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Kate Webb
 
I am a senior policy officer at Shelter. Since joining Shelter in 2010 I have worked mainly on housing benefit and welfare reform and now suffer from the misapprehension that tapers and income disregards are acceptable topics of conversation.

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By Kate Webb

Budget 2014: Setting the foundations

Today’s Budget will be broadly welcomed by ordinary families seeking a home of their own, or homeowners struggling to keep their home during a temporary setback. However, it laid the long-expected groundwork for a future squeeze on support for renters.

First the good news:

Additional protections for homeowners announced in the wake of the economic downturn will be extended until March 2016. Homeowners who lose their job or are unable to work will only have to wait 13 weeks before being able to claim Support for Mortgage Interest and payments will cover interest on the first £200,000. This will mean homeowners will not be left without support for months after losing a job and will reduce the chance that a drop in income caused by someone losing their job or falling ill will lead to the loss of a home. Prior to the downturn homeowners had to wait over nine months before they could claim support, leaving many struggling to meet mortgage payments in the meantime.

The Budget also announced a series of packages intended to boost supply. These are a welcome first step towards building the 250,000 new homes we need a year. Particularly eye-catching is the proposal to support Self Build, with plans for a £150 million repayable fund to provide 10,000 serviced plots for custom build.  It’s also fortunate that the Chancellor is only extending Help to Buy 1, which provides equity loans for buyers of new homes and is at least linked to new supply, rather than the more inflationary Help to Buy 2.

The announcement that the long awaited prospectus for a new wave of Garden Cities will be published by Easter is also good news, as is some much needed financial support for small builders – both of which we’ve called for. It’s crucial that the Treasury sees today’s package as a first step and not the last word on housing. Shelter will be bringing forward detailed proposals in the spring, setting out the programme needed to fix our dysfunctional housing supply system and really start building our way out of the current housing crisis.

But just as the measures on house building potentially pave the way for future improvements, the announcement on welfare tees up challenges for a future government.

Plans to set an overall cap on welfare spending were trailed in the Comprehensive Spending Review and Autumn Statement 2013. The chancellor confirmed today that the cap will – initially at least – be set in line with Office of Budget Responsibility’s projections for welfare spending. This means cuts on the ground will not be needed immediately. However, if welfare spending rises faster than forecast, for example due to the continued growth of the more expensive private rented sector, then a future government will have to find savings elsewhere in the welfare budget. Crucially the pressure to bring spending back under the limit of the cap falls entirely on the DWP, rather than, for example, rising housing benefit expenditure triggering action in CLG to increase supply of genuinely affordable housing to reduce the HB bill.

It is also likely that one or more parties could go into the next election with a manifesto pledge to lower the cap, meaning cuts would then be required. The technical nature of the welfare cap is an effective way of locking parliament and the public into support for cuts without setting out the detail of what they will entail. Reducing the welfare cap by £12 billion probably sounds abstractedly palatable to the average person on the street. Spelling out that this would entail the complete withdrawal of housing benefit for young families or cuts to benefits that enable disabled people to work may be a harder sell.

The welfare cap is an attempt to introduce some long-term planning into the social security budget but it goes about it in the wrong way. Rather than committing a future government into fixed spending caps, action should be taken to reduce the structural pressures on the welfare bill. This should start by incentivising politicians to seek the long-term reward of rebalancing spending on housing on bricks rather than benefits.

Martha Mackenzie
 
I’m the Stakeholder Relations Assistant 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. In my spare time I’m studying for a MA in legal and political theory. When not chained to a desk I can usually be found running or cycling around London.

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By Martha Mackenzie

Tenure blues

New polling released today by ComRes tells us, once again, that British people don’t want to rent. Given the choice, the vast majority of people (81 per cent) would rather buy a home than rent one.

Even the young adults who are supposed to ‘enjoy the flexibility’ of private renting seem to find it pretty painful: three quarters of 18 to 24 year olds would rather own their own home.

Unfortunately, few people think that this preference will ever be realised. ComRes found that almost three quarters (71 per cent) of people believe it is harder than ever before to buy a home in Britain today.

When this question was asked to 45 to 54 year olds, they were even more despairing (78 per cent). This demographic are watching painfully as their children are priced out of their local area, unable to use the private rented sector as a stepping stone.

These sentiments chime with our findings, released last week. Our research found that only six per cent of renters say it is their preferred choice of housing, yet one third (32 per cent) believe that they’ll be living in the private rented sector for the rest of their lives.

What does this tell us?

Contrary to what commentators, and even Ministers, sometimes tell us, people do not enjoy the flexibility of private renting.

The private rented market… is an important option for the millions of people who prefer the flexibility that renting offers, or who are simply saving up for a deposit so they can buy a place of their own.”- Housing Minister, Kris Hopkins, October 2013.

Replace ‘flexibility’ with ‘instability’ and ‘simply saving up for a deposit’ with ‘no other option but to rent’ and we get a better picture of today’s private rented market.

Our ‘9 million renters’ campaign has been reporting on the lack of basic protections for renters. Despite living in the worst conditions in the country many renters don’t complain because they’re afraid that if they do, their landlord will evict them. In this context, is it any wonder that people don’t want to rent? Private rented homes need to become a better, more stable place to live.

We also know that half of England’s families who rent do so because they cannot afford to buy. We need to tackle our housing shortage head-on and build the homes that are so desperately needed.

Where next?

We need political leadership to make change happen. As all political parties gear up for the General Election campaign, they must start to show the public that they are serious about addressing these very real frustrations.

Stephen Gilbert, Liberal Democrat MP for St Austell and Newquay used a recent speech in the House of Commons to declare:

There will be a moment at which housing bursts through, and when that happens I suspect that whichever party is best able to capitalise on the public anger will be rewarded at the ballot box.”

I suspect we are now hurtling towards this moment. Today’s polling figures make it clear that public anger is rising, the question now is who will reap the political benefit when it bursts through?

Hannah Gousy
 
Hannah is a policy officer at Shelter

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By Hannah Gousy

Are renters really that ‘satisfied’?

Last week when we launched our 9 million renters’ campaign, the Housing Minister said that he understood our concerns. But he also said that 83% of renters are satisfied with their accommodation and so, therefore, these problems can’t be that widespread.

The minister is not the first to quote this figure. I’m often confronted with the “83% of renters are satisfied” stat when I talk about the need to fix private renting. Clearly lots of people are keen to believe that this represents the true picture of renting in England. At Shelter we know for a fact that it doesn’t.

Where does the “83% satisfaction” stat come from?  

The source of this figure is the annual English Housing Survey. As with any survey, the way the question is asked is crucial. Respondents in all tenures are asked how satisfied they are with their accommodation using a sliding scale of very satisfied to very dissatisfied. There are no follow up questions to investigate what the basis of satisfaction actually is. You could imagine that a renter might think that the use of the term ‘accommodation’ means they are being asked to comment on something quite specific like the physical nature of the property, or the location. Problems with insecurity of tenure or their landlord’s behaviour might therefore remain hidden. 

What’s more, such a simple question fails to capture the complexity of people attitudes towards private renting. We have conducted much more detailed research, including our Sustain report (conducted jointly with Crisis), which shows that private renters often have very low expectations. In focus groups, we often ask people what an improved private rented sector would look like. Despite their many complaints about the quality of renting, unprompted responses to this question rarely go further than seeing their current legal rights enforced – suggesting that people aren’t getting the minimum they deserve now, and struggle to imagine anything much better. But when we surveyed renters asking them if they’d like a longer tenancy, for example, only 4% disagreed.

Finally, ‘satisfaction’ itself is a very low bar, and home a very personal thing. So it takes quite a lot to say to a stranger that you are not satisfied with your home. Given this, should the Government really be proud that 1 in 6 renters aren’t satisfied? Is this something we should be settling for?

What other evidence is there?

The Government’s own figures shows that a third of homes are non-decent- a much higher proportion than social rented or owner occupied homes. They also report that almost a fifth contain a Category 1 hazard, which means they pose a serious danger to renters. Hazards could include electrical and gas faults or a serious damp problem. I think most people would agree that living in a non-decent home is unsatisfactory.

At Shelter we spend a lot of time speaking to and surveying renters to find out more about their experiences – good and bad – of living in the private rented sector. Overwhelmingly, renters tell us that the sector urgently needs to improve. We know that too often people end up paying far too much for housing that doesn’t provide any real security and is too often in a poor condition.

What do our stats say?

A survey by Shelter last year showed that just over 1 in 10 renters’ main reason for renting is because it gives them the freedom and flexibility they want. This compares to nearly 6 in 10 renters who say that the main reason for renting is because they have no other choice – because they can’t afford a home of their own or get access to social housing. When we asked renters what their reasons for moving in the last five years had been, of those that had moved, more than 1 in 6 said they had moved because the property was in a poor condition, 1 in 8 said that they wanted to live in a cheaper property and 1 in 20 said they couldn’t afford rent payments.

These figures hardly paint a rosy picture. Families and housing benefit claimants are particularly unhappy with renting – and significantly it is these groups which have grown disproportionally in the last decade. Nearly half the growth in renting in the last two years has come from families with children, who now make up nearly a third of private renting households. Understandably, less than 1 in 10 renting families say they like the freedom and flexibility that private renting gives them, while over 6 in 10 say they have no other option but to rent.

Twenty five per cent of private renters are now in receipt of housing benefit – up from 19% in 2008 – and they are much more likely to be living in poor conditions and far less likely to complain about them. Our research found that 14% of private renters in receipt of housing benefit feared being evicted if they asked for repairs to be carried out or conditions to be improved.

Private renting, as it stands, really doesn’t work for huge groups of people. So maybe it’s time to stop relying on one narrow stat to reject the growing calls to make renting more safe, decent and secure.

 

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

Turning Help to Buy into Help to Build

With public finances firmly in the political spotlight, we recognise that calls for more investment in affordable homes need to be accompanied by ideas for how to pay for it.

We’ll soon be publishing a report by Capital Economics to look at several options, but in advance of next week’s Budget, here’s a sneak preview of three ideas that we’re exploring.

1. Help small, local builders who are being starved of development finance.

We’ve said consistently that we think that the Help to Buy scheme – which provides state-backed mortgages and equity loans – is the wrong approach to the broken housing market. Pumping more mortgage debt down the broken pipes of our house building system will only lead to higher prices. But the policy mechanisms used in Help to Buy are interesting – not least because they avoid adding to public sector debt. Could these mechanisms be used instead to get investment into home building in a sustainable way?

Small, local builders historically built a large proportion of house building in England – and provided a lot of local jobs too. They still do in most other advanced countries, but in England many smaller builders have been forced out of the market or merged into the larger players. By 2012, large builders who build more than 500 homes per year controlled nearly 70% of the market. This concentration reduces the industry’s resilience to shocks, because so much house building is dependent on so few companies operating on the same business models.

Small builders’ associations often say that access to development finance is one of the major barriers they face to building more homes, as banks have cut back lending to them since the credit crunch. Could some of the contingent liabilities set aside for Help to Buy be switched into a new scheme to incentivise lending to SME builders?

One option would be for the government to take on a risk-sharing guarantee with banks to lend to SMEs, with the support conditional on providing affordable housing development. This would be similar to the ‘Funding for Lending’ scheme, which incentivises banks’ credit allocation to businesses or households. Addressing the balance of credit allocation would enable SME firms to re-access credit markets and therefore invest to build. It would also reduce the cost of funding, to the benefit of small, local builders.

Capital Economics estimates that diverting some of the guarantees of the Help to Buy scheme towards SME builders  could lead to an additional 18,000 homes over the next parliament at current build rates.

2. Use a leasehold models to get homes built on local authority land

The major up-front cost of getting homes built is land. While we think that land market reforms are needed across the entire market, there is a particular opportunity for public sector land owners to get more land supply into the system for home building.

While there have been calls for public land to be “gifted” to developers, this would represent poor value for money for the public sector and cash-strapped local authorities would rightly be reluctant to take the losses on their books. A more pragmatic intervention would be for local authorities to retain ultimate freehold ownership, and sell developers leases on the land (say for 125 years). This reduces the upfront cost for builders and means that the public sector isn’t giving away valuable assets for nothing.

By leasing land to affordable housing providers, local authorities could also share the rental income of the land. This could even mitigate the need for direct investment from government to build affordable housing on these sites.

The downside for local authorities would be the lower cash receipts from not selling the land at full market value. But the benefits from increased construction activity, more affordable homes and the future returns to the authority would be felt for years to come. Capital Economics estimate that greater use of these models could get us building over 34,000 new affordable homes over the course of a parliament.

3. Relax artificial local authority borrowing caps to get them building

The most important group of builders to have fallen out of England’s house building system over the past few decades are local authorities themselves. These sleeping giants of house building should be part of a healthy  mixed economy.But policy interventions to get councils building again have to recognise that the capacity and appetite for development differ across the country.

Today, 171 councils with retained housing stock manage their housing through a Housing Revenue Account (HRA). These accounts have strict caps on them, set by central government, which limit borrowing to invest. Currently these borrowing caps are set at least £7bn below what the market would happily lend – even after George Osborne raised the cap by £300m in the 2013 Autumn Statement., because HRA borrowing adds to the public debt.  This means that the Treasury is incentivised to limit additional borrowing, no matter the financial position of local authorities.

The UK is unique in Europe in classifying a very wide range of bodies and activities as within the definition of ‘public sector’ used to measure public debt. All other EU countries and most other OECD countries split out certain types of investment from general government expenditure when reporting public debt, including borrowing by ‘public corporations’ to build affordable homes. A pragmatic reform would be to further raise the artificial borrowing caps gradually over five years, while monitoring value for money from extra local authority investment. To avoid the extra investment counting against the politically sensitive measure of debt, the government could look at reform to modernise our accounting rules in line with international practices.

Capital Economics estimate that raising local authority borrowing caps within prudential limits would lead to an extra 49,000 affordable homes over the course of the next parliament.

Building the affordable homes we so desperately need will require public investment – but there are smart, sensible ways of funding some of it without running up excessive debt, building on measures already in place. Fingers crossed for next week’s Budget.

 

 

 

Hannah Gousy
 
Hannah is a policy officer at Shelter

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By Hannah Gousy

Can’t Complain

Private renters live in the worst conditions in the country. A third of private rented homes fail to meet the Government’s Decent Homes Standard – compared to only 15% in the social rented sector and 20% of owner occupied homes.

Our new research also shows that 61% of renters have experienced at least one of the following problems in the past 12 months: damp, mould, a leaking roof or windows, electrical hazards, animal infestation or gas leaks.

Despite these widespread problems, complaints about poor conditions remain relatively low. Our concern is that renters don’t complain because they’re afraid that if they do, their landlord will evict them. This practice is known as retaliatory eviction – and it happens far too often. That’s why we’re launching our ‘9 million renters campaign’, calling on the Government to end retaliatory eviction, empower renters and tackle poor conditions in the private rented sector.

Our research shows that:

  • Renters fear retaliatory eviction - 1 in 12 renters say they have avoided asking their landlord to repair a problem or improve conditions in the last year because they were scared of eviction.
  • Renters do suffer retaliatory eviction: Over 213,000 renters across England have been evicted or served with an eviction notice in the last year because they complained to their landlord, letting agent or council about a problem in their home.

Why is this?

Renters in the UK generally have very short fixed term contracts of either 6 or 12 months. During the fixed term landlords can only evict renters if they can prove certain grounds such as rent arrears. After the fixed term ends landlords can issue an eviction notice without having to provide any grounds of wrong doing on the renter’s part. 

In a market where there simply aren’t enough homes to go around, renters are easily replaceable. Landlords know this, and so do renters themselves.  There is currently no specific legislative protections in place to stop renters who report poor conditions being evicted from their homes. This obviously makes their position extremely precarious, and restricts their consumer power to bargain for better conditions. Many renters feel they have no choice but to put up with dreadful conditions, as they dare not risk provoking their landlord.

When compared to other countries, the fragile position of renters in the UK is stark. In many European countries such as France and Germany, renters are protected by longer fixed term tenancies. In places where shorter term tenancies are more commonplace – like Australia and New Zealand – renters who complain about poor conditions are protected from retaliatory eviction and other forms of retaliatory action such as rent increases.  Even 39 of the 50 American states provide legislative protection from this practice.

 

What can be done?

We need robust, legislative measures that will empower renters to report poor conditions. Shelter is calling on Government to put restrictions in place to prevent Section 21 Notices – the legal notices that allows landlords to evict renters without proving any grounds – being served after a renter has complained about poor conditions. We are recommending that:

  • Renters who report poor conditions to their landlords and are subsequently served with a Section 21 Notice should have the right to appeal the eviction notice.
  • When a local authority issue a notice following an inspection identifying that there are dangerous hazards in a home, landlords should temporarily not be able to serve a Section 21 Notice.

These measures help landlords too.

These measures would rightly prevent rogue landlords from evicting renters who complain. Stopping the rogues will also help the majority of well-intentioned landlords maintain the condition of their properties, because empowering renters to report problems at an early stage will help prevent properties deteriorating, which increases the cost of repairs.  Given that someone who is trained in the Housing Health and Safety Rating System would have to verify poor conditions also protects landlords from spurious complaints.

It is vital that the Government act to better protect renters living in poor conditions. Stamping out retaliatory eviction is essential to improving standards across the sector.

To find out more about our 9 million renters campaign and to get involved visit www.shelter.org.uk/9millionrenters

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