Ken Gibb's 'Brick by Brick'

Housing, academia, the economy, culture and public policy

Category: housing policy

Good for the Gander? Reflections on the 2017 Housing Studies Association Conference

goose 1 is a goose that for three days strongly defended its space on the main way into the conference on the York Campus at Heslington. It appeared to be protecting its partner and made the odd aggressive shift in direction if any delegate came too near its mate in the undergrowth. I am no David Attenborough but it reminded me of years jogging round Strathclyde Park and carefully avoiding the personal space of gangs of Canadian geese or the attention of fairly abrasive Lanarkshire swans.

The conference this year was themed around precariousness and financialisation and how the housing sector is becoming more unequal, insecure and unstable. Plenary speakers included Oliver Wainwright from the Guardian, Shelagh Grant, CEO of the Housing Forum, Dinah Roake ex of HCA , Paul Quinn from Clarion Housing Group and Bob Colenutt from Oxford Brookes. The final plenary involved David Madden from the LSE and Blase Lambert, CEO of the Confederation of Co-operative housing. The conference dinner also included a memorable talk by the ineffable Ian Cole.

Financialisation and the precariat are well-met topics and they worked well with many of the workshop papers and for once a conference theme seemed to retain purchase across the full event. Not that everyone agreed of course with very different views circulating and also some concern that perspectives were a little too metropolitan and London-focused (something conceded by David Madden co-author of In Defense of Housing). There were also debates about the proactive role of the state in facilitating speculative mega real estate projects and a degree of vagueness about the transmission mechanism that might export people out of unaffordable, overcrowded cities. A key theme throughout was what can be done about these processes – do we despair or are there ways to fight back? There was talk (Madden again) about housing movements but I quite liked Glen Bramley’s discussion point that in fact an important (albeit atomised) housing movement are those older equity-rich often suburban home owners (and sometimes BTL investors) who are such a break on progress with respect to increasing housing supply.

I heard some interesting conceptual papers by David Clapham, Keith Jacobs and Tony Manzi, as well as a good paper using Australian evidence on private landlords from Hal Pawson. Duncan Bowie reprised debates about housing tax reform. I did a paper (co-authored with Duncan Maclennan) on Brexit and housing, the fundamental premise of which can be summarised by we don’t know the rules of the game regarding the rapidly approaching negotiations so we cannot really scale or estimate the impacts. Many economists feel they will be negative depending on the scenarios for how Brexit plays out, but we cannot in turn say much specific about housing impacts other than some likely directions of broad consequences via lost trade and growth, out-migration, risks re European funds and EIB, but much more fundamentally, risks to housing policy arising from possible break-up of the UK itself as a consequence of leaving the EU. More to follow on this I am sure.

The conference has a nice informal and friendly feel to it. This was complemented unexpectedly in a city centre bar by a very impressive four piece jazz band playing standards via an excellent trumpeter. Well done to the organising committee. Roll on 2018.

I missed a fair bit of the conference, in part because unexpectedly, the ESRC decided bring forward  the announcement of the UK housing evidence centre which made Thursday a bit of a social media blur but it is great to finally have it in the public domain.  More on that subject in a later blog.

‘The geese are flying westward’ is a fine song by Bill Fay (check it out) – but I am now heading north on the east coast line, eventually back to base for what I hope will be a quiet weekend.

 

 

 

 

Rent Reform and the Too difficult Box

 

Over the last 20 years, I have worked on at least five discrete projects about rents and rent-setting. This has included studies funded by governments and by individual providers in Scotland and Northern Ireland. A feature of this experience has been on the one hand that precious little reform of how rents are set followed on from this work (score zero for ‘impact’), but at the same time, it has been a learning curve. In this post, I want to reflect on these lessons.

First,  we are primarily interested in the pricing of social housing. By that we mean the level of the average rent, the way that rents are distributed around that average reflecting variations in, or differentiating the, quality of the stock, and, how we uprate rents each year. A fourth theme is whether these principles can be established not just for one provider but across a housing system (e.g. all social landlords), be that a local authority, a region or even a country. A fifth theme is whether rents should be consistent across the entire stock or whether pooling would not extend to separate well-defined schemes and new developments? Most of the following discussion assumes complete pooling (e.g. with a premium applied to new build should it be required).

Second, this desire to look at rents may arise because of policy seeking to remove anomalies and put rents on a more coherent basis than current perception or evidence would suggest. It may also arise because of the actions of a single landlord (e.g. taking over another landlord’s stock), it may be due to external policy challenge such as welfare reform or the sense that competitive threat makes its necessary to review the rents. It may also reflect asset management strategies and the use to which rental income is put. There could conceivably also be internal pressures from board members or tenant groups, or indeed staff groups, to address perceived shortcomings. However, we should not underestimate the ability of these groups alongside other stakeholders like lenders or the regulator – to resist or dilute rent reform proposals.

Third, what are the key principles involved? One would be consistency – that rents are differentiated on a rational and credible basis e.g. bigger properties, more space and more amenity command higher rents and do so in a coherent way. A second would be affordability (a thorny issue in its own right) but typically about securing low cost housing for low income households, especially those just above HB ceilings, often in low wage work. A third point would concern viability – does the rent allow development to take place and does it support the ongoing operational delivery of housing services thereafter?

Many readers will recognise longstanding problems of archaic rent structures lost in the mists of time, of anomalies in rent levels comparing similar properties from different landlords and inconsistencies within a given landlord’s portfolio when looking at different areas, vintages of stock and other similar problems. There is also often the sense that rent systems may be past their prime and are slipping into entropic disorder accelerating over time.  These discrepancies can be brought to light particularly during periods of new development, when stock transfers or mergers take place and when the external policy environment sheds perhaps too much light on the way rents are done.

So how to reform? I worked with one landlord who initially wanted to bring the full weight of evidence and analysis through a sophisticated formula rent. The stakeholders I mentioned earlier thought not and subsequently a much simpler model based really only on size and property type became the favoured option. Others lose their zeal for reform when they see that, as in England in the 2000s. shifting to a national formula rent (complete with local average rent convergence across landlords) requires long term adjustment over 10-15 years and also implementing protection measures for those losing out in the form of damping to lessen year-on-year effects. While the English model was relatively complex – such a process of transition and convergence could be devised for much simpler internally consistent models. But a big lesson from the English experience for me has been the unwillingness of Governments to see these sorts of policies through. The simplicity of a national formula rent, for all its problems (e.g. the financial pressure it put on landlords who had to slow down planned rent increase), fell apart after a change of Government and their desire to set off on different paths for non-market housing and required rents for new models. This was then followed up by statutory rent cuts to save on housing benefit – massively expensive for social landlords who in good faith planned reinvestment (as well as  just trying to retain the resource levels of  their landlord operations).

Geography is interesting concerning policy trajectories over rents. Alongside the English experience since 2000, Northern Ireland’s social sector appears to have had quite a lot of discretion though in fact almost all social landlords base their rents on some version of sorts of the dominant (Housing Executive) landlord’s rent points policy from the 1980s.  Again, this has gradually become less recognizable over time (and average rents remain lower for Housing Executive properties). In Scotland, on the other hand, despite earlier research studies examining the merits of a more national system of rent-setting, there has been absolutely no interest from those who would champion rent reform. And as a result, Scotland probably has the least coherent and comparable rents in the social sector across the UK. Yet no-one gets that excited about it, other than in terms of the starting rents required for new build, and the impact of LHA caps on rents and rental income received.

So, does viable, affordable and consistent pricing of rents matter? At one level, of course it does. But more broadly, surely it still makes sense for tenants to be able to make rational, informed judgements about price and quality both within a landlord’s stock and between different landlords? Arguably the growth and encroachment of private renting into the non-market housing sphere is another reason for more not less transparency. But if the regulator is tolerably happy with the situation, if tenants are not too despondent about annual rent increase (outside of England), and if providers are up to their necks in operations and crises, unless the policy environment forces it on them – rent reform is not going to be coming anytime soon. Like so many public policy reform questions, the rationality and benefits of rent restructuring are outweighed by their time, resource and political costs (and it is of course a nontrivial process) – but like council tax reform, not making the necessary change will only in due course make things worse.

 

 

Lessons from German Housing?

 

IPPR has recently been producing a series of reports on housing in Germany asking why can’t the UK follow in its stead and take on some of the apparently desirable features of their housing system. As with other examples of policy transfer, diffusion or mobility, I don’t think it is always as straightforward, though IPPR are demonstrably aware of either the barriers to transfer or that we do need to look closely and critically at the German system as well as positively regarding certain undeniably positive outcomes.

What do IPPR say in their reports? The first one says why is it that Germany builds more homes, has a less volatile housing market and a bigger private rented sector? The second report, out last week, describes renting (i.e. the PRS) as the dominant tenure, more stable and with greater rights than for those in England. Since 1995,  and with much lower levels of volatility, German house prices have risen by 50%; in the UK they have gone up 400%.

IPPR argue that greater levels of housing construction are associated in Germany with a wider range of builders, both SMEs and larger firms. Ostensibly similar (a plan led system like in the UK), Germany seems to do better at converting planning permissions into new supply (i.e. the housing delivery system) but they have also seen a significant reduction in the volume of affordable housing being constructed. Perhaps more significantly, German public authorities are more proactive in the land market assembling sites and delivering infrastructure. Unlike the English, they continue to use planning gain to support the development of affordable housing. The lending environment is  more conservative than the UK and mortgage debt to GDP is considerably lower. While the housing tax regimes are not dissimilar, the German system of capital gains tax encourages long term property holding rather than speculation.

Interestingly, the IPPR conclusions include what they call mis-steps that should be avoided in the UK: first, they argue that a model of long term covenants (20-30 years) has failed to deliver more affordable units and second, they argue that there are higher transactions costs and inflexibilities that may impact negatively on the labour market.

Turning to the second report on private renting, IPPR stress that alongside security of tenure, private rents in Germany are much less likely to be associated with housing stress or very high housing cost to income ratios. Germany has a large supply of rental properties (which helps reduce the impact of longer tenancies on the supply of vacancies and this is supported by rent controls and a further control or brake on rents when properties are re-let. Not surprisingly, in such a different tenure distribution, tenants are also organised politically and have voice in a way that does not exist in the UK. This leads IPPR to recommend for the UK that: government should let LAs construct build-to-let schemes as part of the PRS and also recommends longer tenancies if public subsidy is involved.

The reports are worth reading and make excellent points. However, one must recognise the universal challenges of lesson-learning, transfer and diffusion of policy across national boundaries where market contexts, institutional settings and the evolution of housing systems move differently. Germany has more than half of its households in private renting but the institutional features of the PRS in Germany are quite different, as we have seen, from the deregulated UK. The benefits of the system stability and much more moderate volatility have taken decades to achieve and have had to overcome the challenges of reunification and surplus low demand social housing in the East. They have also enjoyed a comparatively stable policy framework without the catalogue of initiatives and innovations that we suffer from.

Yes, it is true that they do not meet their housing need targets and affordable housing completions are moving in the wrong direction. It may also be the case that the German mortgage market is more conservative and it is undoubtedly true that their rental market (by definition) is less flexible than that of the UK. But this may be an acceptable trade-off in terms of overall housing policy outcomes?

The point about the mortgage market is interesting for other reasons. Recently, in the House of Lords Economics Affairs Committee inquiry into housing, Dame Kate Barker made the point that there is a massive tension between housing-related government departments trying to boost housing supply and home ownership while, at the same time, HM Treasury, the Bank and the financial regulators are re-regulating and constraining mortgage lending.  Acknowledging this difficult trade-off and trying to develop the right balance is a critical requirement for housing policy and the forthcoming White Paper on housing.

I think these reports are a fundamentally good idea because it is by looking at other places in some depth that we shed light on some of the things wrong with our housing system. However, apart from one references to legislating over letting agency fees, I was a little surprised that IPPR did not make more reference to Scotland, given that we have just undergone fundamental reform to our tenancy laws (creating open-ended tenancies and limited specific routes only for eviction) and also proposed rent uplift limitations in pressured market areas. It is Ironic that there appears to be less interest with intra UK policy diffusion. After all while housing policy is diverging rapidly across the UK, it is nonetheless much more similar than comparisons made with Germany. Although it is early days and the law is not yet in force,  considering reform along Scottish lines might be preferable to the IPPR proposals suggested above which are premised on retaining the present tenancy laws and hence privileging, it seems to me, labour market flexibility over housing security.

 

 

Land, Tax & Housing Supply in Scotland

 

The Scottish Government has its five-year target of 50,000 new social and affordable homes and is exploring ways that the sector might overcome bottlenecks and impediments to the required levels of new build. Not surprisingly, there has been a focus on the supply delivery system, planning, the development industry and the land market. Scotland has recently had an independent review of the planning system chaired by Crawford Beveridge and earlier inquiries by RICS Scotland  and by the Shelter Commission on Housing and Wellbeing. Now, as a sidebar to the recent proposed reforms of the council tax, it has been suggested that the Scottish Government would consult on the efficacy of a tax on vacant and derelict land, so as to incentivise the supply of housing land from those relatively untapped sources. This follows on the recent introduction of a similar levy on such land in Ireland.

This was the context for a roundtable discussion I attended Tuesday morning about the pros and cons of such a tax chaired by the minister and populated by stakeholders across the housing supply delivery system, professionals, policy, academics and practice. It followed the Chatham House Rule so I will simply reflect on themes expressed around the table.

The meeting was structured around three key questions: why can’t we deliver more housing supply; would a tax on vacant & derelict land help; what other policy instruments might help? There was a wide range of views on show both in terms of diagnosis and what needs to be done.

Regarding what prevents housing land supply coming forward more speedily, there was (unresolved) disagreement over whether or not speculative land banking played a part. Other culprits were identified as high levels of risk, infrastructure constraints, construction capacity questions, the reduction in SME builders since the crisis, the cost of decontamination many derelict sites relative to the funds available, and lack of access to sufficient affordable land – amongst several other issues. Underlying much of what was said was the continuing large discrepancy between the volume of housing land with consents in the housing land supply figures and the much lower number of what actually gets completed. How do we rectify this and what quantitative significance does vacant and derelict land play as part of this story?

Contemplating a tax on vacant and derelict land means having clear definitions of what it means to be derelict or vacant and targeting the tax appropriately. That is not easy. Assuming that it can be done the tax would have to overcome a series of standard hurdles: the tax should be cheap to set up and run, it should be simple, transparent and be credible as a fair burden. It should also minimise wider distortions or unintended consequences.  I argued that if these criteria could be met through careful design, the tax should also possess local discretion so that the nuances of locally heterogeneous markets could to an extent be addressed. Overall, a wide range of views were expressed about the feasibility and desirability of such a tax.

In the course of the discussion a number of important wider points were made. First, there is of course a major issue about dereliction in our town centres and working on creating residential demand and solutions for these properties could play an important role in the future of many urban areas across Scotland. Second, there was a sense in some quarters that derelict and vacant land was a part of the problem of land supply for housing but it should not be over-cooked against the wider questions of how we best deliver on new housing targets. One view was that there was essentially nothing that far wrong with the planning systems aims and goals but there was a too common failure to actually deliver the housing delivery public policy outcomes we desire – and we need a range of mechanisms to make that happen.

How might this be done? First, there was discussion of the prospect that planning permission might be taken away on a site if it is not used. This is often discussed but of course there are dangers here – the site may nonetheless be a viable site and its development will be delayed and, moreover, by taking consent away, the effective housing land supply is actually being reduced. Second, there was discussion of national and regional land development agencies that could overcome market failures by delivering serviced affordable land for housing. To that end I would also support local revolving land funds that could do the same once they are pump-primed with initial funding. Third, it was suggested that the state can borrow over much longer periods than the private sector and should do more to exploit this by playing a larger role as an investor in infrastructure versus the relatively short run requirements of market sector developers and that, furthermore, there was an appetite for this long term state investment debt from pension funds.

Finally, there was debate about whether the local state has the capacity and even the confidence to use its existing powers, notably CPO as a way of braking log jams, assembling land and moving sites forward. Several speakers stressed the opportunity to use compulsory sales of land which has the added advantage that it is far cheaper to do in terms of transaction costs than CPOs from the point of view of local government.

Plenty of those present brought specific experienced examples to the table to make their arguments. Only one academic brought detailed research evidence (it was not me). One takeaway point for me from the debate in public policymaking terms, therefore, was that the Scottish Government still has an exercise ahead of it to collect different forms of rigorous evidence as well as this distillation of key stakeholder views – before decisions are taken about the direction of, and specific instruments for, a policy aimed at successfully expanding housing land supply and completions.

 

 

 

Gimme (a ‘standard’) Shelter

Showing their undoubted media abilities, Shelter today launched a new study describing a model of a living home standard (LHS). The standard is based on 39 attributes of essential and more ‘tradable’ attributes of five dimensions of ‘home’ drawn from intensive research with the public carried out by Ipsos MORI. The hook was to show many homes in Britain fell below this new standard, an approach characterised as in the same spirit as the national living wage. The social, tv, radio and print media took to it hugely. So well done Shelter for getting the housing crisis and housing deficit to the top of the news agendas.

In this short post I want to review how they arrived at this new standard and reflect a bit on the national results that they hung their story around.

Ipsos MORI carried out nine months of investigative qualitative research with the public to uncover the five themes and 39 attributes deemed to make up the living home standard (regardless of tenure age or size). This was reminiscent of the approach taken by the Oxfam Humankind Wellbeing Index.The themes were based on: affordability, decent conditions, space, stability (i.e. security) and neighbourhood. Passing the standard required that it meet all of the essential conditions for each theme and a minimum number of the tradable ones for each theme.To take affordability as an example: the essential requirements were 1. Can meet the rent or mortgage payments on the home without regularly having to cut spending on household essentials like food or heating; and, 2. Not worried that rent or mortgage payments could rise to a level that would be difficult to pay. Tradable requirements for the affordability dimensions involved: 1. Can meet rent or mortgage payments on the home without regularly preventing participation in social activities; and 2. Can meet rent or mortgage payments on the home without regularly being prevented from putting enough money aside for unexpected events.

This sort of approach to affordability is refreshing in that it gets us away from the tyranny of specific ratios (cost to income ratios) and minimum values (residual incomes) but clearly does require household survey data. However, it would be incorrect to say that this type of approach is unassailably objective – it is not. Its attractiveness is that it has been robustly built up from the views of real people but of course even that has to some extent been conditioned by the design of the approach in the first place. More significantly, the quest for definitive objective measures is illusory and must require judgements about what is included and excluded, how threshold values are set and why, weighting (and how such weighting is approached) and the fundamental realisation that housing need, affordability and an overall LHS is and must be subjective and to an extent derived from judgment. However, that is not to say that this is anything but a comprehensive and well thought through approach. It is. We just need to recognise that while some forms of housing deficit are apparently objective and straightforward; others quickly become harder to pin down. We should welcome multi-dimensionality to thinking about housing problems but it bring challenges too.

A survey of just under 2000 adults, with results weighted to reflect the national (GB) population, was then undertaken to measure the extent to which the LHS was met and where it was not met. The analysis found that 43% of people live in homes that fail to meet at least one of these dimensions of LHS. Affordability was valued as one of the most important aspects of whether a home was acceptable but was the area that most failed on (followed by decent conditions). However, of all that failed only 1% failed in all five dimensions; the vast majority failed on one dimension or not more than two. The percentage failing the standard was negatively related to income i.e. lower income households were more likely to be in homes that failed the standard. A similar regressive gradient was found contrasting LHS with social grade. Third, fully 69% of private tenants failed the LHS and across age bands, the highest proportion failing (at 58%) were young aged 25-34.

This is more than a useful start and I particularly liked several things about the model – for instance, its multi-dimensionality and the concept of tradable relative to essential attributes. But it would be good to look at the LHS at different more local spatial scales so that it could articulate directly with complementary measures like official measures of housing need. Shelter have done a great job in getting their message out clearly and simply and doing so with such effectiveness. Housing needs to be up there near the top of the agenda because chronic problems rarely seem to inhabit the upper echelons of the news cycles for long. For all that, it is amazing how quickly fairly straightforward concepts and ideas get mauled and can confuse. Last night one of the BBC reporters struggled with the idea that 43% overall could fail the LHS but at the same time 69% of (private) tenants lived in homes that did not meet the standard.

http://www.shelter.org.uk/livinghomestandard.

 

 

 

 

A Different Class?

 

Just under a year ago many of us sat looking at the ONS website waiting for the news about whether or not they would reclassify English housing associations as public bodies for public accounting statistical purposes. On the basis of a review of the powers of the Regulator created under the previous UK Labour Government, the ONS took the view that these powers of disposal of assets, board and senior staff appointments were sufficient to deem that enough degree of control from a government agency meant that reclassification was indeed appropriate. This shifted more than £60 billion of debt on to the public books and initially raised uncertainties about the freedoms housing associations would retain over borrowing.

This fundamental change was not wanted by Government or the sector or other major stakeholders. In the midst of last year’s controversial housing legislation in England, the Government proposed a series of measures aimed at deregulating the English sector sufficiently, they hoped, to re-re-classify the sector back into the private sector.

Still with me? Yesterday morning the ONS announced its decision regarding the classification status for public accounting statistical purposes for housing associations in Scotland, Wales and Northern Ireland, assessing them on a similar basis as was the case in England. They are now described as ‘public non-financial corporations’. The Scottish Housing Regulator (SHR) has been reclassified as a ‘central government body’.

Interestingly, the Scottish Government had taken pre-emptive action by preparing and pre-announcing deregulatory legislation on a similar basis to the English proposal in order to reduce uncertainty and get back to the pre-announcement status quo. In 2012 the ONS re-reclassified English further education and sixth form colleges which it has earlier reclassified in the public sector in 2010 because Government relaxed some of its earlier controls. So there is a precedent.

According to Inside Housing, the reasons for reclassification in Scotland were threefold: the SHR has a degree of control over the management of housing associations, the housing associations need consent from the SHR over ‘constitutional change’ such as mergers and take-overs, and, associations also need consent over the disposal of assets like land and housing.

The Scottish Government plans to respond with new legislation which will first remove the need for consent over the disposal of assets, they will ‘limit’ the power of the SHR to appoint board members and officers, and, remove the need for the SHR’s consent regarding restructuring, voluntary winding-up and dissolution of housing associations. The Scottish Federation of Housing Associations appear to share the Government’s optimism that this will be enough to put the sector back in the private sector, though they reserve the right to scrutinise the ONS details closely. They do make the point that the Scottish regulatory framework has evolved in recent years to put some distance between the sector and public control [link].

This is a statistical exercise but it has real implications, potentially. Governments around the UK would not seek corrective legislation if it were not of significance. Linked to this is the wider question of the degree of autonomy or level of external control applied to an important part of the voluntary or third sector, The reclassification also creates some uncertainty which may impact on policy delivery i.e. the Scottish Government’s preparedness of response in part reflects their desire to protect their priority to deliver the 50,000 affordable housing supply target over the life of this Parliament.

Deregulation is not without its risks – how will lenders respond to the changing regulatory environment? The English experience will provide a guide. Second, is this the end of the matter – will ONS accept the deregulation as sufficient basis for changing the classification back? The plans set out by the Scottish government may well turn out to be quite appropriate and sufficient for this purpose. ONS reclassification could be the dog that did not bark. We will see.

 

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’.

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:

  1. 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.