CROYDON COMMENTARY: The government’s housing White Paper was published this month. JAD ADAMS, pictured right, the chair of the borough’s largest homelessness charity, Nightwatch, suggests it does nothing to address the underlining problems
Fixing Our Broken Housing Market, just released by the Department of Communities and Local Government, seems to have missed the point. The “It was broke when I found it” approach is disingenuous.
The housing market is actually working perfectly well, as a market.
Housing creates such huge profits that property in Croydon is in worldwide demand, some new build is sold “off plan” to investors in the Far East who have no other interest in the area and may never even have visited Britain. The market produces high profits for big companies in building and development; and there is a trickle-down economic effect to benefit the middle-class property owners, who see their homes worth many multiples of what they paid for them. The shareholders are happy, the house-owners are happy. If you actually believe in market place economics, what’s not to like?
It is the notion that a market could provide housing solutions for all that is at fault.
What is wrong is that the government has put their faith in an economic mechanism, when what we need is a society.
At Nightwatch we work with homeless and other vulnerable people in Croydon and so of course that is our focus. Homelessness does not happen in isolation, and we are concerned at the way the housing market creates homelessness as a result of scarcity and very high prices. These are not incidental to the system, but a very part of it.
The White Paper recommends a number of measures to increase the supply of housing. Massive over-supply of housing will eventually bring costs down, and that is a welcome proposal, though the government needs to be a bit smarter than the White Paper suggests it is in dealing with the big building companies.
We suffer a constructed scarcity in the housing market to keep the price of new houses high.
The White Paper refers to this obliquely in the phrase “slow building of new homes” but those who drafted the policy document seem to have listened only to the builders, who say bureaucratic delays in the planning system hold up progress. This is true to some extent and the proposals in the White Paper to gee up planning will be helpful. But this is only part of the problem.
Building companies are deliberately not building enough homes in order to keep the prices high. They will obtain planning permission for new homes and delay building; or will buy up building land and leave it lying empty. A housing shortage is in their interest and in their shareholders’ interests.
The White Paper proposals, “supporting developers to move more quickly” need considerably more bite with the government empowering local authorities to force the pace of housing developments under the threat of having planning permission removed early if there is no evident progress on a scheme.
Housing has been scarce for a variety of reasons, most of them to do with the positive image that London has as a place to live. Many people want to live here, and their choices affect us all. Early in the financial crisis some of the richest people in Europe bought multi-million-pound properties in fashionable areas in London, overheating the market at the top end and making it very attractive to investors.
This reduced the available property for well-off Londoners, who therefore bought property further away from the centre of the city. That saw demand for that sort of property rise, pushing those house prices up, and it shoved people on medium incomes into lower cost housing and less desirable properties.
In practical terms this meant people who wanted to buy in Chelsea could not afford it so went further afield and bought in Blackheath; those who aspired to buy in Blackheath ended up purchasing in Forest Hill or Sydenham. That shoved the prices up so people looking for cheaper properties then came to Croydon.
Now we have the situation that prices are so high that people in professions such as the law and medicine, who in happier times would have been buying their own places, have ended up renting in places where previously semi-professional people would have taken up the tenancy.
That is all unfortunate for home buyers, but what does it have to do with homelessness?
The crisis came because people lower down the scale, in secure but low-paid jobs, were now renting properties that previously had gone to those on insecure incomes, or on benefits. Those people were left homeless or at risk of homelessness. As the White Paper says, “the loss of a private sector tenancy is now the most common cause of homelessness”.
I see those people appearing at Nightwatch who had been good tenants and had no expectation that they would ever be homeless, but their tenancy was terminated at a month’s notice to make way for people able to pay higher rents. The re-introduction of rent controls, as we had before 1989, would solve this problem, but the White Paper does not address it.
People on low incomes used to have a home in social housing, but social housing has been subject to a forced sell-off over decades and there is pitifully little available. Selling council housing to long-term tenants was not a bad policy and in principle it was not controversial. It was originally a Labour policy that was taken up by the Conservatives and no government has sought to withdraw it in the 40 years it has been in operation in London.
The problem came with the penal conditions of the 1980 Housing Act that prevented councils from using the money raised by the sale of council housing to build homes. Selling council housing did not reduce the number of houses available. But it was preventing new build that created an increasing shortage in the percentage of homes available for people on low incomes.
This is one of the clearest causes of the homelessness crisis we see today. The intention to compound this problem, outlined in this report, is a fundamental error.
The White Paper offers no solution here, just a further extension of the right-to-buy from housing associations with higher discounts. Forced sales at forced discounts are certainly an intervention into the housing market, but not a welcome one. In what way is this ideological imposition supposed to address the problem of housing shortage which is cogently outlined in the introduction of this report?
Councils need to be incentivised try new procedures. Hobbling them with an obligation to sell their social homes at a discount is the opposite of an incentive. This undermines the stated objective of the White Paper, to “support housing associations and local authorities to build more homes”. In fact, the government intends to undermine the building of social housing for rent by forcing sales.
Local authorities are not noted for their creativity but the current administration in Croydon has been at the forefront of creative thinking in trying to expand the housing building programme and find new solutions. The White Paper insists that even when councils have been creative, like Croydon on setting up its Brick by Brick company, they will not be allowed to let only to tenants in social need, but must make them available for buyers. “We want to see tenants that local authorities place in new affordable properties offered equivalent terms to those in council housing, including a right to buy their home,” the White Paper says.
Croydon is attractive to workers from overseas and other parts of the UK. This mobility of labour is a good thing but it is important to note that these people aren’t looking for “a foot on the housing ladder” or the “dream of their own home”, at least not yet. They want to rent a place close to their work and when the work moves, they will move with it.
Such flexibility in the rental market is characteristic of successful economies such as Sweden and Germany. Impoverished countries like Bulgaria and Greece are the sort of places where every family owns a house. It isn’t indicative of a successful economy to put all our efforts into property purchase.
In order to help the bottom section of society, including the people Nightwatch cares for, we need to increase the number of homes to rent. The White Paper is woefully thin on proposals to increase and support the rented sector.
The “build to let” provisions of the White Paper are welcome, but we need to be more creative in using existing stock. The White Paper refers to homes where elderly people have space far in excess of their needs and suggests selling them off while the old person downsizes. What if they don’t want to move? Why not make it easier to convert part of an old person’s big house while they are still living there, so they get to stay in their own home and enjoy a rental income, controlled by the local authority?
The proposal to prevent rapacious letting agents form taking high fees from prospective tenants is welcome and overdue, but it is too little intervention in a failing rental market.
It may be outside the remit of the DCLG, but officials could have a word with their friends in the Treasury to make sure they are all pulling in the same direction. The prevention of buy-to-let landlords claiming income tax relief on the interest on loans (from April 2016) is precisely the sort of thing that reduces the rental housing market.
Other measures by HMRC further restrict the operation of small landlords (with five or fewer properties). It is not that small landlords are going to solve the housing crisis alone, but they do some good and removing them from the picture just adds to the problems.
There are many reasons why an individual might be homeless, but the reason for widespread homelessness as a phenomenon is the shortage of homes. Where homes are in short supply the people best equipped with money or skills to obtain the available ones get them.
People disadvantaged for whatever reason – economically, socially or mentally – become homeless. We need more provision all round: new build for sale, build for rent, and bringing currently unused property into the housing market. The White Paper is ideologically bound by a preoccupation with ownership at all costs, where the future of housing lies in the rented sector.
What we need to do is move away from the simple market approach of treating housing as a product to sell, and start looking at social need and the way we can work creatively to satisfy it.
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