Welfare cap – government in retreat

November 30, 2010

On 4 October 2010 George Osbourne – in a keynote speech to the Birmingham Tory Conference – promised to introduce a welfare benefits cap.

“So, for the first time a cap on benefits. No family on out of work benefits will get more than the average family gets by going out to work.”

source

He didn’t cite a figure, but news sources pitched it the cap at either £20,000 or £26,000.

Note that’s not a cap just on Housing Benefit (HB), it’s a cap on a family’s total welfare benefits take.

In his budget speech later the same month Osbourne made the first move to introduce the cap, focusing just on HB. The plan was a £20,000 cap on HB to start April 2011 for new and existing claims.

Even this initial phase of capping welfare benefits has now had to be put back to January 2012 for existing claims. It looks almost impossible to me to add all the other welfare benefits into the cap.

My prediction is we will hear no more about a total cap on welfare benefits, the idea will stop with HB – and even then will be further watered down to allow ‘exceptional’ cases.


House price fall in 2011 impact on social housing

November 30, 2010

Yesterday the Office of Budget Responsibility (OBR) predicted a 3.1% fall in house prices during 2011. See table 3.6 here (large pdf).

While lower house prices are a good thing this will have an impact on social housing development. The major developing Housing Associations (HAs) are up to their necks in debt already: falling house prices reduce their ability to borrow to fund more development.

Additionally an expectation of falling house prices reduces the inclination of shared ownership tenants to buy out additional shares in their home (why buy now when it’ll be cheaper later). This reduces a major income stream for many HAs.


Open Thread

November 29, 2010

Say hello, chat, that kind of thing.


Consultation #2 – ‘Flexible Tenancy’ What is it good for? Absolutely Nothing! Say it again…

November 29, 2010

I’ve been looking at the Government’s proposals for a new ‘Flexible’ tenancy as described in section 2 of the current consultation document. I cannot see what the point of it is.

1) A Flexible Tenancy will enable social landlords to raise rents to 80% of the market rent.

Housing Associations (HAs) and other similar landlords currently use Assured Tenancies. These allow the landlord to charge upto 100% of the market rent as assessed by a Rent Assessment Committee.

Councils use Secure Tenancies and there are no legal restrictions on what rent can be charged. Ok, that’s not absolutely true: with the ring-fencing of the Housing Revenue Account (HRA) in 1988 council rents could be legally challenged – and occasionally were – as being too high or too low to balance the HRA. However, this is a moot point as the Government has announced the HRA ring-fence will be removed.

Currently both Housing Association and council rents are set using a National Rent Formula introduced by Labour in 2002 [check, might have been 2001]. The aim was for the different types of social housing to have moved to the same rent levels within 10 years. Traditionally HAs have had higher rents than councils. However, the National Rent Formula was not statutory. HAs came into line because otherwise they’d have no chance of getting development funding and from memory councils were bullied into it with the threat of revenue grant removal.

In the October budget speech George Osbourne announced the National Rent Formula was being ditched. So as it stands both HAs and councils can legally charge a full market rent for both new and existing tenants using the current form of tenancy. There is no need for Flexible Tenancies to achieve higher rents.

Normal people can skip this paragraph, but hardcore housing management / law shut-ins read on: the 1988 Act introducing Assured Tenancies is clear: when a rent rise is referred to a Rent Assessment Committee they assess if the proposed rent is above the market rent without considering any service charges being added to the rent. The consultation document does not make a distinction between ‘rent’ and ‘service charges’. As it currently reads when it talks about 80% of the market rent it is referring to both elements of what – in the private sector – is seen as simply ‘the rent’ as, for example, when calculating HB local reference rents or LHA median rents. It may be that Flexible Tenancies will end up requiring rent reductions, particularly in supported / sheltered / hostel / foyer accommodation, because of the service charges.

2) Increasing social housing rents will fund additional social housing units

Firstly, it might not be a good idea to move development funding from a grant where the Government can set an annual budget to the more open-ended Housing Benefit system. In the past where central government has said to social housing organisations “Hey, fill yer boots guys!” in this way the Government has had costs many times what they expected (for the housing geeks, I’m thinking of the 1923 Addision Act and the 2003 Transitional Housing Benefit / Supporting People feeding frenzy).

Secondly, there is no proposed mechanism in the consultation document to ensure social landlords use the additional rent income to develop new units. HAs will want to pay off existing debts, fund their appallingly inefficient maintenance programmes and bump up salaries which have been forced down for the last three years. Councils might well spend the money on lowering Council Tax or building swimming pools. For all the guff about localisation this is a serious gap in the Government’s proposals.

3) Flexible Tenancies will allow social landlords to move on wealthy tenants

The proposed Flexible Tenancies are fixed term. This is entirely unnecessary to move on tenants who have the means to provide their own housing but chose not to. That could be achieved more simply by adding an additional mandatory ground for possession to Assured and Secure Tenancies. For more discussion of this see here.

If the intention is to move all social housing to fixed term tenancies – and it seems that way – this could be achieved more simply with legislation to move councils onto Assured Tenancies and government guidance allowing everyone to use the Shorthold form of Assured Tenancies.

4) Flexible Tenancies give Housing Associaton tenants the Right To Buy

This is a bizarre proposal. If enacted, it will simply ensure – whatever other considerations – no Housing Association adopts Flexible Tenancies. Ever. End of.

5) Localisation

Now we’re getting into strange, unmapped territory here. It’s going to be left up to councils and HAs to decide whether they use the new Flexible Tenancies or stick with their existing form of tenancy. As an example of how wierd that is: the Government thinks it’s a good thing HAs should be able to decide whether their tenants get the Right To Buy. But not councils, apparently it’d be a bad thing if they could make the same decision. Except in Wales, where councils are likely to be able to suspend Right To Buy based on their local priorities. If you think about this too long your head may start hurting. Say what you like about Thatcher she’d have had no truck with this level of nonsense.

Essentially, I think the Government don’t know what they’re doing. They’ve rushed it, cobbling together a mixed bag of ideas and knee-jerk ideology without trying to resolve the contradictions. By pushing higher rents, no security and Right To Buy they’re expressing a knee-jerk instinct to make social housing look more like private rented accommodation. This instinct defeats the aim of their own exercise, which is to provide better social housing. Then they’ve filtered the proposals through the ‘Big Society’ localisation agenda resulting in some very mixed signals indeed.


150,000 more social housing units by 2015?

November 27, 2010

Speaking on Radio 4’s Today programme on Monday, 22 November 2010 Housing Minister Grant Shapps pledged a 150,000 increase in social housing units in the lifetime of the current parliament. I don’t think there’s any change the government will achieve even this modest target.

The government is cutting central government capital funding for social housing by roughly 50% – from £8.4 billion to £4.4 billion a year. Perhaps about half of the grant will be spent on new social housing, the rest on mortgage to rent, keyworker and shared ownership type schemes.

With £8 billion available about 25,000 new homes were started over each of the last few years. So the coalition government plans to invest enough to deliver about 10,000 units a year, or 50,000 over five years. The preceding figures are a bit of a guess but at least indicate Shapps is aiming a bit high.

Last year about 8,500 social housing units were sold for one reason or another. If the economy recovers this is likely to rise as Right To Buy sales pick up. There will also be other losses, eg, demolition of unwanted stock in some northern cities (although as the Pathfinder initiative has been cancelled this may be minimal). Let’s predict a minimal rise and say 10,000 units a year are going to be lost. Again, this is a speculative guess.

Taking the scratched-on-the-back-of-a-fag-packet figures above, the government is on course to deliver an increase of, er, zero houses by 2015 when the next election is due. Oh dear.

Ah, but what of the proposed 80% market rent allowed by new flexible tenancies – won’t that allow councils and Housing Associations (HAs) to unleash a new wave of building? Maybe, but I can’t really see it as currently proposed.

The big developing HAs were borrowed up to the hilt and relying on shared ownership buy-outs to keep afloat when the recession and housing price fall hit in 2007. For a while it looked like some of the real biggies – Places for People in particular – might be about to go belly up. There’re not in a position to take on more debt. Additionally, the proposed attachment of a Right To Buy to the new flexible tenancies will prevent HAs using these to fund development.

Local council finances are outside my expertise. In the early part of the decade when target rents were introduced to push up council rents they squealed “this will put up rents for our tenants and we don’t need the money!” But then when it came to bringing all their properties up to Decent Homes standard they squealed equally loudly “we can’t afford it can we need more time!” It is possible councils are in a position to fund their own development programmes but my gut feeling is not.

A slight curveball is there’s no legal reason I’m aware of to stop both HAs and councils increasing all their rents – including current tenants – up to 100% of the market rent. Some landlords may interpret the smoke from central government – encouraging 80% of market rent for new tenants – as meaning no objection to an across the board rent hike. This could certainly fund additional development although the Housing Benefit bill would increase by a fair old amount.

Meanwhile, outside the not-for-profit council and HA world there’s the private sector which has long wanted to get its hands on government social housing capital grants. I suspect the government is relying on these to step up to the plate and make up the numbers of new units. How realistic this is time will tell but surely tying Right To Buy in with the new flexible tenancies will make private developers run a mile?

So, here’s my prediction: the government will fail to provide Shapps’ additional 150,000 units by 2015 without putting in significant additional funding. They’ll need to bring the grant up to something like £6 billion a year. With the current grant social housing stock will stay static or increase only slightly.


Consultation #1 – The scam to end security of tenure

November 26, 2010

This is the first in a planned series of posts looking at the Government’s consultation document on social housing reform.

First up: security of tenure.

Security of tenure was introduced surprisingly recently for social housing tenants – 1980, by the first Thatcher government. It means tenants can stay in their homes indefinitely, unless they breach their tenancy agreement in some way (eg; not paying the rent, anti-social behaviour, eating their housing officer).

The Government heavily trailed an intention to allow social housing landlords to evict tenants whose income meant they could afford their own place to live. This was the talking point of the day for many politicians and commentators.

This is not what the consultation is proposing. All that would require is adding a statutory ground allowing a social landlord to claim mandatory possession having demonstrated the tenant’s means and income are above a certain level.

The consultation is proposing something entirely different: fixed term tenancies. The social landlord can then chose not to renew a tenancy for whatever reason they please. For example, currently if a social landlord is planning to demolish and rebuild a scheme they have an ongoing commitment to their tenants. With fixed term tenancies this is no longer the case. How convenient! You don’t have to be psychic to guess how many fixed term tenants will get rehoused and compensation if their home is being demolished.

Or central government can issue guidance – as the previous Government trailed at one point – not to renew tenancies for feckless claimants who’ve failed to secure employment. Or whatever they want. Social housing tenants will become a football to be kicked around at the whim of their housing officer, landlord, council and government.

Some might argue that’s a good thing, but at least let’s have an open discussion about it rather than sneak it in disguised as a measure to stop rich people living in social housing.


The Right To Buy Zombie

November 25, 2010

Just as Right To Buy (RTB) has died the Tories are proposing to extend it to Housing Association properties.

Since council tenants got the right to buy their homes in 1980 roughly 1.76 million in England alone have done so. It’s become a totemic policy for many. Those against it point at the asset stripping of valuable housing, those for argue it’s a route into home ownership.

Eyeball the graph below, however, and it’s clear that whatever the pros and cons, RTB has died. From a peak 160,000 sales in 1982 to 2,000 in the last couple of years, RTB is no longer having any great effect on stock levels.

1980-2010 English RTB sales

source

Compare the current 2,000 RTB sales to:

“There were an estimated 8,510 total social housing sales to sitting tenants in England in 2009-10, an increase of 16 per cent on 2008-09. The increase contrasts with falls in social housing sales in recent years and was due to an increase in sales of Registered Provider properties.”

source

Yup, that’s right: of about 8,500 sales most weren’t RTB. They’ll be stock rationalisation by housing associations, maybe shared ownership buy outs, that kind of thing. RTB now has an insignificant impact on stock numbers and that won’t change in the future. Looking at the trend it’s impossible to imagine council stock RTBs ever going about 10,000 a year, and even that’s unlikely.

To speculate some factors reducing RTB sales:
1) All the good stuff was sold first, what’s left is not an attractive purchase.
2) The tenants who wanted to buy have done so.
3) As the change to allocating social housing by need in 1977 worked it’s way through the economic demographic of council tenants has shifted downwards so are less likely to be in a position to buy or gain from buying.
4) Large scale stock transfers from councils to housing associations – beginning in 1987 – have gradually reduced the numbers of tenants with a right to buy.

Anyway, whatever the reason, Right To Buy is clearly dead.

Or is it? The Tories are now trying to spread the joy – or rampant loss of stock, depending on your point of view – to housing assocations:

http://www.telegraph.co.uk/news/uknews/8149855/Ministers-to-extend-right-to-buy-policy.html

Curiously they’re tying it in to their proposed flexible tenancies. Now, housing associations would do pretty much anything to avoid RTB. It’ll completely screw their finances to try and secure debt against an asset they may have to sell at a discount. As the Tories are making the new flexible tenancies voluntary – HAs don’t have to adopt them – my guess is they’ve shot themselves in the foot by proposing to tie in RTB. My prediction is this will be dropped at some point.