Kathleen Kelly draws on the extensive range of research undertaken by the Joseph Rowntree Foundation in the last few years to see what it might mean for housing policy in Wales.
It’s both an exciting and a tricky time in Wales. The new administration’s ambition to tackle complex housing legislation is very welcome; but rising homelessness and the ever present spectre of a recession would challenge even healthy public budgets, never mind the depleted ones we’re working with.
The welcome ambition of the new administration made me think about what an evidence based ‘made in Wales’ housing policy might look like. So I set out to pull together a raft of work Joseph Rowntree Foundation (JRF) had published in the last few years to see what it might mean for housing policy in Wales.
Now then, where to start? First, to solve a problem you need a clear idea of what it is that you’re trying to fix. For me, the trouble with debates on housing issues is that there seems to a reluctance to address the real problem. So we talk a lot about high house prices and related problems of affordability, but our policy response tends to be to prop up those high prices with products that will bridge the deposit gap. All that does is maintain house prices at an artificially high level. In response to that you might well raise the many benefits of home ownership, whether real or imagined. You would mention things like the value of ‘accruing an asset’. You might not mention problems of negative equity, a particular issue with 55% of constrained mortgage holders in Wales having insufficient equity to pay for any form of deposit on their next home.
Even where you did acknowledge previous housing market recessions, you would probably say ‘it’s not as bad as last time’. And there’s my next problem with policy – its short term nature. We’ve resolutely failed to learn the policy lessons from past housing market recessions. If you keep doing the same things you keep getting the same results – it’s time to start doing something different.
Underlying all of these issues is the four major boom and bust cycles in the housing market since the 1970s. Some fluctuation in house prices is to be expected of course. But the peaks and troughs of house prices could be closer together. That would help level the playing field between those with financial assistance from their parents to buy a home and those without. Before you think this only applies to home ownership, it’s a sobering fact that the repossession rate for buy to let landlords is strikingly similar to that for owner occupiers. The fortunes of the private rented market reflect those of the home ownership sector rather than acting independently of it.
You might think that social housing sector is more immune to house price volatility. If we still had large capital funds to build social housing whilst private new build rates were falling that might be true. The fact is though that our funding regime for affordable housing has been very pro cyclical in recent years meaning that the funding of new social housing has been more closely connected to the supply of new private housing. The short term cash injection that has seen affordable housing become a bigger part of overall housing output isn’t sustainable. More stability in house prices would benefit us all, wherever we are in the housing market.
So how might we achieve a more sustainable and ‘fairer’ housing market?
Ideally you’d start with the right housing in the right places. Whilst there isn’t a silver bullet that would get enough houses built there are of course lots of approaches to move things in the right direction. The Welsh Housing Partnership is a great start here. The Government working together with other public bodies, developers and housing associations to release more public land is crucial. Enabling public bodies to do deals on publicly owned land that might generate a delayed receipt and/or an equity stake in the future development, rather than an immediate return, is a useful risk spreading strategy that can enable developments to proceed. Trying to attract stable investment from pension funds is another potential route to increase capital funds to build more social housing. New housing supply that is focussed too much on increasing privately rented homes, at the expense of other tenures, risks making volatility in the market worse. However, the long standing undersupply of new homes and the unmet backlog of housing need of 9,500 homes are such that new supply on its own is unlikely to have much impact on house prices (or private rents) in the short to medium term.
This is where government could use its existing policy tools much more effectively. Wales has already been much braver than its GB counter parts; revaluing council tax from its 1991 base and adding an extra band. Ensuring that council tax keeps pace with house price inflation and that the tax goes higher up the house price scale both go some way towards creating a fairer housing system. However to create more stable house prices into the future, regular revaluations are needed. I know this is painful when times are hard but we need to wean ourselves off the notion that unearned gains in house prices are ‘free’ – at the very least they come with a social cost that can perpetuate inequality. And this is where expectations are just as important as actual taxes. If we were to get a clear cross party political signal that in the future unearned house price gains would not be ‘free’ we would all act differently in the market. Of course no one likes taxes but one estimate suggests that £4.6billion of taxes were foregone in 2008/09 because of the preferential tax treatment of home owners. That’s a lot of potential new homes. Whilst tax reform is obviously a political minefield, the optimist in me is reassured that people said mortgage interest tax relief was politically untouchable; it was eventually abolished with barely a murmur.
The housing shortage also raises other challenges. Research tells us that what we know about the housing system, we know from family and friends. Where we don’t have the luxury of family and friends we glean our knowledge from support workers. That gives us another problem – how to educate people that the expectations of their parents, or even their peers, don’t hold true for them. The rules are changing for us all – we can no longer assume that receiving housing related support will automatically result in a social housing tenancy or that going to university and getting a graduate job automatically sets you on the path to homeownership. Young people are keen to have more knowledge of the housing system. Whilst peer education on homelessness in schools is an important part of that, it’s not the whole picture. There’s a need for something that covers the realities of the whole housing system, rights and responsibilities in different tenures and the real costs of living independently. Housing organisations could have a key role in this – there are already projects that have successfully linked this type of activity into the core curriculum. It doesn’t have to cost a lot. Whilst more education doesn’t mean more homes, it should mean a better understanding of the issues. Ultimately this might generate more realistic views from communities on the need for proposed housing developments in their area.
I’ve talked about making the tax system fairer between housing tenures and giving people more knowledge to navigate the whole housing system. Both of these are really important. But if we are to achieve housing policy’s goal of providing decent, safe, affordable homes to live in, we also need to think differently about whether the system we’ve got works properly or not. Young people described the housing system as a maze; a wrong turn could easily get you lost with no way back, but there wasn’t a map to help you avoid those potential wrong turns.
This is where the Government’s ambition for legislative reform could have most impact. Our current tenure system is very much based on who your landlord is (and when you moved in) rather than the type of tenancy that you might need. Where ‘products’ like shared ownership and shared equity have been developed to address the gap between what consumers want and what providers deliver, they left those first taking up shared ownership in a fairly murky legal position. Legislative reform gives the Government a chance to address such anomalies. Ideally this would be based more on what consumers want at different points in their life.
Of course we have to be clear about competing interests. Profit in the private rented sector is based on selling properties as well as renting them. Not all private landlords can afford to be altruistic. The private rented sector’s role as a shock absorber in the housing market means that tenure reform must be careful to avoid unintended consequences. This might include pricing lower income households out of the market altogether if landlords are not also part of the debate. Social housing also plays a key role within the housing system, providing valuable stability for vulnerable households. Housing associations have shown a real willingness to innovate in terms of what they offer beyond traditional social tenancies which legislation could capitalise on. This doesn’t mean abandoning the traditional social tenancy. It does mean though that any legislative package needs to provide reassurance on the role of social housing.
The subject of the ‘housing offer’ for low income households is something we’re going to be looking at more closely in the coming months. First with a JRF funded Cardiff University project looking at the housing challenges facing young people in the UK. A big part of this is likely to be about how the private rented sector works for young people, including young families. We’re also hoping to look more closely at the potential for a bigger programme around housing for low income groups. We’re likely to be asking questions like how local housing allowance reforms are impacting on the market for low income households and what the full menu of housing options might be for those on low incomes.
I hope that in the best spirit of co-production we can work together with you to develop a shared vision of housing for low income groups.
For more information on the research covered in this article see www.jrf.org.uk or for:
Housing market volatility: www.jrf.org.uk
Young people and Housing: www.jrf.org.uk
Homelessness: www.jrf.org.uk
Welsh housing policy – where next? was published by the Joseph Rownbtree Foundation in October 2011 and is online at www.jrf.org.uk
Contact: Kathleen.kelly@jrf.org.uk
Follow Kathleen on Twitter @jrfKathleen