2013-05-25T03:24:02-04:00 Phil Shanks http://www.huffingtonpost.co.uk/author/index.php?author=phil-shanks Copyright 2008, HuffingtonPost.com, Inc. HuffingtonPost Blogger Feed for Phil Shanks Good old fashioned elbow grease. tag:www.huffingtonpost.com,2013:/theblog//3.3231901 2013-05-07T15:56:41-04:00 2013-05-08T09:13:35-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
Unfortunately, this government inspired (and underwritten) subprime mortgage is threatening the economic benefits of house building by injecting an additional dose of risk into the transaction. When did we decide that high loan to value mortgages had become less risky? Was it not the arrival of this type of loan product that created an unsustainable housing bubble in the first place?

It also misses the point.

Economic benefits do not arise from the building of houses but from the building of homes.

Instead of managing a market to entice people to take on ill-advised borrowing simply to fuel the construction industry, the government should be seeking to meet existing needs via a stable financial structure. Yes, I am referring to my old favourite: social housing for rent.

Try if you can to forget about broken washing machines in overgrown gardens. Today's social housing is on mixed tenure sites; desirable housing with far higher standards that people want to live in. More importantly, they can afford to do so.

It is the building of homes that people want to live in and, more importantly, can afford to stay in that brings greater prosperity to an area. Of course there are short term benefits in terms of job creation for builders, but the creation of a home roots people in an area and increases demands for local shops, other amenities and service industries in the longer term.

Local shops will get more customers, the window cleaner's weekly round will increase, the local chip shop will sell more pies, the local child minders will be able to hire more staff to care for more children, local garages will get more cars to repair and so the story goes. The list is long and the impact is significant. Not in the shape of an economic tsunami but by representing sustainable gains for an area.

The key is the supply of new affordable social housing; an issue which I have been campaigning to achieve for some time now, and which myself and my team are investing both time and money to achieve.

I recently made an offer to the Prime Minister to increase the supply of affordable social housing through my company, Houses4Homes. I offered to fund and develop social housing in the most challenging areas of housing provision. My offer would even help the implementation of the principles behind the bedroom tax: building more 2-bedroom houses.

The response was that 'all is well' and that the government doesn't need help from anyone to meet its staggering social housing demand. Of course, this is as far from the truth as the north pole is from the south pole. I know this because our order book has reached £200 million of urgent demand, with as much again for more general demand. In fact, we have been inundated with calls from people waiting for funding before much-needed building schemes can go ahead.

I was reassured to know that, in this regard, Nick Clegg and I see eye to eye.

The Deputy Prime Minister and I met the other week in connection with our housing strategy and, although I won't divulge the details of our conversation, suffice to say that he agreed with me in that more had to be done to meet social housing demand. With just two years left in government, time to make a real impact on Britain's social housing need is now at a premium.

Tick Tock Nick... the clock is ticking and time is running out.]]> tag:www.huffingtonpost.com,2013:/theblog//3.2860813 2013-03-12T12:13:32-04:00 2013-05-12T05:12:01-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
This is ok but there are certain dangers.

When small regional banks in Spain borrowed independently on the back of the central government's credit rating, it led to a loss of control and ultimately the Spanish property slump.

The same could happen to local authorities here, and in the not too distant future. As credit agencies become alert to the issue, they will either reduce the national credit rating or start rating local authorities. Should the latter happen, it will be detrimental to the poorer northern areas of the country as they inevitably get hit with higher risk ratings and higher costs.

The use of local authority borrowing powers should be carefully controlled and leveraged with private sector cash to reduce their exposure to debt risk. Local authorities should, in effect, deploy borrowings on the same basis as grants - by making contributions to projects that are serviced at a lower rate of interest. The effect will be lower rents when the grant funding is mixed with more costly forms of finance.

The input level of such money would be higher than grant, since grant requires no return but it will still create a situation whereby local authorities can limit their exposure to debt while still achieving their objectives.]]> tag:www.huffingtonpost.com,2013:/theblog//3.2733800 2013-02-21T11:32:08-05:00 2013-04-23T05:12:01-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
Of course it was never supposed to be like that. The Beveridge Report famously proposed that all people should pay insurance to provide for the sick, unemployed, retired or widowed. It was possible because people in work had sufficient means to meet their needs and only had recourse to benefits in these circumstances.

Today, a growing number of working families need access to this help. The state is, in effect, subsidising the employers. Why?

The law defines an amount which every person or family needs to sustain an acceptable standard of living. This is the amount we measure against and provide appropriate benefits to reach if there is a shortfall. But the fact that so many families are eligible for benefits today demonstrates the shortfall of compensation.

Even in the days of subsistence farming, a family's efforts were sufficient to provide the appropriate to survive. Those days are gone.

There is no pressure on employers to change this situation despite the fact that measures such as the minimum wage fall far short of an income that obviates the need for benefits. Even ideas like the 'living wage' are little more than a sop.

Shifting responsibilities

If we are to break this cycle we need to start shifting the responsibility for proper employee compensation back onto the employer. Some may deem it crazy in an age of austerity but I think it can be achieved.

To start with we must redefine the minimum wage to match the level defined by law we need to live plus the prescribed housing costs. No working family should need benefits. This would become the new statutory living wage.

The current DWP budget should be transferred to a fund payable through the PAYE system as employer tax credits. This would be used to top op the current minimum wage to the new statutory living wage.

Over a period of five years this tax credit should be reduced until the employers are meeting the full cost. A fair approach I think to solving what has become a major structural problem in our welfare state. It would allow employers time to fully resume their responsibility and for the welfare state to return to what it was created for: looking after those in real need.]]> tag:www.huffingtonpost.com,2013:/theblog//3.2678650 2013-02-13T12:02:58-05:00 2013-04-15T05:12:01-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
Deputy prime minister Nick Clegg is trotting out the existence of a discretionary of £50million housing fund to be spread across the whole of the UK. The aim is to alleviate any hardship that might occur from April when the Welfare Reforms cut the amount of benefit that people can claim if they are deemed to have a spare bedroom in their council or housing association home. The fund is to be used to meet the shortfall created by government policy and on the face of it, it appears to do what it says on the tin. Its purpose is to bridge the gap between the rent charged and the benefit paid, in appropriate circumstances.

Unfortunately there is a catch. Local authorities are adding extra definitions to the criteria such as: "The award is intended as a short-term measure to alleviate poverty or difficult circumstances and should not be relied upon in the long term." While this may be acceptable in the case of an elderly or acutely ill person with a temporary need, it is of no use whatsoever to a young disabled person with a devolved care package seeking to live with support in their own home. I personally know several hundred people with this level of need.

It seems we must continue fighting the same battle for the right of people with extra social and care needs, as we have done for years.

2009 otherwise marked a landmark decision when Commissioner Turnbull, who leads the upper tribunal service on matters relating to specialist housing, ruled in the case CH/4018/2007 [2009] UKUT 116 (AAC). The decision settled a case involving a restriction of benefit on the grounds of under-occupation. In this case and others, including some that I have been directly involved in, Turnbull held that the room required for a carer was occupied as the claimant's home and was therefore eligible for benefit.

Since this landmark ruling, local authorities have rolled out self-directed care - giving more disabled people control over their own care budgets. It marked a time when severely disabled people faced the real prospect of living an ordinary life, with support.

But now, it seems, we are returning to square one: a place where people's lives are lived by a succession of temporary deals.

During the committee stage of the Health and Social Care Bill the secretary of state for health, Andrew Lansley acknowledged that housing was at the centre of social care. He also acknowledged that, at times, the housing sector felt a bit like an 'add on'. Yet government policy continually fails to taken the housing needs of disabled people into consideration.

The people whose case I am arguing here are not people who will 'get better'. Many of them will, however, lead long full lives. Therefore, we cannot simply provide a succession of temporary fixes which are costly, unsatisfactory and which will result in further stress and hardship for some of society's weakest.

The bedroom tax is nothing other than a money saving vehicle. In quizzing Mr Clegg on the issue, several MPs stressed that there is simply no smaller accommodation available for these people to move into. The bedroom tax will have a direct impact on vulnerable people; reducing their standard of living to a level we should be ashamed of as a welfare state. Yet their concerns seem to be falling on deaf ears.

Disabled people in Britain are under attack: from the tightening of eligibility criteria for domiciliary care, the hike in charges, the latest assault by ATHOS and now the bedroom tax. On this point our government is incompetent, incapable or unwilling to listen to the voices of the most vulnerable in society.

Under 'discretionary fund', disabled people who need a bedroom for their carer will have a choice between cutting their food bill, cutting their care bill or living without a night time carer - hoping that they will wake up in the morning. If you think that sounds harsh, you should spend a day with me. Because for many people, it is the harsh reality of life under this government.]]> tag:www.huffingtonpost.com,2013:/theblog//3.2482704 2013-01-15T18:39:22-05:00 2013-03-17T05:12:01-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
It is no secret that banks have ceased lending. As a consequence construction sites lie empty while builder kick their heels waiting for things to pick up. Developers cannot use the value of their assets to kick start new projects. One guy sold his Aston Martin to buy a cherry picker because the bank would not lend him the money. Unfortunately, most of us don't own an Aston Martin!

Although communities secretary Eric Pickles did his best to sound upbeat when he appeared on Sunday's Politics Show, he rather sent me to sleep reciting figures for new housing starts and the number of houses built. The figures were up on the previous year, he claimed - not a huge achievement since that previous year was the worst year for building since the 1920s. But he speaks with no urgency, no relish and no passion. And the fact is that only 136,000 houses out of 250,000 needed were built last year. That IS something to get passionate about.

As has been the case in the past, I believe it is the private sector and not the government that will have to lead the country out of recession. Our road networks, canals, water systems and railways - none were the result of government activity. They were conceived, built and funded by the private sector with the government simply legislating to enable entrepreneurs to get on with it. So that is what we will do. Because while Mr Pickles was unable to deliver some good news, I am.

Houses4Homes is open for business and keen to Marshall our resources. That means builders. If you have land or agreed developments that can be used for social housing, we are willing to buy them. It is not a prerequisite though.

Our pipeline boasts a range of schemes that we want to deliver of different sizes and across the country. To deliver the housing that Great Britain so desperately needs, we are looking for small, medium, large and specialised builders to join us as approved contractors.

The task is immense. We expect our pipeline to exceed £1billion of contract value over the next three years, with an investment strategy to match. It is our intention to keep our approved contractors busy until the end of 2015 at least: creating jobs, providing access to quality contracts and ultimately something developers can take to the bank.

I think January just got a bit better.

Interested developers can download and complete the Houses4Homes PQQ from www.houses4homes.co.uk/developments]]> tag:www.huffingtonpost.com,2012:/theblog//3.2315936 2012-12-17T10:48:02-05:00 2013-02-16T05:12:01-05:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
Despite knowing some of what was to come, I listened with horror and disbelief as the Chancellor presented his Autumn statement to the nation. For Mr Osborne, the notion that we are all in it together means that the rich are asked to sacrifice a significant amount yet still a relatively small amount of their overall wealth. The working poor and the "feckless" (whatever that means) are having to give back to the state a much smaller amount but one that represents a huge percentage of their wealth.

Although I appreciate what the government is trying to achieve, I believe this balance is wrong.

In its bid to try and trim down the welfare bill, and in particular housing benefits, the government has sought various methods of limiting spend on rental support: local housing allowance, benefit caps and now a 1% limit on increases to benefit.

In an economy with insufficient housing, rents have become superheated - spiralling ever upwards. Attempts to address the cost consequences by taking money away from the tenants are bound to fail. Instead of addressing rental issues, the measures are forcing people to chose between paying rent or feeding their families.

The poor working poor

Despite claiming to stand up for hard working families, Mr Osborne's measures are hitting the working poor as well as the allegedly feckless where it really hurts. If the government truly wants to represent working families, it needs to take a different aim to reduce welfare spend.

The fact that working families are exempt from the benefit cap does not protect them from the decision to limit annual uplifts to a maximum of 1%, nor will it protect them if their housing benefit goes up by 1% and their rent by 3.2%. Anyone who claims that I am merely exaggerating should consider why we now have more food banks in Britain than ever before.

Thankfully there are now a number of agencies, including Houses4Homes, that are working hard to plug the housing gap with affordable social housing. The challenge is that new construction starts are at a very low level and funds like ours - despite our large investment pot - will take some time to make even a small dent in the truly enormous and growing need for affordable housing.

Rent limits

I am therefore urging the government to do all it can to limit rents - in part by engaging with the private sector and in particular the market rent sector. In some districts, London being an obvious example, rent costs are truly eye watering and continuing to rise. Look a little closer and you will find a large number of properties advertised for tenants are excluding people on benefits; I suspect because landlords won't get the rent they want from the benefit system.

What we need is rent control. We need it now and for it to remain in place until such time as we have balanced the demand for housing with adequate supply. Once we have done this then the market can, once more, be allowed to determine rents. As it stands, the continuation of the free market for rented property, while supply is so restricted, sustains an abusive relationship in cost terms.

I agree that rent control seems a rather blunt instrument. No less though, however, than an arbitrary benefit cap with very few exclusions. And it would make all accommodation within a framework that is sustainable via affordability available irrespective of means. Such controls would not only help solve Britain's housing crisis. It would also encourage social housing investors to expect sustainable and reasonable returns and put their money into the regulated sector which offers security and predictability.

Impossible?

Introducing and sustaining rent controls isn't at all impossible. It just requires the political will to do so. Strengthening the landlord accreditation scheme which most local authorities operate already with enforcement rights would go some way in enabling controls while still providing the opportunity to set rent caps locally.

Would introducing and sustaining rent controls lead to an exit of landlords from the sector and leave a trail of empty properties in their wake? Of course not. Local authorities have empty property management powers at their disposal which could be strengthened and deployed successfully. With additional short-term resources, local authorities could in fact ensure that no residential property is lost to the nation.

We all want a stronger economy and to drive out excess and waste in public spending. This, though must be done with some basis of legitimacy. If the government introduces a cap on rent on a particular house in a particular area then this should be placed on the landlord and not the tenant. The fiscal result for the government is the same but fairer and sustainable. Such a move might even make this government re-electable.]]> tag:www.huffingtonpost.com,2012:/theblog//3.2230663 2012-12-03T07:50:00-05:00 2013-02-02T05:12:01-05:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/ is seeking to resurrect Right to Buy (R2B) illustrates that party's inability to see beyond the type of myopic asset-stripping we've become used to.

With the likelihood of private investment in house building under the Conservatives' watch resembling anything other than a pool of stagnation for the foreseeable future, I am staggered to hear Housing Minister Mark Prisk MP claiming that R2B will once again teach people that "Ambition pays..." or that "they didn't just pass their property onto their children but their aspiration."

I grew up in a big family, I was the eldest of six, my dad drove trucks for a living and my mum was full time at home. We lived in council housing and it was that access to good quality, low cost housing that made the difference between surviving or not for my family. It's no exaggeration to say the benefit system was not as it is now. The Family Allowance; a forerunner of child benefit, was in place to top up our meagre resources and a home let from the private sector would have taken food from the table and the clothes from our backs.

Fast forward to the 1980s and I was fresh out of university, watching the then Conservative government introducing right to buy. It was aspirational; the intention being to create a property owning democracy and the discounts provided were attractive.

However, the receipts went largely to central government and the stock of housing, particularly for families, reduced. In meeting an aspiration the government had very effectively undermined the position of those who rent.

Later in the 80s, as a social worker I was confronted with the shortages that this and increasing demand for rented property created when I tried to find homes to rent for people with learning disabilities leaving long stay hospitals. It proved impossible to meet this need from council stock and we were forced into more costly provision from the private sector.

There is nothing wrong with aspiration. It is something that I believe in strongly; there is nothing wrong with the aspiration to own your own home. However, it is not acceptable to meet this aspiration by denying the rights of those who must rent.

There are people on the waiting lists of councils who are living in costly unsuitable accommodation and are awaiting the opportunity for access to low cost and good quality housing. It is hard to see how they will move up the waiting list if the housing stock they are seeking to access is ever diminishing.

I understand that the receipts from the current right to buy scheme will be retained by local authorities and can be used to drive the development of new housing. However, there are better ways of funding the building of new homes for rent.

On a final ironic note, my organisation has a number of houses in its portfolio that are ex council stock. These were bought from auction, the shattered remnants of aspiration. They are back in use now, for the purpose for which they were built; rented, social housing.]]> tag:www.huffingtonpost.com,2012:/theblog//3.2165068 2012-11-20T10:08:27-05:00 2013-01-20T05:12:01-05:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/ The baby on the parish steps". At the time of writing I knew that I would shortly be penning this piece.

In that article I highlighted my concerns that future funding for supported accommodation would be separated from the universal credit system and delegated to local authorities. There was talk of a working party to consider how best to proceed but I suspected that a decision had in fact already been made. Sadly it had. The answer to a parliamentary written question, asked on my behalf by my constituency MP Jason McCartney on 29 October 2012 summarised the government's position:

"We are exploring the feasibility of a localised funding system with the Department of Communities and Local Government and the devolved administrations. We are convinced that local knowledge is essential to help identify this often diverse group, build effective relationships with providers and ensure that resources are targeted effectively at those who need it while ensuring that any financial scrutiny is well directed."

On the face of it no one can argue with the sense of that decision. The range of needs met through supported housing is indeed diverse and the challenges vary across the country. Leaving the task of allocating resources to local authorities makes sense.

That, however, is not what concerns me. The last time a funding responsibility was shifted from the housing benefit system to a local authority devolved budget was through the Transitional Housing Benefit Scheme which, once and for all, settled the funding for supported accommodation. Right? Well my tongue is firmly in my cheek as I write this. Under Labour, the Transitional Housing Benefit Scheme provided for three years while the full cost of supported housing could be established via the housing benefit system. It was to form the budgetary framework for ring-fencing 'supporting people' grants. I remember it well because I was there. The service element was separated from the rent while the property element remained the responsibility of the housing benefit system.

It was a well motivated scheme which fell far short of its objectives - establishing a budgetary framework of around £1.8bn (in 2003) which was far too high for the government to contemplate. As a result, take-up across the country was patchy. Those authorities with more traditional residential services did not have the tenancy base to participate in the Transitional Housing Benefit Scheme and risked receiving no 'supporting people' budget at all. Those with more developed services used their large tenancy base and familiarity with income generating techniques to drive their supporting people budgetary requirements, but pushed the budgetary envelope beyond sustainability. Ultimately the government acted to moderate the budgets and, in doing so, removed the ring-fence that protected them. In many cases the local authority then subsumed the budget into the overall social services spend which is now subject to the same cuts that blight all of our services. Each year the funding envelope gets smaller.

The fact that the part of the rent that was retained within the housing benefit system remained high, because the costs of providing specialist housing are high, meant that Regulation 11 (the exemption that allowed for high rents for people with special needs living in RSL or voluntary sector housing) had to be retained. This regulation cannot be incorporated into the very inflexible universal credit regulations that gives rise to this latest of funding shifts.

Good intentions

I still think that the intention behind this latest of government measures on supported accommodation is good. It makes sense and, if done properly, could provide a balance between meeting locally defined needs within a fiscally responsible, national cost framework.

I refer to a national cost framework because we are referring to the diverting of what is currently part of a DWP benefit. Local authorities administer the benefit on the part of government.

That national cost framework has to recognise the current and future trends, which the Conservative government of the 90s failed to do in the case of care for the elderly but without the unfettered budget building and patchy take-up that were the hallmarks of Labour's Transitional Housing Benefit Scheme. These trends include:

• Increasing repatriation from out-of-borough placements to tenancy models within the district


• Moving from group living to individual tenancies


• Increasing self-directed care and its associated housing requirements


• Meeting the needs of a growing number of people living with aging carers


• Dealing with an insurmountable homelessness problem


• A rising number of refugees

Mapping future housing need

In the pursuit of launching our Real Estate Investment Trust we have carried out extensive research across the country into the future requirements for specialist supported housing. In our view, specialist supported accommodation is property which has been built bespoke to cater for an individual with complex needs, or one that been adapted or managed in a way that the costs cannot be contained within reference rent levels.

This type of accommodation is expensive to develop and requires intensive management from housing associations. Our research indicates that we will need a lot of it, but it also tells us that the spend will "top out" in about four years - the time during which local authorities will need to achieve projected cuts.

One solution could be to cap the budget based on a predictions made by local authorities on future supported accommodation need. The risk, of course, is that some authorities will over-state their requirements and that others might decide not to participate as happened with the Transitional Housing Benefit Scheme.

A second option is for the government to do nothing and revisit the situation in four years time when it would be safe to cap the budget based on the prevailing spend. It would require a measure which adds to universal credit regulations which, in my view, should divert claimants that meet the qualifying criteria through to 'special regulations': the part retained from the existing regulations which allow Regulation 11 to operate.

Those claims should be determined, as they are now, by the chief housing benefit officer. They should be subject to the current appeal process and, if successful, see the incorporation of the allowed rent into the new budgetary arrangement. The budget should be kept "live" in this way for the four year period and then capped.

This approach allows the flexibility that services require to meet future need. It achieves the government's objectives of utilising local knowledge to inform local priorities and, thanks to the healthy tension that exists between landlords and housing benefit officers, it enables delivery with fiscal responsibility.

With a host of upper tier decisions defining the required elements which constitute supported housing provision as guidance, and the district auditors oversight to provide safeguards we can give this complex issue the time and respect it requires. We could finally get it right albeit not as quickly as the government might want. The fact that the 1987 regulations have been amended more times than I can remember pays testimony to what happens when insufficient time is spent and thought is given to solving some of society's most complex issues.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1967810 2012-10-15T14:17:31-04:00 2012-12-15T05:12:01-05:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
For an investment fund, no matter how reasonable its rate, to properly meet the objective of affordable housing requires an element of public funding: provided in cash or asset. The common method of achieving this with more traditional funding routes is via grant. We, however, use the issue of preference shares in exchange for grant funding which results in an investment relationship between the public and the REIT.

In common with our other investors, the public will wish to know that the fund is well constructed and that the risks are managed. They will also want to know what the return will be. It is the latter which presents the challenge. A preference share is a "capital marker". It retains the public interest so that when the provision that it supports is no longer required and is liquidated, the cash can be returned. However, it pays no dividend and this is the feature that keeps the rent down. So is this an investment for no return?

Investing public money for the public interest is an activity designed to support social policy objectives such as affordability, stimulating housing supply for elders... the list goes on. But can we even put a price on this? Can we calculate the social policy return in cash terms?

A National Audit Office report in 2005 estimated that the nation spends around £1 billion a year to prevent and deal with homelessness. This includes central and local government spending on administration, accommodation and support to homeless people, but excludes indirect costs to government (e.g. arising from health or benefits).

Research in 2008 by the New Economics Foundation indicated an annual cost to the state of £26,000 for each homeless person. This figure included the cost of benefits, hostel accommodation, and care of any children involved.

An earlier report in 2003 by the New Policy Institute estimated an annual cost of £24,500 for a single homeless person. This included the cost of a failed tenancy, temporary accommodation, outreach and advice services, health and criminal justice services, and resettlement.

In fact, the amount of data available which illustrates the cost of failure to provide accommodation is vast. I could easily provide even more through reports from the DoH and organisations like AGE UK which will reveal the effects of inadequate housing provisions for the elderly: this includes hospital beds, residential provision and additional care services. Similarly I can recite reams of data with regard to people with disabilities in dire need of supported housing and the costs associated with the failure to get to grips with the problem of under-supply.

The cost benefits

Of course these are only broad social policy measures, essential to meet, but difficult to ascribe to a cost per tenancy created. This is because there is a general under-supply of diversionary and support service provision. People are falling through the gaps, stuck on waiting lists or waiting to join a waiting list (the irony). As such, it would be some time before any measurable gains can be achieved.

Instead we have to look at the more direct cost benefit of housing provision to properly measure the effectiveness of the public's investment in housing.

We start from the basis that local authorities are working under government advice to adopt a strategic commissioning role to address housing affordability (Department for Communities and Local Government 2008).

Rent affordability is defined by the (Department for Communities as 80% of market rent. Our experience, however, indicates that this varies across the country. We prefer the 30th percentile definition which basically means that, to avoid rent poverty, rent should not exceed 30% of a family's income.

Any difference between the affordable rent figure and local market rent represents a gain. That gain may be a direct financial gain by local and central government through a reduction in housing benefit spend, or by tenants in greater family disposable income. It is the measurement of this gain that can provide a simple basis for calculating the social policy premium of any investment in public funds.

It is a return rate that will vary across the country and it will favour areas where land costs are high and local incomes low. It is simple to calculate: you simply take the capital sum that needs to be deployed to reduce rents and use the rent saved figure to calculate the return.

For example if you wanted to supply a £90,000 3 bed semi in Wigan, the normal market rent is £450 pcm and yet the affordable rent is 375 pcm. To achieve affordability calls for a public investment of 18,000.

This investment is safeguarded by the valuation on the property and so to that extent is secure. But we can also calculate the return rate. That 18,000 investment yields a 'return' in rent saving of £75 per week, £900 per annum or a 5% yield.

In the example above the local authority has the opportunity to base its decision to use public money on an objective measure. This figure, the social premium, will differ across the country, but the process can establish a benchmark - setting the investment standard for local authorities and governments alike. Using this very crude device, establishing if a particular development is in the public interest should be fairly simple.

Civil servants and government officers should act more like fund managers seeking out the social premium.

Governments need to get out of the habit of giving our money away. Grants should be reserved for charities. In all other aspects of governmental spending both nationally and locally they should be asking the question: 'what's in it for us?']]> tag:www.huffingtonpost.com,2012:/theblog//3.1947729 2012-10-08T08:26:29-04:00 2012-12-08T05:12:01-05:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/ Juliette Tarrant reminded me that it has been a year since we embarked on our mission to deliver the first social housing real estate investment trust (REIT) to provide new affordable social housing, extra care and supported accommodation.

It has been a hectic year and one that has seen massive debate but little progress in terms of providing each and every UK citizen with a suitable place to live: A position exemplified by the contribution to the debate on affordable housing by Heidi Alexander of Lewisham East. She wrote: "We have heard much talk today about affordable housing and social housing. The reality of social housing in London is that between April and September last year only 56 new social rented homes were started, in a city of 7 million people. Is that acceptable?"

London is not alone. The same can be said for just about any city or region in the country. The government, however, has not said nor done anything. In attempts to stimulate house building, the government has relaxed planning rules, allowed renegotiation of section 106 agreements and promoted the building of non affordable market rent properties. In addition, indirect measures to free up under occupied family social housing are being introduced by encouraging tenants to move.

Unfortunately these measures are nothing but noise - designed to make heads turn in the real estate sector and make everyone believe that we are returning to the good old days of massively enriching PFI contracts.

The key to creating a durable, sustainable and successful REIT is its structure. The number one challenge in setting up a structure able to survive for a century or more is to filter the noise coming from parliament - instead, working in tandem with the flow of social and economic policy.

So when the government announces new planning relaxation it should be viewed against the fact that there are already 400,000 approved applications on which there has been no activity. It is nothing but noise and I chose to ignore it.

The government introduces a new 'bedroom tax' to encourage tenants to move to smaller accommodation, but fails to realise that there is no smaller accommodation for them to move to. It is a measure to try and justify cutting housing benefit spend which, instead, results rent arrears. It undermines landlords' obligations to the investor. It is noise.

When the government announces that it will allow flexibility of section 106 planning gains, listen instead to the member for Lewisham when she warns how this will result in social housing that no one can afford to live in. Listen to my followers on twitter who live in Lewisham when they talk about the many new apartments in the area currently sitting empty because no one can afford to live in them. This is an initiative designed to stimulate building jobs rather than help meet housing need and engage with the investment market on an honest long term basis. It is noise.

Although some of this noise is just ill informed, parts of it is rather more dangerous. Encouragement by government to registered housing providers to provide social housing at market rents is a disaster waiting to happen.

One of the key social policy issues faced by this country is rent poverty. At the moment this is being subordinated by the need to stimulate building and is covered by the fact that housing benefit is still, generally, being paid at close to market rent levels.

Once the recession is over and the desperate need to create employment has passed, future governments will want to take action to address rent levels.This government, already recognizes that market rents are too high and have started early work on the issue; albeit with a view to reducing the housing benefit spend than improving peoples lives. The government is driving down housing benefit for private sector market rents by linking it to CPI rather than RPI as is the case with the registered sector.

It is difficult to justify a housing association having two classifications of social housing operating on two different rental regimes. Since Weaver v. London and Quadrant Housing Trust [2008] registered housing providers have been subject to judicial review and it is difficult to see how they could square a two tier rental scheme with their objects if a tenant chose to challenge them. Even if a tenant does not challenge this apparent two-tier rental scheme, the government will ultimately have to act. It has in fact done so very recently by introducing a rent restructuring scheme where rents converged over an agreed period of time.

From an investor's viewpoint, this is not good news: It heralds uncertainty particularly for the unwary REIT that has failed to recognise this reality and invested in market rent housing. In any future rent restructuring there are only two methods of reducing rents: increased grant input or a reduction in return for investors. The latter scenario, where the government steps in with the sole purpose of maintaining investors returns, is rather unrealistic.

The more likely response will be to 'deflate' the difference (about 20 per cent) away over a period of time. Unfortunately this attacks one of the key attractions for investors in social housing namely access to an index linked income stream.

Despite all this noise, the government lacks a coherent sustainable housing policy and is instead simply implementing a range of haphazard measures that either constitute unhelpful noise or which store up problems for unwary investors. That is why the Houses 4 Homes REIT, a vehicle designed to service the needs of its tenants and investors for 100 years will stick to its founding principles. We will offer our investors the opportunity to invest in a REIT constructed by specialists in the field, who are able to ensure that their investment is future proofed and offers sustainability through the affordability of the housing it provides.

So as the government continues to conjure up measures to get the economy going through construction schemes, may I remind David Cameron that building houses does not necessarily equal building homes. For a house to be a home it has to have someone in it. Without occupants, building a house is just a short-term job creation measure with a poor return on investment. For a house to be a home it has to be affordable.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1849973 2012-09-02T04:44:12-04:00 2012-11-01T05:12:01-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/ Real Estate Investment Trust which will bring private and institutional investment to the affordable and specialist housing market, my attention was drawn to a housing report, commissioned by the government from the chairman of the 3i investment group.

Sir Adrian Montague's report highlighted the need for encouraging funding from the investment community into social housing. It also stated that housing minister, Grant Shapps considered the idea of such merit that he was surprised no one had yet done so.

I, on the other hand, am not.

Since the beginning of the year, my team and I have engaged in extensive dialogue on exactly this subject with officials from the Department for Communities and Local Government, as well as with Her Majesty's Treasury. The topic, encouraged by statements from Mr Shapps, has been how to encourage more private investments into social housing. To date we have had no support whatsoever.

Another meeting has now been scheduled with the cabinet office during which myself, SAF Director Juliette Tarrant and our shareholders, will be making our case for private investment yet again.

Stop dancing around

This is no time to sit around. Inactivity continues to cripple our economy while hundreds of thousands of people live on the strees on in unsuitable accommodation.

By launching the UK's first social housing REIT we are doing our bit. The government should do the same by turning off the tap to the banks and directing those resources into kick-starting the economy and building desperately needed housing.

My friend and co-director Juliette always says "Stop dancing around your handbag and say it as it is." so I shall. The government is committing a cardinal sin: paralysis of analysis. In his housing statement last November, Grant Shapps said clearly that the government would encourage the role of the REIT in delivering social housing. Every single day since then, we at SAF have been working tirelessly to making that happen.

But aside from receiving an invitation to a consultation on the role of REITs and a few meetings, we have received absolutely no support from Mr Shapps and his colleagues. Because while officials from the Treasury, Department for Communities and Local Government, and the DWP are interested and have requested that we keep them up to speed with our progress, they claim that it is not the role of government to support private enterprise: not even when the mission of the enterprise is to help solve the social housing crisis.

The Montague report

I read Sir Montague's report with the backdrop of having spent eight months of laying the groundwork for the UK's first social housing REIT. In that time, we have made giant strides and are now ready to deliver. The government, however, is stuck at the beginning.

At a time of national emergency, the Conservative policy of reducing government input and engagement is entirely unacceptable and unhelpful in meeting the need og some of society's weakest. No government would be able to justify a hands-off approach during a time of war. Yet, in one of the most serious economic downturns of our time, it seems the coalition is comfortable doing just that.

The miracle of little ships

Perhaps I was naive when I thought the coalition would be able to deal with the current financial crisis. I believed that we would get a strong lead and that we who wished to pitch in and help would be welcomed with open arms. Imaging my disappointment. A government should not simply sit in a glass house and point out what needs doing. It should roll up its sleeves and get its hands dirty along with the rest of us.

We have labelled the delivery phase of our REIT 'Operation Dynamo' - ambitious in the hope that £700 million pounds of house building can help energise a tired and stagnant market. Appropriately, the name also sums up the 'miracle of deliverance' when 338,226 soldiers were safely evacuated from Dunkirk harbour in 1940.

The government cannot simply sit back and rely on the miracle of the little ships while offering no support and very little encouragement to those on the front-line. What needs doing has already been identified - more than once and by more than one person. Now help us do it.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1705529 2012-07-26T10:14:14-04:00 2012-09-25T05:12:06-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
So when the Office for National Statistics released its latest GDP figures showing that Britain's economy continues to languish in negative growth, I blame a lack of hands-on engagement from the government.

The issues for a broken economy are not dissimilar to those of a failing business. The structural problem that besets the organisation has to be identified and addressed. Importantly, a process of tight management and close control has to be implemented and maintained throughout the turnaround period: close attention is given to cost control and the new shape of the business. The objective is to build a structure that can carry the organisation through to success.

In governmental terms such a turnaround calls for Big Government with a clear message, a plan and the willingness to implement it. And herein lies the problem.

Investing in social housing

A couple of weeks ago my fellow director, Juliette Tarrant and I met with officials from the Department for Communities and Local Government (DCLG). The topic was social housing and our mission was to persuade the government to take the lead which traditionally meant issuing guidance to local authorities or presenting models of best practice.

Since the government, and indeed several economists, support the idea that major infrastructure projects are part of the answer to promoting growth, we expected nothing less than an extremely positive response to our plans of spending in excess of £500 million on new social and extra care housing. Effectively we are offering a stimulus package that costs the government nothing; just a bit of leadership.

Imaging our disappointment when we were told by a senior official that this government believes in small government and as such, little guidance will be issued to local authorities. Instead, the regions are expected to develop local solutions without any direction from central office. Of course the senior official was happy to wish us the best of luck and asked to be kept up to date with our progress in launching the UK's first social housing REIT.

The government's grand plan

Sure, David Cameron and his colleagues have a clear message: austerity and the promotion of growth through stimulus packages that should restore the banking sector's ability to lend. By pumping £billions into the banking sector it was hoping that businesses would see at least some of it. Unfortunately, that hasn't been the case. Despite owning a controlling 84% stake of the Royal Bank of Scotland Group (RBS) and 43% of the Lloyds Banking Group, the state is unwilling to excert its well-earned influence and twist the arms of bankers to turn on the tap.

So, despite having correctly identified the problem - a lack of liquidity - and having devised a plan to restore it through quantative easing, there has been little or no involvement in implementing the strategy. Instead, the banks have used most of our money to repair their balance sheets rather than lending to the small businesses that so desperately need the cash.

Bricks and mortar but no walls

Despite several infrastructure announcements, pots of money for new housing starts and major transport developments, the second quarter of 2012 saw construction dip by 10%. I understand that it takes time to launch large projects but it doesn't explain why residential house building is down when we have so many shovel ready sites.

Again, the government has identified a vehicle for stimulating growth - house building - but as typified by the officials at DCLG, the government does not wish to control the implementation of its own plan. In an effort to reduce the role of government, the coalition is reducing itself to the role of a well-meaning spectator rather than the strong leader we need.

We need hands-on management from the government. The stimulus has to be used as effectively as possible; both in terms of getting the cash out of the door and obtaining maximum leverage. This calls for a Big Government approach and a national strategy to carry out an effective housing stimulus.

The SAF Housing approach

Later this year, SAF Housing will be launching the UK's first social housing REIT with an AIM floatation expected to raise £500 million for new social and extra care housing. In laying the groundwork, we have had to convince the City that we can deploy the cash we raise quickly so that investors can receive their return.

In preparation for the launch we are establishing the level of need in each region and will soon be asking local authorities to submit their bids for available funds. By the time we float, suitable projects will have been identified and time-lined. With bids worth £140 million already on our books, we know that demand for funds will be extremely high.

The infrastructure required to implement the spending of the cash - a specialist team supported by established corporate and legal advisors - is already in place. And since we commission housing on the local authorities strategic plan, the localism agenda is sustained. Within a year, the £500 million will have been invested. Of course we are only scratching the surface with a housing need worth an estimated £10.6 billion.

My point is that Big Government does not necessarily equate to an army of civil servants or a string of working parties. It should, however, mean taking responsibility for solving some of the country's most pressing problems and making sure solutions are implemented.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1645191 2012-07-03T12:29:52-04:00 2012-09-02T05:12:16-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/ Juliette Tarrant and I met with members of London's finance community in preparation for the market launch of our social housing REIT. It was a mixed bag of people who were enthusiastic and positive about what we are aiming to achieve, and those who are seemingly devoid of social conscience and unable to read the writing on the wall.

Allow me to explain...

As we were arriving at Euston to discuss the flotation of our REIT on the stock market with an AIM adviser (NOMAD), another NHS Trust fell victim of an overpriced PFI contract. In describing our investment - social housing to meet local authority defined need and the return of 4.33% - the NOMAD told me without a flicker of humour that the return rate was unattractive compared with PFI investment opportunities at 9-12%. It was pointed out that the products shared the same low risk profile and that we were unlikely to be successful unless we could either match this high rate or obtain sizable government grant funding.

I was stunned; a 9-12% return rate conflicts strongly with the affordable rent agenda as it demands significantly higher rent requirements. At this level, our rent levels would have to be twice the market rate and not the 80% we aspire to. The NOMAD was unmoved.

Fortunately, a number of market leading organisations in the city were more supportive of our proposition and we obtained enough interest to proceed. However, the events of the day and recent news from the banking and investment arena had left me pensive.

The rate of return governing an investment should be determined by two factors: The availability of cash and the risk involved in the deal. Despite the country's economic woes, cash-rich investors are constantly on the search for "safe haven assets" such as gold and AAA-rates sovereign debt.

Investment decisions are based on risk v reward and with return rates of 9-12% the rewards are clear to see. But where lies the risk? There is already an expectation forming that the government will take on the liability arising from the collapse of South London Healthcare and indeed the 30 other Trusts thought to be in the same situation. It is this default expectation that the government will bail out investors which I am uncomfortable with. If an investment has risk priced into it, as these PFI deals appear to have had, then there has to be a downside. If not, that premium for risk becomes unjust enrichment.

The British public have become much more fiscally aware. We recognise a bailout when we see one and we now know that at the centre of each and every one sits a fat cat. Our tolerance for bailing out rich financial institutions has evaporated and the prospect of having to lay off yet more nurses and front-line staff or limiting access to services in order to protect the investors from the consequences of this unjust enrichment is likely to raise a shout that no government can ignore.

The unthinkable word "haircut" can and must enter into the negotiations surrounding the future of PFI contracts. If investors are not willing to expose themselves to risk then they cannot seek the rewards that go with it

Public outrage is spreading and understandably so as we witness the slashing of services to pay for the betrayal of the banks. But what we have seen to date is nothing compared with the fury that will be provoked if PFI contracts are bailed out to the detriment of services or at further expense to the British public. In the face of such fury any government has to respond and it is not without precedent for Cameron & Co to act retrospectively.

The investment community plays a vital part in our financial infrastructure and thankfully there are imaginative, realistic and well-motivated investors out there. They understand that to invest in social infrastructure with the protection of government backing calls for a fair return, without unjust enrichment.

To everyone else may I suggest a very realistic scenario: Imagine that your investment decision is exposed by Jeremy Paxman himself. Could you stand the test of a grilling on Newsnight? Could you convince both Paxman and the viewers that you have not unjustly enriched yourself on the back of the taxpayer? If not, then your investment could very soon face the brunt of overwhelming public outrage.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1624254 2012-06-25T10:57:12-04:00 2012-08-25T05:12:04-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/
Today, our government continues this shameful tradition in its search for smaller government. Of course they do not actually leave babies on the steps of the parish workhouse, but they are abandoning the "children" of our welfare state.

I am referring to the draft regulations for Universal Credit, Ian Duncan Smith's pursuit of a self confessed desire to modify the behaviour of some of our citizens. With the precision of a nuclear missile he is making changes to our welfare provision and perhaps hoping for the best that the 'deserving poor' don't get caught in the crossfire. His assault on the feckless, an underclass created by Margaret Thatcher in her government obsessed with the monetarist dogma of Freidman, seeks to set a cap that is blind to the amount of money that the law says people should live on. The generations of unemployed created as a cannon fodder in the war against inflation are now to being put on short rations.

As is always the case in such measures people with undeniable need do get caught in the crossfire and in the case of supported accommodation the needs of some our most vulnerable citizens are set to be left on the parish steps.

Chris Smith, a highly regarded welfare rights specialist has already raised the issue that supported housing, for people with disabilities, is ignored within the new Universal Credit Regulations and he is right to do so. The government, however, is not ignoring this sector and has said it is forming a working party to work on the future funding of supported housing, having put the matter out to consultation.

The outcome is likely to be that the responsibility for funding this provision and its current spend will to be transferred to a department within each local authority. This sounds a fair enough solution one might think and I am certain that it will be presented to Parliament as a revenue neutral solution... 'no cuts here' they will cry.

Don't be so sure, the Conservative Party has form on this.

In 1993 the then Conservative government did something similar when it transferred the responsibility for funding residential care for the elderly which was until then met largely by the Department for Social Security, to local authorities. It simultaneously transferred the budget, which was claimed as a revenue neutral exercise. However it was flawed; the Government's concern about spiralling costs were well placed as the number of placements had soared, partly because of poor gate keeping but mainly because our population was and is aging.

It was the government's failure to recognise the second of these causes in the settlement it made to local authorities, which revealed its true agenda of capping the cost.

In transferring the responsibility, the Government claimed a clear conscience; it had transferred the budget after all. However, Whitehall did nothing to recognise that the number of elderly people needing care, both community and residential, would rise, even though that demographic information was known.

Complaints about service shortfalls went unheeded, the budget had been transferred so surely the fault must lie with the local authorities and their management of the budget; Westminster was off the hook.

In 2012 we now have people with moderate levels of need being excluded from services as resources are focused on critical or substantial need. The baby has been left on the door step of the parish without the means to survive.

There are similar, well known issues, with supported accommodation. Many local authorities are in the process of repatriating people, currently placed in out of area placements to supported housing in their locality. Councils are doing this, in part, to meet the cuts imposed by central government. Coupled with this there are still many people with learning disabilities living with ageing parents and every day we get a new referral from someone whose accommodation is totally unsuitable and who is in need of costly specialist accommodation.

Great advances have been made in the field of supported housing but there is still a great deal to do, particularly over the next three years or so. To cap spending by transferring the current budget fails to recognise this and measures must be put in place to ensure that the budget continues to meet this increasing need.

One key way in which we can do this with some accuracy and can allow the responsibility for funding supported housing to transfer from central government to local authorities with a clear conscience is to apply a permanent ring fence around the funding that has been allocated. Governments tend to keep ring fencing in place for a limited period and the removal of the ring fence, while giving local authorities flexibility, masks any resource shortfalls for the provision in question.

Maintaining the ring fence gives us the ability to ensure that, as new housing is developed, the resources needed to drive it keep pace with the additional demand.

Specialist supported housing can be expensive but it fulfils a vital role, not only in saving the state money on expensive out of borough placements and sometimes inappropriate residential care situations but also in the lives of the disabled and vulnerable people in terms of inclusion. It is a child of the welfare state that we can truly be proud of and it should be nurtured. The costs of not doing so are incalculable, in terms of emergency or residential care and also in terms of the misery that fills the lives of people living in houses that fall well short of their needs.

I would like to take Mr Duncan Smith to meet some of our tenants, who can tell the Work and Pensions Minister better than I what a difference supported housing makes to their lives. However, I doubt that will happen so I have to be content with a plea to the working party. Please do not just leave this child on the steps of the Parish, look to its future need as well.]]> tag:www.huffingtonpost.com,2012:/theblog//3.1599432 2012-06-15T08:16:03-04:00 2012-08-15T05:12:05-04:00

Phil Shanks http://www.huffingtonpost.com/phil-shanks/ Juliette Tarrant just won't take no for an answer. We have been waiting for some time for the outcome of the housing benefit review for supported housing. When we asked the DWP for a date when this would be published we were informed that there was no intention to publish the outcome at this stage. In response Juliette promptly made a request under the Freedom of Information Act and shortly afterwards a big box with copies of all of the responses was duly delivered to our office. It then fell to me to go through the responses. Don't worry though - I enjoy it and the responses were quite illuminating. Interestingly, no agency raised the obvious issue that the most practical approach to achieving a budget neutral solution is to cut the cost of finance. However, many respondents said that any cut in funding would adversely affect or even lead to the closure of their facilities; and almost without exception there was a recognition that a one size fits all approach is unsuitable for all but those with ordinary housing needs.

Many respondents pointed to the savings that social services achieve by utilising supported accommodation and the likely consequences on other budget areas by any disruption to its provision. The overwhelming message was to carry out any change with great care and with great consideration. So perhaps my initial outrage at another working party was misplaced. However, time is short and if we are to allow for full transitional protection through the reform then we had better start now.

One key issue that emerged from the responses is the need for a recognition of individuality, especially in the area of specialist supported accommodation. The phrase "one size fits all" finds itself into many responses. So who should make this decision and therefore have the budget?

The obvious answer to this is Social Services. They already carry out an assessment of need under the NHS and Community Care Act and this includes an assessment with regard to a person's accommodation. They present the findings of their assessment to a funding panel which then decides on the allocation of the budget for the care package. It seems most straight forward to add the allocation of a supported accommodation to top up this already existent process. No new officers would have to be appointed and no new departments set up. The administration of the process would certainly achieve the governments objectives of a cost neutral solution.

Social Services have the most to gain from the proper operation of the top up since it allows them to achieve savings against more costly care solutions. One respondent actually cited this as an unhealthy conflict of interests. However, the overall saving is to the public purse and therefore no conflict can be allowed to exist.

The current system creates conflict. In two tier authorities the social services department is in the county council making decisions that have to be paid for by district councils through the housing benefit schemes. In some areas this causes great conflict. By giving the social services department the budget and the responsibility we actually join up budgetary activity in a way that facilitates both the delivery of service and continues to provide a major cost saving to the state.

It would create certain challenges and these would need to be addressed by the working party in fairly short order. These include ensuring the budgetary framework was large enough, based on the current HB spend over LHA and securely, permanently ring fenced. Additionally the current housing benefit scheme gives a claimant a right of appeal to a tribunal that can overturn the local authorities decision and this right should be extended into the operation of this budget.

Finally, nearly all of the respondents want any change to be carried out with care and for robust transitional arrangements to be put in place to ensure that people's accommodation is not put at risk. This takes time. However, many local authorities are repatriating people placed out of area and wish to do so into supported housing. The drive for this is, in part, to achieve the required cuts to their budgets. Over the next two years this will result in the commissioning of further accommodation and it is therefore vital that the working party move quickly to ensure that the financial arrangements are put in place to properly support it.]]>