The Housing Question No 1: Owning and renting
This week: Gove v developers; the Building Safety Act; building more social rent v bringing back Right to Buy; reforming renting; a global rental squeeze?
Welcome to the first issue of The Housing Question, my newsletter covering everything to do with, well, housing. It’s still a work in progress but let me know what you think and please consider subscribing and sharing on social media if you like what you read.
Do call me Scarface
Michael Gove must have been delighted to be compared to Al Capone for his treatment of poor, victimised developers over the building safety scandal.
To mix my gangster metaphors, the levelling up secretary made them an offer they couldn’t refuse: pay up for the developments they built plus additional taxes for those they didn’t or lose the ability to get planning permission, building control approval and any other state levers they depend on to do business.
But will some refuse some of that? It was the boss of Galliard Homes that likened Mickey G to the Chicago mobster before he eventually caved in and signed the pledge but he was not the only hold-out. The Sunday Mirror reports that Australian-owned developer Lendlease is still reviewing the implications of the Building Safety Bill and ‘the full detail of the latest government proposals’. The Times reports that the Home Builders Federation has written to Gove complaining about a £3 billion expansion of the building safety levy and that it is time to ‘pursue other actors in the complex ecosystem of products, regulations and development’.
And what of those other actors? Building products manufacturers have yet to be held to account and seem to see it as an offer that they can refuse.
Stat of the week: 11
The height in metres that a residential building has to be before leaseholders will be protected under the Building Safety Act. Below that level – effectively under four storeys – the government will look at whether blocks need fire safety work on a case by case basis.
It’s also the number of minutes that it took Richmond House, a block under 11 metres high in south west London, to burn to the ground in September 2019.
What is now the Building Safety Act is very different to what was first proposed and seems to vindicate Gove’s hard-ball tactics. However, it still falls well short of the promise made by Gove in January ‘to ensure that statutory protection [for leaseholders] extends to all the work [my emphasis] required to make buildings safe’.
The Act received Royal Assent before parliament was prorogued last week. In the final stages of the legislation, the government used its Commons majority to overturn amendments introduced in the Lords that would have protected leaseholders in buildings below 11m and blocks where they also owned the freehold and reduced their capped contribution to zero. A last-ditch attempt in the Lords to set a new maximum of £250 (rather than £10,000 and £15,000) was defeated.
In the final debate in the Lords, building safety minister Lord Greenhalgh argued it would not be ‘proportionate’ to include buildings under 11m or reduce the cap to £250. He argued only ‘a very small number’ buildings were affected but rejected counter-arguments that costs would therefore be minimal. He said that protecting enfranchised leaseholders would merely leave them open to action as freeholders and promised further consultation.
It remains far from clear whether Gove and his ministers have finally found a way to put the crisis behind them with a solution that was essentially retrofitted into the Building Safety Act. Based on the number of leaseholders who say it does not protect them, including many who have already paid, you wouldn’t bet on it.
Stephen Greenhalgh @team_greenhalghThe landmark Building Safety Bill will now gain Royal Assent tomorrow bringing about the biggest changes in building safety legislation in our history. The bill also introduces the waterfall with these #leaseholder protections: https://t.co/ITkUwnRsb8
The Thatcher worshippers strike back
My two most recent columns for Inside Housing reflect what seems to be an internal debate within the Conservative Party that has broken out in public.
In a speech to a Shelter conference last month, Michael Gove challenged ‘Thatcher-worshipping’ Tories to want more social rented housing. This coming at the same time as his new infrastructure levy was being spun as paving the way for a ‘council housing explosion’ and a Telegraph columnist arguing that council housing should be ‘central to the Conservative brand’ suggested a significant moment for the party. It looked like a reversal of everything that the late Baroness had done on housing.
In my first column, I cautioned that the Thatcher worshippers might have something to say about this and sure enough Monday’s Telegraph was briefed about a plan by Boris Johnson to ‘bring back Right to Buy’. My second piece looks back at the long history of extending Thatcher’s iconic policy to housing association tenants and the reasons why this has always proved impractical and calls it the itch the Tories cannot scratch.
The contradiction between a promise to build more social rented housing and a pledge to sell more of it is a striking one – but it is not the first time.
A different Right to Buy?
Another curious aspect of what Shelter’s Polly Neate calls a ‘hare-brained’ scheme, is that our party-goer-in-chief seems to think it will somehow appeal to Generation Rent, a group most people would say consists of would-be buyers trapped in private renting rather than housing association tenants.
However, the irony is that there is a potential Right to Buy policy out there that could appeal to more tenants and deliver more political benefits.
Giving private tenants a Right to Buy was floated by Labour in 2019 (and before that by Jeremy Corbyn personally) but did not actually appear in the manifesto.
However, a private Right to Buy was also advocated in a book published by the centre right think tank Civitas in 2016. Under the plan proposed by Peter Saunders, private renters would get the same discount as council tenants on properties more than 25 years old, with the discounts paid for by withdrawing tax increases on landlords and concessions on capital gains tax (CGT) when they sell.
Politically, the government would get a far bigger bang for its buck. There are roughly twice as many private renters as housing association tenants and, since a far greater proportion of them are likely to be able to afford to buy, the discount would not necessarily need to be as high to be an attractive proposition.
At the same time, increases in house prices mean that cuts in CGT would be significantly more attractive for landlords now than in 2016 – and some might even welcome a way to make a cut-price exit from the sector.
Even if it was watered down to a right to request to buy (like employees’ right to request flexible working) it could be still be a political signal to Generation Rent.
I’m not pretending that this would be good housing policy. It would benefit existing tenants (and landlords) lucky enough to be living in the right sort of homes at the expense of new tenants left with less choice and probably higher rents. And it would come at a considerable long-term cost to the taxpayer.
However, sales to sitting private tenants have historically been a significant driver for home ownership, usually by landlords choosing to divest rather than face rent control.
And the Right to Buy has always been more about political considerations than the practical ones for housing policy or the ethical ones involved in central government expropriating property it does not own. Why should this be any different?
Update: I’d missed an alternative to this idea proposed by Tom Chance and Samir Jeraj in 2018. Under their scheme, private renters would get a Right to Co-op that would enable them to switch from renting from a landlord to a co-op they control. There are already examples out there and they suggest ways of funding it through loans and grant that could build up to a programme supporting thousands of homes being taken into co-operative ownership.
The last regulated tenancies
Meaningful reform of the private rented sector is desperately and urgently needed. Another recent column reflects on a report by the all-party Public Accounts Committee that highlights the piecemeal legislation introduced by the government since 2010 and the agenda that needs addressing in the white paper promised for later this year.
It is three years since the landmark announcement that the government would scrap Section 21, a key element in the deregulatory legal framework introduced in 1988. That, plus the later creation of Buy to Let, are the key reasons why the private rented sector has doubled in size in the last 20 years. Despite the announcement, Section 21 still exists and with it the insecure tenancies that are meant to provide homes for 4.4 million households.
There are better systems elsewhere in the world – and tenancies with more security and fair rents were the norm here before 1988. However, an excellent paper by a PhD student at the recent Housing Studies Association conference reminded me that they still do exist in this country if you look hard enough. The 1988 Housing Act applied to new tenancies but not existing ones. There are still an estimated 75,000 regulated tenancies left in the UK that provide exactly the kind of security that tenants are campaigning for now – but they are steadily disappearing.
Sharda Rozena’s work is based on her own home in Kensington High Street. When her parents got the flat in the 1970s it was owned by the shop downstairs. Now it’s in the last block of regulated tenancies left in the street and is owned by a global real estate company based in Chicago. Regulated tenancies allow for one succession and time is running out before the flat reverts to the landlord – but it’s a reminder that there are different ways to regulate renting.
A sense of hopelessness
Speaking of Generation Rent, a long article in the Financial Times last week asked ‘what’s causing the global rental squeeze?’ From Miami to London and New York to Berlin, renters are facing escalating rents and a dwindling availability of properties to let.
What’s especially striking is that the squeeze seems to be happening in regulated and deregulated housing systems alike. The answers put forward range from demand outstripping supply, especially in the wake of the pandemic, to financialisation and the role of investment funds to the interplay between the rental and for sale markets.
It seems we may have to start getting used to talking about would-be renters in the same way as we used to discuss would-be first-time buyers. As one recent graduate who has just emerged from lockdown in London puts it: ‘It was my expectation [that] I would move out of home straight away: I would graduate and get married. Instead, there’s a sense of hopelessness. I feel that not much will change.’
Votes for homes
The politics of housing comes into focus in the local elections this week. Among the questions to watch:
Will new housebuilding (and new home owners) in towns and cities in the North help the Tories consolidate in the Red Wall?
Will the impact of liberal-minded younger families being forced out of London by high house prices be felt by Conservative-controlled councils in the South East?
Will Tory flagship councils Wandsworth (Conservative-controlled since 1978) and Westminster (true blue since its creation in 1964 and a much longer shot) with long and contentious housing histories finally change hands?
More on this next time.