Owning Housing in the UK: Snakes and Ladders or just Snakes?

One of my favourite ‘angry’ songs from the first Tom Robinson Band album (Power in the Darkness) was ‘I’m Alright, Jack’. The song always conveyed to me the sense of ‘pulling up the ladder’. I was reminded of this reading the new report by the Resolution Foundation: ‘Living Standards 2016‘. In the report they argue that the UK housing ladder has been ‘withdrawn’.

The Resolution Foundation argues that only now are living standards returning to pre-crisis levels. The study focuses on the experience and position of low to middle income working age households. They stress the cumulative impact of long term wage stagnation only recently recovering though ‘flattered’ by low inflation. FRS household survey data rolled forward to 2015 suggests that mean household incomes remain 1.6% below their 2009 levels though they are rising relative to recent years (median income has been doing a little better). Household type (pensioners have done much better since 2002 than working age households), tenure (though with a mortgage facing very low interest rates have done much better than those renting) and place (London is the second best region in terms of household income growth before housing costs but at the bottom of the pile after housing costs).

For the Resolution Foundation these points indicate strongly the central role of housing in affecting incomes and allied to the intergenerational differences in outcomes, helps explain the ‘drastic changes’ to the levels and rate of home ownership. They point out that 1/3 of home owners are aged over 64 (compared with a quarter in 2000) and 16-34 year olds account for just 10% of owners compared to 19% in 1998. They acknowledge that the trend was downward pre-dating the economic crisis but stress that it is among low to middle income households that the reversal has been greatest. They predict that in comparison to 2000 when around half of such households aged under 35 owned their home, today it is more like a quarter and will be just 10% in 2025 if trends continue and only 5% in London. The authors argue for policies to successfully implement the national living wage, reverse the ‘most punitive’ aspects of welfare reform and pursue a sustained and enlarged housebuilding programme.

These figures are important facts that we should be aware of. I would make a couple of additional comments. First, we stressed in the 1980s and 1990s that some national policies have important regional implications, such as the spatial impacts of mortgage interest tax relief. Today, the same can be said about the tightened regulation of the mortgage market since it is deposits that play such an important role rendering home ownership inaccessible – and that has huge spatial consequences particularly for overheated housing markets. Ability to meet such deposits remains arbitrary and increasingly a function of previous generations’ success in ‘winning’ the housing market game and recycling the proceeds to their children or grandchildren. This it seems to me is where a fundamental constraint on home ownership bites and where policy needs to be more innovative and creative (as we will continue to need a more regulated mortgage market compared to a decade ago).

Second, I return to that question about millennials and their changing attitude to housing and the greater insecurity of job tenure in the labour market, to renting in particular, and issues of location, and life-work balance. We need to understand housing demand, tenure aspirations, choices by households and the limits to changing these through policy interventions much better than we do. Aspirations studies are important in this but we do critically need a better understanding of aspirations modified by constraints and actual or likely economic choices. As I have argued before my sense is that the rental market is highly segmented and differentiated but that for a growing number of younger households who do not know anything else other than the parental home – it is is increasingly normal and often quite satisfactory as a housing outcome. It is clearly less well suited for other groups like families but if anything policy work needs to focus on lengthening tenancies and not by simply seeking to ‘solve’ home ownership without tackling the down payment issue.

Glasgow’s rental market affordability challenges

 

In Scotland we have statutory housing strategies for each local authority. Even though it has no council housing, this is a big deal for Glasgow. The city has control over the distribution of capital grant funding to the housing association sector, remains a key landowner and rightly sees housing as central to the delivery of many of its wider corporate objectives. Glasgow like all Scottish councils manages a number of statutory functions such as homelessness and housing planning. Tuesday past was the first set-piece external consulting event and I was speaking at it on the topic of private housing, need and affordability.

The central evidence base that the housing strategy is informed by is the Glasgow Clyde Valley joint Housing Needs and Demand assessment (HNDA). This is an impressive piece of work and one that conforms to a standardised model of quantifying demographic and economic trends, and the overviews the existing housing system, before then going on to examine sources of housing need and estimate three scenarios (low and high migration and the principal projection). This Scottish Government supported statutory analysis is built on earlier eras of housing planning (such as the Local Housing Systems Analysis framework that I was earlier involved with). It is a solid and internally consistent approach that makes best use of data but, as is widely recognised, it is replete with conventions, judgments and assumptions. There are undoubtedly weaker areas in all HNDAs and one of the main challenges is the private rented sector.

Private renting has grown rapidly in the city (and is now over 60,000 units or 20% of the stock) and while we can put together a narrative about the emerging market based on different sources of quantitative and qualitative evidence, it remains impressionistic and I would argue that, generally, we know little about market behaviour on either the supply or demand side. Consequently, we risk undesirable outcomes if our policies for the sector are not based on firm evidence and convincing models of how the sector works and interacts with the rest of the city. Below is my impressionistic version.

Citylets data for the 4th quarter of 2015 suggested an average monthly rent in Glasgow of £701 (compared to £741 for Scotland). While the level is lower, Glasgow how has higher rental inflation (4.2% compared to 2%) and a reducing time to let period – 21 days compared to 30 for Scotland as a whole. So, the market has rising real rents and a tightening around vacant units being filled more quickly Wider evidence suggest that Glasgow (and in some cases Greater Glasgow has been experiencing rising real rents since 2010 and again this is outpacing the Scottish average. Scottish Government evidence also suggests that rents are diverging with upper quartile rents growing quicker than lower quartile rents.

I sat in a breakout session at the conference yesterday where it was suggested by someone in the industry that Glasgow’s 60,000 or so private rented units and no fewer than 35,000 landlords – that is quite a stylised fact if broadly true. It makes policy intervention, regulation and analysis of the sector highly challenging. Landlords may be largely single property landlords alongside a smaller number of multiple unit portfolio landlords. The former may be more ‘amateur’ and short run in perspective – but some actually may see the property as a pension substitute and hence be in for the longer haul unless external drivers like tax changes force then out.

Two things struck me about the landlord suppliers – the recent tax changes to mortgage interest tax relief, LBTT and capital gains tax will have highly differential effects on landlords. Those with stock and not planning to invest will be less affected by LBTT increases but those investing will. And as was pointed out in the meeting, constraining the tax relief to the basic rate could turn for some a profitable business into a loss-making one. Another colleague, second, differentiated between the amateur landlords being likely to be more likely to exist as the market recovers and in the face of these negative fiscal pressures but also as a result of concerns about the new Scottish legislation and how this all affects capital gains. On the other hand corporate investors with several properties will be more concerned about cash flow and income returns.

I remember my former colleague Peter Kemp used to talk about a highly segmented private rented sector with landlords composed of volunteers and conscripts. I think that both notions apply all the more so now – we have a highly differentiated market which caters for discrete groups: students, generation rent working households, those with short run easy access housing demands, and those at the bottom end of the housing ladder unable to access social housing.  I am not convinced we have the research evidence or monitoring capacity to really understand what is going on in each of these segments. Policy is overwhelmingly concerned with the latter problematic group but actually there is much more going on which has an important impact on the rest of the urban housing system.

I think the other really interesting idea raised by Peter’s characterisation is that we cannot assume all tenants are conscripts but indeed some of them are clearly volunteers. Not all Generation rent working tenants, usually younger households. are potential home owners. Some are clearly happy with their rental experience, do not expect to have the sort of job security associated with a traditional mortgage and certainly do not have the savings required for a deposit). But many are content with that reality and would rather trade off a good location (and a relatively high rent) to be able to access the amenity important to their preferences. But we simply do not know enough about the profile of these two forms of tenant who essentially substitute for the presently less accessible home ownership sector. But we need to know more and Glasgow needs to prioritise this in its evidence gathering and ongoing monitoring of its housing system.

Finally, it is interesting that, in a small way, housing associations in Glasgow are dipping their toe into mid market rent and indeed ‘normal’ private renting. Do they have the skills to manage properties commercially and which segment should they operate in? How do you manage estates or neighbourhoods where you have tenants with quite different rights and conditions? This may be anathema to some housing people but to others it is a diversification that makes sense and offers opportunities to improve local housing quality and widen the range of housing on offer.

Changing times.

Housing Studies Association Conference, 2016 edition

Every year I endeavour to get a rapid response post out about the annual HSA event. This is my effort for 2016. Good to see old friends, network and just have space to reflect on what is going on in housing studies. The event was, as always, well-organised and the Heslington campus at York University continues to work really well as our venue (Although more on this below). This year the tweeting was pretty much constant and generally good value (#hsa16).

I think it would be fair to say that there were quite a few rather worrying or even bleak papers presented, not that they were not often also interesting and enlightening. It is just that, as we largely agreed, there is a lot to be concerned about. Cases in point: the impact of welfare reform past and prospective (Christine Beatty), the behavioural impacts of benefit cuts to private tenants (Peter Kemp) and the neo-liberalisation of London (Anna Minton), to name but three of the plenary papers. 

More positively, Bob Black discussed the impact in Scotland thus far of the Commission on housing and welfare. Chris Walker of the Policy Exchange courageously entered the lion’s den to challenge the views held by [almost] the entire audience regarding the housing association sector and how the sector might meet Government policy objectives. Omar Khan from the Runnymede Trust did an excellent talk on housing and ethnicity, presenting a rich array of evidence and suggesting that inequalities will not disappear by themselves and should be a standard part of housing policy. Sarah Johnsen rounded things off analysing the ethical and practical issues surrounding the emerging use of social control on the (rough sleeping) homelessness.

Not for the first time, I found myself in the final morning hangover slot, speaking in the first session on the morning after the conference dinner. I was talking about our recent Housing and Work Incentives project for JRF. Alongside me, Suzanne Fitzpatrick and Glen Bramley did a really interesting quantitative paper in that session about the structural and individual factors associated with homelessness. In Auckland, I recently heard something strongly complementary using Australian data from Gavin Wood.

The general theme this year seemed to be that we are in a difficult place (perhaps a tipping point) for housing policy and provision. Apart from the seemingly increasing adversarial nature between government and the social housing sector, much was made of the unevidenced and often incoherent, rapidly evolving, policy response. Of course, this is, primarily, the story of contemporary England but we must not be complacent on the Celtic fringe.

Mark Stephens spoke at the dinner having earlier tweeted to see if anyone could pass on any housing jokes. I think the general agreement was that there were not any. However, Mark told an entertaining story about the long standing location of HSA conferences in Universities drawing on vacant student accommodation to put up delegates. Could it be that there has been a long-running conspiracy from the HSA board to get us all into the sumptuous sleeping surroundings we all know so well? Does the board have a need for thin mattresses and monk cells? I should declare an interest – I was honorary secretary of HSA in an earlier life so maybe implicitly or explicitly I was part of the process that created the HSA  model that has led us in recent years to happily wander around the Heslington campus at this time of year.  

My most striking memory of the social aspects of the conference? After the dinner last night there was a handy time interval allowing for a drink before getting the bus back to the University. Essentially the entire conference landed on a local pub right in the middle of a pub quiz. The locals were not happy by the deafening change in room volume though I suspect the bar was more pleased to have our business.

While I do not have a housing joke to hand, My joke de jour is still I think worth repeating, here goes:

“A man is walking down the high street at lunch time. He sees a bar advertising ‘a pie, a pint and a kind word for £5’. He goes in and orders his beer and is favourite pie. Receiving his change he asks the barman – ‘what about the kind word?’ The barman replies: ‘Don’t eat the pie’.

Glasgow 2018 European Championships – Continuing the Journey

The 2014 Commonwealth Games in Glasgow was a pivotal experience for the city and its people. This is not to say that there was not controversy and criticism of specific aspects of both the delivery and certain dimensions of the legacy. My point in this post though is whether or not lessons are learnt and applied to future undertakings. It is undoubtedly true however that Glasgow has demonstrated that it has the technical capacity, the facilities and the wherewithal to compete as a host for major events. The success of those 11 days in 2014 in these terms and for the city in the sense of jobs, visitor numbers, festival effects, investment in facilities, etc. now means that Glasgow can host other major sporting events: the world gymnastics, cycling, swimming and the Davis cup to name four since 2014.This is a remarkable achievement if we cast our minds back to just a few years ago.

I understand the critics of what are referred to as post-industrial neo-liberal urban policies fixating on heritage, tourism and culture or sports and also concerns about the ability to bend such programmes towards reducing inequality and proactively supporting multiple disadvantaged communities. But does being an event host competitor and winning these events make a broader kind of economic logic? It depends on whether we think the opportunity cost of event delivery is outweighed by the economic, social and more indirect tor implicit benefits of such activities. The raft of legacy research findings on economic returns, jobs, visitor spend and the like do seem to be additional – but they are also an investment if facilities can be reused not just by citizens but for further events, too. Other legacy lessons about volunteering, physical activity, community development and sports clubs, etc. are much less clear cut. Many of these debates will actually need a longer time period to be resolved.

My point in this piece is more that the city is on a journey and is being transformed into a place which can deliver these mega events (and sport-specific international events too), and if properly constructed this can add value to the city-region economy and change the way we think about it. It could enhance rather than displace other investments, job creation and economic activity (though there is no necessity for this – it requires careful design and constant attention).

It is in this context that I should declare an interest – I was a member of the cross University legacy research partnership that the City Council and Glasgow Life established for the 2014 Games. As part of that role I agreed to facilitate a workshop this week. The meeting sought to learn lessons from 2014 both operationally and in legacy terms, and apply them to the development of the delivery and legacy plans associated with Glasgow’s co-hosting of the summer 2018 inaugural European championships. Working with Berlin this will involve bringing together a series of European sporting championships for individual sports into one mega event. Glasgow and satellite venues will host cycling, swimming, triathlon, golf and rowing, among others; Berlin will do the athletics.

My role the other day was really just to hold the coats and keep things to time but it was nonetheless a thought-provoking morning and a fascinating insight into how partners (lead officers in the council, Glasgow Life and other relevant public agencies) are thinking their way through the challenges of the event. A few things struck me in particular.

First, a considerable amount has been learned about what works and what does not work as a result of the 2014 experience. This ranges from the locus of control and the relationship with other non-local partners integral to a mega events programme, but includes issues over community engagement, communication, managing expectations and trade-offs (e.g. seeking to widen inclusivity among volunteers but also selecting those with the right skills). However, people clearly recognised that there are limits to the transferability of these experiences because of the different nature of the two events.

Second, there was a complete absence of complacency and instead a shared desire to work in partnership with neighbouring councils involved in delivery, with Berlin, European broadcasting, the business community, local sports clubs, volunteers and the specific sports organising bodies. People present were both aware of and thinking hard about identifying and managing risks.

Third, it is clear that Glasgow has changed and is changing as a result of the 2014 experience. This is not just branding and the after glow of the festival effect from 2014. There is a palpable capacity to maintain and strengthen Glasgow’s recently won position as an international mega event host and to lever economic and social benefit from it. While they do not happen by themselves and are easily over-estimated, we should equally not dismiss the potentially major long term effects this may have on the city and indeed for Scotland.

The ONS Returns

After the reclassification of English housing associations in the Autumn of 2015 into ‘public non-financial corporations’, many in Scotland believed that it was likely that in due course ONS would decide to look at the other housing association sectors across the rest of the UK. Last week ONS confirmed what many thought probably inevitable. The proposed work will be carried out by ONS in the last three months of 2016.

In its work programme, ONS said:

“Cases scheduled for assessment:

9. Registered providers of social housing (known also as registered social landlords in Wales) including registered housing associations in Wales, Scotland, and Northern Ireland

Current classification: Private Non-Financial Corporations (S.11002)”


“ONS last assessed the classification of social housing providers in devolved governments in 2003 under the 1995 European System of Accounts rules. The existing classification will be reviewed to assess the impact of the latest 2010 European System of Accounts Rules and, where relevant, of changes in legislation which have occurred since the previous assessment. This will establish whether these bodies should be recorded in the public or private sectors for statistical purposes and whether they are market or non-market producers. Altogether, this will establish in which statistical sector their activities (including their assets and liabilities) should be recorded. As part of this review, ONS will also consider the classification of the associated social housing regulators where applicable.”

While this may not be clarified until the end of 2016, the Scottish case, like in England, is one based fundamentally on the relationship between the regulator and the sector. A number of implications would flow if Scotland is similarly reclassified. First, liabilities and assets would go on to the public sector books, adding to public debt. This may also mean wider government influence and a degree of control over new borrowing. Second, the question then becomes: will the Scottish Government go down the same road as the UK Government and try to deregulate the sector and hence have the reclassification reversed.

Just how this deregulation might be attempted and what its intended and unintended consequences might be for the sector – are quite hard to discern but require very careful consideration. Whatever else, deregulation should not be undertaken lightly or too rapidly. The English deregulation experience over the next few months will be an important if not critical guide for the Scottish government and the Scottish housing regulator. All of the UK devolved governments need to work together.

So, other things equal, we will now engage in a debate for several months about the appropriate way for the Scottish Government to respond to the probable reclassification and what form of regulatory level is both sufficient for reclassification reversal and adequate for the needs of the sector (indluding finance), its long term commitments and the interests of tenants (the current primary purpose of the SHR). What might this mean in a Scottish context for the delivery and composition of the 50,000 affordable units proposed for the next Parliament, if the present government is re-elected?

But we may be getting ahead of ourselves. The ONS has not started the work yet; it may be affected one supposes by the English experience (i.e. it may even be possible to short circuit multiples changes to classification). We will also have to see if primary legislation (as in England) is required to make the changes that the sector and presumably the government want.

All of this is about regulation and ultimately control over the sector. It is ironic that whereas all four UK nations adopt recognizably similar forms of housing regulation, the significant substantive policy divergence over the last few years between England and Scotland regarding social housing policy has absolutely no bearing on the current classification debate.