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Comment: From Westminster to Stormont – forty years of failed housing policies, by Dr Stewart Smyth

Wednesday, July 19th, 2017


Public housing has always been financially sustainable – it is political choices over the past forty years that have sought to undermine social tenure, writes Stewart Smyth. He explains how housing policy has evolved in Northern Ireland and makes the case for a new approach. First published on the LSE British Politics and Policy Blog.

It was a tragic and unwelcome co-incidence to launch a report about public housing in the same week of the horrific fire in west London’s Grenfell Tower. We will need to wait for the investigations to establish the exact causes of the fire but one conclusion is immediately evident. This tragedy arose from an environment of cuts in funding, de-regulation, outsourcing and privatisation policies that have been applied to all public services over the past forty years. Even before the austerity policies of the Coalition government, council tenants suffered from what was known as the Moonlight Robbery.

In 2008/09, council tenants in England paid £1.4 billion more in rent than the management and maintenance allowances spent on their homes. In the following year, according to the government’s own calculations, it was estimated that Kensington and Chelsea needed an increase of nearly £5 million in that year alone, in repairs allowances.

Each news report brings more allegations and evidence of building and fire regulations and inspections being out of date and not fit for purpose. And then there are the privatisation policies – based on the neoliberal view that the public sector is inefficient and bureaucratic and the private sector is innovative and provides good value for money. In other words, public sector badprivate sector good.

This is the ideology that gave rise to the privatisation of council homes through the Right to Buy, introduced in the Housing Act 1980, and a range of partial-privatisation arrangements. One such arrangement is the Tenant Management Organisation (TMO) that managed the Grenfell Tower.

When New Labour came to power they refused to fund council housing directly, forcing local authorities into PFI schemes or arm’s-length management organisations (like the TMO in Kensington and Chelsea) or large-scale voluntary transfers (also known as stock transfers). It is the last of these schemes that is now being introduced into Northern Ireland.

Public housing in Northern Ireland

Sectarian discrimination in local authority housing allocations up to the late 1960s was one of the key issues taken-up by the NI Civil Rights Association. Before the start of the Troubles, Bloody Sunday, and the subsequent armed campaigns by both Republican and Loyalist paramilitaries, housing was the cause of rioting in 1969 in Belfast and across NI. The Westminster government’s report into these disturbances identified the inadequacy of housing provision, unfair means of allocating new build homes, and mis-use of discretionary powers to ensure Unionist control of local government.

One of the final acts of the Labour government in 1970 was to set in motion the establishment of the Northern Ireland Housing Executive and transfer all local authority housing to this new body. Over the intervening decades the Executive has been one of the success stories in NI to such an extent that a PwC report in 2011 stated:

Since its introduction nearly 40 years ago it has delivered significant social benefits throughout Northern Ireland with the quality of the housing stock having moved from one of the worst in Western Europe to what is now regarded as best quality stock. It is rightly regarded nationally and internationally as a leading authority on ‘best practice’ on both housing management and community building.

However, not all political parties in NI share this view of the legacy or the performance of the Housing Executive. For the past five years, successive DUP ministers in the Department for Communities (and its predecessor) have sought to break-up the Housing Executive through internal re-organisations and a policy of stock transfers.

Stock transfers are privatisation

Stock transfers are aimed at moving public housing ‘off-balance sheet’ for the government, by giving the housing to a housing association. Housing associations are private limited companies, which have a not-for-profit basis often with a charitable status. Historically, for government accounting rules, they are considered to be in the private sector and so can borrow without hitting the government’s debt numbers. [In practice this position has continued despite the recent ONS decisions to classify housing associations as quasi-public corporations]. This private finance is then used to fund the maintenance and improvements of the homes transferred.

There are two major problems with this policy, as the initial stock transfers in NI have highlighted. First, housing associations have to charge higher rents. This is because they have a higher cost structure than the NI Housing Executive (NIHE), partly due to the private finance they use. It is more expensive for housing associations (as medium-sized private companies) to borrow than it is for the Housing Executive (as a large public corporation).

For example, in the proposed transfer on the Grange estate, Ballyclare rents are to increase by 18 per cent. In this estate over 70% of NIHE tenants are on full or partial housing benefits; resulting in public money going straight to a private landlord so that they can pay interest to financial institutions, and tenants not on housing benefit having to find that money themselves.

Second, housing associations do not perform as well as the NIHE when it comes to responding to repairs. For example, if the repair needs to be completed within four days, the NIHE achieve the target in 97.5 per cent of cases. The same number of housing associations is just 82.4%. What we get with stock transfer is the old story of privatisation – higher prices and worsening services.

Political Choices

It is estimated that the NIHE needs £300 million a year for the next five years to start the maintenance and upgrade programme caused by years of underfunding. At the end of 2016 the then NI Finance Minister estimated the cut in Corporation Tax would cost £270 million a year off the block grant. If that money was redirected, a prudent estimate is of 4,200 new jobs in housing alone with increased economic activity of £900 million per year. These are real and achievable economic outcomes that are within the control of the Assembly; rather than gambling on potential investment decisions, made in boardrooms of multinational corporations.

For a radical housing policy:

The NI Executive government are in a fortunate position of having a major body, the NIHE, with an outstanding track record of improving the living conditions for tens of thousands of people over the past forty years. However, recent years have seen a concerted effort by some politicians to break-up the Housing Executive, and, in the process, this legacy of improving living conditions has been lost. It does not have to be like this. The new NIPSA report, Our Homes, Our Future, sets out a number of recommendations for both the NIHE and housing more generally. Another housing policy is possible – one that is based on putting the basic human need for shelter before money and profit.

Comment: Housing policy can’t be fixed until we treat houses as homes and not as stores of wealth

Monday, December 21st, 2015

First published on LSE’s Politics and Policy blog – click here to read the original edition.

Last week, Stewart Smyth outlined recent developments in Social Housing policy up to the Comprehensive Spending Review. In this follow-up article he looks to the future, arguing that lack of access, not lack of housing itself, is a crucial problem. He further highlights how the issue runs deeper still; until we treat houses as homes, and not as stores of wealth, the contradictions in housing policy cannot be solved.

Housing policy, no less than any other policy area, is full of tensions and contradictions. Some of these exist in the realm of political hyperbole: when the Chancellor promises the biggest house building programme since the 1970s, he omits that those levels were only achieved because of the contribution by local authorities. And his policy has no budget or role for council house building. Another contradiction is shown with the dramatic reduction in upfront capital grants for housing association new builds and the introduction of affordable rents: this apparent saving comes at a cost of increasing the housing benefit bill.

The Comprehensive Spending Review reported that house price increases have moderated down to an expected 6.2 per cent in 2015, from 9.9 per cent in 2014. Yet it also included a prediction from the Office for Budget Responsibility that average earnings will increase yearly by only 3.5 per cent, up to 2020. So addressing the housing crisis in a piecemeal manner will create winners and losers as one side of a contradiction is preferred for a period of time.

But the house price/wages increase contradiction hints at a deeper issue – what is the nature of the housing crisis? This seems like an odd question, as the common sense answer is that we are not building enough new homes. Certainly, in the dominant policy discourse this would appear to be the sole issue. For example, the Lyons Review takes as given that:

“For decades we have failed to build enough homes to meet demand. We need to build at least 243,000 homes a year to keep up with the number of new households being formed.”

Earlier this year, the Department for Communities and Local Government estimated household formation in England at 220,000 per year up to 2020. The Conservative government (appear to) accept the need to build more houses and have preferenced first-time buyers with their policies since the election. However, when you dig beneath this consensus the issue starts to metamorphosise. In his 2014 book, All that is solid, Danny Dorling convincingly shows that we have never had as much sheltered space available in Britain; the issue is one of inequalities in terms of access to that space. And Dorling is not alone.

The UK Housing Review Briefing Paper 2015 highlights the link between economic inequalities and access to housing:

“Among homeowners just over a quarter of all housing wealth was owned by people in the top income quintile with half owned by the top two quintiles.”

In an earlier report the same authors show that nearly half of owner-occupiers under-occupy their homes. Add in tax changes, such as increasing inheritance tax reliefs, and the conclusion is stark: “the housing market seems destined to continue to fuel inequalities in the UK”.

The conclusion here is that building more homes will only add to the problem as the inequalities continue. One potential solution would be for people under-occupying family homes to downsize instead. But this highlights a deeper issue..

Fundamental contradictions between exchange values and use values

For many owner-occupiers their home is a store of wealth based on its potential exchange value (i.e. what it could be sold for). This is the policy position we have all been encouraged to embrace whether it is through tax incentives, such as mortgage interest relief, or huge discounts through the generations of the Right to Buy policy. The contradiction occurs here when we consider the use value of a house, as a place of shelter, somewhere to live. Further, an address is needed to access a range of social services (such as health, social care and education) and participate in democratic society (for example, through elections).

The past forty years has seen consistent and persistent efforts to undermine the use values of housing, preferring ever-increasing exchange values; as David Harvey has summarised: “The reckless pursuit of exchange value destroyed, in short, the capacity for many to acquire and afterwards sustain their access to housing use values”.

Therefore, the fundamental contradiction is between the use value (somewhere to live) and exchange value (a source of wealth) for housing. Framing the housing crisis in this way allows us to see clearly the impact that policies will have. Further, understanding this is important as a misdiagnosis of the problem leads to the pursuit of inappropriate policy solutions. Current government policy is aimed at enhancing exchange values through subsidising homeownership. This is not surprising given the powerful institutional actors (construction firms, estates agents, lawyers, financiers etc.) who all gain from an expanding housing market.

But there is a desperate need to develop policies that emphasise use values. In general terms this will mean withdrawing increasing numbers of homes from market relations, by maintaining and expanding the socially rented sector. Policies that would contribute to that end include:

  • Ending the right to buy for council housing and abandoning its extension to housing associations (especially, as this will result in even more council housing being sold off to fund the discounts for housing association tenants);
  • Developing and enhancing a right to sell (or mortgage to rent scheme) policy. Such a scheme was introduced in the aftermath of the 2008 crash but as interest rates fell the levels of arrears also fell. With interest rates set to rise there will again be a need for an alternative to evictions;
  • And any new building must be for socially rented purposes (either through councils or housing associations).

At this point it is important to remember that social rented housing is financially sustainable, as a report for SHOUT and the National Federation of ALMOs has shown. For years, successive governments raided council housing rents, restricting the amounts spent on maintenance and management (this was highlighted by the Moonlight Robbery campaign). In addition, the housing association sector is making surpluses, over £2 billion in 2014.

The benefits of emphasising socially rented properties include: directly addressing those on waiting lists (including the hidden homeless such as sofa surfers); a reduction in the housing benefit bill as social rents are lower than either affordable rents or the private rented sector; and maintaining and developing mixed communities as opposed to the displacement currently taking in London and other city centres.

Expanding the social rented sector also provides a straightforward answer to the question, where are poor people supposed to live? And arguably, the most important effect of a bigger social rented sector is that any future property bubble has less room to inflate and therefore, the inevitable crash has a lower impact on the banking and finance system, the economy and society generally.

This leaves a twofold task for academics, practitioners and policymakers; first, to develop policies that emphasise use values (i.e. socially rented) in housing, and second, to find ways of popularising them among the population and politicians. No small challenge, then.

Comment: Inviting market forces in – financing social housing from the coalition to the spending review

Friday, December 11th, 2015


First published on LSE’s Politics and Policy blog – click here to read the original edition.

In the first of two articles, Stewart Smyth outlines the recent history of policy changes towards social housing, from the apparent certainty that had emerged at the start of the year, through to the changes that have occurred in the sector since the election in May, and finally up to the recent Comprehensive Spending Review.

At the start of 2015 there was a certainty surrounding social housing; after an initially tentative start by the Coalition government, a new settlement for building social housing had emerged, focused on dramatic cuts in up front grants and a greater emphasis on developing housing associations having to plug the gap.

The election campaign signalled potential large reforms including the extension of Right-to-buy to housing associations. As if that wasn’t a big enough change, the summer saw the first indications that housing associations would be reclassified as public organisations, with their debt (approx £60 bn.) being added to the government’s finances. This move was confirmed on 30 October by the Office for National Statistics.

We can use a financialization framework to help make sense of at least part of this.

Financialization is a term that is increasingly being used to capture a range of processes focused on the increasing power of financial capital through the financial services industry in relation to households. But financialization operates across a range of fields and in multifaceted processes.

There are two facets immediately relevant to understanding the Coalition’s social housing policy – the shareholder value revolution with its accompanying short-termism and the increased amount of debt within the economy in the UK economy. For example, the shareholder value revolution is focussed on achieving this year’s numbers; in this process, long-term capacity and productivity is reduced. According to the McKinsey Global Institute the UK’s total debt to GDP ratio now stands at 252 per cent; an increase of 30 points since 2007.

Both processes are evident in the Coalition’s social housing building programme – Affordable Homes Programme (2011-15). Under the AHP the government specified the types of homes (or products as they call them) they would fund:  affordable rent homes, affordable home ownership, mortgage rescue, empty homes and supported housing for the elderly. They also made it clear that homes at social rent levels would only be supported in exceptional circumstances.

In 2012, the National Audit Office investigated the AHP programme and showed how the financing was working. They noted that ‘the Programme is intended to build housing with a third of the grant per home of earlier affordable housing schemes’. In further detail, they added:

“It will involve housing providers spending some £12 billion on new homes, funded by a combination of government grant (£1.8 billion), borrowing by providers supported by rents on the new properties (we estimate around £6 billion), and funding from other sources (about £4 billion). Rents totalling around £500 million a year on new homes will be paid by tenants, approximately two-thirds of whom are supported by housing benefit.”

It was clear from the start that the AHP was designed to increase debt levels, debt that the government thought would be private.

The focus on short-termism is not as immediately obvious but is no less an important element, and can be seen in two aspects. First, in the shift from higher upfront capital funding (under the previous programmes) to a reliance on higher rent levels that increase the benefits budget (i.e. revenue expenditure) over the longer term.

This can also be seen in the government’s attitude towards value for money which was to deliver the largest number of homes given the funding available. However, according to the NAO this produced a lower benefit to cost ratio than the previous National Affordable Homes Programme (2008-2011).

The second aspect of short-termism concerns the use of housing association resources, whether that is through the rationalization of housing stock (e.g. the sale of voids or conversions of social rents to affordable rents) or utilizing any spare borrowing capacity. These are one time funding manoeuvres, which are considered to be unsustainable as a long-term funding model.

The AHP is incapable of addressing the lack of social housing supply and therefore cannot help the 1.7 million households on council waiting lists. Unless there was a change in policy direction, the AHP was leading to a debt bubble being inflated which at some point would become unsustainable; but it would be off the government’s balance sheet.

Therefore, the reclassification of housing associations as public bodies would then appear to be a major headache for the government; yet the response so far has been rather muted, with no mention of re-privatisation in the 2015 Spending Review.

Further, because the announcements confirming the extension of Right-to-buy to the sector and the ongoing reduction in rents came at the same time that the ONS started to look at housing association, there is a perception that these were the causal factors in the final reclassification decision. However, the ONS make no mention of either of these policies in their notification statement. Instead, the decision was backdated to 2008, to the Housing Regeneration Act (2008) introduced by the previous Labour government

This all gives support to the argument that the growth of the housing association sector was not about the artificial measurement of public debt but had more to do with a twofold ideological stance of successive government since the 1980s. First, is a strategy to undermine council housing through the stock transfer process. Second, is the belief that competitive market forces can deliver (mainly through some sort of trickle down process) social housing for the most needy in our society.

The concern now is that the government will treat housing associations in the same way as they have council housing and turn it into a Cinderella service through cuts in funding and the extended Right to Buy. This is what was behind the co-ordinated attack on housing associations in July by Channel 4 news and others.

Of course many of us have been critical of the excessive executive salaries in housing associations for many years; something successive governments have shown no concern about. It is the charge that housing associations are not building enough that is a deliberate misrepresentation of the sector. The housing association sector is not designed to deliver a mass building programme.

It is differentiated in its composition with many small associations who do not develop new homes. For example, of the 1,783 registered providers only 336 have more than 1,000 homes. Further, nearly half of these are stock transfer associations who were created for the sole purpose of improving the condition of the housing stock through the Decent Homes policy. There are a relatively small number of very large associations who have active development programmes. In 2014, the top 50 developing associations completed more than 40,000 homes.

In the space of nine months the financial and funding environment within which housing associations operate has changed utterly. There is now significant uncertainty about the future direction of government policy for the sector coupled with significant strains being placed on individual housing associations that have developed strategies based on one set of assumptions only for all those to change.

A Pioneering Academic: Remembering Tony Lowe

Wednesday, June 17th, 2015

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We celebrated the life and contribution of the late Professor Tony Lowe at a series of events on 3 June.

Over 70 attendees came for a day of events at Sheffield University Management School organised by members of the Accounting and Financial Management (AFM) Division and the Centre for Research into Accounting and Finance in Context (CRAFiC).

Head of the AFM Division at Sheffield, Professor Bill Lee, said: “We were delighted to welcome guests from academic and practitioner backgrounds, as well as individuals who knew Tony personally. I was very honoured to welcome many of Tony’s family who helped us during the ceremony to rename the Lowe Lecture Theatre in the Management School.”

“Tony Lowe was the University of Sheffield’s first Professor of Accounting and Financial Management and led The Sheffield School of accounting research, so to see him honoured in the building was very important to us.”

The day began with the Early Career Researcher and PhD workshop and an introductory lecture from Professor Lisa Jack (Portsmouth) discussing social theory and accounting research. The workshop was co-organised with the BAFA Inter-Disciplinary Perspectives SIG and was supported by the Management Control Association. Attendees then split into groups of six to analyse how social theory can be applied to help understand current events. Bill Lee (Sheffield), Doris Merkl-Davies (Bangor), Robin Roslender (Dundee) and Lesley Catchpowle (Greenwich) led these groups.

Following lunch, there was a comprehensive feedback session and discussion on the morning’s events and the naming ceremony. Attendees then filled the Lowe Memorial Lecture Theatre ahead of a panel session discussing the relevance of The Sheffield School today.

Dean of the Management School, Professor David Oglethorpe, and Professor Bill Lee opened proceedings and introduced the panel which was facilitated by Professor John Cullen and comprised Emeritus Professor Richard Laughlin (Kings College, London), Professor Prem Sikka (Essex), Professor Christine Cooper (Strathclyde) and Professor Jane Broadbent (Royal Holloway).

The discussion was broad, but also introduced fascinating insights into Tony’s life and career. While Richard discussed The Sheffield School’s basic principles, Prem touched on how accounting academics can engage the political arena. Meanwhile, Christine profiled the effect of neoliberalism on society and higher education and Jane presented the history of the Management Control Association (MCA), which Tony had helped to found, and the need to revisit The Sheffield School’s original debates. A lively Q&A session followed.

As attendees retired for supper, Dr Stewart Smyth (co-director of CRAFiC) read tributes to Tony which we received from those who couldn’t attend. He concluded: “The day was a fitting tribute to a man who contributed so much to the School, and to the accounting and financial management as a whole. It was an honour to celebrate Tony’s legacy at Sheffield University Management School.”


Find out more about CRAFiC
Find out more about The Sheffield School and Prof Anthony Lowe