The fall guys – Part One

Originally posted on July 28 on Inside Edge 2, my blog for Inside Housing

Here’s my attempt to separate fact from factoid in one of the most controversial TV news reports on housing in years.

I couldn’t watch last week’s Channel 4 News investigation of housing associations on the night but I think the issues it raised are important enough to come back to it in detail.

The clues that something was not quite right about this report were there even for people who know nothing about housing. The musical soundtrack (ironically a song about the campaign for justice by a wrongly convicted boxer) and the quirky graphics (houses appearing and disappearing) were there as distractions. The fact that in the studio discussion that followed the anti-association case had to be made by the so-called ‘Tax Payers’ Alliance (the self-appointed scrutineers of government spending who refuse to say where their own funding comes from) was further evidence.

The closing commentary confirmed this impression. We were told that:

‘There’s a fierce philosophical row between the Tories on the one hand and the Left on the other about the future of associations. One side wants radical change and the other is desperate to protect its ability to serve the community as it sees fit.’

Really? That may be how the Conservatives would like to present it but it demonstrates a complete lack of awareness of the political context for housing. As associations see fit? I’ll let the fact that this point was illustrated by film of a protestor from ‘the Left’ holding a banner from Defend Council Housing saying ‘No Privatisation Sell-Offs’ and ‘Invest in Council Housing Now’ speak for itself.

But what really shocked me from a programme that I admire and watch regularly was that this welter of unsourced statistics and rampant editorialising went out as the main story of the evening. The failure to understand housing and housebuilding was so complete it would be almost comical – except that this report plus trailers in The Spectator and The Times are part of a media and political narrative with deadly serious implications for the future.

Earlier this month I highlighted an article by David Cameron and George Osborne in which they cast housing association opponents of their right to buy plans as enemies and social housing as part of the ‘welfare merry-go-round’. The Budget that followed may be just a foretaste of the spending review to come as departments draw up plans to cut spending by 40% by spotting waste and inefficiency and doing things differently. Housing associations are being set up to be the fall guys in this. As Monimbo99 puts it on Red Brick: ‘These attacks are all part of a softening up process in which social housing is recast as a contributor to the housing crisis rather than part of its solution.’

The subtext in last week’s programme was obvious. From Conservative MP Bob Blackman we heard that many housing associations are ‘coasting’, the same word used by ministers about other sectors that need ‘reform’. And Sir Bob Kerslake was sent a none-too-subtle message to back off in his campaign against the extension of the right to buy as Peabody was singled out for the size of its management costs.

All this makes it vital to separate fact from factoid. Some of the figures used in the Spectator and Times articles were debunked on this site last week last week by Carl Brown. CIH chief executive Terrie Alafat has since shown how the reports got the number of homes delivered by housing associations hopelessly wrong. My own assessment follows.

First, some caveats. Housing associations are far from perfect. The programme did raise some legitimate concerns about executive salaries and management costs that deserve further debate.

Do they pay their chief executives too much? In my opinion, definitely. Salaries of £300,000 or more are indefensible at a time when tenants out of work are having their benefits frozen and a couple in work earning a tenth of that between them face paying market rents. But housing associations are only reflecting a wider cult of executive pay across the public and private sectors. To put their chief executives’ pay into perspective, look at what housebuilders do: the latest annual report of the Berkeley Group shows that its six directors were paid a combined £10.2 million in 2014.

Could housing associations be run more efficiently? Probably. Yes, there are good reasons why the operating costs of some associations are so high but surely organisations that love to style themselves as ‘businesses’ should aspire to do better.

But is government investment in housing associations the waste of money that the programme made out? This was the really dangerous part of the report and this is where we get to the factoids. Many of the key figures used were unsourced but these are my best guesses about where they come from.

The programme’s central allegation was set out more clearly in a blog called ‘Why are housing associations failing to build enough homes?’ on the C4 News website: ‘Government plans to build more affordable homes are being frustrated by the poor performance of housing associations, official figures show.’

This was backed up by two key pieces of information:

‘Housing associations have delivered just 26,000 net new homes a year between 2000-2014 – half the amount required… That is despite taking £62bn in funding, as well as taxpayer-funded rent drawn from housing benefit, according to a Channel 4 News investigation.’

First, the 26,000 homes. As Carl and Terrie Alafat have argued, this only includes some of the homes that housing associations deliver.

So where does it come from? If you look at the DCLG housebuilding statistics (Table 222), average annual completions by housing associations were lower still at just over 20,000 a year. The best candidate I can come up with is DCLG statistics on additional affordable homes (Table 1000) showing that 26,000 social rented homes a year were delivered (mostly by housing associations) over the same period. However, that is not the whole picture: once you include affordable rent, intermediate rent, and affordable home ownership, annual output of affordable homes rises to almost 45,000 a year.

I’m not sure where the ‘half the amount required’ comes from but it may be a surprise to ministers who repeatedly assure us they are on track to deliver 275,000 affordable homes by 2020.

As for the ‘£62bn in funding’, the total amount of government grant paid to housing associations in England over the last 14 years was £23.5bn (see UK Housing Review table 59). The £62bn could be a reference to the total amount of funding including private finance (I make it £54.8 billion between 2000/01 and 2013/14, again from the UK Housing Review), in which case it also illustrates housing associations’ success in raising it in the first place.

But it could also refer to the total amount of debt on housing association balance sheets (the same as the roughly £60bn of debt that will transfer on to the government’s books if they are reclassified as public sector bodies). If that’s right it refers to all debt not just that incurred since 2000.

Unless there’s something I’m missing, at best this first line of attack seems based on a misunderstanding of the stats, at worst it’s a distortion.

But a second, even more serious, claim followed. Is it really true that it costs housing associations £150,000 to build the house that housebuilders can deliver for £90,000? That’s to come in Part Two of this blog.