Pensions for property is still a bad idea

Originally published on June 4 as a blog for Inside Housing.

Every seven years or so, it seems, a senior politician will be tempted by the alluring idea of linking pension savings to home ownership.

When James Brokenshire said on Monday that young people should be allowed to use some of their pension pot to buy their first home, he was following in the footsteps of Nick Clegg and Danny Alexander in 2012 and Gordon Brown in 2005.

He told a meeting organised by Policy Exchange:

‘It seems rather obtuse that we would deny people the opportunity to do this, given that we know those who own their own home by retirement are on average a) wealthier and b) do not have the burden of the largest expense in retirement – accommodation.’

This was one of several what he described as ‘personal ideas’ to ‘help empower consumers in the housing market’ and it’s one that seems superficially attractive given the size of deposit required by many first-time buyers.

And it was an indication of what the housing secretary really thinks about a brief that he could well lose once we have a result from the contest to be the new prime minister and Conservative leader (he ruled himself out).

For him, the idea of allowing people to use their pensions for housing is common sense:

‘It is, after all, their money. Not the fund’s, not the state’s, it’s yours and the next Conservative government should free that capital up, and trust the individual to make the choice for themselves.’

The choice of venue seemed appropriate given that Policy Exchange has been the source of so many of the worst ideas in housing since 2010.

But this one has drawn condemnation from two different directions, with housing groups saying it would fuel house price inflation with tax-subsidised pensions and the pensions lobby arguing that it could destabilise saving for retirement.

Within hours of Mr Brokenshire’s speech, Sky News was reporting that the Department of Work and Pensions (DWP) had complained to Downing Street about a ‘risky’ plan that had not been discussed with them.

A source said:

‘We cannot support this policy because the evidence shows it will be risky and does not help the people it intends to help. The housing market doesn’t need people to dip into their pensions to buy more houses.’

Though this may seem a bit rich coming from those who designed universal credit, the DWP is quite right about the plan: tax breaks are there to boost pension saving not house prices.

Rising house prices would skew the housing market even more in favour of people with wealthy families but falling prices would undermine retirement incomes and increase costs for the DWP.

In fairness, though, Mr Brokenshire was joining an all-party group of senior ministers seduced by different versions of the same idea.

Go back seven years to 2012 and deputy prime minister Nick Clegg and Treasury chief secretary Danny Alexander were proposing ‘pensions for property’ at the Lib Dem conference.

The scheme to allow parents and grandparents use their retirement savings to guarantee a deposit for their children and grandchildren had far more detail than the one floated by Mr Brokenshire but it looked just as dumb. Thankfully nothing ever came of it.

Go back another seven years to 2005 and Labour chancellor Gordon Brown was proposing that residential property should be one of the eligible categories for investment by people with self-invested personal pensions (SIPPs).

This idea was if anything even worse, with huge tax subsidy for housing investment by the wealthiest section of the population and no benefits for first-time buyers.

Thankfully, the Treasury saw sense at the 11th hour and ruled that residential property would not be eligible but that did not mean that the housing and pensions issue had gone away.

The boom in Buy to Let that was just starting to get underway was partly fuelled by older home owners seeing investment in renting as a more flexible way of saving for retirement but it took ministers years to see the impact on would-be first-time buyers.

James Brokenshire is not the first politician to connect pensions and housing and see a way of appealing to aspirational voters but this is a seven-year itch that does not need scratching.

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‘A striking and complete disconnect’

Originally posted as a blog for Inside Housing on May 22.

Not much in today’s report from the UN Special Rapporteur on Extreme Poverty will surprise anyone who has worked in housing over the last decade.

The coruscating criticism of universal credit, the benefit cap, the benefits freeze, the under-occupation penalty and all the other welfare ‘reforms’ seen since 2010 arrives at a time when we have almost become immured to their impact on tenants in general and lone parents and disabled people in particular.

And it was only last week that the latest Homelessness Monitor from Crisis showed the effect of all that on the wider housing system, giving social landlords an incentive not to rent to the poorest people and driving them into a private rented sector in which housing benefit no longer covers their rent.

Yet the final report from Professor Philip Alston is still a shocking reminder of dire consequences that he says are ‘obvious to anyone who opens their eyes’ and of a government response that hovers between hostility, indifference and complacency.

Part of this is due to the Special Rapporteur’s vivid turn of phrase about what he calls ‘the systematic immiseration of millions’. Some choice examples include:

  • ‘Much of the glue that has held British society together since the Second World War has been deliberately removed and replaced with a harsh and uncaring ethos.’
  • ‘The driving force has not been economic but rather a commitment to achieving radical social re-engineering – a dramatic restructuring of the relationship between people and the State.’
  • ‘The British welfare state is gradually disappearing behind a webpage and an algorithm, with significant implications for those living in poverty.’
  • ‘It might seem to some observers that the Department of Work and Pensions has been tasked with designing a digital and sanitized version of the nineteenth century workhouse, made infamous by Charles Dickens.’

But what really struck me reading this final report was how completely he skewers the government’s response to criticism.

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What will a new PM mean for housing?

Originally posted on May 20 as a column for Inside Housing.

What are the chances that the government’s shift to a more pragmatic position on housing will survive a change of Conservative leader?

The papers are already full of news and polls about the leadership race before Theresa May has even resigned, mostly reporting Boris Johnson as the overwhelming favourite but also noting the poor record of overwhelming favourites in previous Tory elections.

The stakes for housing start with the record of May’s government. While much of it is about rhetoric and saying the right things, especially since Grenfell, there is also some substance: the first funding for social housing since 2010; u-turns on key elements of the 2016 Housing Act; reforms to private renting culminating in the consultation on ending Section 21; and a willingness to consider new thinking on issues like land.

Does all of this represent a permanent shift in Conservative thinking on housing or will the Tories revert to type once May and her chief of staff, former housing minister Gavin Barwell, have vacated Downing Street?

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Making a housebuilding splash

Originally posted on insidehousing.co.uk on May 14.

The entry into the UK market of an overseas company that last year built almost as many homes as Barratt, Taylor Wimpey and Persimmon combined is by any standards a big deal.

That’s even before you add what looks like a major step forward for modular building in the UK and one of the most eye-catching individual investments yet by the self-styled disruptors at Homes England.

The £90m deal involves Sekisui House, the biggest housebuilder in Japan, taking a 35% equity stake in Urban Splash’s modular House business. The Manchester-based developer will retain 60% with Noel McKee, one of its existing investors and founder of We Buy Any Car, taking what’s described as an incremental 5% stake

Homes England will take a 5% stake worth just over £3m in the company and will also be providing a £27m loan from its £4.5bn Home Building Fund.

Sekisui House built almost 44,000 new homes last year, almost 5% of all those built in Japan, where new build numbers and demolitions alike are much higher than in the UK.

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The devolution dynamic in housing policy

Originally published on May 9 on my blog for Inside Housing.

Devolution to Scotland and Wales is 20 years old this week and amid the celebrations it’s worth taking a moment to consider its significance for housing.

Since May 1999, when the Scottish Parliament and Welsh Assembly met for the first time, devolution has evolved at a different pace in each country and the Barnett formula has given Holyrood more resources than Cardiff Bay.

Politically, the Scottish Parliament was run by Labour with Lib Dem support for its first eight years before the SNP won power in 2007 and then an overall majority in 2011 and the No vote in the independence referendum. The Welsh Assembly has been run by Labour for the last 20 years, though it has needed the support of either the Lib Dems or Plaid Cymru along the way.

However, it was the election of a Conservative-led coalition government at Westminster in 2010 that led to a new phase for the devolved administrations.

For a while, all they had to do to be progressive on housing was nothing – refusing to follow the English swing away from social rent and towards the market created a clear divide.

Both have still had to cope with the impacts of austerity and benefit cuts largely imposed from London, although Scotland has used its extra resources to mitigate the bedroom tax and has been able to make some tweaks to universal credit.

In the areas that they can control, the devolved administrations have tended to devise policy in partnership with the sector, as exemplified by the ambitious target for affordable and social homes in Scotland and the independent review of affordable housing supply published in Wales last week.

But it is in legislation that a really distinctive approach to housing has emerged and it is one that I’d argue has created a new dynamic in housing policy across the wider UK too. Read the rest of this entry »


The housing trilemma

Originally posted on May 1 on my blog for Inside Housing

The pace of change in housing seems to accelerate every year, especially in the last decade.

There may be better known conferences than the one organised by the Housing Studies Association but there are few if any give you a better opportunity to try to make sense of it all.

Held in Sheffield last month, the theme of this year’s conference was Home Struggles: Politics, Marginality and Resistance in the Contest for Housing. This was a title designed to cover everything from the financialisation and homelessness we are familiar with in Britain to the more informal struggles associated with the Global South.

The conference brings together the growing number of academics working on housing issues from this country and overseas but housing professionals and tenants were there too in the audience and with papers of their own.

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Sidelining of tenants is part of a wider pattern

Whether you put it down to carelessness or couldn’t care less-ness, the inaction inside government inaction that has sparked open letter from A Voice for Tenants (AV4T) is symptomatic of a wider political paralysis.

As the group themselves point out, they are not representative of the eight million people living in social housing in England but they are the best we have until the government keeps the prime minister’s promise to bring tenants into the political process.

The letter is all the more effective for the contrast between its moderate language and its stark message that working behind the scenes has not produced results.

The only option left seems to be to embarrass the politicians into living up to what they have said over the last two years – accepting Inside Housing’s open invitation to a meeting seems the bare minimum they should do.

And there is a strikingly similar message in the Times this morning from Grenfell United, as it attacks ‘indifferent and incompetent’ ministers who took their ‘kindness as weakness’.

Two years of meetings have produced too little action, they say, with no progress on their call for a new model of housing regulator and thousands of people still living in ‘death traps’ with combustible cladding.

Grenfell and tenants were top of the agenda for the ministers in post at the time of the fire – the work of Alok Sharma and his civil servants is praised in the AVT letter – but have slipped down it as the months and now years have passed.

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