The tide turns on deregulation and the private sector

Posted: February 17, 2022 | Author: julesbirch | Filed under: Fire safety, Housebuilding, Legal, Private renting | Tags: Michael Gove |Leave a comment

The package of building safety changes announced this week by Michael Gove represents an extraordinary shift on any number of different levels.

Whether it’s effectively banning developers from building anything if they fail to cooperate or rewriting the terms of tens of thousands of leasehold contracts, the amendments to the Building Safety Bill will fundamentally change the way that flats (at least those over 11m) are maintained and managed.

The package inevitably raises a whole series of questions that I’ll return to in a future column but for now I want to concentrate on what it says about the extent of the change in the government’s attitude towards the private sector in housing.

First off, it shows how far the relationship between the building industry and the Conservatives has swung.

Once upon a time it was clear where everyone stood. Building companies funded the Conservative Party and in return got policies they liked. Margaret Thatcher knighted Sir Lawrie Barratt and even bought a new home from his company for when she left Number 10. 

After the coalition was elected in 2010, Conservative ministers saw housebuilders as crucial partners in delivering on their promises of more new homes and more home ownership. Help to Buy was the most visible result but it was just one in a series of concessions to the industry.

Think back to 2013 and a certain Daily Telegraph columnist was condemning Labour plans for ‘use it or lose it’ powers against builders engaged in land banking. ‘You won’t get developers risking their cash to build if they are told they are vulnerable to Mugabe-style expropriations,’ he wrote.

The same idea is government policy now that Boris Johnson is prime minister and his government is going several steps further by telling developers to ‘pay up or lose the right to do business’ over building safety.

The underlying reason behind this huge shift is obviously Grenfell and evidence accumulating at the public inquiry about the behaviour of construction product manufacturers and the abject failure of systems of testing, certification and assurance in preventing the fire.

But in the wider building safety crisis that has developed in the aftermath it’s also about a response from developers that has ranged from making provisions at best to ignoring pleas to ‘do the right thing’ at worst.

The sea change in attitudes is becoming clearer and clearer as witnesses at the inquiry reveal just how profoundly the government’s obsession with deregulation weakened regulatory oversight and meant that opportunities to act were missed.

The way that fire safety experts at the BRE were prevented from recommending policy changes as a condition of their contract is one example but there are many others of people who knew something was wrong but also knew they would be wasting their time pushing for anything that smacked of greater regulation.

While those who served as ministers before 2017 will have many questions to answer at the inquiry, their successors are implementing changes that some of their erstwhile allies in the housebuilding industry regard as ‘quasi-Marxist’.

It remains to be seen whether the amendments to, for example, prevent developers from gaining planning permission or building control approval will face a legal challenge (a QC’s opinion obtained by Persimmon suggests it could).

However, the government’s hand should be strengthened by making both measures part of a new Building Industry Scheme with the statutory backing of the Building Safety Bill.

Such registration and licensing of private industry would once have been anathema to the Conservatives, both on principle and because of the opportunities it would open up for a future Labour government to inject yet more ‘socialism’.

The changes to the terms of leaseholds, effectively making leaseholders liable for costs last rather than first on many blocks, are just as breathtaking.

The glacial pace of the reform of the leasehold system has been turbocharged, even if two of the outstanding questions concern what happens to those who have escaped its clutches via enfranchisement or commonhold and to leaseholders in low-rise buildings. The leading leasehold campaign group called it a ‘Valentine’s Day massacre of property interests’.

This turnaround would be remarkable enough in itself but housebuilders and freeholders are not the only ones who have experienced a wholesale shift in government attitudes towards them.

Private landlords were once in the vanguard of the revolution that would liberate a moribund sector. The whole point of the deregulatory settlement introduced by the Conservatives between 1988 and 1996 was that market competition and discipline would boost supply and conditions.

Buy to Let was created by letting agents and the mortgage industry rather than government but its extraordinary growth on the back of those reforms was seen as a cost-free route for reform and it took years for minister to wake up to the way that landlords were being subsidised by housing benefit to compete with first-time buyers for homes.

That attitude began to change with the phasing out of tax reliefs for landlords from 2015 but a much stronger reverse gear will be engaged when a rental reform white paper is published in the next few months.

Section 21 of the Housing Act 1988, as amended in 1996, was perhaps the key part of that deregulatory settlement but the no-fault evictions it allows are now seen as a symbol of an unfair balance between landlord and tenant. Three years on from the original pledge by Theresa May, after some fears that the government had gone off the idea, Section 21 is one step closer to abolition.

Registration of private landlords was recommended by the last Labour government but very publicly rejected by Grant Shapps as ‘red tape’ in 2010. Now, as foreshadowed in the Levelling Up white paper, it is back on the table.

Finally, the Decent Homes Standard, a New Labour achievement in social housing that was allowed to wither away after 2010, will be renewed and made binding on private landlords. This will enable a level of prescription by the state over private property interests that would have been unthinkable not very long ago.

There are major changes underway in social housing too as a direct and indirect result of Grenfell. The shifting system of regulation, for example, is a reversal of the breezy abolition of  the Tenant Services Authority as ‘toast’ in 2010.

These are significant changes to the institutional architecture of the housing system, although vested interests will try to water down the changes affecting developers, freeholders and private landlords and there could yet be moves back in a more deregulatory direction as the internal politics of the Conservative party play out.

And what all of it will mean for the longer term is much less clear because they also signal the downgrading of supply as the priority.

The government may have woken up to the need for greater regulation and accountability in housing but the changes leave the fundamentals of unaffordability or of policy run in the interests of existing owners largely untouched.

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