Category: Uncategorized

What goes up may come down.  Only 10 years ago, the growth of home ownership was believed to be inexorable: people would talk of it reaching 90% of households. But without much advance warning, it peaked in 2003 and has fallen from 71% of households then to 65% now (figures for England).
Virtually all net housing growth in the last 10 years has been in private renting. Although the number of home owners has remained fairly constant, in the mid 14 millions of households, and the number of social renters has also been fairly constant at around 3.8m, the number of private renters has grown from 2.2 million to 3.8 million households (in percentage terms from 10.8% in 2003 to 17.4% in 2011-12).  Now people talk about the growth in private renting being inexorable…..
This truly astonishing turnaround in the housing market – which pre-dated and was not caused by the global financial crisis, even if the credit crunch reinforced the trends – has raised a whole new set of dilemmas for policy-makers. Some issues remain the same – the crap end of the market is still crap, and still nothing much gets done about it. But new issues have emerged, and I would highlight four:

• Many of the households coming into the sector are families with children who have been excluded from social renting or from home ownership, but the arrangements in the sector have not changed to reflect the different needs of such families.
• Many new landlords are in a position where the non-payment of rent by their tenant means the non-payment of a mortgage for them – despite high rents and a long-term capital gain they are not necessarily coining it in week by week. Although buying to rent is often described as being ‘the new pension fund’, we still know very little about the new landlords, and in particular whether they are in it for the long term or just until some other investment with a better return comes along.
• Many new landlords are also amateurs at the job and are more likely to be dependant on a lettings agent or manager. Lettings agents in particular are not the friend of the landlord or the tenant – they want turnover because finding new tenants brings in the cash and the possibility of a rent hike, whereas landlords’ business plans are easily wrecked by an unplanned void period. Tenants face an ever-increasing set of fees and charges to access a home.
• One of the effects of the clamp-down on local housing allowances has been to push people out of the more expensive areas into the ‘cheaper’ areas (everything is relative). This has had little or no effect on rents in the expensive areas, where demand is strong, but it is having the effect of pushing rents up in the cheaper areas because there are now more people competing for the same number of ‘affordable’ vacancies.

The upshot of all this is that some new thinking has been needed about the sector. The old remedies – leaving it all to the unrestrained free market, as favoured by the right, and stringent rent control advocated on the left – will not do the job and carry too much risk. There is no silver bullet and a package of new policies are needed. A lot of good policy work has been done (but only outside Government, I am sorry to say) by a range of organisations and think tanks, including landlords’ organisations and responsible agents, and something resembling a consensus is beginning to emerge with the broad aim of stabilising and modernising the sector. This approach is about moderating rent increases, encouraging far longer tenancies, registering landlords, heavily regulating lettings agencies, and reinforcing the role of local authorities in improving standards and stamping out rogues.
Today’s report from the CLG Committee of the House of Commons on the private rented sector is firmly in this new mainstream. Its analysis seems spot on and its key recommendations – around better regulation, the key role of local authorities, ending sharp practice, better court procedures when things go wrong, and changing the culture of the sector so it becomes more family-friendly – allied to the Committee’s continuous exhortation for more house building in all tenures – reflect the emerging view about the best way forward.
Whilst the Government has its head in the sand – the last people to recognise that an unfettered free market doesn’t work for landlords or tenants – Labour has done a lot of work in this area and the Shadow Housing Minister, Jack Dromey, is to be commended for taking time over the detail, consulting widely with all parties, and publishing intelligent policy papers about what should be done.
To get housing right over the next decade, we have to take action in all tenures: we have to enable more people to become home owners, we have to provide far more social rented housing at genuinely affordable rents, but we also have to find a new stable settlement for private renting which is fair to tenants and landlords: homes at good standards on fair terms.

The last month has seen a burst of activity and announcements that confirm how important it is that we have proper reform of the UK borrowing rules.  First, and most dramatically, the government finally announced the sale of the Royal Mail, accompanied by pronouncements that it has no alternative because otherwise its investment needs would be met at the expense of schools and hospitals.  What a pity that Labour didn’t extol the virtues of a public corporation as the perfect vehicle to (in the words of Michael Fallon, the coalition’s business secretary) “combine the best of the public and private sectors”.  It was Labour, after all, that gave the Royal Mail that status and its business independence in the first place.
Labour could have used the government’s own arguments against it, as with no apparent sense of irony or embarrassment about the timing, only a couple of days after the Royal Mail was put up for sale the government was itself saying how wonderful public corporations could be.  This time they were talking about the future of the Highways Agency, which is to become a public corporation so as to give it “long-term funding certainty and flexibility which will enable it to deliver capital efficiencies”, including partnerships with the private sector. Isn’t this just what the Royal Mail already has?
Across in the transport sector, a couple of weeks ago we had the news from the RMT union that 60% of our railways are run by foreign, state-owned companies.  These are of course public corporations, they just happen to be French, German or Belgian ones, which aren’t saddled with the same constraints on their borrowing as British ones are. Indeed, they even enjoy the lower borrowing costs of being state-owned enterprises.  No such advantage is held by the only British public corporation in the rail sector, the glamorously named Directly Operated Railways, which manages the East Coast mainline. It’s just been announced that the franchise will be put out to competition, and there is presumably every chance that a foreign company will take it over, despite DOR’s success.
In the housing sector, Vince Cable used his license to take potshots at government to criticise them about their borrowing rules.  The LibDems have long had a line, to be set out again in a resolution to their next conference, that borrowing rules should be reformed to accord with international standards and facilitate more housing investment. Cable didn’t quite say this though, but managed to imply that simply by allowing the current borrowing headroom to be shared between councils, they could build an extra 15-25,000 houses per year.  This seems wildly optimistic, given that the estimate in last year’s report Let’s Get Building was that output might reach 60,000 over five years if borrowing caps were removed completely, a far more radical measure.
If we were looking for sensible comment about public corporations and the borrowing rules, what better place to turn to than the Fabian Society? They’ve just launched the first report of their commission on future spending choices, called Spending Wisely, and it does indeed contain a concise and well-worded statement of the case for changing the rules. It is worth quoting in full:
“[An] option for accounting reform would be for the government and Office of National Statistics to review how some borrowing by public institutions is classified for the purpose of the national debt. This can be justified if these bodies make self-financing investments for which the Treasury is unlikely to ever need to assume liability. The UK uses a broader definition of debt than most economies. Shifting to using the headline measure of ‘general government’ rather than ‘public sector’ debt would bring the UK into line with many other EU countries and with standard measures used by the European Commission, IMF and rating agencies. The UK could also benchmark itself against other nations and aim to adopt any practices which prevent artificial hindrance of commercially sound borrowing. For example we heard that in Germany state-owned regional banks and public house-building programmes are largely excluded from headline national debt.
“However, any reform would need to be tightly supervised by independent agencies to provide reassurance that it would not undermine overall fiscal discipline. The OBR as well as the ONS would need to sign-off implementation to avoid any slight-of-hand during the transition; and tough independent supervision of local government and public corporations would be needed to ensure that their borrowing is affordable.”
This is a very welcome endorsement of the case for change. Naturally, Red Brick commends the Fabian Society arguments to Labour’s front bench teams, and especially to Ed Balls and his shadow Treasury colleagues.

If I said ‘Iain Duncan Smith eats babies for breakfast’ and, when challenged, responded that I didn’t actually have any evidence to prove this but that didn’t matter because ‘I believe it to be true’, you would probably think I’d been out in the sun too long or had one too many Pimms.
At one time, most Europeans believed that the earth was the centre of the solar system. It turned out they were wrong. But this was the line of rationality taken by the same Duncan Smith this morning on the BBC Today programme when interviewed by an unusually tame John Humphrys (unusual but not surprising because he has bad form himself on welfare issues).
Duncan Smith said that, despite the lack of evidence, he believes it to be true that the pilots of the overall benefit cap encouraged thousands of people back into work. This is despite criticism from the UK Statistics Authority about his, shall we say, creative use of statistics on this and other welfare reform matters. Real facts about the number of people in Haringey, one of the pilot areas, who went into work, provided by the Leader of the Council, Claire Kober, were dismissed as he accused his critics of ‘seeking out cases’ and being ‘politically motivated’.
Duncan Smith always reminds me of the ‘swivel-eyed loons’ that David Cameron’s associates believe inhabit local Conservative Associations – except he is in the Government and in charge of one of the departments that has the most impact on the lives of people who are poor. His level of annoyance at being challenged on any of his policies has risen alarmingly as his barmier policies have come into force.
Labour’s position on welfare reform has improved recently, especially with the ‘benefits to bricks’ policy being debated, but the Party still gives the impression of a rabbit startled in the headlights. There are those who, completely mistakenly in my view, believe that Labour is ‘too soft’ on welfare and that the Party must get onside with the majority of people who tell pollsters they support the Government’s policy. I think it is simply untrue that the system is soft – here for example are some recent examples of jobseekers losing benefit for the most trivial and often unfair reasons. I also think that the correct response to a particular public opinion is not to simply fall in line, but to show leadership and argue from your own principles – otherwise we would be supporting capital punishment, Labour in power would have ended immigration, and we would still be campaigning to quit Europe.
On the OBC Labour has said it supports a cap but wants it to be regionally-based to take much better account of rent differentials . Others have argued that Child Benefit, which is available to all on standard tax rates, should be taken out of the OBC. Either option would substantially reduce the dire impact the cap will have on families. Both deserve to be better debated.
Of course it is hard to get to first base with a progressive view on welfare reform when the media are rampant on the issue, the phone-ins are full of bigots, and the (BBC’s best friends) Taxpayers Alliance are telling everyone that there are a very large number of skivers and scroungers out there.
In face of the onslaught against people on benefits, it is vital to remember some key points and to say them over and over again.
The ‘overall benefit cap’ is not ‘fair’ because does not compare like with like. Humphrys started his piece by saying that the cap was set ‘at the average income for a working family’. Wrong, it is set at the average earnings – the average income of a working family would also have to take account the benefits and credits they receive – meaning that their average income is significantly higher. If the OBC was set at average income, there would be nothing to shout about. Despite all the comments to the contrary, it is virtually impossible for an out of work family to be better off than an in-work family.
The way it will work until Universal Credit is introduced means that the overall benefit cap is essentially a further cap on housing benefit. It will hit hardest at families with larger numbers of children living in areas with high rental costs – on any estimate it will increase child poverty, which the Government is supposedly against. It will save very little money (I believe £110m in the first year) and is little more than a political device designed a) to get favourable publicity about clamping down on benefit recipients and b) to set a trap for Labour. Indeed, in public spending terms it is almost certain to be counter-productive – by increasing homelessness, it will push up costs in local government and other parts of the benefits system, probably by a lot more than it saves.

A fascinating paper published yesterday by the Royal Statistical Society and King’s College London – The Power of Perception – reported on a survey undertaken by Ipsos MORI which ‘shows just how wrong public opinion can be on key social issues’.
Several of the report’s top 10 public ‘misconceptions’ are relevant to the topics covered most frequently by Red Brick. They include:

• Nearly one in three think more is spent on jobseekers allowance than pensions (in fact it’s £5bn versus £74bn).
• The public thinks 24% of benefit money is claimed fraudulently (in reality 0.7%).
• Given a list of changes to benefits, 33% say the overall benefit cap will save most money, twice as many as select raising the pension age to 66 for men and women. In fact the cap saves £290m compared to £5bn for the pension age change.
• People think teenage pregnancy is 25 times more common than it actually is (15% of girls under 16 get pregnant each year, reality 0.6%).
• More than half think crime, and violent crime in particular, is rising (in reality it has been falling for many years).
• People think 31% of the population are immigrants, in reality it’s 13%.

The interesting thing about the top ten is that they are all lines that are taken by the right wing in Britain and reflect the screaming headlines of the right wing press. I guess they wouldn’t do it if they thought it didn’t work.
And it’s not just the written media: TV and radio seem to be so denuded of good journalism that they are increasingly dependant on reporting what is in the papers. Almost every news programme features ‘the press’. As a news junky, it’s amazing to note how many times the lead story on The World At One or even Newsnight is the same as whatever led the reactionary media in the morning. Similarly, when the old bore David Dimbleby gets on his high horse when people complain about the selection of questions on Question Time, his defence is that they reflect what most people in the audience wanted to ask about – which, curiously, also closely resembles what was in the papers and on news outlets during the day.
Fortunately we now have Twitter; it’s so much better than shouting at the TV.
The RSS report illustrates the power of propaganda even in a supposedly sophisticated modern democracy. And it is a huge challenge for people of a progressive persuasion. Anyone taking a different line (eg against the overall benefit cap, or in defence of people seeking work) has to swim against the tide, speaking against the common perception and challenging the conventional wisdom.
That’s why I like Owen Jones so much: not for his own prescriptions, but for his bravery and constancy, in face of frequent scorn and disbelief, to continue telling what I regard as the truth about trades unionists, people on social security, working class communities, council tenants, and so on. His book Chavs is an extraordinary antidote to the Daily Crap we rely on for our news (Red Brick view here). I also have a lot of time for others who spend their time debunking myths and trying desperately hard to get debates about vital issues like the welfare state onto a proper factual  footing, like Declan Gaffney.
It’s also why I get so upset when people I think should be on the same side – anybody vaguely progressive – join in the peddling of myths and attacking the poor for their poverty. It’s been a big feature of my attitude to the LibDems in power, people who have adopted the Iain Duncan Smith approach to statistical interpretation and political discourse. And it’s why it is the equivalent of lighting the blue touch paper when I hear people in Labour taking similar lines.
I can only agree with Hetan Shah, executive director of the Royal Statistical Society, introducing their report:
‘How can you develop good policy when public perceptions can be so out of kilter with the evidence? We need to see three things happen. Firstly, politicians need to be better at talking about the real state of affairs of the country, rather than spinning the numbers. Secondly, the media has to try and genuinely illuminate issues, rather than use statistics to sensationalise. And finally, we need better teaching of statistical literacy in schools, so that people get more comfortable in understanding evidence.’
Spot on.

At the CIH Conference last week, Housing Minister Mark Prisk said that the new funding settlement for housing would involve ‘something for something’. To get a small slice of the increasingly tiny Government subsidy for new rented homes, providers will have to make a bigger contribution from ‘their’ own resources.
Government has been in confusion as to whether there would be a second round of ‘affordable rent’ (that’s the one with rents at up to 80% of market levels) ever since the first round was announced. Back in 2011, then LibDem Minister Andrew Stunell said that ‘affordable rent’ would be a ‘one-off that will not be repeated’ and that a new model would be needed after 2015. At the same time, the then Tory Minister Grant Shapps/Michael Green said there would indeed be another round, and that the Government would be looking for increased cross-subsidy from other activities to fund new homes. Not for the first time, Stunell was wrong. Although some providers, mainly those that lost sight of their social purpose years ago, were delighted to be moving away from social rent, most warned that the ‘affordable rent’ model should not be repeated because of the pressure it puts on their borrowings and viability, pushing their capacity to the limit.
Oblivious to these warnings, the Government has gone even further down the road of removing grant, requiring providers to borrow even more on average to build each home in the new programme. Prisk said the cost of this additional borrowing should be met from ‘efficiencies’, ‘conversions’ and ‘disposals’.
Mr Prisk seems not to be aware that there is a difference between ‘efficiencies’ and rent increases and property sales. ‘With all this money and this commitment, there will be expectations about efficiencies,’ he said, ‘In considering bids for grants, we will expect providers to bring forward ambitious plans for maximising their own financial contribution ….  We expect providers to take a rigorous approach when looking at every relet and asking how they can use them to build more homes for more families. I expect the result to be a significant change in the number of homes that are either converted to be let at affordable rent or are sold when they become vacant.’
So there we have it. More homes are to be provided by ‘converting’ more property from social rent at 40-50% of market to ‘affordable rent’ at 70-80% and by flogging off more existing stock. And to get grant, providers will have to demonstrate that they are doing as they are told.
Prisk said that under the current programme ‘a modest level of relets have been converted to Affordable Rent’. The only official estimate I have seen is that it might be up to 82,000 homes stolen from the social rented stock: how many more does he envisage to pay for the new programme? A civil servant had to move quickly to explain what Prisk meant, but it’s not much of an assurance: ‘Landlords will not be expected to convert all re-lets to affordable rents in the new funding programme’ he stressed.
Very helpful. ‘Not all’. But it is odds-on that we are heading for a position where a majority of social rent re-lets are ‘converted’. In essence, the replacement for grant is huge rent increases.
The Government has always claimed that the ‘affordable rent’ product would be let to the same people as social rent. The only likely outcome of that policy, when combined with a high rent regime, is that more new tenants would be on benefit and for higher amounts. A recent study confirmed that new tenants occupying ‘affordable rent’ homes were even poorer than those already occupying ‘social rented’ homes, the opposite of the social housing allocations policy that the Government is trying to pursue.  Once again housing benefit is taking the strain.
The ‘affordable homes’ programme, which includes ‘affordable rent’, has a budget of around £957m a year for 3 years from 2015/16, about £1 for every £20 the Government spends on housing benefit. Given their obsession with cutting HB, there is a clear contradiction within Government policy. We need to intensify the argument for a major switch to capital rather than personal subsidies in the coming months.

Monimbo
It hasn’t taken long for Danny Alexander’s claims to fall apart. He was supposed to have announced the most comprehensive, ambitious and long-lasting capital investment plans ever. Instead, it turns out that the plans will keep capital investment at its present level, at best.
The IFS led the way by pointing out that at least until 2017/18 there will be no increase in investment levels following the latest spending review.  Public Sector Net Investment will be broadly flat for four years, which means as a proportion of GDP it will actually fall.  Colin Talbot added up several decades’ worth of figures to compare the decade from 2010 with previous ones.  He shows that, as a proportion of GDP, investment in the current decade is expected to average 1.7% whereas in the decade before 2010 it averaged 1.8%.  In the 1970s, we were investing a staggering 4.5% of GDP, but presumably this is too far back to be included in Alexander’s definition of ‘ever’.
Mark Hellowell, in Public Finance, has added up investment over the two decades and concludes that, for the ten years from 2010/11, the government will spend £450 billion in total; in contrast, in the ten years up to 2009/10 the previous government spent £530 billion if PFI projects are included (as they should be).  Looked at in terms of proportions of government expenditure, the respective figures are 6.2% for the current decade and 7.6% for the previous one.
Turning to housing, the cards are similarly stacked against Alexander. He made various boasts, including his promise of the ‘biggest public housing programme for over twenty years’ and that the 165,000 target for the three years from 2015/16 would be ‘a higher number of houses than Labour ever managed in 13 years in power’.
Let’s compare the figures.  According to the statistics bible, the UK Housing Review 2013, the previous government’s National Affordable Housing Programme (NAHP), over its three-year life from 2008/09, averaged just under 58,000 new units per year.  The current government’s Affordable Homes Programme, over the four years 2011/12-2014/15, will produce less than half this, at under 23,000.
If the Alexander programme that follows on for the three years from 2015/16 delivers as promised (surely a big ‘if’), it will produce 55,000 units per year.  While that level of output would be very welcome, it will still be rather less than what Labour’s programme achieved.  (Alexander will quibble that most of the last year of the NAHP was after the 2010 election, but surely even he couldn’t argue that the coalition government built houses in schemes that were on site when they took power, could he?).
Of course, his new claims are only possible because he assumes the government can, yet again, reduce grant levels.  Under Labour’s programme average grants were £51k per unit. They’ve now fallen below £20k per unit; the Alexander programme would see them go down even further to £18k.  Given the conditions that will apply to the new grants, including converting relets to Affordable Rent and sweating housing association assets even more than currently, it must be questionable whether associations will engage with the new programme to the extent required to build at more than twice their current output. Wouldn’t they be better off simply developing at market rents without grant, keeping their social rented stock and adding to it as when the profits from market rents allow?
Certainly, a strategy that depends on high levels of welfare benefits when these are under renewed threat, not to mention even greater leveraging of associations on top of their already high levels of debt, seems… shall we say… a rather shaky one.  Danny Alexander is probably hoping that his plans for Investing in Britain’s Future will be quietly forgotten by the time of the next election, whoever wins power.  And in that respect alone, he might well be proved right.

• By Monimbo

Welfare reform is driven by ‘ideology and electoral calculation’.  Its function is to turn the not-very-well-off but not-really-poor against the really poor.  Red Brick readers may not regularly look to the London Review of Books for their political analysis, but if they don’t they’ll miss Ross McKibbin’s regular pithy commentaries on the current political scene.  His latest full article is a succinct summary of why and how the Tories are attacking the welfare state, and it should be cut out and pasted on Liam Byrne’s noticeboard. He’s updated it in light of the recent speeches by Ed Balls and Ed Miliband.
McKibbin argues that ‘welfare reform’ has little to do with defects in the system.  Yes it’s true that it’s very complex, and a unified system would in theory be better. But while its complexity is a result of various new bits being bolted on over the decades, the reason for them was that they responded to new problems and recognised a vast range of different needs.  Universal credit won’t work as the means to reconcile these conflicts because it’s poorly designed, inadequately tested, flawed by its reliance on online claims by groups that often aren’t computer literate or rely on one-to-one advice, uses contractors whose role is to force people to work even when they can’t, and to save money is being artificially constrained by benefit caps and other limitations.
The government’s main argument for change – that the system is massively exploited by scroungers – is simply not supported by the facts. McKibbin argues that the drivers are ideological and political – hatred of the system and belief that change will benefit the Tory party by attracting votes from the sections of the working class who can be persuaded that the main source of their problems is other, slightly poorer, sections of the same class.  In other words, the changes won’t end ‘scrounging’ because it isn’t a significant problem and reducing it to zero is impossible anyway.
But the changes might just deliver enough working class votes to win the next election for the Tories.  The evidence for this is in the opinion polls: not the ones on party support but the polls on people’s attitudes to welfare. McKibbin points out that people typically think 41% of welfare spending goes to the unemployed whereas the true figure is 3%; people think 27% of spending goes in fraudulent claims whereas the government says it’s 0.7% (I haven’t checked his figures, but they sound right).  McKibbin argues that for Labour to largely accept the Tory reforms would both be morally wrong and bad economics, even though changing these perceptions is a huge challenge.
As Red Brick pointed out, Ed Miliband’s recent speech was a welcome start in trying to shift the debate, for example in its focus on worklessness and low wages.  But Labour has to do much more to drive home the message that it’s not the welfare state that’s out of control, it’s the government’s economic failure, lack of jobs, low wages and unaffordable housing that are combining to put so much pressure on the welfare system.  Cutting welfare can never work in this environment – the government’s own figures show housing benefit costs are projected to grow by a further £2 billion over the next four years, even with all the planned ‘reforms’, and this is very likely to be an underestimate.
Another little-noticed effect of government’s plans for universal credit, highlighted in the CIH’s new UK Housing Review Briefing Paper, is that it draws far more people into the benefits/credits system. This is because it withdraws benefits/credits more slowly from working tenants. A typical family in the private rented sector (couple with two children; rent of £100 per week) will drop out of the housing benefit system when their gross earnings rise to about £480 per week, and tax credits at about £620 per week. But they’ll soon be able to continue drawing universal credit until they earn as much as £725.  Their rent would only have to be £130 for them to be simultaneously eligible for universal credit and caught by the higher (40 per cent) tax rate.
Government figures project that two thirds of working families with children will be better off under universal credit – and many will become benefit/credit recipients for the first time.  Labour can use this as a stick to beat the Tory arguments: look, even your own system recognises that more people need government help, and that’s because wages are too low and rents too high to enable ordinary working households to earn enough to live on without state assistance.  A big part of the need for welfare reform is that the economy is failing those on moderate wages – and the Tories’ own projections for universal credit are the proof that this is so, and getting worse.

It is a common lament on Red Brick that the word ‘subsidised’ appears before the words ‘social housing’ on so many occasions with no explanation or justification or proper comparison with what really happens in the ‘market’ sectors. (See our previous post ‘Who gets subsidised housing?’). It is all part and parcel of a view that ‘markets’ are universally good and efficient and that public provision is invariably poor and inefficient.
A new report from the Centre for London says that social tenants in London are ‘subsidised’ to the tune of £5,300 each per year. They use this ‘fact’ to argue for charging ‘wealthy’ tenants more rent, starting at the London average (£27,000), using a sliding scale until market rent is reached. The extra income would then be used to fund more affordable home building.
This is a proposed variant on the Government’s own ‘Pay to Stay’ scheme which, rather than being graduated, has a single cut off point, below which you pay a social rent, above which you pay a market rent (creating a very steep marginal tax rate).
The proposal is based on a particular theory about what a subsidy is. The Centre for London’s figure of £5,300 is a simplistic calculation which wouldn’t worry the back of a fag packet. They pick the average weekly social rent, take it away from the estimated average weekly market rent for such properties, and multiply by 52. Bingo.
This view of subsidy (in economic theory it is called ‘economic subsidy’ because there is no cash transfer) seems to be uniquely applied to social housing, largely by people who like to exaggerate the cost of social tenants to the rest of us. However, the gap between a better and more efficient socialised system, which produces high quality homes at a low cost, and a very imperfect and failed market model, which often produces low quality homes at high cost, cannot in any sensible dialogue be called subsidy. Social rents are not set by ‘the market’ and never have been.
The strength of council housing is that rents cover costs, including debt interest, and indeed make a profit. There is no subsidy if it is looked at this way. For housing associations, the calculations are different because there has normally been an upfront capital grant to get the home built – but the benefit of building the home will be felt not just by the current tenant but by all tenants in future, possibly for 100 years or more, during which time it will indeed make a profit.
On the Roehampton Estate in Wandsworth, bad policies over many years have led to much of the estate being sold off, and probably one-third of the stock is now in the hands of private landlords letting to students at the local University. The landlords divide rooms and often let a 4 bedroom flat at over £600 per week. Does this lead to the conclusion that the flat next door, still occupied by a council tenant, is ‘subsidised’ by something like £500 a week? Of course not. It only means that the students are exploited by the ‘market’ and the price should be regulated.
Or look at other sectors. What subsidy do you receive by sending your children to a state school? Is it the broad cost of the school divided by the number of pupils? I would say yes. Or is it the difference between a free place and the fees charged by local private schools – ie the market? It would be ludicrous to say so. Similarly, what subsidy do I receive by going to the doctors? Is it the cost of provision or is it the fees charged by local private doctors?
Forgetting the ‘market rent’ subsidy issue for a moment, I have no real objection to the principle of charging more to wealthier tenants, but the Government has failed, and the Centre for London has also failed, to overcome the key issue that you have to means test everyone to discover who has a high enough income to pay the extra. I suspect the Government may try to get away with placing people under a duty to declare their incomes if they are above the defined level, but that approach is at variance with how any other tax or benefit is organised.
The Centre for London’s more complex model would involve full means-testing of everyone. The report makes light of all such issues and assesses administrative costs as being about 10% of the income that would be raised. In truth they don’t know because landlords have never had this function before and would have to set it up from scratch. Would it be total household  income, would it include bonuses and overtime, what happens to people with variable weekly or monthly earnings, are family circumstances taken into account, would there be a mirror image of the bedroom tax, an extra rent for underoccupiers? And what would people make of the choice between seeing their rent double on the one hand and getting up to £100k subsidy to exercise the right to buy on the other?
Moving to a universal means test for social tenants may be a good thing to do in the long term – but only if we switch entirely to an income-based method of setting rents (eg at 30% or 35% of disposable income). That might be worth the effort but is an issue for another post in the future.
Pay to Stay, whether the Government’s or the Centre for London’s versions, imposes an inappropriate market theory on a socialised sector. It is also potentially a bureaucratic nightmare. We shouldn’t touch it with the proverbial barge pole.
 

Following a Freedom of Information request, in October last year Red Brick revealed that 82,000 social rented homes were likely to be ‘converted’ to the much more expensive ‘affordable rent’ regime in a desperate attempt to fund the Government’s flagship programme.
A new independent report on the affordable rent programme by Future of London shows that, at December 2012, there were 543 lettings of new build affordable rent homes in the Capital but 2,571 conversions from traditional social rent – nearly 5 conversions for every single new build home so far. It effectively means that these homes have had an imposed rent increase of 40-50%.
Because the Government stipulated that ‘affordable rent’ homes should be let on the same basis as ‘social rent’, the inevitable has happened: new tenants are even more reliant on housing benefit. Not only have social rented homes been hijacked but also the pain will be felt through increased housing benefit payments for many years to come. While Labour is busy developing policies to turn ‘benefits into bricks’, the Tories and LibDems are busy making the system ever more reliant on benefits.
The report shows that the ‘affordable rent’ homes are being let to tenants who are ‘on average, in greater poverty than existing social tenants’. This is in total contradiction to the many words of wisdom uttered by Iain Duncan Smith about ending benefit dependency and ‘making work pay’.
In London, ‘affordable rent’ is the figleaf behind which Boris Johnson hides his housing policy. It seems likely, says the report, that the programme will deliver its aim of 16,000 homes, although the chances of this being achieved by 2015 as planned seem slim given that the programme is very heavily backloaded, with most homes being built in the final year.
The housing programme is not just about numbers, it matters what is being built and for whom, and at what cost. The ‘affordable rent’ programme is using up housing associations’ borrowing capacity, stretching their financial covenants, increasing risk, using up available land, creating an expensive product and undermining a cheaper model, and raising the benefit bill whilst intensifying the effect of poverty.
The report argues for changes post-2015, with effectively 2 different products: a higher rent, but still sub-market, regime for people in work as an alternative to private renting, and a programme delivering homes at social rent levels. This would take us back to the Livingstone London Plan regime which separately identified ‘social’ housing and ‘intermediate’ housing. Reinventing the wheel is sometimes the best thing to do.

As the Government quietly erases social housing from our system, the European Union seems to be getting more excited about the idea. Earlier this month the Parliament adopted a resolution proposed by the Greens calling on the Commission to set out a ‘European social housing action framework’ to pull together the various programmes that affect the issue. ‘Social housing may not be seen only as expenditure but as productive investment, too, since it creates jobs’ said the MEPs.
Rapporteur Karima Delli (Green) said that ‘investing in social housing means boosting construction and renovation sectors and the opportunity to create green jobs’.  Recognising that ‘social housing plays a key part in the achievement of the objectives of the Europe 2020 strategy, especially its poverty target’ the Parliament called for adequate funding to be made available in the EU financial framework and for national, regional and local authorities to do more to invest in  social housing.
The Parliament also called for member states to take action to prevent evictions caused by the economic crisis.
For those with an interest, back in January the EU produced a useful briefing note on social housing in Europe, available here through the International Union of Tenants website. It showed that virtually all Member States had experienced a growing demand for social housing at the same time as there has been a narrowing of traditional sources of financing. In addition, States had seen a diversification of housing needs, with ‘housing vulnerability’ rising higher up the income distribution, the growing importance of fuel poverty and energy demand, and the different needs of an ageing population. There is useful information about the big differences in definition of social housing in different countries and some interesting examples of innovative housing schemes.