Turning tenants into owners

Originally posted on October 11 on my blog for Inside Housing. 

For all the government’s new-found enthusiasm for social housing and local authorities, the politics of the housing crisis are still fundamentally about home ownership.

Anyone pleasantly surprised by the change of tune in the green paper will still have found two particularly discordant notes: the convictions that welfare reform is ‘empowering tenants as consumers’ and that social housing should be a ‘springboard to home ownership’.

Housing may have been the dominant issue at fringe meetings at the Conservative party conference but two reports out this week highlight the fact that the frustrated aspirations of young private renters are still the dominant concern.

The new Tory think-tank Onward brought forward publication of a proposal for new tax incentives for landlords to sell to long-term tenants following reports over the weekend that the government is considering it as a new form of Help to Buy.

And a report by the Institute for Fiscal Studies put the problem of frustrated ownership into perspective.

Over the last 20 years owner-occupation among the 25-34s has fallen from 55% to 35%. Their incomes are up by 19% in real terms but rents have risen 38% and house prices 173%.

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Scrapping the borrowing cap

Originally posted on October 3 on my blog for Inside Housing.

After Theresa May’s warm words for housing associations, the big question was why she could not offer something similar for council housing.

She answered it today with the surprise announcement at the end of her Conservative conference speech that the borrowing cap will be scrapped.

Vital details remain to be seen. When and how the cap will be lifted? What’s in the small print? What strings will be attached to the deal?

However, the move deserves the warm initial welcome it has already received from organisations across local government and housing.

The surprise reflects what was assumed to be entrenched Treasury resistance to lifting the cap, despite years of patient advocacy from campaigners, commitment from Labour and outspoken support from the Conservative chair of the Local Government Association, Lord Porter.

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Planning, profits and public land

Originally posted on my blog for Inside Housing on September 24. 

While all eyes were on the prime minister’s speech at the National Housing Summit you may have missed news that landowners are now making an astonishing £13 bn a year pre-tax profit just from getting planning permission for housing.

That is the estimate in a new report from the Centre for Progressive Policy (CPP) and the National Housing Federation (NHF) published on the same day as Theresa May was telling housing associations what they wanted to hear.

The £13 bn profit made by landowners in England in 2016/17 is up £4 bn on 2014/15 thanks to a huge increase in residential land values in the last two years.

Seen from one end of the telescope, that was already more than the profits of the entire UK housebuilding industry and it is now more than the global profits of Amazon, Coca Cola and McDonald’s combined.

But the impact can also be seen from the other end of the telescope, with housing association after housing association quoting examples of where they have been outbid by private developers for land.

The sites are often public land but individual associations report examples of developers who bid a higher price than them only to do nothing with it or sell it on for a profit shortly afterwards.

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A new message from a Conservative prime minister

Originally published on September 19 on my blog for Inside Housing.

Anyone familiar with prime ministerial speeches about housing will approach today’s announcement of £2 bn of ‘new’ funding for affordable homes with a healthy dose of scepticism.

They may remember Theresa May pledging an ‘extra’ (but seemingly different) £2 bn in her leader’s speech at last year’s Conservative conference – a month later it emerged that that this had been redistributed from other unspent bits of the housing budget.

This week’s £2 bn seems even flakier: it will not apply until 2022 so we won’t know for certain whether it’s ‘new’ or ‘extra’ until we see what’s in the rest of the spending review; there may well be a different party in government by then, and almost certainly a different prime minister; and Brexit may mean all bets are off, especially if no deal brings to power Tories keen to use it as an excuse to deregulate their way to the promised land.

Even if it does turn out to be new money it will not build a single new home now, there is no guarantee that it will be for genuinely affordable rent then, and will it will still not bring the affordable homes budget back to the level it was when the Conservatives took power in 2010.

Despite all that, though, it’s hard not to be struck by the rest of the message delivered by Theresa May to the National Housing Federation (NHF) summit today: housing associations have ‘a central role to play’; the ‘most ambitious’ will be given ‘long-term certainty’; and the prime minister wants to see them ‘taking on and leading major developments themselves’ rather than buying properties from private developers.

That last bit seems significant of a change in attitude towards development at the heart of government as she went on to tell the summit:

‘Your unique status as public interested, non-profit private institutions allows you to attract patient investment and deploy it to secure long-term returns on quality rather than short-term speculative gains.

‘Your expertise as property managers means you can nurture attractive, thriving places for decades to come.

‘You are capable of riding out the ups and downs of the business cycle, as we saw in the years after the economic crash when housing associations carried on building even as private developers hunkered down.

‘And you do all this with the discipline, rigour and management qualities of the serious multi-million pound businesses that many of you are.’

All that will be music to the ears of big associations like L&Q and Peabody (who both get namechecked) and her hosts will also have lapped up her statement she was the first prime minister to speak at ‘the biggest event on the housing association calendar’.

However, she also restated her commitment to social housing: ‘Whether it is owned by local authorities, TMOs or housing associations, I want to see social housing that is so good people are proud to call it their home.’

Yes, it’s easy to be cynical, yes, she has to make the right noises after Grenfell and, yes ,the government is still pouring far more in to Help to Buy than it is into social and affordable housing.

But think back to what we were hearing up to 2016 from Tory leaders and the contrast is huge.

When May says in her speech that ‘on the outside, many people in society – including too many politicians – continue to look down on social housing’ who exactly could she have in mind?

Could it be David Cameron and George Osborne, who according to Nick Clegg privately dismissed social housing as a breeding ground for Labour voters?

As recently as 2015 housing associations were being lumped in with other opponents of their plans to boost home ownership at all costs that they were determined to ‘take on’.

And it’s not just the tone that’s changed: May reminded associations that it was her government that returned long-term certainty on rents and agreed not to extend the Local Housing Allowance cap to social housing.

She could have added the u-turns on many of her predecessor’s other policies including compulsory fixed-term tenancies for council housing, the high-value levy on forced council house sales (for now), starter homes, Pay to Stay and the withdrawal of housing benefit for under-21s.

And without the levy there is no way to fund the flagship 2015 manifesto pledge to extend the right to buy to housing association tenants – or meet the government’s end of the deal agreed with the NHF at the same conference three years ago.

Whatever you think of the ‘extra’ money, and however crazed and unworkable those policies were, these are not just changes of tone but of substance too.

The final section of her speech (which did not feature in the advance trails this morning) almost goes overboard in her determination to praise housing associations and social housing.

Mrs May (or more likely one of her advisers) has been doing some background reading.

She quotes first from Tony Parker’s The People of Providence, an oral history about the people of the Brandon Estate In Southwark published in 1983.

Where one resident says he does not want to be thought of as an ‘estate person’ that becomes an endorsement of mixed tenure development where ’you should not be able to tell simply by looking which homes are affordable and which were sold at the market rate’ and where you should be ‘proud to be thought of as an “estate person”.’

She praises ‘the social justice mission of the pioneers who created the sector in Victorian times – and their descendants who stepped up half a century ago in the wake of Cathy Come Home’.

And she says that ‘the rise of social housing in this country provided what has been called the “biggest collective leap in living standards in British history”.’ This, I think, is a quote from Homes and Places: A History of Nottingham’s Council Houses by Chris Matthews.

May says that ‘It brought about the end of the slums and tenements, a recognition that all of us, whoever we are and whatever our circumstances, deserve a decent place to call our own’.

That ‘biggest collective leap’ was of course council housing, which came along when government’s recognised that more was required than the philanthropy of Victorian housing associations.

So it will irritate many people that May says that ‘today, housing associations are the keepers of that legacy’ and they will await a similarly enthusiastic speech to the Local Government Association, where even Conservative politicians despair about the government’s refusal to give council housing more freedom.

But that important point aside, when was the last time a Conservative prime minister made a speech more favourable to social housing that this one?


Land value capture looks like an idea whose time has come

Originally published on September 13 on my blog for Inside Housing.

How does land worth £21,000 or £482,000 per hectare suddenly become worth £1.95m? And who should get the windfall?

The answer to the first question is, of course, when agricultural or industrial land is granted planning permission for residential use (all three figures are estimates in government statistics).

The answer to the second is much more complicated – getting it right could boost construction of new homes and provide a new source of funds for infrastructure and affordable housing; getting it wrong could destroy incentives for landowners to bring land forward and mean housebuilding dries up.

Now the all-party Housing, Communities and Local Government Committee has published a report on an issue that has a long history dating back to Winston Churchill’s criticism of the ‘unearned increment’ made by landowners following public investment in infrastructure – and even right back to Henry VIII.

Support for reform has grown across the political spectrum and even the last Conservative manifesto promised to ‘work with private and public sector housebuilders’ on the issue.

Supporters note, correctly, that the success of the post-war new towns was based on their ability to buy land at existing use value and use the uplift to fund infrastructure but that all this was stymied by legislation such as the 1961 Land Compensation Act that entitled landowners to the ‘hope value’ after their land is developed.

At the same time history is littered with examples of governments introducing uplift levies and tariffs and supplements that failed to deliver and sceptical landowners and housebuilders argue that reform will be prove much more complicated than supporters make out.

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Private renting ten years on

Originally posted on September 10 on my blog for Inside Housing. 

So what is the state of the private rented sector – and what can be done about it?

Ten years on from their official review for the government, Julie Rugg and David Rhodes of the University of York are back with an update for the Nationwide Foundation.

Despite finding some progress – the average condition of rental property has improved, the average tenancy has got longer and Build to Rent investment is at long last producing results – the problems remain depressingly familiar and in many areas things have got worse.

The private rented sector is now 40% bigger but that growth is more down to the decline of home ownership and social renting than a wave of new construction or an expansion of choice. Perhaps half a million homes sold under the Right to Buy are now private rentals.

Thanks to Buy to Let, the sector is even more dominated by individual ‘investors’ looking to boost their wealth by getting tenants to pay the mortgage – mainstream commercial property companies account for just 3% of the stock.

The review estimates there are now 2.3m adults in England who are landlords – of those, 9% are themselves also private tenants and (surely some mistake?) 1% are social tenants.

And the bottom end of private renting – the only option for tens of thousands of tenants on benefit – is under such pressure from welfare reform that it is becoming ‘a residual slum tenure’.

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Time to end the freeze

Originally published on August 29 on my blog for Inside Housing. 

The freeze on the Local Housing Allowance (LHA) is a £1.2 billion question for which the answer seems obvious.

The problems detailed in analysis by the Chartered Institute of Housing (CIH) published on Wednesday are severe and they are getting worse.

LHA rates are midway through a four-year freeze that is the culmination of seven years of austerity. The result is that they have completely lost touch with the rents they were meant to cover.

The CIH analysis shows that 90% of LHA rates now fail to cover the rent of the cheapest 30% of private rented homes (bear in mind that this was itself a cut from the 50th percentile and that LHA was originally designed to enable tenants to ‘shop around’ for cheaper rents).

That leaves tenants facing rent shortfalls that grow larger with each year of austerity: outside London, two out of every three LHA shared accommodation rates have a weekly shortfall of £4 or more and half of other LHA rates are short by £10 or more; in London, the shortfalls for shared accommodation are more than £10 a week in every LHA area and at least £30 for all other homes.

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