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.

The long tail of affordable housing and how it can wag again

How fast do you have to run to stand still? And do you really have to run twice as fast as that to get somewhere else?

It’s a question we’ve been grappling with ever since the Red Queen posed it and none more so than with affordable housing.

Well, that was a question I was going to try and look at in this post. But then I found out that not only are they susceptible to a bit of genial name-calling, Shelter also have access to a time machine and have gone back to 2014 to write essentially the same post.

What’s a naptime blogger to do then? Well, it would be helpful to see what has changed since then and maybe have a think about the current trends in net affordable house building.

But first we have to draw a pretty big distinction between affordable housing and “affordable housing”. You see, in most areas when you think about affordable you consider whether someone’s income can cover the cost of the item. Not so in housing, where the government’s definition of “affordable” relates to the market price- the definition of affordable rent is 80% of the market rent in the same area.

This might not seem like a terrible thing and in some areas it just so happens that 80% of the market price is within an affordable range for a relatively low income family. But in reality that’s more of a happy accident than an outcome of wise policy making.

It didn’t used to be wholly this way. Most social housing rents were traditionally set based on the actual costs of paying for the property and its upkeep, with landlords (local authorities and housing associations, in the main) given very broad parameters to set rents. Whilst in power Labour argued that this led to wildly different rents for what was in effect the same house and, through controlled increases in rent, tried to get all social providers to roughly the same rent for the same property- called a “formula rent”. This equation looked at the price of the house and also the median earnings in the area. But it was only a proxy to allow for equalisation in the medium-run.

And it didn’t get there, because Labour slowed down the process and then the Conservatives came in and chose to increase and then reduce social rents at the same rate for everybody. Only now are they looking to allow authorities to increase rents again. This means rents are still quite divergent between providers and between areas.

So, and I can’t be clear enough about this, neither social rent on older stock nor affordable rent really have any direct connection with affordability built in. Social rents are by and large lower (in many areas far lower) than affordable rents and are therefore more affordable. But there is no real mechanism to ensure that stays the case. New social rented homes (those few that are built) often have rent set at the formula rate, but then affordability is only one consideration among others.

When the new “80% of market” definition came along most providers didn’t immediately switch all of their properties to it when a new tenant moved in. What many did was make newly built homes (usually by developers as part of s106 agreements) available for affordable rent as a way to cross subsidise other, more affordable housing. Indeed, until recently building for affordable rent was required through the government’s affordable homes programme, meaning councils who couldn’t borrow (because of central government limits) had no other choice than to build homes for “affordable rent”. Collectively, although mostly for the legacy reasons, this means that the vast majority of affordable homes available today are at a social rent. That’s the good news.

The bad news is the number of new build social rented homes has fallen year on year, from nearly 40,000 in 2010/11 to 6,800 in 2015/16 (with even fewer provisionally accounted for in 2016/17). The number of right to buy completions has been edging up since 2011/12, both when the financial crisis was bottoming out (and when low income households were more able to get mortgages) and when the government significantly increased the amount of discount a household could receive to buy their home. What’s more, as most new affordable homes won’t yet have a right to buy discount, we can safely assume these were almost all social rent homes sold.

Screenshot 2018-01-23 at 3.28.16 PM

So in 2015/16 more than 3 homes at sold under right to buy for every social rent home that was built. Even if you add affordable rent into the mix there are only 1,358 more homes being built than lost. And what’s more, whilst there should be 1 for 1 replacement of homes sold under right to buy, that has never been the case, looks like it will be a very long time until it is the case and if it does happen it will by and large affordable homes replacing social homes, thus adding little to the mix of truly affordable homes.

Put that another way, since 1991/92 there have been 215,000 more homes sold under right to buy than new social rented homes built.  That’s more homes than there are in Bradford.

This is also the case with affordable housing in parts of new developments. Where “affordable homes” are agreed as part of s106 agreements, they often either become “affordable rent” or an intermediate option that is most likely shared ownership. More councils are starting to accept payments in cash for off site provision in lieu of affordable accommodation, which at least means councils can build what they want but does lead to worries about the ghettoisation of “rich areas” and “poor areas”.

Of course developers are hit and miss when it comes to actually providing affordable homes as part of their developments. As part of the planning process they are able to argue that they cannot make their scheme viable with the level of affordable accommodation set by the local authority. This means they are able to negotiate, often significantly or to zero, the amount of affordable housing on the site. Of course every single site can be just about viable at the same time as the heads of the developments earn £100 million bonuses.

In fact it is fair to say that there is something more than a cottage industry set-up to help developers argue their case for lowering affordable housing requirements through the viability process. Perhaps we could call it a 6 bedroom, triple garage industry?

The recent government consultation on viability (amongst other things) goes some way to address this, effectively saying that the local plan is the place to be clear about viability of individual sites and once agreed there is little reason to change it. There are however a couple of issues with this. This first is that councils will take time to update their local plans (remember it is a process that is measured in years) so the current system will remain in each area until they have (or are at least approaching) a replacement plan. The second is that there will still be flexibility in the system (for example by judicial review on the reasonableness of individual decisions) for developers to tease open a loophole or two that they can then drive a bus through. Followed inevitably by bus lane markings and an open highway. Perhaps this is the world-weary cynic in me, but I fear the approach laid out there will lead us back to the same situation in 3-5 years.

Given that developers see having lawyers on a retainer as part and parcel of the industry, I would rather something that looks more like a hard to avoid tax than an easy to evade agreement. Yes, that might mess with their business case and yes, that will meant hey might have to change their modus operandi to suit the new circumstances. Given that might have as many positives and negatives it is a risk I’m willing to pay.

So councils are at the limits of what they can build, when they and housing associations do build they often choose (when they have a choice) to go for affordable rent. When developers build they often try to limit their affordable accommodation and when they do build it what is made is usually “affordable rent” or another type of intermediate accommodation. So where does that leave those who genuinely need truly affordable accommodation?

I fear trying to create a new type of rent level will just lead to another competing layer in the market. Removing “affordable rent” from what counts as affordable rented accommodation, especially under s106, would help restore some sense. Whilst councils are free to set terms in their local plan I think it would make sense for discussion on affordable accommodation to be based on what proportion of people in the local area could afford to live in the agreed accommodation. So if “affordable rent” stays, it could be renamed “rent that X% of people locally could afford to pay”.

Local authorities and most housing associations truly do want to build genuinely affordable homes, so giving them the powers to do borrow and build will make a huge difference in building of new affordable homes. Central government continuing the move away from “affordable rent” will allow councils and housing associations to build homes at a rent they think is appropriate and needed in their local area.

Finally, without wanting to sound like a scratched record, the bath will only fill if you put the plug in. Right to buy is leeching away truly affordable housing, giving some households a cash injection (when they sell the homes) and giving a number of private landlords an unearned field day as they swoop in, buy a former council home on the cheap and move in tenants paying market price. In a way, it would be better to give the tenants the discount to buy another house, at least then the landlord wouldn’t have to go through the cost of building a new property, although it wouldn’t help take the steam out of the wider housing market.

It would take many years for the total supply of social housing to dry up, but if we don’t look to do something more about it now then it could still happen. Given the need that clearly exists for affordable accommodation, that would be a huge mistake.