What do we mean by “Affordable Housing”?

Obvious isn’t it? – Housing that is affordable. But does affordable housing automatically refer to all housing that can be bought or rented at below the normal market price? Does affordable housing include both housing to buy and housing to rent? Does the term ‘affordable housing’ include the notion of social housing? And what part does the notion of ‘local needs’ play in the great scheme of things?

I get the feeling that ‘Affordable Housing’ has become a fashionable phrase bandied around with gay abandon by all manner of politicians but crucially, without any clear idea of how the term is to be defined. Here is one definition taken form Powys County Council’s Draft Unitary Development Plan, 2004:

“Affordable housing is property made available at a price below full market value to meet an identified local need for housing as determined by a local housing needs survey. Affordable housing encompasses both low cost market and subsidised housing, irrespective of tenure, ownership or financial arrangements, that will be available to those households who cannot afford to purchase or rent adequate housing generally available on the open market.”

This definition modelled I guess on TAN 2, seems to embrace all housing offered at below market price, including ‘social housing’. But is that what everybody understands by ‘affordable housing’? Here is a quote from one Gordon Brown in his speech to the Labour Party Conference on Monday:

"I've met too many young couples who've told me - we work hard, we save, we play by the rules, we want to get on and yet we can't afford to buy or even rent our first home.
So we plan to help first time buyers and we will increase house-building to 240,000 new homes a year - in places and ways that respect our green spaces and the environment. My aim by 2010 two million more homeowners than in 1997.

And for the first time in nearly half a century we will show the imagination to build new towns - eco-towns with low and zero carbon homes. And today because of the response we have received we are announcing that instead of just 5 new eco towns, we will now aim for ten eco towns ---- building thousands of new homes in every region of the country.

And for affordable housing and for social housing we will now invest £8 billion. This will mean a 50 per cent increase in funds for social housing. I call on all housing associations and councils of all political parties not only to support shared equity for first time buyers, but to help us build more social homes for rent, more homes for key workers and more homes to cut the unacceptable levels of overcrowding. Good homes to rent and buy for the British people."

Finally, I would ask why do so many commentators who coin the phrase affordable housing do so in terms of “first time buyers” and “getting one’s step on the housing ladder”? Housing policy is a mess and not helped by confusion in terminology or vague, bordering on the fantastic, aspirations of senior politicians who should know better.

Housing Market Distortions

Clearly the housing market is subject to a variety of distortions. Some affect the entire UK, such as falsifying statements of income when making an application for a mortgage, some fairly localised, such as the propensity for purchasing second homes in rural areas. The recent introduction of Housing Information Packs (HIPS) is alleged to have caused another, possibly, very temporary distortion. However, there is I believe, a much more insidious distortion of the housing market which is having a devastating impact on the ability of young couples to get onto the housing ladder.

This is the so-called ‘buy-to-let’ phenomenon. I am not sure quite when it became fashionable to adopt the notion of safeguarding one’s retirement by investing in bricks and mortar rather than finding an appropriate pension fund. However, this is what has happened and it is having quite an impact in certain localised areas. In Llandrindod for example, on a new estate to the north of the town it is alleged that some 50% or so of the completed builds are estimated to have been bought to let on. Suddenly everybody wants to be a landlord, and with relatively cheap mortgages available and Gordon Brown’s achievement of a sustained period of financial stability, everybody, or nearly everybody, has become a landlord. And in the process there has been a steady and persistent appreciation in the value of most properties far in excess of the rise in average incomes.

This wouldn’t be a problem except that at the same time the local authorities are attempting to put in place robust policies to ensure an adequate supply of affordable housing. This is clearly the correct policy and its desirability is supported by robust evidence of need. Or is it? Surely our current preoccupation with affordable housing, especially in rural areas, is, in part, an attempt to counterbalance a huge market distortion. Rather than seeking to counterbalance this distortion ought we not seek to prevent the imbalance in the first place?

It is possible that the Northern Rock experience coupled with a slowing down in house price rises that is now clearly evident, will go some way to correcting some of the current market distortions, but if this happens it is likely to be at the expense of another dose of negative equity. No, what really needs to happen is to find a way to take out the speculative investment aspect of the housing market. This means that the credibility of pensions as the proper way to prepare for retirement has to be restored, and buy-to-let, and the fashion for second homes in rural areas, has got to be made far less attractive. Given that interest rates are an extremely blunt instrument of economic policy, perhaps this can only be done effectively through the tax system, either through the cumbersome council tax system which is rapidly running out of control, or through a system of local income tax which will be responsive to local conditions. If the distortions in the housing market cannot be countered through use of the tax system, then has anyone got a better idea?

Early Political Memories

I seem to be one of a number of people to have been "tagged" by Peter Black to describe our earliest political memories. Not knowing the correct protocol, I assumed this was to be done by commenting on Peter's blog - not so, apparently. I am supposed to use my own blog, so here goes.

I first became aware of something called politics when I was 9 or 10 and living with relations in Zurich. I recall my Aunt and Uncle talking about Churchill, specifically wondering why Churchill was rejected in favour of Atlee at the end of the war. Churchill was hugely admired in Switzerland for his record as Prime Minister during the war, and certainly, the Swiss population in general seemed to be enthusiastically Anglophile. I presume this discussion had been prompted by the 1955 General Election campaign.

In the late 1950s I do recall hearing Edward Heath speaking at the Pavilion in Llandrindod, not quite sure when this was, possibly 1957 or 1958, but I think Heath was Minister for Power at the time.

What persuaded me to take an active interest in politics was hearing Emlyn Hooson speak on the the notion of a classless society sometime in the mid sixties. It could have been during the 1966 General Election campaign. Whenever it was, it really struck a chord with me and I became a convinced Liberal, aligning myself with my father's Liberal thinking in contrast to my mother's soft Conservatism. Having said that, my mother always conceded that, having settled in Llandrindod in 1943, she always voted for Tudor Watkins, the much-loved Labour MP for Brecon and Radnor, in preference to any Conservative or Liberal candidate.

The first time I voted was in the (second?) referendum on Sunday opening in either 1963 or 1964. It all seems such a long time ago.

A POTENTIAL HOUSING CRISIS OF LABOUR’S MAKING

Next April the housing benefit system in Wales will be replaced by the Local Housing Allowance (LHA) as part of the Government’s Welfare Reform Act (2007). This well-meaning but potentially disastrous piece of legislation will force Council’s to pay the LHA directly to the claimant rather than paying the housing benefit directly to the landlord as they do currently. In making this change the Government is seeking to promote, amongst other things, personal financial responsibility and inclusion. A noble aim, indeed.

However, it is likely that many claimants in receipt of housing allowance might just be tempted to stop off at the pub, or the off-licence, or the supermarket, or some where else on their way to pay their rent, and by the time they meet their landlord the funds they have available may not be quite enough to pay part or all of the rent. If landlords don’t get their rents then they will evict the non-paying tenant and the responsibility for housing these evictees will fall on the local authority.

Given that generally, those tenants in receipt of housing benefit tend to be economically disadvantaged members of society, that is why they are in receipt of this kind of support, the unintended consequence of this piece of legislation is almost certain to put the disadvantaged into a position of even greater disadvantage.

Governments cannot force people to become financially responsible, it that were possible, then we wouldn’t need support groups such as Gamblers’ Anonymous, nor the debt advice service operated by the Citizens Advice Bureau, and long queues would not form at branches of Northern Rock. By all means encourage financial responsibility, but don’t try to do it by draconian legislation.

Those local authorities which have a disproportionately large private rental housing sector are likely to face severe problems in having to house increasing numbers of homeless individuals and families from next summer simply as a result of Labour’s well-intentioned but ultimately misguided changes in the Housing Benefit System, and once again, it will be the local authorities that will have to bear the extra administrative burden and cost.