Help to Buy and wider housing policy

Originally posted as a blog for Inside Housing.

So much has been written about Help to Buy that by now everyone knows what they think.

If you’re a housebuilder the equity loan scheme introduced in 2013 has meant more new homes and more buyers.

If you unable to get a mortgage, the scheme may have offered a first step on to the housing ladder that would not otherwise have been available but you may be wondering about the quality of your new build.

If you’re a critic, even if you concede the first two points, the biggest impact has been on housebuilder share prices, dividends and executive bonuses.

Evaluations published so far have provided evidence to back up both sides of the argument. On the positive side, 37% of borrowers said they could not have afforded to buy without it; on the negative, that could also mean 63% did not need help.

The new feature of a report published yesterday by the Commons Public Accounts Committee (PAC) is that it takes a step back and considers the impact on the government and on wider housing policy.

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The long-term cost of Help to Buy

Originally posted on June 13 on my blog for Inside Housing. 

Whatever you love it or hate it, Thursday’s report from the National Audit Office (NAO) will probably not do much to change your mind about Help to Buy.

If you think that the equity loan scheme first launched in 2013 has boosted housebuilding and helped more people to buy their first home, you will find evidence to support that view: new-build  property sales increased from 61,000 a year in 2012/13 to 104,000 in 2017/18; and around 81% of people using the scheme have been first-time buyers.

If you think the scheme has mainly benefited housebuilders and the benefits for buyers have been more limited, you’ll find backing for that too: 63% of borrowers could have afforded to buy anyway; many of them have used the scheme to buy a bigger house than they could previously have afforded; and 10% of buyers had incomes higher than the £80,000 (£90,000 in London) limit for eligibility for shared ownership.

The report does reject one common allegation made against Help to Buy by estimating that homes sold under the scheme have cost just 1% more than similar new-build homes. Previous estimates ranging from 5% to 20% have not compared similar properties, says the NAO.

However, that is just part of a much bigger new-build premium (the difference between prices of new and second-hand homes) and the NAO seems to accept the high figure of a premium of 15-20% as a given rather than the product of market conditions that Help to Buy helped to create.

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It’s not just about Help to Buy

Originally posted on February 28 as a blog for Inside Housing. 

All the headlines this week are about Persimmon and Help to Buy but the issues with housebuilding are much bigger than either.

Yes, Persimmon is the most extreme example of the gains made on the back of state intervention, with profits of £1 bn and margins of over 30% to go with those huge executive bonuses that made it the poster child for corporate excess in the industry.

And, yes, Help to Buy supported almost half of its 13,341 private completions in 2018 and a major part of the rest of the industry’s output.

Public and media outrage has now reached the point where ministers feel they have to act and housing secretary James Brokenshire let it be known over the weekend that he has ‘become increasingly concerned by the behaviour of Persimmon in the last 12 months’.

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What’s in the Budget small print?

Originally published on November 30 on my blog for Inside Housing. 

If you listened to the chancellor’s speech you may have thought this was a Budget that did not mean much for housing. As ever you may think again after reading the small print.

As I live blogged for Inside Housing yesterday, the big news in the speech was the extra money for universal credit that makes up for many of the cuts imposed in universal credit and delays the roll-out yet again and sounds like it will be enough to avoid a backbench Tory rebellion.

Elsewhere, Philip Hammond found £2.8 bn to bring forward cuts in income tax allowances by a year but he failed to find roughly half that to scrap the final year of the freeze in most working age benefits including the local housing allowance.

This was a clear political choice to go for tax cuts that overwhelmingly benefit the better-off over benefits that go to the poorest households.

Ahead of the next spending review, numbers crunched by the Resolution Foundation overnight suggest that the squeeze on everything apart from health will continue well into the 2020s.

However, the most interesting developments for housing came in the background documents published as Mr Hammond sat down.

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Where next for Help to Buy?

Originally published on September 6 as a blog for Inside Housing. 

Take a quick look at any of the results published by the major house builders this week and it becomes clear just how dependent most of the industry still is on Help to Buy .

Barratt relied on Help to Buy equity loans for 36% of its sales in the year to the end of June – to put that in perspective all its other private sales only accounted for 31%.

In the past six months, Help to Buy accounted for 39% of sales at Taylor Wimpey and 36% at Bovis.

And a presentation to analysts by Redrow showed that 40% of its sales came via Help to Buy in the year to the end of June.

No wonder its chair Steve Morgan calls it a “godsend”and wants clarity about what happens when the scheme expires in March 2021.

A report from the Home Builders Federation (HBF) this week claims that Help to Buy has been an “unmitigated success”, ensuring the construction of 170,000 new homes in its first five years, while supporting 150,000 jobs and helping 137,000 first-time buyers on to the housing ladder.

But increasingly hostile coverage in the national press concentrates far more on soaring profits, pay and shares at the major house builders and wealthier buyers taking advantage of interest-free loans that they do not need.

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That was the (housing) week that wasn’t

Originally posted on August 20 on my blog for Inside Housing. 

An open letter to James Brokenshire on Monday puts a lacklustre Housing Week into true perspective.

Organised by the Conservative think tank Onward, the letter calls for a change in the law to allow local authorities to buy land for housing at fair market value rather than a price that includes the ‘hope value’ that includes planning permission.

The call for a change to the 1961 Land Compensation Act is supported by a wide range of organisations including think tanks from across the political spectrum as well as Shelter, Crisis, the Joseph Rowntree Foundation, National Housing Federation, National Landlords Association and Generation Rent and even the Campaign to Protect Rural England.

And it is also signed by former Downing Street insiders Will Tanner and Neil O’Brien MP, now director and an advisory board member at Onward.

Reform to allow councils to buy land at close to existing use value would go much further that tentative government moves on land value capture and open up the possibility of a new generation of new towns or urban extensions with funding for infrastructure and affordable housing.

There are caveats to this. First, any such measure would have to withstand resistance by powerful landed interests inside the Conservative party with pockets deep enough to fund a legal challenge like the one that overturned compulsory purchase powers in the original New Towns Act and led to the 1961 Act.

Second, while few would disagree that up to £9 billion a year in land value gains could be put to better use than lining the pockets of landowners, there might be less agreement about what to do next: a report by Onwardin June argued for a programme of discounted rent homes for young people to buy and appeared to argue for less, rather than more, social housing.

However, the contrast between this week’s call for reform and last week’s highlights is still a striking one.

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April arrives with some rare good news

Originally published on March 29 on my blog for Inside Housing.

Sometimes it feels like I’ve written a blog at this time every year with the headline ‘April is the cruellest month’.

It’s not that I have a TS Eliot fixation nor (I hope) that I endlessly repeat myself but because ever since 2010 the start of the financial year seems to have meant yet another benefit cut or housing policy change to cope with.

This year is a bit different not so much because there is no bad news but because there is some good news as well. Here are some examples:

  • The u-turn on the withdrawal of support for housing costs for 18-21 year olds under universal credit announced on Thursday. This was a cumbersome policy that required significant exemptions and barely saved any money but it’s still a significant change to the original pledge to make young people ‘earn or learn’.
  • The Homelessness Reduction Act passed in 2017 applies from April 3. The legislation should be a big step forward in ensuring that more people get help earlier but despite a recent announcement on funding there are still well-founded concerns about whether councils have the money to implement it.
  • Claimants already getting housing benefit who move on to universal credit will from April be paid an additional two weeks of housing benefit. That may not be much consolation for the (in theory) five-week wait for their first universal credit but the payment (worth an average of £233) should ease the transition a bit –and it is not recoverable.
  • It will be unlawful for landlords to give new tenancies on the least energy efficient property from April 1 – all rented property will have to qualify for at least an Energy Performance Certificate rating of E so (in theory) tenants will no longer be stuck paying high heating bills for the worst F and G property.
  • More measures introduced against rogue landlords in the Housing and Planning Act 2016 come into force, including powers for councils to issue banning orders against the worst offenders and implementation of a database of landlords and letting agents convicted of some offences.

Bear in mind too that it’s not so long ago that I would have been writing about plans to apply a Local Housing Allowance (LHA) cap to social and supported housing from…April 2018.

For all that good news, though, the suspicion remains that it will at best mitigate the impact of policies already implemented and still in the pipeline.

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