Housing White Paper – Money talks & Tories makes it sing like Jerry Maguire

We have a ‘broken housing market and we need 250,000 new properties each year says the Tory government in the housing white paper.

Currently private enterprise is building 110,000 new properties per year since 2000 meaning the country needs the other 140,000 to come from housing associations and councils.  (Yes another numbers are pesky fact blog!)

Even if private enterprise increases output to 150,000 per year as they have in the past, this still leaves 100,000 new properties per year to be built by councils and housing associations to make the 250,000 per year (minimum) target.

Councils are prohibited from borrowing in order to develop and as this has not changed then their output will remain at 10,000 per year or less.  That leaves housing associations to build between 90,000 and 130,000 each year.

Last year housing associations built a record 36,000 new developments … ah!

Yes, reader, that is a long long way short isn’t it and housing associations would need to triple their new housing numbers for the government to get anywhere near their 250,000 per year target in order to mend the broken market whose conditions they created in the first place.

However, as I reported on here ALL housing associations and councils are disincentivised from building for social rent purposes by the Tories housing white paper that ONLY incentivises housing associations and councils to both develop private rented sector variants and to build new properties at full market rent.

So, even if the housing associations and councils do massively ramp up their new housebuilding (which involves seeking private finance to do so) then the housing crisis of under supply is abated yet a much greater housing crisis of affordability and increase in the housing benefit bill occurs!

The usual left hand having no idea what the right is doing when it comes to national housing policy – and I hasten to add whether the Tories are in power or Labour.

smt-jerry-maguire

 

The massive incentive for housing associations and councils (through the private Local Housing Company or LHC vehicle) is a huge one.  The private finance they seek to build will also insist unequivocally that they will only lend the money IF they develop the private rented product.  It is a no-brainer.

The only qualification to this is that this get social landlords to set up private companies to build new properties to rent at full market private rent levels is it will only happen in areas where there is sufficient headroom between social rent levels and private rent levels such as London and other regional high private rent areas such as Brighton, Bath, Bristol, Leeds, York and parts of every region and sub-region eg Trafford in Greater Manchester.

There is no point or incentive in places such as Stoke or Hull where social housing rent levels can be higher than existing private rent levels, yet such areas are very much in the smallest minority across the UK.

It also means the end of the affordable (sic) rent model as why would any council or housing association build new housing for 80% of gross market rent – the AR model (which is 65% in London) – when they can get 100% of the gross market rent level instead as the white paper incentivises and permits?

No doubt some highly superficial argument will now be spun by housing associations to say building for private rent means we can cross-subsidise more new properties at a social rent level.  Yet the question that reveals that to be superficial is will their private financiers let them do this as that is where they have to go for the money to build!  The answer to that is of course no.

Councils, and run by all political parties, will jump at the chance to develop new or enhance their existing private Local Housing Companies – a private sector subsidiary of a public sector council – to develop ONLY for full private market rent levels as these properties by virtue of being for private rent are excluded from the perverse ridicule of councils being forced to sell their properties to subsidise the Right To Buy discounts given to housing association tenants – yes that particular delusional f*ckwit policy is still a live one with the current government.

What this means for tenants, new and prospective, is that both councils and housing associations will not and cannot ever build new properties at a social rent level ever again.

Where will our children and grandchildren live?  Or more specifically where will our children and grandchildren be able to afford to live given the white paper’s direction of travel for full market rent and disincentive for social rent?

I repeat that for all the well intentioned housing professionals who dearly and passionately want to see the social housing model with its social rent levels survive and prosper yet which in all reality can’t do so because of current government policy and zero incentive and large disincentives from building for social rent.

I genuinely admire the resolve of some housing association CEO’s and board members who fervently want more social housing, yet there is no viable argument in terms of financing that with the white paper released yesterday.

The white paper is undoubtedly political as it put a nail in the coffin of the rumour that local authorities would be able to borrow in order to finance the building of homes at social rent.  While even self-ascribed laissez faire economists say this is what the UK needs (and see the SHOUT report for that) we find that this became Corbyn / McDonnell Labour Party policy 6 months ago and so the Tories have totally nipped that idea in the bud by NOT allowing local authorities to borrow for social rent.

I would even hazard a very strong guess that housing associations particularly the G15 lobbied the Tories NOT to allow local authorities to borrow and take any such borrowings out of the PSBR as this hugely downplays the importance of housing associations in ‘solving’ the broken housing market … which they continue to say they can solve despite this meaning at least a tripling of HA new housebuilding numbers and the capacity problems in that.

In creating a huge financial incentive for both HA and council landlords to build privately rented homes at full private market rent levels, which in some cases means way in excess of 200% better rent levels, then that is what councils and housing associations will do … and with a huge smile on their faces at the hugely increased rental returns this gives.

This is risk free for councils and housing associations.  There is no RTB element in council properties as they become a private landlord and letting at a private rent level.  Housing associations can also let such properties and avoid VRTB by ensuring the tenant does not have 10 years of tenure which they need to qualify for it.  Both allegedly social landlord types will also have the tenant on an assured shorthold tenancies meaning the tenant has no security of tenure and subject to a no fault eviction on a whim, the same as now exists in the private rented sector!

No doubt that councils and housing associations will argue that the private tenant is better off with them than being a tenant of a PRS landlord along lines of we will do repairs and other such arguments, that will with a huge sense of irony see social landlords becoming the private landlords they constantly portray as the Rachmann bogey man!

One final point is the most objectionable one for me.  Ever since the Tories cut the capital grants (aka ‘subsidy’) to social landlords by 60% which they did on entering office in 2010, the allegedly social landlords have countered by getting more money out of the tenant as the government no longer gives this subsidy.

The haste to develop the affordable (sic) rent product is there for all to see as an example of that.  Now the white paper sees a position of why bother with charging tenants 65% or 80% of full market rent the AR model gave, go straight to the 100% of private market rent levels and sting the tenant even more in higher rents.

Even further the white paper does not constrain or limit housing association or council landlords to a set number as in the “Affordable Homes” programme, they are free to build ten times that number if they wish now with the white paper and at much greater rental returns!

I don’t doubt that many social housing professionals will seek to obfuscate and downplay this with the risible and meaningless social purpose arguments that can only hold in the very lowest private rent level areas such as Stoke of Hull and nowhere else, and seek to ignore that money talks and all social landlords love that as much as the private landlord and most ardent capitalist does.

Show me the money said Tom Cruise and the Tories have done precisely that in appealing to the greed is good mentality of Gordon Gecko in the white paper.

The fact this will store up huge and even greater affordability problems in the medium and longer-term for whoever holds government office, that is how national housing policy will always work, in hugely damaging immediate-term ways until the en masse social housebuilding for social rent that ultra right-wing economists in the SHOUT report and Corbyn’s allegedly left-wing Labour Party agree upon and know to be the ONLY solution that is in the best interests of the UK.

Yet by some miracle that Corbyn gets elected in 2020 it will by then be too late to implement!

Money talks and Tory housing policy makes it sing!

 

 

 

 

 

 

 

 

 

 

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