Property

It seems that the government has at last realised that there is a housing problem if not a housing crisis.

Moreover, it also seems that Ministers have recognised that local authorities and housing associations might provide part of the answer. It’s about time too we think.

It’s not just providing more homes although understandably that would help.

There has been massive under investment in the housing market for all households.

Add to this homelessness, domestic abuse, child poverty and dementia care in older persons housing and the answers are clearly in need of a few different solutions.

Recent stories in “ Inside Housing” have highlighted novel approaches to trans-regional partnerships, rent setting policies but also a worrying trend of declining spend on repairs and maintenance.

Mortgage lending is said to be on the slide. Taxes and regulations have impacted upon "buy to let" sales so the picture is not a simple line drawing. Let’s remember the lessons from the history of municipal housing and that provided by housing associations (registered providers, the third arm, not-for-profit, call them what you will.)

The recently published “Municipal Dreams” by John Boughton, reminds readers that the provision of housing to rent for the working classes, did not always mean they could afford it.

More likely the homes were a demonstration of architectural fancy, or blind political vote catching, rather than built upon proper statistical analysis of need or demand.

It was the impact of “Cathy Come Home” a BBC television play some 50 years ago, that pricked the nation's conscience. This led to charitable monies from SHELTER to prop up a failing revenue-based subsidy system.

Capital grants eventually were introduced, this reduced the ongoing debt, which together with personal rent subsidies led to a more affordable home housing provision. But that was then, this is now.

Looking forward, we can no longer take it that government will have the same sympathetic support for the traditions of social housing.

We can expect a harder approach, which will limit the number of chosen partners and will certainly involve “for profit” companies.

The anticipated Social Housing Green Paper, will no doubt clarify this Government’s intentions. It may well be uncomfortable reading. Retaining the status quo is unlikely.

The historically favoured providers, if they are to compete, will need to demonstrate outcomes in social and economic measures, not just more homes.

Market demand is only one factor in this new scenario.

The continuing pressure on the Government's spending with priorities of the NHS and especially social care, law enforcement, education and defence are all in the queue. So, do not expect special treatment.

At Arc4, we see all these aspects throughout the many and varied clients. They call upon us to create or validate what they are doing or plan to do. It is fascinating. Call us and share confidentially your views.

Who said” together we can”.

arc4 Director, Derek Long, dissects the implications for supported housing commissioners of the government's latest consultation on funding

http://campbelltickell.com/wp-content/uploads/2018/02/ct_brief_33.pdf

To make a real impact on rural housing need for older people, Lord Best’s HAPPI 4 inquiry needs to pose some hard questions about our planning system.

As the All Party Parliamentary Group inquiry into rural housing and older people wraps up its final evidence session, the group will now turn to its final recommendations. Allowing the planning system to focus on older person’s housing need across income ranges could transform the future for struggling villages.

As the Joseph Rowntree Foundation reported in 2012 (Older people’s housing: choice, quality of life and under-occupation. Joseph Rowntree Foundation 2012), significant proportions of older people are likely to be living in unsuitable housing. The lack of suitable housing is a major barrier preventing older people from moving to more suitable accommodation. Yet the effect of rural planning policy, is to discriminate between different groups of older people. This means it erodes the very long term sustainability rural housing policy seeks to deliver.

Currently, the practical effect of rural exception sites and general development policies in many national parks is to constrain building to affordable housing. It is neither sensible nor just to deny existing older home owners the chance to access more suitable accommodation locally. Failing to create ‘downsizing’ or ‘rightsizing’ options will force community anchors out of villages, just as surely as not building affordable housing drives first time buyers from the communities of their birth.

Our current stay put or ship out choice represents a bad bargain either way for society, as well as the rural residents it traps.

Staying put in unsuitable housing could present significant health challenges (e.g. falling down stairs) or prevent the earlier discharges necessary to unjam hospital care. Conversely, forcing residents to leave a community that they love, thereby severing their social networks could create greater pressure on the state to plug the resultant gaps in support networks. And that’s not accounting for the additional isolation and loneliness such uprooting may cause.

In terms of social cohesion, all older people, but especially long-term residents, make a massive contribution to community life. They are the mainstay of voluntary services, they provide childcare that allows others to work and they sustain local character.

Above all, older people usually under-occupy family housing, thereby making it more difficult for the community to attract and retain younger households that add the needed balance and vibrancy.

So, HAPPI 4 needs to highlight how planning policy is failing our older neighbours and suggest ways the planning system can promote rural sustainability by widening housing choice for all older people.

arc4 Director, Derek Long, highlights what the French Presidential Election can tell us about the result of our own June 8th contest

Le Pen’s second place shows the limitations for the harder right
- Le Pen’s second place does not presage a UKIP surge
- This has all happened before when the left was divided and Le Pen Père got through in 2002. He lost by a mere 83% to 17% to the revamped Gaulliste, Chirac.
- The worrying news for Labour’s heartlands is that some of Le Pen’s support comes from Trumpian post-industrial voters in the former metal bashing regions.

Mélenchon’s stronger show suggests a ceiling for a harder left approach
- Mélenchon did get 19% of the poll – but …
- He still came comfortably behind an entirely discredited conservative, a far-right candidate and a Social Democrat/Liberal author of anti-trades union laws
- He has consolidated the old Communist Party vote (like Mitterand did for the Parti Socialiste (PS) in the 1970s) but, with a good campaign, the PS vote up for grabs, Le Pen on the rise and Capitalism going through a major crisis, he still came 4th…

Macron’s rise has the whiff of an SDP insurgency, rather than a centrist realignment
- The Assemblée Nationale elections will give more of a clue whether this was faute de mieux and merely the prelude to US style gridlock (which the AN will win)
- Giscard d'Estaing broke the Gaullist monopoly in 1974 but was not re-elected
- So, as in 2010 – can anyone fake the authenticity needed to break through in the UK?
- And if En Marche doesn’t succeed in France, it may retard UK moves for an anti-Conservative rapprochement for 2022

Be nice to sensible politicians – it’s getting harder to form compromises out there
- We are back in the 1930s (as I have mentioned many times). The managerial centrist parties are losing share to the extremes – 40% voted extrêmes this time in France.
- The first five ‘big’ ‘parties’ share of the vote fell from 94% to 91% - so, even when they win, their mandates are a little less solid than before
- Mélenchon is consulting on abstention or ballot spoiling rather than support Macron
- Expect more votes in the UK for very fringe parties like “Get the coppers off the jury”

The voters are very off-piste about their choices
- Spoilt papers were up to 2.6% (a 32.8% proportionate increase !)
- Turnout was down 1.5% (a 2.1% proportionate fall)
- Despite the strong choices available, some voters are agreeing with Freddie Mercury that “Nothing really matters. Anyone can see.”
- And the long range forecast for democracy is …
“Thunderbolt and lightning, Very, very frightening me”

More than four million households now rent their home from a private landlord; nearly twice as many as 10 years ago. But with the Council of Mortgage Lenders forecasting a substantial drop in the number of buy-to-let landlords in the coming years - how is the private rented sector going to keep up with ever-increasing demand?

This one-day seminar in London will be chaired by HQN's PRS expert, former Head of Housing at the Audit Commission Roger Jarman, and feature a top line-up of speakers including arc4 Managing Director, Helen Brzozowski.

Further information can be found on the following link at HQN's website:

http://hqnetwork.co.uk/events/opportunity-knocks-shaping-a-new-private-r...

With Korea firmly on the world stage again, Derek Long was interviewed by Asian Property News for his insight into its unique property market.

- After a major dip in the housing market in 2013, have things begun to improve, or have recent problems - presidential corruption, threats from DPRK, a shift in US policy away from Asia - exacerbated the problem?

Housing prices recovered gradually from the 2013 setback, picking up sharply in early 2016. However, growing uncertainty has meant prices have plateaued for the past 6 months. It’s early days, but prices look to be slipping below the decade long trend of 2% annual growth. Certainly, a January survey of consumer opinion suggested almost half believed sale prices will fall this year. All of which points to a familiar upwards pressure on jeonse prices, as would-be owners hedge equity losses by chasing ever scarcer jeonse properties.

- What effect is the glut in the property market caused by the building boom of recent years having on the health of the broader Korean economy (particularly re. household debt and borrowing)

Household Debt-to-GDP ratio has now reached 90% which has surpassed the UK and is heading towards twice the German ratio. Fuelled by a sharp expansion last year, the housing component is particularly worrying. Already 1.5 million (8%) of households are already technically underwater and are paying an eye-watering 40% of their disposable income to service loans. With mortgage rates at their highest for two years and US interest rates likely to rise, the Bank of Korea projects the next 1% increase in base rate would add another 69,000 households. This is not sustainable in the long term.

- With Park's ouster, and the coming Winter Olympics, will investor/consumer confidence be restored, or can we expect things to remain difficult with regards the Korean economy, and the housing market in particular, for some time?

The future trajectory for the Republic’s economy appears uncertain. With President Park’s replacement due to be elected in May, ironically the most important election for the ROK’s future has already taken place. It’s President Trump’s reactions towards North Korea that will be key for investor confidence in the South’s economy for the next four years. The lack of a workable Presidential/Parliamentary majority emerging after May could further fuel uncertainty.

With economic growth fluctuating, the chaebols focussing inwards, growing tensions with China and the trend towards global protectionism, the Central Bank’s 2.6% growth forecast feels a tad optimistic.

In times of uncertainty, speculative money moves into sound asset classes. The past new build glut makes property less likely to be a go to investment. True, Olympics tend to push up property prices above trend and national averages. However, given Pyeongchang’s size, urban form and remoteness, it is doubtful the competition will make a significant impact on anything but some local prices.

Which reminds us of the ROK’s key structural challenge, that regional housing markets are effectively decoupled from the dominant Seoul market. Creating measures that are more sensitive to regional markets may be a second order challenge for government – but will be important for the long term health of the housing market and the economy.

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

There’s a reason why that hideous new estate they’ve built on the disused asbestos factory site is called Foxes Barn or St Cuthberts Reach. It’s called doorbellology – the science – OK, pseudo-science that tells us that our addresses can influence the value of our properties.

UNLUCKY13?
Received wisdom has it that number 13s won’t sell. In the latest Department for Communities and Local Government release of 120,000 house sales, only 1,190 number 13s homes were sold – compared with 2,067 number 12s and 1,854 number 14s. So trying to sell a number 13 is surely a bad bet. But… the average price[1] of a number 13 is nearly £15,700, above the average for a number 12. That’s a 6.2% differential.
So why are developers building fewer number 13s? The ratio of new build number 13s to 12s has fallen by 12% compared with existing properties. Might some doorbellology improve their profits?
 
WHO IS THE PATRON SAINT OF ESTATE AGENTS?
Actually every saint is. After ‘The’, the most common name of a street where sales occurred (2,040 or 1.7%) started with a saint’s name.
And saints’ streets are a good bet to live in because a ‘St Something’ address is worth 5% (£13,427) more than the England and Wales median. So while homes in streets with saints names may be more common, they appear also to be in better areas than most for prices.

The word ‘High’ was the next most common start to a street name. However, this was almost half as less frequent, at 1,096 sales.

DO NAMES MATTER?
Well, among the top 5% of streets ranked by their average value, a home on a street named after a girl are worth 2.2% (£16,746) more than ones on those with boys’ names. Once the classical references to Aristotle and Agamemnon are dispensed with, the boys’ names are fewer and, frankly, a bit scratchy such as Waldemar and Onslow.

When it comes to naming valuable homes, being rustic is the best bet. Names referencing trees or woods are by far the most common in the top 5% sales by price, followed distantly by animals (often birds) and more general rural features.

Across the value range, having ‘Willow’ at the start of your house name added 0.8% to the median (middle) value compared with the national median. So, short of moving your house to the country, cultivating a tree in the back garden might be a good plan.

ALWAYS A FOREIGN FIELD?
Exotic locations may work for house names, but the smart money for the expensive sales are much more likely to be in streets named after more European locations, like Luxemburg (sic), Frankfurt, and especially Spanish or related locations such as Cadiz, Palma and Iberian. Often, the streets are named from the by-jingo School Atlas, like Borneo and Burma, perhaps suggesting that old streets have undergone major regeneration.
 
AND THE PICK OF THE NAMES?
Who can better the home sold called WI-WURRIE.

After all, it’s just bricks and mortar!

Derek Long, a director of housing and data consultancy, arc4
First published in Inside Housing Magazine

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."

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