Look beyond the rate rise for the real housing squeeze

Originally posted as a column for Inside Housing on November 2.

Today’s first rise in interest rates for a decade is an important symbolic moment but it will make little or no immediate difference to the housing costs of millions of home owners with a mortgage.

The increase from 0.25% to 0.5% could see average mortgage payments rise by around £15 a month but it will not apply straight away to people with fixed rate mortgages and in any case it only restores the base rate to what was a record low between 2009 and the aftermath of the referendum.

Compare that with the continuing squeeze on benefits and tax credits/universal credit that the Institute for Fiscal Studies forecasts today will help to increase the percentage of children in relative poverty after housing costs from 30% now to 37% by 2022.

And contrast it with the latest overall benefit cap statistics also published today: as at August 68,000 families were hit by the lower cap that came into effect a year ago and nearly a third of them are losing between £50 and £100 a week. The cap is now £26,000 in London and £20,000 elsewhere.

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May dedicates her premiership to fixing housing

Originally posted as a column for Inside Housing on October 4.

You wait a lifetime for a prime minister to make housing their priority and then she gets her P45 while losing her voice with the conference set falling apart behind her.

With all that happening around her it was easy to ignore the substance of Theresa May’s speech.

You may have missed it between coughs but for the first time since the 1950s here was a prime minister promising to put housing at the heart of their premiership.

And here was a Conservative prime minister not just promising an extra £2bn for ‘affordable’ housing but even allowing bids for social rent too.

But as the letters slowly dropped off the conference slogan about ‘BUILDING A COUNTRY THAT WORKS FOR EVERYONE’ you wondered how long she will have a premiership to put anything at the heart of.

And even then it is hard to avoid drawing the obvious conclusions from the comparison between an extra £2bn for affordable housing and an extra £10bn for Help to Buy.

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Ten years after

Originally posted as a column for Inside Housing on September 28.

When I started blogging for Inside Housing in September 2007 I wondered if I’d find enough to write about.

As it turned out there was no need to worry. A week before my first post Northern Rock went bust and the world changed.

What began in the United States as a sub-prime mortgage crisis was transformed by a series of financial acronyms into a Global Financial Crisis.

The connections to housing in this country at first seemed indirect: the UK did not have sub-prime lending on anything like the same scale; we had Northern Rock but there were plenty of other lenders; and the problems at Lehman Brothers and Bear Stearns seemed a long way away.

The direct effects didn’t take long to make themselves felt as credit markets dried up, share prices crashed and politicians panicked at the prospect of cash machines running out of money.

At the time it seemed like we were set for a repeat of the housing market crash of the early 1990s with soaring mortgage arrears and repossessions and families plummeting into negative equity.

One or more of the major housebuilders looked certain to go bust. And the combination of the two would send the banks even further under.

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What a way to run a housing system

Originally posted on September 14 as a column for Inside Housing.

The balance of funding between government funding for home ownership and affordable housing schemes continues to astonish even after the change in emphasis under Theresa May.

Revised figures prepared for Thursday’s publication of the UK Housing Review Briefing Paper show that total support for the private market up to 2020/21 is set to total £32 bn compared to support for affordable housing investment of just £8.6 bn.

This pie chart really brings it home:

These are revised figures that take account of the extra money for affordable housing announced by chancellor Philip Hammond last November. Even after that, even after adjustments for lower than expected spending on mortgage guarantees, and even including the Right to Buy pilot in the pink part of the graph, we are still spending £4 on support for the private market for every £1 we spend on support for affordable housing.

What really leapt off the page at me in this chart was that the government is set to spend £4.2 bn on Help to Buy and Lifetime Individual Savings Accounts (ISAs) over the same period as it spends £4.3 bn on the main Shared Ownership and Affordable Homes programme.

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The state of owner-occupation

Originally published as a column for Inside Housing on September 5.

The decline of owner-occupation in England resumed in 2015/16 after a brief uptick in the previous year.

The English Housing Survey shows that owner-occupation as a whole fell below 63% to return it to levels last seen in 1985, when the Right to Buy and Margaret Thatcher’s drive for a property-owning democracy were in full flow. The ownership rate is now down eight percentage points on its peak in 2003.

However, even that conceals the full scale of the decline. Owner-occupation is made up of two very different groups – people who own their home outright and those who are buying with a mortgage – and the split between them has changed radically over time.

Here are some key points that I picked out from the English Housing Survey for 2015/16:

1) Owning’s rise…

Outright ownership is still rising as people who first took out a mortgage 25 years or more ago pay it off. From 25% of households (4.5 million) in Mrs Thatcher’s heyday, it has grown to overtake mortgaged ownership two years ago and reach 34% (7.7 million) in 2015/16.

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Time for cross-party co-operation on housing?

Originally published on July 11 as a column for Inside Housing.

If we need to ‘invest in good work’ what about good homes?

Theresa May was speaking at the launch of the Taylor review of the gig economy on Tuesday exactly a year after she became prime minister.

In the wake of her failed election gamble, she needs non-Tory support to address the challenges identified in the report.

And her plea to the other parties to ‘come forward with your own views and ideas about how we can tackle these challenges as a country’ is being interpreted as being about more than just the labour market.

So if the challenge of precarious work requires cross-party co-operation what about that of precarious housing?

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Book review: The Financialization of Housing

The Global Financial Crisis was a wake-up call to the world about the dangers posed by a toxic mix of finance and housing, one that has still not been properly heeded.

The mortgage-backed securities, collaterialised debt obligations and other financial instruments that financed the expansion of sub-prime and predatory lending were the result of a wave of innovation by a finance industry that had been deregulated over the previous 20 years. Britain marked the 30th anniversary of the Big Bang in the City last month but similar things happened around the developed world.

All that innovation and securitisation led to exponential increases in the amount of credit circulating within the financial system but it still needed something to be secured against. Which is where housing came in: a mortgage finance system that had been based on long-term mortgage lending funded from savings was transformed into a vehicle for the expansion of credit. And the relationship between the price of homes and the earnings of people buying them was also transformed.

9781138950580

The Financializaton of Housing: A Political Economy Approach, a new book by Manuel Aalbers, is the most comprehensive attempt I’ve seen to outline this process and its consequences. It’s part of a multinational research project based at the University of Leuven in Belgium on what he calls the Real Estate/Financial Complex in 12 different countries around the world. The metaphor is a deliberate echo of the military/industrial complex and serves to emphasise the connections not just between the real estate and financial sectors but also between each of them and the state.

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