Autumn Statement 2013 – live blogPosted: December 5, 2012 Filed under: Uncategorized | Tags: Autumn Statement Leave a comment
17:00 The independent Office for Budget Responsibility has issued yet another update to its estimate of the size of the housing benefit bill. It says housing benefit will cost £6 billion more over the next five years than it estimated at the time of the Budget in March. It puts the cost at £600 million more in 2013/14, rising to £1.8 billion more by 2017/18. According to the OBR’s Economic and Fiscal Outlook:
‘About half of this is explained by an increase in the proportion of employed people who receive housing benefit, based on recent data and detailed modelling, which suggests that growth in renting for this part of the working age population is likely to continue to increase further over the forecast period. Changes in the caseloads for other benefits, particularly ESA, explain the majority of the remaining increase.’
This is the third time in a year that the OBR has increased its estimate of the cost of housing benefit. The March estimate was itself £3.7 billion higher over five years than the one it gave in last year’s autumn statement, and that one was £2.8 billion higher than the one at the March 2012 Budget.
What happens next? Though the OBR’s updated cost estimates seem to grow bigger every six months, the Treasury is determined to cap ‘the vast majority’ of housing benefit spending as part of its overall welfare cap. Those rising in-work claims are the result of low wages and high rents, yet only ‘cyclical’ spending like JSA-related housing benefit will be exempted from the cap. Yet more housing benefit cuts to come?
15:35: The AS2013 document offered no definition of what is meant by ‘high-value’ social housing. However, the inspiration clearly comes from a 2012 report by Policy Exchange called Ending Expensive Social Tenancies. It defined ‘expensive’ as meaning valued above the regional median adjusted by bedroom size.
It estimated that 818,600 social tenancies worth £159 billion are ‘expensive’ when judged on this basis: 21.8 per cent of England’s council and housing association stock. Of those 339,000 are council (18.7 per cent) and 479,000 housing association (24.3 per cent).
If you’re assuming this is mainly to do with London, you’re wrong: almost one in three social homes in London are ‘expensive’ but so too are 26 per cent in the East of England, 22 per cent in the south east and 20 per cent in the south west. The least affected region, the north east, still had 15 per cent of properties classed as ‘expensive’.
14:01: Reactions to AS2014 are starting to come in – though not all with weblinks available.
Grainia Long, chief executive of the Chartered Institute of Housing, welcomed George Osborne’s acknowledgment of the principle that councils should be able to borrow more to build homes:
‘But the steps announced today are far too modest and there is a risk that any gains could be offset by the requirement to sell high-value social housing and the expansion of right to buy. The finer details will be crucial – it is critical that the overall package results in a net increase in housing investment and new homes. As George Osborne acknowledged, we need to build more homes – we are in the grip of a housing crisis, with millions of people being denied access to a decent home at a price they can afford. Increasing local authority borrowing caps by £7 billion, rather than £300 million, would allow councils to build 75,000 new homes over five years, creating 23,500 jobs and creating £5.6 billion of economic activity.
‘Local authorities already have powers to sell off council housing and it is unclear whether selling off valuable homes is always the best way of doing business – councils may also want to borrow against the value of these properties so they can fund more homes.’
Simon Rubinsohn, chief economist at the Royal Institute of Chartered Surveyors, said:
‘If help to buy is to remain, right to buy extended, and expensive social housing sold off then the Government’s commitment to building houses simply must be extended. The £1bn of loans to unblock housing development across the country will contribute towards housing need and will drive construction jobs. However, we still believe housing is not at the centre of a coordinated property-led growth that supports a balanced regional recovery where all can access the market. The increase in the HRA borrowing cap will only make a very minor dent in the housing deficit.’
He added that it was disappointing that Osborne had ignored calls for reform of stamp duty.
Good point from Rob Beiley of Trowers & Hamlins that I missed. He says that ‘the prospect of tax relief on investment in social enterprises and charities could unlock a significant source of new funding for housing associations’. (Not to mention social enterprises and charities of course).
Liam Bailey of Knight Frank reckons that the move to levy CGT on overseas buyers ‘will have only a marginal impact on demand and pricing’.
Sir Merrick Cockell of the Local Government Association welcomed the move on the borrowing cap. ‘The easing of restrictions on housing investment announced today does not go as far as we would like, but it does show that our call for more local flexibility to drive economic growth has been recognised.’
He also welcomed the change of heart on New Homes Bonus funding. ‘Our concerns about potentially costly changes to the New Homes Bonus have been taken on board in the revised proposals announced today. This is good news for local services which otherwise would have taken an additional £400 million cut.’
In other news, he warned of ‘an upturn in the economy coinciding with a collapse in public services’.
That’s it from me for now. Time for some lunch.
13:44: More detail from those AS2013 background documents:
Housing and planning: This is framed very much in terms of removing barriers to supply. Action includes:
• consulting on measures to improve plan making, including introducing a statutory requirement to put a local plan in place
• legislating to treat planning conditions as approved where a planning authority has failed to discharge a condition on time, and using legislative measures to strengthen the requirement for planning authorities to justify conditions that must be discharged before building can start
• consulting on proposals to reduce the number of applications where unnecessary statutory consultations occur and piloting a single point of contact for cases where conflicting advice is provided
• allowing developers to apply directly to the Communities and Local Government department where a planning authority makes fewer than 40 per cent of its decisions on time
• carrying out an evaluation of the new homes bonus, which will complete at easter 2014. The government will consult on measures to further improve the incentive provided by the new homes bonus, in particular through mechanisms to withhold payments where planning approvals are made on appeal
• consulting on a new 10-unit threshold for section 106 affordable housing contributions. (This is seen as a way to reduce costs for smaller builders).
Unblocking stalled sites: A £1 billion, six-year programme will fund infrastructure ‘to support the delivery of 250,000 homes’. It will begin in 2014/15 with ‘investment decisions on nine specific sites, capable of unlocking 27,000 houses’. (Mr Osborne mentioned Manchester and Leeds in his statement).
Land auctions: Remember them? The government will report on the findings of a feasibility study by Budget 2014.
Right to buy: ‘The government will further support right to buy by introducing right to buy agents to help buyers complete their home purchase, and provide £100 million to establish a fund to increase right to buy sales, by improving applicants’ access to mortgage finance.’ So that’s £100 million to sell off public assets at a discounted price. Who will the right to buy agents be?
Estate regeneration: The government will explore options for repayable loans to kickstart ‘the regeneration of some of the worst housing estates’.
Right to move: This idea was in the Conservative manifesto and has now emerged as a consultation on ‘options for a right to move for local authority tenants who want to move home for reasons related to employment’. How will it work in practice and will it ever get beyond consultation?
New homes bonus: £70 million of it will be pooled within the London Local Enterprise Partnership chaired by the mayor. It won’t be pooled outside London.
Private rented sector guarantee: Extended until December 2016.
Local authority housing: In addition to the moves on borrowing caps and high-value homes, ‘the government will launch a review into the role local authorities play in supporting overall housing supply’.
Discretionary housing payments: The budget has been boosted by £40 million in both 2014/15 and 2015/16. The statement says: ‘This will ensure the pot of DHPs available to support those affected by under-occupancy deductions will not be reduced for the next two years, giving councils discretion to make longer term awards.’
Boles Bungs: ‘The government will work with industry, local authorities and other interested parties to develop a pilot for passing a share of the benefits of development directly to individual households.’
Tax: Capital gains tax on future gains made by non-residents disposing of UK residential property will apply from April 2015 with a consultation on how best to implement it published early next year.Problems with implementation are presumably the reason this has not been done before but note that it is only ‘future gains’.
The government will also from April 2014 ‘reduce the capital gains tax private residence relief final period exemption from 36 months to 18 months to reduce the incentive for those with multiple homes to exploit the rules’. Presumably that is to stop people flipping their relief from one home to another.
The definition of ‘high-value social housing’ is not explained anywhere in the documents that I can find. I also cannot find any reference to increased right to buy discounts.
13:16: Here are details that I’ve gleaned so far from the AS2013 background documents:
Welfare cap: We heard earlier that cyclical benefits will not be included but the vast majority of housing benefit will. That seems to mean JSA-passported housing benefit (ie the bit attributable to rising unemployment?) will not be capped but the rest (attributable to rising rents?) will? Still not sure how that fits with the English social rent formula of CPI plus 1 per cent.
HRA borrowing limit increase: This will not be until 2015/16 (£150 million) and 2016/17 (£150 million). The extra borrowing will be allocated on a competitive basis and be part of the Local Growth Fund run by Local Enterprise Partnerships. Bids will be prioritised based on value for money and the government will expect partnership working with housing associations or through joint ventures. There also seems a clear expectation they will be backed by asset sales and public land. The AS2013 says the borrowing cap increase plus sales of vacant high-value social housing will support 10,000 additional new homes. However, ‘this additional investment will maintain the Local Growth Fund at £2 billion in 2015/16’ so is something else being cut?
A separate policy costings document includes these assumptions:
• ‘the full additional headroom of £150 million in 2015/16 and £150 million in 2016/17 is taken up and is spent on new affordable housing in these years
• due to a lag between asset sales and new affordable house-building, there is a loss of rental income from the sale of high value vacant stock in early years, but that there is additional rental income, as a result of a net increase in affordable housing in the later years
• new affordable housing is let at affordable rent levels.’
Note there that the sale of vacant high-value housing is part and parcel of the borrowing limit deal and also the expectation of affordable rent. In answer to my own question earlier then, what seems like a major concession to council housing is actually an acceleration of the conversion of social housing to affordable rent.
More to follow shortly
11.56: A few housing highlights so far from Mr Osborne’s speech:
- Cap on overall welfare spending will include ‘vast majority’ of housing benefit. How does that fit with social rents rising by CPI plus 1 per cent?
- Tax avoidance clampdown targets include capital gains tax on primary residence relief
- CGT on non-UK residents who sell UK property from 2015
- HRA borrowing limit raised by £300 million
- Sell-off of expensive social housing
- ‘Priority right to move’ for social tenants
- £1 billion guarantees for stalled housing developments in Manchester and Leeds
- Unemployed under-21s who refuse training or don’t turn up will lose benefits
- More to expand right to buy
- Big emphasis on supply
- Importance of ‘stable housing market’
More detail to come.
10:40 So what else should we be looking out for? Here are a few more things receiving some advance attention:
Cuts: We already know that Mr Osborne will announce reductions in departmental budgets of £1 billion a year for the next three years. With health, schools, foreign aid, local government, revenue and customs and the security services all protected, the DWP is said to be one of the departments in the firing line (and perhaps the C bit of the CLG too?).
Property taxes: We know that Mr Osborne has been considering imposing capital gains tax on overseas property investors, something that would bring the UK into line with the tax regime in many of their home countries. Will he also look at tax on buy to let landlords, who the Intergenerational Foundation estimates are benefitting from tax write-offs worth £5 billion a year? Depending on the detail, there could be a big impact of new private housing development. Might that put Osborne off the idea?
Benefits: We are expecting more detail on Osborne’s cap on welfare spending that will apply after the next election. The Telegraph reported earlier in the week that he will say we can no longer afford a ‘welfare state’ and will have to make do with an ‘affordable state’ instead. The DWP announced details of the housing benefit cut before this one (the 1 per cent cap on LHA except in high rent areas) so will we learn more about the next later?
Stamp duty: A hardy perennial this one but the usual suspects are pressing for cuts to and reform of stamp duty, with most of the lobbying concerning first-time buyers and homes priced between £250,000 and £300,000.
Infrastructure and planning: Inside Housing reports that details are expected to be revealed of those ‘Boles Bungs’ to buy off opponents of new development. Will there be more besides and will Mr Osborne agree with Boris Johnson that housing should count as ‘essential infrastructure’.
Meanwhile – while everyone is paying attention to the autumn statement – Iain Duncan Smith has announced ‘the continued safe and secure roll out’ of the universal credit. Translation: the crawl-out’s been delayed again.
09.47: The initial answer to my initial question – will housing be a winner or loser? – seems to be a bit of both.
Pete Apps reported for Inside Housing last night on a deal being negotiated within the coalition that would see the chancellor increase English council housing borrowing limits (the Lib Dem bit) in return for another increase in right to buy discounts (surprisingly enough, the Conservative bit).
An increase in the borrowing caps has backing not just from Labour and the Lib Dems and the Local Government Association but also from London mayor Boris Johnson and Tory authorities like Westminster. So far the Treasury has firmly resisted any such thing so if it happens (and that was still an if last night) it would be a major change of policy and would look like a big win for council housing. However, as Pete reports, any deal would come with strings attached: councils would have to commit to build new homes or improve estates (presumably to stop the money leaking out of housing) and the additional debt capacity would be administered by local enterprise partnerships or the GLA (how will individual authorities react to having to share their capacity?). Could there be other, more unpalatable strings too: perhaps a requirement to build at and convert relets to affordable rent?
Any increase in the right to buy discount would be the third in 18 months. It was raised to £75,000 in 2012 and to £100,000 in London this year, when the qualifying period was also reduced from five years to three. Any further increase will have serious implications for the business plans of local authorities and housing associations – potentially reducing the capacity that the other part of the deal is meant to increase. It would also make the government’s ‘one for one replacement’ promise look even emptier than it already does.
Would the overall effect of any deal be a rebirth of council housing or an acceleration of the slow death of social housing? Or perhaps both?