Loans, homes and infrastructure
Posted: October 25, 2019 Filed under: Council housing, Housing finance, Uncategorized | Tags: Public Works Loans Board, Treasury Leave a commentOriginally posted on October 25 on my blog for Inside Housing.
The row over the hike in the interest rate for borrowing from the Public Works Loans Board (PWLB) is important in itself but it also raises a more fundamental point about social housing investment.
The rate increase imposed by the Treasury earlier this month seems to have been sparked by concern about councils investing in shopping centres rather than homes, which is ironic given that their rationale is to find new revenue streams to compensate for Treasury-imposed austerity.
However, it reinforces the impression that the government still does not trust councils to invest wisely in housing or anything else.
That view goes way back to 1979, of course, and the borrowing and spending controls that the Thatcher government imposed on council housing along with the right to buy.
But it also recalls the way that the government finally introduced self-financing in April 2012 but accompanied it with caps on borrowing and then undermined their business plans by imposing the 1% a year rent cut from April 2016.
Now, just at the point when research by Inside Housing reveals that councils are ready to scale up their housebuilding, the beancounters have struck again.
Help to Buy and wider housing policy
Posted: September 18, 2019 Filed under: Help to Buy, Housebuilding, Uncategorized Leave a commentOriginally 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.
Bigger questions lie behind public land failure
Posted: July 24, 2019 Filed under: Affordable housing, Housebuilding, Land, Public land, Uncategorized | Tags: Public accounts committee Leave a commentOriginally published on July 24 on my blog for Inside Housing.
The government has wasted a ‘once-in-a generation opportunity’ to tackle the housing crisis by failing to develop a strategy for disposing of public land.
That’s the damning verdict on the much-vaunted Public Land for Housing Programme from the Public Accounts Committee (PAC) this morning (Wednesday).
The MPs find that by 2020 the government will have sold land for just 69,000 of the 160,000 homes it promised in England between 2015 and 2020 – and even that estimate relies on some heroic assumptions about progress over the next 12 months.
A second target to deliver £5 billion of receipts from the sale of surplus public land over the same period will be met – but only because of the £1.5 bn sale of Network Rail’s railway arches in February that was not part of the original programme.
When you consider that is happening in the middle of a housing crisis and in the wake of an austerity drive that has been closing public services around the country, that is an abject failure.
And those headline figures only tell part of a story that has an ever bigger failure to deliver affordable housing at the heart of it.
The betrayal of the Addison Act
Posted: July 22, 2019 Filed under: Uncategorized Leave a commentOriginally published on July 22 as a blog for Inside Housing.
As we celebrate the centenary of what was effectively the birth of council housing in 1919, it’s also worth remembering what happened just two years later.
Christopher Addison was the minister of health in the post-war coalition government of 1919 and it fell to him to deliver on the promise made by the prime minister, David Lloyd George of ‘a country fit for heroes to live in’.
The Housing and Town Planning (or Addison) Act that received Royal Assent 100 years ago this month (I started the celebrations early) was the landmark legislation that established the principles of council housing and also set out housing’s role in the wider health and wellbeing of the country.
As the King’s Speech put it in April 1919: ‘It is not too much to say that an adequate solution of the housing question is the foundation of all social progress.’
As seen at the time, especially by Addison himself as a surgeon before he became an MP, that housing question started with the consequences for health of the insanitary conditions and overcrowding suffered by millions of people.
The Addison Act provided generous subsidies for new council homes but it also set a framework that ensured that slum landlords did not profit from slum clearance.
Yet just two years later, in July 1921, the housing programme was abruptly scrapped. Only 213,000 of the promised 500,000 homes were delivered and central government assistance to replace and improve slums was reduced to a grant of just £200,000 (around £11m in today’s money) for the whole of Great Britain.
Housing in the Tory leadership contest
Posted: June 21, 2019 Filed under: Housebuilding, Land, New towns, Right to buy, Section 21, Uncategorized | Tags: Boris Johnson, Conservative Party, Jeremy Hunt Leave a commentOriginally 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.
The long-term cost of Help to Buy
Posted: June 13, 2019 Filed under: Help to Buy, Housebuilding, Uncategorized | Tags: National Audit Office Leave a commentOriginally 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.
Pensions for property is still a bad idea
Posted: June 4, 2019 Filed under: Home ownership, Pensions, Uncategorized | Tags: James Brokenshire Leave a commentOriginally 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.
