You might think there was some sort of major political crisis on. Prime Minister’s Questions has become a thing of spooks, dodgy private investigators, IMSI-catchers, and dangerous redheads. MPs Dennis Skinner and Graham Stuart have been agreeing. At long last, it’s a House of Commons like me.
If all the Murdoch, all the time is beginning to pall, how about a quick trip to the latest Coalition policy crash site?
As usual, the accident could have been foreseen and indeed was. Back in October 2010, we asked how much the Local Housing Allowance cuts and associated benefits cap would change the electoral map and how much the government would spend in B&B emergency accomodation. We noted the potential conflict between the central government and Tory councils , and enquired into the real-estate lobby’s role in the whole thing. And here’s a collection of useful links.
Now, the rest of the world has caught up. Somewhere inside the DCLG, while Eric “Alderman Progress” Pickles’ great back was turned, an evil little monkey leaked their internal modelling exercise to the newspapers. David Cameron, as Red Brick and the Obscurer point out, had repeatedly promised that slashing housing benefits somehow would not render anyone homeless.
But the DCLG’s own estimates reckon that some 20,000 additional “homelessness acceptances” will take place as a result of the benefits cap, on top of another 20,000 as a result of the slashing of Local Housing Allowance rates. A “homelessness acceptance” is defined as one household being registered as homeless by the state and put into the pipeline for emergency accomodation.
It’s worth pointing out that presumably, the DCLG has priced-in the degree to which they could be stingier. They’re not counting applications, but acceptances. Why?
The answer is, of course, that the rate of acceptances determines how much the local authorities have to pay out for emergency housing. This is a mechanical process; LHA is cut, evictions happen, claims are processed, B&Bs are booked, and bills are paid. Then, there are a string of other knock-on effects - schools in the areas of net departure will see a sudden crash in their enrolment, with a similarly automatic dive in capitation payments.
As an example, Westminster Council is expecting to fork over an additional £18m in B&B accomodation next year as a result of the benefits cut. A whole string of other councils will soon be faced with a similar Pickles payout to South Coast slumlords.
How bad are they? Jon Snow of Channel 4 News reports that some local authorities deliberately don’t carry out inspections for fear that if they did, they’d get Pickled too, because there are so many people they’d have to rehouse. About 40% of the private rental sector is officially rated as being in “poor” condition.
So, what’s going to happen? In this Bllod & Treasure comments thread, we had a go at that. The official line is that the landlords will all agree to reduce their rents. Well, there is a degree of naivety where it stops just being naive and starts to be offensive. But it’s more serious than that.
The country is full of highly leveraged buy-to-let landlords; squint and you might mistake them for the Tory base. The problem is, of course, that they’re tied to their mortgages, which are fixed in nominal terms. If their rents fall significantly, they have to go bust. And they’ve got to fall significantly. The effective benefit cut due to the change in Local Housing Allowance valuation is of the order of 50% in Westminster.
So, what happens to the banks if another ton of mortgages goes cheesy? Alternatively, what if all that property gets dumped onto the market? What then?
A further unintended consequence is that the various housing associations and others who are expected to build over the next few years are dependent on the housing benefit or LHA payments as a revenue stream. And the DCLG modellers make the excellent point that this will almost cut the 56,000 new starts they were counting on in half. Further, Grant Shapps’s new Affordable Homes program is apparently heading for rents of 72% of the market level. LHA is now assessed at 30% of it. Is this workable? And, of course, housing is meant to be a significant contributor to economic growth in order for the OBR sums to add up.
Also, there’s nothing in this for the people who have to move. No redundancy payment or right-to-buy discount - none of the sweeteners Thatcherism dispensed. So what if they don’t want to go?
Obviously, all things considered, this dog of a policy is not going anywhere. It’s already been kicked two years down the road once. It’s far from obvious why Tories would want to stiff the BTLers, risk another banking crisis, and bust construction, while throwing money at smack’n’chips seaside slumlords. But what’s the failure mode?
Clearly, the people in the best positions to moan will be the Tory council leaders around the South-East. You might wonder what Sandy Bruce-Lockhart, the colossus of Maidstone, long time Kent County Council chief, LGA boss, and confidant of Thatcher would have said. But Sandy is dead and a whole world of alleged Tory competence with him.
His successor Paul Carter is probably worth watching. Current LGA chief Sir Merrick Cockell is also interesting, being a Tory star councillor and holder of several important posts in the party. However, as a Kensington & Chelsea councillor, he’s insulated.
Mind you, who these days gets to have a CV like this?
a trader with F. M. Barshall Ltd. From 1977 to 1982 he served the company overseas in Ghana, Togo, Sierra Leone, The Gambia, and China