Originally published on August 20 on my blog for Inside Housing.
A stamp duty plan that apparently never was offers a tantalising preview of a Budget and spending review that will take place in neverland.
Saturday’s Times reported that sellers rather than buyers would pay stamp duty under plans for a tax shake-up by chancellor Sajid Javid.
The plan seemed either fraught with problems (sales would dry up as buyers waited for the change to take effect) or pretty meaningless (sellers would simply add the extra cost to their asking price).
And the story seemed built on flimsy foundations and journalistic hype – in the interview itself Javid was asked if he was considering the change and did not deny it but that escalated into a definite change in the headline – but presumably there was off-the-record corroboration too.
By Sunday the man himself was taking to Twitter to deny that he was planning anything of the sort:
Clearly this government is not quite the messaging machine with iron discipline that we’ve been led to believe and is just as prone to getting its wires crossed as any of its predecessors.
But what does this episode tell us about what’s to come for housing in the Budget – there is no confirmation yet whether that will be before or after the ‘do or die’ Brexit date on October 31 and there could even be one before and one after – and the spending review to follow next year?
I’d never heard of Ken Griffin before a week in which the hedge fund billionaire bought the most expensive home ever sold in the United States and then snapped up (as you do) what is thought to be the priciest home sold in Britain for a decade.
I use the words ‘houses’ and ‘home’ in a loose sense, of course. Because we are talking about penthouses, apartments and condos too. And because, despite spending $238m on a four-storey penthouse in a new skyscraper in New York and £95m on a London house near Buckingham Palace, it’s hard to see how he will spend much time living in either of them.
Griffin’s Citadel hedge fund is actually based in Chicago, where he already has two more homes. The most expensive ever sold in the city, a $59m four-storey penthouse, offers a place to crash after day at the office. Fitting it out could cost another $25m but if he needs somewhere in the meantime he also owns a whole floor of the Waldorf Astoria plus a two-storey penthouse in another skyscraper.
For weekends or holidays he can fly down to Florida, the state where he was born and has acquired a $230m portfolio of land and property in Palm Beach near President Trump’s Mar-a-Lago estate. One property (which cost $15m) will apparently be used as a guest house while some of the four others could be demolished to make way for a gargantuan beach house. That’s almost forgetting the $60m penthouse in Miami that he seemingly never moved into and has now put back on the market.
If he fancies a change of scene, he can nip over to Hawaii, where he bought one property for $11m in 2009 only to buy a second for $17m three years later.
I’m labouring the point here but it’s worth it on a few different levels, most obviously for what it reveals about the astonishing lives of the ultra-rich but also for what this extreme case says about our attitudes to housing and property and about what has happened since the financial crisis.Read the rest of this entry »
Where do the Conservatives really stand when it comes to supporting workers on low wages?
Are the Tories the One Nation ‘workers party’, cutting tax, increasing the minimum wage and reforming welfare to make sure that work always pays? Or are they the one that’s set to cut spending on tax credits by £5 billion and cost those same workers up to £1,690 per year?
Ahead of Wednesday’s Budget, the rhetoric and the reality simply do not match. In David Cameron’s ‘speech on opportunity’ in Runcorn last month, he contrasted the ‘right track’ of economic opportunity with the ‘wrong track’ of ‘people capable of work, written off to a lifetime on benefits’ and policies that ‘ignore the causes and simply treat the symptoms of the social and economic problems we face’. Rather than redistributing money through the benefits system we have to tackle the ‘real causes’ of child poverty. And our approach to low pay is complacent:
‘There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the government and then the government giving them that money back – and more – in welfare. Again, it’s dealing with the symptoms of the problem: topping up low pay rather than extending the drivers of opportunity – helping to create well paid jobs in the first place. So this is the change we need. We need to move from a low wage, high tax, high welfare society to a higher wage, lower tax, lower welfare society.’
Needless to say he did not explain how. The key Conservative policy of increasing the income tax threshold to the level of the minimum wage sounds like it benefits low-paid workers most. In fact, anyone paid below the current threshold of £10,600 a year will receive no benefit at all while most of the gains will go to people on higher earnings. It’s the same story with tax credits and housing benefit, both of which are essential to people who are in work but on low pay. All the tax cuts in the world do little to make up for the cuts in the last parliament and the cuts to come in this. As Gavin Kelly argues, the notion that higher wages will somehow fill the gap is fanciful.
Here’s a number that should embolden whoever wins the election: 54% of voters support government borrowing to fund more affordable homes.
A MORI opinion poll for the Chartered Institute of Housing (CIH) found that just 21% would oppose borrowing to fund affordable housing for sale or rent and 24% neither support not oppose it. Support was unsurprisingly strongest among renters (60 per cent) and Londoners (66 per cent).
The results are in line with a series of other recent polls showing a significant shift in public attitudes to housebuilding. However, the election campaign seems so fixed that it’s difficult to imagine any of the major parties trying to win majority support by advocating a policy that actually has it. It would simply play into the Conservative narrative that it was not the banks but the last Labour government that caused the economic crisis by borrowing too much.
An idea that was supposedly buried a generation ago is rising rapidly up the housing policy agenda.
Last year saw modest proposals by Labour for rent regulation within three-year tenancies in the private rented sector. Now there are calls for something that goes much further.
The conjunction of two news items last Friday put the issue into sharp relief. The first was an opinion poll for the private tenants campaign Generation Rent that asked ‘would you support or oppose proposals for the government to introduce a “rent control” system in the UK’. The result was 59 per cent to support, 6.8 per cent to oppose and 34 per cent with no opinion. Levels of support rose to 77 per cent among private renters, 69 per cent of Labour voters and 64.5 per cent of Londoners. However, rent control also had the support of a majority of Conservatives (55 per cent) and homeowners (56 per cent).
A new book by the economist whose work first established the 250,000 homes a year benchmark has to be worth reading – especially when she’s not convinced it’s possible anymore.
Kate Barker’s seminal report on housing for the Blair government nailed the idea that the UK and especially England need to build houses at a much faster rate. A decade, and a separate study of planning, later and it still the ultimate source for targets of 200,000, 250,000 and even 300,000 homes a year to cope with demand and make up for the shortfall.
Now she’s back with Housing: Where’s the Plan, a short book setting out the housing challenge and potential solutions to it. With the new homes deficit rising by the year, she starts with a sober assessment of the possibilities:
‘To create a fairer and less harmful housing market, a combination of strong central direction about housing supply and unpopular taxation changes would be required. But politicians find it hard to grasp these nettles: there is far too much short-term pain and the gain will go to their successors. It is easier for them to carry on with somewhat ineffective knee-jerk and populist help for first-time buyers.’
While a perfect market may not be possible the book suggests ‘criteria for what a better housing market might look like’. However, she injects a note of caution from the outset:
‘I have become less convinced that it will be possible to meet demand in much of southern England, given the strength of local opposition in many places. So building more housing will not be the only answer, we also need to ameliorate the consequences of demand continuing to exceed the available supply.’
In less than 100 pages, the book covers an immense amount of ground including the sort of outcomes we want, post-war housing and planning policy, the housing market and the wider economy, market risks and taxation. Read the rest of this entry »
Guess what the total value of government financial instruments to support new homes will be by 2021.
The answer that leapt off the page at me in a report on the department’s performance published by the National Audit Office (NAO) last week is a cool £24 billion. And that is just the direct support that comes under the DCLG and its agencies.
Perhaps the figure should not come as a surprise. After all, ever since the financial crisis we’ve grown used to the government adopting new ways of financing things that do not rely on conventional spending or borrowing.
The three programmes that make up the £24 billion are £10 billion for financial guarantees to housing associations and the private rented sector to help build new homes, £9.7 billion for the Help to Buy equity loan scheme (HTB1) and £4.2 billion for other loans and investments such as Build to Rent and the large sites scheme.
Never mind today and tomorrow: what does the Budget mean for housing over the longer term?
As usual, some of the most revealing information comes not in the speech or the Treasury’s background documents but in the Economic and Fiscal Outlook published by the Office for Budget Responsibility. This time around the detail and the forecasts for the next five years have a lot to say about housing benefit, the welfare cap and the housing market.
Read the rest of this post on Inside Edge, my blog for Inside Housing