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Martha Mackenzie
 
I’m a Public Affairs Officer at Shelter, I joined the Public Affairs team in July 2012. I have been working on a wide range of projects, most notably engaging with local authorities through our rogue landlords campaign and leading our work to end revenge eviction. In my spare time I mentor for the Prince's Trust. When not chained to a desk I can usually be found running or cycling around London.

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By Martha Mackenzie

The politics of rent control

A debate is taking place about whether we should control – or cap – private rents in London.

With the 2016 Mayoral Election edging closer, this debate is heating up. Anyone throwing their hat into the ring is taking a view.

Shelter are currently looking at the technical implications of capping or controlling rents. But we also need to understand the political implications of this very public debate.

It is little wonder that renting dominates our capital’s discourse. The annual English Housing Survey (EHS) was released this week; its perspective on London is staggering. Over two and a half million Londoners now rent their home from a private landlord. This equates to 30% of all households in London – more than double the 13% who rented privately just ten years ago.

At the same time, renters are becoming more and more anxious about their future. Affordability is at the heart of this anxiety. Across all tenures, ordinary Londoners are finding themselves priced out:

A pretty dismal picture.

On the surface, rent control appears to be a ‘gold dust’ policy that will tackle many of these problems. Aspiring Mayoral candidates are searching for immediate, demonstrable solutions that will appeal to anxious renters. Capping or controlling private rents feels doable: its effect will be instant and it won’t cost public money.

But there is a danger that the political expediency of rent control is diverting attention from the root cause of London’s crippling affordability crisis: a lack of supply.

The only way we can reverse these dismal trends is to dramatically increase the number of genuinely affordable homes. London should be building around 50,000 homes per year. Around half of these homes should be affordable – with a particular focus on social rent homes.

There is a desperate need for low rent homes – and it will take serious political courage to not only acknowledge this, but to do something about it. London’s next Mayor needs to be:

  • Up front about the need to increase public and private investment in affordable and social housing
  • Fighting for the devolved powers necessary to get land into the hands of those who want to build
  • Ensuring that new supply meets the needs of Londoners on low and middle incomes

The task ahead is daunting, but it is also achievable. With strong leadership, the Mayor can reverse London’s housing crisis.

Of course, presenting a stark choice between rent control and supply is disingenuous. We do need to stabilise private rents – and we should have a public debate about what the best mechanism would be.  But if we allow rent control to dominate the affordability debate, we risk letting politicians off the hook. They should be talking about the big, bold measures that are needed to kick start supply – and they should be held to account on their delivery of social and affordable homes.

Pete Jefferys
 
I’m a Policy Officer at Shelter and interested in how we can get housing up the political agenda, secure a better deal for private renters and get affordable homes built. Outside of policy, I love exploring new parts of London, sport and going back home to Devon.

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By Pete Jefferys

Who should pay for affordable homes?

Any regular readers of this blog will know that we need to build many more homes in England, especially more genuinely affordable homes. The need for these homes can’t be ducked any longer. However, there is a pressing question: who should pay for tens of thousands more affordable homes at a time of squeezed budgets?

As well as the need for government to prioritise investment in affordable housing (we say an extra £1.2bn per year), and the need to lever in more institutional private investment, I would suggest another important source: lucky landowners. To be clear, this doesn’t mean all landowners – just those who gain a windfall from the current planning system.

Our current housing market disproportionately rewards people who own land – especially farmland near our big cities. The reason is simple, the shortage of homes in places where people want to live makes house prices and rents really high. So if you can take a piece of farmland near a city and get permission to build houses on it, then the value of that land rockets. The latest available data showed that taking a field outside Oxford and giving it planning permission for homes would increase its value by a staggering 200 times (from around £20,000 a hectare to £4m a hectare).

For these landowners, this is tantamount to winning the lottery. Nothing has been built, no family is in a new home but the value of their asset now makes them a multi-millionaire. Lucky them.

Unfortunately, the sky-high land prices mean that the homes must be sold at high prices for builders to turn a profit. This means new homes end up being unaffordable to local people, there’s little money left for decent local infrastructure, and builders are forced to squeeze as many tiny homes on to the land as possible to maximise returns. No wonder so many people object to new development.

At present, councils can ask developers to make small contributions to infrastructure and affordable homes as the price of planning permission – but it doesn’t bring in that much, and local councils’ powers to do these deals are being progressively weakened.

However there is an alternative way of funding quality development. We think far more of the boom in land value that comes from planning permission should fund genuinely affordable homes and better local infrastructure (schools, hospitals, parks, transport). This means that landowners would get less, but the money would go into infrastructure and affordable homes. It would reduce the pressure on government budgets for affordable housing.

For example, would it be unfair for landowners to get 150% of the current value of their plot, with the rest of the cash invested for community benefit? This is how new development works in many other countries like Germany and the Netherlands and not only means that more affordable homes are built, but also that new homes are typically larger, higher quality and cheaper (even in high density Holland).

In the UK the principle of windfall taxes, which this could be argued to be, is a well-established one. In the late 1990s, a windfall tax was levied on the privatised utilities with the justification that they had been under-priced by the public sector when sold, after decades of public investment. Similarly, the private windfall from the land market can only exist when public policy has intervened, both through planning and investment in infrastructure. With Sir John Major making a recent call for another windfall tax, perhaps lucky landowners would be the best source?

……..

Who are these lucky landowners?

The answer to this simple question is hard to fathom because there’s so little data available (something we want to see changed). However, it’s safe to say that landowners are a mixed bag.

They include the major house-builders themselves, who hold strategic land-banks. There are also big institutional land-owners, many of whom are in the public sector – like the MOD, the NHS, councils, universities and the Church of England. And there are wealthy individuals who may have inherited ownership, like the landed aristocracy, or even foreign investors getting in on our booming agricultural land market.

In the London market, a 2012 report [PDF] found that around half of the owners of land with planning permission for homes were firms which do not actually build. This indicates the existence of speculative middle-men pushing up the price of land, trading it and profiting off it at the country’s expense, without building any homes. There’s no wider economic benefit to this sort of activity, compared to the huge benefits of building more affordable homes.

While these lucky landowners will no doubt oppose reform, it’s hard to see how their vested interest can be justified. After all, we’re still proposing that they still take a 50% margin on their asset for potentially doing nothing. That’s a massive reward and the public are hardly likely to shed many tears for them.

High land prices are holding back our ability to build the affordable homes we need. It’s time that landowners got a bit less, and local communities got a bit more.

Adam van Lohuizen
 
Adam is Senior Economic Analyst at Shelter

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By Adam van Lohuizen

Right to Buy – 1 step forward, 10 steps back

The Right to Buy is definitely a policy that causes mixed feelings. What its supporters like about RTB is that it helps people who are socially renting into home ownership by providing them with a substantial discount to purchase the property – thus meeting the social aspiration of tenants to own their own home, and providing them with an asset to help secure their future.

But unfortunately it has other negative impacts. A consequence of RTB is that when a home is sold, it’s no longer part of the social housing stock, and is privately owned. If this home isn’t replaced with a new one, then the total stock of social housing shrinks.

The social housing sector is vital role to play in the English housing market. The private market on its own isn’t providing anywhere near enough homes, particularly affordable ones. This has resulted in astronomical house prices and expensive rents that many simply can’t afford. Unaffordable house prices coupled with the undersupply of social housing has forced more and more households into the private rented sector, which is more insecure, more expensive and more likely to inflict poor living conditions on tenants. Many ex-RTB homes appear to now be privately rented – often to people who need housing benefit to pay the rent. More people renting privately costs government and the taxpayer more, as the housing benefit bill has to rise to pay higher, private rents.

For all these reasons, shrinking the social stock is a really bad idea. So it was some relief when the government announced that it would replace all social housing lost through RTB on a ‘one for one’ basis.

So have the proceeds from RTB been used to replace the housing being sold? The short answer – no. Last week we thought only one new home was being built for every five sold under RTB. But it turns out that the truth is worse than this – in fact, it’s twice as bad.

On Tuesday the Department of Communities and Local Government released the latest stats on RTB. This cut the official number of new homes being funded from RTB proceeds by half.  Previously published DCLG figures said that there were 4,795 homes being built from RTB proceeds between April 2012 and September 2014. Yesterday they ‘downwardly revised’ that number to 2,298. Over the same period of time, 22,899 homes were sold.

So now, rather than replacing every social rented home lost, or even one in every five, we’re actually only replacing one in ten. This figure may get even worse if we don’t start building more social housing, because RTB sales are on the up – 3,285 homes were sold under RTB in the December quarter last year, the second highest amount since the September quarter 2007.

Consider all of this alongside the fact that construction of affordable housing is at only one-fifth of the amount that we need, and it’s plain to see we have a big problem. But it’s a problem that is not impossible to fix. The politics of social housing and RTB has changed and is no longer a political barrier to reform like it once was. The next government has a huge opportunity to once again grow the social housing sector, rather than continuing to shrink it. Ironically, growing the social housing stock would mean more homes are subject to the Right to Buy, and give future generations greater opportunity to access homeownership through the scheme.

Steve Akehurst
 
I’m a Public Affairs Officer at Shelter, and work on getting affordable housing up the political agenda. I’m particularly interested in how housing relates to living standards in the UK. Outside of work, I enjoy reading, writing and putting in painfully mediocre 5-a-side performances.

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By Steve Akehurst

As politicians fiddle, home ownership collapses

The new English Housing Survey is out today, the last of this Parliament. And if you want to understand why housing has become a top 5 issue for voters heading in to the election – or why, despite an improved economy, families remain gloomy about the future, take a quick look at it.

It shows that the shortage of homes is having a profound effect:

  • Homeownership has declined again, reaching its lowest level in 29 years . The clock on the great ‘home owning democracy’ has been turned right back.
  • Looking under the bonnet, overwhelmingly this is being driven by a collapse in ownership with a mortgage, specifically among those aged 25-34. Only 33.7% of 25-34 year olds now own with a mortgage, compared to 53% in 2005 – an astonishing drop of 20 percentage points in under a decade.
  • Largely because of this decline, private renting has exploded – 11 million people now rent, more than double what it was a decade ago. Over a third of these people are families with children.

 

That’s a lot of numbers. But the top line is this: pollsters will tell you one of the things that really resonates with mainstream voters is the next generation’s prospects for owning a place they can call their own. It’s intimately wrapped up in their psyche with a wider anxiety about their children’s future. And yet every year, those prospects are getting worse. Every year, the prospect of an entire generation consigned to life in their childhood bedrooms or unstable expensive private renting looms larger.

At Shelter we don’t privilege any one tenure. Everyone deserves a safe and affordable place they can call their own, whatever the tenure. But you have to admit it’s an astonishing turn around for a country that prides itself on homeownership to now have a rate of homeownership below the EU average.

Most importantly, it’s a damning indictment on the policies of successive governments. Remember this has happened in the face of billions of pounds being pumped into endless mortgage schemes and piecemeal measures by all main parties, the latest being Help to Buy.

All of these have sought short-cuts round the real solution: fixing the shortage of affordable homes. That solution is perfectly do-able, and it is increasingly accepted by voters locally – there are surely now no excuses for politicians to just get on and do it.

This of course requires political commitment, but the sheer number of people now hit by the housing crisis (in lots of different ways) means it will be worth it. Other solutions not only haven’t worked, they haven’t eased anxiety and they will not fool voters.

Finally, the figures once again show the huge opportunity still open to any party which wants to own this issue properly in the election campaign.

Despite it rising up the political agenda in recent years, thus far the campaign hasn’t found too much room for housing. We also know from polls that the public aren’t paying much attention to the campaign. If politicians are looking for a new way to cut through with anxious voters from now to May, they can do a lot worse than pay attention to the huge housing shifts happening under the feet of British society.

 
Vicky is a Policy Officer at Shelter

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By Vicky Pearlman

Legal aid: evidence-lite policy making?

The perils of basing significant reforms on projected savings rather than a robust evidence base have been laid bare in the report from the Public Accounts Committee inquiry, Implementing reforms to civil legal aid, published last week.

As we have highlighted previously, the Legal Aid, Sentencing and Punishment of Offenders Act 2011 drastically reduced civil legal aid, with the expressed intent to save £350 million. This left 36% of all cases previously eligible for legally-aidable housing advice ineligible for legal aid and reduced access to representation in court or at a tribunal by 22%.

From the start, Shelter was concerned that the Government had failed to adequately assess the likely impacts – not only on the people who rely on legal aid to get redress for badly-made decisions – but also the wider costs to the advice sector, to the Courts when both parties have to represent themselves and to the public purse when families do end up homeless.

The direction of travel, and a clue to the Government’s priorities, was set out in 2010 when they stated their objectives were: to make significant savings to the legal aid budget; to discourage litigation at public expense; to target legal aid at those who need it most; and to deliver better overall value for money.

Even assuming that these objectives were the right ones, are they being met? Reporting almost two years after the changes were introduced, the Committee finds that “the Ministry is on track to meet its objective of making a significant reduction to spending on civil legal aid, but it is far from clear whether the Ministry has achieved its other objectives of reducing the number of cases coming to court, targeting civil legal aid to those who need it most or delivering better overall value for money.”

The Chair of the Committee, the Rt. Hon. Margaret Hodge MP, made little attempt to hide her dismay at the “deeply disturbing” finding that the changes to legal aid were based, not on evidence about what would best achieve all four objectives, but on a single objective to cut costs as quickly as possible – the ‘level of spend’ being the critical factor driving the reforms, according to evidence from the Permanent Secretary.

We agree with the Committee’s concern that the Ministry of Justice has “failed to understand what its reforms mean for people, or why people go to court and how and why people access legal aid in the first place, and only commissioned research into these issues in 2014” – a year after the reforms were implemented.

Worse, the Chair criticises the MoJ for neither knowing, nor showing much interest in, the knock-on costs (the ‘better overall value for money’ objective) of its reforms across the wider public sector, caused by people being unable to get advice to resolve legal problems

The problem with reforming a system without measuring the impact is that ordinary people faced with unlawful decisions or practice can fall through the net – only to be picked up elsewhere at even greater cost to the public purse or left with no support at all.

So we agree wholeheartedly with the Committee that the Government must, as a matter of urgency, assess the costs of the reforms to the wider public purse; put in place measures to make sure that people actually get the help that is still available; and monitor how the changes are affecting the availability of advice to prevent ‘advice deserts’, where there is nowhere to turn for legal representation.

This is the third in a series of damning official reports[1] into the way the legal aid reforms have been managed. A fourth, from the Justice Committee’s inquiry into the impact of changes to legal aid, due shortly, is unlikely to make more comfortable reading. The Government must do more to monitor and assess the impact of its reforms. Only when we are able to examine the evidence underpinning all four objectives can we begin to assess how far the Government has met its own intentions.

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