Report – Welfare Reforms will halt building of family homes

Inside Housing

The coalition government’s welfare reforms will prevent landlords from building family-sized homes, a report claims.

The impact of welfare reform on housing, published by the Consortium of Associations in the South East, says the combined impact of the government’s changes will be a ‘mismatch’ between housing demand and stock.

The government’s plans included capping the maximum benefits that can be claimed at £26,000 a year, and cutting housing benefit for tenants that are deemed to be under occupying their homes.

The report says unless the £26,000 cap is indexed for inflation the affordable rent model – where social landlords can set rents at up to 80 per cent of market rate – will not work for larger homes.

It also notes plans to pay housing benefit to tenants rather than landlords will lead to an increase in arrears and larger borrowing costs.

It says: ‘The combined impact of under-occupation rules, direct payments and the benefits cap is… likely to cause a substantial stock mismatch, while at the same time limiting the sector’s ability to address it.’

It says housing associations in the south east of England would have to re-build the equivalent of 7.5 per cent of their stock as one-bedroom properties to meet demand for smaller properties caused by the under-occupation rules.

CASE calls for two-bedroom properties to be exempt from the under-occupation rules, for a relaxing of the proposed £26,000 benefits cap for larger properties and for the scrapping of proposals for payment of benefit direct to tenants.

Guardian  Brain Johnson

Moat and our fellow members of the Consortium of Associations in the South East (CASE) have launched a paper on the impact of welfare reform. Some might argue that the paper needn’t contain more than one word: unmanageable. And I’d agree.

We’re certainly not against welfare reform. The system should exist to help people back to work and stability. Right now, it is in need of serious enhancement to do this as effectively as it should. We also support some tightening of the public purse strings – times are tough and every organisation, whether public or private, should be striving to achieve value for money in all endeavours. The challenge for the housing sector is ensuring that these savings provide resolutions for the long term, and not simply short-term fixes.

According to proposed reforms, we would need to rebuild 7.5% of our existing stock as one-bedroom properties to correctly house everyone deemed to be under-occupying. If we take this deficit and apply it across England, we are facing a shortage of around 112,500 one-bedroom homes by April 2013.

This means that housing associations would have to build nothing but one-bedroom homes for the next two years just to make up the shortfall.

The fact that projected savings are worked out on the assumption that people won’t move is a bad sign. We would have no problem with an initiative that genuinely sought to get the greatest efficiency out of our housing stock – think there are ways of doing that. What we don’t want is a situation where short-term savings are used as the primary determinant for measuring the merit of a policy.

As an example, I doubt very much that anyone behind these reforms intended to encourage the development of more one-bedroom properties. Aside from the impact on build programmes, one-bedroom homes aren’t practical; younger couples soon outgrow them once they start their own families and older people often require live-in support.

Nationwide, these proposals on under-occupation will lead to a severe shortage of the “right size” homes for people, which will mean that many will begin going into debt on 1 April 2013. Surely, punishing people when they want to do the right thing but are unable to cannot be regarded as good public policy.

Equally, I don’t think the real impact of direct payments is yet fully understood. We know from previous experience that the removal of direct payments will lead to higher levels of arrears. The associated bad debt will increase the cost of borrowing for housing associations, as lenders move to manage the increased risk. These additional costs will need to be balanced by increased subsidy for each new home if current development levels are to be maintained. However, logically assuming that only a fixed amount of subsidy is available for housing, the consequence is that fewer homes will be built.

We’ve modelled this across the CASE group and found that the impact will leave 200 homes unbuilt for each £100m borrowed. This is on a relatively conservative assumption of a 2% increase in the cost of borrowing.

Nationally, the total reported borrowing facility for the sector is £63.7bn. A total of £53.3bn is currently drawn, leaving £12.4bn undrawn. If we apply the numbers above, this leaves approximately 106,000 homes unbuilt (according to current figures on drawn funds), all as a result of the implementation of direct payments.

The question for the government must therefore be: is a point of philosophy worth such a loss of capacity? Given where we are at in economic terms, it is difficult to see how the answer could be yes.

This is only a summary of the effects of just two of the proposed reforms on housing, but I hope it’s sufficient evidence to make others take notice. I think it’s pretty telling that nine of the biggest housing associations in the southeast felt strongly enough to come together to share our thoughts. The paper we’ve written isn’t based purely on business concerns; these reforms could have negative social repercussions that will make it more difficult – not less – to encourage people back to work. The bottom line is that if the final welfare reform act reflects none of our sector’s concerns, we will soon be facing a much greater housing crisis than the one we’re dealing with today.

Sub-letting Council Housing – Fraud? – Who Benefits and Who Gains? @grantshapps

Grant Shapps is proposing to make subletting of council and housing estate tenancys a criminal offence.  He regularly describes it as ‘fraud’.

Today the Sunday Telegraph reports research showing perhaps as much as 10% of London tenancys are sub-let.

Im going to be dangerously contrarian here – who really loses out.

Clearly there is a sense of moral outrage that a house build for an affordable tenancy and paid for with public money is being rented out at market rates.  But surely the issue here is allocation policy, someone ‘gamed’ the policy to show they were in housing need when in fact they were prepared to share or take other cheaper accommodation.  The allocation policy itself is the issue and none can be perfect because the demand to ‘defraud’ only exists because of the market distorting effects of restricting the renting out of social tenancys.

What would happen if this 10% were evicted, where would they be rehoused, and at whose expense?

This is the key issue.  There is no defrauding of the public purse because the social landlord is getting the same rent it always would.

In terms of losers and gainers the original tenant gains the rent they get paid and loses out the rent paid (in any) in their alternative accommodation.

The private rented sector loses out the rent they would otherwise have received from the person now taking the social tenancy as a private rent because otherwise they would have been in the private rented sector and gains by the amount of rent the original social housing tenant pays.

The new tenant gains by the difference between the rent they pay in the social tenancy and the rent they would have paid privately.

Without getting too deep into calculus and housing economics it can easily be demonstrated that what the subletting does is transfer some of the the economic rent / unearned income from the private landlord to the social tenant and his/her tenant.

If the sublet didnt exist then private rents would rise, for the very good reason that it increases supply by reducing overoccupation in the social sector and increasing efficiency of occupancy of supply.

The higher rents would also require increased housing benefit.

Evicting 10% of social housing tenants and then dealing with the fallout from homelessness would also be a burden on the public sector.

So to be contrarian perhaps the most cost effective policy would not be to criminalise subletting but authorise and encourage it.

After all it is simply giving to the poor the same economic benefits of private sector rentiers – which was the aim of the original tory ‘right to buy’ policy.

This might strike you as morally wrong but how is it any different in welfare economics terms to providing discounts to rights to buy?  This is simply another policy of transferring rentier income to a wider base.

Before criminalising such a widespread activity – which would make the law impossible to enforce, perhaps the DCLG should do a full economic impact assessment and cost benefit analysis.  The results mights surprise them.

A much more effective policy would simply be to tax this income as unearned wealth, yet again the core issue is the distribution of wealth earned from land.

 

Shapps to back ‘freespace’ project to help elderly downsize

Telegraph

Grant Shapps, the housing minister, said councils should offer to help pensioners move to more suitable accommodation to create space for families.

Local authorities would then take over responsibility for maintaining and renting the vacated properties at affordable rates, transferring any profit from the rental income back to the elderly person or their estate. The Government believes the proposal would provide support for the elderly to move without having to sell their homes at a time when there is a shortage of affordable housing for young families.

Research released last year estimated that 25million bedrooms in England were empty, largely because elderly couples do not move out of family homes to smaller properties.

At the same time, young families are increasingly being squeezed into small homes and overcrowded flats as a result of the country’s high property prices.

A government-backed pilot scheme run by Redbridge council, in east London, has won support from the Department for Communities and Local Government for helping elderly residents to downsize while retaining ownership of their homes. Mr Shapps told The Daily Telegraph that councils should look to replicate the Redbridge “FreeSpace” project. “For too long the housing needs of the elderly have been neglected,” he said.

“Older people who should be enjoying their homes have watched helplessly as their properties have become prisons, and many have been forced to sell their homes and move into residential care.

“With nearly a fifth of our population expected to be over 65 by 2020, radical and urgent change is needed to ensure the nation’s housing needs are met.” Mr Shapps said the FreeSpace project “shows what can be achieved” and illustrated that helping some older people move to more suitable accommodation can make a “life-changing difference”.

“They can live independently for longer and enjoy more disposable income without selling their home, and other families can benefit from living in an affordable home,” he said.

Many homeowners with large properties and modest incomes are unable to downsize without selling their homes.

Government analysis of the Redbridge project suggested that 200 people in the borough were considering moving, but felt that they could not afford to. Under the scheme, the council helps elderly people move into a new property such as sheltered accommodation. The local authority foots the bill for moving costs, renovations and financial advice.

In return, the council is able to rent the house to families in need and manage that tenancy directly. A four-bedroom house managed by the council would be rented at a typical rate of £1,300 per month, £300 less than the average market rate for a privately rented home.

Pensioners who take up the council’s offer use the rental income from their former home to pay for their new accommodation. Lower council tax, utility bills, and the income from their former home mean they can save more than £7,000 a year. Analysis of the project, conducted by Cambridge University, said the Redbridge scheme was “financially astute”.

“There are clear financial gains for the owner-occupier and family from this arrangement,” the report said. “There is also scope for the council to charge a rate of interest on its investment as the margins would allow this.”

The report said the scheme could be funded using “social impact bonds”, the Coalition’s new method for attracting private-sector investment in public projects which provide a social benefit.

Shelter – Empty Homes Empty for a Reason – Guardian

Homelessness charities say £50m empty homes fund is insufficient

The government has pledged £50m for councils to take over and refurbish empty properties, but charities warn this alone will not solve the housing shortage

Homelessness charities have welcomed extra government funding to bring empty homes back into use, but warn that the move is “only a small part of what is needed” to solve the shortage of new homes and reduce rough sleeping.

Last week, the government announced a £50m fund to help councils take over and recommission some of the 930,000 homes believed to be empty. The fund is targeted at areas where the collapse of housing-market renewal schemes has led to large numbers of empty homes. A separate £100m programme of empty-homes grants will pay towards the costs of getting privately owned empty homes back into use, with the properties then let at an affordable rent.

Charities say, however, that this is positive – but more action is needed to ease the housing crisis. The charity Empty Homes says that while there are about 730,000 unused properties in England and 930,000 across the UK, there are 1.7 million families on waiting lists for social housing in England and 2 million in the UK.

Campbell Robb, the chief executive of {Shelter sic], said: “With someone losing their home every two minutes, our housing crisis has never been more urgent. As the most visible sign of housing waste, empty homes are an emotive issue. But while bringing them back into use is a positive first step, it only scratches the surface of the homes we need. The majority of homes are only empty for a short period of time between sales, so we need to focus on the long-term empty properties that blight neighbourhoods.

One problem is that areas with a glut of empty houses aren’t always the areas where homes are most desperately needed, or where jobs are available. Some towns have plenty of empty homes but high unemployment, whereas in the south-west, bringing empty homes back into use would meet just 1% of new demand for homes in the next five years. “There are often practical problems too: empty houses may be in severe disrepair or badly situated, or the owner might not be traceable. It would be impossible to completely eradicate empty homes – some are empty because their owner is in long-term care, or there are disagreements over legal ownership.

“It’s fundamentally wrong that homes should stand empty while families are desperate for somewhere to live. But it’s easy to be seduced by the idea that this alone can solve the housing crisis. We can’t ignore the fact that we have to build more homes, as well as recycle them.”

Howard Sinclair, chief executive of Real Lettings, the lettings arm of London housing charity Broadway, said that many people on low incomes and benefits could not afford to rent homes even when they were brought back into use because of recently introduced housing benefit caps. “The idea that by filling empty homes we can meet the gap in social housing is a simplistic one. It is part of the answer – but only part. Alongside enabling local authorities to bring empty homes into use, we need a coherent strategy about how people who need social housing can access it both in terms of making properties available and also them having the money to pay for it,” he said.

“By the Department for Work and Pensions’s own figures, already 48% of people receiving housing benefit have a rent shortfall because their net rent was more than the housing benefit applied for – and this proportion is set to rise significantly as benefit changes kick in.”

The warning comes in advance of new statutory homelessness figures, due out on Thursday, which are expected to show a steep rise.

David Ireland, the chief executive of Empty Homes, said the government was setting a “rather timid target” of getting just 3,300 empty homes into use through the announced measures. But he said that local authorities could probably achieve much more: “Wakefield council, for example, has announced a new loans fund to help owners of empty properties that can’t get bank loans. The fund is financed by rewards the council gets for getting empty homes back into use and aims to help owners of 3,000 empty homes. It’s a good example of a council using one of the government’s new measures and stretching the benefit.”

16,000 affordable homes could be lost due to s106 renegotiation – Inside Housing

Inside Housing

Councils could be forced to sacrifice 16,000 affordable homes after the government said they should ‘reconsider’ existing planning deals.

On Monday prime minster David Cameron announced the government’s long-awaited housing strategy which contained proposals to require local authorities to reconsider section 106 agreements put in place in ‘more prosperous’ times before April 2010.

The housing strategy, which Mr Cameron described as a ‘radical’ way to ‘get Britain building again’, estimates that there are 82,000 homes in stalled schemes across England which would benefit from renegotiation with developers.

Of these 82,000 homes, 16,000 would have been affordable, according to the National Housing Federation – the same number of homes the government hopes to see built through a separate £400 million ‘Get Britain building’ investment fund to kick-start frozen developments.

The NHF said the policy, which will undergo consultation, was likely to force councils to scrap affordable housing obligations to get stalled schemes moving.

Cameron Watt, head of neighbourhoods at the NHF, said: ‘We are very concerned that since renegotiation was first encouraged in the plan for growth in March, there seems to be a trend of some local authorities allowing private developers to drop section 106 affordable housing deals too easily.

‘The government should make it clear that there are some planning standards, including certain affordable housing requirements, that should not automatically be waived as a consequence of viability concerns.’

Jamie Sullivan, principal planner at consultancy Tetlow King, said councils were already renegotiating section 106 agreements. ‘Affordable housing contributions are often a lot larger than other section 106 planning agreements,’ he said. ‘Developers will be looking at reducing [affordable housing] contributions, but it depends on local authority priorities.’

While many in the social sector welcomed the strategy’s focus on using housing as an economic driver, it was also criticised for being weighed towards the private sector as well as lacking detail. As tipped by Inside Housing last Friday, the strategy contained plans to help communities with larger scale development, to free up public sector land for house building, and a mortgage indemnity scheme for new build properties.

The £400 million investment fund will support building firms in need of development finance, unlocking progress on stalled sites.

An extra £50 million was also found to help bring empty homes back into use – as well as reiterating development incentives such as the new homes bonus and plans to invigorate the right to buy for social tenants.

In addition, it outlined plans to help communities which want to allow larger scale developments – such as garden cities – with funding for projects to be announced next year.

A Policy Exchange report published this week, which gave a nod to next week’s government growth strategy, argued that developers should be able to pitch for the creation of new garden cities close to existing cities.

Shapps is losing Credibility as Housing Minister – Brickenomics

Brian Green

Housing completions in England in the third quarter of this year at just 24,250 were the lowest in a generation or two at least.

The Government can hide its shame a little by pointing to the seasonally adjusted figures which show completions in the final quarter of 2010 were lower.

This still falls within the current Government’s time in office, but they have some room then to blame their predecessors.

While a decline in the social sector might be expected, the figures also show that starts and completions in the private sector have stalled and appear to be heading into a gentle decline again.

These figures perhaps explain the recent increase in noise about a housing strategy and the need to rejuvenate house building.

But one important question that comes to my mind is whether or not the housing minister is losing credibility.

I ask this because in May this year Grant Shapps was quick to crow when housing completions and starts were on an upward curve. That now looks rather hasty.

His implication was that his policies were working. Indeed his comments were highlighted in a tweet from the Communities department.

He seems to have badly misread the data, as I and others warned at the time.

But having made great play of the figures then he has been almost studiously quiet on the latest, and arguably more important, set. He is a prolific user of twitter, but he has not felt it necessary to tweet on the numbers by which he himself says he will be judged.

This all rather lays at his door the criticism of being a fair-weather minister.

The industry and the nation needs more.

Kipling comes to mind.

Humphrys Shafts Shapps on 99% fall in affordable house building

Interview here

Telegraph

Grant Shapps in on-air ‘meltdown’ over housing figures

Housing minister Grant Shapps angrily rejected claims he attempted to bury bad news on house building with a major policy announcement as he accused the BBC of a “misleading” report during a live interview.

Listeners heard Mr Shapps enter into an extended on-air row with John Humphrys, presenter of the Radio 4 Today programme, over the suggestion that he avoided an earlier pre-booked interview about the issue.

Mr Shapps was asked by Mr Humphrys about figures showing that the number of social homes being built in England had slowed to a trickle – which were published the day after the Government made a major house-building announcement.

But before they could begin a discussion, the minister insisted on challenging the programme’s claim that he had failed to honour a booking for an earlier interview – in a row lasting several minutes that was quickly dubbed a “meltdown” on Twitter.

He said the first he had known of the planned slot was the evening before when he told his advisers would be “difficult” as he was going to be on the train to Stoke.

However, Mr Humphrys maintained: “There was a booking with your staff which never happened.”

Mr Shapps retorted: “It gave a wrong impression to the listeners.”

The minister was appearing on Today after figures from the Homes and Communities Agency showed that the number of “starts” for social rented, low cost, or total affordable housing had fallen dramatically.

Figures dropped from 39,136 between October 2010 and March 2011 to 1,746 from April to September this year.

They came out a day after a ministers had announced a series of measures designed to revive the housing market, including measures to help property builders, including a scheme to underwrite mortgages.

The move has raised concerns with the UK Statistics Authority.

Mr Shapps defended the Government over the figures, saying that many more homes were in the pipeline under a new housing programme, which would be reflected in much-improved figures in another six months.

He denied that he had seen the numbers ahead of the flagship announcement and told Mr Humphrys: “Frankly I think you have given a very misleading report by trying to suggest I have avoided an interview and that we knew about these figures.”

In September, David Cameron criticised the BBC over its coverage of the summer riots, saying it had tried to “mush” them together with other ills in society.

UK Statistics Authority to look into timing of 99% fall in Affordable Housing Stats

Mark Easton

“One or two people are not overly happy…”

I have just taken a call from an official at the Department of Communities (DCLG) followingmy post on the housing stats yesterday and my appearance this morning on the Today programme.

I am told that ministers reject any suggestion that they timed their big announcement on building affordable homes to come 24-hours before the worst-ever statistics on building affordable homes.

However, my observations on the fanfare for a set-piece political release one day before the quiet publication of pertinent and troubling official statistics have led the watchdog UK Statistics Authority to say they are “looking into the issues raised.”

The senior DCLG official who called me said that the timing of the housing strategy had been decided, not by a wish to pre-empt some horrible data, but by the demands of the prime minister’s diary and his desire to mention housing in his speech to the CBI on Monday.

“I can honestly say that at no time did the publication of house-building statistics the next day have any bearing on when to put out the housing strategy,” the official told me.

My question to him was: “Well, shouldn’t it have?”

The point is that the DCLG were told on 19 October that new house-building figures would be published this week. Because of changes to the way contracts for affordable housing projects are conducted, they had very good reason for suspecting the statistics would look really bad.

And yet, they insist that at no time in discussion with Downing Street officials on the release of the housing strategy did they even mention the imminent arrival of official and grim building stats.

“We are damned if we do and damned if we don’t”, the official complained. “If we had managed it so that they were not at such close quarters then we could be accused of undermining confidence in statistics and trust in politicians.”

That may be true, but in considering the timing of political announcements like the housing strategy, should ministers not think long and hard about the possible perception that they are also news-managing the publication of official statistics?

One could argue that the release date of major government reports should have less to do with No 10’s desire to get a quote from the PM in the papers and more to do with ensuring we have the most informed public and parliamentary debate.

The 97% fall in Affordable Housing Starts – Inside Housing

Jules Birch

When Grant Shapps and David Cameron told us on Monday that ‘builders aren’t building’ I hadn’t realised that they meant it quite so literally…

Everyone was expecting a fall in affordable housing starts as Labour’s programme ran down and affordable rent got going but hands up who expected a fall of 97 per cent?

Yet that’s exactly what happened according to Homes and Communities Agency (HCA) statistics released yesterday with so little fanfare that nobody noticed until Éoin Clarke posted this blog.

The figures are so extraordinary that they made me wonder more than once if they were a hoax. Between April and September 2010 there were 13,626 affordable home starts. Between April and September 2011 there were just 454. That’s not a misprint: 454 (259 for social rent and 195 for low-cost home ownership).

The HCA explains that the figures were impacted by the closure of three Labour programmes (the NAHP, Local Authority New Build and Kickstart) and that the new Affordable Homes Programme will deliver starts on site in the second half of 2011/12. In other words, I’m guessing part of what we’re seeing is the effect of delays in signing Affordable Rent contracts.

Yes, there are all the usual caveats about the stats on starts and completions – exactly the sort that have led to claim and counter-claim from Jack Dromey and Grant Shapps over the last few days. Yes, starts will pick up in the second half of the year (even though they will not really deserve the tag “affordable”).

But a fall of 97 per cent?

Is it just coincidence that these figures were released the day after that ‘radical and ambitious’ housing strategy? That the pre-release access list for the HCA statistics includes several people at the DCLG including the special adviser to Eric Pickles (under Cabinet Office rules pre-release means a maximum of 24 hours before)? That a figure that would have been quoted again and again in Monday’s news coverage only emerged 24 hours later?

‘not a stellar amount’ of new funding in new housing strategy to be announced Monday – Inside Housing

Inside Housing

Prime minister David Cameron is expected to announce new funding and plans to build up to 450,000 new homes in the government’s long-awaited housing strategy.

After a series of delays, Mr Cameron is expected to announce the strategy early next week. Sources close to the government said it was set to include a pledge to build up to 450,000 homes by the next election as part of the ‘house building revolution’ Mr Cameron promised in September.

It is understood that the strategy, which will mostly weave together existing policies, will allocate new cash which a government insider described as being worth ‘a few hundred million’.

Inside Housing understands there were ongoing inter-departmental discussions this week about the final contents of the strategy and how the money should be split across building new homes, a mortgage scheme and tackling empty homes.

Although the source warned the new cash was not a ‘stellar amount’, it is significant given many in the sector had expected none at all.

The Chartered Institute of Housing warned on Tuesday that the strategy could just be ‘a series of strong articulations of what’s [already] been announced’.

However, new announcements are thought to include: plans for ‘light touch’ regulation of the private rented sector; the release of more public sector land; moves to attract institutional investment into the affordable housing sector; and a call for new companies to enter the affordable housing sector.

One of the most eagerly awaited parts of the strategy for councils is likely to be an accompanying consultation on the government’s proposed revitalisation of the right to buy which will see it replace every sold home and build 100,000 new affordable homes at 80 per cent of market rates.

The consultation will reveal the level of discount available to tenants wishing to purchase their home and a broad outline of how sales receipts will be distributed.

It is understood the document will suggest that the Homes and Communities Agency administer the receipts. The council which sold the property will see the debt associated with that property paid off and have priority for the receipts, which will be used to build new homes.

This would represent a partial victory for councils. The Local Government Association has argued that the alternative, national pooling of receipts, would reduce the amount available for investment in housing and impact the new system of self-financing, which begins in April.