Tory conference announcements pull punches on housing crisis

Oct 05, 2017 11:35 AM

At the General Election in June, Labour won a majority of the votes of the under-40s. This was a wake-up call for the Conservative Party, many of whose members are now filled with a new urgency to address this cohort's biggest concerns - including a rather large house-shaped one.

Their annual conference has duly been bursting with new housing policies, particularly for private renters. But while they are (for the most part) improvements, the proposals fail to address the urgency of the housing crisis.

1. £10bn for Help to Buy

They started off with a stinker. The Help to Buy scheme has been going for four years and has helped only 134,000 households into home ownership (out of nearly 5m in the rental sector) - and better-off-than-average ones at that. The biggest beneficiaries are the major property developers who have seen share prices and profits soar. 

It was pleasing to see that the Westminster media aren't buying it - the collective reaction was "oh, that's the one that just pushes up house prices, isn't it?" Regular readers of the blog will know that Help to Buy not only adds extra demand to a housing market that doesn't need it, it also means that the government takes a stake in property, and benefits from future rises in house prices. When high house prices is the problem you're trying to fix, that's called "a conflict of interest". 

Much better to put that money into homes that will benefit society's poorest...

2. Require all letting agents to meet strict minimum standards

This appears to be a necessary condition of the letting fees ban. You can't ban fees without having a way of policing it. This is something we have called for - as have the lettings industry body ARLA - so it's good, but perhaps not as significant as it would be without the fees ban.

3. Compulsory for all landlords to be covered by a redress scheme

A large section of the rental market is managed directly by landlords, with no agent involvement, so their tenants have no consumer protection from poor practice (aside from non-protection of deposits and hazards in the home). This move also has roots in the letting fees ban as landlords will also be prohibited from charging anything other than rent and refundable deposit, which will need policing. 

But it is momentous in that it will theoretically make all tenancies covered by a national regulation scheme, with penalties for non-membership and nowhere for criminal landlords to hide. We've been calling for a national register of landlords and this takes us closer to that. Many landlords will remain anonymous by operating through agents, but that in turn makes it essential to get regulation of agents right.

4. The possibility of a new Housing Court

Currently, tenants with a negligent landlord have to rely on the local council to enforce the law, or scrape the money together to take legal action. Citizens Advice found that only 1% of tenants who have waited longer than reasonable for repairs have taken their landlord to court. 

With new rights for tenants to reimbursement of rent from landlords who have broken the law, the case to improve practical access to justice is stronger than ever. It is good to see this on the government's agenda, but it needs to involve as little cost as possible.

5. Incentives for landlords "who are doing the right thing" on security

Warning: I did think about doing a separate post for this one.

In his speech on Sunday, Sajid Javid, the Communities Secretary, listed "just some of the problems that renters can face": "unreasonable rent rises...the threat of eviction if you try to complain". This leaves renters "feeling ripped off and insecure", which he admits is "not fair". Rather than limiting rent rises and restricting grounds for eviction, which we are calling for, his proposal is for landlords to offer tenancies of "at least 12 months" with "at least three months' notice" to evict tenants who have done nothing wrong. And, from the sound of it, this wouldn't be imposed on landlords - they would be given incentives to adopt these ever-so-slightly more generous terms. Those incentives will be announced in next month's Budget.

Currently, private tenancies last a minimum of 6 months, with most tenants getting an initial term of 12 months or more. A landlord can ask their tenant to leave outside of the fixed term with two months' notice and without a reason. This is the real test of security - an extra month of notice provides more breathing space but does not make the tenant's position any less precarious.

I'm actually struggling to think of any scenario where a tenant would benefit from what Javid proposes. We often hear from renters who have to renew their tenancy at great cost every 6 months, but that problem is fixed by banning letting fees. A tenant forced to move by a landlord selling up gets an extra month to find a new home, but they still have to raid their savings to pay for cleaning and a removal van.

And of course we will be paying landlords in tax breaks or whatever it is to tweak their terms. On the face of it, then, the offer is pretty dismal.

Charitably reading between the lines, it's possible that the government wants landlords to adopt their Model Tenancy Agreement, which was published back in 2014 and provides a framework for tenancies of 2 years or more. This includes a rolling break clause for tenants (so they're not trapped in unsuitable tenancies) and options for limits on rent increases - though the landlord is free to pick (cue all but the most scrupulously ethical landlords selecting the "Unlimited" option). 

The current Model Tenancy can only be the starting point of improving private tenancies. If the government insists on using incentives instead of imposing changes, then the behaviour we are buying from landlords must significantly improve tenants' lives or else it's a complete waste of money.

If landlords are getting a sweetener from the taxman, they must accept limits on rent increases, and restrictions on evicting blameless tenants. If the landlord has to sell, force them to sell to another landlord with tenants in situ.

Even then, incentives must be targeted properly. For example, there's no point in bringing back mortgage interest relief because the two-thirds of landlords without a mortgage (as well as limited companies) will have no reason to change their tenancies. 

Get all that right and the government will need to ensure the new system is policed properly, so they don't get a kickback then mistreat their tenant. That's one more reason why the proposed registration and redress systems for landlords and letting agents are so important. 

6. £2bn for "affordable" housing - including genuinely affordable housing

And finally, years of campaigning by ourselves, SHOUT, Shelter, PricedOut and others have resulted in a modest victory with a pledge from the Prime Minister yesterday to raise the affordable housing budget by £2bn to £9bn. This will give councils and housing associations the opportunity to build homes for social rent in areas with high rents (as opposed to "affordable" rent which is 80% of market prices). Based on £80,000 grant per council house, this would enable 25,000 to be built during this Parliament.

That's not a lot, but given the Conservative leadership's record on council housing we welcome Theresa May's recent conversion. It follows a pattern of very incremental shifts by the government since May took over in summer 2016. February's Housing White Paper talked of helping councils to build. The election manifesto revealed plans for a new programme of affordable house building - but only at 80% of market rents. Now we have money and acceptance of social rent. It's as if they knew the solution all along but were scared of going cold turkey. If she'd announced all this from the start, those new council homes could be getting built now.

Ordinarily, this announcement might be received more favourably, but with the £10bn for Help to Buy announcement, the mismatched priorities jar.

There is still more the government could do to support house building by councils, including:

  • scrapping restrictions on the use of cash from the sale of homes through Right to Buy, which force councils to borrow money that they can't actually borrow, so they don't build
  • giving councils the power to buy land on the cheap and benefit from the rise in value when it inevitably gets planning permission
  • finding more cash, for example from the stamp duty surcharge on landlords (worth around £2bn per year), to invest in more new council homes

Expect the first in the Budget, the second in next year's conference speech, and the third in Budget 2018...


And that's it. We have a lot of work between now and the Budget to help the government refine its proposals on security, incentives and regulation. Do your bit by supporting our petition.