ROOF Blog

The ability of the Welsh assembly government to formulate housing policy has been hampered by its lack of lawmaking powers, housing expert Professor Steve Wilcox has said. He said the ‘convoluted’ nature of devolution in Wales made it harder for the assembly to bring in new housing policy as it can take years to get permission from Westminster to legislate in specific areas. He added that given the impact of the recession it was ‘extremely unlikely’ Wales would reach its target on social housing.

David Cameron has apologised for his party’s mistakes on the economy. The Tory leader said he was sorry he had got some things wrong and said that politicians needed to admit past mistakes if they were to built public trust and lead the economic recovery. He added that opposition members as well as ministers should admit their failings, and has called on the government to admit the recession was not ‘imported from abroad’ and that ministers allowed debt levels to get out of control and failed to regulate banks properly.

Speaking at the Labour party conference yesterday housing minister Caroline Flint admitted that the government’s target of building three million new homes may never be reached, but said government would encourage the development of the private rented sector as part of a range of measures to kickstart the housing market. She said that the professional rented sector could help provide a better quality of home and more choice for people, adding that the government was exploring other options such as how financial products were marketed, extending the shared equity schemes and ensuring people on low incomes have secure housing.

Meanwhile, Hazel Blears launched an attack on Boris Johnson at a fringe event at Labour party conference, saying that affordable housing in London under the mayor was under threat and was creating ‘ghetto cities’. Ms Blears said that Mr Johnson was moving away from the former mayor’s affordable housing percentage, which aimed at a level of 50 per cent of affordable homes. She said it was important that developers and local authorities are not allowed to spend money for affordable homes elsewhere, or provide affordable homes ‘off-site’. She added that the government is considering changes to its policy of charging business rates to owners of empty commercial properties.

The Council of Mortgage Lenders has confirmed what we all already know – trying to predict short term house price movements is ‘futile’ at the moment. Having admitted its earlier prediction of a 7 per cent fall in prices this year had rapidly become outdated, they go on to say the property market is unlikely to recover from its current slump before 2010.

New figures out from HM Revenue and Customs show that the number of houses sold dropped to its lowest level since records began in 1959, and less than half the figure a year ago. Just 62,000 houses were sold in August, which combined with yesterday British Bankers’ Association figures of just 700 mortgage a day being taken out, indicate that the housing market has ground to a halt.

To make matters worse, recent advice published by Revenue and Customs has also indicated that house builders will face extra tax bills if they rent out the homes they have been unable to sell. Developers may be forced to repay the VAT they have already claimed back, because of the different tax treatment between selling and letting properties

The head of the Housing Finance Corporation has warned that two more housing associations are likely to go bust in the coming 12 months, in a repeat of the Ujima crisis. Speaking at the National Housing Federation conference the chief executive said that probably a lot of failing housing associations will be swept into larger groups, but two are likely to fold entirely.

In America, the Federal Bureau of Investigation has begun an investigation into the four major US financial institutions recently caught up in the financial crisis. Fannie Mae and Freddie Mac, along with Lehman Brothers and AIG are being looked into after allegations that fraud may have caused the troubles at the companies and whether executives deliberately misled the stock market about the health of their businesses.

The Government announced its £1 billion housing package this morning. It aims to help first-time buyers get on the housing market with a £300 million shared equity scheme, support vulnerable homeowners at risk of repossession with a £100 million mortgage rescue scheme, and support the housebuilding industry with a £400 million boost for social housing providers to builde more homes. The chancellor has also announced that stamp duty will not apply to purchases of residential property of £175,000 or less for the next year, and the Department for Works and Pensions will reform support for people in difficulty over mortgage interest payments by shortening the waiting period to 13 weeks. Housing minister Caroline Flint said the government was doing everything to promote long-term stability and market fairness, and repeated the call on lenders to exhaust all other measures before resorting to repossession.

New rules from the Council of Mortgage Lenders and Royal Institute of Chartered Surveyors have come into force to stop mortgage lenders becoming the victims of over-inflated property valuations. Developers and builders must now reveal through a disclosure of incentives form – a 12-point questionnaire - if they have offered buyers incentives such as cash back, cars or paid-for legal fees. Lenders have been concerned that the growing use of incentives to encourage buyers has duped them into lending more than the house valuation. This has been especially true of new-built city centre flats in cities such as Manchester, Leeds and Nottingham.

The Bank of England, due to set base interest rates on Thursday, has ruled out an extension of its six-month scheme designed to ease strains in the mortgage market. The special liquidity scheme which was established in April for a six-month period allows lenders to exchange mortgage assets for government guarantees, will close in October.

According to a National Association of Estate Agents’ survey half of all sales in some areas are being gazundered, as buyers at the last minute reduce their offer. In many cases sellers are forced to accept the new offer to avoid having to put their homes back on the market. One in five agents said half their sales were affected by the practise. Critics, including the Conservative Party, claim the research shows that the government’s housing information packs, brought in to take some of these worries out of buying and selling a house, had failed to make any impact.

And finally spare a thought for the Queen whose property portfolio has plummeted in value. Buckingham Palace fell £57 million during the past year to be valued at £935 million, while Windsor Castle fared better dropping by only £8 million to £180 million.

The Bank of England figures show the number of new mortgages approved for homebuyers fell in July to just 33,000, down 71 per cent on a year ago. This brings further pressure on the government which is expected to release tomorrow a package of financial measures to get the housing market moving again. The latest organisation to claim that governmentefforts are lacking, the Royal Institution of Chartered Surveyors, has come up with its own reforms, after its latest research found that housing sales are at a 30-year low. Recommendations include: allowing the Bank of England to guarantee the issue of new mortgage-backed securities; establishing a tax-free savings scheme to allow first-time buyers to save for a deposit more easily; a short-term holiday on stamp duty, followed by a new lower rate; reduced VAT on repair and maintenance costs; changes to the home information packs; and a mortgage rescue scheme that will allow people to remain in their properties.

Hometrack has also released figures showing that sellers are having to cut almost 10 per cent off the asking price in order to secure a sale, but there were signs that falling prices were starting to attract buyers as the number of viewings to achieve a sale fell for the first time in a year. However properties are still taking more than 11 weeks to sell, twice the time taken a year ago.

Meanwhile, a member of the Bank of England’s monetary policy committee, David Blanchflower, has warned that two million people may be out of work by christmas and house prices will have fallen by 30 per cent unless interest rates are cut. He said the Bank should learn from the example of the US Federal Reserve which cut rates to halt a recession.

Housing Minister Caroline Flint has said that the government has created a housing system that encourages people to claim benefits and avoid working in order to get a council home. She said the ‘demeaning and dysfunctional’ rules force people to manipulate the system in a ‘race to the bottom’. She said the government had started looking at some of the issues around allocations and whether the system is fair or not.

If you had bought a house in a university town during the past 5five years however, chances are you won’t be too concerned about the state of the housing market. Prices have soared in 23 towns by an average of at least 50 per cent – but some towns such as Belfast and Dundee had increases of more than 100 per cent. The UK’s ten most expensive university towns are in the south-east of England.

According to the Guardian, some local authorities are advising tenants served with notices to quit, to stay in their property until they are forcibly evicted. The councils say that tenants who give up their accommodation before eviction could be viewed as intentionally homeless and may lose eligibility for a council home.

MPs called for a ‘radical overhaul’ of the outdated benefits system for carers, and urged the government to provide them with extra financial support. People who care for relatives and friends are believed to save the government £87 billion annually, and the Commons work and pensions select committee has recommended income replacement for those who have to work part-time or are unable to work because of their commitments, and compensation for the extra costs incurred by those providing ‘intensive’ caring roles.

The report coincides with the launch of a new service, FirstStop, which aims to be a free one-stop shop for information about care fees, funding, chosing the right home, as well as information about social care provision, benefits and rights. Help the Aged believes that care fees have increased by 51.5 per cent in the past five years to an average of £20,000 a year, and have predicated that they will double in the next 20 years.

According to the Times today, Gordon Brown could announce as soon as next Tuesday a ’mortgage rescue’ package – a series of measures aimed at encouraging councils and housing associations to offer struggling homeowners financial help in return for a financial stake in their homes. The newspaper understands that town halls will also offer first-time buyers help with deposits in return for a small equity stake, and local government will also be given extra money to buy empty, unsold, new property. But the government appears to have vetoed a proposal to allow councils to compete as mortgage lenders, and has withdrawn plans for a stamp duty holiday.

The eco-town saga rumbles on as Tesco confirms it has pulled out of one of the proposed developments. Tesco owns 80 per cent of the land that was going to be developed into Hanley Grange, a 12,000-home town near Cambridge. After opposition from local campaigners and councils, Tesco announced yesterday that it was dropping the eco part of the proposal, but may try to press ahead with a conventional development. This takes to a quarter the developers on the shortlist for 15 eco-towns who have now abandoned the project.

And local opposition has also given hope to some residents in east Manchester who feared their homes would be demolished as part of a regeneration scheme. Around 550 homes on Toxteth Street are facing compulsory purchase orders under the government’s Pathfinder scheme where their homes will be pulled down and replaced with two and three storey townhouses, and while many owners sold up, about 70 people are still holding out. They are arguing that compared with demolishing the properties, the community benefits, environmental impact and cost of ‘rehabilitiation and refurbishment' will transform the area.

The government has released its code of guidance that local housing authorities should take into account when framing their allocation schemes to offer a choice of accommodation to housing applicants. The guidance says that choice-based letting schemes can have a positive impact on the way social housing is viewed.

The International Monetary Fund dashed hopes yesterday of a quick fix for the British economy, saying the country faces two years of economic pain. The IMF believes UK growth will be 1.4 per cent, down from the 1.7 per cent that was predicted in spring. Next year it estimates growth will be weaker still at 1.1 per cent, compared to Alistair Darling’s projected 2.25 per cent. The IMF said Britain’s woes were worsened by the slump in the housing market, and it estimated house prices will fall by 15 per cent in the next two years.

Despite these predictions, the IMF cautioned that soaring inflation leaves the Bank of England little scope to cut interest rates from 5 per cent. Most evidence is pointing to the annual consumer price inflation rate increasing to more than 4 per cent when July’s figures are released next week, which has had a major impact on the BoE’s monetary policy committee decision today, as interest rates are kept on hold at 5 per cent.

A growing number of critics are coming out against the government’s line on stamp duty. Estate agents and surveyors have told the chancellor that house sales could collapse during the summer because of uncertainty about a temporary freeze in the duty. The Tories have written to Mr Darling accusing him of playing ‘damaging short-term games’ with homebuyers. But in the 1990s, when there was a stamp duty holiday, the positive effects were short-lived.

Halifax house price index figures released today show a fall of 1.7 per cent in July, bringing house prices down by 8.8 per cent in the past year. The monthly drop was smaller than the previous two months, but was slightly higher than estimates. A spokesperson for Halifax said that the housing market was underpinned by a solid employment market and low interest rates, but was being constrained by the decline in credit availability.

Meanwhile the Scottish housing market is heading for its worst ever period of recession, and this will stop the government from meeting its housebuilding targets, according to Homes for Scotland, the industry body. Around 15,000 jobs have been lost across the industry in the past three months, and it estimates that 50 per cent fewer homes are being built than last year. Homes for Scotland told the government that the dramatic reduction will make the target of building 30,000 new housing association homes for rent impossible to meet.

For homeowners, location was still the ‘key’ to their purchase. Almost two-thirds of new buyers quizzed (by property developer Investland) said that the location of their home was more important than interior design, transport links and parking. Of next importance was the size of the house.

And finally, first-time buyers are getting older. Research from mform.co.uk, a consumer website, has found that just 34.5 per cent of all first-time buyers in 2008 are under 30 compared with nearly 50 per cent during 2007. The average amount borrowed has also increased from £117,000 last year to £127,000 this year. First-time buyers now need an average income of £41,600 compared with £34,000 last year, despite recent house price falls.

Destitution among refused asylum seekers and refugees in the UK has more than doubled in 18 months, according to a report by the Joseph Rowntree Foundation, which describes the government’s policy on the issue as ‘unacceptable’. The number of children affected has quadrupled and rough sleepers have increased by a third, and the report puts the blame predominantly down to error or delay in receiving benefits.

As the Bank of England released its July agents’ summary of business conditions, pressure mounts on the government to ease the bottleneck in the credit market. The monthly BoE figures indicate that four out of ten housebuyers in some areas are pulling out of sales, often after losing their nerve or failing to get a mortgage. Adding to the uncertainty, the Bank’s monetary policy committee meeting disclosed that members had considered increasing interest rates to limit inflation.

A Communities and Local Government committee has said England’s economy is threatened with ‘paralysis’ unless the government sorts out chronic problems with the planning system. Failure to recruit more planners and give existing ones more training will hinder the delivery of the government’s three million new homes, and will affect half of all local authorities by 2012. The committee has recommended a national advertising campaign to attract graduates into planning.

Meanwhile housing minister Caroline Flint has set out the government’s latest, and toughest, proposals on establishing green standards in new housing, in a progress report on eco-towns. The towns are expected to achieve zero carbon status in all buildings, including commercial and public buildings as well as homes; providing a minimum of 30 per cent affordable housing; allocating 40 per cent of land within the town as green space, of which half has to be open to the public as parks; and creating more options for travelling and reducing the reliance on cars, including one job per house being reached by sustainable transport.

New national guidelines for private and social landlords, managing agents, tenants and enforcers aimed at cutting the 300,000 fires in residential properties annually, have been released. They apply to existing residential accommodation including single family houses, bedsits, shared houses and flats, but not to new housing. It is hoped that it will help councils and fire and rescue authorities who enforce fire safety legislation adopt a more consistent approach.

Iain Wright, junior housing minister, spoke out against criticism of the Housing and Regeneration Bill and the setting up of the Homes and Communities Agency, saying the agency was not a ‘centrally driven quango’ imposing ‘top down targets’. He also announced the establishment of new Community Land Trusts, that will own or control land for development. Mr Wright added that the name of the new social tenants’ watchdog had changed from Oftenant (Office for Tenants and Social Landlords) to Tenants Services Authority, saying that without exception he ‘failed to see anybody who liked the name’. The Bill was passed in the Lords with amendments and will now go to Royal Assent.

Statistics out from the National Housebuilding Council show that there was a significant drop in private sector housebuilding for the quarter to June 2008. The year on year decrease for the quarter was 51 per cent, while housing association registrations also fell 13 per cent in the year on year figures. Greater London was the only region to experience an increase in new home starts - increasing 8 per cent from the second quarter last year.

The cost of building a house that meets the highest environmental standards is up to 50 per cent greater than a conventional home. The figures, from the department for Communities and Local Government, estimate that the cost of meeting the highest code level ranges from £19,000 to £47,000 per unit, and is higher than building a zero carbon rated home due to the cost of meeting the thermal efficiency standard.

Meanwhile, the National Landlords Association is warning landlords of the risk of rent arrears if they do not carry out appropriate checks on prospective tenants. The NLA is encouraging landlords to make more checks, including the financial record and employment history of tenants. The NLA say that if a tenant fails to pay rent it could take up to six months to resolve, leaving the landlord out of pocket for half their rental income.

In the last week a number of lenders have started to reduce interest rates, dropping the average cost of a new, two-year fixed rate mortgage to below 7 per cent. Yesterday Barclays and Abbey National cut their rates, joining Halifax, Lloyds and Nationwide who cut their rates last week.

A former sub-prime mortgage lender is offering an 8 per cent discount to borrowers if they redeem their loans. The lender wants to get the loans off its books, but can’t find investors willing to buy them, so is making a cash-back offer to 400 customers. The company is also offering to waive its early redemption fee, and says that around 20 per cent of those offered the discount were expressing interest.

And finally a family is being threatened with eviction for keeping chickens in the backyard. The family keeps 25 birds and has been told by council officials that the chickens cannot be classed as pets and the family will be in breach of the tenancy agreement if they are not disposed of.

The Bank of England has released its credit conditions survey for the second quarter of the year and found that the availability of mortgages is likely to continue its decline during the next three months, while the number of people who default on mortgages is expected to rise. The Bank said a big factor in the tightening up was that lenders expect house prices to experience further falls. Chancellor Alistair Darling said yesterday that there was little the government could do to assist on mortgages while the wholesale credit markets remained frozen.

Meanwhile the European Central Bank has defied political pressure and announced it would raise interest rates to their highest level in almost seven years, with a quarter point increase. Fearful of inflation, the ECB president increased interest rates to 4.25 per cent in the first increase in more than a year.

MPs have voted to keep their second home allowance, worth up to £24,000, but decided not to give themselves an above-inflation pay rise. A review by a Commons committee had recommended that the ‘additional costs allowance’ for maintaining a second home should be replaced. However MPs will now only be subject to an internal audit, London MPs will receive a new weighting allowance of £7,500, and all MPs will get a 2.25 per cent pay rise. The Tories accused the government of sabotaging attempts to reform the system after 146 of the 172 MPs who voted to keep the allowances were Labour MPs, including 33 ministers.

Following Wednesday’s announcement that Taylor Wimpey will cut 900 jobs, it’s been revealed that housebuilder Barratt Developments will axe up to 1,000 people, or almost 15 per cent of its workforce. In the last of their figures available, the number of completions had fallen 5 per cent, while reservations were down 33 per cent, compared with a year earlier.

Council tax rebels are to have their bank accounts frozen instead of being imprisoned under new plans unveiled by Local Government minister John Healey. Ministers want to give town halls the power to refer defaulters to the civil courts rather than the magistrates’ courts, where their bank accounts could be seized. Last year more than £600 million of council tax remained unpaid.

And the bad news continues. UK households are 15 per cent worse off than five years ago as rising food and oil prices put the squeeze on household incomes. The report shows that after tax contributions and monthly household bills, the average family has just under 20 per cent left from its gross income, compared with 28 per cent in 2003. And average monthly mortgage repayments (based on a 25-year repayment mortgage at a standard variable rate) is just under £735, which is 78 per cent higher than 2003/4 – driven by higher interest rates and a ‘significant’ increase in the size of a mortgage.

But if it all gets too much, a Belgian architect may have the answer. He has designed a floating city in the shape of a lilypad that could be used as a permanent refuge for climate change migrants. The ‘Lilypad City’ could float around the world as an independent and self-sustainable home to 50,000 inhabitants. However he has yet to estimate building costs or how much it would cost to live on it.