Millions invested in Britain...apparently this is a problem

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Seriously. Foreign investors are spending millions buying stuff in Britain - millions that flow into the economy. And some chap from The Smith Institute thinks it is a problem:

New research by the Future of London and The Smith Institute warns that unprecedented growth in overseas investment in London’s property market creates the risk of another housing bubble and is pricing out local people.

It seems that these very rich foreigners are buying expensive property in central London (this is apparently news to our authors) - presumably the same cash their stashing away in tax havens. And this (one has to giggle) is risking:

 ...pushing prices up and reducing the availability of homes to buy for local people.

The words 'utter nonsense' spring to mind. Twenty five years ago when I left London prices had already stretched beyond affordability for many folk - they either headed for jobs elsewhere as I did, lived in a grotty flat with six locks on the door or commuted 150 miles a day from North Kent, Bedford, Reading or Peterborough.

And whether some oil sheikh, third word kleptocrat or American film star spends multi-millions on a house in Begravia, Chelsea or Hampstead is really of no consequence at all for London's housing market. It seems to me that these authors are looking for anything to blame rather than the real problem - lack of supply. Stopping (no idea how) rich foreigners buying up expensive houses because London's a great place for the rich and the property holds its value is a daft idea.

If there are too few houses (and this is true in London is a way it isn't true in Leeds or Bradford) then we should be asking why government - local and national - persists in making it harder and harder for people to build new houses especially in places where people actually want to live. It's certainly a much better idea than moaning about millions in foreign investment!

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The "housing crisis" that isn't...

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I'm pretty sure it will be all over the airwaves and will generate acres of printed commentary in such places as the Guardian - the National Housing Federation (NHF), lobbyists for the social housing sector, are scaring us about the "worst housing crisis in a generation" (whatever that may mean). Here's the stuff about Bradford:

Figures released yesterday by the National Housing Federation showed 20,800 people in the district are languishing on the waiting list. 

Frightening figures there - how will we ever provide for this enormous demand?

It's not a simple as this because Bradford doesn't have a housing waiting list, we have what's called a "choice-based lettings system". And that system has over 20,000 people registered with it. But not all of them are actually looking for houses right now:

...the figures represent the number of people registered with the choice-based letting system operated by Incommunities* – not the number of people actively bidding. This figure was around 6,100 in June last year, according to Incommunities’ figures.

So there are actually only 6000 people looking for a council house in Bradford right now - still quite a lot but nowhere near the scale of "housing crisis". The churn rate in social housing means that Bradford has at least 2000 social properties coming onto the rental market each year and, as the article points out, we anticipate 400 or so new social lets each year for the next few years. Given that not all the people in that 6000 are in what we'd call "housing need" (they are in a house adequate to their needs but would like a different, bigger, better located one) the idea that Bradford cannot provide right now for those looking for social lets is probably nonsense.

This doesn't stop the NHF lobbying away for more government cash to be hosed in the direction of its members so they can build houses. Since the mid-1980s this has been the development model in the social rented sector - housing associations get loads of grant with which they lever extra borrowing and then jump up and down on planners to require developers to provide "affordable housing". And, quite rightly, the current government has set about shifting the model from funding by government grant to funding through rents.

Wise observers will note that this doesn't end government support - higher rents mean higher housing benefits payments - but it means that the social housing sector has to start to be more business-like in its development strategies. Sadly, the NHF is using these changes to make out that there is a massive housing crisis that can only be solved by huge increases in cash grants for housing associations and local councils.

Not only is there not a housing crisis, there isn't the prospect of a housing crisis - at least in Bradford.

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*Incommunities is the housing trust to which the Council transferred its housing stock about ten years ago

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...on the development tax

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For many years many of my councillor colleagues have worried and fussed about things called "Section 106 Agreements". Essentially these constitute a tax on development;

Section 106 (S106) of the Town and Country Planning Act 1990 allows a local planning authority (LPA) to enter into a legally-binding agreement or planning obligation with a landowner in association with the granting of planning permission. The obligation is termed a Section 106 Agreement.

These agreements are a way of delivering or addressing matters that are necessary to make a development acceptable in planning terms. They are increasingly used to support the provision of services and infrastructure, such as highways, recreational facilities, education, health and affordable housing.

Now under more recent legislation - courtesy of the last Labour government but implemented by the current Coalition government - most of this tax regime is to be replaced with a different tax. We are to get a "Community Infrastructure Levy", the level of which will be determined by the local authority. And, of course, all those useless, Labour-led councils are getting inordinately excited at the prospect of zillions in lovely developer cash winging its way into the Council coffers as a result of this new arrangement.

However, there's a catch. Developers aren't keen and, as is the wont of the market, plan to gravitate to places with lower levies. And - even more importantly - the new levy doesn't include "affordable housing". You still needs a Section 106 Agreement to get that stuff. So the National Housing Federation (the body representing all the housing associations) is frothing:

But the National Housing Federation has warned that without further safeguards many councils will set CIL at a level that jeopardises affordable housing development as CIL can be spent on anything and developers won’t be prepared to spend money on Section 106 agreements as well.

Cameron Watt, head of neighbourhoods at the NHF, said if councils set an unrealistically high level of CIL developers will push to provide a much lower number of affordable homes.

However, the NHF should be worrying that, in their eagerness for some extra cash, Councils will actually stop development altogether. After all, the developer isn't going to build at a loss is he?

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Housing crisis! What housing crisis?

A great deal of column inches are being dedicated to England’s housing crisis - mostly coming from the ranks of housing organisations themselves:

Is a dysfunctional housing market creating Generation Rent, with most young people permanently frozen out of home-ownership by huge deposits, shortage of supply and high property prices?

The National Housing Federation thinks so. Research it commissioned from Oxford Economics foresees an ‘unprecedented crisis’ with the proportion of households living in an owner-occupied home falling to just under 64pc over the next decade, compared with a peak of 72.5pc in 2001.

This prediction is based on assumptions of soaring private rents, long waiting lists for social housing, and a new house price boom, all driven by an under-supply of properties.

The core point of this analysis lies in that final sentence – the ‘under-supply’ of homes. Now there are two possible ways to answer the question as to whether we have an ‘under-supply’ – data on homelessness (it would seem logical that when there are too few houses there will be more people without houses) and figures for house prices (excess demand will drive prices upwards).

The problem is that neither of these measures actually tells us that we have an under-supply of homes right at the moment. The latest official homelessness statistics show a sharp increase:

During the 2010/11 financial year, there were 44,160 acceptances. This is an increase from 40,020 (10 per cent) in 2009/10 - the first financial year increase since 2003/04

On the face of it this is a problem – but is it due to a lack of housing? Or are people becoming homeless for other reasons? And bear in mind that all of those ‘homeless’ people will be housed – sometimes in temporary accommodation (although these numbers are falling).

So we need to look elsewhere. If there really is a crisis – that we really don’t have enough houses – then we would expect the numbers of people sleeping rough to rise. Indeed, given that the most vulnerable and least well off are most likely to be homeless, we might expect these figures to have risen during the “crisis”.

The latest figures (and we should treat them with caution a quite a few genuinely homeless people don’t get counted) show that 1,768 people were sleeping rough at the time of the count. While we should be concerned about these numbers they again do not suggest a “crisis”.

The reality is that, despite an unprecedented surge in population and a rising birth rate, we are managing to provide housing for all but a very few. This does not speak to me of ‘crisis’ but of a problem being managed.

So why do the National Housing Federation, the Chartered Institute of Housing, the Royal Town Planning Institute, charities like Shelter all tell us that there’s a housing crisis – something demanding of urgent, if not immediate, action?

The central part of these organisations’ argument is that to address this housing ‘crisis’ it requires government to provide more subsidy – ideally in the form of direct capital grants to affordable housing providers. Here’s the NHF again:

At the heart of the problem remains a chronic under-supply of new homes. In 2010/11 just 105,000 homes were built in England – the lowest level since the 1920s.

More government investment in affordable housing would stimulate a wider, faster economic recovery and help fix our broken housing markets, according to the Federation.

There are some huge challenges facing the housing sector – not helped by a sclerotic planning system, the stickiness of house prices and a social housing sector that has, since the 1980s, lived on a steady diet of government subsidy via direct grant funding. But we do not have a crisis, there isn’t a huge increase in people without houses – if there were these problems then house builders would be tripping over each other to build new homes to satisfy that pent up demand. That they aren’t suggests to me that we can be more considered in our approach to housing.

This talk of crisis seems mostly to be special pleading from a sector so used to public subsidy it doesn’t know how to operate in the real housing market.

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