Ken Gibb's 'Brick by Brick'

Housing, academia, the economy, culture and public policy

Month: November, 2013

Questions for Scottish Housing after a ‘yes’ vote

I have not yet read the White Paper (I suspect like many). I have read the short version and many post publication blogs. These have focused on the big questions regarding the currency, the EU and the policy pledges offered in the light of a ‘yes’ vote e.g. augmenting childcare support to encourage work.

Despite its centrality to our lives, housing does not feature much in these debates (welfare reform excepting). You might well argue that this is because it is devolved and indeed has featured prominently in the law and policy innovation we have seen since 1999. But of course, significant aspects of the housing system are reserved to Westminster and any debate about how the world will work after a vote for independence should factor these undoubted complexities into the calculation.

I am not taking a line here with respect to either camp. As with economic and fiscal policy controversies, voters need to confront the issues and evidence on the questions that to matter to them in a coherent and systematic way and it is clearly important that major sectors like housing are understood in their entirety and not partially. I have argued before that housing can be conceived of as something of a ‘wicked’ problem that defies simple definition, analysis and policy solution. This will be the case whatever the constitutional outcome. But at least the referendum affords a rare opportunity to have widespread public engagement and debate on these types of fundamental policy challenges.

The current situation is that key aspects of housing taxation are reserved (e.g. capital gains and inheritance). The regulation of mortgage finance is reserved (and the sector is fundamentally a UK level and indeed international marketplace). The benefits system, so fundamental to housing policy & practice, is reserved and the seat of so much current controversy (I read someone saying that the ‘bedroom tax’ is mentioned 38 times in the White Paper). There are also of course UK wide initiatives like Help to Buy.

Scotland’s social housing is increasingly characterised by cross-border ownership and group structures (and I declare an interest in being involved in one of them as a board member) and there is actually no reason to conclude that this will always be one way traffic from England to Scotland.

Scotland has done much that is innovative in recent years – from homelessness legislation, Right to Buy policy, early adapting to guarantees and council house building, to name four examples. And, equally, this policy divergence happened without independence.

Housing is owned by the majority in Scotland and asset-based welfare, rightly or wrongly, is increasingly important. We do have our distinctive ‘free’ personal care system but of course it is not deep enough to avoid the problems that arise with housing assets and the market failures surrounding the funding of long term care. Much of the Dilnott Commission was to me right on the money (though I do not think they found a credible way to incentivise personal savings to support care costs in later life). Any future Scottish settlement needs to address this most fundamental of issues.

So what might be a reasonable set of housing sector questions to debate over the next 10 months? Those supporting the status quo could also replace the word independent in the questions below with ‘devolved’.

1. Would an independent Scotland use tax powers to seek to stabilise the housing market?
2. Assuming the bedroom tax is in the future abolished, what would an independent Scotland do to reform fundamentally Housing Benefit, Universal Credit and support for those struggling to pay mortgages?
3. How would an independent Scotland work with rUK authorities to regulate the mortgage market (and seek to moderate its excessively cyclical nature, much of it of course originating outside of Scotland)?
4. How will new housing supply be supported to provide a stable and higher level of long term new housing across tenures? For instance, what can be done to encourage long term large scale investment in private renting?
5. Post-indepdendence, can resources for non-market housing be planned over at least a five year period and matched to housing need locally and nationally – and can it be afforded, if not, how much can?
6. Would an independent Scotland advance a Dilnott plus package for funding long term care in Scotland?

Policy Debating, Rhetorically Speaking

A few weeks back I read a post by Alex Marsh, which adopted the ‘rhetoric of reaction’ argument originally developed by Albert Hirschman. This involves the development of the thesis that reactionary political thought as rhetoric can be understood from three perspectives: perversity, futility and jeopardy. I was so taken by this that I went back and read the original book published in 1991. It speaks also to our contemporary policy debates

Hirschman is most famous probably for his ‘exit, voice, loyalty’ framework but this little book is also a tour de force. He sets out his three theses of reactionary argument set against three paradigmatic progressive-reactionary debates: the meaning and effects of the French revolution, the struggle to extend the franchise to universal suffrage and the more contemporary debate about the impact of the welfare state in western economies. It also helps to recognise that his book was developed at a time of the ‘end of history’, the collapse of the Iron Curtain and the triumph of neo-conservatism under Reagan and Thatcher.

An argument that helps us deconstruct the nature of reactionary rhetoric is not just useful as an academic exercise – perhaps it can also instruct in terms of contemporary politics, both in the current stalemate of the US Congress but in a couple of major cases closer to home.

Let’s set out the argument. Hirschman says (p.7, original emphasis) ‘According to the perversity thesis, any purposive action to improve some feature of the political, social or economic order only serves to exacerbate the conditions one wishes to remedy. The futility thesis holds that attempts at social transformation will be unavailing, that they will simply fail to “make a dent”. Finally, the jeopardy thesis argues that the cost of the proposed change or reform is too high as it endangers some previous, precious accomplishment.’

Thus, a combination of rhetorical arguments are used to rebut progressive proposals on the basis that they will either make the things they wish to improve worse in some sense, or that in fact these efforts will make no difference (often because of immutable laws of nature or society). Third, it is considered that the reform would threaten prior, valued achievements. These are clearly not mutually consistent – but this is the cut and thrust of political debate after all.

Do note that Hirschman is quick to recognise that these three devices are not the monopoly of reactionaries but may be used by the very progressives hitherto attacked, again for rhetorical effect. But they are characteristic of the kinds of arguments used by reactionaries in the face of calls for social reform.

An interesting facet of the book is that as Hirschman develops his argument he in fact comes to the conclusion that reactionaries and progressives can all too easily inhabit a world of political extremes where their arguments rule out any accommodation with the other side – what he calls the ‘rhetorics of intransigence’. He sets this up nicely by counter posing three sets of arguments (p.167):

“Reactionary: the contemplated action will bring disastrous consequences.

Progressive: Not to take the contemplated action will bring disastrous consequences.

Reactionary: The new reform will jeopardize the older one. 

Progressive: The new and old reforms will mutually reinforce each other.

Reactionary: The contemplated action attempts to change permanent structural characteristics (‘laws’) of the social order; it is therefore bound to be wholly ineffective, futile.

Progressive: The contemplated action is backed up by powerful historical forces that are already ‘on the march’, opposing them would be utterly futile.”

Initial views, values and the fundamental way in which different groups recognise data as legitimate and what that evidence actually means – completely sets the two parties apart and never the twain can meet. The final example above is particularly striking. In response to the fundamental worldviews of the reactionaries (e.g. the Pareto principle or Burke’s desire to conserve long-established institutions) the opposition put forward contrary explanations of how the world is – Marxism being an obvious example.

Hirschman concludes by seeking to move us beyond these intransigent postures to a more democracy-friendly debate. He astutely recognises that it is a likely to be a ‘long and difficult road’ (p.170). Nonetheless, this engaging text ends by reflecting on the fact that what started off as a critique of reactionary thinking and how it espouses its argument ended up a ‘more even-handed contribution – one that could ultimately serve a more ambitious purpose’ (ibid).

Sadly, since at least the mid 1990s and particularly since 2010, the breakdown in the middle ground in American politics, the more extreme political discourse and the disavowal of evidence in political debate – all suggest that Congressional and presidential politics have slipped much more into the mire of the ‘rhetorics of intransigence’, as the recent brinkmanship around the budget and the debt ceiling showed so alarmingly.

But this shift is also, I think, apparent in the UK debate on welfare reform, on incentives and the ‘fairness’ of benefit cuts. The Government and the wider advocates of the policies inhabit a different world and sense of what constitutes legitimate evidence compared to those who oppose the policy reform. This is undoubtedly also true of several other aspects of Coalition policy.

However, the conclusions of the Hirschman rhetoric of reaction model are also I think a useful way of thinking about the two poles in the Scottish independence referendum. Increasingly one feels that the two sides cannot really enter into any meaningful debate at all because they have completely opposing conceptions of what would be the reality of an independent Scotland or a continuing Union. This colours how they interpret almost any new piece of evidence lobbed into the debate. Of course, there is a locked-in rhetoric especially on the part of the no campaign, who do not feel the need to make much of a positive case at all. At the same time the yes campaign increasingly present a case, which is to them wholly self-evident, such that it is hard to see how one has any real kind of debate at all. Would Hirschman recognise the Scottish debate as a democratic-friendly one or as one of intransigence?

Albert O Hirschman (1991) The Rhetoric of Reaction: Perversity, Futility, Jeopardy. The Belknap Press of Harvard University Press: Cambridge, Mass.

New International Evidence on Policies to Stabilize Housing Markets

Fresh from David Miles intervention on equity loans discussed in my previous post, Tony O’Sullivan forwarded me another paper that I want to share with you. This is a new econometric study (November 2013) for the Bank of International Settlements by Kenneth Kuttner and Ilhyock Shim (BIS Working Paper 433) entitled: ‘Can non-interest rate policies stabilise housing markets? Evidence from a panel of 57 economies’.

The authors start from the generally held position that interest rates are a blunt instrument that often need to go up so high that they tip the economy into recession before they can bring the housing market to heel. Hence the search for other non-interest-based policy tools that might moderate and ‘tame’ the housing market.

Like Miles’ paper, this is closely related to the literature on macro-prudential policy that seeks to ‘limit systemic risk in the financial system as a whole’ (p.2) and to a growing series of papers on policy tools other than short run interest rates with which to stabilize housing markets (they identify such papers since 2005 – see footnote below).

The authors assemble a powerful panel data set covering 57 countries employing quarterly data from 1980 to 2011, which allows them to consider a series of policy interventions in different housing markets.  The authors focus on nine policy areas, grouped around three headings:

1. General credit policies

  • Reserve requirements (the percentage of liabilities that have to be held as liquid reserves).
  • Liquidity requirements (the ratio of highly liquid assets to total liabilities).
  • Limits on general credit growth.

2. Housing-targeted specific credit policies

  • Maximum LTV (sets a ceiling on housing loans).
  • Maximum DSTI (debt service to income ratio).
  • Reserve and liquidity requirements specific to housing credit.
  • Limiting bank housing exposure as percentage of total assets/liabilities.
  • Increasing the bank’s risk weight for housing (making it more expensive to extend housing loans for a given amount of bank equity – p.11).

3. Housing-related tax policies

  • A range of taxes and subsidies that reduce house purchase costs – wealth and capital taxes, stamp duty, direct subsidy and tax deductions, etc. This is conceived of as ways of changing the user cost of capital.

Cutting to the chase, having undertaken a series of cross-checking tests of the robustness of their results through techniques including panel regressions and sophisticated forecasting models known as event studies (which were new to me), the authors report findings of policy impacts with respect to both housing credit and house prices.

They find that many of the policy instruments studied are not effective but that housing credit constraints in the form of tightening debt service to income ratios do make a difference in statistical significance terms. They find that a small tightening in the ratio can ‘decelerate credit’ by 4-7% over the following year. Loan to value ceilings also had a significant effect on credit but are sensitive to the statistical model specification used. The other striking effect the authors found looking at policy effects on house prices (the only statistically significant factor) was that housing-related tax increases lead to a measurable fall in house prices (i.e. a small increase in housing taxes leading to a 2-3% reduction in house price growth – though this was not symmetric and did not reverse it though a reduction in housing taxes).

The authors recognise that their models has been applied to more than 50 different economies at different stages of economic development, income levels and institutions.  The results need, despite their exhaustive testing, to be treated with caution.  Average effects may wash out in certain circumstances and in others imply strong effects. The point, however, is that there are important negative findings – increasing the supply of general credit has little measurable impact on housing credit and credit policies do not seem to affect house prices. At the same time, housing credit policies based around the key debt servicing ratio and housing tax-related policies do seem to have a market impact.

The authors conclude that this is a promising basis for further research to understand how policy effectiveness is influenced by more narrow legal, financial and housing market institutions and structures (p.26).

This is an interesting paper, which makes a sterling effort to wrestle with a range of policy interventions across a range of national housing systems. Of course, there are genuine difficulties in interpreting just what results from such a wide range of countries mean and what average effects imply for a specific system such as that of the UK. But, for all that, the clarity of the negative results and the positive indicative ones suggesting market-moderating roles for taxation and for a debt servicing ratio ceiling/credit constraint – are certainly intriguing.

What will the Bank of England make of this research?  It should certainly note that many of the tried and tested measures may have less impact on the housing market than they may have anticipated but that there are some promising candidates, too. It is intuitive that more tailored housing-specific policies may be more effective but it is also salutary that many even of these instruments may not make much difference to the housing market. Like the authors of the study, the Bank should take this and related work and think through its relationship to UK markets and institutions. I think also that it is encouraging evidence, even if somewhat limited, for all of us who want to construct and implement tailored interventions that can promote more stability in the housing market.

Footnote

Selected housing policy references in the Kuttner and Shim working paper:

Borio, C  and Shim, I (2007) ‘What can (macro-)Prudential Policy do to support monetary policy?’ BIS working paper 242.

Claessens, S, S Ghosh and R Mihet (2013): “Macro-prudential policies to mitigate financial system vulnerabilities”, Journal of International Money and Finance, forthcoming.

Crowe, C, G Dell’Ariccia, D Igan and P Rabanal (2011): “How to deal with real estate booms: lessons from country experiences”, IMF Working Paper 11/91

Hilbers, P, I Otker-Robe, C Pazarbasioglu and G Johnsen (2005): “Assessing and managing rapid credit growth and the role of supervisory and prudential policies”, IMF Working Paper 05/151.

Lim, C H, F Columba, A Costa, P Kongsamut, A Otani, M Saiyid, T Wezel and X Wu (2011): “Macroprudential policy: what instruments and how to use them? Lessons from country experiences”, IMF Working Paper 11/238

Shim, I, B Bogdanova, J Shek and A Subelyte (2013): “Database for policy actions on housing markets”, BIS Quarterly Review, September, pp 83–95.

Housing Market Instability, Equity Loans and the Wider Economy

I was going to write about something else today but then my wife forwarded me the speech made yesterday by David Miles, member of MPC of the Bank of England, at a conference in Dallas. His paper ‘Housing, leverage and stability in the wider economy’ has been press-released by the Bank of England [1]. His paper speaks to the capacity of central banks to help reduce leveraged debt in the housing market and thereby reduce housing market ‘turbulence’ in the wider economy. High leverage e.g. a 5% down-payment can leave owners highly exposed to small falls in house prices, let alone adverse movements in interest rates). This also speaks to earlier discussion regarding controlling house price volatility and the furore around the possible wider impacts of Help to Buy 2 and whether house prices ought to be an explicit target to be monitored and indeed intervened against by the Bank.

The argument in the paper is as follows (p.2): ‘I want to consider some of the policies – including monetary policy – that might be used to reduce the risks of turbulence in the housing market causing widespread damage. I will argue that one factor is particularly significant…leverage: that is the fact that houses are bought with such a high proportion of debt. In that context, I consider the advantages of (and obstacles to) greater use of outside equity in financing house purchase’.

His point is that the classical tool of market management, interest rates, is at best a blunt instrument. And of course the user cost of capital (broadly – interest rates minus expected house price gains) may be negative and unless one believes house price change makes up an unfeasibly large share of the CPI, a more housing/mortgage target set of policy instruments will be required. This will be particularly so according to Miles where the level of interest rates required to bring stability to the housing market are not those required in the interest of the wider economy – a classic case of too few policy tools.

So what is to be done? He repeats the recent Bank line that a ‘range of macro-prudential policy levers could be used to mitigate risks to financial stability emanating from housing markets, graduating from more intensive supervision…through variations in capital requirements on mortgage lending to limits on loan to income and loan to value ratios (p.8)’ (though the Governor viewed the latter as voluntary exhortation in recent pronouncements).

The paper by David Miles considers how to seek to reduce the proportion of home purchase that is debt and thereby reduce leverage and the instability, risk and exposure associated with it – by increasing the level of equity. How so?

A first way would be to use greater use of individual equity through lower LTV ceilings which if enforceable would of course increase the period required to save and the average age of first time buyers would remain high.

Alternatively, Miles suggests some form of outside equity or equity-like funding sharing the risk between the owner-occupier and the outside provider of funding. Such things, he points out have been looked at before in Australia, the UK and the USA (e.g. equity loan finance wherein the owner retains rights over all of the property unlike shared ownership).

The scope for developing this area further has been widely discussed by academics like Christine Whitehead, Judy Yates and other colleagues at Cambridge’s CCHPR.  In fact HTB1 looks very like such a risk-sharing device where the lender receives nothing for five years prior to a regular payment before recouping (hopefully) at sale. As Miles points out, in these cases the equity loan provider shares the risk of property price falls as well as the opportunity of sharing appreciation.

The UK is fortunate in not having tax relief on mortgage interest for home owning mortgage debt as this would, as David Miles correctly notes, act as a disincentive to reducing debt via equity loans (since deductibility depends directly on debt size). Moreover, Miles argues that even a small equity loan stake would have a major impact on leverage if home owners can provide an element of home equity themselves. His example in the conclusion of his paper is that a 10% down payment by the borrower subsequently augmented by a 20% equity loan changes the leverage ratio from 10 to 3.333 (plus the cumulative affordability saving by having lower repayments on a smaller mortgage).

The big question is how to create a successful market in equity loans, in effect, providing a private sector version of HTB1? Other questions are – should it be national or regional, should it be targeted to first time buyers and should it have ‘affordable’ ceilings placed on purchase prices? How do we encourage banks and other equity investors to tie up scarce capital in this way?

David’s paper is in effect it seems to me to be saying that the BoE’s macro prudential and monetary policy measures can influence leverage but that a promotion of an equity loan market for home owners of 10-20% of value could, on an incentive-compatible basis, share risk and significantly reduce leverage and the wider problems that go with it. He recognises that establishing such a market will not be easy: ‘various shared equity products in the past (most of which were not equity loans) have a patchy success rate. But the recently launched equity loan product provided by the UK government for those buying newly built homes (under its Help to Buy scheme) has proved popular (pp.17-18)’.

All in all, an interesting discussion – a possibly larger role for Equity Loans for macro deleveraging reasons though big questions remain as to how to establish and then make such a market work. It is good to see that prominent thinkers on the MPC are encouraging debate even if they are on the one had writing in a personal capacity but, at the same time, being press-released by the Bank. As usual it is difficult to tell how much internal consensus there is about this direction of travel.

[1] http://www.bankofengland.co.uk/publications/Pages/news/2013/132.aspx

Remembering Lou Reed

It has been a week or two since Lou Reed died and only now, for what it is worth, have I had the chance to set down my thoughts on his passing.

I was, like many of my generation, a great fan both of the Velvet Underground and also much of his solo work in the 1970s. This had a lot to do with David Bowie and Transformer of course but also, strangely, Bob Ezrin’s period producing Berlin and arranging him working with Hunter and Wagner from Alice Cooper’s band on the fantastic live album Rock’ n Roll Animal.

He was the writer of many rock standards, a genuine innovator as a songwriter and one possessed a rare style and musicianship; he possessed a real intelligence about so much of what he did. Often laced with pessimism and ‘difficult’ subject matter, he nonetheless produced a considerable volume of thought provoking material but also in the end some really excellent tunes.

I think I first became aware of his new music around the time of Street Hassle and thereafter dipped into the back catalogue and followed his subsequent music thereafter. I was about 8 when ‘Walk on the Wild Side’ was in the charts but it was much later that I listened to the albums of the period.

Regarding the Velvets I was always a big fan of the first and last albums and also the 3rd self-titled and rather weird collection of songs – the first after John Cale left. My favourite songs were things like Sunday Morning, I’m Beginning to See the Light, Sweet Jane and Pale Blue Eyes. Apart from The Gift and one or two other tracks, the second album never really worked for me in the same way. The Velvet Underground and Nico must be one of the greatest debut albums; just as Loaded is a classic final album, like LA Woman or The 12 Dreams of Dr Sardonicus – both of similar vintage.

I found a lot of the solo period after the 1970s frustratingly patchy with some great songs like The Day John Kennedy Died and I Love You Suzanne mixed up with a few indifferent tracks. Still he was capable of making truly great albums like New York and (with Cale) Songs for Drella.  A relative of mine truly hated Nobody Like You so much that I still find the need to have it as a ringtone for her when she calls.

Back in the early 1990s I saw him live a few times both solo and on that strange short-lived Velvets reunion in Edinburgh. I thought it was a great night myself but had the sense that they were not too happy being there.

For those people familiar with the album New York you may recall one of the catchier songs ‘Good Evening, Mr Waldheim’.  In the Autumn of 1992, as a callow and inexperienced research fellow, I found myself as a solitary social scientist at an international housing conference in Salzburg, Austria. The conference dinner involved a Mozart string quartet and meeting luminaries. And, as you might have guessed, one was none other than the then MP for Salzburg, the former head of the UN,  Kurt Waldheim. When I heard of Lou Reed’s passing, amongst other memories, I was taken back to that surreal evening.

Of course, one is very sad to hear this news but there are so many things to remember and great music to consider. I am also really glad that his old partner, John Cale, is still working and making great music in 2013.

Is the ‘Bedroom Tax’ bedding down?

There has been quite a bit of media interest and reportage on a paper I did for the Welfare Reform Committee of the Scottish Parliament. This was added to with my appearance yesterday (November 5 2013) giving evidence to the Committee on the report. The paper is linked below:

http://www.scottish.parliament.uk/parliamentarybusiness/CurrentCommittees/46339.aspx

The evidence to the committee is on a link in one of the pages on this website.

I provide a summary below of the main points but a first a little context.

First, my brief was to explore the evidence thus far about the impact of the under-occupation charge. This involved looking at the research and policy literature on impacts, both prior to April 2013 and thereafter. Second, I tried to make sense of the limited empirical or quantitative material that has ben circulated. Because we recognised that this might only take us so far, I also carried out interviews with seven landlords to get a sense of how they thought the charge was impacting on their tenants in different parts of Scotland and different housing contexts.

Second, it became pretty clear early on that this is such a hot topic and so much work is underway that the profile of the ‘bedroom tax’ story changes certainly weekly and sometimes daily. Even in the three weeks or so since the report came out there have been several additional strands – with new analysis from, among others, the University of York about DWP assumed savings from the charge, from the Scottish Housing Regulator on arrears, from the Scottish Federation of Housing Associations, plus research by the BBC.

Third, as is stated in the report, we simply do not have a complete picture of what is going on. This is because:

  • The incidence of the charge is dynamic and there is considerable churn as people move in and out of its effects, and as people enter and exit tenancies. The same applies to arrears.
  • Arrears are also affected by the signup for, and availability of, Discretionary Housing Payments, now topped up to the max by the Scottish Government.
  • DWP on-line benefits data, which is better in England, has not yet reached the same resolution in Scotland – though I am led to believe it shortly will do.
  • We instead rely on a series of partial, snapshot, sampled and otherwise segmented data that does not take account of these dynamics.
  • This is particularly the case for making sense of how many properties became vacant that are one bed in a given year. Working out how many under-occupiers can be ‘downsized’ each year and how long it would take to clear the backlog, is fraught with difficulty – even of those affected actually wished to move.

The picture will improve but would be best if Government and the regulators in Scotland would work together to build the database we need which is one that matches households to properties and where vacancies would be measured by property size. The COSLA/Scottish Government survey remains our best sense of incidence – but it is a snapshot of 98% and not a stable picture over time.

With regards to the other main findings, the most interesting material is I believe in relation to the interviews with the seven landlords from different housing associations and council housing departments – operating in very different contexts. The main conclusions of this part of the work was as follows:

“The views of officers from a range of social housing providers indicate that the reality of the under-occupancy charge on the ground is varied, challenging and changing. There are important differences between councils and housing associations, between towns and rural settings and between tight and looser labour markets. The incidence of the charge varies across providers as does arrears. DHP and linked support from councils and the Scottish Government has been critically important in many places and its uncertain future underscores its importance to managing the under-occupation charge in future years. Different kinds of client seem to be disproportionately affected in the range of settings the landlords work in. It does seem however that single people and those with illness and disability are those principally exposed”.

“Those who are actively responding to the charge are doing so by paying it, by seeking DHP support, by trying to get off benefits and my terminating their tenancies and looking for housing solutions elsewhere. However, there is little demand to downsize, even if there is little actual one-bed property turning over in any of the organisations consulted. The pull factors that keep people in their homes and existing settled communities outweigh the push driver of the charge”.

“The other striking point from these discussions concerns the universal recognition of further difficult challenges in the shape of ending direct payments to landlords, the end of local Housing Benefit services, the huge financial inclusion challenges ahead and the specific problems facing those of working age in social housing relying on ESA and DLA. It is ironic that much of the important professional learning delivered as a result of implementing and dealing with the consequences of the under-occupancy charge locally – will in part be lost by the very nature of succeeding welfare benefit reforms”.

It is only seven organisations but these were, in the main senior staff, some specialist in welfare benefits. One could not fail to be struck by the sense that (a) many people were unwilling to move for understandable support network reasons and (b) that the interplay of successive waves of welfare reform will have cumulative adverse effects on the often highly disadvantaged and that it is still early in this process of change.

The evidence session was intense but thoroughly fair. There was a lot of interest in this idea that many of those affected by the under-occupation charge on balance did not want to move because of ties to their present home, adaptations, local support, etc. or indeed the absence of reasonable alternative housing solutions. These critical behavioural questions about how those affected actually respond to the new situation is for me the key area of knowledge we need to understand better going forward.

A key area of political dispute in Scotland concerns bedroom tax arrears and whether evictions associated with the charge should be ruled out (as some councils have already declared). In the report and in evidence I suggested caution about this development and the need for further debate or consultation.

I am worried about the signal this sends out (particularly given that in future direct payments will be ended via the universal credit). I also think that as a consequence  much more investment is required in financial inclusion, budgeting and money advice. Landlords work effectively where they deal proactively with tenants in financial difficulty, taking account of specific contexts and dealing with the situation on a case by case basis. This is potentially a more effective way of actually tackling the source of issues and should be supported and resourced. In the long term I believe better client-focused arrears management and financial inclusion coaching will work better for precarious tenants. We should of course always seek to avoid evictions as far as is possible – but there are worse things ahead than the bedroom tax in the form of further welfare reforms in terms of their effects on the financially vulnerable.