Housing: weak

There are plenty of times to talk about housing. Some of my friends and close relatives wished I talked about it less, especially when I am holiday. Yet here we are. I’m typing this on a sofa in our holiday cottage, hoping that the bairn stays asleep for long enough for me to finish it.

I didn’t choose for the social housing green paper to be published when many people are on leave or looking after children. I would have been much happier if they had published in the spring, as previously indicated, or even before the summer recess as latterly promised. I even prepared mentally for the last couple of days before the summer recess/ school holidays (Ms Lattepapa being a teacher) to bash out a reply. But here we are.

You might have to ask yourself why government waited until the quietest time of year to publish the paper. We certainly did, although all the changes of Secretary of State and Housing Minister made it possible that different sets of approval were being sought and ministers brought up to speed. It was also possible that they were fighting to get changes from the Treasury, something I have already talking about being occasionally difficult. But the more cynical thought perhaps it would be a disappointing document, particularly compared to the Labour green paper, which I have previously written about. And so it is here and you most likely agree it is a disappointment.

I know I’m late to this and that most people have already published their accounts, so I’m going to assume most people know the key measures announced and talk through what I think this means.

The paper was promised following the fire at Grenfell Tower and that social housing tenants lost their lives through what seems like avoidable causes. Of course separate proceedings are taking place to this paper to look into the causes of the fire and we are yet to see whether any criminal proceedings will follow. A key message the government told us they had heard was that social housing tenants needed to be treated with dignity and more respect. It was supposed to look at this and whatever it achieves or does not achieve should be measured against this.

But this focus on the dignity for current social housing tenants shouldn’t become placed at odds with the need for more social housing. To create dignity for social housing tenants you need to create more social housing tenants and make it something people can have for life. I’ll put that another way, for decades politicians and society at large have given explicit social cues and financial support for social housing tenants to buy their properties when they had a moderate income. Living in social housing has gone from something different groups of people may expect to do for their entire life to something that must be escaped from at the earliest possible point. At the same time, the lack of determined building of social housing means the overall number has reduced. Only the most needy are allocated homes and they stay in them; either until their circumstances change dramatically and they can buy them, or forever. The ‘forever’ group are seen as the most lamentable, with society seeing permanent accommodation in social housing (and certainly on an estate populated by people predominantly living in social housing) as either failures or failed by society.

So when we talk about dignity we also need to talk about the dignity of social housing tenants as a community- with shared life experiences and an ability to move through life and still be connected. Which is why tinkering with right to buy to, at best, replace homes 1 for 1 is about dignity. If you see homes around you being bought up and you cannot afford to do the same you will feel marginalised and like a failure. Your community will crumble before your eyes- you will see yourself as society sees you- someone who cannot get on.

Which is why using the fact that many people in social housing would like to be owner occupiers as a reason to continue sales of council homes is bottom-backwards. Governments help make society and they have certainly made property owning democracy. If they are serious about treating social housing tenants with dignity then they need to be thinking about how to stop reducing the number of real social housing units, whether through right to buy, linguistic wheezes like the definition of “affordable” homes or through large scale regeneration of existing estates that is predicated on the bottom line rather than the number of social housing units that be made. Make social housing something people want to live in for the rest of their lives and are able to live in for the rest of their lives. Yes that is about design and customer relations, but it is also supply and policies designed not to move people out quickly.

Conversely, the need to prevent social housing from being a temporary and unsavoury experience is why the u-turns on both fixed tenancy length (be a social housing tenant until your circumstances have improved) and high value homes (being a social housing tenant means living in a cheap house in a cheap area) are good things. But here we hit the next point the most positive changes in the paper are reversing policies legislated for or implemented since 2010.

This is true for the two changes above, having a monitor for social housing (hooray for the return of the Tenant Services Authority or similar) and even having a national focus on tenant empowerment (doubly hooray for the return of the National Tenant Voice or similar!). Even more so getting rid of the terrible “democratic filter” designed to turn MPs and Councillors into some sort of notary public for housing complaints. So what we really have is a set of u-turns and walking away from policies that have been on the statute books but unimplemented for a few years. All that is good, but not the same as actually doing anything new and positive. In a way it is a return to the Major-Blair-Brown consensus: talk positively about social housing but do very little to create new supply. Plus bunting. You’ve got to have bunting if you want to be the best neighbourhood.

At its most techy this is exemplified by the already announced measure of councils being able to increase rents by CPI+1%. This is better than the rent cuts that had been forced on the sector, but still means there will be significant rental diversity out there between different areas, often based on how much they frontloaded rental convergence when that was still a thing.

Whilst we are on payments to landlords, the intensely milquetoast section on universal credit, a whole 2 paragraphs of telling us what they’ve already done, doesn’t begin to explain why people are worried about this benefit. Tenants are worried because managing a low and changing income is intensely difficult, particularly if you have any deductions or work hours that change. Landlords are worried because all of this means tenants may struggle to pay their rent and they’ll have to run around trying to either help them through a tough spot or make arrangements to repay.

I’ll put that another way, if social landlords need to assume that each and every working age tenant will, at one time or another, be 8 weeks in arrears (the amount usually needed to set-up direct payments) then it will have to amass large revenue reserves. This means putting less money into capital spending and, therefore, making fewer non-urgent repairs, not looking after communal areas so well, choosing not to put their own money into building and so forth.

Funding community housing is positive, but the question must always be about where the money is coming from. If it is cash that would have been spent on social housing then this is a much harder decision. Similarly, worrying about the organisational capacity of some tenant management organisations (Kensington and Chelsea TMO was the landlord of Grenfell) but simultaneously mulling giving more power to collective community or resident-led groups has an air of circularity to it. Rather than focus on a patchwork of small landlords with an occasional community focus I’d rather time is spent improving the organisational capacity of larger landlords, including in community building. This probably won’t be a popular view, but if it is about using scarce resources then it is my preference.

Making grant funding partly dependent on tenant satisfaction is a sensible bit of tinkering. But it is only that. There’s no new money or ataboys for the sector as a whole increasing satisfaction, just a slightly bigger piece of the pie for those who, all other things being equal, can do it better. And slightly smaller bit of the pie who don’t.

Finally, I don’t think the government have thought through the proposal to buy your house 1% at a time. Making lots of people very small shared owners is full of dangers in the current shared ownership system. Will people be liable for repairs if they own 1%? Will they have liabilities for water running under their house? Some wags have already worked out that owners of 1% would not be liable for the bedroom tax- surely that’s been considered somewhere? Shared ownership doesn’t work for everybody- under the current rules I would be very cautious about advising anyone to do it (my advice would be to seek more expert advice!). Trying to pretend it is right to buy via hire purchase is simply worrying.

There is plenty more little changes (or, actually, proposals in the consultation) in there; these are just the ones I think are worth pulling out and expanding in more detail. But they are mostly little changes. Most social housing tenants won’t have heard about this green paper and I doubt any of them will ever really feel any benefit from it. It’s a return to situation normal after 8 years of utter nonsense being thrown at them. That’s good, but it isn’t good enough.

Po-tay-to Po-taa-to, Letwin’s latest

Housing reports coming from all angles- how can a naptime blogger cope? Well, if you’ll let me, I think I will concentrate on the recent update from the Letwin review (or “build out review” as it is now apparently named). This is because it is the one commissioned by government and so the one with the highest potential for serious reflection from them.

If you’ve read my previous post on the launch of the review, you’ll know that my main concern was that we already had a welter of reports, reviews and recommendations from industry insiders, academics and politicians. What I would argue we haven’t had is the political will to redress the balance of power and financial flows between the different groups of people who are involved in the process, whether that is landowners, developers, housebuilders, prospective owners, prospective tenants, local communities or so on. This doesn’t mean that the state is being neutral, merely that it was not yet willing to actively change the existing rules; benefitting those who are already benefitting at the cost of those who were not.

So what is the latest from the review and what policies does it mean he might be coming out with in the budget? Is there a sea-change on the horizon or am I mixing my metaphors?

Sir Oliver has been to see some larger sites, including spending a trip visiting three locations in Cherwell. Indeed, outside the Ledsham Garden Village in Cheshire and a statistically fruitless trip to Solihull, the furthest north he went was Cambridge. I’m not one for drawing a random north south divide on a map, but that is pretty stark, justified by the draft report on the notion that the south east has the highest demand for housing.

There is a growing argument that different areas have different issues with regard to housing. What happens in London or South Oxfordshire might be different from what happens in Manchester, Bradford, Oldham or Gateshead- and they might even be different from each other.

Even with the same planning system issues relating to housing and land supply, skilled labour, incomes, access to financing (both for builders and prospective buyers) and so on will make a difference. The local planning system, especially as it is dependent upon supply (even more so if the housing delivery test comes in) makes this even more difficult to unpick. So staying almost wholly within spitting distance of London may make his statistical findings a little specific and mean he may have missed something going on elsewhere.  A big elsewhere, like almost all of the midlands and north.

Indeed, Sir Oliver is now fixed on the idea of looking almost wholly at improving delivery speeds larger sites. He’s been engaged in some pretty strong mythbusting- deciding that issues like utilities, most skilled trades and finances may make some difference, but they are not fundamental to slow build out rates. He has also batted away the suggestion that developers sit on sites with planning permission without building- holding sites as an asset to be sold rather than where they will build in the fullness of time.

Whether that means Sir Oliver has disproven (not at last, but once again) land-banking is taking place something else entirely. Indeed, he tries to unpick this, but it is understandably difficult because what people call “land-banking” is so flexible and fudgey that it can mean everything and nothing. I’ve had a quick check and I haven’t used it on this blog before now, despite writing quite a few times on housing supply issues and strongly on the actions of developers. It simply isn’t a helpful term because it is used so loosely. There’s a strong argument to be made that titles are swapped around before planning permission is given, but Sir Oliver feels that this is outside of his remit.

What Sir Oliver is convinced upon is that developers drip feed homes into the market in order to hold the price of properties level. This, he argues, is because they have paid for the site based on the current market rates for selling the eventual properties and need to recoup their money and expected profit levels. Call that land-banking or don’t, it is developers using the tools at their disposals to make a profit.

Without getting overly-detailed Sir Oliver is arguing that the current method of site valuation leads to the outcome of slow build out rates. If developers increased supply they would decrease prices, make less money and perhaps fail to break even. He also argues that a lack of diversity of both design and tenure means that builders are only working in one market (broadly: high value, repetitively designed, large-ish homes for sale) which means their actions affect this one small part of the wider economy.

I can happily agree with almost all of that. I’m not wholly convinced that increasing supply necessarily reduces price in the current housing market- it is a lot more complicated than a couple of intersecting curves in a perfectly competitive market. There’s a lot of pent up demand to get through first and people tend to borrow what they can (based on their deposit and lending rates) and bid based on what they can borrow. But here’s the thing, one person who is convinced of this is Dominic Raab, the Minister of State for Housing. He keeps referring to housing affordability and the panacea of increasing supply of housing for sale to resolve this. So is Sir Oliver advocating to change the method of valuation? Er, no.

Here we cut back to my concern from the earlier post– there seems to be an explicit worry that impacting on developer’s business cases (at least for their current homes) will send huge shockwaves through the economy. We have to accept this is possible, but we also have to consider if proposing to pay £110 million bonus to a single person is a sign of a well functioning economy? Is rebalancing away from a system with so much stacked in one direction so bad? I’ll put that another way, Sir Oliver seems intent on -at least in the short run- trying to improve build out rates whilst not significantly changing the existing relationships and hierarchies between those involved.

How likely is this to be successful? Well, that will depend on the policies he comes out with for the budget. The focus seems to now be on diversifying large sites. Not splitting them up, but making them able to attract a range of tenures and making more attractive, less cookie-cutter developments.

This weeks Onward report seems to be opening the door to much wider collective work- with councils taking a strong role in joining up the dots in large scale development. There is a sense I get from Sir Oliver’s report and the interviews he gave over the weekend that he may be minded to suggest something more collective in the long run- at least for very large sites. What that might be remains to be seen. It would most likely be welcome, but trying to square the circle of increasing delivery whilst defending builders margins may be impossible. On what side he falls could make the difference between a change and none.

It very positive to see Sir Oliver talking so openly about the role of social housing and the very high demand for this across the country. Clearly, somehow separating the speed of delivery of social homes from the slow delivery of market housing would be of huge benefit, both for society and general house building. How this is achieved is quite another matter, in particular if there is a wish not to see enclaves of social housing separate from the rest of a site. Local plans (or indeed government guidance) could have set percentages of different tenure types, with design matters being even more strongly part of local authority decision making. (Yay more long planning committees about brick finishes!) How likely this is to make any positive change will actually come about in appeal decisions. If the quantum of new homes outweighs any design or tenure issues -which is often how appeals decisions can be perceived- then it is more words for little effect.

One way to try and achieve additional quickly built social homes could be allowing the part payment of the Community Infrastructure Levy (or indeed a similar development tax) to be in land (valued at existing use) or completed properties (valued at affordable rates). Developers could pass over a section of the site to be built by the authority- or indeed sold to fund housebuilding elsewhere.

And finally, how much of this actually coming about is wholly dependent on quite a few different political processes. Will the current government still be here for the Autumn budget? Will legislative changes be passed given the amount of parliamentary time needed for Brexit? Will developers see whatever proposals coming forward as a threat to their margins, even if Sir Oliver has specifically designed them not to be? How in favour are developers right now? Will there be the focus and drive for accelerating delivery when it comes to the crunch? How will any changes to social housebuilding dovetail with the social housing green paper?

I have at least one comforting thought- land is the one thing that cannot really be taken off shore.

Universal creditors

It has been another terrible few weeks for the ministers and civil servants at the heart of the universal credit debacle, what with the release of the NAO report into the roll out, their own full service survey and the legal case which showed that they were discriminating against severely disabled people who moved between areas during the roll out period. I’m trying not to shed a tear, but it is pretty hard. Not for the politicians and civil servants, you understand, but for those on the receiving end of the clearly failing benefit.

There are plenty of reasons for this failure- the reports I have already linked to have more than enough detail, but to fully understand why this is so damaging (and to get some wider context into people’s lives rather than simplistic models often used by government) then you need to look no further than the JRF’s 2018 report on destitution in the UK.

Rather than rewrite a very sensible report, I want to try and unpick why people claiming universal credit might find themselves destitute in a bit more detail. If you want, all I’m doing here is fleshing out a couple of sentences closely and with some examples. Crucially I want to point out that this isn’t just “shocks” but in many ways the general running of the benefit that can lead to a spiral of debt and destitution.

The starting rates of universal credit are myriad, but a single person over 25 has a personal allowance of £395.20 a month, with any elements (including the housing element) paid on top. That’s £73.34 a week, roughly equivalent to other means tested benefits.

Private renters may find that their housing element doesn’t cover the rent, if this is seen as “too high” (ie. above the 30th percentile) in the area. Most under 35 year olds will be particularly hit by this, as they can only claim for a room in a shared house, no matter what their actual living circumstances are (or where they can reasonably move to). Social tenants will find their housing element may be reduced if the are seen to have a “spare” bedroom under the much loved bedroom tax. Homeowners will only be able to claim an interest only loan to cover some of their mortgage interest costs.

I’ve written elsewhere about the lack of a severe disability premium in universal credit. Needless to say, compared to the previous benefits system, those who live by themselves who have care needs are going to be significantly worse off.

As you can see, before we even get to the nitty gritty of people’s lives, the amount they receive is at or below a subsistence level. Those subject to the bedroom tax or living in higher rental properties (often because that was what was available when they moved and they could afford it) will be struggling to make ends meet from their remaining income.

So, let’s start at the beginning of a claim: the NAO report shows that 60% of people who claim universal credit also claim an advance. This is a loan from the DWP, that has to be repaid over the next 12 months (it used to be 6, but the government increased it last year following public outcry).  The NAO also stated that the average advance are around £43 a month, so that comes off before payment is made.

Of course the size of the debt (and therefore the size of repayments) is based on how long the household had to wait for the benefit. So it is worth pointing out that the NAO is expecting up to 338,000 households to be paid “late” (at the end of the first month-long assessment period) in 2018. So this is well over a month of having to rely on a DWP loan (or other begging/ borrowing) for a very large number of households.

Then payments get going, claimants might be paid in arrears, but they’ll spend it when they have the money. Payments will usually be based on the last month’s income (although woe betide anyone on very variable earnings subject to the surplus income rule) so what people get in one month and what they need in that same month may be two different things.

If people pay the rent (including any surplus bedroom tax or amount above the local housing allowance) then the money left after deductions and after rent may not be enough to see them through the month. They may be flush at the start, but even very careful spending is going to make the last weeks very difficult. So whilst the headline rates of universal credit may allow for a subsistence existence the sheer act of going through with the claim could be enough to push the household into destitution.

One way out of that trap, to smooth the curve, at least in the short run, is debt. Debt can happen in many ways- some less active than others. Households might not pay all of the rent. They may take out a short term, high cost loan. They might not pay their bills (those that they can not pay- prepayment meters abound).

They may get help from family or friends- a form of social debt. The ebb and flow of universal credit payments may mean that such support is reciprocal- if you’ve just received your payment and someone who loaned you £30 a week ago needs help, would you say no because you’ve got to get to the end of the month? They may also as a last resort look to the less friendly and scrupulous lenders you can find if you really need money quickly.

The other options are of course going without essentials (which is about as clear as destitution can be) or relying on charities or other non-reciprocal social giving.

Any debt taken on of course has to be paid off and if that comes with interest then you’ll have to pay more next month, leading to exactly the same (or worse) situation again in the next month. Give it a few months and reputable organisations (landlords, utility companies, council tax, etc.) can take repayments straight from your universal credit entitlement, meaning at least they get paid, but the amount the household receives gets smaller and smaller and the challenge of making ends meet becomes harder and harder. Just about managing becomes occasionally struggling becomes struggling all the time.

The point I’m trying to make is that whilst the actual allowances for universal credit are arguably slightly above the minimum level, the way that the system works means that households will actually be paid (or have after housing costs) puts them below what they need to fund their necessary expenses. Attempts to even stay afloat in those conditions is destined to make the situation worse in the long run.

This isn’t necessarily about monthly payments, but it is clear that on such a low daily income it is hard to manage a budget over a month. It isn’t also necessarily about paying rent to tenants- but again paying an amount less than their living costs including rent means that they have to make a hard choice-like it or not rent arrears are a choice people make to put food on the table for another week.

It also isn’t necessarily about shocks such as sanctions or payment hold-ups, but these no doubt cause destitution themselves. A sanction is enough to put many people into destitution and even if a hardship payment is authorised this is itself a debt, which has to be paid back- reducing payments when they do return.

So sanctions are one way into the destitution-spiral that can happen under universal credit, but it isn’t the only way by a long shot. According to the survey commissioned by the DWP, only a quarter of people say they do not struggle with financial commitments (a further 2% do not know). The rest, some 73% say that they struggle in one way or another. 35-36% of those surveyed stated that they were in housing arrears.

There is a contradiction at the heart of the DWP’s responses to all this. On waiting for payments they argue that advances are available, and they are- as a loan. On sanctions they argue that hardship payments are available, and they are- as a loan. On ‘extra’ housing costs such as the bedroom tax or above local housing allowance rent they argue (inaccurately, mostly) that people make a choice and can pay for this through their standard allowances. Finally, on payment amounts they argue that they are enough to cover basic living expense- and they possibly are unless there are other deductions, such as loan repayments or payments towards rent.

In very few cases are all of these things true at the same time- indeed, it needs someone not to have the first three for the fourth to be right. And that is why people end up somewhere below the safety net, wondering how the heck to get out.

Khan we fix it everywhere?

Yesterday was a busy day for housing all round, but the happiest news was in the capital; where Mayor Sadiq Khan has announced a huge investment in new council housing. This can only be a good thing, but it is worth looking through what is actually being proposed and, perhaps crucially for anyone interested in housing outside of London, see if this can be replicated elsewhere.

The document, Building Council Homes for Londoners is actually quite readable, for a technical briefing, so if you are interested it is worth having a look through. I will do my best to summarise, but it is rare I can suggest a general reader looking at a document like that, so feel free to.

There are two main legs to the funding side, a not-insignificant block of money (£1.67 billion) given to the capital from the Chancellor in the Spring Statement and an interesting wheeze about right to buy receipts.

Coming to the £1.67 billion first- I know I have mentioned seemingly big bits of money before and pleaded for people to understand them in context. But we can do that a little bit with this- compare this amount to the £2 billion added for all of England earlier this year. I was critical of the size of latter because per area because it didn’t actually amount to all that much. Spread thinly across the country (or even in centered on particular areas) it wasn’t going to amount to a huge amount of extra housebuilding. Plus as it was for both Council and Housing Association house building and it is the government at the end of the day who will be deciding who gets funds and who does not.

The Mayor has been given much more freedom with his (per head) much larger allocation of cash and the announcement yesterday shows how he is going to use it. He is choosing to spend this money unequivocally on Council housing. This isn’t just traditional social rent, but could also be London affordable rent, London living rent or shared ownership. What it clearly isn’t is affordable rent. Housing Associations aren’t completely out of the picture as there is another funding mechanism similar to the affordable housing programme for them to bid for.

In terms of what the Mayor will consider funding with this cash, for rents below the London affordable rent levels he will pay £100k per property. This looks positive compared to the “average” £80k paid under the affordable housing programme (although you’d expect London properties to be above average in that programme). For the other rental or shared ownership schemes he will pay £38k per unit for quick wins (started before April 2020) or £28k per unit for later starts. There is an emphasis on a programme approach, so we are talking about each borough putting in a sizable application and, if the worked example is anything to go by, a mixture of rent types.

So this looks like a more generous scheme than central government’s direct scheme focused on delivering only Council homes. It exists because:

  1. the government has decided to give a large block of capital funding to London
  2. the Mayor has the power to decide what to do with the money
  3. being directly elected he has a strong personal mandate and
  4. he has decided to do something linked wholly to council homes with it.

Without any of these rungs the scheme would not look like this. Other authorities, for example the metro mayor areas, may have the personal mandate but usually any funds they get from government are limited and very prescriptive. Just look at the housing deals announced for the West Midlands and Greater Manchester. They are both having to up their overall housing supply numbers just to get significantly smaller agreements from government and would be unlikely to be allowed to do anything like spend all of the extra cash on council housing.

Non metro-mayor areas (which we do have to remember is the vast majority of the country) will just have to take their share of the affordable housing programme, use up any housing revenue account headroom they have (and any extra they can grub from the government) and try to use up right to buy receipts as best they can.

Which brings me on to the second part of the Mayor’s announcement- the use of right to buy returns. This is a very clever little bit of circulating cash -I won’t go so far as to say laundering it- but certainly relies heavily on London having a different arrangement to the rest of the country.

You’ll probably know the issues relating to right to buy receipts- homes are sold at a discount, the Treasury takes some costs back straight away and, after all this, the money can only be used to fund 30% of a new housing association home. All this and councils have to use the money within 3 years or it disappears off to the Treasury.

But what happens then? For everywhere except London the money goes to the Homes and Communities Agency, who plough it back somewhere across the country- who knows where? In London the money goes to the GLA, who until now have been giving it out as part of their affordable housing programme.

What the Mayor is now proposing is London councils that wish to opt-in can give right to buy money back to the Treasury, who pass it on the GLA. So far, so the same. But then, the GLA will ring-fence the money to be spent in the council’s area and will allow the council to make the funding decisions. There will still be rules with this- the 30% rule and the housing association rules look like they will be the same. But it looks like the Mayor’s office will be much more flexible and open-minded about how this money can be shared out, particularly with regard to mixed sites (ie. where one house is funded through right to buy and another through a grant). It will also give councils more freedom to (within limits) move money about whilst construction is ongoing in order to deliver more homes.

The total amount of funding for this is much smaller than the £1.67 billion- London councils have so far given back to the Treasury £50 million. But the key issue is that instead of losing money because of a strict set of rules, councils in London will be able to in effect keep money to replace (to an extent) right to buy homes. With the government-enforced rules still in place it remains to be seen if 1:1 replacements can be achieved (I suspect not quite) but this is still much likely to be a better, friendlier scheme than the one overseen by the Treasury.

Again, this clever little circulation of cash can only works because of the powers held by the London Mayor and GLA. Nowhere else in the country has this arrangement and I doubt the HCA are going to suggest something similar for every other council.

So what the Mayor is doing is using his significant and unique powers (and personal mandate) to mitigate against what he (and I) see as central government’s failures. But it isn’t replicable elsewhere without those powers being devolved, something that was unlikely the day before yesterday and is perhaps incredibly unlikely now. I’m sure central government are smarting slightly at his actions, but the point is he alone is able to do this.

One of the challenges of devolution, particularly the uneven and deal-led devolution preferred by the government since 2010, is that different areas will have different agreements. London is always likely to do well out of this, especially if they have an activist Mayor who is unconcerned about his popularity with the Westminster government of the day. London has a huge number of challenges, especially in the provision of affordable housing, but it is also in a position of power. It is doing far better that other areas on insisting on affordable housing proportions through section 106 (again, due to the powers of the Mayor) and has the ability to gain investment from around the world.

So this is great news for London, but without rule changes it doesn’t mean much for anywhere else. That isn’t a criticism, it’s just a point to be made when celebrating the scheme. As discussed enough times here already, what would make the difference everywhere is a lifting of the HRA borrowing cap and further investment in council housing as a genuine alternative to the other tenure types available in the country. Labour’s green paper goes some way to moving ahead with that- if they were in power. We continue to wait for the government’s social housing green paper.

The first green paper of spring

Labour got there first. Their social housing green paper is out, with a not at all connected to the local elections launch at the LGA’s offices.

Anyone reading my blog over the last few months will not be surprised that much of what is in the paper is very welcome. But as a serious and relatively complete policy document there is always going to be some critique (rather than criticism, I hasten to add) to undertake in order to understand it fully. This is especially true as the paper reads like a set of policies that are, in a sense, shovel ready. So this critique is meant as a compliment- this is exactly what I would do if it was a green paper from a government.

I suspect that much of this has been due to the forensic and policy-focused approach of John Healey, who has both always been impressive in housing and has had the brief (on and off, slightly) for long enough time to really get to grips with it. There is an argument for giving ministers (and their shadow counterparts) long periods in posts in order to understand the deeper issues and John Healey is the proof that it can work. Perhaps the government should take note.

There is a huge amount of detail in the paper, so I want to pick out a few bits. Firstly I’ll look at some of the major positives (of which there are a few!) and then look at where there are gaps or opportunities to do things a little bit differently than suggested.

So, the positives. Labour have set a clear (if amazingly round) target for the delivery of new social housing. The government’s social housing green paper has mostly been framed around improving matters for existing tenants, not creating new tenants. That’s why the JRF have been so clear in trying to push for new homes alongside other changes- a battle I’m not sure they are winning with the current government.

Delivering 100,000 new affordable homes a year will be a challenge for any government and it will take a significant effort from local authorities, housing associations and other providers of social housing to achieve. I believe the will is there, even in areas not wholly committed to large scale housebuilding, but a target like this will require a herculean effort from the social and building sector to see through.

Moving on to the definition of “affordable housing”, the green paper suggests getting rid of the 80% of market rent test. Good. What replaces it is slightly more interesting. Whilst trumpeting a new average income based living rent the “core” of the affordable homes programme will be the good old formula rent. That’s not a bad starting place, but the formula only has loose ties with affordability, so it is worth considering if there are other options available.

The paper is positive about the role of housing associations, both as a not for profit service for their tenants and as one of the ways to create new social housing. There have been previously been concerns about Jeremy Corbyn’s support for housing associations, so it is good to see real inclusion of them in these plans. Yes, that comes with some additional requirements, inclusion in freedom of information legislation for one thing, but that seems to be a small price worth paying so that they can play a part in large scale social house building.

No-one will be surprised that suspending right to buy (preferably off a cliff) and scrapping the bedroom tax are welcome. Both create significant issues and cannot sensibly be justified- as the paper suggests- social housebuilding is likely to reduce the overall benefit bill.

Moving onto something the paper doesn’t do- I’m certainly relieved that it doesn’t try to reinvent the wheel when it comes to funding new social homes. The key issue is not that new homes are too expensive to be built by local authorities; they usually make a surplus over their lifespan. It is that there is an arbitrary limit on the amount councils can borrow, even though they are sat on huge assets (the very homes they currently let out!).

The current government has repeatedly, maddenly, tried to put forward different ways to fund selective council house building, usually through one off loans or grants, whilst keeping the purse strings themselves. This allows them to appear to be the ones making the decisions whilst touting a very big number (usually £X million, so not actually that big in housing terms!) and simultaneously refusing to allow local authorities to borrow off their existing assets. So it is great that the paper suggests the main way for new council homes to come about is through borrowing up to the prudential limit. That is, in a way, all that is required for stock owning local authorities with a desire to build.

Helping councils that have transferred their stock to a housing association to build a new generation of council housing is positive. Government loans will allow them to build up (literally) assets which they can then borrow against. What might be needed is provisions or guarantees that this new stock won’t itself be transferred at some point in the future, negating the whole process.

In terms of wider financing, the paper is sensible (but brief) in suggesting other sources of funding, including institutional schemes like pension funds, could be harnessed for housing associations. There is nothing wrong in any of that, but it is worth remembering that pension funds will put money where they can make money- if there is another, better opportunity for them then they will go elsewhere. Certainly funding affordable housebuilding is likely to be low risk, but will it have the returns of other investment opportunities?

Which brings us to things with (in my view) slight alternatives to the policies laid out. Firstly, the paper is looking to set targets for local authorities building social housing, almost as a subset of the objectively assessed need I’ve spoken about before. They’ve not outlined how that would take place and I worry that trying to force councils who don’t want to build affordable housing will take focus, time and money away from providing for councils who do. If they try and split the 100,000 a year based on some affordability calculation (as with the government’s proposed OAN measure) then areas who may be less able to find sites, have less recent experience of building to date and overall willing to build quickly may have a higher target.

It is unclear what the sanction would be for authorities that don’t meet their targets. The paper (rightly) talks more about incentives than threats, but if they are serious about every area delivering social housing then threats may eventually have to be issued, much as they are currently over local plan adoption. What the mechanism for this will be remains to be seen.

The best alternative for me, at least to begin with, is to work with those who want to build. Get up to scale with social house building in those areas who will relish the opportunity and hope that those remaining will be converted either by showing it can be done or by political pressure from their own residents who see it happening elsewhere.

The green paper is also a touch vague on how a Labour government would actually close the viability loophole. There’s talk about boosting support for councils to prove schemes are viable with affordable housing with independent viability experts to sweep in. I’d worry how liable those independent experts will be to regulatory capture, especially as you would expect that they will be drawn from and potentially looking for work from, existing builders.

It is worth remembering that the government has threatened (however idly) that it could go further and set affordable proportions or payments centrally. There is an opportunity for Labour to outmanoeuvre them and promise to shut the viability door once and for all. Perhaps there were concerns about appearing to knock big builders (something it is counterintuitively easier for the conservatives to do) but the outcome looks less like closing the loophole and more like bolstering one side against the other whilst keeping the rules by and large the same.

The clawback clause does do a bit of work to cover this, but balance sheets are often malleable to what the company creating them wishes to show. It would take either extremely well written rules or forensic auditing to check whether companies have made additional profits on individual sites or not.

Another way the paper is vaguer than I would like is on supported housing reform. Yes, the government’s current plans don’t have the support of the sector and yes, a period of talking to them again might be required. But we have been in this limbo for years and the can does keep being kicked down the road. I think any government has enough options laid out infront of them, it needs to make a decision and see it through. That’s going to annoy some people- potentially older people who may have to pay more either in life or in death. That’s politics.

Finally for this (short!) section on alternatives, the paper is clear that it wishes to see different households knitted together into a mixed community, but is short on a mechanism for how this is achieved. For private sites there are plenty of opportunities to achieve this, mostly around the rules governing how the affordable homes do not differ from the other homes and are not located in one cluster away from prying eyes. For new social housing sites, which will clearly be a growth industry if the society seen in the paper comes to pass, it is a little bit less clear.

Yes, having a range of the affordable tenure types mentioned in the paper will do a bit as will a supply of new council homes being available not just to those who desperately need a home, but without a mechanism to achieve mixed communities I think it is potentially over-optimistic to think they will appear organically. How this will be achieved, how large scale council or joint built sites can be attractive enough to want potential owner occupiers to move into will be a challenge and one that needs to be considered deeply before the concrete is mixed.

So, overall, lashings of positives and much for a future government to get their teeth stuck into. You can only hope the government are looking over their own draft social housing green paper and wondering if it matches this one in terms of its ambition and clarity (prediction: it won’t). Whilst deliverability is key I think there is enough substance in the paper to make many of the proposals possible and, frankly, aiming high is better than not aiming at all.

And still high rise

High rise blocks. For good or ill they are on the agenda. The tragedy at Grenfell has highlighted that at least some recent re-furbs have been done poorly and in a way that increases fire risk. But many thousand people live in high rise blocks across the country and, whatever some Birmingham Conservatives might think, the buildings are likely to be here to stay in the long run.

So, getting away from the need to ensure they can contain fires (something bare concrete blocks are actually quite good at!) what is the issue with high rises, particularly council and housing association blocks? Firstly, we have to admit that a minority of blocks were poorly designed and constructed and that no amount of refurbishment apart from complete gutting or demolishing will make them adequate to live in. Those blocks should not stand the test of time. Bodged refurbishments need to be improved and if risks have increased by refurbishment (as it appears they were at Grenfell) then this need to be reverse quickly.

Moving on from this, the upkeep of blocks is best described as “hit or miss”- some communal areas in blocks are well looked after, both by the tenants and the housing management and some, well, aren’t. Crucially, the need to foster both an active community spirit and adherence to fire regulations in communal areas is key to making blocks livable and safe.

Next, when blocks were built there was fewer qualms about families with children living high up. Most point blocks were built with at least two bedrooms with the expectation that a family would be living in them. Nowadays families with children quite rightly won’t usually seek this kind of accommodation and are likely to reject it if they are offered it, or stay there for a short time before moving to somewhere more appropriate. To be fair to the Brum Tories, it does sound like there is an issue with children being accommodated at height in the second city, but their approach seems to be knock them down and start again, rather than relocate and consider what else can be done with the blocks.

Thirdly, if families aren’t going to use the blocks then who will? Recognising the problems relating to families quite a few councils started putting single people into two bedroom high rise flats, but along came the bedroom tax and put anyone in this situation claiming benefits at a disadvantage. Who knows how long the bedroom tax will be in existence. Unlike the blocks themselves they are simply legislation- a government could overturn it very, very quickly if it chose to. But until that happens single claimants of working age are rightly pretty concerned about creating a liability they cannot afford.

Next and on to a more general point, but amplified by people living cheek by jowl and with communal spaces in high rises, is that with significant demand for affordable housing someone (usually under choice based lettings a computer) has been deciding who qualifies for the next available house. In many areas, this means most if not almost all lettings are to people with one form of priority need or another. Filling a dense space with people who, for one reason or another, have a vulnerability and many of whom who have experienced homelessness (in one form or another) is possibly not always great housing management.

Finally for this sketch, quite a few of the older high rise blocks were built in the middle of larger council estates. If people are tempted to move into them they either have to have no issues with that or overcome those issues, potentially by experience of the area at its best.

Over time these issues have interacted in order for some blocks to see a vicious circle. Families moved out and only those topping the housing queue could get a house. Those bidding (or, pre-CBL, those being placed) were likely to be relatively desperate for a home. Communal areas were neglected or vandalised, if not cleaned up then they would get worse. The sort of tenants who may act with community spirit eventually became and exasperated and moved out. Most flats were filled, but with the advent of the bedroom tax it became hard for working age people to consider moving in, so some were left empty. Empty flats led to concerns from neighbours, some of whom moved out. And so on.

It is worth remembering that a significant amount of money has been spent on many high rise blocks, firstly to get them up to decency standard and then to make them nicer places to live. But the logic I have until now outlined potentially shows that there is a need to treat high rise blocks as a bit of a special case that needs some special answers.

What I’m about to say next isn’t new and I certainly don’t want anyone thinking it is my idea. But there is an answer staring us in the face for at least some of the blocks. If households with children and single working age people cannot be accommodated, who does that leave?

I’ll ask another question: who is sitting in larger properties that could be used by families, perhaps as they have children who have moved out, who may have gardens they want to maintain but struggle, who would like to take part in communal activities close to their home and would by and large respect and maintain shared spaces? Who doesn’t need to worry about the bedroom tax?

Indeed there are plenty of examples of councils and housing associations using recently refurbished blocks as general accommodation for older people. Absolutely fundamentally, what doing this means is that you have to ensure the lifts keep going at all costs (lift engineers can be expensive!) and maintain communal spaces so that people can live and socialise under the same roof.

This shouldn’t be about forcibly moving people out of their homes, rather creating exactly the kind of private living space with communal facilities that many private providers are showing many older people want. If you can make high rise blocks desirable to live in for older people then you can free up other homes, provide a decent and long term place for people to live and ensure the co-location of services around those who need them and social activities for those who want to take part in them.

Another option (again, not my idea) is to let people be a bit more free with who will be renting with them. Allowing house-shares for younger people actually fits with what the government were trying (badly) to achieve with the bedroom tax. Yes, this doesn’t necessarily get away from some of the issues I’ve listed above but it does offer another opportunity rather than letting blocks dwindle away until a politician decides it is time to knock them all down and start again.

So let’s be clear, there are clear opportunities for what to do with high rise blocks that break the vicious circle. Just because they are not suitable for families doesn’t mean that they need to come down and be replaced. With a bit of lateral thinking and investment early in the process high rise blocks (excepting those too poorly built to last) can be something to be saved, lived in and cherished.

Since you are doing sensible things…

And hooray! The 18-21 year old restriction on housing costs in Universal Credit is gone! This seems to be a big win for common sense, backed up by major charities and other sensible folk who knew it was a ridiculous policy.

I worked for a young person’s charity a while back (when this possibility was first mooted) and it was clear even then what a nightmare it would cause. In fact, it was not only obvious, we had first hand (daily) experience of trying to convince the DWP that people were estranged from their families in order to claim income support whilst in education. This was usually young people who had been kicked out (sometimes literally) by their parents.

Sometimes getting these decisions made in the young person’s favour was easy, sometimes it was hard. But we almost always were successful. Why? Because a young person doesn’t swan off to a hostel, get accepted for housing association or council housing or sleep on the streets for no reason. They certainly didn’t do it for the pittance paid by income support, although that money meant that they could continue with their education and seek to overcome the challenges they’d met in their life so far.

I suspect this particular Easter present is a one-off, but in my own optimistic way, I hope this could be a time of government accepting sensible changes to policies for young people.

So here are some suggestions on what it can do next:

  • Increase the under 25 rate of universal credit to the same as the 25 and over rate. What happens when you reach 25 that suddenly means your expenses go up? Beats me, but the under 25/ 25 and over distinction in benefits has been around for ages. Too long. In 2018/19 the standard allowance for a single person under 25 is £251.77 a month. For someone 25 or over it is £317.82 a month. That’s £66 a month. The couples it is £103. This is for no other reason than tradition (well, and saving money, and some nonsense about needing to provide an incentive and the rates of national minimum wage). Which brings me on to…
  • Remove the minimum wage distinction for under 25s. The escalator on the minimum wage is about trying to allow companies to invest in new (young) staff. However, it can also look like a way to pay younger people less, even as they take on more and more responsibility. So having the same floor of post mandatory education income for all would be a great way to help young people get a start in life. And you know what- higher incomes means less dependency on benefits like universal credit and means potentially more taxes for the government: win win.
  • Restore the work allowances in universal credit for everyone, including young people in order to, in the words of someone I vaguely remember repeating ad nauseam, make work pay.
  • Remove the shared room rate cap for single private tenants under 35. Did you/ do you want to live in a shared property until you are 35? I thought not. The most worrying thing about this policy is that it forces young(ish) people to live cheek by jowl even if they are very vulnerable. This creates its own knock-on issues for landlords, social care, police etc. etc. The rate used to be 25, but the government made it 35 for reasons perhaps not related to sheer spite. It could be changed so the amount paid relates to the actual accommodation the person is living in- perhaps with a bedroom tax type reduction for young people on benefits who somehow convince a landlord to let them rent an 8 bedroom mansion to themselves. Oooh, someone mentioned the bedroom tax…
  • Get rid of it [the bedroom tax, weren’t you reading the last point?]. Of all the silly, pointless, nonsensical policies ever imagined, forcing people to pay because social landlords had historically not built one bedroom properties is about the worst. Or forcing them to pay because they have health problems and need to use a different bedroom to their partner. Or so on. Social landlords didn’t give young people (or not-young people) bigger homes because they were frittering away their stock, they did it because that was all they had and there was a housing need to be met. If the government wants people to live in the right size houses it could build some.
  • Get rid of the 2 child limit. Yes some younger people have more than two children. Do we even need to discuss this one? The one with the form to tell the government that your child is the outcome of a rape? No, good.
  • And the benefit cap. And the other benefit cap. Yup, both of them.
  • Do you have any you want to add? Let me know and I’ll think about putting them in.

Now, here comes the punchline. With the exception of the minimum wage change (which, I repeat may save the government money) each of these would end up costing the government -or at least the benefit budget- money. The thing about the under 22 housing rule was that it was so poorly thought through and so few people actually were caught in it that it most likely cost more to administer than it saved. It certainly will have cost more when looked over the whole of government’s budget, especially when social care, homelessness, family support, etc. budgets are considered.

This policy was one of those that was created to meet a perceived problem, not a real one. The government could say they were doing something about the legion of indolent young people who could simply just move home, without recognising that this was actually a tiny to non-existent part of the overall number of claimants.

So let’s celebrate that the government has seen sense. But the sense that they have seen is that this policy was costing them money. Until they start working their way through the list above I’ll not be convinced they have suddenly decided to support young people through the benefit system.

Inviolable viability

Right, are we all enthused and ready to go? Viability is dead: long live, um, something that looks a lot like it.

Before I am accused (again) of cynicism approaching apocalyptic levels, let me first say, the fact that the government are trying to do something about viability is positive. I’ll try and get into what I think it means in a bit, but given the amount of bluster about the policies I think it is worth actually trying to get down on paper what the government are proposing.

Under the current system, many local plans include a brief sketch on what requirements a site might have for affordable housing, education facilities, green space and other bits of infrastructure. Nowadays this is split between in section 106 agreement (which is negotiable) and in many areas Community Infrastructure Levy (which isn’t). But the real tooth and nail side of what is required for a site comes during the planning application, where the need for infrastructure, followed closely by the developer’s ability to pay for it out of the eventual sale of homes is bashed out.

The developer gets to use the price they paid for the land (however inflated that is by the prospect of planning permission) and lots of other bits and bobs go into their very detailed spreadsheet to prove their point. The local authority then makes a decision based on the agreement. If agreement can’t be reached within a set timescale, or if the application is refused because the developer’s won’t budge then it can go to an appeal where an inspector and, eventually, the secretary of state can decide upon the merits of the application. Parties who feel (legally) hard done by can apply for judicial review, which can and does quash decisions and demand a rehearing.

In the new system, first proposed last year and now laid out in slightly more detail, the major discussions about the viability of sites will take place during the plan making process. I’ve written before about this process; one of the positive things about centrally suggested targets is that the massively long-winded process of establishing housing need can be removed, which would have made the local plan process quicker. But reaching an assessment of infrastructure need and viability for every site included during the process and coming to an agreement of this with developers, is going to be a huge and time consuming ask. Developers will no doubt (and quite understandably, from a business point of view) use the local plan process to try and extract the best deal for themselves at this point, rather than further down the track.

Yes, in the end it is the local authority that draws up the local plan, but developers will go into the local plan examination (where a planning inspector in effect decides whether it is “thumbs up” or “thumbs down”) with all of their legal arguments, expensive lawyers and fabby dabby spreadsheets ready to prove their point. Those spreadsheets will now be public and use something approaching a set methodology, which is a huge victory for transparency campaigners. But it doesn’t necessarily mean that a small band of local campaigners doing this in their spare time will be able to outwit a company whose profit levels are at least partly based on extracting just this kind of victory. Many council planning departments, often stung by large costs if they lose judicial reviews or appeal cases, will be very cautious of pushing hard if they know they may not win.

Another good(ish) thing is that the land value being proposed for viability assessments is not the price paid for the land, but some inbetween figure. As Shelter have commented, given recent land sales have possibly been inflated by the current market, the new assessments might be higher than you might hope. It is a step in the right direction, but the wording- particularly that the land value should be set at “the minimum price at which it is considered a rational landowner would be willing to sell their land” means this could all fall down rather quickly. If that’s the case there is nothing to stop landowners working collectively to ensure prices remain high.

This all means that the local plan process becomes longer than it would have been and there is no guarantee this will lead to additional affordable accommodation. The government may be hoping land prices will fall as a result of this change, which seems hopeful and best and naive at worst.

The government are stating that once the local plan process is complete (however long that takes) that will be that. But of course, they have to (and to their credit, have) considered the other situations, for example when a site outside of the local plan comes forward. Or, indeed, the economic world changes significantly and developers are suddenly significantly more or less able to pay. In that situation local authorities will have to work with developers to assess or reassess these agreements.

There will be disagreements, claims will be lodged and eventually a set of precedents will be made about what counts as a change and what doesn’t. Unless there has been a big change in developer’s business plans this will then become the new normal. They will use the precedent to turn the drip into a flood. That’s not a criticism of developers- they are acting rationally. It is a criticism of the proposed system. It gives them an inch of wiggle room and expects they won’t take a mile. As with my previous post, I confidently predict we’ll be back in the same situation with viability and affordable housing within a few years.

BUT! The government have added a backstop- with a not very discreet threat for a system where “contributions to affordable housing and infrastructure to be set nationally, and to be non-negotiable”. Given my previous comments you’ll not be surprised that I like the second part of that. I would much prefer a system where the connection between overall viability, developer’s expectations of tidy profits and affordable housing is broken. I don’t see why it would make sense for this to be set nationally, when practically everything else in local plan making is, um, local. Neither Theresa May or Sajid Javid mentioned it in detail in their speeches, so I think this was only planned for certain eyes only. It’s a threat to developers of what could happen if the system doesn’t work and in my opinion a pretty idle one, much like the threat to end help to buy.

The proposals I sketched out in my previous post would be stronger than those being threatened by government and they should feel free to use them if they would like. But given I don’t think they have much intention to actually do this I won’t hold my breath.

So we have been promised another revolution only to see some generally positive but not exactly world-shattering reforms. Before too long we have to ask ourselves why this is? Do ministers over-sell proposals that they know are milquetoast? Are they convinced that one more set of changes will push the housebuilders over the edge to become the sort of civil minded operators the government want them to be? Are they making comments based on what they hope newspapers will report rather than what will actually make a difference?

The key issue, in a way, is that government is stuck. Changes since the late 1970s mean that the major housebuilders are the only people who can deliver at scale. The government seems willing to pay lip service to other forms of building, but know that these can only take off with either significant government investment, underwriting loans and subsidy (for small builders, community housing, housing associations, etc) or local government debt (for council housing).

Another option would be development corporations, often used for new towns but theoretically usable anywhere. This would involve local authorities, builders, landowners and trades coming together to create new homes. The corporation could be structured to prevent perverse incentives (including a risk of chummy contract-giving between the partners) and provide incentives for actual building. The builders wouldn’t like this as it threatens their ownership of large parts of the process, but it is something more akin to a revolution than some (admittedly positive) tinkering with viability.

The government are right that there is no silver bullet to ending the housing affordability crisis, but I do wish they would put away the rubber ones.

As a final note, is it worth remembering that the government has consistently said that the first report from the Letwin review will be coming with the Spring Statement next week. This wasn’t mentioned in either speech (Sajid Javid referred to the publication of the full report at the (Autumn) Budget), so I will be very interested to know whether something will be released and what it says.

Build to rent or build to build?

Build to rent, is it a way to get some top quality new rental housing or just another brick in the wall? There’s plenty of chatter about this new type of development coming forward, but what is it, what does it mean for the planning system and affordable housing and what will happen as the market matures?

Build to rent is in many ways something new. Large scale investors like pensions schemes are seeking ways to find returns and have hit upon the idea of having their own property portfolios. These aren’t mom and pop landlords with a property here and there, but organisations who have the ability to buy and sell entire buildings and blocks on a whim. But there is part of the problem- they like the idea of rental income from assets that grow in value over time but don’t want to have to deal with the issues relating to having leaseholders or other owners to get in their way.

What they’d prefer is a nice clean, wholly owned asset that can be theirs outright, traded easily and the rental returns known. This kind of housing doesn’t exactly exist in the UK (or in many places in the world) and the most obvious way to create it is to build it. So yes, there is hundred of millions of pounds floating around right now looking for investment in housing- hooray!

But that money doesn’t particularly care where it is investing, as long as it can get the best return for the investors. Where the best deal is might relate to the rents that can be expected, the land cost, the costs associated with planning and who will let them build exactly the kind of block they’d like to see. Manchester of Salford, Leeds or Bradford, London or Colchester, Milan or Barcelona- what matters to them, quite reasonably, is where the net return is highest.

Of course all housebuilders are like this to an extent, but whereas traditional builders are looking for a pipeline of land across a range of sites, from city centre to the surrounding countryside, to buy develop and then sell, build to rent developers are looking for inner city properties where the principle of development has been agreed since Victoria was on the throne where they can buy the land, build the asset and then hold it as such, selling on the whole unit at the appropriate time.

With traditional housebuilders the key issue fought in the planning system is where homes will be built. With build to rent the key issue is what homes will be built. As I mentioned above, the need for a nicely packaged up unit precludes anything quite as messy as sales of flats to a housing association or even something as messy as shared ownership or even, shock horror, someone else owning a property in their building! It would be bad for the portfolio to have a couple of appendages and provisos thrown in with any sale and therefore reduce the market value of the asset.

Many authorities in the UK, including big cities need significant amounts of new housing. This is both due to a genuine requirement to meet the needs of their residents and because they have more or less objectively assessed needs that are required to keep their planning system ticking over. A developer, whoever they are, turning up and stating that they are interesting in building a few thousand homes on underused or unused city centre sites is a godsend.

So let’s say you work for the planning department and a developer comes in saying just that- they want to build thousands of properties to rent. But there is a catch. Firstly, they are also talking to a few other cities and can only really decide on one or two locations to build at the scale they want. Secondly, their business model doesn’t really allow them to have affordable housing on site, so could they pretty please just pay cash instead? Thirdly, like all other developers, costs are high and profits are low, so they might not be able to pay all that much towards affordable housing anyhow. Fourthly, they operate in a cut-throat market where information is king, so please could any negotiations and agreements be held in secret?

Now, generals are always fighting the last war, but you’d hope planning departments are a bit quicker off the bat than that. Because let’s be clear, the opportunities for significant new developments are enough for authorities to have to consider changing their rules to keep ahead.

Earlier this week I praised Jennifer Williams’s recent article on affordable housing in Manchester. One of the key things behind the continued growth of city centre housing in Manchester -but also the complete lack of on-site affordable housing- is the willingness to get in front of the curve for build to rent. You can’t apply planning rules just for certain types of investments though, so every developer gets to play the same game- offsite contributions for affordable housing (sometimes called commuted sums), confidential viability reports, excellent but private shared spaces without significant contributions to public spaces.

Perhaps “race to the bottom” is too strong a term, but I think we need to see that Manchester is the outrider for city centre housing outside of London and look at the impact build to rent is having there.

As I’ve mentioned before, commuted sums as opposed to affordable housing onsite isn’t necessarily a bad thing, although there is a need to prevent areas from becoming ghettos of either rich or poor households. Councils or housing associations can use that money to invest in their own large scale schemes rather than a smattering of housing here and there and the smart ones could create their own mixed schemes with market and affordable homes side by side.

But no payments, or money that disappears into the ether through a viability process or into an “affordable housing saving fund” that never gets spent is never a positive thing. Development after development in or near a city centre without public space is also not great.

As with my previous comments on viability, I’m coming round to the view that no process framed around negotiation will actually be able to put the genie back in the bottle. The changes to the national planning policy framework may make some temporary difference, but I am going to firmly predict that a small army of lawyers and consultants will put us back to where we are now within 5 years. Amending viability simply isn’t enough for affordable housing, the goal must be to remove the connection between the two.

What might be better is putting affordable housing into some form of tax like the existing Community Infrastructure Levy. An amount could be worked out from the average square footage of a proposed development (or sale price of properties if you’d rather) and this could be paid to the council for them to build affordable housing (either directly or by housing association grant), with clear accounting to show this is done. A developer who wants to reduce this bill could offer a number of homes in payment for their charge, but this would be at affordable house prices rather than the full purchase price of the property.

Another change would be for local authorities to work together to set clear boundaries on what they will and won’t accept. Hopefully I’ve shown that there is an oblique strategy, perhaps even an unintentional one, to change the planning system in order to fit it around build to rent. If larger local authorities, for example the metro mayoral cities and the English core cities came together to set out what they would like their planning system to look like, they could seek to insist on published viability statements and set affordable housing quotas. This could stop developers trying to play one city off against another, but it of course comes with a healthy reward for cities going back on the agreement.

It remains to be seen how this new market will mature. As I mentioned at the start of the piece, one of the reasons investors are looking to build is because there aren’t currently the type of properties available for them to invest in. Of course there are other benefits to putting value into a bare bit of earth, particularly the one shared by more traditional housebuilders that this will appreciate the value significantly.

But once there are a raft of new build to rent properties available, will investors keep on building, or will they be happy trading the buildings that exist between each other? I’ll put that another way- there are plenty of shares that come onto the stock exchange, but the vast majority of the role of the exchange is to trade existing shares. Buy low, sell high, or at least buy for a lower price than you sell for! It is fair to say pension schemes dabble in the markets, usually in long term investments, so they are likely to be quite happy to think this way about property as well.

Sure there will be property managers who actually do things like sort out repairs and they won’t be affected by these shenanigans. The average tenant won’t notice ownership changing, perhaps the brass plaque outside the door will occasionally morph overnight into something new. But from a housing supply issue, we have to consider whether build to rent will be a major builder for many years to come or -once there are enough properties to play the asset appreciation game- whether it will be a niche portfolio for certain schemes to hold and trade between themselves.

If it is to be a major source of new housing then the issues seen in Manchester might be heading to a town near you on a large scale. If it is the former, then are the changes (or resistance to changes, such as publishing viability reports) being made to local planning systems (for all developments, remember) worth accepting for a limited local reward?

Rough sleeping and smooth sailing

I wish I could move on from talking about housing on this blog. But stuff keeps on being proposed that piques my interest. The latest such thing is the Labour announcement on housing for rough sleepers.

This was announced on Sunday, perfectly to fit in with the Sunday newspapers and interview circuit, but I wanted to have a couple of days to have a think about it and what it really means. You see, I cannot imagine anyone would have any issue with more homes for those with recent experience of sleeping rough, in particular as much of the evidence from housing first suggests that this can make a difference in people’s lives.

But it is worth having a look at the policy, because there is something interesting going on. In brief, the wording around the policy announcement looks like it is about housing supply, but in actual fact it is about housing allocations.

So let’s quickly run through what’s been said. Labour is proposing that it will seek to provide 8,000 houses for people with experiencing of sleeping rough, both as part of their existing commitments and as an immediate implementation of the housing first policy.

The government currently have pilots of housing first, which is essence is about providing people with long term accommodation before seeking to overcome any other issues that may be causing homelessness. It has many fans (the author included) but crucially it is about not only providing accommodation but also a significant level of support in order to access services in order to prevent a return to the streets. As Jeremy Swain has recently reiterated, there are factors in returning to homelessness that have to be overcome and experience states that includes intensive work from professional agencies seeking to keep people in the home.

But where are the homes to come from? The Labour press release states quite clearly that instead of building new accommodation, which will take time, they will be seeking agreements with housing associations to provide homes as they become available and replace them with newly built homes from their aspirational social housebuilding programme.

So the homes are existing affordable accommodation (whatever that means!) from registered providers that you would expect to have gone to someone else in need if they were not used as part of this scheme.

Let’s put that a different way. You run the allocations for a housing association. You have a 1 bedroom home become vacant and have to choose between:

  • A rough sleeper.
  • A disabled single person living in an unaffordable privately rented home.
  • A disabled couple living in a privately rented home in severe disrepair.
  • A vulnerable young person living in temporary accommodation who has not slept rough.

Now, each of these households is likely to meet the legal definition of homelessness and indeed for priority need. Exactly who gets the property will depend on the allocations policy of the association or, if the work with a local authority, the council’s own allocations policy.

What Labour are saying is that they will prioritise the rough sleeper over the other households and apply this nationally so that allocation policies will only apply after the need is met for rough sleepers. That’s a policy decision and it isn’t a bad one per se, but it needs to be understood as a decision on allocations. Using that home for a rough sleeper will take it away from someone else who also needs it- someone is going to get it and someone is going to not.

Of course Labour have also made a commitment for a huge increase in the number of affordable homes, but as the press release says, this will take time. So those households will have to wait longer than they might otherwise have done. Again, that’s a policy choice and not an unreasonable one, but moving other households further down the queue has to be understood as a consequence.

What would be a worry is if these policies aren’t tied up together. Any government is used to getting some of its policies through and not others, so I can easily see a situation where the rough sleeper policy comes forward (it is, after all using existing properties) but the policy of building affordable homes stumbles along the way or is delayed. Even governments that are very quick off the blocks (1945 and 1997, I’m looking at you here!) have some things that go on the back-burner or hit unexpected consequences. If you have taken on homes on the guarantee that you will replace them then there is a need to complete both sides of the bargain.

Another comment to make is why this is only housing association homes? The present government almost came unstuck when it tried to introduce right to buy for housing associations. It is unclear why policy makers from different parties see housing association properties -homes built by non-governmental bodies overwhelmingly for the public benefit although often funded by public subsidy- as theirs to dip into when they feel like it. I’m not sure if the sector will be up for another round of tough negotiation, especially to provide a service many of them feel that they do anyway.

As I mentioned above, the key issue will be the level of support that come with rough sleepers into the new homes. There’s no mention of that in the release, or how it will be funded, although it is fair to say that many rough sleepers already receive a significant level of personal support, so this may be that the organisations who currently work with them will continue to do so, hopefully with some level of financial backing from government. The alternative is a replication of what has happened many times previously, where the settled accommodation breaks down and people return to living on the streets.

Another way to provide homes for rough sleepers would be to buy up homes from landlords with buy to let mortgages looking to sell vacant properties (or, even better, empty homes), perhaps on the “we buy any car” approach of a quick sale for a below-market price. The homes could then be improved and made tenant-ready quickly (providing opportunities for local tradespeople or for skills training). This removes the “robbing Peter to pay Paul” aspect of the policy whilst still ensuring a quick turnaround for those who need homes. It’s not a new idea either, it is something quite a few councils, charities and other organisations do, but government backing could make it much larger and more effective.

In his interviews on Sunday Jeremy Corbyn also returned to the idea of compulsory purchase of high value homes “deliberately kept vacant”. Now, he hasn’t provided a number for how many properties he thinks would be involved and I would think it would be very hard to for local authorities to prove mens rea in cases of empty homes. That word “deliberate” sticks out like a sore thumb to me. With a requirement to prove why a home is being kept empty I don’t think it will lead to many compulsory purchases, so it may be an attempt to put the wind up financial speculators rather than a policy that will make a huge difference on the ground. Of course we’d have to see the final policy, it could exclude that difficult word “deliberate” and have some impact on some homes.

So the housing first announcement is another piece in the jigsaw. There are other ways to achieve a quick expansion of homes for housing first, most notably working directly with local authorities or housing associations rather than trying to buy up housing from the latter. If Labour are serious about their affordable housebuilding plans and are willing to put in the resources to pay for it then this may be one small but important cog in the machine. What we must not forget is that providing a home is not sufficient to keep someone off the streets- it is just the first step and the ongoing support that person receives is just as significant as the roof over their head.