The OECD on Housing and the Economy – arguments and evidence

Yesterday I stumbled on an OECD survey Housing and the Economy: Policies for Renovation. The report seemed to have been overlooked by the UK press apart from the Financial Times. Even Inside Housing appears to have overlooked it.

The report recommends reforms to financial sector oversight, taxation, land use policies, rental sector regulation and social housing provision. It argues that these changes will improve the functioning of the housing market and benefit the economy more generally. (The relevance of the report can be seen in US’s jobless recovery where negative equity is hindering the ability of America’s unemployed to move for work.)

As housing has been a casualty of the financial crisis and now the deficit reduction plan, it might have been expected that this objective, balanced and well-researched report might have been read by someone. Even if it had not been carefully studied, chunks could easily be copied and pasted to provide fodder for arguments on all sides.

Advocates of the Coalition’s housing benefit curbs could point to:

Where housing supply is constrained in the short run, however, part of the benefit of government rent allowances may shift from renters to landlords without necessarily enhancing housing availability for needy households. Indeed, there is some evidence that rent allowances are passed onto higher rents.

Opponents of the government’s moves to weaken security of tenure in social housing could signpost:

means-tested social housing systems may potentially reduce job seeking incentives amongst the unemployed, or discourage low-wage workers from seeking higher paid jobs if social housing is withdrawn or rents are increased as earned income grows.

Even abuse and manipulation of the report might have been better than being ignored.

The report is written to draw conclusions from across the OECD’s membership of advanced industrial countries. Inevitably this means that the report’s recommendations may not all be relevant to all 30 countries. Even where the recommendations such as looser land use policies, freer rental markets and more reliance on rent allowances than social housing may be appropriate, there are practical and distributional concerns. However, the study is worth reading with an open mind.

Mortgages, misery and the happiness index

The Council of Mortgage Lenders has published a forecast that next year net mortgage lending will fall to the lowest level since 1980. It will be £6bn compared with £110bn in 2006. It could be worse - the CML are assuming there is no double-dip.

This will have implications for the housing market.

Yesterday I was reading the latest Research in Public Policy bulletin from the CMPO think tank at Bristol University. It included research on a link between house prices and well-being. The study found a correlation but explaining it is more tricky. The article suggested: "Perhaps the state of the housing market – and media coverage of the housing market – foster a ‘feel good factor’ when house prices perform well – and vice versa." That feel bad factor might be bad news for David Cameron's happiness index.

The government's changes to social rents and tenancies

The government’s announcements yesterday about rents and tenancies in social housing are complex and part of what can be seen as a somewhat contradictory policy agenda (cutting housing benefit and pushing up rents in social housing).I would therefore recommend the Chartered Institute of Housing’s fair minded Briefing on Social Housing Reform (pdf available).

The briefing clarifies what the new types of tenancies being proposed actually involve: (1) the fixed-term flexible tenancies lasting as little as two years and (2) the affordable rent tenancies set at a maximum of 80 per cent of local market rents.

The latter is intended to generate finance for more affordable housing at a time of much reduced capital spending on housing. The affordable rent tenancies will initially be offered by housing associations rather than local authorities. It will be offered on a proportion of re-lets from April 2011 and on new stock later. The CIH point out: “in high value markets 80% would not be an affordable product for consumers and it would create problems around housing benefit”.

As the flexible tenancies and the affordable rent tenancies may account for an increasing proportion of local authority and housing association tenancies, the shorter tenancies may well mean that Right to Buy never recovers from its current low levels. Maybe we are seeing a Conservative prime minister effectively abolishing Right to Buy while it is being retained in theory.

The significance of the benefits cuts controversy for the rest of the public sector

The kerfuffle over the changes to Child Benefit and Housing Benefit must raise doubts over how viable the path set out by the Spending Review will be. Both sets of “reforms” may not survive coming into contact with the real world. There are serious practical problems with their implementation. The numbers involved are significant – as always the losers from any change are very vocal but in this case there are no apparent winners; in the case of the Housing Benefit caps the media will be able to show emotionally charged footage of families and pensioners being evicted. (For a fascinating look at the numbers involved, the Data Blog of the Guardian has an interesting analysis.)

This is only the start. Hardly any media coverage has been devoted to the changes to Council Tax Benefit. From April 2013, CTB will be replaced with grants to councils who will be able to set their own local criteria for payments. The central government funding is being reduced by 10% - saving £0.5bn a year by 2014/15. Tom Clark on the Guardian has pointed to echoes of the Poll Tax.

In last week's Public Finance Ian Mulheirn of the Social Market Foundation set out how the difficulties of implementing reform will blunt the blade of George Osborne's axe.

In addition to the political challenges of cuts, there is the inevitable uncertainty surrounding the macro-economy.

So might the Spending Review be jettisoned? Probably not given the political priority given to deficit reduction. (Interestingly there is speculation about another Spending Review in 2012 and then a pre-election one in 2014. Nevertheless these are more likely to see only a tilt on the tiller.)

If deficit reduction is here to stay but some of the welfare savings are not tenable – what takes the strain? The Spending Review gave several spending departments more generous departmental expenditure limits than expected as a result of headroom created by “welfare reform”.

ROOFless after 35 years

It was disappointing to get the final issue of ROOF this month. For 35 years ROOF has been campaigning and covering housing policy.

The magazine has provided the serious analysis so often missing from the mainstream media.

The magazine will be particularly missed at a time when there are so many worrying developments - not least the cuts in Housing Benefit proposed in the Budget.

The only good news is that everyone can now access the magazine's online archive.

Housing and the Coalition: TSA lives on?

Before the election there was some uncertainty over whether Grant Shapps would have housing brief in a Conservative government. Last week Mr Shapps was given responsibility for housing in the Conservative-Liberal coalition. The tolling of bells for the Tenant Services Authority could almost be heard ...

Yet looking at the full coalition agreement, there is no reference to the abolition of the TSA. In fact there is not much about housing at all. A quick CTRL+F unearths a few references: abolishing Regional Spatial Strategies, converting farmyard buildings into homes, reviewing the Housing Revenue Account (again), using empty homes and promoting shared ownership.

I suspect things may get more interesting.

Catchup - the Conservatives and regulation of social housing

Life has been busy - mostly working with organisations in the overlap of the public, charitable and education sectors. This month I will try to reserve more time for this blog.

This weekend I have been catching up on last month's issues of Public Finance. It was disappointing to see that the Conservatives appear to be planning to re-arrange the regulatory landscape for English social housing as part of the crusade against quangos. If the Tenants Services Authority is doomed, there will have to be a new regulatory regime otherwise lenders will be wary of lending to housing associations - or, if they do, it will be at higher margins.

Housing market: crash, bang, wallop, and more decline?

With a rush of house price statistics due over the next couple of days, its worth having a look at the latest issue of Roof with its depressing Housing market healthcheck. The article by Julian Birch includes a depressing graph from Nationwide which features on the housepricecrash.co.uk website. The graph shows the four cycles of boom and bust in the UK housing market since 1970. Basically the graph shows that house prices remain above their trend – for now…

House price falls are likely to be given a shove by the on-going credit drought. I was cheered up to hear one commentator refer to the end of the banking crisis. But then we had last weekend’s twitchiness in the USA about Bank of America and Citigroup.

Earlier this month The Economist made reference to Alt-A mortgages in the USA. After sub-prime this may trigger a sense of déjà vu. These mortgages have what might have once been called “innovative” features such as payments that are less than interest – so the debt grows for several years. Financial institutions have been digesting these rather toxic assets. As American borrowers come to the end of their not-even-interest-only periods, I suspect that even more misery will result. (House prices in the USA have fallen 25% already.)

Back to the latest issue of Roof … I would recommend you buy it if you want to read several articles on how the credit crunch is affecting the housing market and policy. However, it’s not an uplifting read when it looks like in 2009 the number of repossessions may be greater than the number of house-building starts.

Three million homes – or not?

On this blog I encouraged people to sign up to the epetition on the Downing Street website urging a re-statement of the three million homes by 2020 target. Does the response do this? I don’t think so. Look at it here.

It’s a pity that the epetition only clocked up just over 2000 signatures. Building affordable homes in sustainable communities and sustaining the flagging construction industry (with new home starts halving last year) are now more important than ever.

House prices bears, bulls and the National Housing Federation

A good place to read about the property crash is the website Housepricecrash.co.uk. An addition to that site is the inclusion of house price predictions. They vary from housing market bears suggesting falls of 50% from the market peak to bulls like the National Housing Federation who predict a 25% rise over the next five years.

I must say that I lean towards the bears. Capital Economics – who now forecast a fall of up to 35% over the next three years – had long warned that a house price crash was on the way. (Their voices should not have been so lonely. Ultimately house prices and incomes had to be brought back into line. Buy-to-let investors and permissive lending could only stretch the elastic so long.)

It is good to see that the NHF have moderated their predictions – last year the NHF was suggesting that house prices would continue to spiral with a 40% rise from 2007 to 2012. While the NHF was right to draw attention to the need for new homes and the problem of affordability, I still feel a bit uncomfortable. I have seen the suggestion on the blogosphere that the NHF was inadvertently helping to ramp up house prices.

It is worth noting some of the NHF’s members are painfully learning the reality of a market correction hitting property sales and land values.

The economic crisis and affordable housing: Three million new homes please

Shelter has a petition on the No 10 website asking Gordon Brown to publicly restate his commitment to three million new homes by 2020 and to prioritise social rented housing. I would urge everyone to sign up. It takes less than a couple of minutes.

A history of the housing market collapse

With the credit crunch and the related problems in the housing market, financial services and the rest of the economy causing pain for families and difficulties across the private, public and third sectors, there is interesting historical background on the Housepricefacts website.

There are some cringe-worthy quotes such as Gordon Brown’s from 1997:

I will not allow house prices to get out of control and put at risk the sustainability of the future.

Shared ownership - A problem shared?

This month’s Roof special on Affordability makes rather depressing reading – with perhaps the exception of the new Homes and Communities Agency chair promising things will only get better (after they get initially worse).

I’ve always been a bit of a sceptic with shared ownership. It is of course a cheap form of affordable housing for the public purse and a cheap form of asset ownership for families. But there have been problems with viewing it as a panacea – as well as issues such as with key worker schemes and Social HomeBuy.

Now Roof depressingly reports that shared ownership accounts for between a fifth and a quarter of the workload of some debt advisers. If they haven’t done so already, housing associations need to critically review the way that they assess the ability of applicants to sustain shared ownership. There is some bad practice out there – and it could lead to more people losing their homes.

Some thoughts on 200 blog entries: the FE sector, social housing and the third sector

As I’ve posted 200 entries on this blog, I thought it was time cast a look over my shoulder.

Back in late 2006 when I was setting up I thought that a blog might be interesting as an opportunity to share ideas and information as well as occasionally pontificate. Everyone seemed to have a blog. Many blogs were interesting – either informative or a little weird such as the President of the Islamic Republic of Iran. Perhaps not everyone had a blog – there seemed to be a lack of blogs on housing and further education – two sectors where I have done a far bit of work over the years.

Since 2006 we’ve acquired a new prime minister – and a fair few commentators speculate that we may have another one before long whether before or after the next general election. Public sector reform is still on the agenda. The language has shifted a bit – away from competition and choice towards contestability and personalisation. Some of the agenda has been adopted by the Conservatives - and taken further as in the case of Michael Gove’s proposals on schools choice. Even the Liberal Democrats are advocating empowering the user of public services. One major change that we have seen in the policy environment is a significant tightening of public finances although the implications of the Comprehensive Spending Review were well-heralded and analysed by the experts at the Institute for Fiscal Studies.

In social housing we’ve seen a review or two leading to end of the Housing Corporation as we know it – with a de-merger seeing English Partnerships absorbing investment (aka funding of new affordable housing) and a Tenant Services Authority (briefly known as Oftenant) taking over regulation. The TSA might even have a sector-wide remit including all social housing if the government listens. The nature of regulation is a bit of an unknown. Housing inspection will live on at the Audit Commission for the moment anyway – with new short, sharp, shock notice inspections coming in after some years of talk. We’ll probably see some new council houses at long last – although not many. Indeed there is a bit of uncertainty over all house-building after the credit crunch – who worried about sub-prime in 2006? (Arguably not enough people.)

In further education we’ve seen the announcement of the death of the Learning and Skills Council. Its role will be parcelled out – perhaps neatly, perhaps not - among a Young People Learning Agency, Skills Funding Agency, a National Apprenticeships Agency and dozens of local authorities and “sub-regional clusters”. We’ll see how joined-up that is. As a result of the changes we’ll probably see LSC staffers finding new homes – hopefully not too many will compete against me as freelance consultants. Another key development will be sixth form colleges “rejoining the local government family” – a good or bad thing depending where you are. (I won't quote Tolstoy or Larkin.)

Of course, the third sector – particularly social enterprises – are even sexier now than 20 months ago. Politicians are falling over themselves to woo charities and other third sector organisations. The other week it was the Conservatives offering the sector treats including the Office for the Third Sector which NCVO welcomed. Yesterday it was the government promising the third sector a role in service delivery. As always, reality may be less rosy – as seen in the disappointment when the Department for Work and Pensions gave the lions share to the private sector in a major commissioning exercise. Still we have seen actions as well as words – funds for third sector organisations, ambassadors for social enterprise, training for commissioners, new and flexible forms of legal entity for social enterprises.

I am sure that I have missed a few developments. Its seems a lot has been happening even if much of it is skated over in the mainstream media.

I wonder what I’ll be writing about after another 200 blog entries.

Stock transfers delivering on promises: more evidence of improvements

The Housing Corporation just published a thematic review of housing association formed by “stock transfers” from local councils.

The thematic review found stock transfer associations are “making considerable progress towards the delivery of its promises to tenants made at the point of transfer. The one or two cases where associations have been unable to deliver on their promises are generally due to circumstances not directly related to the transfer process.”

While the study was primarily one based on self-assessment by housing associations, it is consistent with other evidence such as the National Audit Office’s finding in 2003 that “RSLs have largely delivered the expected benefits to tenants of better quality social housing, better housing services and opportunities for tenant participation.”

Social HomeBuy initiative: three council houses sold

I’ve not read all 111 pages yet but yesterday the Department for Communities and Local Government published an independent evaluation of the Social HomeBuy initiative.

The evaluation is timely. Only three council houses had been sold via Social HomeBuy by the end of 2007. The scheme has been more successful with housing associations but we are not seeing great strides towards an asset-owning society.

In the executive summary, the evaluators note:

An average of 70% of tenants receive benefits and therefore would be ineligible for a mortgage. Of the remaining 30% of tenants, demand remains limited by income, demand to be a home owner and the desirability of their current property.

That has relevance across housing policy more broadly.

Double whammy for social housebuilding targets

The impact on social housing of the credit crunch and property market is at last getting some attention in the mainstream media. On Monday's Radio 4 PM programme, the chief executive of Southern Housing Group warned that the reticence of lenders was making it hard for housing associations to plan new developments. Combined with a likely decline in homes earmearked as affordable coming through Section 106 planning agreements, this adds up to a double whammy.

Can and will the government increase grant rates from the Housing Corporation to provide more socially rented and other affordable homes?

How well will housing associations be able to digest the credit crunch?

Yesterday I went to an excellent seminar for housing association audit committee members run by KPMG’s Audit Committee Institute. One of sessions was delivered by the Housing Corporation’s head of financial regulation. He spoke about the financial health of housing associations. It was somewhat depressing hearing his summary of the sector's Global Accounts. He noted the pressure on association’s operating margins and their heavy reliance on profits on property sales.

It is rumoured that there are only two lenders in the housing finance market. (And, of course, the margins are higher and expressed over the inter-bank rate LIBOR.) This week Inside Housing is reporting the lenders' loss of appetite. This will hopefully change once the credit crunch passes - eventually. If housing associations struggle to sell shared ownership (and outright sale) new build, they may also lose interest development.

Housing associations (including their boards) need to watch this very closely although there scope for action is fairly limited.

Beyond decent homes - rooftop swimming pools for social housing?

We are fast approaching 2010 when the decent homes programme is meant to be (kind of) complete. It will have achieved a significant improvement in the long-neglected council housing sector as well as being used to promote reform and modernisation - not least with the successes of the Arms Length Management Organisation model of managing council homes. But what then?

Vienna's alt-erlaa social housing complex includes rooftop swimming pools. I don't think that will be on the agenda here. (I did not post this on April 1st!)

But local authorities, housing ALMOs and housing associations need to do some thinking about strategy - and some talking to residents. It should be remembered that decent homes is a narrow set of yardsticks and - as the name suggested - pretty limited to the basics of "decency". In the twenty first century I would suggest that having a shower fitted something that residents should be entitled to expect (and arguably it is an environmental prerequisite in water-hungry times).

Getting the goat - Conservative plans on homelessness

The budget may not have been very exciting but the opposition is really getting serious about the housing crisis. The Financial Times reports that Conservative MPs and conference delegates are being urged by Caroline Spelman, their party chairman (sic), to help build a shelter for a rare breed of Bagot goats at a working farm near Gateshead.