The Housing Question

If you follow my blog here, you might be interested in my new newsletter published on Substack.

The Housing Question is a newsletter about housing, but not just housing… politics, social policy, economics, history and anything else that helps makes sense of how we got here.

I’ll still be posting blogs here but mainly as an archive of articles I’ve published elsewhere. The Housing Question will explore issues in more depth, with more of a sideways look and with a bit more context and evolve over time.

You can read the first issue of The Housing Question here and more about the thinking behind it here. If you’d like to subscribe (it’s free for now) go here.

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Hunt’s statement of intent

Originally written as a column for Inside Housing.

Eight weeks after Liz Truss and Kwasi Kwarteng shrank the economy with their growth plan, chancellor Jeremy Hunt completed his reversal of almost all of their plans in his Autumn Statement.

He was speaking against a backdrop of dire forecasts of recession, unemployment, falling living standards and rising taxes that spoke of bad news to come for housing and tenants and landlords alike.

The complete rewrite of the Autumn Statement leaves a long list of tax increases and spending cuts in its wake, even if many of them will not take effect until after the next election and so may not happen. However, there was still a little hope amidst the gloom.

Here are five points I picked up from the statement itself and the background documents.

The cap and the freeze

Perhaps the most surprising thing about the statement – with a nod to expectations management by the Treasury – is that there is also some good news. The announcement that the government will stick to previous pledges to increase benefits (and pensions and the minimum wage) in line with prices was not completely unexpected but will still come as a relief to tenants and landlords alike.

But Jeremy Hunt’s decision to increase the overall benefit caps by the same amount is much more of a surprise. Without this, thousands more households faced being capped as their benefits rose to hit thresholds that have been frozen since they were cut in 2016. The main thresholds for families will now increase to £22,020 a year outside London and £25,323 in the capital. The cost is estimated at £315 million in 2023/24 and almost £2 billion over the next five years.

And yet… these are still far below the average earnings figures that were misleadingly used to justify the cap in the first place. And they leave people who are already capped facing rent increases with no extra income to pay for them.

Finally, buried deep in the background documents is more gloom: the assumption that Local Housing Allowance rates for private renters will remain at 2022/23 levels, which have themselves been frozen since April 2020. This despite rapidly rising rents. If confirmed, the result will inevitably be rising rent arrears and homelessness.

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Taxing questions

Originally written as a column for Inside Housing.

Around £50 billion worth of austerity looks inevitable in next week’s Autumn Statement but it remains to be seen how chancellor Jeremy Hunt will strike the balance between spending cuts and tax rises.

Even if recent reports that suggest he will increase benefits and pensions in line with prices prove to be correct, there are still big questions over local housing allowance (still frozen despite rising rents) and the benefit cap (which will catch thousands more tenants if the thresholds stay frozen) and housing budgets already eroded by inflation look vulnerable to cuts in capital spending.

On tax, the stamp duty cut was one of the few measures proposed in the mini-Budget in September that has survived the demise of Liz Truss and Kwasi Kwarteng. So far at least.

But there has been very little debate about where the tax burden should really fall, and in particular about the balance between taxes on income and taxes on wealth.

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The state of the (housing) nation

Originally written as a column for Inside Housing.

The UK Housing Review Autumn Briefing Paper is published this week and as usual provides an invaluable guide to the state of the housing nation. Here are five graphs that illustrate key points about five different parts  of the housing system:

Shifting rules on rents

What everyone wants to know, of course, is what will come in place of that purple line on the right but the graph is a reminder that so-called long-term deals on social housing rents can quickly disappear. The four-year rent reduction at the end of the 2020s that ended the previous one is now set to be succeeded by an annual increase significantly below the 11.1 per cent implied by the CPI plus 1 formula.

The decision is finely balanced between cost of living considerations and housing investment, with the existence of housing benefit making it much more complex than it was in the famous case of Clay Cross 50 years ago.   

The Briefing Paper quotes estimates by Savills that a 5 per cent cap on rents in England (the government’s favoured option) would cost councils £500 million and housing associations up to £1 billion. One association says that even a 7 per cent cap would mean a 21 per cent reduction in new build and there are also major concerns about the impact on investment in existing stock and on supported housing.

A cap would help tenants not on housing benefit but the major beneficiary would be the Department for Work and Pensions unless its savings are reinvested in housing.

That point was really brought home to me when I interviewed the Welsh housing minister recently. She was only too aware that the more she restricts next year’s rent increase, as might be her instinct, the more savings will go straight back to Westminster, with zero chance of them coming back to Wales.

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Austerity all over again

Originally published as a column for Inside Housing.

Austerity is back. The mess left by Liz Truss and Kwasi Kwarteng will have to be cleaned up, constraining the options for Rishi Sunak and for whoever wins the next general election.

But there is nothing that says Austerity 2.0 has to be a repeat of the 2010s. Treasury orthodoxy is in charge again but there are always political choices.

David Cameron and George Osborne chose to prioritise cuts in public services and benefits over tax rises but that will be more difficult for a prime minister taking office at a time when those services are collapsing and benefits are already close to destitution levels.

And there is one more crucial difference this time around: in the 2010s austerity was accompanied by record low interest rates that slashed mortgage payments for millions of home owners and buy-to-let landlords.

The benefits flowing to anyone with a mortgage – and to existing owners as house prices rose – help to explain why the Conservatives have won four elections in a row. 

But Austerity 2.0 arrives just as mortgage rates are rising and just as the prospects of a housing market downturn are shifting from likely to inevitable.

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The decline and fall of Trussonomics

Originally written on Tuesday October 18 (before the resignation of Liz Truss) as a column for Inside Housing.

Growth, growth, growth? Little survives of Trussonomics after a series of astonishing u-turns but in housing at least is still seems to be half-steam ahead.

Just two of the tax cuts announced by former chancellor Kwasi Kwarteng in his statement last month and only because the legislation for them had already gone through parliament.

The scrapping of the health and social care levy obviously begs big questions about funding for both but the increase in stamp duty thresholds now looks even more of a spare part than it did at the time.

While stamp duty is fundamentally a bad tax because it inhibits transactions, cutting it without wider reform of property taxation benefits sellers more than buyers as savings are capitalised into higher prices.

Cutting it permanently now rules out what has always been the first lever the Treasury pulls in a housing market downturn: a stamp duty holiday.

Even on the Treasury’s own figures, it will only generate an extra 29,000 house moves a year. But the limited growth in the wider property sector this generates will come at a cost to the taxpayer of £7 billion over the next five years.

New chancellor Jeremy Hunt has signalled that ‘eye-watering decisions’ about spending cuts and tax rises are on the way, mortgage costs have soared since the not a Budget and the energy price guarantee is now only guaranteed until April.

With even the pensions triple lock not guaranteed, the battle that was already looming over the uprating of benefits next year will now be even more intense.

Further freezes in the benefit cap and – despite rising rents – local housing allowance look more likely with devastating consequences for poverty and homelessness.

All this will be the acid test of  Hunt’s promised return to ‘core compassionate Conservative values’.

The implication of the fiscal position for the Department of Levelling Up, Housing and Communities must be that any budget that is not already nailed down is up for grabs.

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A tale of two Conservative parties

Originally written as a column for Inside Housing.

If the Liz Truss government is serious about delivering growth and getting Britain moving then it has to be serious about housebuilding and planning reform.

The superficial signs are that it is: the promised programme of investment zones; promises of further reforms to boost housebuilding and home ownership in the Autumn; prime ministerial support for growth, growth and growth.

The underlying ideology shouts that it is: take a quick look at this briefing paper on housing from the Free Market Forum, an offshoot of the Institute of Economic Affairs whose parliamentary backers include Truss, chancellor Kwasi Kwarteng, housing secretary Simon Clarke and housing and planning minister Lee Rowley.

But history still suggests a need for caution: exactly the same thing could have been said in 1983/84, 1988/89, 2010/11 and 2020/21, when Conservative ministers proposing planning liberalisation were thwarted by more cautious colleagues or rebellious backbenchers or both.

Because there are two poles of Conservatism: the libertarian, economic liberal one that is currently in the ascendancy and a social conservative one that sees green belts and planning regulations as a good way to conserve things.

Between those two poles, more pragmatic Tories recognise that they have to take account of both if they are to deliver more homes – and that their political success or failure in future could depend on that delivery.

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The legacy of the Clay Cross rebellion

Originally written as a column for Inside Housing.

This Saturday marks the 50th anniversary of legislation that triggered one of the most famous rebellions in the history of housing – and it is a story with a contemporary twist.

October 1, 1972 was the date that ‘fair’ rents were imposed on council housing by Edward Heath’s Conservative government. Under the Housing Finance Act 1972 all local authorities were forced to increase their rents by £1 a week (around 50 per cent).

Many in England, Wales and Scotland resisted interference by central government in their right to set their own rents but, threatened with the appointment of a Housing Commissioner, all but one eventually complied.

Clay Cross Urban District Council in Derbyshire refused point blank to increase rents that were the lowest in the country at around £1.65 a week.

The Labour-controlled council had a long track record of going its own way and finding loopholes in legislation it did not like: there were rebellions not just over rents but also over free school milk and pay for council staff.

Led by Dennis Skinner until he became the MP for nearby Bolsover, Clay Cross saw housing as one its top priorities as it replaced slums that had been built by the mine owners before nationalisation with new council houses at low rents.

As one councillor put it: ‘On this council we like to think of ourselves as basic socialists. We regard housing here as a social service, not as something the private sector can profit from.’

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Kwarteng’s plan causes growing pains

Originally written as a column for Inside Housing.

So, after 10 years of redistribution and socialism under David Cameron, Theresa May and Boris Johnson, now we know what a proper Conservative government looks like.

The biggest package of tax cuts seen in 50 years will cost a cool £45bn and overwhelmingly benefit the highest earners: someone on £1m a year will be around £55,000 better off next year.

The benefits get progressively smaller the less you earn: someone on £20,000 a year will gain just £218 while someone on £200,000 will gain £4,333.

And there is nothing so far for the very poorest: no more help for renters and no boost to Universal Credit.

Instead around 120,000 claimants face having their benefits cut unless they find more part-time hours from January.

There may be some announcements still to come in an actual Budget to follow this Growth Plan, including vital decisions on whether to unfreeze Local Housing Allowance and the benefit cap, but the contrast could hardly be more stark.

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How short-term lets have hollowed out the rental market

Originally written as a column for Inside Housing.

It’s the end of summer and the tourists are going home but the housing problems they leave behind are here to stay.

This time last year I write about the momentum behind moves to tackle the blight of second homes in Wales and in parts of England like Devon and Cornwall.

Second homes are not new in themselves but combine them with the rise of Airbnb and short-term lets and in many areas the problem for local people has become less finding an affordable rented home than finding a rented home at all.

Anecdotal evidence I’m hearing where I live in Cornwall suggests that these trends have got far worse in the last 12 months. In the process, more assumptions about housing are being turned on their head.

Just down the road from me, the landlord of a large house converted into flats has just given all the tenants two months’ notice. One has been there 17 years, a couple in their 70s have lived there more than 20 years, and they have always paid their rent on time, but none of that matters. The house is being converted into short-term holiday lets.

A seaside town in Cornwall is possibly an extreme example of the trend but problems with short-term lets are being reported all around the country and I can think of many more villages nearby where the situation is far worse, with communities full of second homes and Airbnbs and second homes and few full-time residents.

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The big questions facing Simon Clarke

Originally published as a column for Inside Housing.

Simon Clarke has yet to reveal much of his thinking on the key issues facing his new department but the early signals coming from the new government mean it’s already clear that tough choices lie ahead.

As chief secretary to the Treasury since September 2021 he was responsible for scrutinising and departmental requests for more public spending. Now he replaces Greg Clark at the Department for Levelling Up, Housing and Communities (DLUHC), where he briefly served as a minister for regional growth and local government in 2020.

As a prominent supporter of Liz Truss, Clarke will have some influence with the prime minister and could be heard acting as her spokesman on energy costs on the Today programme on Thursday.

Like any secretary of state he will fight for the departmental interest and but it seems doubtful whether he will have as much heft in Whitehall as his predecessor but one Michael Gove.

Indeed there are already some straws in the wind. Consider a story leaked to the Telegraph over the weekend about a £1.5bn underspend at the DLUHC.

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