News

  • Non - starter

    In a year when May came after June, you might have bet that the Starter Homes initiative would also have landed on the new prime minister's bonfire of George Osborne's vanities. Yet, as the government gets set to announce a paradigm lurch towards ownership in planning policy, our new research into the Starter Homes market raises important questions about whether developers and councils can meet Downing Street's aspirations.

    In the next few weeks, the Department for Communities and Local Government will confirm that the National Planning Policy Framework is to be changed so that Starter Homes will form part of councils' affordable housing requirement. Councils will need to achieve a 'quota' of Starter Homes on appropriate sites, including probably rural exceptions. Planners will need to secure Starter Homes as part of their on-site negotiations.

    Add in that Starter Homes-eligible households of first-time buyers under 40 can access a 20% discount and settled conclusions about housing demand go out of the window - as our recent research commissioned by a Northern local authority shows.

    Using primary research, re-analysis of 2013's Strategic Housing Market Assessment (SHMA) data, Zoopla's database and Census analysis, we found that the Starter Homes discount could potentially bring 82% more households into buying. This constituted a staggering 4% of the total households in the authority. Three-quarters of this new market could afford two-bed properties, with the remainder being able to access three-bed homes via the discount. However, when the level of savings were factored in, the number of potential households fell back by half.

    The Starter Homes-eligible households appear to have different aspirations than the SHMA analysis would indicate. Our research found that 60% of an (admittedly much smaller) sample of eligible households sought two-bed housing compared with the majority that sought three-bed properties reported by the SHMA.

    As with the previous SHMA analysis, the eligible households expected (but did not aspire) to move to semi-detached properties or terraces. However, the locations they could afford had changed significantly. This suggests that marketing campaigns will need to recalibrate households' expectations of where they might move.

    A worrying finding for registered providers bidding for Homes and Communities Agency grant is that hardly any eligible household had considered shared ownership, and significantly, of those that did, only a small fraction considered it a possible option. This is corroborated by other primary research we have undertaken where target households preferred full over shared ownership. While raising the profile of shared ownership will undoubtedly help, the resistance to the product among informed target households suggests that almost doubling the numbers of shared owners in England by 2020 requires a rethinking of the offer.

    Our survey of eligible households revealed a limited awareness of the Starter Homes initiative and while the product generally achieved a positive response when explained, there was some scepticism that it was 'too good to be true', that locations would be unfavourable and unhappiness that it was only available for new build.

    For housing strategists, there are wider implications. Our analysis found that two-bed Starter Homes would be cheaper than their private rented equivalents. While this price advantage did not extend greatly into the three-bed private market, in discrete communities, Starter Homes developments could very easily create demand problems for private landlords with potential consequences of under-investment and empty homes.

    Although Starter Homes are private products, the pressure will be on the public sector to deliver. While our research found the aspiration to own is strong among eligible households, flexibility will be the key for planners and developers seeking to make sense of a brittle post-Brexit housing market.

    Derek Long, Director of Housing and Data Consultancy, arc4
    First published in Inside Housing 20 September 2016

    Category: News, Comment, Housing industry, Property, Social housing, Arc4 Tags: Housing, starter homes, affordable, shared ownership, Strategic, SHMA
  • Surfing the Third Wave

    Arc4's Senior Consultant Colette Manion shares key discoveries from Australia's new approach to social housing in Inside Housing.

    Australians are known for their surfing prowess. But just recently the country's social landlords have swapped Bondi for the boardroom as they learn how to surf a new wave of social housing policy. A wave propelled by a stance on welfare reform that is sweeping fast through our social sector too.

    Dr Tony Gilmore, CEO of the Australian Housing Action Network, is clear that countries like UK, New Zealand and Australia have now entered a third wave of government support for tenants. The universal provision of the mid-20th Century and the later, more consumer focussed approaches have ebbed and been replaced by a third wave of support, where social housing is required to be ‘step-up’ not a ‘hand-out’.

    The new wave is nowhere more evident than in New South Wales (NSW). (The Australian States play the major role in housing policy.) The ‘Future Directions’ housing policy is a real paradigm shift and has been earmarked as pivotal to changing the face of social housing across NSW forever. The state’s housing Minister, Brad Hazzard's aims are not just to build more affordable housing, but make the housing continuum work better, enable transitions to the private market and reduce welfare dependency.

    The 23,500 new and replacement homes put English housing policy in an interesting contrast (albeit Future Directions is a ten year strategy.) The intention to transfer up to 35% of social housing stock to community housing providers and create mixed communities sounds more 1980s on British shores. There will also be a 60% increase in the use of support to occupy private rented accommodation. (Maybe news of our ballooning bill for private rent support has not reached Sydney yet.)

    However, beneath the shiny spin-doctored headlines lie a chilling distinction. Social tenants are to be divided into a 'safety net group’ whose members will need support in the long term, and the ‘opportunity group’ that can be helped to live an independent life free of welfare subsidies and living in the private market. As Minister Hazzard announced, it will do the children in social housing "good to see their neighbours in private housing going to a job each day”. A sense of the Victorian (and arguably Frank Field's) 'deserving’ and the ‘undeserving’ poor seems to be the ideological driver.

    Yes, perhaps a modest 10 percent of Australian social tenants have a reasonable income or might reasonably be expected to progress to work. But the harsh reality is, even in growing Australia, that for many, there are no suitable local jobs and the private rental market will prove just too expensive.

    Like the Aussie stereotype, their social landlords sound more entrepreneurial. A trait which the Future Directions strategy emphasises by encouraging new multi-faceted ‘vehicles’ that cater to a range of needs from finance to community support, perhaps a trick we have missed? Adopting the more commercial and somewhat market savvier approach Australian to housing could be the new path for many UK housing associations.

    The Australian engagement of Government is different too. Yes, there is a strong market component to what New South Wales is doing. But, there is also an overt commitment to joined up government (and with targets) !

    For example, there is a strong focus on education and employment. Improving the educational performance of social tenants is an overt goal. So interesting measures like trialling changed allocation processes so young people and families with children can be placed in dwellings that are close to better educational and employment opportunities are part of this housing strategy.

    So, as the third wave breaks over UK’s social landlords, maybe we should drawn on the lessons from the champion social housing surfers Down Under!

    During February 2016, Colette was Housing Action Network’s thinker-in-residence, based in New South Wales.

    Category: News, Comment, Housing industry, Social housing Tags: Social housing, arc4, inside housing, affordable housing, Welfare Reform
  • Steve Wood comments on the Autumn Statement and the impact for older people

    So, the dust settles on an Autumn statement which left some low income families breathing a sigh of relief as proposed cuts in tax credits were scrapped and buy to let landlords contemplating the impact of a 3% surcharge on stamp duty.

    Win or lose, there is little doubt that he changes announced by the Chancellor this week will be closely scrutinised over the coming days and weeks, and here are some early observations on how they impact on older people.

    Housing

    £400 Million of funding for housing associations and the private sector to build more than 8000 new ‘specialist’ homes for older people and people with disabilities.

    The Care and Support Specialised Housing Fund (CASSH) is already on track to deliver 4000 new homes and we are eagerly awaiting the announcement of the allocation of a further £155 Million under CASSH2. The additional funding announced on Wednesday is a welcome continuation of the governments recognition of the importance of good quality housing for older and disabled people but many agree that it is not nearly enough when you consider our ageing demographic.

    An additional £500 Million available by 2019/20 for Disabled Facilities Grants. The government equates this to over 85,000 adaptations and estimates this will prevent 8,500 people from going into residential care.

    Social Care

    The drive to integrate health and social care by 2020 forges continues with the commitment to increase the funding available through the Better Care Fund from April 2017, increasing to an extra £1.5 Billion by the end of 2019/20.

    Local Authorities with a responsibility for social care have the option to levy a ‘precept’ on Council Tax, with all additional income to be directed into spending on social care. The Chancellor claims that this has the potential to raise up to £2 Billion in additional funding by 2019/20.

    Reform of the New Homes Bonus scheme could generate £800 Million which would be directed into social care.

    Any additional funding is to be welcomed but the fact remains that the care sector remains in crisis, and much of the additional funding might not see its way into providing new services. Within the full Autumn Statement, it is suggested that the additional money available would in part help local authorities increase the rates at which they currently commission care services to counter the impact on providers of the imposition of the National Living Wage.

    Welfare

    Housing benefit for social housing tenants will be capped in line with the private sector, limiting housing benefit for social renters taking up new tenancies from April 2016 to Local Housing Allowance rates

    It remains to be seen if this will apply to ‘specified’ accommodation such as extra care housing, where rent levels are often much higher that the LHA. If exemptions are removed or limited to exclude extra care housing, then this will have serious implications.

    Pensions

    The state pension for existing pensioners will rise by 2.9%, or £3.35, to £119.30 a week from April, to match the rise in average earnings, the largest increase in 15 years. This is the result of triple-lock pledge on pensions which means the state pension rises each April to match the highest of inflation, earnings, or 2.5%.

    Next year is a significant one for new retirees as it is the start, from April, of the new flat-rate state pension, set at £155.65 a week. However, not everyone will get the full amount, such as some of those with a private or workplace pension provision. Some who have built up an additional state pension may get more.

    Generally, this is good news for pensioners and again they have been protected from a lot of cuts by this government, although many people retiring under the new arrangements from April remain unclear about, and indeed let down by, the fact that they will be penalised if they have contracted out at any time during their working life.

    Pension credit payments will be stopped for people who leave the country for more than one month. Currently, pension credit is paid for up to 13 weeks while claimants are temporarily abroad. If they go overseas for medical treatment under the NHS, then it is paid for longer. The same new restriction for those going overseas will also apply to housing benefit

    All in all then a real mixture but an overall sense that whilst recognising the need to invest in better housing and to provide additional support to a significantly underfunded care sector, the measures put forward to bring this about fall well short of the mark.

    Category: News, Housing industry, Arc4 Tags: older people, older persons housing, Housing, autumn statement
  • Right to Buy makes no sense in growing Austrian market

    Austrian social housing chiefs facing strong price rises are astounded
    by the UK government's intention to extend the Right to Buy, arc4
    Director, Derek Long, has learnt.

    The Right to Buy policy attracted incredulity during an overview of
    current UK housing policy that Derek gave to 30 Austrian housing
    association Chief Executives and journalists in October. The
    undermining of the social rental asset base at a moment when
    affordability is crucial for economic recovery was considered by the
    Austrian delegation as a poor outcome, both for the UK as well as its
    associations.

    The fact-finding visit into UK social housing was organised by the
    Österreichischer Verband gemeinnütziger Bauvereinigungen - the
    Austrian version of the National Housing Federation for co-operatives
    and limited profit housing associations.

    Whilst Austrian housing prices have not increased as fast as the UK's
    in past year, the Austrian price to income affordability gap has grown
    faster even than in the UK. In the five years since 2010, house prices
    in Austria rose 18% more than incomes. This level of unaffordability
    is the highest of the developed countries in the OECD. The UK has the
    fourth highest increase after Germany and Switzerland at 8%. Austrian
    house prices were also outstripping rental increases at a slightly
    higher rate than in the UK.

    Commented Derek Long,

    "To deliver Right to Buy replacements successfully, HAs will need a
    forensic understanding of local markets."

    Category: News, Housing industry, Property, Arc4 Tags: right to buy, austrian housing market, arc4, Social housing
  • Are you in the market …?

    Delegates never return from the Federation’s Annual Conference saying they have seen something genuinely historic that will unlock new market opportunities for them. Yet, the opening of Grand Central – the new shopping mall above the redeveloped Birmingham New Street Station – has changed all that!

    In other news, from the Fed’s 2015 Annual Conference, Minister Greg Clark’s foisting of a voluntary Right to Buy regime onto the housing association movement is genuinely a historic shift, on a par with the 1988 Housing Act. Every significant association is now operating in the home ownership market. Regardless of size or inclination, they will be selling a chunk of their best rental properties and replacing them with sale or shared ownership products. The result of the NHF’s eight day “vote” on the voluntary code is a foregone conclusion. The large providers have already given their support and the counting will be by the amount of stock held.

    So, what are the key implications for associations?

    - All associations are in the home ownership business now. They will need to really understand their markets and their customers to a far greater extent than ever before. That will be a challenge – especially for those who are not already developing.

    - Decisions to reinvest in stock will have to be made in the context of the market – will this asset transfer as soon as the kitchen fitter has walked down the path?

    - The question of whether to renew sheltered housing assets has become even more difficult to determine.

    - Understanding the reaction of existing tenants will be pre-requisite intelligence for any major board decision. “Pay to stay” tenants will be at the front of the queue – and in some parts ethnic groups may also be very active in buying their homes.

    - Larger providers will use the receipts to spread risk and relocate their businesses into better markets thereby undermining the market where the RTB occurred.

    - Downstream, there will be much more competition for the remaining social rented stock as RTBs slide into private landlords’ hands.

    - This is going to produce interesting responses from the retail mortgage companies. Will red-lining of estates reoccur once defaulting follows the inevitable interest rate rises? Might this be a commercial opportunity to diversify into the private rental market?

    - The Minister’s two year replacement turnaround is very tight. Achieving the misleading 1 for 1 replacement will become a political and therefore regulatory issue in a couple of years.

    - And so on. This is a genuine paradigm shift. Government, regulator and the sector have only the broadest of ideas where the Birmingham announcement will end up.

    Lemonade?

    Given the housing crisis, RTB2 is clearly a daft policy. History will regard spending hundreds of millions of Pounds to end up with many fewer homes as immense folly. To disrupt the last remaining delivery mechanism for volume building in a recession will haunt future government’s economic policy. And undermining probably the strongest part of the third sector in Britain represents a cultural vandalism that weakens our civil society profoundly.

    So can associations make lemonade from the huge lemons they’ve been handed?

    Yes, but it will all hinge on using what government will pay in compensation quickly and effectively. Quickly, means replacing the lost property within two years, or the significant hole in rental income will be made deeper by the Treasury clawing back the compensation. Effectively, means using this opportunity to diversify into new markets – both locations and products – before the social rental base becomes too small to support significant growth. This can only happen where associations have a real and very precise understanding of their local housing markets. This forensic understanding can only be gained from real-time intelligence about what it costs to rent or buy down to street level and who their public and private competitors are.

    Like it or not, we’re all in the market now.

    Derek Long is a director at arc4, the housing and markets consultancy

    Category: News, Housing industry, Property, Social housing, Arc4 Tags: Social housing, Housing, natfed, right to buy
  • Arc4 assesses opportunities and challenges for registered providers

    With the Chancellor's Summer Budget adding momentum to the "Northern Powerhouse", Arc4’s Derek Long was invited to analyse the future opportunities and challenges for the new grouping of the Chairs of Greater Manchester Registered Providers. The group will now complement the longer-standing Chief Executive led providers group in the city region and will be a focus for non-executives' development.

    Category: News, Social housing, Arc4 Tags: Housing, Social housing, Registered providers

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