Pathways to housing-related poverty

Affordable housing concept.The JRF report What will the housing market look like in 2040?, released yesterday, provided an eye-catching and headline-grabbing answer to the question that acts as its title. Presumably grabbing the headlines was the point.

The answer is that under plausible assumptions about future trajectories on tenure, costs and incomes we are looking at a future of higher housing costs, more private renting, and a substantially increased incidence of poverty. The authors, from Heriot Watt and Sheffield Universities, forecast that private renting will accommodate 20% of the population by 2040 and half of them will be living in poverty.

The authors argue that four factors, all to an extent under policy control, could combine to prevent this unhappy outcome. We need to see housebuilding in England rise to 200,000 homes a year by the 2020s and 220,000 by the 2030s. We need the decline in the proportion of households living in social renting to be halted. We need social rents to remain indexed as they are at the moment to prices. And housing benefit needs to continue to meet the same share of housing costs as it does at present. If the stars align favourably in this way then the unpleasant future sketched out might be avoided. [Read more…]

Beyond the council tax

row of potted treesThe council tax is unlovely and unloved. It was rushed into being as a replacement for the hated poll tax. Its structure has always been an uncomfortable compromise, somewhere between a charge for services and a genuinely progressive property tax. The property values upon which it is based haven’t been uprated for twenty years in England and Scotland and ten years in Wales. This means that, because local housing markets have traced out different trajectories, the relativities built in to the council tax bandings bear very little relationship to the current distribution of property values. The truncation of the council tax bands means that higher value properties are relatively lightly taxed compared to lower valued properties. The tax is, broadly speaking, regressive.

There are good reasons for reforming the council tax as a basis for gathering revenues to fund local authority services. But there is another aspect to the debate. The Joseph Rowntree Foundation’s Housing Market Taskforce argued a couple of years ago that property taxes may well have the potential to act countercyclically in the housing market and dampen housing market volatility. That is, as prices rise the tax burden will increases, and that puts a brake on further price rises. Such a property tax could take various forms, including creating additional council tax bands for higher value properties or moving to a flat rate or progressive property tax. The latter has the advantage of removing discontinuities, but brings greater informational demands in assessing property values.

These are ideas I have blogged about before.

Last week, Chris Leishman and colleagues produced a report that explores these issues empirically. It is based on an ambitious attempt to create a comprehensive dataset of property values for England and then model the impacts that changes to local property taxation would have both spatially and at household level. The researchers were interested in how alternative tax structures could improve fairness between places and fairness between people, and whether it is possible to detect any influence of property taxes on price volatility. [Read more…]

It’s only going to get worse

It seems that with each passing week the news on the housing front gets gloomier. A week ago the NHF published its latest Home Truths report which extrapolated current trends and concluded that if things carry on as they are then affordability – or rather unaffordability – will pretty rapidly reach new heights of absurdity. And we are barely able to grasp the implications of the longer-term scenarios for prices and rents set out in the report.

Of course, the chances of these forecasts proving accurate are pretty low. All sorts of things could, and probably will, intervene in the meantime. For example, the probability of a Help to Buy fuelled property price implosion just in time for – or more likely just after – the 2015 General Election is non-zero. And if that happens then the direction of the whole debate will change.

But the purpose of such forecasts is not to be accurate. They are a political call to action to try to ensure the future turns out differently. Given the media profile that the report achieved I would imagine the report is seen as having met its short term objectives at least.


A more substantial piece of research emerged a few days later when the third instalment of the Crisis/JRF Homelessness Monitor was published. This is an invaluable long term project documenting the impact of the changing social, economic and policy context upon housing and homelessness since the arrival of the Coalition government. I blogged about the previous report in The gathering storm. This year’s report presents a similarly gloomy picture. Jules has summarized some of the key points already. The trajectory of homelessness is very different in different regions, as are the principal causes in different parts of the country. But the overall picture the report paints is one of a deteriorating situation.

The report identifies three issues, which have perhaps had less prominence in the debate so far, that I thought worth noting. [Read more…]

Osbo’s poverty trap and pinging the elastic of reality

Message opposed to unemployment.Since they entered office the blue-tinged contingent of the Coalition has been engaged in a systematic process of stigmatising those in receipt of social security benefits. Great emphasis has been placed upon the undeserving and the fraudulent. There is support for the hard working strivers, but condemnation for the skivers. The spotlight has been on the most extreme cases of households receiving substantial financial support from social security in order to create a smoke screen for cuts in benefits to the poorest. The Tories are convinced that welfare “reform” – particularly the overall weekly benefit cap – is their most popular policy. Yet many of the components of this policy have yet to be fully implemented. The general public has yet to grasp their full impact. It may transpire that once they do, the Tories will feel they acted precipitately in drawing such a positive conclusion. [Read more…]

Alternative housing futures

A few months ago the Building and Social Housing Foundation argued that one in five households could be living in the private rented sector by 2020, if current trends continue. Last week the estate agents Savills suggested that we could reach that situation by 2016. Is the housing market trend towards private renting speeding up? More probably, we’re not quite sure exactly what’s happening, nor how fast. But it is fairly clear that there’s plenty of change in the housing market. We know that something like a million additional properties have entered the private rented sector since 2005.

We may be witnessing a structural reorientation of the housing market away from home ownership. Or we may be witnessing temporary turmoil as a consequence of the global finance crisis. It is more likely that the future trajectory of the housing market is yet to be determined. The negative equity of the early 1990s led to the rise of the “slump landlord”- owners who wouldn’t or couldn’t sell who rented out their property while themselves renting elsewhere – but that phenomenon largely disappeared as house prices moved upward again. So what we are witnessing now cannot yet be assumed to represent structural change. What policy makers do over the next few months will shape which future is realised. The only thing that everyone is agreed upon is that increasing housing supply is a good thing. Beyond that, there is room for debate. [Read more…]

Up to the task? Dealing with housing market volatility

It does not take great insight to realise the UK housing market is in a mess. Recently we’ve witnessed significant nominal house price declines and consequent negative equity, a massive contraction in the supply of credit, a private sector construction collapse, and social house building as a victim of austerity. Repossessions have risen. And that affects not just owner occupation but also ripples out to the private rented sector as Buy to Let landlords fall behind with their payments and tenants lose their homes. Demand for both social and private rented housing has increased as ownership becomes unaffordable or inaccessible for many.

Layered on top of all this we’ve had a series of policy initiatives around housing allowances in the private rented sector, support for independent living, and rents and tenure in the social sector that are not obviously going to improve the situation. Indeed, critics argue forcefully that these policy manoeuvres are only going to exacerbate the problems.

The dimensions of the problem are not generally contested. The question is what we do about it. The latest attempt to chart a course out of the jam we’re in is the final report of the Joseph Rowntree Foundation’s Housing Market Taskforce Tackling Housing Market Volatility in the UK, published today. [Read more…]