At the heart of politics lie battles over meaning. In an uncertain world there is plenty of scope to contest the definition of problems and the perceived effectiveness of solutions. Under Labour we came to think of agenda management as “spin”, and to condemn it. But the Blairites were simply the most egregious and effective exponents of the political arts. All politicians face decisions about the message and how one would ideally like it interpreted.
This seems particularly pertinent in relation to current discussions about affordable housing. We’re seeing the government providing some creative readings of what is on offer.
One component of the debate is the battle over “fairness”. The term is, of course, utterly meaningless without further specification. We can all agree fairness is desirable, even though we mean radically different things by it. That is its strength and its weakness in political discourse.
The government, particularly its bluer contingent, are trying rather successfully to shift the dominant interpretation of fairness away from the appropriate assistance to the disadvantaged and towards the interests of the tax-payer. It isn’t a new debate, but clearly an opportunity has presented itself for another lap around that particular track.
But that’s not my principal concern here. I want to consider the current agenda relating to the supply of affordable housing, to the extent this is yet clear.
The government has announced the construction of 150,000 affordable social rented homes over four years. At one level this is fair enough. The claim is that this is a faster rate of addition to the social housing stock than occurred under Labour. That claim needs a bit of unpacking. It only makes sense if you compare the net addition to the stock under Labour – new construction minus Right to Buy sales and other disposals – with gross additions to the stock under the current regime. Which of course doesn’t make sense.
It could be forced to make sense if the Right to Buy were to be suspended and demolition ceased. It isn’t clear these are formal policies, but de facto a move to 5 year tenancies for council tenants could render the Right to Buy ineffective and reductions in the availability of funding could do for demolition.
But never mind its plausibility, as an argument it plays well on Question Time.
And all this is to leave aside the point that an addition to the stock of 150,000 units over four years falls a long way short of expert estimates of what is required. At least there is the consolation that Labour didn’t really get very close to what is required either.
The further confusion is that the government has cut the social housing capital budget in half. The plan is to square the circle by allowing rents on properties managed by social landlords to rise to 80% of local market levels.
This raises the question: what do we mean by “affordable housing”? The term has had a relatively stable meaning for many years – rented housing let at rents (significantly) below market levels. It can also encompass other types of provision, such as some low cost homeownership initiatives. This meaning is now being destabilised.
The government’s proposal will see social rents in some areas quadruple, although in other areas the impact would be much more modest. The government seems to be taking the position that if a dwelling can be made affordable because the tenant is eligible for assistance through housing benefit then it is an affordable dwelling. But that is no different from the private rented sector. The distinctive understanding of “affordable housing” dissolves.
The consequences of this policy being implemented are potentially significant. It is in tension with broader policy objectives to smooth the transition off benefit and into work. More households will be caught in a deeper benefit trap. Equally it is unlikely that the policy will save much public money if housing benefit has to take the strain. Social rents also feed into the calculation of the rate of inflation and therefore rent increases have an impact on the achievement of broader macroeconomic objectives.
We appear to be destined to repeat history here. In the late 1980s and early 1990s the previous Tory government pursued a similar strategy of raising social housing rents. The policy ran out of steam in the mid-1990s when it was pointed out that it was costing the government more in benefit payments than it was saving in subsidies to prices.
In those days the problem was not just housing benefit but also that the uprating of a wide range of welfare benefits was tied to RPI. So the public spending implications were considerable. In this respect the current government has the advantage that it has already taken the decision to decouple many benefits from RPI and base uprating on CPI. But clearly it isn’t going to be hugely advantageous for those who rely on assistance from benefits to secure an acceptable standard of living.
It may be that the government considers it has no option but to build fewer houses, charge more for them, and offer less generous assistance to those in need. But it would be more honest to say they are doing something different than to go through a tortuous process of claiming they are not. There are signs that views are hardening and the tactics are to shift in this direction. The substance may not be palatable, but at least it has the virtue of honesty.
While policy discussion is being conducted in familiar language, the death of affordable housing as we have known it is imminent – unless there is the will to contest attempts to manipulate language and reframe the debate to the disadvantage of the already disadvantaged.
Alex Marsh is a Liberal Democrat member who blogs at alexsarchives.wordpress.com
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27 Comments
Finally a post on this blog that admits the truth about the coalition’s housing policy.
The National Housing Federation have already stated that by their analysis the total number of affordable homes built will be zero.
That’s right all you apologists, zero. Not one, single, affordable home, at all, anywhere.
My question to Lib Dems everywhere?
What is your Red Line? What policy catastrophy will make you think again?
“What is your Red Line? What policy catastrophy will make you think again?”
My personal red line was crossed some time ago, hence the ‘ex’ in my sig, I think that it won’t be long before the ‘old’ LibDems are completely replaced by ‘new Tory’ LibDems
nige (exLD)
I’m deeply grateful for this superb piece.
Not one affordable home?
So what, has the government banned house construction? Has funding for house construction been abolished?
No, obviously not. Let’s wait to see what happens before we give up on the government entirely.
Hi alex,
A timely article. I have recently written about exactly this subject on LDV, as indeed has Andrew Stunell, ‘Our Man in the Department’. There is a good, strong debate around these issues, one that will become clearer when the Decentralisation and Localism Bill is published on 22 November.
Let’s deal with the numbers issue. The Government says that they will build c150k new homes over four years. They also estimate that they will sell some 25k from Right To Buy (RTB). That leaves a net addition of c125k social homes to the housing stock. Given that RTB sales have been greater than social home completions in every government since 1979, Andrew Stunell can truthfully claim that, as long as numbers stay as predicted , this government will be the first to have a net addition to the housing stock for thirty years. (As an aside to this, the Government is also increasingly fond of saying that this year they are completing more social houses than in any year under Labour. This happily ignores the fact that the homes finished this year will have started under Labour, with money provided by Labour. I am no cheerleader for the last government, but even i object to claming their social home completions as our own).
I’m prepared to accept the Goverment’s commitment to building new homes, and will take their 150k gross (or 125k net) completions on trust for the moment. That’s mainly because we have Ministers like Andrew Stunell who I think are good and decent, adjectives that I have trouble applying to Conservative MPs.
What seems bonkers, however, is the expectation that rents at 80% of market rate are ‘affordable’. No. They. Are. Not. They may be if HB is paying for it, but then we get into a merry Whitehall go-round of the Communities and Local Government Department getting the Department of Work and Pensions to pay for their housebuilding programme through HB, instead of funding it directly. In getting the homes built by HB receipts and the rents paid to housing associations, the Government is taking our tax money, asking tenants to claim it (itself an exhausting process, as anyone who has ever claimed HB will know), paying administrators to distribute it, asking RSLs to collect it, and then using it to lever in cash from banks to build new homes. What a huge waste of time and money, when the Government could just build homes with the money in the first place, without, literally, sending it all round the houses.
We are barely scratching the surface of the issues here, but i’ll stop now and spare readers any more of me.
@ stephen w
“Has funding for house construction been abolished?”
Pretty much. The funds channelled into the banks have been channelled by the banks into boosting their balance sheets and into overseas activities, Private-sector house-building is in the doldrums with very limited availability of finance from banks.
From the lead article: “In the late 1980s and early 1990s the previous Tory government pursued a similar strategy of raising social housing rents. The policy ran out of steam in the mid-1990s when it was pointed out that it was costing the government more in benefit payments than it was saving in subsidies to prices.”
Correct! Overall welfare payments peaked at over 12% of GDP in 1993 and 1994. They’re now as low as they were during the 1960s.And not much higher than the 1950s. If you read the daily newspapers – and believed the rhetoric from Osborne and Co – you’d likely think that welfare payments are at all time high.
See graph
http://www.ukpublicspending.co.uk/downchart_ukgs.php?year=1950_2011&state=UK&view=1&expand=&units=p&fy=2010&chart=40-total&bar=1&stack=1&size=m&color=c&title=Welfare Chart
stephen w wrote –
“Let’s wait to see what happens before we give up on the government entirely.”
That’s like saying ‘lets to see if the horse bolts before we shut the stable door’ and all the while people will go through real hardship while we “wait and see”
I know the Tories are well known for not giving a damn about the poor and vulnerable.
But I am curious what there attitudes will be when they realise, there constituencies are flooded with an influx of people reliant on welfare, as many thousands of people are forced out of the cities.
Especially those Tory MP’s in outer borough Cities that have marginal seats.
I would suspect this might be cause of some alarm for some Liberal Democrat MP’s as well.
What will happen to their share of the vote, once the make up of their constituency is suddenly changed to Thousands of Housing Benefit Claimants who are out for Justice for being thrown out of their homes.
We will soon be shouting
Light dawns over Marblehead
This raises the question: what do we mean by “affordable housing”? The term has had a relatively stable meaning for many years – rented housing let at rents (significantly) below market levels.
I imagine that most people think they mean a house they can afford. I don’t care about the number of council houses, or whatever they are called today.
Getting lower house prices is mostly a matter of building new houses, and that would certainly be possible at current sales prices, if you could get a new development through the planning system.
Which is why the current government has scrapped the regional develoment plans, and is simply going to give money to councils that give planning permission for new houses.
http://www.communities.gov.uk/housing/housingsupply/
” we will shift control over housebuilding from central government to local authorities and the community. We do not believe that top-down housing targets work so we are replacing these with powerful financial incentives.”
Just to try to get some perspective back into this and to widen the focus of the housing discussion:
Affordable housing does not get built by the government. It gets built via the activities of housing associations and councils.
Where I am, the way affordable housing gets built is by requiring developers to allocate a percentage of new development to be built as affordable and handed over to a housing association. No public money involved. Up until now the percentage in our planning policy has been quite low, and we are very very slowly adding to affordable housing. Even the Tories have realised it isn’t good enough. So now the percentage has more than doubled, and we expect to get a lot more affordable housing as a result. To give you an idea how much: we are due 35% of 10000 houses by 2026, that’s 3500. It’s not enough, but it’s a lot more than has been delivered locally in the past 16 years.
@ MrsB
“the way affordable housing gets built is by requiring developers to allocate a percentage of new development to be built as affordable and handed over to a housing association. No public money involved”
that’s only a little bit true. Some AH is delivered through S106 agreements of the sort you mention. However, if there is an massive reduction in private housebuilding – which, relative to the past ten years, there is – then there are no developments on which to ‘tax’ affordable housing in this way. Most social housing that has been built nationally (if not necessarily in your local area) in the past 20 years has been by housing associations, and they are grant funded by the state.
That’s like saying ‘lets to see if the horse bolts before we shut the stable door’ and all the while people will go through real hardship while we “wait and see”
What, so we should just always believe the most pessimistic possible scenario about what will happen, lest the horse bolts before we shut the door? I was under the impression we should judge on results, rather than the hyperbole of whoever comes along.
Thanks for the comments so far.
The connection to planning is of course a vital part of the story that wasn’t touched on in the original post. s106 agreements have been an important source of affordable housing over the last 10 years, but, as @Dominic Curran notes, this is a mechanism that relies on the health of private house building activity and is hence not going to be delivering a lot of new affordable homes in the near future. It is, more generally, a rather uncertain mechanism for ensuring that the need for affordable housing is met. The fact that many local authorities came to rely quite heavily on it for meeting their affordable housing targets is in that respect unfortunate.
@ad – While I agree that the problem of affordability stems at least in part from insufficient supply (but also from things like the impact of deregulation of the housing finance industry), I’m not sure that the abolition of regional house building targets will necessarily have a positive impact on the problem. While many people might agree that there is a need for housing to be more affordable and therefore for more housing to be built, a fair chunk of them would also prefer that when the new housing appears it isn’t built anywhere near them. The impact of delegating decisions to a local level is as likely to reinforce NIMBYism as it is to bring forth new supply where previously there was shortage. It will be interesting to see whether offering financial incentives as an alternative to top down planning results in policy objectives being met more effectively.
It is also clear that the government is doing some useful things, like a renewing the focus on bringing empty homes back into use. The question is just whether these are adequate responses to the scale of the problem.
@Stephen W
I was under the impression we should judge on results, rather than the hyperbole of whoever comes along.
That’s fine, when it is not peoples livelihoods that are being gambled on.
The government have promised 150’000 houses over 4 years, 37’500 new affordable houses each year, which lets not forget, will now be charged at 80% of the market value rent.
I struggle to see how that can be construed as affordable. housing.
Local Housling allowences are also set to fall as governments rules so that only 3 in 10 “private housing are affordable, rather than the 5 in day as it is now.
This will push demand up for private housing, and push rents up along with it.
It also pushed the Housing Benefit bill up, as more and more social housing tenants are charged at 80%
Introduce LVT – or even just start talking about introducing it – and we could have a million empty homes back on the market for rent or sale. Affordable housing is the automatic consequence. Used to be a no brainer for this party.
This thread just shows how fiendishly complicated it all is. Affordable housing suffered its’ first tumour when Thatcher introduced the sale of council houses, largely to escape the costs & irritation of having to deal with tenants who abused the system. Over the years it has developed into a full blown cancer which has pretty well killed the patient. To turn it round one must start with a rent setting system. In a part of Manchester not far from Andrew Stunell’s constituency a house is being rented out at £478 a month. Virtually next door an identical house is for sale at £55000 and round the corner the same house is on part ownership for £19950. If the landlord thought he’d find a tenant he’d charge double the rent. As it is, however you play with the figures, he is on at least 12% return on capital. Not bad!!. Next you have to take into compulsory purchase any property that has been empty over one year. But no one has the courage – certainly not Labour. By all means become an ex-LibDem if you must but where would you go? Better surely to continue to do battle from within. Lib Dems are still better than anyone else at ordinary membership involvement in the political process.
http://www.bbc.co.uk/news/magazine-11674864
LHA rates will be linked to the Consumer Price Index (CPI) from 2013/14 as a result of June’s budget.
According to Roger Harding, head of policy, research and public affairs at the housing charity Shelter, once inflation takes its toll this will drastically reduce the benefit’s ability to keep up with rises in accommodation costs.
Looks like LHA is taking hits from every direction possible.
How Many bullets does it need to take, before the government realises they have destroyed it,
Hmm, I think there are a couple of aspects to this debate which have been overlooked so far.
If we can agree ‘affordability’ relates to the real prices of housing (whether in rents or mortgages) it’s worth pointing out that one of the biggest factors in the economic slowdown was the credit crunch.
At the peak of the house price bubble top rate mortgages were being accepted at 20x salary. Now this is down to 9x salary.
Last month it was reported the rolling quarterly average of house prices saw its first drop in living memory and the related slowdown in completions means there are fewer properties in the process of handover. The property pool has suddenly started being used more efficiently as inflated demand has been taken out of the system and this is making the market more affordable.
As prices drop and houses are seen less as investment vehicles and more as homes for living in they become less profitable to keep standing empty just to support market valuations.
In other words the vicious circle of increased credit pushing prices ever upwards and creating perverse incentives for scarcity of supply has been reversed almost overnight.
Although the pinch has eased, according to my estate agent, the benefits won’t really start to be felt and understood by the wider public until a whole cycle has been completed (7 years is the average period of time spent living in one place) and mortgages fall below the 5x salary barrier.
However labour mobility and other demographic trends are also factors – it’s not so much whether there are enough bedspaces, but whether the properties are of the right type in the right place to match consumer choices: it’s about who wants to move, and where they want to move to.
The introduction of a sensible regional policy would have a dramatic impact on housing demand and rebalance the market without the need for massive levels of new (and unaffordable) state intervention – and it would also mean people could live closer to where we work, increasing our quality of life and productivity levels.
It’s madness to try to rebuild the country to fit the market model the government has devised over generations, surely its much better (and more affordable) all round to rebuild the market model to fit with the in-built structure already existing in our country!
But that doesn’t stop parties with vested interests from trying.
I think some stronger questions need to be asked about why there is such a disparity in housing availability and price between, say, central London and, say, central Darlington. The answers are not all on the supply-side; we shouldn’t ignore the structural demand created by government policies aimed at centralisation.
Do we want to just build more homes on the Thames flood plains, or could we find ways to move jobs profitably out of the capital?
This could be the moment for Vince Cable to start talking again about his regional investment banks…
@ Oranjepan you pick up on the issue of regional policy, that was given a bit of an airing in the thread associated with the recent post by @Dominic Curran (http://ldv.org.uk/21846)a
If I may repost the comment I made there:
“We need to look at these issues in relation to a broader understanding of spatial development not just within the UK but at a European level. The planning regime established in the UK after the second world war was seen as a complement to robust Regional Policy. But the history of Regional Policy is not one of conspicuous success. Rather even during periods of active Regional Policy it could be characterised as fighting a losing battle against economic concentration, a process accelerated by European integration. My reading of the regional economics literature is that it is recognised that there are centrifugal forces at work in the spatial economy that should in theory overcome the friction of distance and allow economic activity to decentralise, but that on even the most optimistic reading this is a very slow process. Further concentration of economic activity is more likely over time horizons relevant to policy. There are economic benefits to concentration that are not easily discounted or counteracted. Years ago ideas such as the Euro-banana had some prominence – European economic activity will progressively concentrate in an arc running from London through France and Germany down to Northern Italy because that is the most efficient spatial location for it.
I am not at all against exploring how one might effectively disperse economic activity to relieve pressure on the SE of England. But I just think that it is important to recognise that this is a task of significant magnitude, for which there is limited precedent.”
The other point you make is about the easing back of house prices. This has undoubtedly had an impact on affordability in the owner occupied sector, although it has been counteracted by the changes in lenders’ requirements for LTV ratios and other lending conditions which make access to funding more difficult.
I think the point I would make there – which takes us rather away from social housing where this thread started – is that nothing that has happened over the last couple of years has yet fundamentally altered the structure of the housing finance system. So there are no institutional barriers to it happening again. After the house price scare in the early 1990s it was said that we’d learnt our lesson and no one would be stupid enough for it to happen again. Yet it didn’t take all that long for it not only to happen again but to happen more severely.
There is currently talk of responsible lending guidance etc. but that doesn’t put institutional barriers in the way of similar finance-fuelled run ups happening again in future. We hear this week of new subprime lenders re-entering the British market for example. Competition between lenders will almost certainly ensure that such run ups in house prices happen again at some point.
.
@Oranjepan – where do you get your facts from?
1) At the peak of the house price bubble top rate mortgages were being accepted at 20x salary.
2) Now this is down to 9x salary.
3) Last month it was reported the rolling quarterly average of house prices saw its first drop in living memory.
4) …the benefits won’t really start to be felt … until a whole cycle has been completed … and mortgages fall below the 5x salary barrier.
@RichardSM
facts are amazingly easy to come by if you look for them (and you have an idea of what you’re looking for).
barring the spam filter for excessive links this is what a 30second search came up with:
i)a couple of nice graphs on average house price to average earnings ratios and first-time buyer affordability up to Q3 2008
http://www.mortgageguideuk.co.uk/blog/house-prices/house-prices-income/
ii)a Sept 2007 report on Ninja mortgages which details how applicants were being “encouraged to lie about their incomes” among other abuses which fuelled the crisis
http://www.guardian.co.uk/business/2007/sep/30/5
iii)a report on the 0.9% quarterly drop announced at the beginning of September2010
http://www.telegraph.co.uk/finance/economics/houseprices/8048189/House-price-drop-What-does-it-mean-for-buyers.html
However, while I’ll admit the 20x earnings figure is anecdote and the point about a demographic cycle being a bar to greater reductions in the ratio is the private opinion of a low-rankiing industry professional, there are different ways of calculating data to come up with the headline stats and this creates potential for disparity which must be allowed for. So the general argument isn’t weakened.
But as a better starting point I’ll point you in the direction of the Home Truths annual report recently published by the National Housing Federation which makes a note of the current 9x earnings figure.
http://www.housing.org.uk/default.aspx?tabid=596
One of my local LibDem councillors, who also happens to hold the housing brief on the council, commented on this figure in the report (in a way which neatly sums up the argument and is worth repeating): “The fact is there is a shortage of affordable housing and because housing is not affordable it puts pressure on social housing.”
In other words, trends in the wider housing market have a direct impact on those at the bottom of the scale and the policy issues are inextricably interwoven – you won’t solve problems in one while ignoring the other.
Sadly, previous governments have been notoriously bad at joined-up thinking and we’ll have to wait and see what influence LibDems will have whilst in office at national level – perhaps greater engagement with Europe will enable the issues Alex raises in his comment above to be addressed more productively, and maybe then the Exchequer can be weaned off its unhealthy dependance on the City as the prime engine for the economy of the country.
as I’m on the subject I’ll also mention my bank manager grandad’s careful detailing of the strict rule he was required to enforce, namely that no mortgages he approved should exceeed 3x annual earnings of the applicant.
This was at the then National Provincial Bank which then merged in 1970 to become NatWest and was at the forefront of the consumer credit boom, during which period enforcement of this ruling has obviously slackened off to zero.
@Oranjpan
1) At the peak of the house price bubble top rate mortgages were being accepted at 20x salary.
In fact, it was x7!
2) Now this is down to 9x salary.
In fact, it is currently between x4 and x5!
3) Last month it was reported the rolling quarterly average of house prices saw its first drop in living memory.
You’ve failed to provide any evidence for this assertion. Don’t bother yourself anymore, your claim is wrong!
4) …the benefits won’t really start to be felt … until a whole cycle has been completed … and mortgages fall below the 5x salary barrier.
In fact, they fell below the x5 barrier in the UK two years ago.
Would you say you’re prone to – let’s be generous – gross exaggeration?
Richard,
what multiple of income would you say it is for someone who gets (got) a mortgage while unemployed (as was referred to by the term ‘ninja’ loan and specified in the article linked to)?
Are you confusing averages with individual cases, perchance?
According the the NFT current average house price to income ratios in the south-east are 9x, as they clearly state in the report linked to.
Are you confusing general averages with more defined regional variations, perchance?
The Halifax Building Society’s report that 3-monthly averages fell 0.9%, as was noted in the article linked to.
But thanks for confirming the old truism that one picture is word a good couple of million words, as has been expended in producing all those sources and thousands of reports which miraculously flew over your head without even bothering to type three words into a search engine.
@ Oranjepan
“…the NFT current average house price to income ratios in the south-east are 9x”
Not only have you got your facts wrong, but you’re also confusing the relationship between income and mortgages applications with the relationship between typical incomes and typical house prices.
Here’s what you wrote:
“At the peak of the house price bubble top rate mortgages were being accepted at 20x salary. Now this is down to 9x salary.”
This is demonstrated by your use of the word, “mortgages.” It’s the eleventh word in your sentence.
All clear now?
You didn’t answer the question: would you say you’re prone to gross exaggeration? – but I think we know the answer to that question, don’t we?
Richard,
I think it is a perfectly fair to make the points that the economic argument should include an analysis of both supply-side and demand-side factors, that more consistent lending rules in the private sector will help ensure regional variations in housing benefit payments don’t become excessive and greater regional development will compensate for the income disparities which increase unaffordability.
The relationship between house prices and mortgages is fixed like the bricks and mortar which holds up the roof of the building purchased; when house prices march up or down, mortgages follow stride for stride, and vice versa. This is especially true for first-time buyers, who are the most significant group here.
We can argue over the drum and the beat of the march all you like, but the link between them remains and it is still the factors in this link which impacts upon the point under discussion, namely the affordability of housing in general.
I’ll happily take one of your criticisms (either that I’m comparing apples and oranges, or that I’m exaggerating – the effect is the same) if you accept it has little to do with the thrust of this article or the point I was making.
So in my defence and in the hope of hearing a productive contribution from your fingertips, I think you should asnwer what is the average mortgage to house price ratio, how has this changed over time and what do you think this change reflects?
And consequently, do you agree that affordability of housing should be measured as the proportion of take-home pay spent on rent or mortgage repayments?