The future of housing – a battle of visions
Posted on 19th May 2016
As this piece is written it has been an exciting week in shaping the future of housing in the UK and in the capital. Many sources have noted that housing was the major platform for the newly-elected Mayor of London, Siddiq Khan of the Labour Party. Polls suggested that for voters, the housing crisis in the capital was their main concern, ranking significantly above immigration, terrorism and healthcare.
For those that have been out of the country for the last ten (or twenty) years, the housing crisis is a description given to a collection of factors that have combined to create a severe, and some would say dangerous, shortage of good quality, affordable and secure housing. The problem has hit hardest in the south east of England and (as things often are) is magnified by the sprawling mega city that is London. The simplified version is that finding a home is now for many people difficult to impossible.
Our new mayor incumbent has published his manifesto on housing in London with his plan to address the housing crisis as a priority. Similarly, the Housing and Planning Act 2016 (HPA) has gained Royal Assent, this controversial act seeks to shape the future of housing in England in line with the Conservative manifesto. The two strategies have their similarities, but also differences that are worth looking at.
Private Rented Sector
Mr Khan proposes landlord licensing schemes in London boroughs, allowing people to check whether their landlord is licensed or has any good references (a sort-of Trip Advisor for landlords perhaps?) This proposal is echoed in the HPA where plans are laid for a national landlord database, allowing a tenant to check whether their potential landlord has acted badly in letting out properties before.
The problem with these proposals is that it assumes that people have sufficient choice to steer clear of landlords with a poor reputation or who are not licensed. The housing crisis has left many people desperate for homes that they can afford to rent, the quality of a landlord’s reference may not play heavily into a person’s decision making. Furthermore, it relies heavily on severely underfunded local authorities to maintain their databases and to keep a record of landlords in their area. Currently, local authorities only have to licence HMO properties (houses in multiple occupation) but the enforcement of any failure to licence a HMO varies from borough to borough.
Mr Khan also proposes a letting agent for London, run by a public body matching up good landlords with good tenants. Although this sounds very admirable, this social enterprise vision of a letting agent will be difficult to implement. How will someone be categorised as a “good tenant” and what incentive will there be for a landlord to use the nationalised service? Letting agents are often a barrier for lower income tenants to access housing, often requiring the payment of fees and a minimum income or a guarantor. A social letting agent would presumably do away with these fees, but would provide little incentive to landlords to use the service if there were no guarantee on the tenants ability to pay.
The term affordable housing covers a spectrum of potential housing options. This can be shared ownership, flexible tenancies, or affordable rent tenancies, calculated as a percentage of market rent.
The striking difference between the Mayor’s manifesto and the HPA is the definition of “affordable”. Mr Khan defines affordable in relation to average wages in London (estimated at around £30,000 median income city-wide in 2015). A new form of tenancy is proposed that will include a rent control to allow tenants to spend no more than a third of their wages on rent every month. It is not clear how Mr Khan intends to achieve this goal without a reform of tenancy law, significantly beyond his powers as Mayor.
Affordability in the HPA and other housing related legislation seems to refer to any house prices or rent levels that are not purely controlled by the market, with a much publicised example being the “starter homes” for which buyers and developers will receive incentives for building or buying the homes.
The social housing sector has been shrinking for many years, with properties now reserved through changes such as the Housing Act 1996 and the Localism Act 2012 for only the most vulnerable in our society. Siddiq Khan’s manifesto does not address social housing as a separate matter. The HPA does address social housing directly, in particular the point that some social housing properties, because of size and location, are worth far more on the open market than as a social let. The HPA will force local authorities to sell off their highest valued social housing when it becomes vacant.
An amendment from the House of Lords allows the council to negotiate with the Secretary of State to be able to keep enough of the profits of these sales to invest in a new council house, if they so choose. However, a possible issue is if the money is reinvested into a smaller property, i.e. a 2 bedroom property, the council reduces the diversity of its stock, meaning in the long run it is less able to provide accommodation for those in need. This is on the premise that larger properties would be of greater value.
One of the reasons for the depletion of the council stock is the right to buy that many tenants exercise. The HPA now extends this right to tenants of housing associations, meaning that the available stock of social housing is likely to fall even more. This means that there will be less accommodation available for the most vulnerable in our community, including those who are at risk of homelessness.
It is likely that if the housing crisis is not contained a revision of homelessness law will be necessary, especially given the diminution in housing stock and the rising numbers of homeless people.
A striking similarity between the HPA and the new Mayor’s manifesto is the focus away from the traditional rental model of private sector rental properties and social rents. Emphasis is put on home ownership, buying into the housing crisis to get out of it. The knock on effect of which is, the pool of social housing diminishes as the need for it increases.
The new Mayor has been bold in his aim for more than 50% of homes to be affordable on some housing developments, however he may have to compromise on this figure in reality so as not to alienate developers. In addition, while it is obviously welcome that there is licensing of landlords (proposed by both the new Mayor and the HPA), it remains to be seen how these methods can be implemented.
What is apparent is the new Mayor faces an uphill struggle in providing affordable housing during a Conservative government keen to further diminish social housing.