Nov 172015
 

REMEMBERING BUDDY HOLLY

Back in January I posted a piece, Let’s Be Honest About Housing Associations, that began in nostalgic-humorous mood before going on to make more serious points about the provision of rented accommodation. The fundamental point I tried to make was that up until about a century ago rented accommodation was provided by the private sector, employers, charities and other bodies, not by local authorities or any other social housing provider. I asked, in view of changes taking place in the housing market, whether we could now be moving back towards that situation, how it might be done, and what benefits it might offer.

In my January piece I made a number of points about the changing nature of housing provision in Wales and, especially, how the proportion of people living in the private rented sector (PRS) was growing, almost unnoticed and, certainly in Wales, unplanned. I used the table below to show the dwelling stock percentages in the four categories: local authority, registered social landlord (RSL), owner-occupier and PRS.

Houses by tenure

I am now able to follow up that January piece thanks to a regular source who has drawn my attention to a recently published report examining the advantages of giving a greater role to the PRS in the provision of social and rented housing. The report is produced by the Public Policy Institute for Wales (PPIW) and is entitled The Potential Role of the Private Rented Sector in Wales. I advise you to open the report in another window or browser in order to follow the points I shall pick up on later in this article. But before that, let’s take a fresh look at the RSL sector, using information not previously available to me.

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WAY OUT WEST

For much of this new information I am indebted to another contact who has looked into the workings of the RSL sector in Ceredigion, an investigation that has unearthed a number of disturbing issues, prompting him to submit important questions to the ‘Welsh’ Government. Unsurprisingly, the civil servants acting as the ‘Welsh’ Government refuse to answer his questions, so he has now taken the matter to the Public Service Ombudsman for Wales.

Alas, the PSOW is Nick Bennett, former head of Community Housing Cymru, the umbrella body for housing associations, so I have warned my contact not to expect any help from that quarter. (Bennett’s appointment was a pre-Sophie Howe illustration of how incestuous and corrupt public life is in modern Wales.)

One of the facts unearthed is something called Dowry Gap funding, paid to certain housing associations for them to use in upgrading the housing stock they’ve inherited from councils under voluntary transfer (i.e. through a vote by tenants). This funding is currently being paid to ten housing associations and in 2015 – 16 the total cost will be £43.8m. Tai Ceredigion Cyf’s ‘Dowry’ will be paid at the rate of £1.6m a year for 30 years. If this 30-year term applies to the other, larger housing associations, then the total cost will be £1.3bn.

This Dowry Gap funding seems to complement the Welsh Housing Quality Standard legislation, which demanded that all RSL properties be up to WHQS standard by 2012. This deadline – and its funding of £108m a year – has now been extended to 2020. Introduced in 2004 and running to 2020, £108m a year totals up to £1.7bn.

Adding the two we get a total figure of £3bn for ‘improvements’. Seeing as Wales has 143,790 RSL properties, this works out at almost £21,000 per property! (Is this right? Will somebody please check the figures.) That is a lot of moolah for windows and doors, especially when we accept that many of the dwellings inherited from local authorities were in good condition, certainly not needing ‘refurbishment’ to the tune of 21 grand per property.

Then there seem to be two funding streams for capital projects, i.e. new-build housing, the Social Housing Grant and the Housing Finance Grant. I knew about the first, and I submitted an FoI last year to the ‘Welsh’ Government asking how much had been dished out under the SHG. I used the answers to compile the table below (click to enlarge). It shows that the figure for the six years 2008 – 2013 is £692.5m. (The explanation for the declining amount paid out in SHG can be found below in other, newer funding streams.)

Social Housing Grant 1

But at that stage I knew little about the Housing Finance Grant. Now I know a little more.

Even though I’m a regular and consistent critic of housing associations one feature of their operations that I have always regarded as commendable is that they raise funding from banks and other commercial lenders. Which means they are not entirely reliant on the public purse. Well, that’s what I thought; the reality is very different, as I learnt from my enquiries into the Housing Finance Grant.

The system works thus: Yes, housing associations find commercial lenders prepared to give them large loans – but then the ‘Welsh’ Government – i.e. you and me! – repay those loans over 30 years to the lenders, M&G Investments and Affordable Housing Finance, the latter being funding guaranteed by the UK Department for Communities and Local Government.

(And as the DCLG website puts it, “Borrowers will need to be Registered Providers (or equivalent in the devolved administrations) and classified to the private sector”. Which suggests that housing associations are not public bodies. Or maybe they are, in which case why is a Conservative government putting so much money into public bodies in order for them to build up valuable assets . . . unless they are being fattened up for full privatisation?)

Housing Finance Grant clip

The system of repaying lenders also applies to the ‘Dowry Gap’; housing associations take out loans, paid in lump sums, and the ‘Welsh’ Government repays those loans over 30 years. This explains why Tai Ceredigion has now completed its programme of upgrading its properties but will continue to receive the ‘Dowry Gap’ funding every year. The money is repaying Tai Ceredigion’s loan, which seems to be itemised in the latest financial statement at £23m.

It is even suggested that ‘Dowry Gap’ and WHQS funding is being used – improperly – for capital projects, but financial oversight of housing associations by the ‘Welsh’ Government is so lax that there’s no way of proving or disproving this claim.

All of which means that housing associations, despite the flim-flam about ‘new ways of doing things’ are old-fashioned Statist creations, entirely dependent on the public purse, which explains why they are favourites of the anti-business parties, Labour and Plaid Cymru.

Their only assets, their only other source of income, is of course their housing stock – either inherited from local authorities or built with public funding. So, again, at no cost to them. It’s a ‘new way of doing things’ only in the sense that it’s more opaque than straightforward dollops of public funding.

Seeing as housing associations are entirely dependent on the public purse it’s worth asking, again, why they are not covered by the Freedom of Information Act? Maybe the duplicitous and very expensive way they’re funded provides the answer.

Another point, one that I have raised before – dealt with in my January post, and also here – is the scandalous amount of this public funding that our ‘Welsh’ housing associations spend over the border. In the case of Cartrefi Cymunedol Gwynedd it was the insanity of giving its total maintenance contract to English firm Lovell which, from its Cheshire base, recruited its sub-contractors exclusively from north west England.

I’m sure Tai Ceredigion uses local firms to do its work, but I still question why a firm operating on Cardigan Bay should have external auditors based in Birmingham (Mazars LLP) and internal auditors in Hampshire (TIAA Ltd). Both may have offices in Cardiff, but neither is a Welsh company. There are genuine Welsh companies closer to and even in Ceredigion that could and should be doing this work that is paid for with Welsh public funding.

Tai Ceredigion auditors

‘Welsh’ Government funding should carry the stipulation that as much as possible of that funding remains in Wales. This can only be achieved if the funding reaches genuinely Welsh firms, not outside firms with an office in Wales funnelling profits back to HQ, or those seeking to capitalise on the public funding bonanza with a hastily set up ‘Welsh branch’ that is little more than a post-box and a telephone number.

Of course, it would be easy to argue that none of this really matters because all the funding comes, in one form or another, from London. But only part of the Housing Finance Grant comes directly from London, the rest is raised commercially, and the other funding streams – Social Housing Grant, Welsh Housing Quality Standard and ‘Dowry Gap’ funding – seem to be ‘Welsh’ Government initiatives.

Which is worrying, because it gives us a situation in many parts of Wales, perhaps especially in rural areas, where housing associations are on a treadmill of growth and expansion fuelled by this funding – yet there is often little or no local demand for more social housing.

Housing associations are perhaps the ultimate manifestation of the Third Sector, the shadow world that those buffoons down Cardiff docks want us to believe is an economy, but it’s all smoke and mirrors, all underpinned by public funding. And all unnecessary. As I shall now explain by delving a little more into the Public Policy Institute for Wales report I mentioned earlier.

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‘THE POTENTIAL OF THE PRIVATE RENTED SECTOR IN WALES’

Before diving into the report it might be worth just pausing to see what kind of an organisation the Institute is. It was formed in January last year to “provide the Welsh Government with authoritative independent analysis and advice.” If you look through the names to be found in ‘The Team’, ‘The Board of Governors’, and the ‘Executive Group’, you get the impression that the PPIW is very much a cross-border outfit, containing – on the Board of Governors – people who know Wales such as Gerry Holtham, along with people, such as Will Hutton, who may be very clever and a Newsnight regular but know little about our country. ‘The Team‘, presumably those running the PPIW day-to-day, is disappointingly top-heavy, to the point of capsizing, with apparatchiks and people from the Third Sector.

The Executive Group “is made up of representatives from the organisations that formed part of the consortium that collaborated in the development of the PPIW”. These are ‘our’ universities (including Liverpool but not Glyndŵr!) and Victoria Winkler of ‘Welsh’ Labour’s very own think-tank, the Bevan Foundation.

The report set out to answer three questions, found below.

PPIW report aims

Some Report Findings

The PPIW report confirms that the PRS is growing in every single local authority area, though predictably, Cardiff, with its vast student population and other young singles, outstrips all other areas. In fact, the report tells us that in Cardiff, “owner occupation has actually fallen compared to renting in both absolute and proportional terms”. Table 6 shows that 22.1% of Cardiff’s dwellings are privately rented. The next highest local authority area is Ceredigion with 17.5%, and then in third place comes Denbighshire with 16.5%.

PRS changes

The figures for both Cardiff and Ceredigion are influenced by the student presence while the ‘Rhyl factor’ explains the Denbighshire figure, correlated in Table 1, which tells us that Sir Dinbych lost 870 private households between 2001 and 2011 while the same period saw an increase of 1,468 in the PRS. Other areas saw a decline in the number of private households but nowhere was the fall as dramatic as in Denbighshire.

Staying with Table 6, in percentage and absolute terms Carmarthenshire saw the highest increase in private households due mainly to the saturation housing strategy devised by the Planning Inspectorate and eagerly implemented by those running the council. The same designed-to-attract-English-buyers process can also be observed at work in Powys. (N.B. A ‘household’ can be a person living alone or a family of 10.)

Table 9 tells us that rents in the PRS are always higher than the RSL sector though this varies from area to area. In Blaenau Gwent the average social rent is £61.68 per week, or 89% of the PRS, whereas in Wrecsam, Swansea and Cardiff the percentage drops to 67%, though the average PRS rent in Wrecsam is lower than the two southern cities.

Poor PRS

Of course there is a downside to this unplanned and largely unchecked growth in the PRS, especially in decaying coastal towns like Rhyl, and areas of our cities taken over by students. That downside is the breakdown of community life and an increase in various forms of criminality and anti-social behaviour.

It could even be argued that there is a case to be made for paying compensation to long-term residents of such neighbourhoods. Compensation to be paid by the ‘Welsh’ Government or the local authority, whoever was responsible for not guarding against such decline or refusing to implement the legislation that could have prevented it.

A Better Way

Happily, the report also makes clear that there are alternatives to endlessly pumping public money into secretive, unaccountable and amateurishly run housing associations, or otherwise allowing the growth of ghettoes of cross-border criminals and misfits housed by slum landlords. To avoid these outcomes the report draws our attention to institutional investment such as pension funds to provide rented and other property, coupled with more imaginative and varied housing options.

In the Appendix the report’s authors look at three examples in the south where the ‘Welsh’ Government is in partnership with the Principality Building Society in a venture called Tai Tirion (or Tirion Group Ltd, Co. No. 08891823) to build over a thousand new homes on brownfield sites in Cardiff, Newport and the Rhondda. Though that said, there is not a lot of progress being made. Not really surprising, seeing as the ‘Welsh’ Government is involved . . .

I say that not out of malice, it’s just the way things are. Institutional investors such as pension funds are viewed with suspicion by Statist ‘Welsh’ Labour. As the report puts it – refer to ‘three questions’ panel above – “the Minister confirmed that the emphasis of the project should be concentrated mainly on (i) and (ii)”.

PRS minister response

To remind you . . . Question iii reads, ‘If the PRS is to be a long term tenure of choice, whether it is likely to be possible to interest institutional money and professional management in the market (i.e. what are the barriers to large scale investment?).’

On reading that you can almost imagine a ‘Welsh’ Labour politician or apparatchik having an involuntary evacuation of the bowels . . . “‘institutional money’! . . . ‘professional management’! . . . people who might understand business! . . . what about our friends in the Third Sector, how are they to sustain their muesli-weaving, skinny latte lifestyles? . . . oh, no, we can’t have that!

So the ‘Welsh’ Government prefers to let the private rental sector grow in a reckless and uncontrolled manner through the activities of Buy to Let ‘investors’ and people who buy dilapidated hotels in Colwyn Bay to house Scouse junkies.

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CONCLUSION

It is surely obvious that if housing associations are the answer, then the question must have been, ‘What is the most expensive (to the public purse) and least efficient way of delivering rented social housing?’ In the hope of disguising this monumental error we are now encumbered with secretive, unaccountable money pits.

Which would be bad enough if they were at least spending the money on housing Welsh people, but due to the Englandandwales allocation system into which our housing associations are locked a Welsh family is all too likely to discover that the Family from Hell has been given the house next door . . . ‘Hell’ in this case will be Birmingham, or Stoke-on-Trent, or Sheffield, or . . .

Consequently, there is no justification for pouring any more money into housing associations. Especially given that the Conservative government in London is almost certainly planning to do away with them. Or does the ‘Welsh’ Government think this is a devolved matter? Maybe it is, but that won’t count for anything if Westminster forces change through by cutting the block grant. And further undermines the sector with selected benefit cuts.

So my advice to the ‘Welsh’ Government is this: realise that housing associations are an expensive failure. Then, get ahead of the curve by taking control of the social rented sector nationally and looking for the kind of investors mentioned in the Public Policy Institute for Wales report, pension funds and others looking for the kinds of large-scale investments that individual housing associations and single sites cannot provide.

To take advantage of this private funding, and to save the public purse a hell of a lot of money, you, the self-styled ‘Welsh Government’, need to put aside your congenital hostility to business and real money and, for a change, prioritise the best interests of the Welsh people. It’s what you were elected to do – remember?

END

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63 Comments on "Housing Associations – The Great Deception"

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Red Flag
Guest
There is, always has been and always will be only one form of social housing that is efficient (or more efficient than anything else anyway) – council housing. Then there is the impact of housing benefit. I don’t know about Wales specifically, but across Englandandwales most of the claimants are in work and living in private rented. Then there is the hidden element of tax credits which containa housing element… Read more »
dafis
Guest
You have captured part of the problem very well – that many employers, particularly those using a high proportion of lower skilled, have been subsidised for years by succession of Westminster regimes. That’s why Blair /Brown were so popular with big business for so long. Minimum wage combined with tax credits + other benefits were a major structural blockage when trying to get people to advance themselves. They would do… Read more »
Ian Perryman
Guest
The Labour Party was not elected to government in Cardiff to serve the people of Wales, it was elected to serve the interests of the UK Labour Party. It’s ability to operate independently of diktat from HQ in London is restricted, so I believe, to matters devolved to the Welsh Assembly. It is not therefore, in reality, the Welsh Labour Party, it is better described as the Labour Party in… Read more »
Wynne
Guest

Well done Jac. Excellent bit of investigative journalism. Conclusion, spot on.

dafis
Guest
earlier this year you wrote extensively about the rented property sector(s) and much of what you wrote was either supported, or added to, by various correspondents. Few, if any, chose to confront you with more facts or alternative analysis. Yet those in power/authority remain dumb silent, despite having have access to this data, and even more, . I took a speculative call the other day from an aspiring local Conservative… Read more »
Ian Perryman
Guest
There have been several mentions of Cantref in the press over the years. In August 2015 an article appeared in the Camarthenshire Herald. http://www.carmarthenshireherald.com/6211/welsh-government-investigates-cantref/ Apparently the investigation is being carried out by consultancy Campbell Tickell (address in Middlesex) and there is no clear timescale at this stage for its completion. In 2014 it was reported that the Welsh Language Commissioner may investigate failure to implement a language scheme Back in… Read more »
The Earthshaker
Guest
Another interesting article, you’re on a roll, keeping eating your Weetabix. The other reason Housing Associations are in vogue with the Welsh Government is because they’re providing services to tenants, skills training and basic qualifications, financial advice, work experience etc, in short gobbling up more third sector spending at the expense other groups. Another point the opposition parties and media seem unwilling or incapable of exposing. I also noticed the… Read more »
Daley Gleephart
Guest
Decline in the number of Council properties – Housing stock depleted by ‘Right to Buy’ with money raised not staying with Councils. Little to no new builds as a result of lack of money. Overall cuts to Council budgets imposed by Westminster. Increase in the number of Housing Association tenancies – HAs able to borrow money without adding to the PSBR. Tenants not able to purchase using ‘Right to Buy’.… Read more »
dafis
Guest
“…..Private landlords don’t want them and are quite happy for successive governments to provide tenants on low incomes with Housing Benefit etc.” …… Spot on. Bit remeniscent of the old “cost-plus” contracts back in 70’s when government made index linked incraments to payments for all sorts of services. Today, allegedly, there is little or no inflation yet landlords hike up rents knowing full well that the dumb ass at Benefits… Read more »
Daley Gleephart
Guest
Carnabwth
Guest
As if on cue…..this morning on Radio Cymru Sioned Hughes (Director of Policy at Cartrefi Cymunedol Cymru) talked about how much Housing Associations were contributing to the economy. A lot of figures thrown around byt the BBC presenter and Sioned eg Contributes £1 billion to the Welsh economy…..although no timescale is given. Safeguards 20,000 job. Although we later learn this is 9,000 ‘directly’ as corrected by Sioned. 2,000 houses built… Read more »
Carnabwth
Guest

Oh yes….she talks at 57 minutes in just before 7 am.

L J Jenkins
Guest
Jac, Why don’t you precis your points about “Dowry funding ; social housing costs ” etc etc and send as one letter to 20 leading Welsh newspapers? Many papers would publish such a letter. It is only by getting into local papers , will the people of Wales learn about this opaque , WASTEFUL public funding….and the immense cost of housing association projects. Very few people view internet sites, compared… Read more »
dafis
Guest
You are homing in on a fundemental point that us brainwashed Welsh ( and other parts of the UK ) seem wedded to – that provision of housing is in some way “better” in the hands of organisations that appear vaguely “public”. The choice of term – Housing Association – cultivates an image of not for profit ( ycha fi ! ), caring, cost concious, etc etc , whereas the… Read more »
Jobovitch
Guest

So, using the ‘Homes Under the Hammer’ technique, housing assocs should buy run down properties and do a bit of cosmetic work on them rather than buy land and build on it?

dafis
Guest

take note of the good lady’s name………….probably destined to become a Welsh speaking version of Sophie Howe, lower paid of course because she works through medium of Welsh ! Any bets on her succeeding Ms M Huws in a few years ? or will Ms Howe take that job as well ?

Brychan
Guest
Jac, when you say that the Welsh Government housing association policy is an expensive failure, are you sure you don’t mean that it is a resounding success at ethno-linguistic cleansing? The point I wish to make is shown by the contrast of Rhondda compared with what’s occurring in Y Fro Gymraeg. Here’s my point… Rhondda Housing Association is a small longstanding one. It’s very small by comparison to others in… Read more »
dafis
Guest
…………………….”After I publish Green Party docs http://j.mp/1LbBAr5 La Bartolotti revives Martyn Shrewsbury, her attack hamster http://j.mp/1PPnUbO” Seems like you are source of major irritation to your Green friends. The “Dragon” appeared to be cosying up to Ms Howe, does he have an undisclosed fetish for women in positions of power ? or is he just sucking up in the time- honoured fashion of mildly deviant inadequates with severe delusions of… Read more »
The Earthshaker
Guest
Is this the same Martyn Shewsberry who claimed on his blog im Anne Greagsby, well unless I’ve had a sex change operation and aged a few decades in the past 24 hours then Martyn’s got his facts wrong. He should be careful before telling lies and trying to smear others, perhaps he’ll set the record straight on his blog if he’s got any decency. I can only think he believed… Read more »
A Black
Guest

Jac off message, re your post of October 29, young Ryan is now a Carmarthenshire councillor, he won the Kidwelly by election by dropping the Labour vote by only 10%.
Has the donkey vote turned into the groper vote?

dafis
Guest
Quote from Trinity rag for North Wales ……@LeanneWood says attempts to forge racism and dividing bcommunities will not be tolerated. 1:26 PM – 21 Nov 2015 Our great leader was preaching the virtues of unrestrained migration ( and accomodation, benefits etc ) to a rally of assorted fellow travellers at Ynys Mon.Their collective anger was aimed at Infidels of Wales, whose underlying objections to immigration and importation of criminals &… Read more »
dafis
Guest
Here we go again ! http://www.walesonline.co.uk/news/wales-news/private-landlords-wales-subject-new-10482821 another round of busybody bureaucratic interference by the dopey buggers down the Bae ! Quite rightly there should be a concern about bad landlords. Student accomodation in parts of Cardiff was notorious, may still be, and there are cases all over where tenants have endured shocking living conditions – damp, leaking roofs, bad plumbing , defective heating etc etc. However the worst problems in… Read more »
dafis
Guest

http://golwg360.cymru/newyddion/cymru/206791-cyngor-cymuned-yn-gwrthod-argymhellion-ombwdsmon

Good to see a small community acting like they are still comfortable with their identity and culture. The old slag who was wingeing about use of Welsh should pop over the border to Cheshire, though I suspect there’s plenty in N.E. Wales who will go out of their way to make her feel at home.

Carnabwth
Guest

What’s needed in Denbighshire is for some enormous housing development to drown out the voices of such troublesome locals. Oh hang on a moment…………….

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