Patrick Mooney of Mooney Thompson Consulting comments:
The next few months could define the new government’s housing credentials and firmly set out its housing agenda until the year 2020.
Yes the next election does seem a long way into the future but implementing new housing policies is a bit like steering a huge super-tanker on the high seas – you need to make adjustments early on in order for them to have the desired impact and even then they can take a long time to be felt.
An early indication that David Cameron intends pushing ahead with the controversial proposal to extend the Right to Buy to housing association tenants was revealed when this was given centre stage in the new housing bill announced as part of the Queen’s Speech.
Extension of RTB
Brandon Lewis (nearly the former housing minister) was then sent north to Manchester, to plead with the big wigs of the housing world to get onside with the proposal and to help HA tenants achieve their aspiration.
We shall skip over the obvious question “Had anyone actually asked HA tenants if they wanted this new right?” to briefly ponder on the problems this policy could encounter.
Lots of commentators are predicting a rough ride for the legislation in the House of Lords – no doubt led by Lord Bob Kerslake, who recently left his top job in the civil service and is now a leading campaigner against the RTB extension – not least because he sees it damaging the fabric of housing in London, where he has just become a the chair of a large HA.
Joining Lord Kerslake in an unusual coalition was new London MP, Boris Johnson, who urged the government to ensure money raised from London council house sales stays in the capital.
The controversies come thick and fast, but at the top of the pile are:
- The funding mechanism which forces councils to sell their most expensive houses when they become empty could see millions of pounds leave the capital to other parts of the country;
- HA tenants will be tempted into taking on debts which they cannot really afford, with the potential for high rates of default and repossessions;
- Government promises to build one new home for every property sold have been shown to be worthless and even misleading, with only one home built for every six or seven homes sold since higher discounts were given to council tenants.
Figures released by the Department for Communities and Local Government showed that 12,304 homes were sold by English councils under the RTB in 2014/15, while only 1,903 homes were started or acquired to replace them using the receipts.
And yet the Government will persist with trying to push this unpopular policy through while we are also seeing two bedroom former council flats in places like Westminster and Kensington being sold for £1 million plus. Of course not everyone benefits from such housing market windfalls.
It seems pushing home ownership is the only substantive housing policy that the Government has – that and pushing for more decentralisation of powers to places like Manchester, at a time when when public sector budgets are being squeezed harder than ever before.
Northern powerhouse
By pushing powers out from Whitehall, the Chancellor can side-step any criticism of failure to deliver because he has passed responsibility over to compliant local authorities who are having to make do with billions of pounds less.
It’s a bit like giving a teenage child more responsibility but cutting their pocket money and saying ‘Go on, get on with it.” A similar point was made by Tim Montgomerie when he addressed the CIH annual conference in Manchester.
The former Times leader writer is fast becoming a favourite speaker at housing events and he warned the government they risked alienating the public. He said the government intended ‘to emphasise things like the northern powerhouse and to emphasise the fact that this is a different kind of Conservative government’.
At the same time the Government is proposing to cut upto £12 billion from the welfare budget, with tenants of councils and housing associations very much in the firing line. Mr Montgomerie added: ‘If you are making those levels of cuts, it’s very difficult to sustain those credentials.’ The Prime Minister has already said that under 25s are unlikely to receive housing benefit, while other changes in benefit eligibility are also expected.
The annual cap on the maximum amount any household can receive in welfare is being reduced to £23,000 and the bedroom tax could be increased as well. Montgomerie said both the new communities secretary Greg Clark and David Cameron had housing at the top of their agenda, as if that makes us feel any better.
He added:
“David Cameron has told all of the ministers that housing is one of his signature issues.”
If you know what that actually means, then please let us all in on the secret. Also outlined in the Queen’s Speech were two other measures to promote home ownership: First-time buyers will be helped by plans to deliver 200,000 Starter Homes, which will be available at a 20 per cent discount to first-time buyers under 40.
And a ‘Right to Build’ in the new Housing Bill will also help increase housing supply and diversify the housing sector by giving people the right to be allocated land with planning permission for them to self-build or commission a local builder to build a home. Ministers hope this will act as a boost to smaller and medium sized builders.
Defaults and discounts
Meanwhile HA chief executives and finance directors are getting increasingly worried that pushing through with the welfare cuts and extending the RTB to their tenants could see them being forced into discussions with their private lenders about the impact on their income streams and how to avoid defaulting on loan covenants, as the security for their loans are sold at discounted prices from under their feet.
In the meantime the Government is extending the time frame and funds for the various initiatives to support house buying, particularly for first time buyers. This money is leaking out of the Treasury at an alarming rate and is helping to prevent a readjustment in house prices.
The Homes & Communities Agency are unlikely to see their budgets extended in quite the same way and funds for new social/affordable housing are likely to face severe cuts. By way of a sop to housing associations, it is expected that the introduction of regulatory fees by the HCA, will be further delayed until 2017 at the earliest.
This policy was first mooted as part of the shake up of housing regulation, following the review by Professor Martin Cave.
Benefits and rents
The housing benefit bill amounts to something like £26 billion – so you can see why it is being targeted for cuts, particularly as a number of spending areas are being protected – but much of this goes to private sector landlords, who are absolutely coining it in.
Private rents have risen by more than 10 per cent in the last year, according to figures published in June. The Homelet Rental Index shows the average private sector rent across the United Kingdom in the three months to May 2015 was £935, a 10.7 per cent increase on the £845 average for the same period in 2014.
The highest percentage rent increase was in the South West of England which saw a 13.6 per cent increase to £878. Scotland, the South East and Greater London all saw huge increases, of 9.6 per cent, 9.4 per cent and 9.2 per cent respectively.
Martin Totty, chief executive officer of Barbon Insurance Group, parent company of Homelet, said:
“Rental values are now increasing year-on-year across the country, with no exception. “After a short period of London rents rising more slowly, when it seemed the rest of the UK may catch up or even exceed the capital in the speed at which rent prices were increasing, we now see the rate of price rises in London returning towards double-digit growth, while the rest of the UK continues to rise steadily.”
New homes
Some good news (of a sort) came with the announcement that the Government has provided nearly 800,000 new homes across England since 2009. Official statistics from the Valuation Office Agency, show the Government’s plan to help families achieve their dream of home ownership and boost jobs and growth in the house building industry is working.
The figures highlight an increase of 795,000 new homes since 2009. The annual increase is 173,000 homes between March 2014 and March 2015. This compares with the required 250,000 new homes required to keep up with new household formations – so even when we are doing well, we are still behind the curve.
Communities Secretary Greg Clark said:
“Today’s figures show how our efforts have got the country building again, with almost 800,000 additional homes delivered since the end of 2009.”
“Our radically reformed planning system has put power in the hands of local communities, helping over 200,000 households onto the property ladder through government-backed schemes. While our efforts to cut the deficit have helped keep interest rates at their record low making mortgages more affordable. This government is on the side of working people and is supporting their aspirations to own their own home.”
This is essentially just about everything we need to know.
But building rates fall
Against this we also learnt that output in the construction industry fell by 0.8 per cent in April compared to the previous month, according to new figures from the Office for National Statistics (ONS). The drop followed a 1.4 per cent rise in March.
Despite the slowdown, construction output experienced its 23rd consecutive month of year-on-year growth, increasing by 1.5 per cent compared with April 2014. However, April 2015’s figure was the weakest year-on-year growth since November 2013.
Repairs and maintenance decreased by 4.8 per cent compared to the previous month, while all new work increased by 1.6 per cent. Within the repairs and maintenance category, public housing repairs and maintenance fell by 6.2 per cent. New housing was the main contributor to the increase of 1.6 per cent within all new work, increasing by 5.4 per cent.
Industry insiders observed an increase of affordable housing completions ahead of the end of the HCA’s grant period and there have been reports of a gradual increase in housebuilding among small builders, according to the ONS.