amount above 25% being taken out of your pension pot would be subject to tax. George Osborne has spotted that this could contribute painlessly to reducing the deficit in years ahead. Is this a classic case of short term gain but long term pain?
The astonishing advert and tweet published by the Chairman of the Conservative Party, Grant Shapps (aka Michael Green aka Bingo Bob) illustrates the condescending and insulting view that the Tories – the Eton Mess – have of the great British public.
If Bingo Bob thought a penny off a pint and cheaper Bingo would woo millions of working class voters then he was wrong – but it does illustrate that there is no money left, unless it has a political purpose of course.
The Budget holds out little hope for housing and has nothing at all to say about affordable homes. However the detail of the Budget documents always includes some items that get little attention but do have an impact on the housing world, so here are some initial thoughts.
The Government are obviously still thrashing around looking for a magic bullet to get housebuilding up. They have the cheek to claim that the extension of the Help to Buy equity loan scheme counts as ‘further action to boost housing supply’ but it is perhaps more significant that they have not extended the Help to Buy mortgage guarantee scheme – is that an admission that it is misguided? A small builders finance fund is probably quite useful and is something Labour have been talking about. Small and medium-sized builders cite lack of access to finance as a key constraint on their activities.
The Urban Development Corporation for Ebbsfleet has a ring of deju vu about it, possibly because this small New Town has been announced before. A new prospectus for additional Garden Cities will be published but they will be ‘locally-led’, a policy we have criticised on Red Brick before. Their boast that planning approvals for housing are at a 5 year high is not much to write home about given the scale of the recession and the absolute certainty that the economy would eventually recover irrespective of Government actions. Most people will support a little more help being given to self-builders.
I shiver whenever I hear the word ‘regeneration’ these days because I have seen too many council estates being pulled down for private housing with the social rented element not replaced. So a new fund available to private developers will need to be watched. More support for infrastructure around Cambridge and a new rail connection to help open up Barking Riverside (a move supported by London Labour Housing Group in its submission to Lyons) may unlock thousands of new homes. We need many more plans like these. More planning relaxations are to be proposed but the Government still seem to be missing the point that planning authorities need to be working strategically at a regional level and to be operating as proactive bodies rather than just responding to private development proposals.
The Budget also includes welcome changes to the use of ‘corporate envelopes’ to purchase property, thereby avoiding stamp duty land tax, bringing properties of value over £500K into the new regime. It involves the extraordinarily named new Annual Tax on Enveloped Dwellings (ATED).
There is also a pre-announcement of a proposed ‘Right to Move’ for social tenants to increase their mobility for work-related reasons. Options will include giving such tenants priority when a new social home becomes available, and setting aside a pool of vacant lets to enable them to move across local authority boundaries. This seems totally at odds with everything done previously on housing allocations, with a stronger emphasis on residential requirements and ‘locals first’.
There is to be a pilot project on passing a share of development benefits directly to individual households. We will have to wait to see if this is a scheme after the style of Islington’s innovative approach to development.
Boris Johnson was sunning himself in Cannes last week at the World’s greatest property development conference, obscurely called MIPIM (20,000 participants, 2,000 exhibitors from 80 countries) encouraging more global investment in totally unaffordable London property and making jokes in very bad taste about German invasions (watch his speech here if you have 32 minutes to waste in pointless activity).
Meanwhile, Chancellor George Osborne was busily working away at next week’s Budget. With a flick of a pencil, George could double the affordable housing investment programme and it would still be within the margin of error of the housing benefit budget. There are endless changes he could make to fund such an increase – for example, additional taxes on the most expensive properties, penalties for land hoarding, or ending the ridiculously ineffective New Homes Bonus.
But no. Instead Osborne is, according to the Sunday Times (paywall), beavering away on an extension to the Help to Buy scheme. Spun as a scheme designed to help people get on the property ladder, Help to Buy has been widely criticised as being inflationary at a time when the UK economy needs a property bubble like a hole in the head. It is of course a political rather than a housing policy – Osborne believes that rising house prices will make a key sector of the electorate feel richer and therefore better-off.
Right wing commentator Fraser Nelson in the Spectator says that pouring more petrol on the property market fire by extending this ‘discredited’ scheme ‘would be laughable if it were not so plausible.’ It is, he says ‘a flagrant example of politicians using taxpayers’ money in an attempt to buy votes. It’s a sign that Osborne intends to use help-to-buy as an election weapon, and as loaned money doesn’t show up on the deficit figures he’s quite relaxed.’
And he adds: ‘The last conservative leader who tried to manipulate the property market for political purposes (to claim to voters he was on the side of hard-working people etc) was George W Bush – and we all know how subprime lending worked out for America. But before its damage, it did bring a property boom – and that’s what Osborne seems to be trying to seek now.’ He also quotes a report from Bloomberg based on a survey of analysts, which concluded that Help to Buy is ‘creating the illusion of wealth by subsidizing house prices and encouraging a further levering up.’
So what is Labour saying? Labour appears unwilling at this stage to get caught up in an argument about who is in favour and who is against helping aspirational people to buy their own homes. Ed Balls is therefore not presenting a simple ‘end it’ message. Instead he is arguing for major reform, restrictions that would prevent the scheme from creating an unbalanced housing market that could put economic recovery at risk. He would cut the upper limit on the scheme from £600K to £400K, possibly with regional variations, and consider restricting the scheme to first time buyers. He argues : “The lack of funding for affordable housing, alongside a housing market that has been very slow to respond to rising demand, means there is a real risk for our economy” – by which he means greater pressure to raise interest rates faster.
Balls raises the interesting concept of a ‘Help to Build’ scheme as an alternative, using Government guarantees in a different way to help small and medium-sized builders to access finance. He thinks such a scheme could help provide an extra 10,000 homes a year. He has also floated the idea of using Government guarantees to back a new generation of New Town Corporations.
Help to Buy demonstrates that Government money is sloshing around in housing in its billions. Yet it is only when the conversation turns to genuinely affordable housing that the language of austerity reappears. There is no money left we are told. In my view, there is lots of money left. It is just being spent on the wrong things by the wrong people for the wrong purpose.