The pandemic and wealth inequality

Originally published as a column for Inside Housing.

Three numbers from a report published this week sum up the financial impact of the pandemic on households – and housing is at the heart of it.

First, £50,000. That’s the average increase in the wealth per adult of the richest 10 per cent of households, says the report by the Resolution Foundation think tank.

Second, £7,800. The increase in the wealth per adult of households in the fifth decile, those right in the middle of the wealth distribution.

Third, £86. That’s the average gain per adult in the poorest 30 per cent of the population.

In part, these numbers reflect the pattern established in the 1980s and then accelerated after the financial crisis whereby wealth begets wealth.

But they also represent something new: the Resolution Foundation estimates that total household wealth has increased by £900 billion since the start of the pandemic, making the period we have just lived through the first recession since the end of the Second World War in which we have got richer.

Some of that is down to spending less (£125 billion) and getting into less consumer debt (£10 billion) but over 80 per cent of it is due to rising asset prices (£750 billion). 

Some of that is driven by rising share values but most of it is due to increases in house prices, which are now up by more than 10 per cent since the start of the pandemic, fuelled in part by the stamp duty holiday.

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Ominous signs ahead of the spending review

Originally published as a column for Inside Housing.

The government’s refusal to extend the £20 a week uplift in Universal Credit has ominous overtones for housing’s prospects in the spending review to come in the Autumn.

Consider the evidence. Unemployment-related benefits in the UK are among the least generous in Europe, not least because of cuts made in the original plans for Universal Credit. Removing the uplift means benefits will fall to their lowest ever level as a proportion of earnings.

For all the government’s arguments about levelling up, the cut will hit a third or more of working age households in Wales, the North and Midlands against a fifth in the South East.

For all the government’s arguments about work being the route out of poverty,  almost as many people on Universal Credit (2.2m) are in work as unemployed and looking for work (2.3m). The remaining 1.6m are not required to work because of ill-health or having a child under 1. All will become £1,000 a year poorer. 

Of course there is still time for ministers to change their mind, but for the moment they look set to go ahead despite lobbying from the last six Conservative work and pensions secretaries to keep the uplift.

But can you imagine the last six housing ministers, or communities secretaries, doing the same as their colleagues at the Department of Work and Pensions? And, even if they did, do you think that the chancellor would be more or less likely to listen to them?

So Matthew Bailes is surely right to warn that the housing sector should be on a ‘war footing’ ahead of a spending review being conducted in the context of long-term structural pressures on the public finances.

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Falling short on climate change

Originally published as a column for Inside Housing.

With just four months to go until the COP26 UN Climate Change Conference in Glasgow, the government is long on ‘historic’ targets but woefully short on credible policies to implement them.

That was the verdict from the government’s own adviser last week in reports that identify housing as a key sector where action fails to match the lofty and legally binding target of achieving net zero by 2050.

The Committee on Climate Change says a ‘step change’ is required but it is hard to discern any comprehensive strategy in climate plans announced in the last 12 months and statements of ambition have been undermined by delays to essential legislation and plans to decarbonise buildings.

The Ministry for Housing, Communities and Local Government (MHCLG) is accused of falling short on ensuring that building standards are fit for purpose and properly enforced and overseen ‘almost none of the necessary progress in upgrading the building stock’.

Meanwhile the Planning Bill misses ‘the powerful opportunity to ensure that developments and infrastructure are compliant with Net Zero and appropriately resilient to climate change’.

Delivery rates on key retrofit measures have ‘continued to stagnate’. On the vital issue of how homes are heated, the number of heat pumps installed in new and existing homes rose from 33,000 in 2019 to 36,000 in 3020. The CCC says 900,000 installations a year are needed by 2028. 

We are even falling short in new homes. Heat pumps were installed in just 5 per cent of them in 2020 against a requirement for 20 per cent by this year.

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Politics trumps planning

Originally published as a column for Inside Housing.

Two by-elections, two widely predicted Conservative victories that did not quite turn out that way.

Labour holding a seat and the Lib Dems winning one against a government that has been in power for 11 years would never have been seen as surprise results in previous parliaments but they could signal politics beginning to return to normal after Brexit, the 2019 election and the pandemic.

If Batley and Spen shows that the Tories can no longer be confident in Labour seats in the North, then Chesham and Amersham shows a worrying vulnerability to the Lib Dems in the South.

And the upshot is a depressing one for anyone who believes in the case for new homes. Trouble was always likely when planning reform met politics, but I wasn’t expecting it to happen so quickly.

Planning is, of course, always contentious – even in a Batley and Spen by-election dominated by other issues it still featured in the letters pages of the local press.

But it was front and centre in Chesham and Amersham. While HS2 was also seen as a factor, the victorious candidate made heavy play of planning and housebuilding in her leaflets, quoting extensively from Tory critics of the plans who say they will mean ‘the wrong homes being built in the wrong places’.

This was deeply cynical of the Lib Dems, who support both the new high-speed train line and 300,000 new homes a year at a national level but said the opposite locally.

However, they were not the only ones. The losing Conservative candidate proposed turning much of the constituency into a national park during the campaign. This surely foreshadows likely tactics by local Tories in getting as much of their land as possible designated as ‘protect’ against new homes under the new system proposed in the Planning Bill.

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Four years of broken promises

Originally published as a column for Inside Housing.

Four years on from Grenfell and a solution to the fire safety crisis looks further away than ever.

The litany of broken ministerial promises highlighted by Pete Apps in his analysis this week only adds to the impression of abject government failure and of a crisis that continues to escalate faster than its fumbling attempts to tackle it.

From James Brokenshire’s ‘expectation’ of ACM remediation by June 2020 to Lord Greenhalgh’s ‘ambition’ that it should be completed this year, even the programme most directly related to Grenfell keeps slipping into the future.

And despite Theresa May’s pledge that ‘we cannot and will not ask people to live in unsafe homes’ to Boris Johnson’s promise that ‘no leaseholder should have to pay’, thousands are doing and facing exactly that.

In mitigation they could plead that in June 2017 hardly anyone expected things to escalate to the stage where it seems that virtually any residential block built in the last 25 years has come under suspicion.

The public inquiry has rightly concentrated on the causes of the fire and the run-up to that night in June 2017 but it was clear even at the time that the problems went well beyond the refurbishment of one tower block and the actions of one landlord and council.

Evidence revealed at the public inquiry has amplified those wider concerns many times over – but so far the government has not even kept its promises to implement the inquiry’s initial recommendations.   

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First Homes: what’s the big idea?

Originally published as a column for insidehousing.co.uk

It is of course complete coincidence that the First Homes scheme was launched in the constituency that perhaps most symbolises the Conservative election victory in 2019.

It’s not just that Bolsover had been Labour since it was created in 1950, it’s also that it had been represented by Dennis Skinner since 1970, making it a reverse ‘Portillo moment’ for the Tories.

All of which makes the launch of the scheme itself look like an extension of the nakedly political approach taken with the Towns Fund and Levelling Up Fund.

A more generous interpretation might be that the government had more sway over this particular site, which looks like it was developed by Keepmoat Homes in partnership with Homes England.

Either way, this is the launchpad for housing secretary Robert Jenrick’s big idea, homes for sale at a discount of at least 30 per cent market value to first-time buyers. Discounts of up to 50 per cent may be available in some localities.

This is Starter Homes 2.0 with one significant advantage over the original scheme: the discount will remain in perpetuity rather than disappearing into the pocket of the first buyer.

The disadvantages remain the same. The scheme will be delivered initially with grant and then via the planning system. Either way it will squeeze out other forms of affordable housing funded via Section 106, with 25 per cent of developer contributions reserved for First Homes. The government claims it will ringfence homes for social rent so the main impact could fall on share ownership and affordable rent.

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A not so humble address

Originally a column for Inside Housing.

Affordable and safe housing for all’. Who could argue with that?

Pretty much everyone, funnily enough, because this was the title of the housing part of the House of Commons debate on the humble address following the Queen’s Speech.

Catching up with last week’s debate, two things struck me really powerfully: first, just how much politics has been turned on its head; and second just how riddled with contradictions the government’s position on housing really is.

In the post-Brexit and (hopefully) post-Covid world, the more that the blanks in the empty slogan of levelling up are filled up, the clearer the first becomes.

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When planning reform meets politics

Originally a column for Inside Housing.

A couple of miles away from where I live in Cornwall a community land trust wants to build 29 affordable homes for people with a strong local connection.

These are the first new affordable homes of any kind in Newlyn for years but (you guessed it) there is a ‘backlash from angry locals’. It’s not the homes they object to (of course not, it never is) but the traffic they will generate.

On the one hand, house prices are way out of reach of local earnings and there is a desperate shortage even of homes for private rent thanks to holiday lets. It would be hard to think of an example of a development more deserving of local support rather than campaign groups organising against it.

It’s a compelling reason why the government’s plans to reform the planning system so that individual planning applications no longer come into the equation and land is simply designated for protection, growth and renewal should be taken very seriously.

On the other, this is one of the rural areas facing the ‘threat’ of 400,000 new homes in a report this week that illustrates the scale of the well-housed Tory rebellion in the shires.

But something else I was reading recently suggests a need for caution. My Style of Government is Nicholas Ridley’s critique of the record of Margaret Thatcher’s Conservative administration between 1979 and 1990.

Ridley was one of the main ideologues of Thatcherism and as her environment secretary between 1986 and 1989 he was the architect of the Housing Act 1988 and therefore of much of the housing system as we know it today.

He is also credited with popularising the term NIMBY, although his credibility suffered when it was revealed that he had himself objected to a planning application near his country home in the Cotswolds.

But what’s significant I think is this arch Thatcherite’s admission of complete failure on planning and the political lessons that he drew from it.

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Building Back Better (in due course)

Building back better? Safer? Fairer? How about slower?

At first glance this is a Queen’s Speech that looks full of welcome reforms to planning and the delivery of new homes, conditions for renters and leaseholders and building safety. Scratch beneath the surface in the background briefing notes, though, and big questions remain and there are big battles to come.

Ahead of the speech, the Planning Bill was spun as ‘cruical’ to levelling up, a way to cement Conservative advances in the Midlands and North by boosting home ownership.

But that ignores the battle to come with Tory backbenchers over housebuilding in the South East.

A cynical outcome from the white paper would be to emphasise local growth as you allow councils in expensive areas to designate large parts of them for protection. This would do next to nothing to tackle affordability – or address the very real questions about the future of Section 106 – but the politics will be very tempting.

In the wake of Grenfell, the government will ‘continue to deliver on the Social Housing White Paper proposals’ and ‘legislate as soon as practicable’.

But Grenfell was almost four years ago and the social housing white paper that was published in November that took more than three years. Practicable? Grenfell United has already called it a ‘betrayal’.

Improvements will come in the proposed Building Safety Bill which is at last delivering on the improved regime promised after the fire.

However, that in itself is a delayed opportunity to address the plight of hundreds of thousands of leaseholders after ministers steadfastly resisted all amendments to the Fire Safety Bill to make it clear they should not have to pay for problems that are not their fault. The stage is set for another huge Commons battle.

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Guarantees, cladding and the housing market

Originally published on April 20 on www.insidehousing.co.uk.

The housing market is at a frenzied record high as house prices rise by more than 2 per cent in a single month.

Just the moment then for the government to step in with a scheme to guarantee 95 per cent mortgages for anyone who thinks they have to climb the ladder before it disappears out of reach.

The house prices in question are only asking prices as recorded by Rightmove but the £6,733 average increase between March and April reflects a rush to beat the end of the stamp duty holiday and demand for more space from people who have done well during the pandemic.

It’s now 13 months since the start of the pandemic and, to pick another measure, house prices are up by around £16,000 or more than 7 per cent since then, according to the Nationwide.

Prices initially fell amid the economic uncertainty but surged again on the back of the stamp duty holiday introduced by chancellor Rishi Sunak last July and then extended in March.

The overwhelming beneficiaries are people who already own homes who have been able to sell them for higher prices that now wipe out the stamp duty savings for most buyers. For all the rhetoric about helping people on to the housing ladder, few first-time buyers saved much in stamp duty and all now face having to spend considerably more in total.

The mortgage guarantee scheme, essentially a rehash of one part of Help to Buy, should help them by addressing a genuine problem with the supply of high loan-to-value mortgages.

However, lenders are cautious. The Financial Times reported on Saturday that the largest banks are refusing to lend on new builds under the scheme and that they may also charge higher rates and apply stricter affordability criteria.

From their point of view that makes sense to guard against falling prices, especially when they factor in the new-build premium that adds around 10 per cent to the cost of a new home. .

And the benefits look dubious for first-time buyers too. Based on the Nationwide index, a 95 per cent loan on home at the current average price would be £220,000 – more than the total price was when the stamp duty holiday was first announced.

None of this makes any sense and yet, in an under-supplied and under-taxed housing market fuelled by credit and low interest rates, somehow it does.

As memories fade of the housing market crash of the early 1990s and the downturn after the financial crisis, the logical next step would be a relaxation in affordability checks on mortgages to allow loans at larger income multiples, ignoring the lessons of the 2000s and the economic headwinds that could lie ahead as furlough ends.

But all of this is happening at the same time as the entire market for recently built flats remains mired in the continuing fall-out from the fire safety crisis.

Inside Housing reported on Friday on cases of leaseholders buying flats on the basis of External Wall System (EWS) form declaring that their cladding was safe only for new inspections to decide that it must be removed.

One buyer purchased a £350,000 flat rated A1 and safe in February only for the EWS to be downgraded to B2 just 34 days later. That made her flat worthless and left her facing costs for waking watch and cladding remediation.

If the EWS rating can be changed at the drop of a hat like this, why would anyone risk buying a recently built flat?

The government has grudgingly and in stages committed a total of £5.1 billion to fixing the cladding crisis so far and it has announced some welcome reforms to leasehold.

But leaseholders in buildings below 18m are only eligible for loans and help does not apply to other fire safety problems, leaving a significant chunk of the housing market in limbo.

The fact that at the same time the government has spent £5.4 billion on the stamp duty holiday says it all about where its priorities really lie.