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Auld Lang Syne

The eighteenth century French philosopher Voltaire once observed “We look to Scotland for all our ideas of civilisation”.  If the new Scottish Labour Manifesto isn’t quite the new Scottish Enlightenment, it is certainly enlightened compared to anything we hear from the government in Westminster.
The emphasis in the Manifesto is on jobs and achieving greater prosperity in Scotland.  But it also contains important housing commitments and an emphasis on affordable housing and mixed communities that has gone missing in the world of Pickles and Shapps (my thesaurus tells me the antonym of enlightenment is ignorance.  Seems appropriate.) 
The basic tenet of the housing policies in the Manifesto is that many Scots are anxious to obtain and retain secure affordable homes.
For example, on homelessness, it says that a Labour government would work towards meeting the target that all unintentionally homeless people are offered a secure tenancy by 2012 and would provide guidance on the interpretation of homelessness and housing legislation, in stark contrast to the approach in England of removing rights to secure tenancies from homeless people.
A mix of policies are proposed to assist people across the tenures.  Labour will review the effectiveness of schemes to help home owners facing repossession, strengthen pre-action protocols, introduce First Foot, a new mortgage indemnity guarantee scheme that aims to reduce deposits to 5 or 10 %, and set up an infrastructure fund to encourage private housing development to build more homes to satisfy demand.  New building should meet a Scottish Housing Quality Standard and there will be consultation on raising building standards especially in relation to energy efficiency.  There is a strong target to end fuel poverty by 2016 and investment in community and household renewables, such as solar panels and community heat and power schemes, will provide a new revenue stream for housing associations, co-operatives and local authorities through the feed-in tariff.
The Manifesto says Labour will encourage responsible investment in the private rented sector and tighten landlord registration schemes to root out rogue landlords
Labour would establish a Taskforce to strengthen the role of local authorities and housing associations in increasing supply, especially of affordable homes.  There is strong support for community-based housing associations and housing co-operatives, in particular in their role as ‘community anchors’, and the remit of the Scottish Investment Bank and Co-operative Development Scotland to will be extended to include housing. Social housing lettings will be reviewed to offer more support for vulnerable people and to ensure sustainable communities.  And a Housing Advisory Service would be established for tenants and homeowners and new Housing Tribunal set up.
Scottish Labour Leader Iain Gray introduced the Manifesto ‘Fighting for what really matters’ by saying
“Scottish Labour believes that the foundation for a strong community is fairness. Jobs, opportunity and prosperity must be spread more widely throughout our communities – to improve housing, to regenerate deprived communities, to support the most vulnerable and to lift people out of poverty.”

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More questions than answers

CLG press releases these days are strong on message and weak on information.  Yesterday’s big announcement, which led to Grant Shapps tweeting every few minutes about yet another local radio interview he was doing, sounded clever and appealing.  The press statement said “Housing Minister Grant Shapps today offered tenants a Cashback deal worth billions to take control of their own homes.”
Wow.  Billions!  And what does the scheme involve?  Well it “will allow residents to take more control of their repairs budgets for their homes, for example carry out their own DIY, or commission it locally and pocket any savings made.  Cash they could use however they want – for example, towards a deposit on their own house.  With maintenance and repair costing £4billion a year, the move could see a bonanza for small businesses.  The Government wants all landlords to offer their tenants the chance to manage more of their repairs budgets – and will consult on bringing forward changes to regulations to give all tenants the option to request it from their landlord.”
Does the press statement answer any of the obvious questions about the scheme?  Well, no.  Not one.  Here’s my starter for 10. 

  1. Will all repairs be eligible?  Many repairs involve a statutory requirement on the landlord, for example in relation to the structure, dampness, ventilation, electrics and, perhaps above all, gas.  So far as I am aware, the landlord cannot devolve these duties and any other health and safety responsibilities to the tenant.
  2. Who can the tenant employ to do the repairs?  Could they for example do electrical or gas works themselves unsupervised or give work to someone unqualified or to someone without insurance?  Could they use someone who illegally evades VAT or tax?
  3. If the tenant fails to get the repair done properly, or it needs to be rectified by the landlord, who pays?
  4. The press statement talks about painting work and carpentry work – but aren’t the vast majority of these jobs, if they are internal, already the tenants’ responsibility under the tenancy agreement?
  5. What is in the proposal that can’t be done by landlords already?  And does localism take a back seat when there is a juicy announcement to make?
  6. What evidence has been collected about current innovations in repairs to inform this decision?  There have been huge changes in repairs procurement in recent years, presumably some research and evidence gathering has been done.
  7. Of the £4bn spent on social housing repairs and maintenance each year, £1000 per home, how much is it estimated could be devolved to tenants, and how does Shapps know it will be ‘billions’. 
  8. Shapps says “Doing your own DIY or choosing a local handyman to do the work – will allow tenants to pocket any savings they make.”  Where is the evidence that a tenant can get a job done cheaper than the council’s contractor?  How much will they be allowed to ‘pocket’?
  9. How will the scheme work – will tenants receive a grant from the landlord or payment against invoices and receipts? 
  10. Who will check jobs for quality and safety?  Will tenants in homes that need a lot of repairs get more?

 In the words of Johnny Nash –
“There are more questions than answers
And the more I find out the less I know.”

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What should we advise the Australian Labour Party to do? (part II)

A comment by Tim Williams on my previous post, I thought worth putting up here in full. More from me shortly on the need for the political space needed to allow for change:
I’m the ‘colleague’ Tony referred to who wrote about housing in Sydney on my blog. I was a special advisor to David Miliband on housing, regen and local government and advised all subsequent housing ministers on some aspect of housing or other. So my fingers are all over this. Essentially, the housing department had no control over Treasury and we confused housing need (real enough but not scientifically quantified) with housing demand(which was being stoked up by over-lax policies by Treasury and under-regulation by its agencies such as the FSA). So housing need was growing because housing demand was being whipped on by too low interest rates, rising house prices preventing lower income and younger folk from accessing homes! Then the house-builders’ business model kicked in as they effectively constrained supply in order to keep their margins up. Oh and then planning and environmental policies inhibited the supply of land to said builders which further limited housing numbers and raised prices.
Not all of this applies in Australia. The demography is real enough with population growing. I think management of the financial institutions has been better in Oz though I suspect the federal treasurer is about to raise interest rates (already 4 points ahead of the UK’s flatlining level) to choke off demand. House prices are already stabilising it seems to me. Despite the scary graphs I think they might just have enough policy and brain to fend off a drop of about 15% which the UK has seen in prices. Maybe we are about to see that most mystical of beasts in housing: the soft landing.
Having said that, what goes up must come down and soft landings rarely happen. The deeper point is of course what did governments think they were doing by enabling the market to flood society with such cheap money. Centre left governments thought they were helping poor people access equity – as well as wanting to be as pro the aspirational or as they say in Australia, the ‘battlers’. There was a politics to home-ownership on the centre left as well as the right, in the UK, the US and Australia.
A space should have opened up after the Global Financial Crisis to provide alternative tenures and justify them politically. Tony and Toby (now of Shelter) will know I pushed this as an advisor, as did Tony. More tangibly I don’t think the silly, easy money of the noughties is ever coming back to housing finance. That is the view of many in the game and look at the moribund state of the house-builders three and a half years on from the start of the crisis. Zombies.
So new models (rented, shared ownership, cooperatives) have to be found anyway to deliver supply. So where’s the Labor/Labour Party with a narrative about this?
In Australia the Labor government gave a huge stimulus to the social housing and private rented market by their economic package to fend off recession. That worked economically amazingly well though they get no political credit because dumped the prime minister who did that (without explaining very well why). It has had the perverse(?) incentive of persuading mums and dads to get further into property speculation (via owning a few private rented units) though it has not created the conditions for a high quality, big, private rented sector, attracting institutional money of the kind we need, I think. It has however transformed community housing providers and some of them are on their way to being big UK style RSLs.
Advice? Raise interest rates sooner rather than later. Incentivise private rented. Syphon off economic demand from the capital cities. Lower entry level costs for housebuilders so that small guys can get in to shake up the market. Think through the brown-field-greenfield issue and be more flexible about building on the latter. Develop a narrative about the benefits of alternatives to ownership, helped by the fact easy money is not coming back. Read my blog!

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A bad day for Mr Clegg, a worse day for social mobility

There was no pleasure to be taken in watching Nick Clegg flounder his way through yesterday failing to convince anyone that the government was serious about improving social mobility.  I suspect he once believed in it, but like other LibDem ministers who used to have something serious to say on the subject – Sarah Teather, Andrew Stunnell and Steve Webb to name but three – he has sold his principles at the knock-down price of a Ministerial car and an AV referendum.
The social mobility strategy should face prosecution under the Trades Description Act.  As a strategy it brings together existing policies on education, welfare, employment, housing and the rest into a patchwork quilt – but there is no stitching to make it a coherent whole.
Nothing will be done about growing inequality, and the relationship between inequality, social mobility and good social outcomes is simply not explored.  Nothing will be done about inheritance and nothing will be done about people being able to buy privilege, so the rich private school elite will maintain its grip.  Nothing will be done to reverse the cuts to the services that give poorer people some hope, like Sure Start and the Education Maintenance Allowance.  And for Clegg to focus on changes to internships shows how threadbare this strategy is.       
The document points out that housing makes up 42% of household wealth but there is no analysis of the role that housing might play in promoting greater social mobility and equality of opportunity.  The same old Duncan-Smith-isms are trotted out: social housing somehow causes deprivation, there is a culture of dependency, people aspire to be home owners, and all the rest.  The only thing I can see that might make any difference to social mobility is the (already announced) set of proposals to improve the geographic mobility of social tenants, but even that is outweighed by the failure to address supply.
Living in a decent warm affordable and secure home with enough space provides the platform on which all other opportunities are built.  Health inequalities and educational inequalities are closely linked to housing opportunities.  Children will find it hard to achieve if they have faced homelessness or overcrowding or living in cold damp conditions.  Many of the government’s housing policies will make it harder for children and young people to succeed.  For example, housing benefit will cover less and less of the rent, increasing real poverty and the risk of homelessness for many.  Fewer tenants will have long term security in their home, the place where they build their lives.    
The final proof, if any more was needed, that this is not a serious strategy, was provided by Clegg himself in an article in yesterday’s Telegraph.  Writing jointly with Iain Duncan Smith, they say that the strategy is aimed at squeezed middle-class parents who are “working hard to make the best life possible for their children”.  They go on: “Most of them are not poor, and certainly don’t want to rely on welfare payments.  But nor are they rich enough to insulate their children against life’s misfortunes.”  
Mr Clegg should note that there is more than a slight difference between insulating the middle classes and promoting social mobility.

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Yes, Grant, it is hypocrisy

The new financial year marks the introduction of some of the government’s most contentious housing policies, so you would expect government ministers to be focused on the major changes and their impact on millions of people.  So what have Eric Pickles and Grant Shapps been up to, what are their key messages to the nation at this crucial time?
Well both have been extremely excited by the fact that some councils sent people to the Local Government Chronicle’s children’s services awards dinner at council expense.  Personally, I don’t like such functions, all that dressing up in dark lounge suits and posh frocks, and think they should be held in a dusty town hall somewhere with municipal nibbles and compulsory hair shirts.  But the ministers spotted a headline in the making: according to the Daily Mail, Pickles “condemned the councils for ‘pleading poverty’ while using public money to ‘swill champagne’ at London’s five-star Grosvenor House hotel.”  Shapps accused the councils of “hypocrisy”. 
One of the councils in attendance was Mr Cameron’s favourite of Hammersmith and Fulham, who sent the Leader, the Chief Executive and 4 other officials, according to the Mail.  But they seemed to think it was ok because the bill was picked up by the council’s IT supplier Agilysys.  Another council offered the defence that their attendance was paid for by Capita and Price Waterhouse Coopers.
Not a word about these sponsorships from our deadly duo.  As the government is embarking on a new era of compulsory competitive tendering for services, some may think it is even more scandalous for councils to be accepting gifts from private companies who have lucrative contracts with them and may be bidding for many more in the future.      
And, of course, Pickles and Shapps never eat at anyone else’s expense, do they?  I’m sure Pickles never touched the grub or the liquid refreshment at the British Curry Awards or at the County Council Network Dinner, amongst several required to be declared by this scourge of the freebies.  Shapps is either an abstemious sort of chap or he doesn’t get many invitations, I suspect the latter, but he did have dinner with the House Builders’ Federation, who might be regarded as having a vested interest in the department’s work.
Not satisfied with his day’s work, Shapps then set off in pursuit of a ‘union baron’ in the shape of Bob Crow, who was ‘accused’ of living in social housing and, according to Shapps, is “taking advantage of publicly subsidised housing.” (unfortunately the original story is behind the Sunday Times paywall, so I have to rely on secondary reports).  
Now why the Housing Minister feels free to comment on the housing status of individuals is beyond me.  Normally I don’t comment on such matters but I suspect Mr Shapps is an owner occupier and “takes advantage” of a number of hidden public subsidies to the sector like exemption from capital gains tax.  According to the Telegraph he may not need public subsidy anyway because “He is the multi-millionaire minister with his own private plane” who has “taken to sleeping on a camp bed in his parliamentary office.”  I wonder if they charge hostel rates?
Meanwhile, over at RMT a spokesperson said: “Bob Crow makes no apology for living in social housing at the heart of his local community.  Bob was born into a council house and has lived in one all his life, and actually turned down a union mortgage in favour of remaining a tenant.  Bob also turned down the right to buy his council house at a discount, as he believes social housing stock should remain available for future generations.’
I don’t agree with Bob about much, but at least someone in this tale has some principles.

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What should we advise the Australian Labour Party to do?

If only we’d seen it as a property bubble. If only we’d realised price rises can’t go on for ever. If only we’d have woken up to the fact that house prices seven times the average income was a crash waiting to happen.
Hindsight is a valuable thing. We didn’t take seriously any of these possibilities during the boom. Not Whitehall, industry, government or opposition. There were some sane and far-sighted voices in the wilderness, such as Shelter’s new Head of Policy, but they were certainly the exception.
With this new wisdom even a Tory government is saying government should have intervened in the housing market and would use in the future ‘levers’ to ensure a bubble did not inflate again.
It seems highly likely to me that rapid house price rises will resume again as soon as lended loosens up (which could take a while admittedly). But we don’t have to wait until then to try out our new wisdom.

A colleague recently drew my attention to house prices in Australia, a country considered to have managed its economy well and escaped the worst ravages of the global recession. However, if you look at their house prices, it looks like they have simply delayed their crash:

Australian house prices are booming and escalating higher still with broadly the same factors that drove the unsustainable increase in Britain and with households taking on similarly huge amounts of debt.
So with new-found wisdom and confidence that we can deflate any future bubbles, what should we advise the Australian Labour government to do, that would a) work, b) not cause the bubble to burst quickly  and c) carry enough popular support so that it can be done by a government with a majority of one.
We’ve got a real life exam question here; I’m still not sure we have a credible answer for Australia now or Britain again in the future.

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‘If they go, there might be trouble, but if they stay it will be double’

Those wags at Inside Housing are in the April Fools Day Spirit clearly, with their news that Grant Shapps will release a cover of the Clash’s ‘Should I Stay or Should I Go?’ to coincide with the Housing Benefit cuts.
Good joke, to highlight again a deadly serious issue for thousands of families.
Steve adds:
A friend told me a few minutes ago that there’s a text going round saying that Gaddafi is arriving in Newcastle this morning for talks.  Newcastle owner Mike Ashley thinks he’s a new cheap centre forward to replace Andy Carroll.
But the best April Fool hoot this morning was Lord Freud on the Today programme.  He made me lol by saying that the government has put ‘a lot of money’ into local authorities to enable them to help people facing housing benefit cuts.  The government is making housing benefit payments ‘realistic’ he said.   It took me a minute to realise what the date was.
What a card the man is.  And what a fun way to start the new financial year.

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The tide of destruction

TUC General Secretary Brendan Barber has been busy recently, what with the huge march and rally for the alternative on Saturday.
So it was good to see him taking time today to comment on the government’s decision to bring forward to January 2012 the new rule that single adults up to the age of 34 will be eligible only for the single room rate of local housing allowance. 
Brendan focused on the risk of homelessness.  He said: ‘This reform runs the risk of increasing homelessness among young people as many will have their benefit entitlement significantly reduced.  There is almost no chance that all of these people will be able to find alternative accommodation at affordable rents.  With unemployment still rising and the housing crisis deepening, the government seems intent on piling on the financial pain for young adults.’
The government has been happy to keep the debate about housing benefit/local housing allowance changes focused on the largest families receiving the highest amounts of benefit in the highest value areas, especially in central London.  But the changes will hit hard at all kinds of tenants all over the country, as the tables produced by the Valuation Office Agency (VOA) show clearly, and they will hit single young people between the ages of 25 and 34 severely.  You can see figures for your local area here. 
The tables show for each area (Broad Rental Market Area in the jargon) what the difference is between the current 1 bed rate and the single room rate and also how the rates will be affected by the switch from being assessed on the 50th percentile – ie the median rent in an area – and the new rule that they will be based on the 30th percentile.
So a single person aged between 25 and 34 would currently be eligible for the 1 bed rate at up to the 50th percentile rent; in future (ie over the next year) they would be entitled to the single room rent at the 30th percentile.  The figures will change as market rents change, but on current calculations a single person age 25-34 living on Tyneside would be entitled to a 1 bed rate of £97 a week and after the changes would only be entitled to a single room rate of £58 a week.  In southern Greater Manchester the drop will be from £103 to £56.  In Leicester from £91 to £56.  In north west London from £178 to £80.
In theory the 30th percentile rule means that 30% of properties in an area will be ‘affordable’ for claimants.  In practice the cheapest 30% are already occupied and people having to leave their existing accommodation will have to compete for vacancies as they arise.  Not only is this likely to force rents at the lower end up (not down as the government ridiculously claims) but there will be a flood of 25-34 year olds seeking to move and it is extremely unlikely, as Brendan comments, that there will be enough accommodation to go round.  The risk of homelessness is great, and even if there is a scramble amongst landlords to convert larger houses into shared accommodation there will then be knock-on effect on families. 
As Brendan said at the rally at the weekend, ‘We’ve come together not just to oppose the cuts, but to call for a new approach to rebuilding our economy rooted in social justice, in place of this tide of economic destruction.’  Quite.

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Institutional chaos

The Chief Executive of the National Housing Federation, David Orr, spoke last week about the ‘institutional chaos’ facing housing associations and the need to think carefully about balancing the needs of their business with their mission. 
He said “You might take a strategic business view that the smart thing to do is wait until all the moving parts have settled down and not take any risks. But that is pretty disastrous in mission terms with the scale of the housing crisis.”
Housing associations (HAs) certainly face huge dilemmas in the current policy framework.  It is no longer possible to build what is needed most – social rented housing at genuinely affordable rents – except in tiny numbers as a special case.  So, if HAs with development programmes want to keep them going, and most are assembling their bids at the moment, there is little choice but to plan a mix of private housing, shared ownership and the new, grotesquely-named ‘Affordable Rent (AR)’ product (which is little different from the intermediate rent products we have seen before).  Of course it can be argued that building almost any housing is useful given the current shortage, and AR at 80% of market rent is not that much different from social rents in those parts of the country with the lowest values.  But everywhere else, the virtual removal of social renting from the mix totally disregards the needs of communities and the people on lowest incomes.    
One thing HAs with a development programme can and must do is protect the existing stock of social rented homes when they become available for re-letting.  The government wants them to re-let a share of their existing homes at AR rent levels to generate funding for new development.  I think they should demonstrate their commitment to their mission, to borrow David Orr’s word, by refusing to do so and by re-letting these homes at social rent levels.  Councils, in revising their housing strategies and setting their new ‘tenancy strategies’ under the Localism Bill, should set out their opposition to existing social rented homes being re-let at such high rents. 
Lettings policies, already the art of getting a quart in to a pint pot, will come under even greater strain.  Demand for homes that are re-let at social rents will increase as supply contracts even further.  Who will the new AR tenancies at up to 80% market rents be allocated to?  The government argues that the profile will be the same as those who currently get allocated social rented homes, but they also say that the new policy will not impact on the requirement for housing benefit – and they can’t have both of these.  Higher rents require more housing benefit, as we have argued before and as Family Mosaic’s research showed.  Once again their housing policy and their welfare reform agendas are in direct conflict. 
HAs caught in the middle say quietly that this is an argument that the lenders may ultimately decide – they don’t like it when the tenants can’t pay their rents and this will be reflected in their risk assessments of new schemes.  One middle course would be for HAs to refuse to set AR rent levels above the limit for Housing Benefit, irrespective of local market rent levels.  That would reduce the yield but would keep the homes available for people on housing benefit.  But, in higher value areas, it is the total benefits cap (rather than the housing benefit limit) that will prevent many tenants from being able to pay their rent.  This will be reflected in the risk assessment for new schemes and the pressure will be on to let to people with sufficient income to be able to afford the rent. 
So, there are dangers both ways.  If AR homes are let to people on low incomes who would previously have qualified for a social rented home, then housing benefit spending will go up.  If AR homes are let to people who can afford the higher rents, then people on lower incomes will be squeezed out and more will end up in private rented accommodation at higher rents with a higher requirement for HB support.  Either way, there is likely to be upward pressure on HB spending: the government will have to find more money or look for more cuts.  The prospects are grim.

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Do you recognise this rabbit?

One of the rabbits that the Chancellor pulled out of the hat in this afternoon’s budget was extra help for up to 10,000 first time buyers. What a great idea!

But, hold on, I’m sure I’ve seen this rabbit somewhere before…

FirstBuy announced today provides a 20% equity loan (jointly funded by the government and house builders) to help first-time buyers get a home. First-time buyers put down a deposit of 5% and get a mortgage on the rest.

HomeBuy Direct provided a 30% equity loan (jointly funded by the government and house builders) to help first time buyers get a home. Sometimes they had to pay a deposit and sometimes not, (depending on their lender) and they got a mortgage on the rest.

However, this awful HomeBuy Direct scheme was axed in the autumn and was described by Grant Shapps as “a very expensive flop”.

Thank goodness that they’ve introduced FirstBuy to replace it.  

 

Alternatively, they could have maintained funding in HomeBuy Direct for the past seven months, especially as house builders are willing to match the government’s money (extra bang for your buck).

The real value of these programmes is that they keep house builders building because they provide a guaranteed stream of first-time buyers to buy the homes they produce. Without that confidence, they don’t build because they fear there’s no one to buy the homes.  All quite simple really: create demand and underpin supply.

If they’d have stayed the course,  they might have given extra ballast to a construction industry that was providing a big portion of the economy’s job and growth (a third of all growth in Q2 of 2010 and a quarter of all growth in Q3 of 2010). In Q4 of 2010, residential construction collapsed and the economy shrank by 0.6%.

Behind these figures are people who lost jobs they could have kept if the government hadn’t scrapped then re-introduced exactly the same policy. Complete stupidity.