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July 03, 2011

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Barry Freed

Not to be all nit-picky but that's 40,000 families. I don't know what the average size of a family likely to be affected by this is but the total is probably ~100,000 people at least.

jamie

Thanks Barry: duly changed.

CharlieMcMenamin

jamioe, you're missing the point. Social cleansing is worth a bit of pain (as long as its someone else's pain, naturally):

"...change is coming. Within three years, homelessness will start to become a thing of the past, the report predicts, as more people on higher incomes move in. Expensive "problem families," at-risk children, and older and disabled people requiring intensive home care will be packed off to outer London boroughs and beyond, where they become another council's responsibility. As young affluent renters move in to Westminster so the demand for council services and public institutions that bind communities - from schools and children's centres to libraries - will reduce. It will still be Westminster, but not as we know it."

jamie

Maybe, but is the whole policy dictated by the social cleansing plans of a few inner London authorities. Don't Tory controlled outer London boroughs have a say at the very least?

CharlieMcMenamin

jamie: I was aiming for 'bitterly flippant' rather 'having the skinny on the secret conspiracy plan' in my previous comment.

The IBS 'theory' is that landlords' rent asks will be driven down as demand, in the form of HB funding, goes down. That Patrick Butler article to which I previously linked quotes the private Westminster paper as saying:

"The City Council has recently commissioned a survey of private sector landlord activity... Landlords were clearly concerned about the impact of the LHA changes. In terms of their likely response to the changes 13% of LHA landlords (and 6% of landlords overall) would reduce rents but 40% of LHA landlords (53% overall) would leave rents at the same level. Over 80% of LHA landlords thought that if their current tenants could no longer afford the rent, they would end the tenancy."

I reckon the government are fighting a class war, but doing so incompetently.

jamie

Ha! seconded. This is partly why I find it difficult to get their range sometimes.

john b

I hate the position here of being a leftie economist with a background in data analysis.

a) if you surveyed me on "should I stop giving you money and generally make your life harder, or not do that", I'd say "no".

b) private landlords who benefit from HB tenants need a rigorous buggering. I hope anyone even vaguely leftie here agrees with me on this.

Therefore, whenever a copious quantity of private sector stuff is built, we should insist on affordable housing being a decent quantity of the same; and also make sure that any increase in value of the land in question is paid for by landowners.

Isn't that, erm, how the last govt did things?

CharlieMcMenamin

A lot of the 40,000 will be v.large families. I'm all for s106 agreements and all that, and I'm very strongly for the rent restructuring framework which is being abandoned in new social housing in favour of 'affordable' rents @ 80% of market values, but little of this impacts on those large families in the private rented sector. It's never going to be practical for them to pay a market rent. Or for them to rent accommodation outside the social sector without very substantial HB subsidy.

ejh

I imagine this will actually be handled on the basis of "good homeless versus bad homeless".

CharlieMcMenamin

Ejh: perhaps. But, in a way, that's what the housing legislation already does. If you're homeless you get rehoused if you have a local connection, you're not intentionally homeless and you are in priority need. (I won't bore folk with the voluminous definitions, and case law, over the terms in italics).

Who is going to having a local connection if they're forced out out Westminster to Barking and Dagenham?

Strategist

"Don't Tory controlled outer London boroughs have a say at the very least?"

That could be where this policy will flounder and maybe fail? Westminster want these families out, but Tory recipient councils such as Havering or further afield Thanet (or indeed pretty much everywhere) desperately don't want them in. These councils will do everything they can to keep them out. (Charlie - your views?)

ejh

What I generally mean is that there wil be an all-out propaganda assault on squatters, bad neighbours, young unemployed males, young single mothers alll all sorts of other people housed permanently, temporarily or illegally, on the pretence that if it were not for these people, the poor displaced families would have other accommmodation to go to.

(You may object that an all-out propaganda assault is not distinguishable from the situation presently obtaining. I will cite Bachmann-Turner Overdrive.)

CharlieMcMenamin

there wil be an all-out propaganda assault on squatters, bad neighbours, young unemployed males, young single mothers alll all sorts of other people housed permanently, temporarily or illegally, on the pretence that if it were not for these people, the poor displaced families would have other accommodation to go to

There are plans to weaken the security of tenure of social housing tenants and it is easy to imagine how this could be linked to the need to 'create space' for those displaced from the PRS by the IBS reforms/benefit caps. But I'm not so sure that squatters or folk in temporary accommodation will feature much in this particular debate, except in their long term role as 'always available Tory Folk Devil'.

Strategist: yes, the govt's housing/benefits proposals are incoherent in policy terms. But then look at where the govt has got too in terms of the NHS where no one in middle management knows whether they're coming or going or whether they should re-apply for jobs they've just been made redundant from. Incoherence in and of itself won't stop them.

Alex

No amount of propaganda trumps logistics, though. Pack'em off, and the councils' housing officers have a statutory duty to process the homelessness claims. About five minutes later, Kent council bills DCLG for all the B&Bs they suddenly need.

The councils have been furious ever since this was first suggested, with good reason. I think the person to watch is probably Bruce-Lockhart, the Kent council leader and panjandrum of Tory local government, who is both very influential and also one of the councils that is staring at this particular bucket of shit.

Alex

Also, what if they won't go? That's a hell of a lot of people and unlike a lot of Thatcherite social engineering projects, there's not even the slightest attempt at buying them off with a cynical short-term bait-and-switch like redundancy money or right-to-buy or the GCHQ bonus for signing away your rights.

I mean, who's the sinister ex-travel agent here?

Alex

Also, note that DCLG is expecting 40k additional acceptances, not claims. That is to say they've presumably already priced in the extent to which they can turn them down.

CharlieMcMenamin

It's hard to resist bailiffs when you've got loads of little kids running round under your feet Alex: 'the welfare' might come and take them away.

But you're right about (most) councils' attitudes, and about Bruce-Lockhart's influential position.Problem is, the govt - especially Cameron and Osbourne - have got themselves in a fix with their trumpeting of the line 'no one gets benefits more than £26,000' to the general applause of the mid market tabloids. A retreat by them now is going to be humiliating, so we might see a bit of brinkmanship and or 'phrasing in' of the reforms( i.e. an attempt to kick it into the middle distance grass but not abandoning the idea).

There's more on all this from the trade paper's op-ed blog, and from the Labour Housing Group (who are good on the technical detail and not overly infested with new Labourism). I think these posts, taken together, are significant: they're the sound of the technocrats withdrawing consent...

Alex

As-you-know-Bob, you don't have to be out of work or a feckless single mum to be affected. It's not the cap, which is trivial, it's the slashing of the LHA valuation rate.

PS, we've covered this on Stable & Principled since way back when.

Also, this has *already* been kicked down the road - IDS decided to give it 2 years before implementing anything last year.

CharlieMcMenamin

Alex: thanks for the reminder, I don't go to Stable and Principled as often as I might do.

In the event that anyone else is still awake (housing debates do tend to send others to sleep, I know) I find the NHF's briefing put the link between the overall cap and the LHA into a clearly understandable context:

"The Bill gives the Government power to apply an overall cap to the benefits to which a single person or couple is entitled. This will be set by reference to „estimated average earnings‟ of a working family, which by 2013 are projected to be £26,000 per year (£500 per week) for a family and £18,200 per year (£350 per week) for a single person. The caps will operate by reducing the amount of benefit paid to cover housing costs (ie. it is housing benefit that is reduced once the total reaches £26,000).

The measure risks uprooting families from their communities or pushing them into debt, arrears or homelessness. While it will mainly affect recipients of LHA in the private rented sector, it could also present problems for families in new housing association homes let at near-market (up to 80% of market value) rents, particularly larger families in London and the South East.

If the cap was introduced today, a couple with two children living in a three-bedroom home in London on 80% market rent could be left with just £237 per week once they have paid their rent.

The overall cap will also represent a risk to housing associations‟ revenue, and could act as a barrier"

CharlieMcMenamin

F*ck: cutting and pasting should be straightforward.

Anyway, that last sentence in full:
"The overall cap will also represent a risk to housing associations‟ revenue, and could act as a barrier to increasing sector capacity, particularly with regard to larger family homes."

dsquared

It's hard to resist bailiffs when you've got loads of little kids running round under your feet Alex: 'the welfare' might come and take them away.

That destroys the economics even more though. I think that what we're hearing is the sound of Sir Humphrey breaking the news to Jim Hacker that the policy of the elected government has come into conflict with the policy of the permanent government.

Also pace John B, I think these survey results:

In terms of their likely response to the changes 13% of LHA landlords (and 6% of landlords overall) would reduce rents but 40% of LHA landlords (53% overall) would leave rents at the same level. Over 80% of LHA landlords thought that if their current tenants could no longer afford the rent, they would end the tenancy."

seem about right to me. Rents are downward-sticky; this is one of the things we know about Anglo-Saxon housing markets. And they're largely downward-sticky because of the financing structures; also there is enough excess demand for Central London housing that this might actually be the locally rational thing to do. If nothing else, price adjustments won't take place immediately, and six months is plenty of time for all sorts of interesting things to happen in a property market.

On a technical note "represent a risk to housing associations revenue" = "represent a massive snafu in HA lending".

dsquared

In fact, the more I think about it, the more I think the crucial swing factor may be the willingness and ability of the banking and specialist lending industries to continue to maintain and let a big old inventory of foreclosed buy-to-let property. Ooerr.

Richard J

Yer typical institutional RE investor aims for a 2-3 year hold period, so, um, arse. Now may not be a good time to sell a BTL-standard property. Such as, fuck, a two-bed garden flat.

Alex

I think, again, that we discussed this back in the summer of 2010. I certainly recall D^2 making the point that, on its own terms, this risks pushing the BTL lenders over the edge again.

Regarding HAs and other RSLs (I TLA it, hardcore, like porno flick bitches y'all) it's well worth remembering this is explicitly mentioned as a problem in the leaked note - without the LHA revenue stream, the new construction target of 56,000 units will be missed.

Of course, construction is a hugely procyclical industry, so this has downstream consequences for the wider economy...

This may actually be the worst thought through policy initiative EVAR. I'm planning a post on S&P for later.

Long range scope - NHS plans have fallen apart, welfare ones falling apart, education ones in ridiculous mouse mode. This just leaves the dead hand of incumbency, doesn't it? DC = John Major 2.0.

Alex

Also, struggling to see the % from a Tory POV in a policy that a) catfoods the BTLers, a Tory client group if ever there was one, b) enriches slum owners in smack'n'chips seaside towns, another Tory client group, c) stiffs the banks (Tories, it goes without saying) with another ton of shitty mortgages, and d) busts the construction industry (more Tory clients).

It's as if you'd decided to shoot every tenth donor at random to encourage the others.

dsquared

DC = John Major 2.0

except without the ERM-exit and the massive fiscal stimulus of the Clarke budgets.

Alex

Still, at least the Irish situation is OK...whoops.

CharlieMcMenamin

Never mind, the owner occupied sector will pick up the strain...oh
"There are now more properties for sale in London at above £1 million than there are for under £200,000" Evening Standard, 29/6/2011

Richard J

And, oh, there's plenty of commercial investors interested in long-term investments in residential property... [Checks rental yields.] Oh no, no there aren't.


CharlieMcMenamin

Of course, there is one group of potential investors who, subject to finance, might be interested in buying up those BTL properties, at least in a falling market: local authorities who have to deal with all the people being made homeless by the benefit changes.

I'm not entirely joking: about 5-10 years ago a friend of mine developed a scheme like that to help an inner London Borough cut it's B&B bill. The added irony was that a lot of the local BTL stock was in fact ex-council property anyway....

But at that time anyway most of the inner London BTL stock was 2 bed flats- which wouldn't fit the larger families about to be made homeless...

Alex

By George, he's got it. Trebles all round!

Richard J

But at that time anyway most of the inner London BTL stock was 2 bed flats- which wouldn't fit the larger families about to be made homeless...

Except, except, they've just, IIRC, changed the definition of overcrowding!

Igor Belanov

" b) enriches slum owners in smack'n'chips seaside towns, another Tory client group"

Yes, and it's ironic that at one time a lot of the disgruntled residents would have turned to the Lib Dems. Still, how can we understand the political nous of skilled operators like Clegg and co?

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