“We argue that there have been failures of vision, collective memory, strategy and regulation that have wasted many billions of taxpayers’ money. The deregulation of financial markets in the 1980s sparked off a flood of house purchase lending that has underpinned massive house price rises and consumed £600 billion of investment that could have found a better use renewing our infrastructure or in research and development to make Britain more competitive in a global market rather than in bolstering house and land prices. The increasing commitment, from 23% to 72% of GDP since 1980, to house purchase loans seems unsustainable; furthermore the increasing flow of demand side subsidies are working to enrich landlords and land vendors, not to stimulate more housing output. The analysis shows that more money has gone into housing but fewer houses have come out. Housing benefits and allowances have imposed a huge and increasing burden on state finances.” [1]

He was one of the few who saw the 2008 disaster coming. The 2013 budget continues the same disaster prone and chaotic link between unregulated finance and land in limited supply.  It is assumed that “stimulating the market” will increase supply, when more likely it will increase prices when our housing is already overvalued.  As Shelter has pointed out if food prices had risen at the same rate as house prices over the last 40 years, a chicken would now cost £51.18. Four pints of milk would be £10.45, and a loaf of bread would set you back £4.36

In London, if not elsewhere, overseas investors, fleeing their dodgy economies, and bankers spending their bonuses, are flooding the market with money buying homes, forcing rents and prices to rise, so squeezing out first time and other young buyers of their homes, moving them away from their jobs and fuelling the London housing crisis.

Stephen Hill of the Pro-housing Alliance commented on the budget:

“Artificially boosting the building of homes for market sale or rent in the UK is just one more example of the predatory capitalism that has created the current financial crisis. For every new construction related job it undoubtedly creates, the net effect of ‘getting the housing market moving again’ i.e. ‘values’ going up, is to suck the life out of the productive economy and reduce GDP. Speculative extraction of the scarcity value of land by landowners, developers and providers of credit is at the rotten core of our zombie economy and divided society.”

Housing Policy should cover all tenures

A coherent housing policy and budget would cover all tenures. But Osborne is obsessively attached to the promotion of a property owning democracy. He can only throw a few crumbs to first time buyers of new builds; but the crumbs will have to be regurgitated when the home is sold. He is fighting a trend.

We would all be better off if he could match his polices to present facts rather on dreams of the future “heaven” of a “perfect market”. Home ownership has begun to diminish and the private rented sector is overtaking social renters. Places and People estimate that there will be 5.5 million private rented households by 2016. Local Authorities are just coming to terms with the localisation of housing provision, and seeing the need for policies covering all tenures from Housing Association, RSL and Council Housing, but the Osborne cannot let go of central government endorsement of ownership.

Our existing housing has some appalling conditions.  The worst is in the private rented sector, even though much of increase in the PRS is in the newer and better quality housing.  The Government’s own figures show 207,000 households in the private rented sector are overcrowded (almost 6%) with 843,000 having a serious health and safety hazard. 1.4 million are classified as non-decent.  At the same time almost 3.3 million owner-occupied homes are classified as non-decent with over 2.2 million having a serious risk to health and or safety. Privately rented homes are also more likely to have damp and mould.  The Government has cut support for local authorities to improve existing housing to zero; yet this sort of housing renewal supports local small business and provides work. Improving existing housing also reduces exported costs, such as on the NHS. Poor housing conditions are an obvious social determinant of health and exacerbate health inequalities. The Budget does nothing to recognize or address this.

Impact of the Housing Benefit Caps

Housing Associations are concerned that the cocktail of direct payments, benefit cuts, housing benefit caps, under occupation penalty, taxation of benefits by councils and council tax arrears will inhibit HA’s ability to inflate and collect rents and so reduce their capacity to build homes. Angelo Sommariva, Public Affairs and Policy Manager of Moat, has also pointed to the total mismatch between the demand for one bedroom accommodation created by the bedroom tax and lack of one bedroom properties in the South East.

Among the many failures to match welfare policy to present facts is an expensive avoidance by Osborne of the economic, personal and social costs when incomes cannot buy adequate, food, fuel clothes, transport and other necessities.  Dr Steve Field, former Chairman of the BMA, is now charged with tackling health inequalities in the NHS. He says, “The fact that the gap (in life expectancy between rich and poor) has widened is inexplicable”. Explanations should be sought beyond smoking and obesity.

The Department of Health has refused to discuss the impact of low incomes on health. In 2009 Labour ministers at the DWP sent research about the relationship between low birth weight, poor maternal nutrition and poverty incomes to Ministers at the DoH. The Institute of Brain Chemistry and Human Nutrition has shown a link between poor maternal nutrition, low birth weight and the poor mental development of the offspring in the womb.

There is a link between poverty incomes, debt and malnutrition. It was bad before the cuts, housing benefit caps and the new imposition of council tax, and is getting worse. The rapid emergence of food banks, which cannot provide a regular healthy diet, and the rise in fuel poverty, so increasing winter deaths among the poorest citizens, should stimulate discussion in the DoH about the impact on health inequalities of “welfare” policies at the DWP and the Treasury which reduce the lowest incomes and increases the costs to the taxpayer in the NHS.

Alice Thompson, writing in The Times on budget day, “A bedroom tax is just what families need”, chose the wrong ethical polarity; “the real victims of the bedroom tax aren’t those who will lose £14 a week housing benefit for having a spare bedroom but those who have no home”.

They are, however, both victims of the failures of the 1979, 1997 and 2010 governments to get to grips with poverty, inequality and the lack of a coherent affordable housing policy. It is better to contrast tenants hit by the caps and homeless people with the people flooding into London from southern European countries, the Middle East and China, or banker’s bonuses, buying second or third homes and leaving them empty. This property boom forces rents above the housing benefit caps creating spiralling insecurity of tenure and employment for increasing numbers of London families and disruption of the education of their children. Land should be used for the common good and all speculation in it regulated or abolished.

Rev Paul Nicolson, Taxpayers Against Poverty & Pro-Housing Alliance

In 2001, the late Inez McCormack – the influential human rights activist and first female president of the Irish Congress of Trade Unions – brought together a wide range of individuals including social justice and human rights activists, community representatives, academics and lawyers from across the island of Ireland, to begin a discussion around the theme of participation and rights. The resulting cross-border conference of 2002 entitled ‘Participation and the Practice of Rights’ evidenced the need and the desire to harness international human rights tools for use in local struggles for equality. Encouraged to explore this further, the emerging organising groups linked in with an international network of human rights experts and advisers, whilst simultaneously moving the discussion into local communities to explore the value of this work to concrete experiences of exclusion on the ground

It was seen as vitally important to link international human rights with local experience. For while the UK and Ireland are required by law (currently) to implement their human rights obligations as defined in the international treaties they have ratified, the realities on the ground clearly demonstrated that this implementation was failing in practice. Only by equipping local communities with the knowledge of these state obligations, and putting tools of rights relevant to their specific conditions at their disposal, could they begin to effectively hold the state to account and bring about real and meaningful change.

Participation and Practice of Rights (PPR, see their website for individual tenant stories) works in Northern Ireland on issues including the right to health, housing, welfare, youth participation and urban regeneration, and employment, directly supporting disadvantaged groups to use PPR’s innovative human rights based approach to tackle the exclusion and socio-economic inequalities they experience.

The United Nations Office of the High Commissioner for Human Rights has recognised the work of the Belfast based Seven Towers Residents Group as an international best practice example of using international human rights standards to make local change. The publication on Human Rights Indicators: A Guide to Measurement and Implementation has cited the Seven Towers use of human rights indicators and benchmarks as “an example of how people can effectively use indicators to claim their rights.” The report examines different methods of monitoring government activity in order to make improvements to the social and economic condition of the most marginalised in society.

Is it not the time for a similar organisation in England? One that can equip local groups who are so badly affected by the government’s attack on human rights either directly or via “welfare reform” to seek their own remedies and hold national and local government to account?

Memorandum from the Pro Housing Alliance

1.0 Executive Summary

1.1. Housing is a determinant of health, with the exported costs of poor housing are met by the NHS and others. Cold, damp and overcrowded housing makes tackling health inequalities harder

1.2. Amateur landlords who too often are ignorant of the law typify the PRS. In some cases landlords are either wilfully neglectful or plain criminal.

1.3. The PRS contains some of the worst housing conditions with more than one-third non-decent.

1.4. High rent levels and lack of security mean that vulnerable tenants too often have to endure poor conditions and do not complain to local housing authorities (LHAs) for fear threats from the landlord and retaliatory eviction

1.5. LHAs too often rely on complaints before intervening and using their enforcement powers.  More vulnerable tenants are unlikely to complain, so this is an ineffective approach to regulation

1.6. Letting agents are inadequately regulated and causing problems for tenants and owners

1.7. HMO licensing has been allowed to become too bureaucratic and its lack of connection with Part 1 of the 2004 Act is a weakness.

1.8. Use of the PRS for LHAs meeting their homelessness duty needs careful monitoring as the supplementary guidance is weak

2.0 Introduction and the Pro Housing Alliance

2.1 The Pro Housing Alliance (PHA) is an alliance of organizations and individuals who recognize the fundamental contribution of housing to public health and that poor housing exacerbates health inequalities.  Member organisations include Care & Repair (England) Camden Federation of Private Tenants, Zacchaeus 2000, Team Homes, Home Improvement Trust; Housing Justice, the Chartered Institute of Environmental Health (CIEH), and C2O Future Planners. The PHA works to encourage others to join it in efforts to bring about a greater recognition of the role of housing in society as a determinant of health and well-being and as a vital element of infrastructure to service the growth of the national and local economies; it seeks to develop the components of a credible and just national housing policy[1].

2.2 It is the view of the PHA that poor housing leads to poor health and exacerbates health inequality (inequity).  The BRE estimates that poor housing costs the NHS in England £600million a year which represents just 40% of the total exported costs to society[2].

3.0 Quality of the Private rented sector

3.1  The private rented sector (PRS) is highly segmented, and contains high quality expensive accommodation and also some of the most unsafe and unhealthy conditions. The PRS has grown substantially in recent year to more than 3.6 million dwellings however according to the English Housing Survey (EHS)[3]: -

• Over 37% of PRS housing is non-decent[4] with the highest incidence of non-decency of all tenures (1.386 million dwellings).

• Some 858,000 homes are non-decent because of the presence of a Category 1 hazard under the Housing Health and Safety Rating System (HHSRS).

• That said Category 2 hazards in the higher bands could still pose a significantly greater risk to health and safety than the average for the stock. PRS homes are more likely to have damp and mould problems (440,000 out of 1.4 million in the whole stock) even though relatively few would be assessed as a Category 1 hazard.

• In 2010, 638,000 dwellings in the PRS were in the lowest two energy-efficiency rating bands (F & G) and 608,000 non-decent dwellings in the PRS failed the thermal comfort criterion.

• Some 29% of all overcrowded households are in the PRS according to the English Housing Survey, and overcrowding is an increasing problem In 2010 some 187,000 households in the PRS were overcrowded compared to 75,000 in 2001-02

3.2  The PRS is made up of many landlords who are both inexperienced and unprofessional, and who own a small number of properties. The number has increased as the result of buy-to-let and slack lending criteria. Within the sector: -

• 89% of all landlords were private individuals who were responsible for 71% of all private rented dwellings.
• 78% of all landlords owned a single dwelling.
• Only 8% considered themselves to be full-time landlords and very few landlords are members of a landlord association or relevant professional body.
• Only one-third of all landlords and agents had heard of the HHSRS[5].

3.3  Amateur landlords typify the PRS. It is easier to let a property to humans than it is to run boarding kennels. Housing is seen as a personal asset plus the value in the market (and rent charged) does not reflect condition. The owner seeks too often to maximize income and minimise expenditure on maintenance and management costs.

3.4  Measures to ensure all involved in renting out properties are competent before they start would contribute to improving quality.  There have always been arguments for licensing the whole PRS but HMO licensing as in the 2004 Act (considered later) can be cumbersome.

3.5  A system of accreditation might be a better approach.  Any accreditation scheme must involving compulsory training. This reflects the recommendations of the Law Commission[6].  This entails national provision of landlord accreditation schemes, available in every local authority area and set on a statutory footing.  Individual or consortia of LHAs could provide schemes, but this need not be the only route so long as any accreditation scheme meets national criteria and is endorsed by CLG or other agency such as UK Accreditation Service or the Office of Fair Trade[7].  There is a good argument for accreditation being a pre-requisite for use of the accommodation to meet the homelessness duty (see below) or for the payment of housing benefit.

3.6  A further step to ensure that the sector is an acceptable standard would be to amend section 8 of the Landlord and Tenant Act 1985. Implied into every letting at low rent is that the dwelling should be fit for human habitation[8]. The Law Commission said this should be implied into all tenancies of dwellings for less than seven years. The principle should be updated further so that it should be implied into all such tenancies that no Category 1 hazard exists at the start of the tenancy and should be kept that way throughout the tenancy. In addition such changes could include a requirement for landlords and letting agents letting such a tenancy (perhaps with a more realistic rent limit), be a member of an accreditation scheme.

4.0 Rent levels

4.1  Rent levels reflect the housing market, and the overvalued housing stock. The housing market suffers from a lack of ethical foundation in the model of the free market followed by UK governments since the 1980s. It is not just supply side or just demand side solutions needed, but a balance. The balance does depend on the state of supply. It is reasonable to focus primarily on supply, when the chronic undersupply of genuinely affordable and healthy housing is one of the main structural problems.

4.2  As the result of an imbalance in supply and demand, the cost of private renting has increased consistently since 2009, hence the increase in housing benefit.  Historically it has been easier for all income groups to find housing opportunities that match their widely divergent incomes. The problem now is that the profile of housing costs is truncated towards the lower end while disparities in income have increased. So access to suitable housing for lower income groups depends increasingly on benefits. This dependence has serious inherent problems.  The solution is for private and social rental growth to be controlled at less than earnings inflation.

4.3 According to the EHS[9] the average PRS weekly rent in England as a whole (excluding service charges) was around twice that of those living in the social housing at £160.  Lower quartile weekly rents in the private rented sector vary by district from £700 to £231 and are much higher in London than any other UK region. By October 2013 over 159,000 London households will face a reduction in the Local Housing Allowance received and 10,000 households will be forced to relocate.

4.4  A survey of London private sector landlords showed that 60% of landlords would not reduce rents for households with lower Local Housing Allowance. This is likely to push the most vulnerable households into the clutches of the more unscrupulous landlords.

4.5  The RICS has assessed the average rental increase in the year to July 2012) was 4.3% with regional variations. In the last year (to July 2012) average rents grew by 6.9% in the North West, by 5.9% in London and by 4.9% in the West Midlands. Further growth of between 2% and 4% is predicted, with 7.8% growth in London. As recent research for the PHA found[10] welfare reforms are already having a detrimental effect on the health and wellbeing of private tenants who claim Housing Benefit, whether in work or not. Yet tenants have little opportunity to improve their situation. They choose to remain living in cold and unsafe housing fearing complaints may lead to eviction or higher rents.

4.6  Feelings of insecurity are heightened which, combined with coping with a small budget, contribute to increased levels of stress and anxiety. Debt damages relationships with families and friends. Tenants lack confidence to find work and for those with a job, it is difficult to concentrate at work.

4.7 Rents should therefore be limited or capped unless a good case can be made for an increase for example to invest in maintenance or improvement.  The Housing Benefit bill has increased so much is because of market rents and increased gap between income and housing costs. A substantial proportion of those in receipt of Housing Benefit are in work – so the taxpayer is subsidising low pay from employers and high rents for landlords.

5.0 Regulation of landlords

5.1  The existence of so many bad or poor quality landlords in the sector partly as the result of ineffective regulation by LHAs is unfair to the more responsible landlords but also makes it less attractive for institutional investors.

5.2. Local authorities have not used their powers or met their duties as well as they might; too often acting only on complaint from tenants. Despite the duty under s.3 of the 2004 Act the removal of the CLG’s capital for private sector renewal and lack of funds to be able to gather the necessary information, there are few LHAs with coherent strategies for the PRS. Indeed the most common way of dealing with hazards found is “informally” although it is not clear what this is, and in the case of Category 1 hazards would be a breach of the statutory duty[11]. LHAs and the regulation of private landlords was covered in detail by a report for Alison Seabeck MP and Karen Buck MP published in 2011[12]. Abolition of the Audit Commission is only going to lead to weaker regulation of the PRS.

5.3 It is clear that the Enforcement Guidance[13] (and ODPM Circular 5/2003[14]) should be updated and revised to reflect the changes and lessons since the 2004 Act came into force.

5.4  Even with a low level of intervention however, between September and November 2012 LHAs using the Housing Health Cost Calculator estimated housing interventions saved the NHS and society as a whole more than £1million.[15]

6.0 Regulation of letting agents, including agents’ fees and charges

6.1 The RICS has highlighted the potential for rogue lettings agents to cash in on the rental boom due to a combination of consumers’ low expectations and a total lack of effective regulation.

6.2 Anyone can set up a lettings agency without appropriate qualifications, knowledge or understanding of the rental process. It is not compulsory for agents to conform to any code of conduct or register with a government-approved redress system. This allows letting agents to take advantage of, and charge both potential tenants and landlords, as Shelter has shown. Letting agencies charge fees to access keys often for better quality properties. This has the effect of forcing lower income households to seek accommodation from poor quality landlords with poor quality property, also making moving more difficult and expensive[16].

6.3 It is apparent from lack of awareness from tenants of what they should expect from their agent is compounded by a lack of effective regulation. The SAFE Agent is a scheme to protect tenants and landlords who are paying money to a letting agent for rent or a deposit but it would appear not to be well known

7.0 Houses in Multiple Occupation (HMOs)

7.1  HMO licensing in the Housing Act 2004 is a more bureaucratic approach than many campaigners for its introduction envisaged. For example, licensing cannot be used to deal with hazards under the HHSRS (other than incidentally).  It would be more sensible for it be a pre-requisite for the grant of a licence that no Category 1 hazards exist in the HMO. It was envisaged that licensing could be merely an administrative exercise. In practice it seems few local authorities grant a new licence without a visit. A purely administrative approach should have been more like the proposed registration in the Rugg Review[17].  It was, and remains unclear whether licensing was intended to address management issues or the physical conditions.

7.2  The licensing regime and prescribed standard is also inconsistent with the principles of better regulation.

7.3  The infrequency with which Interim Management Orders are used indicates that licence applications are rarely refused.  This means either all applicants are “fit and proper” or else LHAs are taking too relaxed an approach, but also focussing on “easy” cases[18]

8.0 Tenancy agreements and length and security of tenure

8.1  One of the problems with the sector is the lack of security for occupiers. It is too easy for landlords to gain possession with no cause at two months’ notice, plus impose unlimited rent increases. This makes it impossible to establish a home within the dwelling. In part this is a consequence of the buy to let market, and the mortgagee requiring lettings on short terms so vacant possession can be gained should the mortgagor default.  It would be better for both landlords and tenants to have a longer minimum period of a tenancy, 3 to 5 years now that the PRS is becoming such an important part of housing provision (this could be linked to annual rent increases in line with the increase in average earnings.

8.2  It is the experience of many LHA officers that when tenants complain about conditions, there is a threat of or actual retaliatory eviction – a problem identified previously by Shelter and Citizens Advice. This means that tenants are often putting up with unhealthy and poor conditions[19]. It is the view of the PHA that where there is a breach of the repairing obligation[20] no rent should be payable by the tenant – this could be as the result of an application to the County Court. Given the difficulties of accessing public funding for an action for breach of the repairing obligation, it would be fairer for tenants to have the rent liability reduced until the landlord has met their legal obligation.

8.3  Additionally where the local authority takes action under Part 1 of the Housing Act 2004 because of the existence of a Category 1 hazard, then it should be the case that no order for possession should be granted (which would contribute to reducing retaliatory eviction) and again no rent should be payable until that hazard that poses a risk to health and safety is remedied.  In the case of action other than a hazard awareness notice that would be on revocation of the Notice or Order made by the LHA.  As the tenants should be given a copy of the notice or order, that could also act as certifying no rent is payable until that time.

8.4  As a comparison, in France an unfurnished property contract has a minimum duration of three years (if the proprietor is an individual), or six years (if the proprietor is a company or society).  The general rule that the tenant cannot withhold the rent does not apply in the exceptional circumstances where the mairie, in collaboration with the préfecture, determine that the dwelling is “insalubrious” and a danger to the health of its occupants.

9.0 Local authorities, their homelessness duty and the PRS

9.1  Local authorities can now discharge their homelessness duty by direct referral to the PRS[21]. No property should be used until it has had an HHSRS inspection by a competent surveyor trained at least to the standard provided by the government prior to the 2004 Act coming into force. They should then certify the absence of any serious threats to health and safety before use. LHAs should incorporate this into their policies[22].

9.2  The supplementary guidance refers to the duty on LHAs to keep the housing conditions in their area under review[23] but does not require an HHSRS inspection of the property. It also refers to action under the “Household Health and Safety Ratings System”, but the Housing Health and Safety Rating System is the means of determining whether or not a Category 1 or Category 2 Hazard exists. The HHSRS itself is not enforced, but the first step in determining whether a duty or a power to intervene exists.  This basic error perhaps demonstrates some carelessness (or lack of understanding) in the guidance.

9.3  Authorities should “ensure that the property has been visited by either a local authority officer or someone acting on their behalf to determine its suitability before an applicant moves in” according to this guidance.  It does not refer to the HHSRS or provisions in Part 1 but an inspection by a competent person (whether from the LHA or not) should be undertaken. It is unacceptable to place people in homes that present a serious risk to health and safety. Could it leave LHAs vulnerable to legal action should they place people in conditions that cause ill health or injury?

A showcase event of research across England

Public Health Hub, Sheffield Hallam University

Wednesday 12^th December 2012, 9.30-1.30,

Aspect Court, Room 15202, City Campus

Pond Hill, Sheffield, S1 2BG

This seminar aims to bring together practitioners, academics and clinicians interested in the area of fuel poverty, housing and health. Organised by the Public Health Hub at Sheffield Hallam University, the seminar will showcase some new research currently being undertaken in the Universities of Sheffield Hallam, Sheffield and Salford. They hope the discussion will help and inform future research activity and partnerships.

To reserve a place please contact Anna Ryan at a.f.ryan@shu.ac.uk

Press Release – Stark choices for private tenants on benefits and increased demands on the NHS

“The health of tenants in the private rented sector who are in receipt of housing and other benefits, is

clearly being put further at risk as a consequence of the Government’s welfare reforms and poor conditions within the sector, and this is not just a London issue”, said Dr Stephen Battersby, Chair of the Pro Housing Alliance at the launch of a research report commissioned by the PHA – Poor homes, poor health- to heat or to eat? Private sector tenant choices in 2012. 

He continued, “The study by GLHS shows that lack of security and high costs for what can be dangerous and unhealthy housing contributes to poor health including mental health. This is made worse by the difficulties of finding the money to keep warm and eat – sometimes tenants cannot do both. This will lead to greater demands on the NHS, and one wonders if this is part of a policy of coercion by destitution” he said.

Gill Leng who led the research said “Talking to tenants and advice agencies up and down the country has shown just how the cuts are impacting on people who already have very little money to live on.  It is clear that health inequalities will be further increased not reduced”.

She highlighted one quote from a tenant interviewed in Blackpool where rent is comparatively cheap and the PRS accounts for 22% of the housing market, but who could not move to cheaper accommodation:

“It would have to be a tent in a field.”

A single pensioner interviewed said:

“I have lost contact with all my old friends because I am embarrassed about the circumstances I am living in and my lack of money.”

It is difficult for advice agencies too, who are in their own words “drowning under demand”. One adviser interviewed said

“People will live in dangerous situations with their fingers crossed rather than tackle their landlord.”

The worries about landlords and lack of security at the cheaper end of the market condemn tenants  to suffer. As two quotes from the report highlight:

“Went to CAB about damp. Have had difficult conversations with landlord who threatened he would not renew my contract if I pursue this.” 

“[Landlord] is not a nice bloke to get on the wrong side of.” 

The report concludes that the Government should be doing more to assess the public health impacts of the welfare reforms, particularly as cutting one budget which merely reflects the high cost of  housing, increases demands on other budgets such as GPs in the NHS.

The full report can be downloaded here.

Notes for editors 

For more information contact Dr Stephen Battersby on 0208 3954032 or 07771534741 (e-mail sabattersby@blueyonder.co.uk) or Gill Leng on 07766 660799.

1. The report is based on interviews with Housing Advisers including Citizens Advice and private tenants in Camden, Exeter, Aylesbury Vale, Stoke and Trent and Blackpool.

2. The Pro-Housing Alliance is an alliance of organisations and individuals who believe that housing is a key social determinant of health.  Health inequality cannot be addressed unless there is access to housing that is both truly affordable and healthy. Members include:- Chartered Institute of Environmental Health; Team Homes; Care and Repair England; National Housing Forum; Home Improvement Trust; Housing Justice; C2O Future Planners; Camden Federation of Private Tenants; Zaccheaus 2000 Trust.

3. The Report is dedicated to the memory of Professor Peter Ambrose who was one of the founders of the PHA and instrumental in setting up the research and whose work had previously highlighted the “exported costs” of poor housing. For example he was one of the authors of the report “The real cost of poor housing” published by the Building Research Establishment Press which assessed the cost of poor housing to the NHS alone as £600million per year, and that these costs are only about 40% of the total costs.

4. The study was undertaken with generous support from Affinity Sutton and the Joseph Rowntree Foundation.

5. The Government’s own data show that nearly 900,000 homes in the Private Rented Sector have a Category 1 hazard, that is, have a risk to health and safety from deficiencies in the home that pose an unacceptable risk to occupiers and visitors.

6. Almost 1.4million homes in the PRS are classified as non-decent and 44% fail the standard on the “thermal comfort criterion’.

The report is based on interviews with advice agencies and tenants. It also includes an analysis of advice agency data and is a stark reminder of the effects of welfare reform on health and well-being, leading to the transfer of costs to other parts of society.

Date: 16th November 2012

Time: 09.30 for 09.45

Venue: Chadwick Court, 15 Hatfields London SE1 8DJ Map

Light refreshments will be served. RSVP to Peter Archer at peter.archer@THCP.org by Thursday 8th November

Tea, coffee and cakes at the church will follow the service.

By Dr Stephen Battersby and Rev Paul Nicolson

The housing market suffers from the lack of ethical foundation in the model of the free market followed by UK governments since the 1980s; hence the richest citizens, particularly landowners, become excessively asset and income rich and the poorest citizens are forced to call on food banks. In an inflated and overvalued housing market home owners have equity that can be used for paying health and care costs but renters do not, which is inequitable and further increases the social gradient in health.

The Pro-Housing Alliance recommendations are:

1. It will take too long to increase the supply of housing of all tenures needed by UK citizens; therefore the market should be brought under control quickly.
2. Rents should be capped. Market rents have led to increased Housing Benefit costs.
3. Landlords should be required either to be members of an accreditation scheme that is acceptable to the local authority and includes a requirement for training or they should be licensed to let properties.
4. Where there is a breach of the repairing obligation under the Landlord and Tenant Act 1985 no rent should be payable. Where the local authority takes action under Part 1 of the Housing Act 2004 because of  the existence of a Category 1 hazard, then 1) No possession can be granted and 2) No rent should be payable until the hazard is remedied.
5. There should be a high tax for leaving a property empty or land unused. We would prefer the introduction of Land value tax and the abolition of the council tax and stamp duty; TAP is supporting Caroline Lucas’s private members bill.  Where a property has been empty for 12 months there should be a duty on the local authority to make an Empty Dwelling Management Order.

Back ground

The Private Rented Sector is made up of too many landlords who are both inexperienced and unprofessional, and who own a small number of properties; the number has been increased by buy-to-let and recent slack lending criteria.

Prices and rents are being increased by an influx of overseas investors who are either fleeing their own dodgy economies, investing tax free money or are from economies with GDP in credit; the Chinese for example. Many are left empty.

As a consequence of the housing benefit caps some families are moving into long term temporary accommodation or overcrowded accommodation to make the rent fit the cap; this is known to damage both the health of the family and the health of the children, particularly when the property is badly repaired and poorly heated. Others are moving a long distance from their work making the commuting unaffordable. Teenagers are refusing to move away from their friends with all the dangers of homelessness.  A substantial proportion of those in receipt of housing benefit are in work – 93% of the increase in HB claimants between January 2010 and December 2011 came from those in work – so the tax payer is subsidizing low pay from employers and high rents for landlords.

Local authorities can now discharge their homelessness duty by direct referral to the PRS without the applicant’s agreement. No property should be used until it has been inspected by a competent surveyor who certifies that there are no serious threats to health and safety.

The sector, includes the worst conditions and the least secure tenures, comprises 23% in London compared to 10% nationally. Generally housing costs in London are about 50% higher than national and childcare costs much higher than elsewhere.

Lower quartile weekly rents in the private rented sector vary by borough from £700 to £231 and are much higher in London than any other UK region. By October 2013 over 159,000 London households will face a reduction in the LHA they receive and almost 10,000 households will be forced to relocate.

A survey of London private sector landlords showed that 60% of landlords would not reduce rents for households with lower Local Housing Allowances. This means that the most vulnerable households will be at the mercy of the most unscrupulous landlords. This 60% will be able to let to people who might previously have been first time buyers, and may on the face of it at least, be the more responsible landlords. Everywhere we look in Z2K the coalition is increasing the incidence of debts among the poorest citizens.

The private rented sector is poorly regulated. Local authorities have not used their powers or met their duties on conditions as well as they might. With the cuts to local government that is only going to make regulation of the PRS on conditions worse. See the report for MPs Karen Buck and Alison Seabeck here.

There are almost 900,000 homes in the PRS that have Category 1 hazards  – that is the most serious risks to health and safety (and almost 1.5 million are non-decent).  Because so many of the properties that have come in to the PRS and have contributed to the increase in the size of the sector are newer, it looks proportionately as if the poorer quality part of the PRS has reduced, numerically there is little change.

The important point missing is that on exported costs. Poor housing costs the NHS at least £600 million a year (BRE, Real Cost of Poor Housing) so that given that the worst conditions are in the PRS, then it is probable that the PRS costs the NHS disproportionately more than any other sector. The costs to the NHS also are probably only about 40% of the full costs to society of poor housing. So the poor conditions in the PRS cost us all.

Professor Peter Ambrose 1933 – 2012

Professor Peter Ambrose died peacefully on the morning of the 22^st August. He had been struggling against cancer for several months. His condition deteriorated sharply resulting in a couple of falls in the night. The ambulance was called and he was made comfortable; but by the morning he had died.

Working with Peter was always both informative and fun.  My last e-mail from him was on the 20^th August. We had both read about a legal decision which showed the law to be more than the usual ass. We both love Gilbert and Sullivan and can quote chunks of the patter songs. I had sent him the first lines of the Lord Chancellor’s song from Iolanthe as a comment on that decision.

The law is the true embodiment of everything that’s excellent,
It has no kind of fault or flaw, and I Mi’Lords embody the Law.

Peter answered with the next lines; .

The constitutional guardian I of pretty young Wards in Chancery
All very agreeable girls and none are over the age of 21.

The email before that on the same day provided six horror stories about overcrowding in the London Private Rented sector which he had researched with London Citizens in 2009, which will be sent to the GLA review of the PR sector. He had finished drafting the Pro-Housing Alliance submission to the Parliamentary Commission on Banking Standards on the 17^th August, which was sent on the 19^th. On the 20^th I had a final e-mail exchange with him giving advice about a note on the Commission which I was sent to Bishop of Durham who is a member.

We have on the Zacchaeus 2000 and the ProHousing Alliance websites a store of wisdom and information from Peter which will inform our work for years to come. It should never be forgotten that he foresaw the crash in 2008; his long standing foresight was included in the Zacchaeus 2000 Trust 2005  Memorandum to the Prime Minister on Unaffordable Housing; it was read by Tony Blair. All this important work on housing and health was done with love and out of profound concern about the impact of decades of dreadful or non-existent housing policy on the poorest citizens of the UK.

Rev Paul Nicolson, Chair
Zacchaeus 2000 Trust.
Member Pro-Housing Alliance.

We are inviting comments to be left below so people can share their thoughts and memories of Peter.

submission to the

Banking Standards Inquiry

20 August 2012

Drafted by Professor Peter Ambrose, Visiting Professor in Housing and Health, University of Brighton, and agreed by;

Dr Stephen Battersby, Chair PHA, past President of the Institute of Environmental Health.

Stephen Hill, Director, - C₂O futureplanners

Peter Archer, Chair, Care and Repair.

Angela Maule, past Chief Executive, UK Public Health Association.

Rev Paul Nicolson, Chair Zacchaeus 2000 Trust.

Introduction

The Pro-Housing Alliance (PHA) is an alliance of organisations and individuals who believe that housing is a key determinant of health.  Health inequalities cannot be addressed unless there is universal access to housing that is both truly affordable and healthy.  It is a prerequisite for good public health, including mental health.

The members of the Alliance are: Chartered Institute of Environmental Health, Team Homes, Care and Repair England, National Housing Forum, Professor Peter Ambrose, UKPHA, Ecorys, Housing Justice, C2O Future Planners, Camden Federation of Private Tenants, Zacchaeus 2000 Trust.

Two recent reports, Recommendations for the Reform of UK Housing Policy and its accompanying report Housing Crisis in London, can be found on our website. http://www.prohousingalliance.com/resources/

The Banking Standards Inquiry’s Terms of Reference

The terms of reference of the Inquiry are to consider and report on:

a)   professional standards and culture of the UK banking sector, taking account of regulatory and competition investigations into the LIBOR rate-setting process;

PHA Submission

Bullet points summarizing the submission

• A retrospective look at the consequences of the deregulation of lending, abolition of rent controls and allowing the free movement of capital in and out of the UK in the 1980’s shows that Parliament gave the impression that ‘anything goes’ to make a profit.
• We note that ‘stronger sanctions to tackle abuse of the system’ are included in the initial discussion paper produced on 10 August 2012 by Martin Wheatley’s LIBOR review commissioned by the Cabinet. It is remarkable that such an inquiry is called for and that very severe sanctions for lying about an interest rate, which affects all citizens of the UK, had not already been put in place by Parliament long before the LIBOR crisis emerged..
• The FSA Banking Conduct of Business Sourcebook (BCOBS) lays down clear guidance for the industry and the Handbook and the FSA Statement of Principles has clear definitions about ‘integrity and proper conduct’, the definition of ‘fit and proper persons’, standards of supervision to ensure stability in the sector, the adequate protection of clients’ assets and much else besides.
• It is abundantly clear that the actual conduct of many individuals and banking organisations within the industry, not least in relation to LIBOR, has signally failed to live up to the standards laid down in these documents.
• For the past twenty years and more we have had governments and others criticizing regulators for being ‘heavy handed’ and anti-business when in most cases they are anything but. Whether in banking or dealing with the worst private landlords, enforcement of the legislation and use of powers to control bad practice has been minimal.  In the long-term effective regulation is better for business, but we appear to be concerned only with the short-term.
• The PHA believes that ‘professional standards and culture’ must be interpreted to include the impact of the banking sector’s workings on the broader economy and society as well as the internal workings of companies and the conduct of their management and staff.
• Several aspects of the changing lending practices following the 1980s finance sector deregulatory Acts were clearly less than providential, some were irresponsible and others fell well short of professional standards of conduct.
• The huge release of house purchase credit, outstripping general inflation by a factor of four or more between 1980 and the mid 2000s, led to a severe mismatch between income growth and the growth in house prices and rents; this resulted in widespread housing unaffordability and greatly increased personal and household indebtedness which has very serious and costly implications for mental health.
• The overall impact was to cause average house prices in the mid 2000s to be more than three times what they would have been without the disproportionate growth of mortgage lending.
• Given the differential access to owner occupancy (about 70% can access ownership and 30% cannot) this in itself is likely to have had long-term regressive effects on wealth distribution.
• The increased commitment to the servicing of mortgages has also had a range of other adverse social and economic impacts on households’ spending patterns, lifestyles and the work/life balance.
• The application of very large sums of lending to the stimulation of property prices over the 1980 to 2005 period carried huge opportunity costs in terms of other productive uses to which anything up to £1,000bn of investment might have been put (for example in investment in the productive economy or in infrastructure).
• It also led to a vast increase in housing benefit payments as rents increased in a housing market in short supply and this has had the knock-on effect of trapping more people into benefit dependency and complicating the transition into work.
• The general public is now well aware of the adverse impacts of the mortgage lending boom and its aftermath (including the present dearth of bank lending); there is also general awareness of unprofessional and even criminal conduct in the banking sector; public trust in the banking system is therefore at a low ebb.
• One way to begin to repair the damage might be to set up a banking Social Responsibility Commission to consider the range of social and economic impacts, including some set out in these responses, that flow from the operation and conduct of the sector.

Responses to the Inquiry’s specific questions

1. 1.       To what extent are professional standards in UK banking absent or defective? How does this compare to (a) other leading markets (b) other professions and (c) the historic experience of the UK and its place in global markets?

Responses to 1 (b):

1.1.           ‘Professional standards’ are a prerequisite for participation in other fields usually termed ‘professional’ – e.g. medicine, law, accountancy, etc.

1.2.           The term carries a number of implications including a high level of certification, strict internal regulation of competencies and conduct, a specific duty of care to the users of the skills of practitioners and arguably a general duty of consideration to society as a whole

1.3.           The same standards do not apply in banking and are widely perceived not to do so.

1.4.           Part of the reason for this perception has been the changes in lending conduct and practices that followed the period of financial deregulation stemming from the passing of a succession of deregulatory Acts in the early to mid 1980s. Changes in mortgage lending practices over the ensuing decades have included:

• A lengthening of average repayment terms
• An increase in the average loan to income multiple
• The taking into account of an increasing proportion of the household’s second earner’s income when calculating a loan
• The movement towards loans of 100% or more of the value of the property being purchased
• The gradual easing of income certification practices
• In some cases active encouragement to overstate incomes in order to permit a larger loan

1.5.           Some of these practices have marked a retreat from previously expected standards of responsible providential lending and some (for example the last two) have clearly fallen short of professional conduct

1.6.           In addition there has been the rapid introduction of complex and opaque financial products that have not been adequately explained to borrowers – some have subsequently been found to have been mis-sold and compensation has been paid

1.7.           Some of these financial products have permitted the realization of profits in the form of bonuses before those profits have actually been made

1.8.           The use of the products referred to in 1.6 and 1.7 has

been widely regarded as examples of unprofessional conduct and has been in apparent contravention of the BCOBS

2.   What have been the consequences of the above for (a) consumers, both retail and wholesale, and (b) the economy as a whole?

Responses to 2 (a):

2.1.           The impact on indexed mortgage lending volumes of the changes in lending practices set out in 1.4 is shown in the 1980-2005 graph of mortgage lending (attached – also available in the Zacchaeus 2000 Trust Memorandum to the Prime Minister on Unaffordable Housing, published by Z2K in 2005 [1])

2.2.           The effect on consumers of this massively increased

indebtedness has been wide-ranging and profound. For example:

• Mortgage repayments have increased as a proportion of incomes leading to reduced disposable income for other significant items such as heating, recreation, holidays and food all of which are significant to the preservation of health
• Heavy and unmanageable debt has been shown by a recent literature review (University of Brighton, forthcoming) to be deeply implicated in the increased incidence of mental ill-health which costs the country £105bn per year [2]
• Mortgage repayments have been spread over a longer timeframe, sometimes into retirement
• Increasingly the second earner in the household’s income  has been taken into account in the loan calculation, obliging him or her to continue in full or part time work to continue to service the loan
• For many households this has forced both a juggling of work/life balance and a much greater dependence on paid childcare
• Two recent UNICEF reports have shown that the UK is at or near the bottom of the table of comparator EU countries in terms of exposure to risk and unhappiness in children
• Heavy loan repayment obligations have also significantly increased financial pressures (for help with housing costs) and time pressures (for help with childcare) on grandparents
• In extreme cases difficulties in making repayments, often due to changes of circumstances beyond the borrower’s control, have led to increased rates of repossessions

2.3         It is intuitively evident that the steep increase in property values impact differentially on different groups in society. About 70% of the population has had access to the personal asset growth permitted by owner-occupancy and 30% has not. The tenure division has therefore worked to reinforce previously existing wealth inequalities.

2.4.                Among the 70% who own, the more vulnerable and economically weaker groups, for example those whose parents have fewer capital resources or who have themselves built up less equity in property, are likely to be suffering far more from exposure to higher debt levels and higher repayments in relation to incomes.

2.5.        If these suppositions are correct the much increased mortgage lending flow is in itself having long term wealth and income redistributional effects which contribute to the general inequalities in society; this is a matter of considerable significance and requires urgent consideration.

Responses to 2 (b):

2.6.                Table 1 of the Z2K Memorandum to the Prime Minister   on Unaffordable Housing showed that the aggregate House Purchase Debt (HPD) outstanding as at 1980 was £53bn (23% of GDP).

2.7.            Were this to be updated to 2003 to match the rise in RPI and further adjusted to allow for the rise in the incidence of owner occupancy the HPD as at 2003 would have been £181bn.

2.8.           The actual HPD as at 2003 was £774bn (72% of GDP) – this is an ‘excess’ of £593bn over the figure that might reasonably have been expected had lending grown consistent with the RPI, had it reflected owner occupancy growth and had it not seen the significant changes in lending practices listed in 2.2.

2.9.           This ‘excess’ HPD has subsequently been updated to 2006 when it was found to be of the order of £800bn. It is highly likely that it now in the order of £1,000bn.

2.10.       There have been enormous opportunity costs relating to the application of these huge lending volumes to property purchase rather than to, for example, infrastructural, industrial R and D and similar uses in the productive economy. As approximate examples the cost of a significant upgrade to the rail network was put at £9bn, a recent estimate of the cost of putting the housing stock in good order was £20bn. The capital cost of a new hospital might be of the order of £0.25bn. An estimate some years ago of renewing the entire water supply system in the USA was between £40-160bn over 25 years. Pro rata to population the cost in the UK would be maybe one fifth of this. All these are insignificant compared to the sums loaned, effectively, to boost property values over a 25-year timespan.

2.11.       Approximate calculations show that had mortgage lending volumes risen since 1980 consistent with RPI and owner occupancy growth, the average house value in 2011 would have been £61,000, not the actual £161,000. General private sector rent levels would have been commensurately lower since to a large extent they reflect capital values. Thus housing costs across the entire private sector would have been significantly more affordable.

2.12.       In the years since the onset of the banking crisis (2007/8) there has been a dearth of mortgage (and other) lending as banks look to repair their balance sheet positions. This has been a major factor in prolonging the historically low output of new homes for sale and for the partial exclusion of first time buyers from the market. Both these effects have serious implications for the long-term health and balance of the housing market and for the viability of the house-building industry.

3.   What have been the consequences of any problems identified in question 1 for public trust and in, and expectations of, the banking sector?

Responses to 3:

3.1    The lapses below professional standards of conduct identified in 1 and the consequences set out in 2 have seriously reduced public respect for the banking sector.

3.2.      The general public have clearly perceived that the pre-emptive bonus-taking, the imposition of high charges and the public costs involved in the bail-outs have resulted directly from difficulties due to less than providential lending patterns and volumes over a period of at least three decades.

3.3.   These bail-outs have led directly to the post-2007 crisis in public finances and the increasing regime of cuts across a wide range of public budgets.

3.4.      These cuts again impact most heavily on the more vulnerable in society because they are the groups more dependent on public assistance programmes and publicly funded, as opposed to private, health and education systems.

3.5.  As a consequence there is widespread unease and anger at these costs imposed on the public individually and collectively and a general loss of trust in the probity and social responsibility of the entire banking sector.

4.   What caused any problems in banking standards identified in question 1? The Commission requests that respondents consider (a) the following general themes:

No responses from the PHA

5.   What can and should be done to address any weaknesses identified? To what extent are such weaknesses subject to remedial corporate, regulatory or legislative action, domestically or internationally?

No responses from the PHA

6.   Are the changes already proposed by (a) the Government, (b) regulators and (c) the industry sufficient? Respondents may wish to refer to the Financial Services Bill and the Government’s proposals for the Banking Reform Bill.  They may also wish to refer to proposals by the Bank of England and the Financial Services Authority on how the Financial Policy Committee, Prudential Regulation Authority and Financial Conduct Authority will operate in practice.

No responses from the PHA

7.   What other matters should the Inquiry take into account?

Response to 7:

7.1.   The Banking Standards Inquiry should take into account not only ‘standards of conduct’ as strictly defined internally within the banking sector but also crucially standards of conduct as they have consequences for the wider economy and society

7.2.     These consequences, some spelled out above, flow inevitably from the pattern and volume of lending carried out by the banking sector year on year

7.3.     Because of the central significance of money flows in the economy these lending patterns and volumes (or in some circumstances as at present the lack of them) have extremely important impacts on the long-term competitive success of the UK economy in relation to the world economy

7.4.   They also have extremely important effects on the internal distribution of wealth and income between different groups in society

7.5.     They are therefore powerful mechanisms in both the management of the economy and the shaping of the society; their regulation has been too weak over the past 30-40 years – stronger regulatory regimes are required that reflect more accurately the highly significant consequences of the conduct of the sector

7.6.     The Pro Housing Alliance feel that such is the importance of the banking sector to the health of both the economy and the society that there should be some mechanism to assess and monitor the impact of its workings on society as a whole – a banking Commission for Social Responsibility (CSR). This could be set up either:

• at corporate level by individual banks already known for taking an ethical stance (where a CSR might confer commercial or PR advantage)
• at industry level by some appropriate umbrella organization
• by the Bank of England or some combination of the regulatory authorities

7.7.   A banking Commission for Social Responsibility, while in no way undermining the prime duty of the individual bank or sector to maximize returns to the shareholders and to protect the interests of depositors, should keep under review many of the issues identified in this set of responses. In the view of the PHA this would have, among other benefits, that of beginning to rebuild public trust in, and respect for, the banking sector – currently at an extremely low ebb.

Changes in 5 key indicators – 1980 to 2004*          July 2012   

*from the Zacchaeus 2000 Trust Memorandum to the Prime Minister on Unaffordable Housing, May 2005 (available at www.z2k.org)

Note that over the period the total house purchase debt outstanding rose by a factor of about 18 (clearly involving much ‘sub-prime’ lending) while the amount of housing stock for transaction in the market rose by only about 30%. This largely explains the damaging rise in house prices post-1996 (and the ‘blip’ in the late 80s).

The direct consequences of this lending explosion have been a bursting of the house price ‘bubble’, widespread difficulties in repayment for marginal borrowers and thus rising repossessions, increased forced reliance on housing benefits, massive bad debts requiring transfers from bank reserves, some bank failures and the severe damage to public finances as a result of the cost (£150bn?) of bank bail-outs.

Even more important is the ‘opportunity cost’ of this misplaced lending – seemingly quite undiscussed. The housing debt figure, had it risen since 1980 simply with inflation, would have been in the order of £200bn in 2004. Instead it was around £800bn. What benefits to the economy would have resulted had this ‘excess’ £600bn been applied not to inflating house prices (and rents) but to renewing our ageing infrastructure, modernising the rail network, investing in renewables, supporting R and D for our productive industries, building hospital and schools….. the list goes on?

The point is not what happened in the last 25 years, which cannot be re-run, but what regulatory regime can be put in place to prevent a recurrence of the cycle over the next 10-15 years! This is the structural issue – not bankers’ bonuses. How will the main parties respond to this challenge?

Peter Ambrose        Visiting Professor in Housing and Health, Brighton University

Associate Housing Adviser, Zacchaeus 2000 Trust