Housing in the Tory leadership contest

Originally posted as a blog for Inside Housing on June 19 – updated June 21. 

Beneath the surface of a Conservative leadership battle dominated by Brexit and Boris Johnson there is a battle of ideas about the future direction of Conservative housing policy.

Put at its simplest, the battle is about whether to continue in the pragmatic direction signalled by Theresa May since 2016 or go back to the more ideological one taken by David Cameron before then.

But scratch a little deeper there are more fundamental debates going on about how far to go in fixing a housing market that most Tories agree has turned into an electoral liability for them.

Key questions such as how far the government should go in borrowing to invest in new homes and intervening in the private rented sector and the land market are back on the Conservative agenda.

Read the rest of this entry »

Advertisements

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.

Read the rest of this entry »


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.


Freezing out ‘No DSS’ landlords

Originally published on March 5 as a blog for Inside Housing.

The way that responsibility for housing is split between different government departments means that sometimes the left hand does not know what the right hand is doing.

The classic example of this came in parliament yesterday when even as MPs were approving another year of frozen working-age benefits, the housing secretary was making a written statement attacking landlords for refusing to let to tenants on housing benefit.

The vote means that the local housing allowance (LHA) will be frozen for the fourth year in succession and the benefit cap will stay stuck at the reduced rate of £20,000 (£23,000 in London).

The impact of that will fall directly in the ‘thousands of vulnerable people and families’ mentioned by James Brokenshire in his written statement and will be felt most by families with children and those living in the most expensive areas.

And it will come on top of the continuing impact of the transition to universal credit and all the problems with waiting times, delays in payment and supposed simplicity for tenants and landlords that it brings in its wake.

If it reinforces the sense of relief among social landlords that the government abandoned plans to cap housing benefit for social and supported housing at LHA rates, it means many social tenants face a freeze on the rest of their incomes despite rising prices.

But the freeze will give private landlords yet more reasons to think twice about letting homes to tenants on benefits.

And the move by the Department for Work and Pensions (DWP) comes at precisely the moment that ministers at the Ministry for Housing Communities and Local Government (MHCLG) give their backing to a campaign by Shelter on ‘No DSS’ adverts.

Read the rest of this entry »


Coping with climate change

Originally published on February 21 as a blog for Inside Housing. 

Remember when England was going to lead the world on zero carbon homes?

Three years after that was meant to happen, a report published today (Thursday) by the government’s independent advisor on climate change reveals that instead we are going backwards.

The Committee on Climate Change (CCC) warns that ‘UK homes are not fit for the future’, with progress stalled on reductions in greenhouse gas emissions and efforts to adapt the housing stock falling far behind the risks posed by higher temperatures, flooding and water scarcity.

Improving the quality, design and use of homes will not just address the challenges of climate change, it says, but save people money and improve health and wellbeing, especially for vulnerable groups like the elderly.

Many of today’s headlines were generated by its recommendations that would mean no more gas boilers and hobs, with no new homes connected to the gas grid from 2025 .

However, the report as a whole has multiple and far-reaching implications for new and existing homes if the UK is to meet its legally binding target to reduce carbon emissions by at least 80% of 1990 levels by 2050.

Read the rest of this entry »


Parker Morris and Homes for Today and Tomorrow

Originally posted on February 19 as a blog for Inside Housing.

Listening to a new Radio 4 documentary about Parker Morris and space standards it is impossible not to feel a mix of nostalgia for an era of housing optimism and sadness that our ambitions have shrunk so much since.

As John Grindrod relates in Living Room, the title of the 1961 report was an indication that it was about much more than just a technical exercise in allocating space per person.

Work on Homes for Today and Tomorrow started 60 years ago this year but it was building on a 20th century council housing tradition that began 100 years ago and it was also looking to the future to ensure that homes were fit for it.

‘A good house or flat can never be made out of premises which are too small,’ said the report, which set out a much greater ambition for new homes:

‘An increasing proportion of people are coming to expect their home to do more than just fulfil the basic requirement. It must be something of which they can be proud and in which they can express the fulness of their lives.’

Read the rest of this entry »


Shrinking homes to fit

Originally published on January 23 on insidehousing.co.uk.

Shrinkflation made the headlines this week as government statisticians highlighted the way that food manufacturers reduce the size of their packets rather than put up the price of their products.

Most commonly seen in bread and cereals, it means you now get 10 Jaffa Cakes where you used to get 12.

But another news story got me wondering about whether the same thing could happen in housing.

Micro-homes could solve London’s housing crisis,’ said a BBC headline based on a new report from the Adam Smith Institute.

Read the rest of this entry »