The Housing Times Issue 2
The National Housing Federation, in their efforts to make sure that housing wasn’t ignored by politicians during the 2015 General Election campaign organised a rally at Westminster Central Hall to highlight the housing crisis. An article in Inside Housing in February reminded its readers that it is fair to say that the election campaign of 2010 did not shine much of a spotlight upon housing. Their reporter wrote, “Public interest was low, politicians largely treated it as an afterthought and the housing sector was fragmented and, as a result, its voice made little impact at the stump.” Not so this time; time travel forward to the 2015 General Election and the housing sector – by which is meant all those that shelter under the National Housing Federation’s umbrella and not local authorities – has learned its lesson ahead of the election. For the previous five months an organising committee had been making plans for the rally in March. The rally was to be the climax of the campaign titled Homes for Britain to put pressure on politicians to end the housing crisis within a generation and to set out proposals by which this could be achieved. David Orr, chief executive of the National Housing Federation, adding his support for the campaign, stated, “With the election fast approaching, we need to put housing at the top of the public agenda…we simply cannot afford to let this moment pass us by. Never have we been in a stronger position to send out a clear message that strong leadership and real action is required to end the housing crisis within a generation”.
HAS THE NATIONAL HOUSING FEDERATION LOSTS ITS CREDIBILITY?
To help getting that message known to the public the campaign hired an advertising company. In particular they wanted to get their message across to politicians and journalists and so in the weeks prior to the rally Westminster underground station, the nearest to the Houses of Parliament, passengers were able to read about the rally as they waited on the platform. This was followed by an advertising campaign across the rest of the United Kingdom to remind voters during the election campaign that housing was an issue that deserved their attention when it came to voting on polling day.
Although the motives behind the rally by the National Housing Federation were laudable in their efforts to highlight the housing crisis there was also an element of self-interest involved. It was also to be a show of strength to the invited politicians and to whatever party was in power following the election that housing associations through the National Housing Federation were happy to be their coalition partners in their plans for housing. David Orr in a letter to The Times, 7 February, 2015 makes clear to the government that they were “ready to play our part but need the new government to meet us halfway by providing real leadership and a commitment to solve the housing issue” (In another letter to the paper a week later he wrote expressing his opposition to the plans to extend the right-to-buy to housing associations.)
David Orr didn’t say what he meant by real leadership and what the government needed to do to meet him halfway. Some indication can be gleaned from the National Housing Federation’s policy paper titled Surplus NHS land; a best value alternative. It states, the NHF, as part of the Homes for Britain coalition, “want the next government to publish a long-term plan within a year of taking office that sets out how” it will end the housing crisis within a generation. An important part of that plan will be measures to increase the supply of land for housing, and releasing surplus or underused public land. Public land belonging to central government, the Greater London Authority, the NHS and local authorities could help deliver as many as two million new homes. Cabinet Office figures show the public estate held by central and local government in England is worth £370 billion.
Savills, the property agents, in their autumn 2014 report called Public Land: unearthing potential estimated that public land could deliver as many as two million new homes based on their analysis of public records of the central government estate in England and the land holdings of the Greater London Authority. It showed that one of the biggest landowners in the United Kingdom is the National Health Service with total assets valued at more than £31 billion. Hitherto the NHS followed well established ways of disposing of land which include selling on the open market but the Department of Health, in order to encourage the process, set up the £100 million Growth and Efficient Fund to incentivise and support NHS organisations to make savings by releasing land for housing by 31 March 2015. In the chancellor’s autumn statement in December 2014, the government increased its ambition for public sector land by confirming its aim to release land with the capacity for up to 150,000 homes between 2015 and 2020. So it is not surprising that the NHF issued policy paper when it did. To elaborate the policy paper states, “This policy paper sets out the alternatives to the NHS’s traditional and well-established approach to disposing of land, which usually involves selling it at market price. Working with housing associations, this new approach would offer an ongoing revenue stream from the NHS estate through the development of affordable housing, rather than a one-off capital gain, achieving even greater financial returns over the medium to long-term. By working in partnership with housing associations, the NHS could use the profits from its estate to cross-subsidise the building of high-quality supported housing schemes for patients recovering from mental health problems.”
The policy paper goes on to say to argue for an alternative definition of best value. Too often best value is interpreted as achieving the maximum upfront price for land. It argues, “The Federation believes that best value should be qualified in terms of wider, social economic and environmental value, not simply price, and has been urging government to broaden to broaden the definition of best value along these lines.” In fact policy paper quotes another publication, following a seminar hosted at the health think-tank offices, the King’s Fund, in which David Orr participated, Making Creative Use of (the) NHS estate makes the same case and it is obvious they are singing from the same hymn sheet.
The NHF’s interest in surplus public land for housing follows the announcement in June 2011 by housing minister Grant Shapps that it was the government’s intention to release surplus public land for housing. A progress report was issued a year later. Some indication of the government’s thinking on the matter of releasing public land for such purposes as proposed by the NHF was seen by the appointment of Tony Pidgley, chief executive of Berkeley Homes Group. The housing group, as one newspaper stated, focuses “on upmarket homes in London, building 10 per cent of all new homes in the capital” They could have chosen someone from the public sector with experience in building homes for rent. It is quite obvious that the government’s intentions are to sell off public land to the highest bidder which will meant that the developer comes to sell the homes they too will be to the highest bidder.
When the annual report for 2014 for Berkeley Homes was published it showed what property reporter Russell Lynch in the Independent described as a “bumper payout” for Mr Pidgley of £23.3 million. His pay award for the year to the end of April is outlined in the group’s annual report, which shows that his £825,000 salary is bolstered by £2.4 million in annual bonuses and payouts from long-term inventive plans worth £19.8 million. The size of the Mr Pidgley’s pay packet rockets him into the top hundred of UK’s corporate earners.
Another journalist, Jon Armitage, from the Independent commenting upon the results wrote that in ordinary times someone who increases his company’s profits deserves to be handsomely paid. It’s called capitalism. He adds, forget capitalism, the company’s profits have been due to old-fashioned state support. He writes, “Thanks to the taxpayer’s money pumped into the Help-to-Buy scheme supporting loans for first-time buyers, house builders have been able to sell nearly 50,000 new homes. Every taxpayer’s pound lent through this system is a pound of revenue in a house builder’s pocket.”
Furthermore, “The impact of the scheme on the property market has been far wider than that, though. It sent a clear message from the government to the whole country: we will not allow house prices to fall. The best policy message a house builder could dream of (hearing)” Meanwhile, he mentions, “the Bank of England has pushed through years of quantitative easing and sustained record low interest rates. This has had the double impact of making mortgages so cheap that Mr Pidgley’s customers can afford to pay Britain’s exorbitant house prices as an alternative to low-yielding investments based around bonds.” Thus, it is clear that only part of the success of the Berkeley Homes is truly due to Mr Pidgley. Jim Armitage concludes that given the housing shortage, it would be preferable if Mr Pidgley and his directors were paid by the number of homes they build rather than the size of the profits.
Tony Pidgley was one of the invited speakers at the June 2014 meeting of the GLAs Planning Committee, chaired by Nicky Gavron, to discuss the implications of the growing number of tall buildings in the capital. During the discussions he was asked from his perspective were tall buildings profitable. In reply he said that Berkeley as a public company wanted to be profitable and they accepted the criticism that comes with a proposal for a tall building. Besides the criticisms associated that goes with tall buildings any developer has to take into consideration that a percentage of the homes in any development would go to the local authority for social rent and you cannot build a social unit and make a profit. This, he admitted, was offset by knowing if you had a heart attack that, for example, a nurse might be allocated one of the flats which was reassuring if you had a heart attack.
Unlike Tony Pidgley, who reconciled himself about the hoops he had to jump through in order to gain planning permission by stating that some public good might result from his gymnastics, David Orr’s justification for his attempted land grab of surplus public land by claiming what he was seeking to do was in some way helping to solve the housing crisis, was for all intents and purposes nothing more than an attempt to give a more altruistic hue to the aggrandisement of the NHF. In his closing speech to the rally he mentioned the plans of the government to dispose of surplus public land. In doing so it convinced me the message that it wanted to convey to the public, and the government, was that they were the people to be entrusted to solving the housing crisis if given the means to do so – the land.
It was for this reason that I decided to write a response to what I saw as a sheer arrogance of David Orr and the National Housing Federation in claiming that the Homes for Britain rally was the united voice of the whole housing sector. Not quite, your honour, although the rally was backed by the Chartered Institute of Housing, the National House Building Council, the Residential Landlords Association, the Royal Town Planning Institute, the Homes Builders Federation and the Royal Institute of British Architects. Organisations representing tenants, such as the Defend Council Housing campaign, weren’t invited. Eileen Short handed out leaflets about the Defend Council Housing campaign outside Westminster Central Hall. Glyn Robbins, from Defend Council Housing said, “I think the whole thing was a bit of a sham.” Also housing policy is devolved to the other representative bodies in the UK.
It was not my intention when I sat down to write a response that it should be any longer a couple of hundred words, enough for a letter to Inside Housing magazine. My response had taken on a life of its own. The scope of the response began to widen to include the many reports that have written about housing in recent years in particular those written by the policy think-tank Policy Exchange under its former director Alex Morton. He has since left to become part of David Cameron’s team in Downing Street, which may explain the increased emphasis there has been on housing in recent years. In 2010 he wrote the report Making Housing Affordable, a new vision for housing policy as well as the report that recommended that local authorities should sell off vacant and expensive social housing to fund a programme of new social housing. (An unintended consequence, or not, of such a policy would be the social cleansing of poor people from areas where they would be unable to buy on the open market.) One of the other reports on housing that was published by Policy Exchange was written by Natalie Elphicke, wife of Conservative MP Charlie Elphicke, S
which sought ways to replace government investment in housing because new lending to housing associations by banks has reduced to around two-thirds since the banking crisis. Her solution was the promotion of investment portfolios offering long term returns with the object of increasing the housing supply. The close links between the think tank and the Conservative Party were evident when George Osborne in his 2013 Autumn statement asked Natalie Elphicke, along with Keith House, leader of Eastleigh council in Hampshire, to consider the role that local authorities could play going forward in helping to meet the housing needs of their local population within the current financial context to ensure good value for money and fiscal discipline. That in plain language was an order not to produce any recommendations that would breach the government’s fiscal consolidation. In future, local authorities and the land they owned were merely to become enabler for other organisations, like housing associations, to build homes. The authors in the foreword review state that councils have the confidence to do so much more as Housing Delivery Enablers. Local authorities were to change from being statutory providers to midwives.
This was a view that was in total opposition to the report produced by the GMB trade union on housing in 2014. It was written to serve notice that an incoming government will need to make affordable housing a central part of its incoming economic and social strategy and local authorities. The report acknowledges the number of new homes that Housing Associations have built has been impressive “but has gone nowhere near making up what used to be built by local authorities.”
A couple of hundred copies of my response were printed and distributed to as many newspapers and television networks as possible in the couple of weeks before the rally. One of the first journalists to receive a copy was Hilary Osborne of The Guardian. Hilary Osborne is the newspaper’s business and property reporter. She was invited to chair a meeting on housing hosted by the Green Party representatives at City Hall on 3rd March. I took the opportunity after the meeting to speak to her and explain why I had written the riposte to the forthcoming rally in the hope that she would mention it in any article she might write about the rally. In a portent of what was to come nothing became of the meeting. The only people to whom I sent copies that responded were the academics Danny Dorling and Rebecca Tunstall. (Both sent emails, Danny Dorling mentioned that my essay had proved helpful when Radio Four’s Today programme interviewed him about the rally. I sent a copy of my essay to the Today programme.) A couple of copies were sent to Inside Housing magazine before the rally. No mention was made in their coverage of the rally.
In spite of the hard work in organising the rally there was little coverage on the evening television news programme and in the following day’s newspapers. The event, from the point of view of highlighting the housing crisis to the general public failed, although it may not have seemed so to all the people who organised the rally and made it a success. Yet housing as an issue was too important for the politicians to ignore during the election campaign. It was just that their solutions to the housing crisis showed just how out of touch they were and how little thought how they would work out in practice. This was highlighted by Natalie Bennett; leader of the Green Party, in a couple of interviews she gave when asked about her party’s housing plans. In both the interviews with the BBC’s Today programme and LBC’s (London Broadcasting Company) Nick Ferrari, she was unable to say how her party would be able to finance the building of 500,000 homes. Russell Lynch, property reporter for the Evening Standard, wrote that housing ought to be the biggest issue of the election, certainly in London, and that both the Conservative and Labour had failed to produce any “grown-up solutions” to tackle the basic problem: the fundamental lack of supply. Instead, he wrote, “we’ve got both sides indulging in ‘back to the future’ electioneering, with David Cameron stuck in the 1980s and Ed Miliband harking to the bad old days of the 1960s and rent controls”
Increasing the fundamental lack of supply was something that Jeremy Blackburn, head of policy at the Royal Institute of Chartered Surveyors considered to be one of the “thorny issues” that blocked a solution to the housing crisis. It was something also remarked upon by Christine Whitehead, housing academic at the London School of Economics. Nearly all of the promises made by the parties were about increasing demand, and to some extent decreasing the tax base. None had any idea how they were going to provide the number of homes to be built that they promised.
The prize for the silliest housing policy went to the Labour Party. The mansion tax, a property tax, whatever its merits or otherwise, the decision to use the proceeds to, as Ed Balls proposed to “help save out NHS” and not solve the housing crisis wins the prize for being the dumbest policy by a political party in the 2015 general election. Simon Jenkins, writing in the Evening Standard the week following the election called it a “stupid tax” and it was no wonder that both its “parents”, Vince Cable and Ed Balls, lost their seats.
As for what Russell Lynch calls David Cameron’s “big hope”, extending the right to buy to over one million housing associations tenants, funded by further huge discounts on the sale of council homes, it was, he writes. It was done for the sake of sprinkling a little Thatcherite “aspirational” magic dust that could even land London councils with a £2 billion bill. Russell writes, “Housing associations are private bodies and charities with legal obligations to trustees to get the best price for their assets. Hence the government will need legislation to order them to offer big discounts to tenants. Councils will sell off their most expensive homes to fund these discounts although they will replace those sold off on a one-to one basis, the Tories say.”
Cameron and his Tory colleagues “must be living in a parallel universe. Since 2010, councils in England have sold off about 25,000 homes and have built 7,500, according to research from property consultants JLL. Less than a third of homes sold have been replaced – hardly surprising when the affordable-housing budget was cut by 60 per cent in the October 2010 Comprehensive Spending Review.”
The proceeds from the right to buy sales have exceeded the amount from all other privatisations that have occurred since 1979.During the 1980s council sales receipts amounted to £18 billion. For Margaret Thatcher Right to Buy was part of her political crusade, writes Simon Jenkins in his book The Tory Nationalisation of Britain. “She simply wanted council houses sold and no more build”, writes Simon Jenkins. (In her memoirs the mention of council house sales receives one line) Yet if the object was to increase home ownership it failed as recent figures have shown. With the inexorable rise in house prices many former tenants sold up and pocketed the profit. Figures obtained under Freedom of Information requests from 91 local authorities have shown that 37.6 per cent of former council homes are now being privately let at market rents. In 2013 the Daily Mirror disclosed that the son of a former housing minister in Thatcher’s government had a property portfolio largely consisting of ex-council flats.
Like Margaret Thatcher, David Cameron seems to be on a political crusade. When asked by the Sunday Telegraph in 2011 as part of the celebrations to mark its sixth anniversary, what he considered the most significant piece of legislation of the past sixty years he answered the 1980 Right-to-Buy Act. It is therefore no surprise that his government have decided to extend the right to buy to housing associations tenants. It is a move that has been almost totally opposed by everyone other than the government.
Stephen Howlett, chief executive of Peabody Housing Trust, began his article in the Financial Times on 28 April 2015 thus, “David Cameron (has) put forward what could be one of the worst policy ideas ever: extending the right to buy to allow housing association tenants to purchase their homes for less than they are worth. It would make the housing supply crisis worse, by removing housing associations capacity to build more homes. It would push up rents, by creating a buy-to-let bonanza. It would make areas such as central London less affordable, damaging the economy and forcing people to live far from where they work. It would be economically disastrous, potentially adding as much as £60 billion to the national debt.”
He goes on to say that of the homes that have been bought under right to buy (he means council homes but cannot bring himself say so) one in three has been privately rented, often to recipients of housing benefit, whose rental bills are paid by the government. Therefore if there is an extension of the right to buy to housing associations this “would mean higher rents, with the taxpayer footing the bill through increased housing benefit payments. This would be a compulsory transfer of social and charitable assets, at a discount, to people who have already benefited from sub-market rents and security of tenure. With these former tenants transformed into landlords with the ability to make a significant profit, a social asset would be lost and the community changed forever” As proof he adds that it has been shown that only one in ten social homes (he means council homes but again cannot to mention them by name) sold under this scheme has so far been replaced. Also the strength of his argument would have been more powerful if he had the magnanimity to mention the devastating effect that the right to buy legislation has had on housing since the passing of the Right to Buy Act in 1980. By failing to do so it makes the justification of a publication that has no sectional interest all the more imperative.
The Financial Times in 2015 focused on housing with several articles questioning whether the proposals to extend the right to buy to housing associations, plus the ‘new and improved’ (enlarged) discounts to council tenants, will raise as much as much as they planned. That is because council homes in the more expensive areas of London do not become vacant as frequency as homes in homes outside of the capital. A study by Savills, the property people, showed that the government prediction of £4.5 billion a year looks optimistic. Before the 2015 summer recess the housing minister Brandon Lewis stated that the government has not calculated how many high-value council homes will become vacant each year in a written parliamentary answer. Since the government hoped that most of the proceeds from local authority sales would come from high-value in London it is a major blow to their plans.
Following George Osborne’s budget in July the Financial Times in an editorial believed that there was little in the measures he announced to boost the supply of new homes and
that considering the growth of the population over the past decade the failure to provide them needs to be explained. The editorial does so. It states “successive governments have been unwilling to confront vested interests – mostly notably existing homeowners – who resist new developments. In their approach to this problem, the Conservatives have been found wanting. Government policy has focused on boosting demand rather than supply, subsidising first-time buyers with policies such as ‘right to buy, ‘help to buy’ and ‘rent to own’. George Osborne recognised the need for measures to help build homes. But the chancellor is still doing too little to boost supply while one new policy – a sharp reduction in the rents charged by Britain’s social landlords – may worsen the problem. By cutting social rents in this way, Mr Osborne aims to reduce the housing benefit bill by $4.3 billion by 2021. That is understandable. But his policy will cut the supply of homes, too. The way in which they finance construction programmes is to borrow against future rents. The Office of Budget Responsibility says the drop in guaranteed rental income is likely to lead to housing associations abandoning plans to build 14,000 new homes.”
In conclusion, “Mr Osborne’s housing policy looks confused. The government spends £1.4 billion a year subsidising people trying to buy a home, but cuts rental subsidies for those on benefits. While the government tries to boost house building by shaking up the planning system, its attack on housing associations will reduce construction. Britain’s housing shortage is an immense economic challenge that requires a lot of joined-up thinking in government. There is little to suggest this is happening.”
Martin Wolf, chief economic commentator of the Financial Times, is the author of several books on such subjects as globalisation and global finance. His latest book is about the lessons to be learned from the financial crisis in 2008. Writing in his column in May 2015, the Tories are wrong to buy votes with ‘right to buy’ homes, declared that he found the right to buy policy highly objectionable. “It is a direct transfer of large amounts of public wealth to a fortunate few. Only a silly fixation with public debt rather than the public sector’s balance sheet masks the scale of the transfers”
If the fixation with public debt was the only motive behind the report Ending Expensive Social Tenancies published by the Policy Exchange think tank, founded by Michael Gove and Francis Maude, it would be excusable but that is not the case. The report written by its former director Alex Morton may have began life as an exercise by which selling off council properties in rich areas such as London would fund a large scale social housing programme in excess of 80,000 homes but such is the political dynamism of the proposals that they will be seen as a means of socially cleansing poor people from the posh areas of cities such as London by the Cameron government. All the more so since “expensive social tenancies” is a misnomer. They are only considered “expensive” by such people as Alex Morton by virtue of their location and because of the cost of renting similar properties in the private sector. By selling off such properties he believes it will help provide more homes elsewhere. Such a policy should be seen for what it is, social cleansing by any other name.
Of all the reports that have written on housing in recent years and in particular on how to solve the housing crisis the Policy Exchange report called Ending Expensive Social Tenancies will be remembered as being the one that was most akin to contraptions invented by Heath Robinson. (For younger readers Heath Robinson constructed complicated machines to perform simple tasks.) Heath Robinson’s machines were S
harmless creations; the Policy Exchange report is one that raises questions about the social cohesion of society, community and the demarcation of cities by wealth. It is a throw-back to the nineteenth century and the separate existences of the rich and the poor that ironically the former Conservative Prime Minister Benjamin Disraeli highlighted in his book The Two Nations. It is an irony that seems to have escaped the author of the report. (“Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts, and feeling, as if they were dwellers in different zones, or inhabitants of different planets; who are formed by a different breeding, are fed by different foods, are ordered by different manners, and are not governed by the same laws”. Benjamin Disraeli, the Two Nations.)
Alex Morton in the executive summary to his report sets out the situation as he sees it as regards the housing crisis. He writes, “The country is in the grip of a housing crisis. Housing construction is falling. Social housing waiting lists hit an alltime high of 1.83 million in 2011. Private rents keep rising. The 2010 spending review cut housing capital spending by nearly half to £4.5 billion over four years. Government needs to make even more cuts in future reviews. Housing cannot realistically expect more money” His report argues that a cost- free way to fund building more homes is to sell expensive social property when they become vacant. The concept of being cost-free is to be interpreted only in a monetary way. Then there is the use of language; he refers to the proposal to sell off “expensive social tenancies” as a reform. David Marquand in his book Mammon’s Kingdom writes “Policies designed to further marketisation are ‘reforms’”. (See also Professor Fairclough’s book on the language of New Labour) Furthermore there is the use of what I consider to be questionable questions in a poll, conducted by pollsters Yougov, to support the proposal. (People should not be offered council houses that are worth more than the average house in their local authority? and People should not be offered council housing in expensive areas?)
The method that has been adopted to define “expensive social housing” is also questionable. The report proposes a regional medium to define “expensive social housing”. It rejects a national-wide definition or one based on local authority boundaries. A definition based on local authorities would mean areas such as Kensington and Chelsea would keep too much of their “expensive” stock which would defeat the object the report wishes to achieve.
The report has calculated that the total value of “expensive” housing stock is £159 billion using English Housing Survey data but this amount will only be accessed slowly over time because it is likely to have a lower annual turnover rate as tenants are less likely to leave desirable properties in desirable areas. Despite this drawback the Policy Exchange report states that “the annual total of £4.5 billion a year this reform could raise is roughly equal to the figure of £4.5 billion spent on capital investment on housing during the period of the current spending review” and will pay for hundreds of thousands of new social homes.
The report believes that selling a “high expensive social” property is the best option. In order to justify doing so it rejects the option of right to buy as it leads to a loss of revenue for the government. It is the report’s contention that the right to buy does not work for more expensive properties as they require large discounts and that only selling them at market price can unlock their value. The report states, “We would argue that giving expensive social housing to a single lucky household in unfair to the more than 1.8 million households languishing on the waiting list.” Yet for the same reasons it can be argued that it is unfair to deprive the more than 1.8 million households languishing on the waiting list the option of the right to buy give one lucky household. If there had been no right to buy would such an unworkable bureaucratic proposal such as selling off vacant high value council properties to help solve the housing crisis have been worth the effort.
The report ends by stating that sale of more “expensive social housing” should be mandatory policy. “Local authorities and registered providers should be required to value their vacant stock and sell expensive properties. This would have to be incorporated into law. Change could begin prior to this, with government sending out guidance on how to assess the value of vacant stock to begin the process. The costs of valuation will be tiny”
He argues that there is a strong case that housing associations charitable status carries a responsibility to use scarce resources appropriately. Alex Morton believes that the report will recycle assets to benefit housing associations tenants and that the government needs to commit to a swift plan of action. “Plans for secondary legislation should be set in motion as soon as possible in the next few months” Within a few months of writing his report Alex Morton had left as director of the Policy Exchange think-tank and became part of David Cameron policy unit in Downing. His proposals took more than a few months to become part of the plans for the Conservative government after the election but within the next few months will become part of the government housing bill.
Martin Wolf, writes as regards the government’s plans to extend right to buy to housing associations, writes “This is a flagship policy of a party supposedly devoted to both the market and careful stewardship of public funds. Yet it amounts to nothing less than the expropriation of private property. It would also shift important parts of the charitable sector’s housing stock into expensive private lettings, for the benefit of the lucky tenants turned landlords.” Furthermore, he adds, the extension of right to buy will undermine the efforts of housing associations to increase their supply of homes. Who, he asks, is going to give large amounts of money to charities whose assets are being looted at the behest of government?
Under the policy, Wolf believes, “it is quite unlikely councils will reimburse housing associations for the full market value of lost property, as the government says they will. As important, it should not happen. Local authority funds are under enormous pressure from the government‘s past and prospective programme. To force them to use their scarce assets to fund such arbitrary gifts is unconscionable. Most significant of all, the programme will do nothing to solve the biggest housing problem, which is the lack of additional supply. The feeble defence offered by the government is that it is helping people to fulfil an ‘aspiration’ for home ownership.”
Martin Wolf ends thus, Conservatives, of all the parties, “should understand that it is not the job of the government to fulfil all the aspirations people possess, unless doing so responds to a fundamental social need. One can readily justify support for the poor, the sick, the elderly or the very young. But how can you justify handing over huge amounts of money to people who happen to win the housing equivalent of musical chairs? One cannot. Providing selective transfer of resources to a favoured few cannot meet that fundamental criterion. This is a corruption of policy making. Yet this is one of the British government’s flagship policies. The government should think again. It will not but it should. Its offer to tenants of housing associations of a ‘right to buy’ is worse than a crime, it is a blunder.”
Martin Wolf’s use of the word ‘blunder’ to describe the decision by the government to proceed with its plans to extend the right to buy for housing association tenants harks back to the decision of the Thatcher government to proceed with the poll tax. In their book The Blunders of our Governments Professor Anthony King and Professor Ivor Crewe write that once those outside of the government got to know of the details of the Local Government Finance Bill they were uniformly astonished and dismissive. They write that “The great majority of the organisations that responded to the government’s (wholly cosmetic) consultation exercise including the Chartered Institute of Public Finance and Accountancy and the Institute for Fiscal Studies were critical. So was the broadsheet press. The Financial Times called for a reformed property tax, and The Economist was excoriating.” Despite losing hundreds of seats in the local election held in May 1990 the government ignored the calls within the party to drop the bill. The government had to rely on loyal backbenchers and bullying tactics to get the bill, which Margaret Thatcher regarded as “flagship” policy of her third term as Prime Minister, through its parliamentary passage.
In conclusion, King and Crewe write, “The Thatcher government’s folly was on a truly heroic scale. In short, some of the best and brightest in British government nevertheless contrived to produce one of the worst and stupidest pieces of legislation in modern British history” It remains to be seen whether history will be repeated as regards the extension of right to buy to housing associations.
The Conservative Party’s 1987 general election manifesto contained a commitment to abolish the unfair domestic rating system and replace it with what was perceived as a fairer system in which all members of a household contributed. Whilst a good idea in theory as has been seen it made no sense in practice. The 2015 Conservative Party’s general election manifesto contained proposals for a housing bill to extend the right to buy for housing association tenants believing it was unfair that only local authority tenants were allowed to become home owners.
Since the sell-off of housing associations homes will disproportionately affect London it was only appropriate that the GLA’s housing committee at its monthly meeting in July decided to look at what might be the consequences of such a decision should it happen. A number of people from all sides of the housing sector appeared before the committee to give their views. Pat Turnbull, speaking on behalf of the London Tenants Federation said, “The London Tenants Federation is very concerned because they see the proposal as another nail in the coffin of social rented housing” She quoted what Tony Lloyd from Shelter said about the right to buy policy. He said, “It wasn’t a policy to encourage home ownership – it was to encourage less social housing” What Pat Turnbull wanted was for the committee to consider standing united with the housing associations to prevent the proposal being passed into law. Richard Blakeway, deputy Mayor for housing, speaking next failed to do so.
Among the guest speakers was Lord (Bob) Kerslake, former head of the civil service and currently chairman of Peabody Housing Trust, as well as chairing the inquiry into how housing supply can be increased in London. In his opening remarks he said, “The policy has difficulties both in principle and in practice. On affordable housing, we can see a significant
loss of affordable housing, which will be very hard to replace through the one-to-one policy that has been described, by Richard Blakeway. The reason we can say that is because the experience so far is that for every six sold only one has been replaced.” He added the challenge will be in the delivery and whether the numbers add up in terms of income and cost. “Also there will be a challenge about where that new affordable happens. The preponderance of sales will very much orientate towards central London boroughs whereas the builds may well be somewhere very different. Thirdly, there is the timing issue here. Inevitably, you are likely to see a surge of sales in the early period and it will be very hard to replace that except over quite a long period of time” (Later in the discussions Lord Kerslake questioned whether the assets the government wants to sell belong to them. As regards Peabody Housing Trust, it was founded over 150 years ago from a donation from the Anglo-American businessman and philanthropist George Peabody.)
The chairman of the committee Tom Copley wanted to know from Richard Blakeway, given the situation that Lord Kerslake described as regards replacement of council homes, what the situation will be for housing associations. In reply he said housing associations had very different delivery processes.
Less equivocal was the mayor Boris Johnson. When assembly members questioned the Mayor on 15 May he said, “To make this policy (both forced sales and right to buy for housing associations) it has to deliver more homes. It would be the height of insanity to use the proceeds of council homes sales in London to help build more homes outside and away from London because it is in London where we have a housing crisis.”
Jim Ripley, chief executive, Phoenix Community Housing, in reply to a question about the effects of right to buy on housing providers, said that the government right to buy decision has resulted in a double whammy for him. Phoenix wanted to build 500 new homes and were about to go to the market. That is not now possible and he blamed the government for interfering. Moody and Fitch, the credit rating agency, have given them a negative credit risk. That applies across the board to all housing associations.
Then there is the minus one per cent rent settlement. For the government that is great news in terms of keeping the housing benefit bill down as well as tenants but what it means to housing associations is a hole in their business plans. For Phoenix that will be a loss of £150 million over 30 years. Jim Ripley believes the ‘elephant in the room’ is the pay to stay proposals. It is going to force people to buy. In Lewisham the social rent will go to two or three times. He wondered why “it is not acceptable – to this government – to subsidise rents if you happen to be earning over £40,000 but it is acceptable, for the government, to give people who want to buy their homes a £105,000 discount. He was not the only person to ask whether it is right to play political football with social housing.
Another point raised by Lord Kerslake is the very substantial outflow of funding from London under the proposals for right to buy to the rest of the country. He said, “To my mind, it would be perverse outcome given the housing crisis in London.” Richard Blakeway, concluding the discussion, said that the policy “is on a journey” and will evolve. The Mayor is in extensive discussions with the government to ensure that the money raised from right to buy sales in London stays in the capital.
The other way the government hopes to raise money is from selling high value council homes. There too, according ^
to Richard Blakeway, the policy seemed to be on a journey. He was asked by Tom Copley, chairing the meeting, as to how many high-value council homes he expected to be sold in London each year under the policy. Richard Blakeway in reply began by saying that all the data available is based on a series of assumptions. “Broadly speaking, the range of council house sales that we anticipate will be needed if the policy worked on a national basis will be between 3,000 and 4,500 per annum. How many of the sales would be in London, asked Tom Copley. The answer was given by James Clarke, housing policy manager for the GLA. He replied “It is between two-thirds and three-quarters from inner London, we think, because London is where most of the council houses are located”
On this point Cllr James Murray, cabinet member for housing for Islington, mentioned a study commissioned by Islington showed that over the first five years of the policy that around 3,500 would be sold. In Islington it would be 34 per cent of their housing stock, for Camden it would be 38 per cent of their homes, five per cent in Haringey and none in Enfield. He added, “The burden of the policy is very much weighted against the inner London boroughs. That is not to say this is only an inner London borough problem. The study showed that there will be fewer lettings available in Islington and Camden; it will mean that people who are homeless or seeking alternative accommodation then would have to move to outer London to find somewhere that they could at least initially afford. This would mean that the pressure on private rents, temporary accommodation and social services in the outer boroughs would go up. It would push people out of the centre forcing the outer boroughs and putting a strain on the outer boroughs.”
The forced sale of high value properties would affect their new build programme. He said, “Every home we are building in our new build programme is above the threshold because new builds, by virtue of being new, well designed are going to be more expensive than some of the older flats within our housing stock. There is a real threat that the plans could put an end to our new build programme. It means that every home, once completed, will be over the threshold and presumably therefore we would be forced to put it up for sale.”
Cllr. Philip Glanville, cabinet member for housing in Hackney, told a similar story of what was happening in his borough. “We are building 900 new rented homes and they already allocated to people on those estates where we are ding the regeneration. Therefore, you are creating a degree of uncertainly over the next ten years about those homes.”
Hackney, like Islington, he said, have commissioned a study. “We have our own plans to deliver affordable housing and this (policy) has really dropped a bomb right in the middle of those plans. If you add that together with the other reforms, the government has introduced in the Budget in terms of reducing social rents, the pay-to-stay elements and renewed right to buy, you are seeing a collapse in the supply of social housing, even in those boroughs like Hackney and Islington that are building homes as fast as they can. It makes it very challenging to deliver new housing. I do not think it makes it unnecessary unviable but, if we did not win those exemptions on new-build homes, it clearly would make it unviable and we would have to ask ourselves why we would bother building”
Kensington and Chelsea would suffer the most under the proposed plan. Laura Johnson, director of housing in the borough, said, “We would probably have to sell every familysized home that became available because of the values in Kensington and Chelsea. We would be in a position where we were able to let only bedsits and one-beds because every two, three and four bedroom flat would probably be above the threshold being set out at the current time.” She added that “We are very concerned about the economic impact on people in Kensington and Chelsea and live in our council homes. They are managing to provide employment for local employers, who often employ in the service sector on a living or minimum wage and will not be willing to travel across or outside of London to fill those positions. Therefore, it will have a knock-on economic effect, which is beyond just the provision of council housing”
Ron Hollis is the Local Authority Tenant Representative on the London Tenants Federation. He mentioned how the plans would affect Lambeth. “Our concern with high-value council homes is that the hard fact is that this will mean the removal of working-class families from London. There is no way that this policy can work unless you remove a whole tier of the community out of London. I hesitate to use the words ‘ethnic cleansing’ because that implies that only one particular group is going to be affected. The fact is that we are talking about an economic group. Young families, often, and long-established families who have lived in and been part of the communities for generations will be forced out”
He made the connection between housing associations and local authorities. “At social rented levels, there is a huge interaction between local authority housing and housing association properties because, obviously, local authorities have significant rights of nomination for housing association stock. If the housing associations lose stock, then that is gone.”
The Heath Robinson complexity as regards the financing of replacing right to buy homes was raised by Cllr. Phillip Glanville. He explained that in Hackney, they had around 70 homes under construction at the moment to replace homes sold under right to buy. “One of the challenges about replacing right to buy homes is the complex financial mechanisms the government set up to use those receipts. Not only do you have to be onsite within three years to develop your replacement property, but you cannot use any other form of subsidy to replace it and has to be 30 per cent of the value of the property” The complex financial mechanism means that it is difficult the ‘like for like’ replacements which means the receipts go back to the government. He added, “It is not (possible) under the current financial mechanism that is being used. There is also a presumption that they should be provided at affordable rent. We are choosing to provide them at social rents”
Cllr James Murray expanded on the difficulties of providing homes to replace stock that had been sold. “If you look at what has happened over the past few years in terms of the replacement under the right to buy programme, the number has been something like one replacement home for every ten that has been sold. That has not necessary even been a like for like property. It could well be replacing a good family home for social for social rent with a one-bed for affordable rent and so it is not even replacing like for like.”
Another Heath Robinson factor that has to be considered is that interest payments have to be added to the amount if the money is not spent. Cllr. Murray explains, “If you do not spend the money within three years, you have to pay back the extra interest for the three-year period” As regards the forced sale policy he stated that it is going to be a disaster. You simply cannot build replacement homes in your local area. “As has been illustrated, if you build new homes within your borough they will be above the threshold from day one.”
In reply to a question from a Conservative member of the assembly, Andrew Boff, about the consequences of forced-sale receipts being pooled nationally rather than being ring-fenced for the London area Laura Johnson said there would be a “Net outflow of money from London to the regions because, on any year, from the predictions that we have done on sales, the bulk of the money is generated from the sale of high-value voids in London, probably between 40 and 60 per cent. If it (the money) were pooled nationally, you would see funding going from London from the sale of high-value wards to other areas of the country”
It was a this point in the discussions that Richard Blakeway said that the replacement rate was about one-in-six not one-in-ten. In response Tom Copley wanted to know if there was a distinction between homes replaced due to right to buy and a council’s development programme. Richard Blakeway had to ask his colleague James Clark, housing policy manager, for a clarification. He said, “There are two issues here. One is that the data is really poor and so you (who you?) are not really clear. Data on council completions does not distinguish between different types of completions and where the funding comes from, but there is an assumption that because of the volume of right to buy receipts, most of the new council properties will have right to buy receipts with them” He confirmed also that proceeds would be distributed on a national basis. Richard Blakeway also clarified that uncommitted receipts from right to buy sales reverted to the GLA rather than the government. Tom Copley wanted to know whether that would be the case under the sale of high value properties. It was a question that Richard Blakeway wasn’t able to answer.
Stephen Knight, Liberal Democrat, wanted to know whether it was possible to replace homes in central London from the sales of high-value sales. Cllr, Glanville said the sums do not add up to do what the policy was designed to do, unless it is, for example, a Georgian terrace that is worth over £1 million. “Then you might be able to carve up the receipt and get somewhere near the replacement. If you are selling a more humble two-bedroom property in inner London, a council flat, then you are not going to get another two-bedroom property in the centre of London at a social rent as a replacement. You are simply not”
Nicky Gavron, Labour asked about what impact the policy would have on housing lists. In reply Cllr. James Murray said that as a policy the boroughs of Islington, Hackney and Kensington and Chelsea would expect to lose loads of homes but you cannot build homes somewhere else and hope it will somehow help people in inner London. Nicky Gavron added that the people who are going to hit hardest on the waiting lists will be larger families and as a result the welfare bill is going to go up because people will be forced into the private sector.
Ron Hollis, London Tenants Federation, suggested not to become distracted by the one for one issue. “The fact is, if we look historically at the issue, one for one has not happened. There is absolutely no evidence that any of the mechanisms suggested by the government are likely to make that happen. If we look at the whole mechanism, I have spent several weeks trying to find any economist who will do more than use a basic pocket calculator to explain to me how the figures work. The fact is that they do not. The policy has all the hallmarks of something that happened late at night on the Tube between Westminster and Victoria rather than any kind of thought-out economic philosophy.”
(In 28 October 2013 Kris Hopkins, housing minister, replying in to a letter from Liberal Democrat MP Tessa Munt, stated the government considered it unreasonable to extend the right to buy to housing associations. There was no mention in the letter of the possibility of funding the extension through the sale of high value council homes. Kris Hopkins in April 2015 described the policy as “sensible and affordable”.
The meeting was near its end and Tom Copley asked Richard Blakeway to state what he would be his lobbying priorities to government. He began by saying that he had already held talks with boroughs and housing associations and others about this policy from the outset. He added, “I would say that the foremost priority for us is to ensure that the resources that could be generated in London through the exercising of the right to buy by housing associations tenants and the sale of council homes are retained in London”
The Mayor, he said, had set out four principles including many of the points made by speakers around the social-economic mix of London. Suffice it to say the primary objective is to ensure that the resource is retained in London. As to whether the policy is a viable one as regards the discounts and the debt servicing can be challenged. Richard Blakeway was challenged as to whether the replacement homes would be social rented homes. He said there would be a mix of “affordable products”. Reading the transcript of the meeting the prevailing parameters within which the government’s proposals were taking place was one of inevitability and acceptance, with a couple of exceptions from the representatives of the tenant organisations.
Following the meeting Richard Blakeway has written to Tom Copley to give a more detail estimation of the number of sales that would sold homes as a result of the high value homes proposal. It is estimated to be between 3,000 and 4,500 per year. The lower end of the range is based on data supplied by Hometrack and the publicly available land registry data. The upper end of the range is based on GLA analysis of data from various sources including the English Housing Survey, the Local Authority Housing survey and the Land Registry. Still there is uncertainly because to local valuations and stock turnover data. On right to buy sales, the letter states, it is not possible to accurately predict the level of sales because the policy is demand led. The GLA expects that the level of sales could be between 10,000 and 30,000 over five years.
Shortly after the George Osborne’s Budget Inside Housing magazine dutifully published an interview with David Orr to reflect on his ten years as chief executive of the National Housing Executive and to discuss the new government’s new environment (sic) for housing associations. He was in a quandary he told his interviewer, “Should he speak out and risk alienating the politicians who hold all the cards for five years, or moderate his criticism and risk being seen as a collaborator with a government which many now believe is overtly hostile to the sector” He realised that the present situation was a watershed moment for housing associations but remained keen to keep the line of communication open. “We’re still having the conversation with government (about right to buy). For as long as we’re having the conversation there’s a possibility that things will improve. I don’t think it’s a broken relationship, but I think it’s stretched” (Perhaps he should be reminded what Benjamin Franklin, one of the founding fathers of the American Revolution, said about hope; “he who lives upon hope will die fasting”.) In doing so he echoed what Jim Ripley said that the early indications are that a small number will find the government’s proposals a challenge to survive. S
In response to the interview with David Orr I sent a letter to the magazine. In it I wrote that there was no point in talking to the government. Sadly, I wrote, that he was in denial regarding the relationship with the government. Parodying Monty Python’s Blue Norwegian sketch I wrote that that their relationship is broken, it is no more; it has ceased to be. It was time for a war-time leader and added that even Winston Churchill’s predecessor realised after the Munich agreement that there was no point in talking any further to someone who was hell-bent on their destruction. I reminded readers that the Defend Council Housing campaign hoped for years to get the Labour government to repeal the right to buy legislation. They failed; it never did. I ended by advised housing associations to get a war-time leader who was prepared to do more than more just talk. My letter wasn’t published.
Tom Murtha, a former regional officer of the National Housing Federation, in his Inside Housing column in April
2015 about the government’s proposals to extend the right to buy to housing associations stated that the proposals were another nail in the coffin of social housing. “Many housing associations have complied with the government’s policies to reduce social housing and this is their reward. I hope that this newfound zeal to defend social housing will serve to unite the sector to oppose the proposal”. He regretted that the other disastrous policies introduced in the past five years have not been met with a similar amount of opposition.
He harked back to the 1980 when the Conservative government introduced a similar proposal to include housing associations in the legislation giving council tenants the right to buy. He recalls that although the bill was passed by the House of Commons it was defeated in the House of Lords. He writes, “The Lords pointed out that if rented stock was sold at substantial discounts then housing associations, which were charities, would be parting with their assets for the benefit of those housed today at the expense of those needing housing tomorrow” (Sadly the same argument could be said to have applied to council housing and public assets but it seems they were sacrificed to save housing associations) The argument was accepted and housing associations were excluded from the legislation. Tom Murtha ends thus, “Can we learn anything from this today? The first point is that the sector was united in its opposition to the government and was not afraid to campaign hard against it. This spirit has been missing in recent years” Did Tom have David Orr in mind?
David Orr and the NHF throughout the summer of 2015 the NHF continued to have talks with the government which involved a plan under which associations pledged to build more low-cost homeownership homes in return for the right to buy being adopted voluntarily. At the National Housing Federation’s conference in Birmingham in September 2015, Greg Clark, Secretary of State for Local Government and Communities, announced that a deal had been agreed with the NHF. It was a deal that David Orr saw as an ‘offer he couldn’t refuse’ considering the alternatives. Whilst the NHF’s decided to do a deal with the government other professions -the lawyers, the doctors, the police and teachers – have refused to accept the imposition of government policy and have decided to stand and fight the government.
Was the decision to do a deal with the government worth the opprobrium considering what happened to the Liberal Democrats when they did a deal with the Conservatives in 2010? As the junior partner they were unable to prevent the Conservatives pushing through many policies that they opposed. The House of Commons Communities and Local Government Select Committee in its report published in February 2016 highlight areas where the deal could unravel. In particular, the areas where housing associations seek exemptions from the right to buy. The report states, “It is unclear from the voluntary agreement whether individual housing associations will be able to create their own criteria for exemptions or to judge each sale on a case by case basis. The voluntary agreement did not address the issues caused in areas with very high property values or where there was limited land available for new development. It is important that all the provisions of the deal are spelt out, including the circumstances in which housing associations have the right not to sell, as detailed in the agreement” Also the voluntary deal offers housing associations flexibility in how they replenish the housing supply following a sale but this flexibility would be undermined if (my italics) the public commitment to full reimbursement were reneged upon by the government. (It is noticeable that the big housing associations voted for the deal whilst the smaller ones, fearful of their future, didn’t).
Has Greg Clarke the authority within the Conservative government to see that they keep the government keeps its side of the agreement? From past experience the NHF should not build their expectations too high. Greg Clarke at the 2014 Centre for London conference was asked about the prospects of more powers being devolved to London. He was pathetically indecisive, noncommittal and evasive. It was obviously a decision above his pay grade. Greg Clark although appears quite amenable but he didn’t get to his present position by being a softy. He still retains the distinct Liberal Democrat quality of someone whose principles can be moulted into pragmatism that allows him to ascend the ‘greasy pole’ and keep his present cabinet position.
Tom Murtha, from the perspective of a housing campaigner, sees the deal with the government as one that will cause the slow death of social housing. The NHF is taking a giant leap of faith in putting its faith in the government to deliver its part of the deal. In the space of a year, from wanting the government to hand over surplus public land to expand the housing association sector, a year later David Orr is hoping that they will keep their promise to reimburse housing associations for their losses from right to buy sales – there is no statutory obligation. Failure to do so would leave his strategy in tatters. His legacy would be that he oversaw the beginning of the end of housing associations as they have been known over the centuries.
Over the centuries there have been times when decisions by out of touch governments and rulers have led to the founding of publications to resist the imposition of laws, or for the repeal of long-established laws. It is the intention of this publication to follow in that long and noble tradition and oppose the efforts of this government to impose the Housing and Planning Bill upon people who are not in the fortunate position to buy a home or who chose not to do so. What the Conservative government is trying to do is best expressed by Colin Ward, the author of The Hidden History of Housing and many other books. He wrote, “Ours is a society in which, in every field, one group of people makes decisions, exercises control and limits choices, while the great majority have to accept these decisions, submit to this control and act within the limits of these externally imposed choices. It happens in work and leisure, politics, and education, and nowhere is it more evident than in the field of housing” ■
Terry McGrenera, the House Party: Homes for Londoners