[On 6th February I participated in the NHF South West Regional Conference “Building neighbourhoods”, held in Exeter. This is the text to accompany my presentation.]
Embedded in this statement are three key terms:
- a decent home
- for all
- a price within their means.
The way in which this aspiration has been articulated may have remained broadly constant, but the vigour with which governments have pursued it has varied. The rhetoric may be the same, but the realities of the substance of policy and implementation may have differed substantially.
And the understanding of the three key terms is mutable. Over time thinking has shifted. For example, when we talk of a “price within their means” do we mean that housing costs need to be lowered so that they can be sustained on the basis of available earned income? This might suggest the need to reduce housing costs. Or should it be interpreted as meaning that we need to enhance households’ incomes so that prevailing housing costs come within their reach?
We could rehearse the history of housing policy over this period and trace out the ways in which the aspirations of housing policy have subtly, and not so subtly, been reinterpreted. But we won’t. For now the important point is that the Coalition government is, broadly speaking, holding to the standard rhetoric. But at the same time it is reframing the debate.
The Coalition has been very active in the housing field. In the typically British way it has proliferated new initiatives and resuscitated or rebranded some old ones. It has put them all together between two covers and called the resulting document a housing strategy. But whether, in practice, all this activity adds up to a coherent strategy could be debated. The rhetoric is that the actions being taken are proportionate to the scale of the problem. But I think few informed observers, from whichever point on the spectrum, are convinced. Most are, however, convinced that we are in the midst of a housing crisis. And that more needs to be done.
Where we are now
When we look across tenures how might we characterise the situation? We have decent homes for most, but poor quality homes for many. Many have secured their home at a price they can afford – just – as long as interest rates stay low or benefit levels stay as they are. And there are some who face eye-wateringly high costs, relative to income, to keep a roof over their head.
In addressing this situation we face not just the short term fallout from the Global Financial Crisis, but the legacy of policy pursued over three decades or more. This is of the utmost significance when it comes to looking for solutions. We need to be looking in the right place.
What is not in doubt is that we are living through a remarkable period of change in the housing system. The process of rapid tenure transformation – the rise of the private rented sector in particular – is extraordinary, as is the intergenerational redistribution of housing wealth. It brings with it a wide range of concerns.
In looking to the future I want to distinguish two accounts. I will offer my perspective on where I think we are going. And then say something about where we should be going.
Where we are going
The short to medium term is characterised by considerable uncertainty over key parameters of the housing system. Social rent policy is a good example. Yet, it will also, I believe, be characterised by considerable policy continuity. I don’t see the Coalition changing course on housing in any substantial way. And if Labour is elected in 2015 I don’t see that at heralding a major reorientation of policy. There will be tinkering – perhaps more substantial change on private renting – but I don’t think we’ll see anything too revolutionary.
But there are good reasons for thinking that in some areas a period of policy stability is desirable. There are policies under development or in place that are going to take time to bed in and have an impact: for example, attempts to increase institutional investment in the private rented sector.
We know that significant change in the environment in which housing associations operate – in the shape of the first tranche of welfare reform – is imminent. We know that this is going to have significant implications for the financial health of many associations. It does not require particularly acute insight to forecast that some organisations will not make it through the storm that is about to hit us.
There is also, for me, a sense that the centre of gravity on policy is continuing to shift. The cuts in CLG’s budget have restricted its scope for action. The FT earlier this week forecast forward to 2018 and indicated not only that the cuts will continue – this we knew – but also that CLG will continue to be badly hit. It is being eviscerated. The drivers for housing policy therefore increasingly sit elsewhere – in DWP, in respect of housing allowances, and the Treasury in areas such as the construction of new financial instruments or the stimulation of institutional investment in private renting.
Much of the policy that influences the housing system therefore does not have decent homes, housing needs and preferences, or affordability front and central in its thinking.
Is there anything else that we can say for (near) certain about future directions?
The Affordable Rent regime’s days are numbered. The search is on for viable alternatives and new financial products, such a retail bonds, to support new development beyond 2015. Innovative partnership and joint ventures, and creative uses of existing resources, are being explored. But as yet no model has emerged as the frontrunner.
With creativity and innovation comes added complexity. We may come to look back at the mixed funding regime in place from the 1980s until 2010 as an era of blissful simplicity by comparison. Great complexity will be accompanied by greater risk and higher transaction costs. Development is increasingly going to favour those operating at scale. And the more that development relies upon enticing private finance into the game, with a very limited cushion provided by government to mitigate risk, the more it is going to favour developing in certain geographical areas and not others.
We are going to see increased divergence within the sector. Some organisations will decide to continue developing, with all this entails. But some will decide that risks are too great or too difficult to manage and it’s no longer prudent to continue developing.
On the other hand, we are likely to see some organisational convergence across rental sectors. There is going to be a further blurring of boundaries. Social landlords will increasingly become involved in Affordable Rent, intermediate and market renting, while private landlords will increasingly become involved in providing housing at intermediate and Affordable rents.
Welfare reforms around restrictions in local housing allowances in the private sector and the changes to the underoccupancy rules in the social sector are going to have a range of consequences. From the tenants’ perspective they are going to raise the unappetizing prospect of increases in mobility to reduce housing costs or increases in in situ poverty.
Given the policy course that has been set, over the longer term there is going to be an increase in spatial sorting. Residential location and neighbourhood composition will become increasingly correlated with income. The point of housing intervention was to break the link between households’ income and the quality of housing to which they had access. That link is progressively being forged once again. More poor people will live in poor housing.
We can expect that in the short to medium term a lot of time will be taken up with coping with crises – both at individual and organisational level.
A proportion of individual tenants are shortly going to find themselves in financial distress. Landlords will respond in different ways, with different types and degrees of support. But if, ultimately, it is a question of moving to cheaper property then where are the tenants going to go? We know that such aspirations to trade down may be difficult to realise given the stock profile of some landlords. Are there new types of relationship or partnership between landlords that could assist tenants with an urgent need to find accommodation that is more manageable?
Implicit – and occasionally explicit – in the Government’s agenda is the view that under current policies some households find themselves over-accommodated – young single people in particular. There is going to be a policy-induced long term increase in demand for smaller, cheaper properties. Can this be accommodated within the social sector? More likely it is going to manifest itself in HMOs at the bottom end of the private rented sector. Is this a type of provision that more housing associations should contemplate, in order to reduce the risk of vulnerable households finding themselves in poor quality, poorly managed private accommodation?
At the organisational level, at the less severe end of the spectrum, we might anticipate some rapid reconsideration of allocation schemes and allocations policies. We know, for example, that a proportion of general needs lettings tend to be to households that are underoccupying when they take up the tenancy. That is fine if they are paying from their own pocket, but how secure is their employment? Is this approach to letting just postponing a problem for landlords? Landlords are already feeling obliged to find out more about their tenants, will this feed through into rethinking allocations? How far will we travel down the route of developing approaches that are more sensitive not just to current employment status but also employment history, industrial sector and probabilities of future unemployment?
More dramatically, some organisations will go under. Do others stand ready to step in and facilitate the orderly takeover of the business? Will the welfare reforms be a spur to more proactive initiation of discussions about merger or takeover where there are suspicions that assets are not being managed effectively? It seems likely.
The growth of the private rented sector means that the question of regulation is not going away any time soon. The fact that different types of household – particularly families with children – are residing longer in the sector, but on established precarious tenancy terms, is going to keep the issue on the agenda. Equally, the devolved administrations have either implemented or are considering stronger regulation of the private rented sector. If past policies in other areas are any guide, these developments will be folded back into policy in England eventually. And we know that the Labour party has already made a policy commitment to “secure and affordable” housing for families in the private rented sector.
Finally, we are going to witness continued undersupply of new housing across tenures. There has been a lot of activity around planning policy. After the NPPF we’ve had a range of adjustments aimed at increasing private supply involving extensions, gardens and the conversion of offices to flats. But in my view this activity, quite apart from being mostly misguided, is just tinkering. It doesn’t represent solutions that are a match to the scale of the problem. Government guarantees to back up the financing of new social housing, on the other hand, seem to me to have potential to make a discernible difference to housing supply. But are we making sufficiently rapid progress on capitalising on this initiative?
Planning policy also brings out very clearly the point that much of the housing debate is not primarily technical but political. If we recognise the concentration of assets among those over 50, who also tend to participate more regularly and actively in representative politics, we can predict the likely impact of localism on supply.
What should we be doing on housing policy?
I want to make some broad points regarding thinking about housing policy.
Thinking more holistically and make connections
It has been suggested that the “bedroom tax” policy is incompetent. Whether that is an accurate description or not, it is certainly a policy that fails to work through the implications – for schools, services, social care – and realise that whatever saving might be generated on the housing benefit budget is very likely to be wiped out by greater costs and confusions under other headings. There is a real danger that all that is happening is cost-shunting.
Similarly, the failure to finalise the government response to Dilnot will have knock on consequences for households. It is rational to seek to protect the value of your housing assets if you might need to liquidate them to pay for care in later life. So you might well resist development locally that would reduce house prices.
The case for housing must be made forcefully. It is intimately and inextricably linked to most other dimensions of life. The case is economic. But it is also social. The connections across space need to be teased out. For example, the impact of international investors on the top end of the London housing market is not irrelevant to understanding what happens in the provinces, given the ripple effect on house prices. Yet, these connections are rarely made as forcefully as they could be.
Thinking bigger on supply
Contrary to the position taken by organisations like the Policy Exchange, we shouldn’t focus quite so squarely on the planning system as the root of all housing supply evil. The planning system needs to be kept in view, for sure, but we need to look at the whole system of housing supply – the construction industry and the land market.
However, the Planning Exchange is, I think, on to something when it argues that part of the problem with securing new development is that past development comprising unattractive dwellings squeezed on small plots acts to deter support for further development. Matthew Taylor has made a similar point. Exemplary master planning on larger sites in order to deliver sympathetic and attractive development would reassure current residents that their living environment would not be destroyed if they were to support new development.
Think again about how we regulate finance
The Financial Policy Committee recently came out against the idea of regulating mortgages at the individual level –through maximum Loan to Value and/or Loan to Income ratios. Instead it favours indirect regulation through regulating banks’ reserve requirements. As I have blogged before, I think this is the wrong route to pursue if we’re serious about curbing volatility.
Think about capitalising on resources wherever we may find them
In the face of a housing crisis we should be looking to maximise the bang for every buck we have. We should be open to exploit potential wherever we find it. That means the statutory sector being willing to set aside any residual suspicions it may have about the private sector. It means the Government being willing to accept that local authorities may be well-placed to use their unencumbered assets as a springboard for further new development. That was very much the message sent by the CLG Select Committee last year. It was a message that was strikingly rejected by our then housing minister. There was no appetite in government for further expanding the role of local authorities. This does not seem sensible. Removing the HRA debt cap would open up potentially fruitful new opportunities for investment. It may well be that we need to revisit the venerable debate about the definition of public expenditure, if that is proving a significant barrier to policy change. We are arguably edging in the direction of harmonising with Europe already. A more concerted move in that direction could unlock significant benefits.
Thinking again about some of the key parameters of the debate
For a quarter of a century policy has been premised on the idea that price subsidies are bad and people subsidies are good. One result of pursuing that policy in the context of unresponsive supply is a £23bn housing benefit bill.
We may need to recognise that while the conventional economics textbooks tell us that subsidizing people is always better than subsidizing prices, in the real world that conclusion may be contingent on the characteristics of the market we are talking about and the circumstances we are dealing with. This is a point made many years ago by Christine Whitehead.
Last year IPPR argued for a rethink. Switching back towards subsidizing properties is unlikely to be the indiscriminate subsidy the critics were concerned about back in the 1970s precisely because the consumption of social housing is now much more concentrated among those who are socially disadvantaged. It is possible to develop arguments that in the current context price subsidies may be more efficient and more effective. Those arguments are worth taking seriously and working through carefully.
Thinking about housing at a more fundamental level
My feeling is that we need to go back to first principles and recover some fundamental concepts. Why do we intervene in and around the housing market at all?
There are arguments about human dignity and valuing the individual. There are arguments about human flourishing and allowing everyone to realise their potential. There are arguments about housing rights.
At base there is a need to rekindle the ability to identify; the capacity for empathy.
If those arguments can be linked back to more a more instrumental economic case then so much the better. It simply reinforces the desirability of taking housing seriously.
Thinking about bringing to the surface the work that policy narratives are doing
There is something that a more detached academic analysis can contribute to this discussion.
There is a role in picking apart what is being done with language. Excavating the way in which policy narratives are being reshaped. Words such as “fairness” have been radically recast by the Coalition. “Decent” “all” and “a price within their means” have all been reinterpreted, using the financial crisis as the lens through which to view the aspirations of policy. And the direction of travel is not one of characterised by greater ambition about what policy can achieve.
And there is a role in highlighting the gap that frequently opens up between narratives and practices.
This is not necessarily an evaluative task. It is a task of clarification. Of drawing back the rhetorical curtain to lay bare the reconfiguration of meaning. If the terms of the debate are being changed then let them be changed consciously and knowingly, rather than allowing the debate to drift on to new territory without reflection.
This post is also available as a document on Scribd.
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