Budget 2014: the next five years

Never mind today and tomorrow: what does the Budget mean for housing over the longer term?

As usual, some of the most revealing information comes not in the speech or the Treasury’s background documents but in the Economic and Fiscal Outlook published by the Office for Budget Responsibility. This time around the detail and the forecasts for the next five years have a lot to say about housing benefit, the welfare cap and the housing market.

Read the rest of this post on Inside Edge, my blog for Inside Housing


Minding the gap or moving the government?

What can be done about the London problem: the growing economic divide between the capital and the rest of the country?

Mind the Gap, a two-part BBC documentary by Evan Davis, looked at the causes and consequences of the growing divide between London and the rest of the country. He argues that powerful economic forces are polarising Britain: in theory technology should mean we can work from anywhere but in practice the economics of agglomeration mean that businesses look to cluster together and secure the benefits go with being close to each other.

However, for all those positive effects there are negative externalities too: the pressures on transport infrastructure, the environment and perhaps above all housing. Not so slowly, but surely, Londoners are being priced out of their own city. Much of this was summed up by in part one of the programme by film first of The Shard and then, just a few miles, the derelict and the soon-to-be-gentrified Heygate Estate.

Mind-the-gap

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Incentives, bribes, fracking and housing

The prospect of local communities gaining an estimated ‘£10 million per wellhead’ if they approve plans for fracking in their area got me thinking about the role that incentives (or bribes) can or should play in countering opposition to controversial development.

As far as fracking goes, local authorities will be able to keep all of the business rates they collect from shale gas schemes rather than having to give half back to central government. The government estimates that the concession could be worth up to £1.7 million a year for each fracking site approved.

On top of that, energy companies have pledged to give local communities £100,000 for test drilling and a further 1 per cent of revenues if shale is discovered. The double payment seems calculated to forestall opposition to an industry that could potentially affect every county in England except Cornwall but which ministers believe is vital to the future of the economy.

However, that seems not to be enough for many councils and MPs and an all-party group in the North West is demanding that the Treasury give up a share of its tax revenue so that even more of the profits go local.

I’m interested here not so much in the pros and cons of fracking (and I do live in Cornwall) as in the wider relevance of these sort of incentives.

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Silly season

Silly? Naïve? Bonkers? Proposals by the RICS for managing house price inflation are getting about as warm a welcome in the property industry as the UN got at Conservative HQ.

Some of the reactions are just as self-interested too since an end to house price volatility would be good news for people who want to buy but very bad news for some of those queuing up to say the whole idea is crazy. While some critics point with good reason to the practical difficulties of implementing the idea, others seem personally offended by the very idea of putting a stop to the house price gravy train.

Read the rest of this post on Inside Edge, my blog for Inside Housing


Osborne’s symbol of turning a corner

The venue for George Osborne’s speech claiming that the economy is ‘turning a corner’ may turn out to be a symbol of rather more than the economic recovery he had in mind.

The Chancellor was speaking at One Commercial Street, a half-finished 21-storey development of shops, offices and homes on the edge of the City of London and his choice of venue was no accident:

‘You’re probably thinking that a construction site is a strange place to make a speech. But I’ve invited you here for a reason. This development – 1 Commercial Street – began in 2007. The plan was to turn this building into 21 floors of office space, private apartments and affordable housing. Construction began; and continued at a pace. Until in 2008 the work simply stopped. Investors pulled out. Jobs were lost. And the site lay silent for three years.

‘But last year, something exciting happened. Construction began again. Today, 230 people are working here at 1 Commercial Street to complete the development – and it will open its doors next year. I’ve brought you here because this building is a physical reminder of what our economy has been through in the last six years.’

Work on the development did indeed stop in October 2008, when the concrete frame had been built as far as the 11th floor. It took three and a half years and a change of owner before housebuilder Redrow restarted work on the tower in May 2012.

So far, so good for the Osborne narrative. Work stalled by the credit crunch is finally underway but work on what? What does 1 Commercial Street really say about the nature of the recovery he was proclaiming?

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Never knowingly undernudged

So-called ‘John Lewis-style mutuals’ are (depending on your point of view) the future of the public sector or a euphemism for privatisation. However, the expression may have some unexpected implications for the government.

Cabinet Office minister Francis Maude launched a competition today to find a commercial partner for the government’s Behavioural Insights Team – or Nudge Unit. He described the move as ‘employee-led’ as the 12 Nudge staff have led the process and will continue to run the organisation. Reports suggest that private companies will be invited to bid for a stake of up to 50 per cent in the new business in return for the government guaranteeing long-term contracts. The staff and the government would also own stakes.

nudge

The Nudge Unit is claimed to have already saved the government millions of pounds although it not quite clear how. It hit the headlines for different reasons today when it was revealed to be behind bogus psychometric tests for jobseekers. It is best known to me as the unit that the DCLG failed to consult when it introduced the New Homes Bonus in a bid to change the behaviour of local authorities and I wonder what, if anything, it had to say about the behavioural impacts of welfare reform that the DWP found impossible to quantity.

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Ignoring the obvious

Without local authorities, England has only seen more than 200,000 housing starts three times since the war. So why is council housing being ignored now?

As John Perry argues in Inside Housing, councils are currently building around 3,000 homes a year but they could build 15,000 if they were given more freedom to borrow. ‘A government that is desperate for house building shouldn’t look a gift horse in the mouth,’ he says.

Desperate is exactly the right word for our current performance on housebuilding: just 105,000 starts in England in 2011/12, down from a miserable 112,000 in 2010/11 and less than half the level needed to meet demand and prevent an ever-increasing spiral of rising prices and rents.

Read the rest of this post on Inside Edge, my blog for Inside Housing


Yet more cuts

As Crisis launches a campaign against ‘unworkable and irresponsible’ cuts in housing benefit for the under-25s, there is another scary reminder today of the bleak prospects for the next spending review.

Fiscal Fallout, a report from the Social Market Foundation and Royal Society of the Arts, concludes that the flat-lining economy will make the structural deficit significantly higher than forecast in the Budget in March.

Read the rest of this post on Inside Edge, my blog for Inside Housing

 


Squeezed out

Housing is the big thing missing from today’s major report on living standards from the Resolution Foundation.

The final report of its Commission on Living Standards looks at the plight of low and middle income families. Things were bad even before the crash with average incomes falling by £570 between 2003 and 2008 as growing inequality meant that prosperity was not shared around. The gap was only made up by a £730 a year increase in tax credits.

Read the rest of this post on Inside Edge, my blog for Inside Housing


Five-year stretch

Five years ago this month I started my blog for Inside Housing wondering how I would ever find enough interesting things to say. I needn’t have worried.

Fortunately for me (bad news is always good news for bloggers and journalists) and unfortunately for everyone else, the week before I wrote my first post a small bank called Northern Rock went bust. The consequences of that still dominate my blogging five years later (and hopefully that makes it interesting enough to keep reading).

Read the rest of this post at Inside Edge, my blog for Inside Housing


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