Monday, 8 November 2010

Peer predicts carnage

On 4 November The House of Lords was the forum for a 'distinguished, illuminating and powerful' debate about the long term impact on housing of the autumn spending review and Budget, and how this could erode the value of housing benefit.

Baroness Hollis of Heigham, who chairs Broadland Housing Association, thanked the Chartered Institute of Housing and the Royal Institution of Chartered Surveyors for their 'helpful' Spending Review briefings, before launching a critique of current reforms.

A double-dip housing recession?

The Baroness drew attention to fears of a 'double dip housing recession'. She said:

'Most lending bodies now require a 25 per cent deposit - £40,000 on an average home - which people with university debts as well will find impossible to obtain. In 2006 there were 245,000 mortgages with a 10 per cent deposit; there are now 28,000. Without parental assistance, the first time buyer will now be 38 and will have lingered 10 to 15 years longer in the private rented sector.'

First time buyers

The Baroness went further, saying that first time buyers, 'will be joined by a second group-owners who have become unemployed. Why? Because now, of all times, the Government are effectively halving the mortgage support they give to families on benefit; halving the interest rate from 6 per cent down to 3.65 per cent; halving the capital covered; and doubling the wait before support kicks in.'

'Many families will face arrears and repossession and be forced back into the private rented sector without the hope of ever rejoining owner-occupation.'

Baroness Hollis suggested that the private rented sector will no longer represent 'transitional tenure' for young people, arguing that instead they are likely to remain there for decades, alongside 'hundreds of thousands of poorly paid professionals who cannot buy, joining the many hundreds of thousands of the low-paid who may be on housing benefit but who cannot access social housing.'

The Baroness said, 'How will private landlords respond? Rents in the private sector will probably rise, according to the National Landlords Association. Yet housing benefit will fall, not just capped at the top end but also, far worse, capped to cover not, as now, the average rent of 50 per cent but only rent of 30 per cent. So 70 per cent of rents will be higher than that and unaffordable in the market.'

Linking housing benefit to the CPI

Baroness Hollis outlined the possible long-term effects of linking housing benefit to the Consumer Price Index (CPI), rather than the Retail Price Index (RPI). She said, 'By 2020, housing benefit based on CPI will have fallen so far behind private rents that it may cover only 10 per cent of available property.'


The peer ended her speech, in which she had frequently referred to the proposals as 'indecent', predicting 'thousands and thousands of families in just a few months will face debt, stress, eviction and homelessness. Weeping children, desperate mothers, defeated fathers-how dare we do this? It is carnage among our own people, and we should be ashamed.'

The debate

As is often the case with debates in the "Other Place", the contributors showed an enviable range of knowledge and experience of their subject matter: speakers included former Director General of Age Concern England Sally Greengross, former chair of the Housing Corporation Brenda Dean and Richard Best, whose housing experience is too long to list. As many Liberal as Labour peers spoke of their concerns.

Government response 

The junior communities and local government minister Baroness Hanham, replying to the debate, described Lady Hollis's speech as 'apocalyptic'.

She said that the housing benefit cap would have "some impact" but that was necessary if the government was to save money to cut the deficit.

"It is true to say that some tenants may need to move from expensive areas. But this is no different to working people who have to move if they cannot afford to live where they want to live," she said.

"There are many, many people of working age who are living out of London coming into London every day of the week, spending a fortune on travel because they cannot afford the rents in London."

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