Look on the back

Originally posted on October 20 on Inside Edge 2, my blog for Inside Housing

A few answers and yet more questions: my round-up of the latest developments on the Housing Bill.

An ex-colleague used to speak in awed tones about the time he saw an old-school football reporter compose his match report for the Football Pink as the final whistle sounded. He took a cigarette packet out of this pocket, drew lines on it in the shape of paragraphs, and then dictated a word-perfect report down the line to the copy takers.

Much has changed since the olden days: smoking in public places; laptops and the internet have replaced phones and copy takers; and Pink ‘Uns died out long ago in most cities. But looking back at the events of the past week it seems that cigarette packets remain as popular as ever for drawing up plans – and for things infinitely more complicated than football matches.

This was exactly the metaphor used by an anonymous source in Jill Sherman’s story in The Times last week that the government is set to phase in the extension of the right to buy because of concern over the costs. ‘The Treasury people are hanging their heads in despair,’ the source said. ‘How did this policy that was made up on the back of a fag packet get adopted during the election campaign?’

As some of us pointed out at the time, the assumptions about how much money could be raised from forced council sales always looked hopelessly over-optimistic. That was confirmed last week in research by the Chartered Institute of Housing suggesting that the plan will cost 7,000 council homes a year but raise less than half the amount the Conservatives claimed during the campaign.

Things were not much clearer after a brief Commons debate last Monday in which housing minister Brandon Lewis repeatedly evaded questions about the rules for replacements. He did though manage to imply (wrongly) that there are restrictions on renting out homes sold under the right to buy and to answer a question from the SDLP MP for South Down by saying ‘I cannot speak for the Scottish Government’.

The Housing and Planning Bill a day later brought some answers but also some new questions. Rather than councils handing over what they actually raise from high-value council house sales, they will be expected to make a payment determined by ministers based on an estimate of how many will become vacant. While that may give them the option of raising the money by other means, exactly how ministers will make the estimate (and how it will be any better than the one in the election campaign) remains as clear as mud.

It’s the same with the voluntary deal on the right to buy proposed by the National Housing Federation and accepted by David Cameron. True, that involved rather more than a fag packet but it was composed almost as close to the deadline as the match report. I blogged just after the result about the many unanswered questions (partly the result of not seeing the government’s side of the deal).

As always seemed likely, the ‘voluntary’ deal will be enforced by regulation and this is spelled out in the legislation that the deal was designed to avoid. The government’s ‘home ownership criteria’ will ironically be monitored by the agency responsible for funding and regulating affordable rented housing. And it turns out that the compensation at full market value promised in the deal will instead be ‘grant’. Perhaps this is just a matter of dovetailing with the HCA’s legal powers, but would anyone bet on the grant rate remaining at 100% over the long term? The government has promised ‘one for one replacement’ without ever specifying exactly what that means.

That raises more questions. If the more gung-ho housing associations are right that they can achieve better than that, what’s to stop a future chancellor deciding to keep some of the receipts? If 10-year deals on future social rents are not worth the paper they are written on, where does that leave voluntary deals announced at the NHF conference? If the government can renege on the terms of the statutory self-financing agreement with councils, why not the voluntary deal with housing associations?

As I’m writing this, I’m listening to David Orr give a more bullish -and certain -answer in his evidence to the Communities and Local Government committee. He insisted that the deal means that associations will receive compensation at full market value. Without it there will be no deal. ‘That’s not what the Housing Bill says, is it?’ asked committee chair Clive Betts. Orr replied: ‘The truth is that if that doesn’t happen then that will be in breach of the agreement with the government…If there is not full compensation then the agreement will fall.’

On another point raised by many people, Orr said that the deal will be binding on all NHF members, regardless of whether they voted for it. ‘There is no opt-out option.’

However, the Bill also contains several other fag-packet policies that it does not so much detail as enable. On pay to stay, the Bill was preceded by one of the shortest consultation papers I’ve ever seen, which confirmed that higher rents will be tapered in for ‘ High Income Social Tenants’ (HISTs) earning more than £30,000 (or £40,000 in London). Two points stick out on this: first, what may have seemed like a high income on the DCLG fag packet is anything but in the real world  (as analysis by Clare Powell of Sovereign makes clear); second, we now live in a country where it’s acceptable for HMRC to hand over details of tenants’ earnings to their landlord on a routine basis.

And where do I start with starter homes? Rather than rehash my old blogs, I’ll highlight two by other people. Richard Petty of JLL asks ‘are starter homes really the answer?’ and quickly concludes that they aren’t. He calls it ‘a new and worrying centralisation of planning policy’ that sets up a conflict with requirements for affordable housing in local plans and adds: ‘We are deeply concerned that Starter Homes will displace genuinely affordable homes on a huge scale, meaning the housing needs of many would be swept aside in an ideological rush for ownership.’

Besides which, the housebuilding industry is simply not capable of building 200,000 starter homes by 2020. The implied output of 50,000 a year from 2016 is about half the annual total of homes built for private sale in England:

‘Housebuilders are not going to want – or be able – to see such a high proportion of their output sold at a 20% discount; and the industry does not look capable, simply in terms of capacity, of building 50,000 additional homes a year, on top of current supply.’

Meanwhile Edward Clarke of the Centre of Cities argues that starter homes may bring some marginal sites back into use but overall they have the potential to make things worse not better. Even with a 20 per cent discount, they will be beyond the reach of most people around England’s most successful cities. Across the South East, it’s taken just five years for prices to rise by 20 per cent, wiping out the value of the discount. And counting starter homes as affordable could simply feed through into higher land prices, making affordability even worse.

Finally, there’s the plan to tackle rogue landlords and letting agents through banning orders. If that sounds like the government is getting tough at last, the Bill stipulates that the fine for breaching them ‘must not be more than £5,000’. Those rogues must be quaking in their boots.

I would go on but I’ve run out of room for lines on the back of my fag packet.