Budget misses its ‘housing moment’

Originally written as a column for Inside Housing.

It was meant to be a ‘housing moment’ that would make a home ownership-based pitch to younger voters.

That was the line briefed repeatedly to the Sunday papers in the run-up to a Budget that will probably be the last before the next election with the Conservatives 20 points behind in the opinion polls.

On new homes, chancellor Jeremy Hunt did have some minor funding announcements for specific schemes that seemed to stretch the definition of ‘levelling up’ to include Cambridge and Canary Wharf. He also boasted that ‘we are on track to deliver over one million homes in this parliament’ without mentioning the more ambitious manifesto target of 300,000 new homes a year.

The ‘moment’ was never going to be about social housing or homelessness. There was a small relaxation of the rules on using capital receipts by local authorities and a six-month extension of the Household Support Fund, but the Budget included none of the measures called for by Matt Downie of Crisis in his piece for Inside Housing last week.

Worse still, the Budget constrains the options for the spending review that will follow the election even further.

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Taxing questions

Originally written as a column for Inside Housing.

Around £50 billion worth of austerity looks inevitable in next week’s Autumn Statement but it remains to be seen how chancellor Jeremy Hunt will strike the balance between spending cuts and tax rises.

Even if recent reports that suggest he will increase benefits and pensions in line with prices prove to be correct, there are still big questions over local housing allowance (still frozen despite rising rents) and the benefit cap (which will catch thousands more tenants if the thresholds stay frozen) and housing budgets already eroded by inflation look vulnerable to cuts in capital spending.

On tax, the stamp duty cut was one of the few measures proposed in the mini-Budget in September that has survived the demise of Liz Truss and Kwasi Kwarteng. So far at least.

But there has been very little debate about where the tax burden should really fall, and in particular about the balance between taxes on income and taxes on wealth.

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Austerity all over again

Originally published as a column for Inside Housing.

Austerity is back. The mess left by Liz Truss and Kwasi Kwarteng will have to be cleaned up, constraining the options for Rishi Sunak and for whoever wins the next general election.

But there is nothing that says Austerity 2.0 has to be a repeat of the 2010s. Treasury orthodoxy is in charge again but there are always political choices.

David Cameron and George Osborne chose to prioritise cuts in public services and benefits over tax rises but that will be more difficult for a prime minister taking office at a time when those services are collapsing and benefits are already close to destitution levels.

And there is one more crucial difference this time around: in the 2010s austerity was accompanied by record low interest rates that slashed mortgage payments for millions of home owners and buy-to-let landlords.

The benefits flowing to anyone with a mortgage – and to existing owners as house prices rose – help to explain why the Conservatives have won four elections in a row. 

But Austerity 2.0 arrives just as mortgage rates are rising and just as the prospects of a housing market downturn are shifting from likely to inevitable.

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Kwarteng’s plan causes growing pains

Originally written as a column for Inside Housing.

So, after 10 years of redistribution and socialism under David Cameron, Theresa May and Boris Johnson, now we know what a proper Conservative government looks like.

The biggest package of tax cuts seen in 50 years will cost a cool £45bn and overwhelmingly benefit the highest earners: someone on £1m a year will be around £55,000 better off next year.

The benefits get progressively smaller the less you earn: someone on £20,000 a year will gain just £218 while someone on £200,000 will gain £4,333.

And there is nothing so far for the very poorest: no more help for renters and no boost to Universal Credit.

Instead around 120,000 claimants face having their benefits cut unless they find more part-time hours from January.

There may be some announcements still to come in an actual Budget to follow this Growth Plan, including vital decisions on whether to unfreeze Local Housing Allowance and the benefit cap, but the contrast could hardly be more stark.

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The £3 trillion question

Originally written as a column for Inside Housing.

It has so many zeros in it that it’s worth writing it out in full: £3,000,000,000,000.

That’s the increase in the housing wealth of British households since 2000, according to new analysis from the Resolution Foundation. Perhaps even more remarkably, as the graph below shows, around half of that has been (un)earned since 2012, in the wake of a Global Financial Crisis that seemed set to bring the whole market crashing down.

The distribution of all that housing wealth has been startlingly unequal. Londoners gained almost four times as much (£76,000) as those in the North East (£21,000) and the over-65s eight times as much as 30-34 year olds and more than three times as much as 35-39 year olds.

Where the least wealthy third of households gained less than £1,000 per adult, the wealthiest 10 per cent chalked up an average gain of £174,000.

Needless to say, the gains for anyone who has remained a social tenant or a private renter are zero and zero – and less than zero for leaseholders unlucky enough to be stuck in unmortgageable and unsaleable flats.    

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Fixing social care by protecting property wealth

Originally published as a column for Inside Housing.

Boris Johnson has broken all kinds of election promises in his announcement on health and social care levy but for housing purposes there is one pledge remains front and centre.

Amid the wreckage of the triple locks on pensions and tax rates, it’s a survivor of the sunlit days of July 2019 when the new prime minister stood outside Number 10 and said: ‘My job is to protect you or your parents of grandparents from the fear of having to sell your home to pay for the costs of care. And so I am announcing now on the steps of Downing Street that we will fix the crisis in social care once and for all with a clear plan we have prepared to give every older person the dignity and security they deserve.’ Note the order of priorities.

It was there too in the Conservative manifesto in December, even though the ‘clear plan’ had become a somewhat vaguer aspiration for a cross-party consensus.  The significant bit came next (with original emphasis): ‘That consensus will consider a range of options but one condition we do make is that nobody needing care should be forced to sell their home to pay for it.’

And it’s there front and centre in the plan announced this week for a new £86,000 cap on the amount that anyone in England will have to spend on their personal care costs.

There are still some big caveats to mention – not least that the cap does not include accommodation costs and that social care comes after the NHS in the queue for cash – but the net effect should still be that people get to keep far more of their housing wealth and pass it on to their children and grandchildren.

Yet when we consider the details of the Health and Social Care Levy that will pay for it all, it’s striking that one category of assets and income is left completely untouched.

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Tackling the blight of second homes

Originally published as a column for Inside Housing

As the staycation summer starts to draw to a close, spare a thought for everyone living in the places where the rest of us have been on holiday.

Coastal areas and beauty spots in the countryside are well used to tourists but this year has really brought home the impact of second homes, holiday lets and relocating buyers on housing for locals.

On the beach on the  Llyn peninsula in North Wales, the message is Hawl i Fyw Adra (the Right to Live at Home) while demonstrators have scaled the country’s highest mountains to protest that Nid yw Cymru ar Werth (Wales is not for Sale).

In the South West of England, there are persistent reports of Londoners snapping up homes they’ve seen online without even viewing them in person and of tenants being evicted to make way for lucrative holiday lets.

House prices beyond the reach of local wages and rents inflated by holiday lets have long been features of the market but a new development this year is an acute shortage of any homes for rent, let alone affordable ones.

A quick search on Rightmove for my home town in Cornwall reveals just four rentals listed all summer – a studio flat, two bedsits in an HMO and a retirement flat.

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Guarantees, cladding and the housing market

Originally published on April 20 on www.insidehousing.co.uk.

The housing market is at a frenzied record high as house prices rise by more than 2 per cent in a single month.

Just the moment then for the government to step in with a scheme to guarantee 95 per cent mortgages for anyone who thinks they have to climb the ladder before it disappears out of reach.

The house prices in question are only asking prices as recorded by Rightmove but the £6,733 average increase between March and April reflects a rush to beat the end of the stamp duty holiday and demand for more space from people who have done well during the pandemic.

It’s now 13 months since the start of the pandemic and, to pick another measure, house prices are up by around £16,000 or more than 7 per cent since then, according to the Nationwide.

Prices initially fell amid the economic uncertainty but surged again on the back of the stamp duty holiday introduced by chancellor Rishi Sunak last July and then extended in March.

The overwhelming beneficiaries are people who already own homes who have been able to sell them for higher prices that now wipe out the stamp duty savings for most buyers. For all the rhetoric about helping people on to the housing ladder, few first-time buyers saved much in stamp duty and all now face having to spend considerably more in total.

The mortgage guarantee scheme, essentially a rehash of one part of Help to Buy, should help them by addressing a genuine problem with the supply of high loan-to-value mortgages.

However, lenders are cautious. The Financial Times reported on Saturday that the largest banks are refusing to lend on new builds under the scheme and that they may also charge higher rates and apply stricter affordability criteria.

From their point of view that makes sense to guard against falling prices, especially when they factor in the new-build premium that adds around 10 per cent to the cost of a new home. .

And the benefits look dubious for first-time buyers too. Based on the Nationwide index, a 95 per cent loan on home at the current average price would be £220,000 – more than the total price was when the stamp duty holiday was first announced.

None of this makes any sense and yet, in an under-supplied and under-taxed housing market fuelled by credit and low interest rates, somehow it does.

As memories fade of the housing market crash of the early 1990s and the downturn after the financial crisis, the logical next step would be a relaxation in affordability checks on mortgages to allow loans at larger income multiples, ignoring the lessons of the 2000s and the economic headwinds that could lie ahead as furlough ends.

But all of this is happening at the same time as the entire market for recently built flats remains mired in the continuing fall-out from the fire safety crisis.

Inside Housing reported on Friday on cases of leaseholders buying flats on the basis of External Wall System (EWS) form declaring that their cladding was safe only for new inspections to decide that it must be removed.

One buyer purchased a £350,000 flat rated A1 and safe in February only for the EWS to be downgraded to B2 just 34 days later. That made her flat worthless and left her facing costs for waking watch and cladding remediation.

If the EWS rating can be changed at the drop of a hat like this, why would anyone risk buying a recently built flat?

The government has grudgingly and in stages committed a total of £5.1 billion to fixing the cladding crisis so far and it has announced some welcome reforms to leasehold.

But leaseholders in buildings below 18m are only eligible for loans and help does not apply to other fire safety problems, leaving a significant chunk of the housing market in limbo.

The fact that at the same time the government has spent £5.4 billion on the stamp duty holiday says it all about where its priorities really lie.   


We need to talk about tax reform

Originally published as a column for Inside Housing on November 12.

When the pandemic is eventually over, one of the big political questions will be how the  government will go about recouping the huge sums pumped into keeping the economy going.

Chancellor Rishi Sunak told the Conservative conference that he believes it is his ‘sacred duty’ to balance the books. Even before the costs of the second wave, a document leaked from the Treasury in May suggested that tax rises or spending cuts equivalent to £25-£30 billion would be needed.

However, Mr Sunak is boxed in by manifesto promises not to increase income tax, VAT and national insurance and not to scrap the triple lock on pensions.

Cutting public spending will not be easy either. If anything the pressure will be the other way as the government looks to implement its levelling up agenda.

That applies even to the depressingly familiar remedy of cutting benefits, with calls for temporary increases in universal credit and local housing allowance to be made permanent set to grow as unemployment rises.

However, housing could still be a key battleground when it comes to tax and areas not covered by those manifesto promises. So far, it’s been another cost to the Treasury, with the £3.8 billon earmarked for the stamp duty holiday, but sooner or later attention will turn to the other side of the ledger.

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The problems with Johnson’s housing priorities

Originally written as a column for Inside Housing on October 6.

You are prime minister. You have £5.8 billion to spend on housing. What do you do?

Before you answer there is a catch. You are a Tory prime minister. So this has to be all about home ownership.

This is not about the Affordable Homes Programme either – although the modest increase in that is tilted towards home ownership too.

You may have guessed by now that this is about decisions already taken by Boris Johnson’s chancellor Rishi Sunak, decisions that are looking worse and worse the more time goes on.

That thought was prompted by the only ‘new’ idea that I’ve seen emerging from the Conservative Party conference: a plan to create ‘Generation Buy’ by encouraging low-deposit mortgages to help young people on to the housing ladder.

The idea revealed by Mr Johnson in a Telegraph interview on Saturday is not especially new – essentially it’s a rehash of the mortgage guarantee part of Help to Buy and it harks back to the days when Gordon Brown wanted to encourage long-term, fixed-rate mortgages – and it seems to be inspired by a report published by the Centre for Policy Studies last month.

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