Social Housing: the End?

The graphic is from this week's edition of the housing trade mag, not some alarmist leftist publication. It refers to the end of public subsidy for the capital costs of building social housing. If the Tories really mean what they say, we're in uncharted waters.

Housing finance is notoriously difficult and dull, so let's strip it back to its essentials: to cover the costs of building houses you can either pay a lot upfront to cover the initial costs or borrow that money and pay the loan off by hiring it out on a periodic basis. The smaller amount of money you sink into the scheme upfront the higher the periodic charge. This is not rocket science.

Since the late 1980s, we've not had 100% capital subsidy for social housing - indeed, housing associations have bid for funding partly on the basis of how little capital monies they need to deliver any given project. Naturally, the first result of this system was to send rents - the 'periodic charge' - through the roof in the early 1990s.& high rents do tend to produce very high Housing Benefit bills.

So a decade or so ago the government introduced a system of 'target rents' which apply to both council and housing association rented stock. Basically, this system sets the rent of any given socially rented property, new or existing, in accordance with a formula based on the size and value of the property and relative local manual wage rates. So this reined in the tendency to produce low capital subsidy/high rent schemes.

The Tories have decided to rip this system up: they want rents to be capped at 80% of the local market rate for all incoming tenants, even those going into existing social housing, which has enjoyed past capital subsidy. This is laughably called 'affordable'. Public capital subsidy is being reduced to more or less nothing. The promised 150,000 new 'affordable' social tenancies are supposedly going to be financed primarily from either these higher rental streams or via loans mobilised by big housing associations on existing stock where previous capital subsidy means the debt is now largely paid off.

Wake up at the back there - I know this is boring and detailed and rather more than you perhaps want to know. So let me put this in context: this means that rents for a two bedded socially rented property in Islington would rise from £91pw to £232pw: a three bed social rented house in Cambridge would go up from £93pw to £128pw. I can only assume that the application of the word 'affordable' to such rents is some kind of sick joke.

& what's more this means that the Housing Benefit bill is going to go up, not down. The housing associations' trade body is saying that, in Hackney, you'd have to earn £54,000 to escape HB eligibility and be in a position to keep the bulk of your additional salary and be better off in work.

For all the dull, grey complexity of housing finance it really is that simple: higher rents= deeper benefit traps for wider numbers of people. No amount of huffing and puffing about a Universal Credit is going to change that.

Nor is this simply a problem for the minority of the population who live in social housing. House prices are now such that it is increasingly difficult for people to get their foot on the ladder. A new report from the Home Builders Federation puts this pretty graphically:

"...the average first time buyer (FTB) would have to save every single penny of their earnings for more than two years to have a chance of getting a foot on the housing ladder. In London it would take three years.

Even over five years, young people have to save almost half of their take home pay every month to save a deposit for a house, with some areas even higher."

So rents matter: even if you're in the 70% of people who are currently home owners your children are probably not going to be any time soon if they live in London and the SE.

Addendum: the definitive explanation of the impact of the Housing Benefit changes, found in possibly the most unlikely place on earth for sensible comment, CIF.

The Coming Cuts Chaos: A Small Case Study

Supporting People? It’s the best little government programme you’ve never heard of: according to the CLG’s own study its' £1.6bn of expenditure on preventative support services saves the nation- well, England in this case - a total of £3.4bn. Basically, it saves over £2 for every £1 spent on it. Think of it as the 'stitch in time..' programme.

How does it do this? Very largely by putting in places services which help divert people from more expensive services, or delay their entry into/speed their exit from such services. (We’re talking about how to keep people out of care homes, hospitals, prisons, emergency homelessness facilities and so forth here). Good stuff you might think - surely a priority even for this cost conscious government?

No. They're cutting it by 12% over the next 4 years.

You might feel that's not very much at all if you work in Higher Education which is facing 80% cuts in undergraduate funding, but the cuts themselves are only the most obvious part of the problem. The real problem is that the money is no longer going to be separately identified - it's going to be rolled up into something called Formula Grant paid to local authorities. This, we're told, is cutting down on bureaucracy and giving local councils 'unprecedented freedoms and flexibilities'.

The problem here is that pesky word 'prevention' - it's very hard to give any specific legislative meaning to prevention that impacts on individual circumstances: prevention is not about measuring current need per se, but about stopping that need developing into something worse.If you're successful you've prevented a counter-factual situation developing. There are clever ways of measuring this at a prevalence level, but none that work at the level of the specific individual. So the vulnerable people who benefit from SP funded services have no legislative right to them.

On the other hand, councils do have a legislative duty to provide services for people who meet their increasingly stringent social care criteria, or the criteria which determine the eligibility of homeless people for social housing. So they have no choice but to fund services for these people.

So imagine you're a hard pressed local councillor or Chief Executive. You have to provide services for specific groups in priority need but not specific preventative services. There is nothing now to say you can't provide for those people defined as being in priority need by using monies originally intended for preventative services. & your core funding is going down by 7% a year. You join the dots.

Scaremongering? Not really. The Isle of Wight has led the way on this front and put through a massive SP cut last year. 8 months on, the results seem to be:

• That more tenancies are at risk
• Anti-social behaviour has generally increased
• The lack of support available has deterred some landlords from providing accommodation
• Accommodation placements are breaking down sooner
• There is evidence of increased homelessness, offending, self harm, substance misuse, increased health issues and financial problems
• Issues are becoming more difficult and long term to overcome and therefore more expensive.

SureStart: A Marxist Approach

From, via

NW Business Interests Unite To Save Key Turkish Airlines Advertising Strategy

But he'll still go I think, 'cos he's had his feet held to the fire. I mean look at this picture from Weds game and note the correct use of the apostrophe. That's not the Stretford End we all know and love, is it? That somehow has a ....well, slightly more corporate feel don'tcha think? I think his rather low rent agent got stuffed by the PR machine of a large organisation who had fought the world class Spice Girls/Beckham PR machine to a high scoring draw some years before. That's gotta hurt and is no basis for a long term relationship.

Plus, of course, both the dressing room and the fans now detest him and no amount of goals are ever going to restore those relationships entirely.

But he's more likely to go in the summer than January. In either event, the club is going to make a fortune when he does go and he's passed up the chance to ever be the front man for a insurance company TV ad trying to project a subliminal message of reliability.

Addendum: final comment, via that weekly footie photoshop competition at the Guardian

Localism: Politics and Management Collide

Three currently Tory led West London Councils are considering merging services. This sort of thing has happened before in small local Districts, but never with authorities of such size. Collectively, they serve a population of getting on for 600,000 people. The three are already merging their children's services departments - aka education and social care for kids - and now they seem to want to go further and bring together their environmental health and corporate services. Savings of £50m-£100m are being claimed as possible, though I suspect this is more total Bollix than Total Place.

This stands somewhat in contradiction to any political narrative based on the 'localism and devolution of powers' theme aka the Big Society. Flippy Rick has covered this general subject more than once and, at a general level, I'm more on board with his entertainingly-jaundiced managerial eye for all the things that can wrong with either localising or centralising initiatives than absolutely convinced that Bigger is always Better. Nonetheless, I would concede that it is not inherently impossible that savings can be made through economies of scale in various areas.

What's interesting here of course is that two of the councils - Westminster and Kensington and Chelsea - are solid true blue Tory heartlands but the third, Hammersmith and Fulham, swings back and forth between Labour and the Conservatives every few years. Conventionally, it has generally been considered that electing a Council of a different stripe might, just might, mean that something changed. But if your Council is locked into long term contracts to jointly employ staff with other bodies who deliver an integrated service - whoops, sorry, to offer a common package of consumer choices (sic) - exactly how possible is this going to be? Doesn't it threaten to reduce the role of Councillors to funny people who shout at each other in the Council Chamber for no readily identifiable reason while the slick professionals get on with their terribly efficient way of doing stuff?

Now, let's be clear, I'm not coming over all dewy eyed and 'Heimat' in contemplating any of the existing London Boroughs. Most of them have existed in their current form for less than 2 generations and few command any real deep seated affection from their populations. I've never considered myself a 'Lambethian' for instance and I'd rather snigger at anyone who did. It would be like feeling patriotic about one's Water Company.

But the traditional deal is that, every generation or two since the late 19th Century, central government sets up a commission to look at all this and take soundings and proposes new boundaries - this may often take account of appropriateness of scale but also is driven by politics and community identity. What these West London Councils are seemingly proposing is very different from that - they're creating a permanent Tory controlled Local State with default Tory policies hard wired into their key services. It's management trumping politics.

And it's wrong.

University Fees: Driving Down House Prices in the Long Term

Righty-ho: as widely prophesied, it has come to pass: the state isn’t simply cutting stuff, it’s withdrawing from whole areas. Specifically it is withdrawing from funding most undergraduate tertiary education.

Frankly, this is a surprise to me - in its' sequencing at least. I thought they’d first go for Social Care for the elderly. But the same three card trick is likely to be played in that field as well: first issue ominous but anonymised threats of financial Armageddon; then set up a commission or special study to look into creating opportunities for creating individual debt obligations to cover the gap; and then sit back and wait for the providers to conclude that their only hope is to persuade the ‘consumers’ that the only serious game in town is to take on additional financial risk personally. Bingo! You’ve re-defined the boundaries between the obligations of the state and the basic social finance requirements of individuals. Something similar happened in pensions and housing a generation ago.

& therein lies the problem. Well, therein lies the problem if, like me, you’re 52 year old father of two kids who’ll go to Uni in the next seven years and also the son of a 88 yr old in a registered care home. Oh, and did I mention that the mortgage doesn’t get paid off till I’m 63? Don't talk to me about the 'squeezed middle' matey, I got there some time ago...

I can pay my mortgage. I can make a contribution to Mum’s care home fees. I can even give the kids a bit towards their Uni costs (crossed fingers). But, fuck me, I’m going to struggle to do all three things. & I got an essentially free tertiary education, and Mum does qualify for quite a bit of public subsidy in that care home.

So how is it going to be for the next generation up - the people who’ll enter working life with huge debts from tertiary education, increasingly ageing parents (that’ll be me, I suppose) and the need to somehow acquire a mortgage and a home in their late twenties or early thirties? Not so wonderful I’d guess. In fact I really doubt that people in my position in 20 years time will be able to bear such a triple burden of debt. So they’ll box and cox, like we all do. They’ll not be willing to risk quite so much in any particular debt obligation.

So: who’s volunteering to tell the Daily Mail that this move to cut Higher Education funding is going to drive house prices down?

P.S. 'Course, if I were one of those bug-eyed Marxist wallahs,I might make some point about the way unproductive (aka finance) capital constantly seeks to re-order the world to create more opportunities for it to reproduce itself. But that would just be extremism of a most old fashioned stripe and hardly welcome in today's Big Society. I'll leave that to the entirely non Marxist Richard Murphy.