Tag: Home ownership

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Forgotten Generation

“We are on our knees in terms of the housing crisis. I have worked in this sector for 35 years and this is the worst I have ever seen it”

 Fiona Fletcher-Smith, chair of the G15 group

To remedy what is already a catastrophe, we need to activate a national housebuilding programme to deliver the housing that the country needs now and into the future. It is only at this scale and by targeting the housing shortfall and needs of the country that we will stand a chance of providing the housing solutions this and future generations deserve.

Simply put, we need a lot of every type of housing, but mostly housing that is affordable, sustainable and secure. The housing we need is not being delivered due to a constrained planning environment, market conditions and funding complications. This is exacerbated by poor governmental leadership – 16 Housing Ministers in 13 years is not helpful. Institutes are unable to enact the measures needed due to being too risk averse and unable to support the affordable housing sector as they should.

Homeownership rates among 19-29 years olds fell by two-thirds over the period 1989 to 2013, from 23% to 8%. The housing shortage is also leading to an increased number of concealed households, with the number of adults living with their parents rising to 4.7 million in 2021, an increase of 700,000 compared with a decade earlier.

For younger people this is yet another setback in a long line of measures that are holding them back – lower relative incomes, rising housing costs and student loans. Not only is this having a significant impact on their short- and long-term life options, it also directly impacts on national productivity as younger people are held back in their careers due to their immobility.

In many areas of England, younger working people are often not eligible for, or are unable to secure, social rented homes. Due to a lack of affordable supply, home ownership or rental is beyond their financial reach too. 

Set against median incomes, we can see that most forms of affordable (intermediate) homes are out of reach to people under the age of 35. This pushes more and more people into living in overcrowded or inadequate homes.

Chart 1 – The chart above shows what households should be spending on housing costs (green bars) based on the latest ONS data for median incomes against what is charged (blue bars). The affordable threshold for housing cost is calculated at 40% of net income (London Plan), which is the criterion set for affordability. It is 30% of gross income (Manchester housing strategy). The housing costs above are taken from actual housing offers around London and represent typical costs. It clearly shows that for people on median or lower incomes, they must exceed allowances to afford a home.

The Government states that you can buy a home through shared ownership if both of the following are true:

  • your household income is £80,000 a year or less (£90,000 a year or less in London)
  • you cannot afford all of the deposit and mortgage payments for a home that meets your needs

Yet, there is a huge gap between incomes and housing costs. The median incomes for all people aged between 30 to 39 (2020 ONS), in England was £32,259 – dropping to £27,087 for women, who make up the nearly two thirds of people buying shared ownership homes. Even with London weighting, this is a far cry from what is needed to buy a Shared Ownership or Discounted Market home in London which require incomes above £48-63,000 as shown below. A report from UCL illustrates that over the last 7 years, the value of the staircased share has increased by 60% implying that shared ownership is becoming less affordable.

Chart 2 – Example of typical incomes required for Shared Ownership Homes in London.
Chart 3 – Example of typical incomes required for Discounted Market Sales Homes in London.

The result is that well over 50% of younger working people, regardless of their jobs, do not have access to any independent housing options – this is a terrible situation and it is only getting worse. We are not building enough homes and not the right types of homes either.

To overcome the disparity between income and cost, we need to greatly increase housebuilding. We need to look beyond housing types and focus more on whether they are actually affordable to people. Too many people are getting further into debt and spending far too much of their income on housing and energy rather than wellbeing and their prospects.

There are a number of housing models (discounted rents or fixed shared equity) that can ensure affordability, but we are not providing anywhere near enough of these homes. Affordable housing providers and Local Authorities, if given the right levels of support, funding and expertise, can make significant inroads into delivering the homes we need. All suppliers of affordable homes should be supported with access to appropriately priced land and funding.

With the right housing policies and structures in place we can deliver the homes we need that are affordable, safe and protect us from the climate. We need stability and a determination to resolve the housing crisis. We can then aim to make housing a human right and begin to address the shortcomings set in front of younger people.

Pieter Zitman is an affordable housing provider and champion. He recently founded a Bursary to support disadvantaged architecture students in South Africa.

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The battle for evacuation plans, so we can live safely in our homes

Who Are CLADDAG and Why Were We Set Up?

We are a Leaseholder Disability Action Group, campaigning on issues impacting disabled leaseholders trapped in the cladding and building safety crisis scandal. In the absence of any group representing disabled leaseholders, we set up CLADDAG in December 2020. This was after Sarah Rennie saw a blog I had written for Greater Manchester Housing Action, about disabled leaseholders not being included within the conversation. At that time, it seemed that our existence wasn’t recognised.

We campaign hard and aim to improve disabled representation, within campaigning, discussions and the media. This is about increasing visibility, as well as highlighting issues specific to us.

We use the term ‘disabled’ loosely in the aim of being inclusive. Many people with health conditions don’t identify as disabled. This might include deaf or older people for example.

Whilst we are disabled leaseholders and there are specific issues related to leasehold, we recognise that many impacts us the same as other leaseholders. Also, that some issues that impact us, affect disabled people across housing tenures. So as allies, we work with individuals, groups and organisations, across all categories with common aims. We learn from each other and by uniting, our combined strength increases our influence. 

Our Campaign and Our Asks

In May 2022, the Government announced it would not be implementing Personal Emergency Evacuation Plans (PEEPs), although it had previously committed to doing so.  A PEEP is a plan that helps people who cannot self-evacuate in the event of a fire, which could include a knock at their door or equipment such as a device alerting a deaf person that the fire alarm is going off. The Grenfell Inquiry made important recommendations for their implementation and they also received overwhelming support (87% in favour) from the Government consultation on PEEPs. The Home Office had secret meetings with private lobbyists who raised concerns which led them to this decision, based on ‘practicality,’ ‘proportionality,’ and ‘safety,’ but with no underpinning evidence.

Following the announcement, another consultation on Emergency Evacuation Information Sharing (EEIS) was launched, which doesn’t resemble PEEPs and is clearly an inappropriate standalone alternative. This closed in August 2022. 

So not only was anyone given the opportunity to respond to these concerns, but the Fire Minister, referred to disabled people as ‘getting in the way of others’ during evacuations. Such throwaway comments have been used by many throughout these consultations. Others include, ‘you should be living on the ground floor,’ being referred to as ‘those people,’ ‘evacuation chairs get in the way of everyone,’ ‘equipment is too expensive,’  ‘the Grenfell fire was rare, so the risk is low’ They aren’t easy spaces to engage in generally and is why many disabled people are reluctant to or refuse to. 

Focusing so much on cost, with no projected evidenced based costs, is a typical tactic, to make us appear unreasonable, reinforced by flippant comments, so that not only do we feel inconvenient and a burden, but others about us do too. How much is a disabled life worth?

When you look at the timeline from the Grenfell fire in 2017 (which caused the deaths of 40% of the disabled residents living in the tower at the time), it was in 2018 that the Grenfell Inquiry recommended the Government enact PEEPs. Now we’re still in a situation where nothing has been decided, following three consultations. The relatives of Sakina Afrasebi, a disabled woman who died in the Grenfell fire, took the Home Office to Judicial Review in 2020, as the first consultation was on a watered down version of PEEPs. This led to the second consultation on PEEPs. 

It feels that the human aspect is often overlooked, especially when discussing such issues often coldly in online meetings and some questions on forms being tick box questions. 

For over five years the fight for fire safety equality continues. So there was no alternative, but to request a judicial review, as the only way of holding the Government to account on their decision, which we find discriminatory. On equality grounds, people should not be prevented from evacuating a building if they wish to, at the same time as their neighbours, only because they have a disability or are pregnant for example.

Our application was granted, stating that we have an arguable case, and the hearing is due to be held later this year. In order for us to be able to do this, we need to reach our crowdfunding target towards legal costs, in case we lose. Our legal team are working on a ‘no win,’ ‘no fee’ basis. 

Equality in evacuation has become our current main focus, while most of us are currently in limbo, waiting to see if the Building Safety Act will cover our homes. This is going to take years to complete, so the most urgent issue is equality to means of escape. 

In our overall campaign, we join with our allies to demand three actions:

  1. Ensure disabled leaseholders live in accessible homes of their choice, unimpeded by the building safety crisis.
  2. Protect disabled leaseholders from the costs resulting from remedial safety works.
  3. Provide disabled leaseholders with aids and equipment for safe evacuation.

Escalated related costs are wholly infeasible for all leaseholders. However, disabled and older people are more likely to be supported by state benefits or pensions. Such restricted incomes massively impact ability to fund remediation costs, including insurance hikes. Some of our flats are more than a home and in a sense are also a care setting, as they’ve been adapted for our needs, e.g. wet room installation, ceiling tracking for hoists. For others, their conditions have progressed, meaning they need to move somewhere accessible, but they are stuck, unable to sell.

The majority of disabled people we represent do not have PEEPs to evacuate their homes, many of which are in highly dangerous blocks of flats. Managing agents are reluctant or refuse to discuss disabled leaseholders’ needs.    

Local and National Campaigning

From grassroots to national organisations, we’ve worked with numerous campaign groups, fire experts, politicians, fire and rescue services, unions and will continue to do so. We’ve had huge media coverage, partnered with organisations including Grenfell United, Disability Rights UK and Social Housing Action Campaign, as well as End Our Cladding Scandal and local groups under that umbrella, such as Manchester Cladiators. We’ve also met with local councils.

This has all come at a huge negative impact on our physical and mental health, but we do what we can, when we can. We know what it’s like to live in unsafe homes, which currently isn’t physically or financially secure, but the opposite. Combined with the fact that most disabled people are denied access to a PEEP, means our situations are confounded. It’s on your mind constantly, no matter what you do and where you go. There is literally no escape. People advise you to take time out, switch off and rest, but how is that realistic? 

Trust in all associated companies and services has been lost, which will take decades to repair. I live in a midrise block, informed of fire safety issues in 2019, including timber cladding and balconies and compartmentation issues. 

For too long ‘stay put’ as a strategy has not even been discussed publicly. It’s taken a devastating fire where so many lives were lost for this to come to light. I hadn’t previously questioned it, even having a disabled mother, in all the jobs I had working with disabled people and unexpectedly becoming disabled myself as an adult.

People contact us with all sorts of harrowing experiences. They are scared and also angry that this is even a fight. It should never have come to this. 

Our asks for Labour’s policies 

Therefore, within this crisis and alongside others, including the cost of living crisis, our contribution and focus, as part of all this, is mainly in the fight for PEEPs. Sadly, fire safety inequality is yet another example of how the government views our lives as less ‘worthy.’ Finally, I urge the Labour Party to incorporate our three demands into policy and support our legal battle.

We #DemandBetter #EnoughIsEnough

Please donate if you can.

www.claddag.org

Twitter: @Claddag

Facebook: @LeaseholderDAG

<strong>Georgie Hulme</strong>
Georgie Hulme

Georgie Hulme is a leaseholder at the Life Buildings in Hulme and a campaigner with the Manchester Cladiators.

Georgie co-founded the disabled-led leaseholder action group Claddag, which has relentlessly advocated in the media, in the community and in the courts for disabled and older people impacted by Building Safety Crisis

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The elephant in the room: to broaden home ownership access, governments must tackle housing affordability head-on 

Boosting home ownership: an overriding housing policy objective for many decades, not only in Britain but the world over. And yet, as also seen in many countries, the past 10-20 years have witnessed owner occupancy rates static or falling – see graph. 

Figure: Changing home-ownership rates (owner occupiers as a percentage of all households) in selected countries indexed to 2003 (2003=100) – for sources see Figure 19 in our report

Home ownership levels among young adults have widely plunged in much more dramatic fashion. In the UK, for example, the 25-34 age group owner occupancy rate declined from 51% in 1989 to only 28% in 2019. And, in another concerning dimension, both in the UK and Australia, within each age cohort, ownership rates have declined disproportionately among lower income households. Given the range of inherent benefits believed associated with home ownership, these trends present a major housing policy challenge.

It is not as though official endorsement for home ownership can be dismissed as purely rhetorical. Quite the contrary. As demonstrated by our recent research comparing approaches across eight countries including the UK, a highly diverse array of first-time buyer assistance interventions have been, and are being, pursued around the world. 

Demand-side and supply-side interventions

In Britain this has lately involved schemes such as the Help to Buy shared equity model, where government effectively takes an equity stake in the value of an acquired home via a (time limited) interest-free loan, thus reducing the size of a purchaser’s necessary mortgage. Significant stamp duty concessions and government-backed low deposit mortgages have also been recently offered for first time property acquisition.

Since these types of help effectively enhance consumers’ ability to pay for housing, they can be classed as ‘demand-side’ instruments. Supply-side measures, by contrast, involve government support for home ownership targeted through housing suppliers (developers) or through the below-market-value disposal of publicly owned assets. 

UK examples include grant funding for housing association shared ownership dwellings and the effective subsidy offered to council tenants exercising the Right to Buy, as well as developer contributions to affordable home ownership mandated through land use planning. 

In Australia, while supply-side interventions are nowadays virtually absent, government-commissioned build-for-sale schemes formed an important instrument for boosting home ownership in the early post-war period. Direct state involvement in land and housing development to generate ‘entry level’ homes for sale meanwhile remains significant in both Germany and the Netherlands, and extensive in Singapore. 

All demand-side and supply-side models identified in our research feature among seven distinct forms of first-time buyer assistance identified in our generic policy typology – see Table 1 in our published report.

Political potency

Generally speaking, anglophone countries (e.g. Australia, Canada, Ireland, New Zealand, UK) have in the past 10-20 years tended to see growing deployment of demand-side first-time buyer assistance measures. 

Approaches of this kind chime with the neo-liberal preference for governments to act as ‘market enablers’ rather than to play a more direct role in provision. They also tend to be politically attractive because of their media appeal and electoral resonance. 

However, especially where they take the form of cash grants or tax concessions, demand-side measures are widely criticised by economists and public policy experts as inequitable (because the beneficiaries tend to be moderate income rather than low income households) and ultimately counter-productive since, by boosting purchasing power for a commodity with inelastic supply, they contribute to house price inflation. 

Those losing out under this type of approach – because of the higher prices consequently faced – include all aspirant first-time buyers failing to qualify for such assistance. The main beneficiaries, on the other hand, are existing home owners, whose properties consequently appreciate in value without any effort by property holders themselves. 

Nonetheless, the political potency of home ownership affordability was notably highlighted in recent national elections in both Australia and Canada where rival demand-side first time buyer assistance measures were pushed high among contested issues by the leading rival parties.

Broadening access to home ownership?

How far do first-time buyer assistance schemes in fact broaden home ownership across the income spectrum, as sometimes claimed? From our own work we would largely endorse the conclusion of UK researchers who concluded in 2017 that:

‘[Low cost home ownership] schemes are not expanding … social mobility by opening up home ownership to new groups of lower income households. Rather they are being used by households who would most likely buy anyway’.

Instead, the main effect of models such as shared equity (e.g. Help to Buy) or low deposit mortgages is to bring forward home purchase for moderate income earners otherwise destined to buy some time later. Alternatively, beneficiaries are enabled to buy a home somewhat bigger, or better located, than in the absence of assistance.

Arguably, regarding the scope for broadening access to home ownership, the discounted sale of council housing to sitting tenants could be something of an exception to the rule, since many scheme participants have indeed been relatively low-income households. Nevertheless, considering the eye-watering value of the effective subsidy receivable via discount entitlement (currently up to £100,000 per buyer), the true program cost to government is, and has been, colossal.

Because such costs have been historically incurred without direct government expenditure (but, rather, by accepting a below-market price for a state-owned asset), they have had low political visibility. However, if the Conservative government was serious about its recently declared intention to promote housing association Right to Buy sales, this would change because the associations concerned would expect Treasury compensation for the value of discounts approved. 

Some more recommendable first-time buyer assistance measures include:

  • Mandating developers to include below-market price housing for sale (as well as affordable rental) in residential developments is recommendable on the grounds that the discount is effectively financed by taxing land value
  • A strength of the shared equity model (e.g. Help to Buy) is its potential for lowering both the income and wealth threshold for home ownership access, to the benefit of lower income households.
  • Enabling development of for-sale housing by state agencies or housing associations offers a means of providing dwellings that can be sold to qualifying applicants at cost price (i.e. no need to factor-in profit), while also expanding overall housing supply to the benefit of the wider market.

Housing unaffordability – the elephant in the room 

Well-chosen measures to assist first-time buyers are a desirable element of a wider housing strategy. But their potential for expanding access down the income spectrum remains very limited if other key policy settings remain sacrosanct. Overall home ownership growth demands systemic change to tackle the much tougher challenge of easing broader housing affordability. 

Yet this objective calls for the dampening of property values, an objective in tension with the dominant theme of home ownership policy: to facilitate wealth accumulation through asset ownership. 

Some will argue that this demands land-use planning de-regulation to ‘free up supply’. In our view, however, the volume of new housing output is primarily influenced by developer response to market conditions, not by the planning system. Rather, the key problem lies in the taboo status of key tax and/or social security policy settings that in many countries encourage people with spare money – or credit capacity – to plough it into housing. In the UK context this could refer to the unlimited exemption from capital gains tax for the principal home, the weakness of the inheritance tax regime and the absence of a broad-based land tax.

A serious commitment to expanded home ownership demands consideration of phased reforms in areas like these. 

<strong>Hal Pawson</strong>
Hal Pawson

Hal Pawson is Professor of Housing Research and Policy at the University of New South Wales, Sydney. He is also well known in the UK for his many years of work at Heriott-Watt University, where he worked up until 2011, and where he is still an Honorary Professor. Hal’s latest co-authored books are: ‘Housing Policy in Australia: A case for system reform’, and ‘The Private Rental Sector in Australia: Living with uncertainty’, published in 2020 and 2021 respectively.

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Buy a House on Benefits? Why not!

Right to Buy (RTB) – argued to be the most successful transfers of wealth since its introduction in April 1980. Yet despite successfully giving aspirational working-class families the ability to participate in the property-owning democracy it once again is under scrutiny.

Incredibly over 1.9 million homes have been sold through RTB since its inception, a take-up that demonstrates its sheer popularity. Once commonplace under Local Authorities the offer has now been made to tenants of Housing Association (HA). But for many this is a step too far.

Labour, Guido Fawkes and Shelter condemn the proposal

On the right, we have seen Guido Fawkes condemn the “buy a house on benefits” scheme as a “stupid idea”. Shelter has claimed extending RTB “couldn’t come at a worse time”. While also suggesting “the government should be building more social homes, not selling them off”. Shadow Secretary of State for Levelling Up, Housing and Communities, Lisa Nandy, recently called into question Boris Johnson’s announcement.

She challenged Johnson over the feasibility of allowing people to use housing benefit towards a mortgage. Tweeting recently whether lenders are “on board” with the Prime Minister’s first proposal after his disastrous vote of no confidence. Nandy also claims the new proposal would “make the housing crisis worse”.

Questions over feasibility and acceptance by the market

The scheme could help 17,000 families a year according to the report on the pilot published in February 2021. However, it found half of the homes under the scheme weren’t replaced despite promises of “one-for-one” replacement. Those “replaced” were often found to be as a more expensive form of tenure. This in large part driven by a Tory grant programme favouring such forms of tenure. Arguably fair kop to call into question.

Notwithstanding the above, we have seen the rise of the for-profit registered provider backed by private equity and institutions. Who have been piling into the sector lured in by government backed income in a supply constrained market. Whether social or affordable rent, or controversial shared ownership, the private sector has been licking its lips.

If these capital providers can accommodate such government-backed income streams, why cannot lenders?

But the proposals actually spur on new supply

Secondly, the argument around the need for one-for-one replacement seems one based on a lack of understanding of basic arithmetic. For those on the left, many feel a tenancy for life forms part of housing as a human right.  On that basis, whether an aspirational working-class family lives in a social rented home, or one where they have exercised the Right to Buy, morally this principle holds true. Under RTB total housing stock does not deplete and new build from recycled capital ultimately still contributes to new supply.

The family who can now use their in-work benefits towards a mortgage become the beneficiaries directly of the subsidy. Not the HAs who fail to do repairs and pay their executives investment banker wages. At a time where the National Housing Federation announces an independent panel to review the poor-quality homes endemic under its watch, why would we want to prevent aspirational working-class families from the opportunity to fix and maintain their own home, if they have the means to do so. Ultimately giving them an opportunity to escape the ever-lasting trap of poor housing management they currently endure under HAs.

But how, after all, in a supply constrained housing system does adding new housing stock make the housing crisis “worse”?

Global market headwinds make opportune timing to support demand

All sides have now sought to strawman the Right to Buy, blaming it for the loss of much needed social housing stock. The debate has not become one of supply. Instead some argue these recent measures merely add to demand-side pressures, which an already distorted market does not need. Yet in a time of globally increasing interest rates and a recession, when else is there a better time to broaden access to those on low incomes and counter market forces.

Furthermore, HAs often have low levels of debt against them with the homes valued on the books at Existing Use Value (EUV). Such a low level of debt allows the Government to provide meaningful discounts and unlock wealth for working class families. Of course, the HA lobby and HM Treasury will have kittens if they have to sell their silver, but ultimately who benefits?

Boris Johnson is playing to the aspirational working class

Whatever your politics, broadening access to an affordable home or home ownership should be the end goal. Yes, the Labour Housing Group has taken a stance to abolish Right to Buy. But I argue this policy is targeted at those Labour must seek to win back from the Tories. Boris Johnson is sending a key message to the millions of tenants living under often dreadful Housing Association conditions, that he cares about them.

Meanwhile, Labour and much of the left-leaning housing industry, condemns what has previously been a hugely successful policy for those who have benefitted from it. Right to Buy and the need to provide more social rented homes are not mutually exclusive.

Without means-testing tenancies how else can we recycle capital from those in social housing who can afford to buy?

Many of those who will exercise their right will be those who can afford to, who are still living under the benefits of a social tenancy. These include the members of Parliament who remain in their social rented flat, while earning a top 10% salary in the Commons, as well as the 117,000 households (16%) in London living in social rented accommodation  resided in by the top 40% of earners in the capital.

But if we are not to bring in means testing of social rented accommodation throughout a tenancy, is not recycling capital from sales into the provision of new homes an admirable end goal?

I certainly think so if the sellers can keep the receipts. We can argue about whether we “replace” less than half with social or affordable rent. Or we can recognise the use of the benefit systems ability to increase the overall level of stock in a housing market beholden to NIMByism. After all an election message to aspirational working-class families that they have a chance at closing their own personal wealth inequality gap is compelling.

<strong>Christopher Worrall</strong>
Christopher Worrall

Chris is the Editor of Red Brick blog and sits on the Labour Housing Group Executive Committee.

He currently is Chair of Poplar and Limehouse CLP, co-hosts the Priced Out podcast and is the Local Government and Housing Member Policy group lead for the Fabian Society.

He writes in a personal capacity.

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Housing in the Australian election

Housing loomed large in the campaign debate running up to the recent Australian federal election. In fact, rival plans for first-time buyer assistance were central to the rival pitches of the two main parties in the final week of the contest.

The overarching context for this is the concern provoked by declining owner-occupancy rates in a country that still thinks of itself as a home ownership nation. By UK standards, the overall downward trend has been quite modest – the past 20 years has seen owner occupation drifting down by around 3-4 percentage points to 67 per cent. But that conceals much faster rates of decline among young adult cohorts.

Again, as in Britain, falling home ownership worries have been aggravated by the unexpected COVID house price boom which has seen prices jump by 30% since 2019 – a substantially more marked increase than the UK’s equivalent market climb.

Add to that, the recent spike in rent inflation greater than at any time since 2008, and it’s obvious that the pandemic significantly aggravated Australia’s longstanding housing affordability challenge.

So, in this battle that ended with the centre-left Labor Party (yes, that’s the correct spelling) regaining power after nearly a decade in opposition, what exactly were the rival housing plans pitched by the two main parties?

With Labor having retreated from significant reforms to private landlord tax breaks pledged in the previous two elections, there was actually less distinction between the housing offers of the main protagonists this time round. Even so, the difference between Labor’s 2022 platform and that of the Liberal/National governing coalition remained notable.

The home ownership offers

The main area of contest was of course home ownership. Both parties committed to expanding the existing national low deposit mortgage scheme for first-time buyers predicated on a government guarantee enabling downpayments of 5% rather than the standard 20%. This may now be made available to around half of all those entering home ownership.

Beyond this, and targeting much the same group, Labor pledged to initiate a national shared equity programme. Complementing existing state government schemes in Victoria and Western Australia, and subject to applicant income and property price caps, this would see the federal government taking an equity stake of up to 30% in an existing dwelling and up to 40% in a newly built home. The model is very similar to the UK Government’s Help to Buy scheme in both content and name.

Deriding Labor’s approach as one in which ‘the government wants to own your home’, on the ropes in the opinion polls, and clearly seeking a point of difference as the campaign neared its end, the Prime Minister further ramped up the debate by pitching a new and novel proposal. Aspirant first-time buyers would be enabled to draw on otherwise inaccessible pension (or ‘superannuation’) savings for home purchase.

Although widely criticised as inflationary, as well as inequitable, the ‘super for housing’ proposal was considered by some a political masterstroke, since it leveraged a libertarian sensibility across the electorate at no (immediate) cost to government. It also served the partisan aim of attacking the pension industry disliked by conservative Australians not only because of its compulsory contributions but also because some funds are union-linked.

Social housing

While featuring comparatively minimally in election media coverage and debate, a number of other potentially significant housing commitments were aired in the contest – mainly by Labor. These included Labor’s pledge for a national social and affordable investment program to generate 30,000 dwellings over six years.

Considering that Australia has been latterly constructing only around 3,000 social housing units annually, with the federal government making a near zero contribution, this is notable – yet also modest. Factoring in expected population growth, it would be enough to slow, but not to reverse, the longstanding decline in social housing representation in the housing system (now only just over 4% of total occupied dwellings).

The most novel aspect of the social and affordable housing investment proposal is its financing through investment returns from an ‘off balance sheet’ future fund. The attraction of such a structure is that, under relevant accountancy conventions, the cost would not score as government debt. Some readers may detect parallels with the long-running UK debate on the accounting treatment of council housing investment.

As far as social housing is concerned, the Liberal/National election platform extended only to expanding the quantum of community housing debt guaranteed by government – a facility of only very limited value without the matching subsidy that the Coalition declined to offer.

Institutional reform and strategy

Finally, and once again, with a very low media profile, Labor’s election pitch included some significant institutional reforms which, with the Party now installed in government, we can expect to take shape in coming months. These include, firstly, the creation of a National Housing Supply and Affordability Council (NHSAC), a body charged with analysing housing needs and provision – a remit similar to the UK’s erstwhile National Housing and Planning Advice Unit (NHPAU).

NHSAC will sit within a new national housing agency, Housing Australia. This will absorb the former administrative roles of the National Housing Finance and Investment Corporation (NHFIC) for first-time buyer assistance schemes, as well as the housing future fund. Perhaps opening up more far-reaching possibilities for the future, Housing Australia will also take responsibility for a ‘National Housing and Homeless Plan’. This, it would be hoped, will cement the federal government back into an active an ambitious role in the national housing system – something unseen for more than a decade.

Until Labor can find the stomach to revisit fundamental tax reform many of us would argue that the scope for fixing Australia’s dysfunctional housing system will remain extremely limited. At the same time, the incoming government’s program contains some housing green shoots that are still worth celebrating.

<strong>Hal Pawson</strong>
Hal Pawson

Professor Hal Pawson, is based at the City Futures Research Centre, University of New South Wales, Sydney

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Deposit Barrier Must be Addressed to Widen Access to Home Ownership

With an average deposit of £21,000 required, the Government’s much heralded ‘First Homes’ will remain beyond the reach of a large number of aspiring homeowners. This includes the 61% of private renters who have no savings at all, those who are unable to rely on the bank of mum and dad and a high percentage of key workers whose incomes are not high enough to enable them to save.

To truly widen access to home ownership we must address the deposit barrier. Only then will we be able to open the housing ladder to those on lower incomes. The Government has proposed that a quarter of all new affordable homes will be First Homes: homes for first-time buyers sold at a discount of at least 30% of market value. Whilst the lower price will no doubt make these homes more affordable to some, there will remain a significant portion of aspiring homeowners for whom they will still be out of reach because they simply cannot raise the amount required for a deposit.

Based on the average price paid by a first-time buyer, even after the 30% discount a buyer under ‘First Homes’ would need to have saved £14,000 for a 10% deposit. With lenders dramatically reducing the number of mortgages available to buyers with small deposits it is now more realistic for a deposit of 15% or 20% to be required. This equates to £21,000 or £28,000 respectively, plus legal fees and moving costs. Factor in that just 10% of private renters aged 16-34 have savings of between £5,000 and £15,999 and this keeps the dream of home ownership beyond the reach of all but a small minority of young renters.

It’s not just the deposit which is a barrier but also the income needed for a mortgage. Lenders will generally offer four and a half times a buyer’s salary. Based on an average First Homes house costing £140,000, if the buyer did manage to save a 10% deposit they would need a mortgage of £126,000. This would require them to have a salary of £28,000. However, a newly qualified nurse starts on a salary of less than £25,000 and it would take 6-7 years’ experience until they had reached this salary threshold. What about the key workers in the care and retail sectors who have kept the country going through the pandemic on a minimum wage?

There is a home ownership model which provides a solution to these barriers. ‘Affordable rent to buy’ helps tenants to save up to buy the home they are renting. It is different from other rent to buy schemes as the tenants benefit from an affordable rent for a much longer period of up to 20 years compared to just 5, and when they are ready to buy they receive a gifted, 10% deposit which they do not have to repay.

The model does not require buyers to provide any upfront deposit to access the scheme. Instead, they undergo a financial assessment which looks at whether they will be likely to be able to buy in up to 20 years’ time. For example, for a newly qualified nurse the provider would see that within 10 years she or he would be able to afford the mortgage so they would be eligible for the scheme, even though they couldn’t afford a mortgage or deposit now. Based on their finances, they will choose to aim to buy at year 5, 10, 15 or 20. Rather than having to remain in private rented accommodation up until this time, the nurse would live in the home they know they will one day own and pay 80% market rent helping to save more each month towards a deposit with a long-term, secure tenancy.

A number of local authorities have already adopted the model. As well as helping more people onto the housing ladder, they are experiencing the model’s wider benefits including that it houses many families from the housing waiting list. 17% of the families benefitting from the scheme come from social rented homes that they no longer require freeing these up for those in greatest need. On top of this, the model is fully funded by pension funds and institutional investment so not using up any of the grant funding local authorities access from the Affordable Homes Programme to deliver homes for social rent.  

To truly help level up home ownership, the Government should ensure that models which more effectively address the barriers to home ownership are included alongside First Homes. This will encourage local authorities to consider adopting innovative models like this to address their local housing need and help make home-ownership a reality for many who otherwise can only dream of it.

<span class="has-inline-color has-accent-color"><strong>Steve Collins</strong></span>
Steve Collins

Chief Executive of Rentplus, the leading affordable rent to buy housing provider.
Steve has over 25 years’ experience in housing and development, both in private and public-sector organisations.

This includes working for the then Homes and Communities Agency where he had responsibility for the successful delivery of over 42 Government programmes with a combined value of c.£900m pa, aimed at accelerating the delivery of housing and public sector land across the country.

Steve has significant experience in the affordable housing sector where he managed the allocations of the affordable housing grant programme.

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Thatcher, ideology, and elderly home owners

Thirty-odd years ago in Haringey we had a great scheme for helping elderly home owners manage their affairs.  If it was their wish, the council would buy their family home at market value and, in exchange for a specified discount on the price, we would provide them with a home in a sheltered housing scheme or similar.
The scheme benefitted everyone.  The council now owned an asset it could invest in and rent to a family, giving up a unit for which there was less (although still substantial) demand.  The home owner was released from the burden of managing and maintaining a large house, often on a fixed income, and got a rented home with the support of a warden as well as a significant capital sum they could invest.  The policy tackled both under-occupation and overcrowding.
The scheme was, of course, brought to a halt when Meryl Streep became Prime Minister in 1979.  For ideological reasons the Tory government stopped ‘municipalisation’ and all the benefits of the scheme were lost.  Elderly home owners were deprived of the opportunity to become residents of sheltered housing, which many of them aspired to do.
I suppose I should be pleased that Grant Shapps has started to reinvent the wheel to encourage older people to ‘downsize’ in a voluntary and non-coercive way.  It contrasts sharply with Government’s bullying bedroom tax for social tenants who under-occupy.
Unfortunately the ideological objection to municipal ownership remains in his new scheme.  In what passes as a Government announcement these days, Shapps told the Daily Telegraph that, instead of selling their home to the council, the elderly home owner would move into suitable rented or sheltered housing (which regrettably is in decline following changes in the Supporting People regime) and the council will lease their property, taking responsibility for maintaining and letting the property at ‘affordable rates’ (which I presume means well above social rent levels).
Based on an existing pilot scheme in Redbridge, the council would pay the costs of moving, renovations and financial advice.  The former homeowners would receive the rental income and retain ownership of the home for their estate.  As the council does not own the home, it will be willing to take on management and maintenance costs but will not want to invest in the property for the long term.
One issue is that it remains unclear whether Shapps intends that the rent received by the former owner would be net of management and maintenance costs; this would seem obvious but the (Lib Dem) Deputy leader of Redbridge Council wrote on ConservativeHome that “The home owner retains ownership of their home which is leased to the council to provide us with additional social housing.  The owner receives all of the rent as income, as well as free property management.”  ‘All of the rent’ seems to me to be not the right thing to do, and undermines the viability of the scheme.
Another issue to be resolved is the tenancy terms on which the new tenant of the family home occupies it, and what happens to them if the owner dies and the home is part of their estate.  I assume the tenant will only be given a fixed term tenancy but they should have some reasonable guarantee of their security and period of notice.
Subject to seeing such details of how a national scheme might work, this looks like a reasonable step forward.  It’s just a pity that an entire generation of home owners wishing to downsize, and an entire generation of families wishing to rent a home, have been denied the opportunity because of Thatcher’s ideological purity.

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Generation rent

I was suitably riled listening to Grant Shapps on World at One at lunchtime today, failing to answer sensible points and questions about the housing market from Tony Dolphin and Owen Hatherley.  His ability to avoid any question and reply in ludicrous blandishments never ceases to amaze me. 
According to Shapps, house price inflation only occurs under Labour.  He must have been too young to remember the boom under Thatcher – and even worse the bust when home owners were abandoned with vast amounts of negative equity, a huge number of repossessions – and no government help.  At least when the bust came in 2007 – and never forget it was an international banking bust whereas Thatcher’s was home grown – the Labour government took a series of important steps to protect tens of thousands of home owners, and the tenants of home owners, from foreclosure and homelessness.  
Shapps simply fails to deal with the issues raised by two important reports today.  The first, the one that grabbed the headlines, was from the Halifax who coined the phrase ‘Generation Rent’ to show that people no longer feel that they will be able to buy and that half of 20-45 year olds now think renting is the norm, similar to much of the rest of Europe. 
The second, Tony Dolphin and Matt Griffith’s serious piece of work for IPPR, Forever Blowing Bubbles? takes a long hard look at housing’s role in the UK economy with a proper historical perspective.  It makes a series of recommendations for mortgage regulation and the importance of stopping borrowers from thinking that housing market is a one-way bet.  They also make a strong case for reform of the private rented sector to provide a real alternative choice for those who need to hedge their move into home ownership.  As they say, “tenure rights are weak and the sector is poorly prepared for larger families and their needs. The professionalisation of the sector is much needed to make it the natural choice for those who wish to sidestep the risks of the owner-occupied housing market.”
At one level it seems obvious, but they demonstrate the importance of looking at the housing market as a single entity and not two markets of different tenures, arguing for “reform of the PRS to make it a less destabilising influence in the UK housing market. As we have seen, BTL (buy to let)  investment has too often been speculative, volatile and a cause of pro-cyclical price pressures in the housing market. Worse still, it appears to have cannibalised existing housing stock, led to a weak response in total housing supply, distorted existing supply incentives to encourage the overproduction of small city-centre flats, and driven out large institutional investors by pushing prices up beyond sensible yields.”
Owen Hatherley, whose interesting article on home ownership and renting is also published today, put it to Shapps that people who could no longer afford to become home owners were left at the mercy of the unregulated and insecure private rented sector, and therefore faced no real choice at all.  And that secure public sector tenancies should be a genuine option.  Exit stage right for the Minister, off on another ramble about some excruciatingly complex shared ownership option he’s invented (effectively a cut-back and rebranded Labour scheme). 
The Government avoids the big questions in housing policy today, especially how the housing market – and the vast majority of people live and will continue to live in market housing – can be made to work for people on low and moderate incomes.  There is a real opportunity for Labour to build on these interesting reports and come to some radical but sensible and appealing policies of its own as the Housing Policy Review takes shape.

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We need Isambard and a tin hat

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone. Steve sits on the Editorial Panel of Red Brick.

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As Tony suggests in his post I agree with Grant, Grant Shapps deserves (begrudging) respect for raising the importance of achieving long term house price stability, but I hope he has his tin hat on in anticipation of the reaction in some parts of the media.  The Mail has already highlighted Shapps’ own personal property dealings as they smell ‘hypocrisy’.   Of course, never one to miss a political trick himself, Shapps also tries to pretend that house price hyper-inflation came in with the Labour government in 1997, whereas all the key trends and policies, long booms followed by a sharp and damaging busts, have been in place for a couple of generations now.

The real problem is that I can’t see anything in his or the government’s philosophy that might lead to the necessary actions being taken to bring house price stability about.  The Mail quotes Shapps as saying that homeowners should no longer rely on their houses to fund their retirement and that ministers were hoping to engineer an era of ‘house price ­stability’ in which property values would gradually be eroded by ­rising earnings.  

‘Engineering’ a market seems rather at odds with everything else they stand for.

Indeed rather a lot of extremely heavy engineering projects would be required to achieve long term price stability.  We may need the housing equivalent ofIsambard Kingdom Brunel because all of them are hard to achieve. 

The first is a better balance of supply and demand, which will need policies to massively increase the rate at which new homes are built over a sustained period of time, more than a decade.  With the regional planning framework scrapped, and huge cuts in infrastructure investment, this seems a forlorn hope to me.  

The second is the stable supply of mortgage funds on sensible terms, targeted towards the cheaper end of the new build market, to encourage developers to produce more affordable homes.  This will require a stiffer attitude towards regulation than this government promises and lenders are used to. 

The third is to tackle land prices and not just house prices – the problem in many places is not the cost of construction, but the price of the land – which can probably only be done through some kind of land value tax, not natural territory for any of the main political parties. 

And fourth, we need a stronger safety net for home owners when interest rates spike or redundancy strikes – Labour’s policies during the credit crunch were a good start in this direction.  Stable or falling prices need to be accompanied by reduced risk for individual households.

At the bottom of it the hardest change to make will be in attitudes.  A good home ownership market is vitally important, but it will fail if it is regarded as the only tenure that brings status and respect, or as a get rich quick scheme or a proxy pensions market or even a place to bung the latest bankers bonus.  The core business should be about delivering reasonably-priced homes to people on reasonable incomes, and shared ownership to people on ‘intermediate’ incomes who want it.  But the market will still fail unless we have a better understanding of the relationship between tenures.  A balanced housing market needs far more renting as well as more homes built for sale, so people at all income levels have real choice at different stages in their lives and are not forced into debt that they cannot sustain.  

More care is needed with the language of ‘aspiration’, which has become synonymous with wanting home ownership.  Of course many people would like to own their own home if they can afford it, but the aspirational classes may well give higher priority in future to getting their children through college and protecting their retirement.

These are real challenges not just for Grant Shapps but also for Labour’s housing policy review when it gets under way.  It would be nice if a new consensus was emerging that enabled serious long term policy options to be discussed rationally, but I suspect the odds are against.

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What will housing look like at Christmas 2014?

<strong><span class="has-inline-color has-accent-color">Steve Hilditch</span></strong>
Steve Hilditch

Founder of Red Brick. Former Head of Policy for Shelter. Select Committee Advisor for Housing and Homelessness. Drafted the first London Mayor’s Housing Strategy under Ken Livingstone. Steve sits on the Editorial Panel of Red Brick.

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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.