Housing lobbies

Yesterday I attended a meeting organised by the National Housing Federation where a number of public sector housing groups came to lobby MPs.

Their gloomy presentation was based on the usual precepts that state direction and control and more use of the state cheque book were the only possible answers to a problem. We were told that the cuts to Housing benefit, the removal of regional planning and housing targets and the level of public funding were all bad decisions which stood in the way of a good housing policy.

In the discussion which folllowed it was good to see some newly elected MPs cut through their two central propositions that all that was needed was more public cash and more central control to solve the problems. It was also good to have an old fashioned meeting about the issues with some disagreements and differing views in a Commons committee room, instead of the informal meetings with drinks or running buffets available that were so common in the Labour years. It emerged as we questioned the panel of presenters that:

1. Current new public sector housing provision costs more than it need do thanks to the rules and bureaucracy surrounding its procurement

2. There are substantial numbers of empty homes already owned by the public sector which need to be brought back into use

3. Subsidising people rather than houses makes more sense. If you subsidise houses people living in them may get better jobs and good incomes but you cannot withdraw the house subsidy.

4. There are problems with a small minority of tenants whose anti social behaviour disrupts neighbours. The Housing Association representatives complained about courts and legal enforcement standards

5. The current policy does not allow sensible incentives to be offered to people in social housing to encourage a move to smaller homes when their families have left home

6. New home building hit new lows during the easy spending Labour years, so even Labour did not in practise think they could build their way out of the problem.

I pointed out that around half of those living in rented accommodation would prefer to buy but cannot afford to do so. We need more pathways into home ownership, assisted by more shared ownership and easier purchase schemes.
The aim of housing policy should be to offer more people the choice and security which ownership brings. For all those approaching retirement it is especially important to lift the need to pay rent for the rest of their lives. The poorest of our society end up paying the most for their housing at the end of their lives when they can least afford it. We should look again at schemes like the proposals I put forward to help members of the armed services own a home whilst on Her Majesty’s service, so they have some housing equity when they leave the forces.

I know many of you think that UK house prices are still too high, thanks to the mortgage soaked credit binge that the government and Central Bank allowed or encouraged 2002-7. That is a topic we have debated often before. Today I want to concentrate on how much the government and its quangos should do, and what is best for social housing tenants.

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37 Comments

  1. Posted September 16, 2010 at 8:41 am | Permalink

    >>There are substantial numbers of empty homes already owned by the public sector which need to be brought back into use

    Is there any information about the location of these? Are they in areas of high demand or low demand?

    Are there any rules that prevent money going towards new building if an area has an unacceptable number of these out of use houses?

    If a public sector house is out of use for long enough can the local authority in charge of it be forced to offer it to the private sector at a reasonable price?

  2. gyges
    Posted September 16, 2010 at 8:51 am | Permalink

    Encourage squatting. (I do not encourage illegal squatting, but do think in the case of run down public sector housing we could renew the policy of homesteading, allowing people to do them up and acquire them at knock down prices to reflect their effort and the low value of the home in its original condition-ed)

    There are two properties close to where I live. One a run-down boarded up shop right in the centre of the village; it has been like that for at least twenty years. If it had been squatted it could either been someone's house or a shop, both a welcome contribution to the village.

    The other property is a brick warehouse. Again, it could house a number of people. The property is there, it isn't being used; nor has it been used for years.

  3. JimF
    Posted September 16, 2010 at 9:03 am | Permalink

    "The aim of housing policy should be to offer more people the choice and security which ownership brings."
    But to do this either house prices must come down or wage levels must rise. If your Government follows Labour into more QE, this combined with a hefty devaluation of Sterling will eventually bring about the latter solution. I believe this is the most likely, though least preferable, course.
    Regarding your other point about the supposed joys of shared ownership schemes; frankly if you can't afford to buy a house, then don't. Buy a flat or smaller house, or rent one. These schemes just add extra layers of complexity to buying/renting a house which keeps this credit-fuelled edifice from toppling over as it should do in any normal market situation, and keeps buyers from moving on with sensible equity later.

  4. DBC Reed
    Posted September 16, 2010 at 9:07 am | Permalink

    Worth a try to side step the issue but the fact remains that nothing can be done with the housing market while house prices remain over-inflated to this ridiculous extent.There does appear to be a consensus emerging on this at long last.
    Nothing wrong with a binge of cheap money if it had been spent on fixed price consumer goods and not land which is used as a collectible that makes money "even as its owner sleeps" as JS Mill said hundreds of years ago.
    You might have pointed out in your remarks about the Labour leadership election
    that Andy Burnham is recommending the very tax solution (LVT) that Mill recommended.In fact Mill's line in the sand LVT or start from the present land price level and tax only upward price movements is probably still a bit more sophisticated than Burnham's which would recover some past land price increases to general consternation.(The updated Mill LVT called the Sentinel Tax tracks house price movements against cheap -money Keynesian stimuli and when land price inflation occurs kicks in with LVT unlike now when they halt the Keynesian stimulus stop-go style)

  5. Iain Gill
    Posted September 16, 2010 at 9:29 am | Permalink

    I would add the a coherent immigration policy is needed, and some substance to the election promises on immigration, without these housing policy is a nonsense

  6. Posted September 16, 2010 at 9:40 am | Permalink

    Land Value Tax would sort all this out. It's then just a question of which existing taxes should be scrapped, whereby the starting point should be "All of them."

    • Mark
      Posted September 17, 2010 at 10:02 am | Permalink

      Who will pay the LVT for public housing? What incentive does that provide to tenants unless their rents reflect market pricing?

      • Posted September 18, 2010 at 5:42 pm | Permalink

        If in doubt, apply commonsense:

        1. There is little point in making the state pay LVT itself (although for accounting purposes it is useful to disclose notional income and expenses, which is what the official statistics already so).

        2. The total market rent for a house = rent from bricks and mortar + rent for location. LVT would be equal to or slightly less than the rent for the location. So even if social tenants aid half market rents, this would cover the location rent element in most cases.

        3. I would be quite happy to see social tenants charged market rent – but that would mean that a lot more social housing has to be built to get marginal prices down to what even low income people can afford.

        4. Failing that, we could set social rents at a % of the income of social tenants, e.g. twenty per cent, which could be deducted via PAYE system.

        • Mark
          Posted September 20, 2010 at 9:46 am | Permalink

          So we have the State with a tax advantage that hides it from the economics of the private sector. Moreover, social tenants are to be charged income tax, not LVT at all, while their rent doesn't cover the cost of upkeep and repair (who will pay for that if a private social landlord is paying LVT?).

          It seems to me that common sense and LVT don't go together too well where social housing is concerned.

  7. Kevin Peat
    Posted September 16, 2010 at 9:46 am | Permalink

    It doesn't help that our country is over populated and it's getting worse. This is affecting demand/supply ratios.

    No serious debate on housing (or the provision of any other resource for that matter) can take place without including the subject of immigration.

    The Tory party has refused to act on a clear mandate given by the British people to stem immigration, so I don't see much point in discussing this subject.

    • Mark
      Posted September 17, 2010 at 10:00 am | Permalink

      I see some signs of intent to reduce immigration, but legislation has been back-burnered while legislation we don't need now on AV etc. is pushed forward. After all, there's supposedly nearly 5 years until the next election.

  8. P Haynes
    Posted September 16, 2010 at 10:43 am | Permalink

    Put social housing rents up to market value and use the additional rents to pay benefits to those who need them. Tenants who need help get it through benefits anyway.

    Otherwise people with never chose to give the flat as it is free money and will remain trapped in the one location. Give the financial help to the tenant and let them choose their landlord.

    Why should a typical worker taking home say £400PW have to pay £200 PW for a private sector market value flat when someone else pays £60 for a similar one. Leaving one with £340 free income and the other with £200 when both should, to be fair, be in a similar position.

  9. Daedalus
    Posted September 16, 2010 at 10:47 am | Permalink

    We bought our current house in 1989 for £95,000, with a huge £50K mortgage, at that time our combined income was about £30,000. Just before I was made redundant our combined income was around £78,000. The house is now "worth" about £350,000 (at the height it would have been more like £450,000) based on other houses currently up for sale locally. We could not now afford to buy our house (even if I was still in work) unless we took out a 4 times mortgage. To me, as I have been saying to anyone who would listen for years, if you cannot afford to buy the house you live in, then there is something seriously wrong with house prices. There really needs to be a serious correction still, another 25% to 30% maybe needed and the old 2.5 times your income needs to come back. Far too much of our money is tied up in bricks and mortar, or stone in our case. Our kids will never be able to get onto the property ladder at current prices, and now the first has gone to Uni I dont want them comming back. A house price realignment will be very painful for us (its some of our poor pension) but at least in the long run the country and my kids will be better off.
    Daedalus

    • Kevin Peat
      Posted September 17, 2010 at 10:00 am | Permalink

      Something seriously wrong ?

      Yes.

      Rocketting house prices are a sign that people are getting poorer and not richer. For all the benefits of modern gadgets (bought on credit I hasten) most of us are having to live in much smaller spaces than our parents did. And the single income family ? An impossible dream for most.

      Throw open the borders, relax the control of credit … hey presto ! A property backed spending boom in which everyone gets stretched to the limit whilst deluding themselves that they are getting wealthier.

      This is how Brown and Blair got away with it whilst ruining our economy and our international standing.

  10. Lola
    Posted September 16, 2010 at 11:11 am | Permalink

    For all those approaching retirement it is especially important to lift the need to pay rent for the rest of their lives. False. Owning a house outright has an opportunity cost. The money tied up in the house is money an owner could invest into income producing assets to pay an income. Very roughly a properly set up fund will produce about 4% per annum in your hand for ever. Hence someone owning a 150,000 property (roughly national average house price) is foregoing £6,000 pa by owning. That's £500 per month. Round here you can rent a decent house in a reasonabe area for that. (con't:)

    • Lola
      Posted September 17, 2010 at 2:58 pm | Permalink

      erm? The second half of my piece hasn't been posted. has it been lost?

  11. simon_555
    Posted September 16, 2010 at 12:51 pm | Permalink

    We need fewer shared ownership schemes. They should be a last resort for the truly desperate. I don't want to see shared ownership becoming the normal way to purchase property as is slowly becoming the case, this is dangerous and will only serve to give property prices a big boost.

    The very fact we have these schemes shows that something is drastically wrong with affordability. They only serve to exacerbate the real problem.

    • Mark
      Posted September 17, 2010 at 9:56 am | Permalink

      Shared ownership should be abolished. It's simply a way to fob off unaffordable property to those who can't afford it and keep the property boom inflated. If they can only sell it for half price, then the HA should write the value down to half price in their balance sheet.

  12. Michael Read
    Posted September 16, 2010 at 1:19 pm | Permalink

    Any chance of a return of Right-to-Buy and its extension to housing association tenants?

    Ban social housing landlords entering into partnership agreements with contractors. These partnerships are monopolies. Repeal QLTA – or qualifying long term agreements – in the 2002 act.

    Insist on competitive tendering.

  13. Michael Lewis
    Posted September 16, 2010 at 3:30 pm | Permalink

    "to concentrate on how much the government and its quangos should do"

    Government should do nothing. Apart from ask the BofE to set interest
    rates to ensure 2-2.5% inflation.

    Won't happen.

  14. a-tracy
    Posted September 16, 2010 at 4:08 pm | Permalink

    You could set up a website for people to report directly to the government social housing that is left empty for months on end so that Mr Pickles dept can take it up directly with the Councils concerned. I know of a three bedroomed large council home where a young man was moved out into a one bedroomed flat over a year ago yet his old home he shared with his elderly mother is still left vacant. I agree with his being moved into a smaller property and now he is used to it he can manage the bills better, it helped the Council because he is in the second floor of a maisonette and not many elderly residents want the upper floors.

    Sensible incentives are to re-carpet and cushion floor retirement type homes – repaint and make nice and show potential downsizers around as though they were buying and offer to relocate them for free, re-homing some of their unwanted furniture.

  15. Will J
    Posted September 16, 2010 at 5:29 pm | Permalink

    How can you subsidise the person without disincentivising work? Also, please can you link to the posts where you've made your argument about house prices not being too high? Thanks.

  16. whistle
    Posted September 16, 2010 at 5:45 pm | Permalink

    If we were to stop immigration into this Once Great Country of ours,then the need to build so many new houses would diminish.As you say,there are simply thousands of homes standing empty.

  17. John Laity
    Posted September 16, 2010 at 9:16 pm | Permalink

    The problem with housing is that it is a means to make money, rather than a means to shelter. What this means is that at the top of the market you have duck ponds and land…at the bottom you have housing nobody in their right mind would want to live in.

    Everybody aspires upwards.

    HRH Price of Wales has delivered viable and sustainable models for the built environment, where people at all levels of earnings can build communities in which they want to live. Both assisted, rented, leased and owned property coexists.

    Unfortunately too many Local Authorities focus on procurement and provision. Forgetting that affordable housing and association properties do not deliver communities.

    Government should step up to the Challenge HRH sets it ;0)

  18. Mark
    Posted September 16, 2010 at 10:56 pm | Permalink

    There is a large demand for social housing, simply because it is subsidised and much cheaper than bubble inflated private housing. There is a large eyes-bigger-than stomach demand for house ownership based on the false premise that house prices only ever go up, ignoring the real cost of buying and maintaining a house. Allow house prices to fall, and both these demands would wane substantially. Remove the subsidy pricing of public housing (for rent or for purchase) as well to get a single housing market. Then the market can do the allocation job. Some welfare payment tops up income on a needs related basis, providing an incentive for those whose welfare payments are reduced when the family leaves home to move on. The concept of a separate stock of social housing (and the associated class barrier) simply disappears with the exception of some specialised housing arrangements for those not suited to normal housing, such as care homes for the elderly.

    Tenants with behavioural problems need to be in sheltered or supervised accommodation (ultimately jail), depending on the reasons for and the nature of the bad behaviour. Care in the community has failed the mentally challenged, drug addicts and criminals – but this isn't really a mainstream housing issue.

    I do not consider the NHF to be an appropriate vehicle for housing issues. Its own members' economics depend on keeping property prices inflated and maximising government subsidy and licence to people farm in inadequate small premises. HAs should be required to sell off their properties, either to the occupants or to private landlords. The added supply would drop prices, and the spread of ownership would keep competition going.

    Talking of housing quangos, has the useless NHPAU that promoted the bubble been chopped yet?

    • Mark
      Posted September 24, 2010 at 2:03 pm | Permalink

      Yay! I see the NHPAU has made the quango cull list according to the DT.

  19. Posted September 16, 2010 at 11:40 pm | Permalink

    I support the concept of public housing, but however it is supplied it seems to end up with administration and huge costs whether councils or housing associations are involved. There are also security of tenure problems which seem to benefit the idle, and movement problems which hold back those who might move for work if only they could get accommodation.
    One major problem is that councils are bound to supply accommodation for the homeless, which seems to benefit those like the unemployed scrounger couple with ten children (recently in the news) who were costing their council something like £80,000 a year in rent.

    And as for high house prices, I also blame two other factors
    Firstly, immigration is increasing the demand for homes and rented accommodation.
    Secondly,I blame Women's Lib! I had my previous house up for sale at the time Building Societies started offering mortgages based on joint incomes. The estate agent stuck about another 15% on the asking price on the basis that they'd be able to afford it!

  20. adam
    Posted September 17, 2010 at 4:45 am | Permalink

    Isnt it true that prices are far too high because of self-certified mortgages which bypass any lending restrictions.
    We need to ask questions about mortgages themselves and how the system works.
    The banks seem to be in a win win position.

    I wish this sort of review would happen. Maybe something positive could get done instead of these propaganda lobbying presentations you are subjected to.

  21. Posted September 17, 2010 at 5:39 am | Permalink

    How many properties does the government own which can be turned into public housing? For instance, out-of-service hospitals.

    Why does the government have to provide homes, per se? Why can't it offer rooms/lodgings, instead? Surely this would be an incentive for those occupying such rooms to make alternative arrangements, as soon as possible?

  22. Simon
    Posted September 17, 2010 at 9:19 am | Permalink

    Serial house ownership is one of the factors which drives up rental and sale prices – price control is one of it's main objectives .

    A number of people do BTL because they believe it is their only shot at providing a proper pension for themselves .

    The current state pension needs to be replaced with one which is fully funded and payed for by serious deductions from salary like NI . By deferring peoples reward in this way they will have to spread their spending over their whole lives rather than just binge during their working lives .

    Restrict ownership of British housing with a value below 25 times the median wage to British Citizens .

  23. Andrew Duffin
    Posted September 17, 2010 at 11:42 am | Permalink

    "…UK house prices are still too high, thanks to the mortgage soaked credit binge…"

    There is some truth in this, but I don't think it is the whole story.

    Surely the excessively-restrictive planning system must bear some of the blame?

    If it were easier to build houses on the land you own, prices would certainly come down. Scotland (where I live) has enormous areas of empty land AND a chronic housing shortage – a sure sign of inappropriate regulation imho.

  24. simon_555
    Posted September 17, 2010 at 1:59 pm | Permalink

    There seems to a be a clear consensus that house prices are too high and must be allowed to fall. The government is supposed to represent the people, so lets stop propping it up with daft shared ownership, 0.5% rates , QE etc.

  25. Posted September 17, 2010 at 3:47 pm | Permalink

    I'll send you a copy of my book.
    http://www.localis.org.uk/images/Localis%20Princi

  26. Lindsay McDougall
    Posted September 18, 2010 at 11:06 pm | Permalink

    Subsidising people rather than houses makes for sense. Indeed, yes. It used to be a cornerstone of Conservative policy that the poor should be helped but not at the cost of messing up markets. Why not give pensioners a slightly higher pension rather than transport concessions, free television licenses and a winter fuel bonus. What if a pensioner has nearly saved up enough money to buy a much needed small, environmentally friendly car to replace an old banger. Is he/she to be denied just because the nanny state doesn't approve of that particular purchase?

  27. Alan Jutson
    Posted September 19, 2010 at 9:27 am | Permalink

    Not up to speed on local Council Housing situation,

    Is it true that local Council rents, or a percentage of it, is all sent to Central Government to distribute to whatever Regions they deem suitable.

    If so, no wonder no new Council houses are being built, what is the point of spending for a nil return on that investment.

    We need a balance of all types of property to purchase and to rent, but shared ownership is the worst of all situations, as you have 100% of all the costs, but only part of the benefit of any increase in value.

  28. Posted September 19, 2010 at 10:28 am | Permalink

    "I know many of you think that UK house prices are still too high, thanks to the mortgage soaked credit binge that the government and Central Bank allowed or encouraged 2002-7."

    The simple reason why house prices are so high is lack of supply. Build more homes, and prices will come down. And there's plenty of land to do this.

    Unfortunately, your policy to remove targets on building will simply have the effect of stopping this happening. Councils will build less housing than they would have done.

  29. grahams
    Posted September 20, 2010 at 1:30 am | Permalink

    Nearly all housing problems (other than sheer poverty) stem simply from a shortage of homes. So just build more. It doesn't really matter if they are for sale, rent or something in between. Macmillan as Cabinet minister for housing managed 327,000 in 1953 and 354,000 in 1954 without concreting green belts, without higher taxes, without easy mortgages and, I believe, without more quangos. And there were far fewer families then. That boost came largely through local councils and it is sad that since council house building virtually ended, new housebuilding has trailed way behind need. Don't know why and it does not matter. Means can change but drive and priority are essential. Today, housing is the beat of a junior minister with no independent authority to act and no target. So there is a lot of talk and lots of quangos and pressure groups but no priority and not much action. Just do it.

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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