By regular guest blogger Monimbo
Once again the Daily Mail is the favoured news outlet for a government minister, and once again it fails to check if he’s actually right. This time the story is about 6,000 council tenants who allegedly earn more than £100,000 per year, and how Mr Shapps wants to make sure they either leave their homes or pay a market rent, because they are costing the taxpayer more than £100 million. Poor Frank Dobson is rolled out once more as the prime example.
Let’s take a look at some of the facts. First, the article says that not only do 6,000 council tenants earn more than £100k but that 720,000 earn more than the national average wage. What we know is that 18,000 council tenants were identified as earning more than £50k annually in the English Housing Survey, so it’s perfectly possible that Grant Shapps has got his staff to break these figures down further and has found that one third of this group earn over £100k. Let’s give him the benefit of the doubt. What is implausible is that 720,000 households earn above the average wage: the true figure of council tenants earning more than £20k annually is 405,000, and earning more than £30k is much smaller at 154,000. The Mail is confusing council tenants with all social tenants.
Now it’s important to remember that citing these figures does not mean that anyone knows where these 6,000 high earners actually are. The figures are based on sample surveys, grossed up to apply to all English households. Apart from a few celebrity cases like Frank, neither Mr Shapps or anyone else could identify the culprits.
Mr Shapps wants to introduce an upper income level above which tenants will have to pay full market rents. But the obstacles he faces are formidable: first, it needs legislation with some careful wording, then it needs a way of rewriting existing tenancy agreements to change the tenancy terms of households who have probably enjoyed them for many years, and then it needs to impose a means test on people who almost certainly have never had to reveal their incomes to the council (e.g. to claim housing benefit).
Finally, given that rent-setting is and for many years has been a power that rests with councils and not with government, he needs a way of telling Camden council to raise Frank’s rent. The irony, of course, is that he’s floating these plans at the very time when he’s giving councils even more freedom over their council housing finances.
The other part of the Mail’s story is, of course, that it’s the taxpayer who is subsidising these high earning tenants, and who will therefore get the benefit if they pay their full whack. Wrong on both counts. It might suit Mr Shapps in peddling the story to the Mail to woo their tax-paying readers, but as he well knows they don’t subsidise council housing. If high earners pay more, it’s councils and other tenants who will benefit. If high earners move out, which is what he and the Mail seem to want, there will be no savings at all, simply a new tenant paying the same rent. Of course it would free up a council house, but that isn’t a direct saving to the taxpayer.
There is sufficient confusion in the financial aspects of this story that I haven’t even touched on the arguments for having a number of better-off people in council housing, and I’m sure Red Brick readers are well aware of the case that can be made. The next time the Daily Mail links council estates with the riots or the chronically work-shy, it might pause to ask what the opposite might be. Having a few more people living in those estates who have good jobs and earn above the average wage, perhaps?
Tag: Council housing
Michael Collins is styled as a biographer of the working class, with his best known work being ‘The Likes of Us’ published in 2004. The book’s rosy view of working class culture in history and how it was destroyed by social change was controversial, with black writer Mike Philips saying ‘the book… appeals to the most destructive form of nostalgia.’
Recently Collins has meandered through the history of council housing. I mainly enjoyed his TV film history ‘The Great Estate: The Rise and Fall of the Council House’ earlier in the year, but took issue with his analysis of what had gone wrong over the last 40 years and in particular the blame he attaches to the 1977 Housing (Homeless Persons) Act, an argument he returned to this week in a piece for the Independent. The core of our difference is that I think the homeless are ‘us’ too.
Comparing a distorted view of how awful council housing is now with an exaggerated view of how great it used to be only benefits those who wish to undermine its future. The golden era was just as mythical as the right wing press’s modern view that it is a failed sector populated by ‘Shameless’ characters, everyone skiving, dependent on benefits and getting their home by conning the State that they were homeless.
I don’t look back on my childhood in Newcastle, on the Montagu Estate in Kenton, as some great heyday when everything was right in the world. Still in the desperation of the post-War housing shortage, it was without doubt a pretty good deal: a brand new Bevan house, with partial central heating, front and back garden, close to both the Town Moor and the countryside stretching towards the tin hut called the airport. Virtually all the men were in work, most had skilled trades or were clerks, so I suspect there had been social selection going on. It could still be a tough place, with gangs and fights and flick-knives, and we didn’t venture onto neighbouring estates. Periods when men fell out of work, as most did from time to time, were hard. There were no shops, just travelling vans, and no community facilities apart from the neighbourhood school. The front door was the colour the council said it would be, no-one had security of tenure and anyone not paying their rent got kicked out. So my nostalgic memories are reserved for Len White or Stan Anderson playing at St James’s Park (now forgodsake the Sports Direct Arena) and a youthful visit to the Club A Gogo to see Eric Burden and the Animals.
So where specifically do I think Collins gets it wrong? Let’s start with his tirade against the homeless persons’ act. “It was Labour who demolished a fair letting system. In 1977, the homeless were made a priority and a system of “need” was introduced that was open to abuse. Unsurprisingly, a lot of “homeless” people appeared, to the annoyance of locals who had waited patiently for years on the housing lists.’
This revision of history, that allocating council housing according to housing need is the root of the sector’s perceived problems, has been gaining currency, influencing ‘Blue Labour’ and the Labour’s front bench. The reality is that the impact of the homelessness legislation on allocations after 1978 was slow. The Act encouraged a high degree of gatekeeping (and still does), and there was a high refusal rate for applications, rigorous application of the ‘intentionality’ rule, and many people suffered the purgatory of a period spent in bed and breakfast or single mother’s hostels. It was a process no-one would choose to go through if they had any real alternative. Local connection was vigorously applied and people with a connection to another place were sent back. Virtually all homeless applicants were local and on the waiting list. Crucially, the homeless only became a significant proportion of total allocations when supply collapsed in the 1980s as homes were sold and not replaced. Most homeless people would have been rehoused off the waiting list before becoming homeless in the 1970s when supply was much better.
I also disagree with Collins when he says ‘The Government should clarify who the houses are for. In the past it was clear who was entitled.’ My view is that it was only in late 1960s and early 1970s, following ‘Cathy Come Home’ and the rise of Shelter, that council allocations policies came under greater scrutiny. Before that there was a variety of local practices, but rarely were they transparent. Applicants were subject to subjective assessments of their housekeeping standards by home visitors, and the practice was often discriminatory as the poorest were kept out. In many areas, individual house allocations were made by councillors, a practice that would be condemned today.
Collins lauds ‘sons and daughters’ schemes which ‘ensured extended families remained on the same estates, in the expectation that further generations would remain locally.’ But it is worth remembering that in many places black people were excluded either by schemes that favoured existing families or by direct discrimination. The National Front used the phrase ‘sons and daughters’ to mean ‘no blacks’. It was right that these practices were challenged vigorously by the Community Relations Commission and others.
There’s plenty wrong with council housing, now as in the past. But it is better run and managed than it ever has been. Tenants have gained security of tenure and reasonable rents in a profit-making and improving sector. 5 million households have expressed their demand to live in it. Council housing is a success story, just as it was in the past, and could have a great future. Its role in providing decent housing to millions of ordinary people deserves proper recognition and proper assessment – with a lot less spin.
Categories
The build up to HRA reform
Monimbo
With self-financing for council housing just 139 days away we can expect a plethora of reports and advice to councils on what they can do to maximise the benefits. The latest has been produced by Navigant for London Councils, which adds to an earlier one by PwC for the Smith Institute. CIH has been producing bulletins for members and has teamed up with CIPFA to create an online resource on self-financing. What are they all saying?
As everyone knows, the big prize from self-financing is that councils get to control their rental incomes for the first time (or, at least, for the first time in recent memory). PwC emphasises the magnitude of this by assessing the total income as being more than £300bn over the next thirty years, though of course the real figure could be very different from this.
However, as everyone also knows, the big snag is the cap that will be imposed on each council’s borrowing, which will vary in its effects: some councils will have very little ‘headroom’ above the cap for extra borrowing on top of the new level of debt they have to service, others will have quite a lot.
For the first time, there are real political decisions to be made about setting rents and using the revenue they generate. Not surprisingly, this is also causing real tensions. First, do you put rents up to maximise income and borrowing, or do you keep them down to reflect tenants’ difficult financial circumstances, particularly those who pay rents from their own incomes? There is no formula that can give an answer to that conundrum and each council will have to decide for itself, hopefully in full consultation with tenants.
The second tension is how to spend the spare cash. There are multiple choices here too:
completing decent homes programmes where there is still a shortfall, doing works to improve the security of and amenities in estates, starting to make the stock energy-efficient through retrofit programmes and – of course – new build.
A common feature of all the advice being published is that the key to maximising resources is creative asset management. Until now, council haven’t had the same incentives to manage their assets constructively as housing associations have had, and there are still limitations on what they can do, but for example it might make sense to demolish some stock that is no longer in the highest demand and is costly to improve. It is also going to be vital to reconfigure planned maintenance programmes so that they take account of the need to radically improve energy efficiency, factoring in outside resources such as the Green Deal.
These are demanding tasks, and the key question is whether or not the resources expected to be available from April onwards will be enough to satisfactorily manage and maintain existing assets, before even contemplating new build.
The London Councils report suggests that some boroughs (the public document doesn’t say which) will struggle to balance their business plans, ie. both meet the new debt costs and effectively invest in and maintain their assets. Most, though, will have some headroom, limited of course by the cap.
What is clear though from the various reports is that no one has yet come up with an idea for adding to councils’ resources beyond the basic options that have always applied, which are:
- fully use the funding you will have in the self-financed HRA – including potentially build new homes with grant from the HCA if you are willing to go for ‘affordable’ rents
- lever more funds into the existing stock through PFI
- transfer the stock
- use land and other assets to bring in affordable housing through other routes, mainly via housing associations.
Even the new options for ALMOs, which I blogged about in June, involve transfer, albeit to a community-led body and maintaining a close link to the local authority. The London Councils report suggests transfer as an option, too, but focuses on the merits of using it for parts of the stock – either good stock that will bring in some money, or poor stock that will remove a liability. But will partial transfer be attractive either to councils or to tenants?
My conclusion from reviewing this material is that the choices largely remain as they were when the current self-financing deal was put on the table. Given that the government (like
the previous one) insists on sticking to the current borrowing rules, the options for bringing in resources that are ‘off balance sheet’ are essentially the same ones, with their respective pros and cons.
Councils without ALMOs are well-advised to concentrate on making the most of what they have already got, and be as well prepared as possible to finalise and start to implement their business plans when the final debt levels are known in the New Year. For councils
with ALMOs the advice is the same, but those who are planning to close their ALMO down should be aware that – whatever the other arguments – they are foregoing options that just might be attractive once self-financing gets underway.
It’s a complicated business, housing. Those poor souls at the Policy Exchange and their pollsters YouGov apparently can’t tell the difference between social housing and council housing. Despite generating alarming headlines (‘Public backs limit to social housing areas’ – thanks, Inside Housing) a glance at the detail of the poll (and the base data, entitled ‘Fairness’ presumably with a touch of irony) shows just a little confusion. Although the discussion in the Policy Exchange report ‘Just Deserts’ is about social housing, the actual questions asked were about council housing. Just as well they didn’t wander into the fantasy world of ‘Affordable Rent’?*
Strange questions they were too. “People should not be offered council houses that are worth more than the average house in their local authority” Agree or disagree? Despite requiring considerable knowledge – what is the average, how do council houses compare in value, might there be a different answer for housing associations, does this ever happen in reality? – the question is really quite leading. So no surprise that a majority say they agree. It tells us very little about public attitudes to council houses, and nothing whatsoever about public attitudes to housing association properties to rent (because they weren’t asked about that).
And the second question was “People should not be offered council housing in expensive areas” Agree or disagree? Also rather leading and confusing.
This selection of questions tells me more about Policy Exchange and the point they wanted to make in the first place. I suspect they know – and if they don’t, YouGov should – that if you ask positive questions about mixed and balanced communities you get very different answers. But that wouldn’t fit PEx’s obsession with contradicting the pro-equality conclusions in The Spirit Level, would it?
*PS I’ve started calling ‘Affordable Rent’ SCARE tenancies – standing for So-Called Affordable REnt. Will it catch on?
Categories
Right to transfer
Attracting virtually no comment at the time it was passed, an obscure clause in Labour’s 2008 Housing and Regeneration Act could offer council tenants a unique but controversial way of owning and running their own homes.
Section 34A, as it is known, requires a local authority to co-operate with a formal notice from a tenant group to transfer ownership of council homes and estates to them. The government has decided to press forward with making regulations under the section and has branded it the right to transfer. A draft is expected in February.
As a policy, S34A is a direct descendant of the Tenants Choice legislation that was introduced by the Conservatives in 1988. The political belief at the time was that tenants would rise up to take control of their housing from Labour councils who ran their housing badly. In practice, and famously, it was used by Walterton & Elgin Community Homes (WECH) to take over their estates when Westminster Council, led by Shirley Porter, tried to sell them to developers. As it didn’t lead to the hoped-for tenants’ revolt in Labour areas, and caused embarrassment in Westminster, it was repealed in the mid 1990s.
WECH is still going strong, a leading example of tenant control working in practice. Based on its experiences, the organisation has become a strong advocate of the principle that genuine empowerment through community ownership and control can lead to measureable improvements in happiness and wellbeing.
The right to transfer is seen by the ConDems as furthering both Localism and the Big Society. So we have Labour legislation and ConDem implementation, does this mean there is a consensus that the right to transfer is a good thing? The left has often been divided on the issues of tenant control and, in particular, tenant ownership. The co-operative and mutual traditions run deep, but there has often been hostility to moving ownership out of the public sector and away from traditional democratic control. Is transfer from a council to collective tenant ownership and control ‘privatisation’ or a different form of socialised ownership? I go for the latter as long as the model does not allow for private gain (as some earlier co-ownership models did) and the homes are properly used to meet housing need.
There are of course dangers to negotiate. If tenants wish to transfer part of a local authority’s stock to their ownership, coming out of the housing revenue account is hugely complex and has risks for both sides. Other major issues to deal with include the viability of the new tenant organisation and the long-term relationship with the parent authority over issues like allocations and future development.
The right to transfer will also cause bigger political divisions in the Conservative Party. In Hammersmith and Fulham, normally the incubator of Tory housing policy, tenants on estates threatened by demolition as part of the huge Earls Court redevelopment have already served notice that they want to take over their estates, potentially scuppering the council’s plans to reduce the amount of social housing in the borough. Will the government be willing to effectively overrule the Prime Minister’s favourite council to pursue its policy?
Given the need for the Labour Party to develop a new stance on housing, my own view is that Ed Miliband and the housing front bench should support tenants interested in using this new power.
PS – In legislative technicalities, S296 of the Housing & Regeneration Act 2008 introduced a new Section 34A to the 1985 Housing Act.
Just published on the Labour Housing Group website is a fascinating article by LHG Executive member Graham Martin, who tries to predict what will happen to the 3 main tenures between now and Xmas four years hence, when we will be 5 months away from the most likely date of the next General Election. What will the Labour Party, when returned to government, be facing in housing? Here is a summary of Graham’s conclusions (figures are for England only).
Social Housing
Housing Associations currently own around 2.3m affordable homes. Given the size of the stock, the overall numbers will change slowly despite the planned changes.
- The current (inherited and new) social rented programme will produce about 100,000-120,000 extra ‘target rented’ properties. But between 100,000-170,000 existing target rent homes will be relet at intermediate (upto 80% market) rents. In 2014 it is likely to be 50,000 fewer in total than now.
- There will be around 285,000 more homes let at intermediate rents (say 135,000 relets and 150,000 new build).
- The debt funded/rental cross-subsidised new Intermediate rented homes will be produced mainly in London and the South East (with some in the South West and Midlands) as it is here that the maths work best. In other parts of the country, intermediate rents will result in either a small increase or even a rent reduction, making development on the new model unviable.
- The biggest impact is likely to be caused by the interaction of the various benefit changes, and in particular the overall benefit cap of £26,000, restricting tenants’ ability to pay.
Council house numbers will change slowly. There is little appetite and resources for significant stock transfers. Some other conclusions:
- The reform of Housing Revenue Accounts is likely to improve councils’ financial strength and their ability to invest in their own stock. There is a risk that there will be a smash and grab raid on HRA money (rising rents, financially more secure) to cross subsidise the General Fund.
- The provision by councils of Intermediate rented housing is likely to be slow.
- Management issues around benefits are likely to be the same as with Housing Associations.
- Changes to statutory homelessness rules, and changing letting priorities will have a significant impact.
Home Ownership
Graham projects that house prices might fall another 20%, maybe 25%-30%, as measured against inflation. This will be mainly due to the long term ‘deleveraging’ of the residential mortgage market – i.e. there will not be the money to lend to home owners to buy new homes (such money as there is will go mainly to those buying the nicest properties with the biggest deposits).
Home construction for home ownership will be remain low until 2014, after which is may start to increase again (from a very low base).
The lack of affordable homes for (all but the best off) first time buyers will result in increased pressure on the rental market, and more adult children living in the parental home.
Private Rented Sector
The hardest to predict. The only certainly is that there will be big change.
The changes to Housing Benefit (and total benefit) rules will profoundly impact on the sector. Landlords may split their properties into smaller flats to respond to the benefit caps and ceilings. Savills are projecting that the impact will be, first, large falls in demand for and rents of 1 bedroom flats (due to under 35’s now being subject to the ‘single room rate’ rule), and, secondly, increased demand for larger ‘shareable’ properties.
The new 30% centile cap on maximum HB and the plan to greatly widen the ‘Broad Market Rental Areas’ will have a big impact. There are areas where over 30% of private tenants are dependant on HB, but will be constrained to living in the 30% of cheapest properties. 40% into 30% just does not go….
It is likely that the gap in housing (especially ‘green’) quality between other tenures and the private rented sector will grow significantly upto 2015.
Regulation and quality control are likely to be drastically reduced due to spending cuts, and there is a danger that undesirable landlord practices will increase. This is unfair to tenants but also to responsible landlords and managing agents.
There is an opportunity to promote high quality institutional landlordism, with investment available if the regulatory structure is right. REITS – Real Estate Investment Trusts – could work well in residential letting, kick starting the UK residential construction industry, and providing high quality, long term rented property at market rents.