Ending leasehold’s ‘industrial-scale racket’

Originally posted on July 12 on my blog for Inside Housing.

As far back as I can remember, every government has promised to tackle abuses of our outdated system of leasehold.

Between 1979 and 1997, the Conservative governments of Margaret Thatcher and John Major legislated four times on leasehold reform.

The Labour government of Tony Blair promised ‘a comprehensive package of leasehold reforms’ in 2000 and introduced the alternative system of commonhold in 2002.

Piecemeal reforms improved things a bit for leaseholders but commonhold has still only been used on 50 developments at an optimistic estimate – in contrast to the expansion of similar tenures like strata title and condominiums across the rest of the world.

Little wonder when leasehold offers so many advantages to be profitably exploited by landowners, housebuilders and freeholders.

Now, in the wake of the twin scandals of cladding and leasehold, all that could – finally – be about to change.

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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.


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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The implications of the leasehold scandal

Originally published on March 19 as a blog for Inside Housing.

The leasehold scandal will have far-reaching implications for housing that will be felt well beyond the major housebuilders with whom it began.

A report published by the all-party Housing, Communities and Local Government Committee on Tuesday takes as its starting point the doubling ground rents and onerous contract terms faced by buyers of new homes who it says were treated ‘not as homeowners or customers but as a source of steady profit’.

And it also highlights the issue of leaseholders facing huge bills to remove and replace combustible cladding raised in its work on fire safety.

But this report goes well beyond those recent high-profile problems with leasehold and poses some fundamental questions about a tenure that only exists in England and Wales – and they are ones that will require answers by social landlords as well as private sector housebuilders and freeholders.

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More housing questions than answers

Originally posted on my blog for Inside Housing on December 11. 

As Westminster grinds to a halt over Brexit at least some progress is still being made on housing – or is it?

In the year of the social housing green paper and the end of the borrowing cap, some things have undoubtedly moved but the signs at Housing Communities and Local Government questions on Monday were that others are grinding to a halt.

First up was the land question and specifically the way that MHCLG dashed hopes of radical reform of land value capture in its response to a Housing Communities and Local Government Committee report recommending big changes to a system that sees planning permission for housing increase the value of agricultural land by 100 times.

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Who gets the most subsidy in housing?

Originally posted on November 21 on my blog for Inside Housing. 

A report out this week comes as close as we are probably going to get to answering one of the most vexed questions in housing: who gets the most subsidy?

Feather-bedded home owners sheltered from the tax paid on all other forms of investment? Social housing tenants who don’t know how lucky they are to get a tenancy for life at a subsidised rent? Fat-cat landlords lining their pockets with housing benefit? Housebuiders trousering huge Help to Buy-financed bonuses? The answer has changed over time.

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From housing ladder to housing treadmill

Originally posted on April 30 on my blog for Inside Housing.

Once upon a time the image of a ladder was a fair representation of the housing system. Not anymore.

The old days in which the home-owning majority saved for a deposit and got a mortgage, a significant majority put their names down for a council house and got one and the rest used the private rented sector as a temporary transition are long gone.

And a report out today from the Joseph Rowntree Foundation (JRF) suggests a new image has replaced the ladder for people on low incomes struggling with high housing costs and insecure jobs and tenancies: a housing treadmill, where people ‘were running to stay and were worried about falling off completely’.

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