Major house builders and “contrived scarcity” in housing

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Two academics at Sheffield Hallam University have produced a useful paper, Profit Before Volume, Major house builders and the crisis of housing supply.1 The paper examines the role of the major house builders in the housing market and the connection between their domination of the market and the historically low level of house building. The concentration of production into the hands of a small number of major house builders has enabled them to exert a degree of control over what is built in order to maximise their profits and drip-feed supply.

The top ten house builders have increased their share of housing production from nine per cent in 1960 to 47 per cent by 2015. In 1980 there were over 10,000 small and medium (SME) house builders, building 57 per cent of all housing. In 2014 this had dropped to 2,800 firms delivering just 27 per cent of all output.” (Read on below or download a PDF here contrivedscarcity – see the PDF for the Addendum) More

“Statutory homelessness” in Swindon

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The statistics for 2015/16 relating to people who approach Swindon Council as homeless or being threatened with homelessness show a worsening situation.

  • In 2015/16 the number of households approaching the council as homeless was 559. Two years previously it was only 225.

  • The number of households accepted as homeless and “in priority need” (see Addendum for explanation) has risen by 50% over the last two years; from 110 to 165.

  • The number of households living in temporary accommodation has increased by 78% over the last two and a half years, from 201 to 359.

From the figures it’s clear that Swindon Council is finding it increasingly difficult to deal with what is a growing problem. In 2009/10 they managed to assist 956 households in preventing or relieving homelessness. Yet by last year they were able to achieve this in only 287 cases.

The number of households they were able to help obtain alternative accommodation (where they were faced with the loss of their existing accommodation) fell from 757 in 2009/10 to just 242 in 2015/16. (Read on below or download a PDF here homelessnessstatsswindon ) More

LRC calls for Labour to commit to cancelling council housing ‘debt’

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The National Executive of the Labour Representation Committee, chaired by FBU General Secretary Matt Wrack1, has passed a resolution supporting Swindon Tenants Campaign Group’s call (see our new pamphlet) for Labour to:

  • Press the government to reopen the 2012 ‘debt settlement’ and write off council housing debt in line with the significant loss of rental income resulting from government policies since 2012;

  • Commit to cancelling so-called council housing debt if elected to government.

The LRC agreed to write to the Labour leadership calling on them to support these proposals. It also agreed to circulate its affiliated organisations to ask them to do likewise. More

Why the proposal to “appropriate” HRA assets should be withdrawn

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Swindon Council is proposing to transfer assets – garages, shops and “amenity land” – from the Housing Revenue Account to the General Fund. Below I explain why the ‘legal’ justification for this proposal is wrong, how the proposal would be financially detrimental to the HRA and tenants and why it should be withdrawn.

1) Housing Revenue Account ‘ring-fence’; Background

Council housing is accounted for in a ‘ring-fenced’ account within the General Fund. The ring-fence was introduced in 1989, primarily to prevent rates being used to support council house building. However, it also meant that council rents could not be used to support other services. Prior to 1989 transfers between the HRA and the General Fund were common. Rates had been used to support council house building from the end of the First World War. What is less well known is that rents were used by some councils to support other services. In the case of Dacorum Council at one time 40% of their non-housing services were paid for with tenants’ rent. The 1989 Local Government and Housing Act changed this. “From 1st April 1st 1990 there were to be no transfers from the General Fund to make good deficits on the HRA, and transfers from the HRA to the General Fund were only allowed in certain prescribed circumstances” (The HRA Ringfence, Chartered Institute of Public Finance and Accountancy LAAP Bulletin 22).

When Margaret Thatcher introduced Right to Buy in 1980 and council homes began to be sold off to the sitting tenants, what were council estates when built began to include home owners and, later, tenants of private landlords. Services which were previously provided solely for council tenants were now provided for ‘mixed communities’. The 1989 Act included rules for determining when the General Fund should make a contribution to the HRA and vice versa. Schedule 4 Part III of the 1989 Act said that where “benefits or amenities” were shared by the community as a whole, “the authority shall” (i.e. must) make contributions to their HRA “from some other revenue account of theirs” which will “properly reflect the communities share of the benefits or amenities”. Swindon Council does not appear to have been carrying out this duty (of which more later). Read on below or download a PDF here appropriation More

HRA robbery

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Swindon Council has sent out a questionnaire on ‘2017/18 Housing Funds’. It asks for tenants’ opinions on how to deal with a shortfall of £1.34 million next year. It lists the reasons they have less money as the loss of homes due to right to buy, the 1% rent cut imposed by central government, and the need to invest in homes.

What they conveniently neglect to mention is the loss of income as a result of the proposed transfer of garages, some shops and “amenity land” owned by the Housing Revenue Account (HRA), to the council’s General Fund. Their questionnaire is silent on the fact that these transfers will mean the HRA would lose annual income of £1.309 million. Garage rents of £1.074 million and £235,000 income from shops/commercial premises will be handed over to the General Fund. Last year the garages made a surplus of £724,000 after costs are accounted for. More

“Affordable Rent”: Slough Council “doing the Conservative government’s dirty work for them”?

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Slough Council, a Labour administration, is proposing to apply the Tory government’s “affordable rent” policy to new council homes it plans to build. So-called “affordable rent” is up to 80% of market rent. According to the Slough Observer the town’s Cabinet is proposing rent increases along the following lines.

Current council rent

Affordable Rent”

1 Bed

£394.90 pcm

£656.50

2 bed

£474.80

£840.32

3 Bed

£553.80

£1,061.19

4 Bed

£607.45

£1,280.00

Any local authorities that accepted money from the Homes & Communities Agency for new build had to sign an agreement that they would charge “affordable rent” on new properties. The scheme also included “conversions” of existing stock from social rent to affordable rent in order to make up for the low level of government grant. In the case of Swindon’s Conservative administration, for instance, a building programme of 104 homes, partly funded by HCA grant, also involved conversion of 142 social rent homes to “affordable rent”.

However, any council building new homes with their own resources are not obliged to charge “affordable rent”. So why is a Labour council proposing to introduce it? The Cabinet document says that it has had to review its position on charging council rents for these reasons: (read on below or download a PDF here sloughhousingarticle ) More

“The case for cancelling council housing ‘debt’”

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Swindon Tenants Campaign Group’s new pamphlet, The case for cancelling council housing ‘debt’, aims is to raise awareness of the scale of the funding crisis which existing council housing is facing and to promote measures which will resolve this crisis. It calls on Labour to address this crisis by

  • Pressing the government to reopen the ‘debt settlement’ of 2012, and

  • Committing to cancel the Council housing ‘debt’ if elected to office.

Below we explain why these measures are necessary.

Council housing funding crisis

Council housing is facing a serious funding crisis. Government policies since 2010 are responsible for a significant decline in the income local authorities collect from tenants’ rent. In 2012 a new council housing finance system, self-financing, was introduced. Under this system local authority Housing Revenue Accounts1 receive no subsidy. Their income is overwhelmingly from tenants’ rent and service charges (around 91%)2. In ending the old housing subsidy system, the government divided up what it said was the national council housing debt, and redistributed it amongst councils. More than £13 billion extra debt was imposed on 136 local authorities, whilst 34 had some debt relief. Councils have to repay the principal (the original ‘loan’) and pay interest annually. So hundreds of millions of pounds a year have to be paid to the government’s Public Works Loan Board. This is money which cannot be spent on the upkeep of homes. Swindon was given an extra £138.6 million debt which costs more than £9 million a year to service. Even an authority like Leicester, which was one of the 34 which had their debt reduced, still pays £9 million a year to service theirs. More

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