Housing and the Credit Crunch - Communities and Local Government Committee Contents


Memorandum from Crisis (CRED 44)

  Crisis is the national charity for single homeless people. We welcome the Committee's timely inquiry into the Government's response to the effect of the economic downturn on its housing policies. Over recent months, we have been raising concerns both that the economic crisis will cause more people to become homeless and that those who are already homeless will find it harder to get a home. Government has spent billions on bailing out the banks, now they must spend just a fraction of that on supporting ordinary people. In this submission, we outline both the immediate and the long term challenges as well what we believe Government should do to prevent the financial crisis becoming a human one.

SUMMARY—KEY ISSUES AND RECOMMENDATIONS

  We must deal with the current crisis and circumstances but also use this as an opportunity to tackle longer term issues and reform our system of housing supply and homelessness assistance. In particular, as well as addressing the needs of those being made homeless now, it is equally critical that we do not forget those who are already homeless or in housing need, who risk being left even further behind.

Housing Demand and Supply

    —  Existing housing demand has not gone away. The population is growing and there are around four million people on the waiting list for social housing, as well as tens of thousands of hidden homeless households.

    —  House building has not kept up with demand and we do not have nearly enough social housing.

    —  At the current rate, Government will not hit its house building targets until 2029[51] with the economic crisis leading to a collapse in new house building.

    —  Government must remain committed to its house building targets and bring forward the necessary funding to deliver them.

Repossessions

    —  We are seeing a sharp increase in repossessions, which are predicted to hit 45,000 by the end of the year.

    —  We also need to consider how this figure may rise further as people get into difficulty repaying other debt secured against their property and are affected by rising unemployment.

    —  Those in the private rented sector are also facing housing insecurity as buy to let mortgage holders are repossessed.

    —  Whilst we welcome the Government's recent guidance to lenders and the courts to ensure that a repossession order is not the first port of call. It will be important for the Government to ensure the situation is monitored closely and action taken, as appropriate, to enforce the guidance. Measures to provide assistance to some homeowners announced in the mortgage rescue package do not go far enough. We would like to see a wider range of options available to homeowners facing difficulties, including measures such as local authorities taking equity shares in properties and sale and rent back by the state. These measures need to come into force now.

    —  Landlords and creditors should be required to notify their local authority when they raise repossession proceedings or serve other notices. This would alert local authorities to households at risk of homelessness and enable them to respond to prevent homelessness.

Advice and Assistance for All

    —  We must help all those facing homelessness, in all sectors of the housing market.

    —  Many people who will get into difficulty are not entitled to be housed by their local authority, according to the restrictive terms of current homelessness legislation, and, too often, the advice and assistance local authorities provide is meaningless.

    —  Local authorities should have a new duty to more actively prevent people becoming homeless and to help all those facing homelessness, beyond the current statutory duties.

    —  We need a universal system of housing advice and support for everyone who needs it which should offer individuals a range of meaningful options. This should be the case in general but the need for such a system is even more pressing in current circumstances.

    —  Government must also ensure that sufficient advice on financial issues is available and that people are able to access credit at reasonable rates, whilst ensuring lending practices are responsible. This should be accompanied by a crackdown on unscrupulous lending and other practices which can take advantage of those in vulnerable situations.

HOUSING AND THE CREDIT CRUNCH: THE ISSUES

Housing Demand and Supply

  1.  Official predictions for household growth suggest that there will be over 220,000 new households a year until 2026, with 70% of these being single households.[52] There is also an increasing demand for social housing. In 2007, 1.6 million households, around four million people, were on the social housing waiting lists. That number is predicted to rise to some two million households by 2010, that's five million people waiting for a social home.[53] This is without taking into account the likely increase in demand due to the current crisis.

  2.  In particular, as the demand for social housing has increased, so the supply has withered. In 1979 we had a social housing stock of 5.5 million; by 1996 the figure was 4.2 million, a drop of 1.3 million homes.[54] Most of this decrease was as a result of right to buy sales[55] with the stock not being replaced. Since 1986 the numbers of new social housing units being completed has not exceeded 40,000 a year and for the last 10 years the number has hovered around the 20,000 mark.[56]

  3.  In 2007, to help tackle this long term undersupply of housing, the Government committed to building three million homes by 2020, along with a target for a 50% increase in the number of new social homes by 2010-11. We welcomed these targets, however, in the current climate it is becoming increasingly clear that, without significant extra investment, particularly by Government, they will not be met.

  4.  Recent predictions suggest the number of houses completed this year will be well short of the Government target[57] and this was before the full effects of the economic downturn were really felt. There has already been a staggering 67% drop in the number of private house-builders applying to start building new homes this year compared with the same time last year.[58]

  5.  The economic downturn is also having a significant impact on the supply of new social housing. In recent years, much new social housing has been funded by Section 106 agreements as part of private developments; by RSLs borrowing money; or by RSLs cross-subsidising social housing by selling houses on the open market. In the current financial climate, all three of these options are under serious strain and do not look likely to deliver the required new social housing. The current model for building significant numbers of new social housing is therefore broken but this cannot mean we stop building social housing, particularly at a time when more people will become reliant on the sector.

  6.  It is crucial that Government sticks to its house building commitments, plays a more active role in the housing market and brings forward resources for development. Now more than ever is the time to build to take up the slack in the construction industry and meet ever growing demand. This can only be achieved by the Government and its agencies taking a more activist approach and allowing local authorities to do likewise.

  7.  There are opportunities as well as challenges in the current economic climate. Government could, for example, buy up unused land from developers and bring forward money for developing this land and constructing new housing.

  8.  The new Homes and Communities Agency in particular needs to make bringing forward new social housing in innovative ways a priority, though this may well also require additional resources from Government.

Rise in Repossessions

  9.  As well as the acute pressures on housing demand and supply and the extent to which they are exacerbated by current economic circumstances, we must of course deal with the immediate crisis of the dramatic jump in repossessions. In the second quarter of 2008, there was a 71% increase in repossessions on the corresponding period last year.[59] It is predicted that there will be around 45,000 repossessions by the end of the year[60] and there are over 310,000 mortgages in arrears.[61]

Private Rented Sector

  10.  However, it is not just homeowners that are being affected. The economic downturn is also hitting the private rented sector. Banks have been withdrawing affordable buy-to-let mortgages and the number of buy-to-let landlords being repossessed in the first half of 2008 is double that of the first half of last year.[62] When landlords are repossessed their tenants are evicted and we must ensure there is support for these people too.

  11.  The problems of those struggling in the private rented sector to meet their living costs also look likely to increase. Rents in the private rented sector have risen steeply in recent years. In the South East, rents rose by 83% between 1996 and 2006.[63] According to a recent poll, almost a quarter of those in the private rented sector spend more than 50% of their income on rent and 25% are struggling to meet housing costs. This is higher than the 7% of those with mortgages who are struggling[64] and, in the current climate, there is also a risk that there will be a further sharp rise in rents, putting more pressure on already stretched tenants. It is crucial therefore that we provide assistance to people who are renting and at risk of losing their home as well as to homeowners.

Government Action on Repossessions

  12.  Crisis welcomes the Government's recent moves to introduce new court protocols and guidance on the steps that lenders are expected to take before bringing a repossession claim to court.[65] Repossession should only ever be a last resort. We also welcomed the £200 million mortgage rescue package when it was announced in September. However, we do not believe the current measures go far enough and many of them still need the details worked through before they can be implemented.

  13.  Whilst we were pleased to see the Government acting to prevent some 6,000 repossessions across England, this will be only a small proportion of the overall total and barely scratches the surface.

  14.  Additionally, the measures announced in the mortgage rescue package will only help those who already qualify for homelessness assistance[66] and so will exclude large numbers of homeowners, particularly singles and couples without children, who are amongst the main groups affected by the current crisis. The Government is right to state that "for those affected, being repossessed is a major life trauma".[67] It is crucial therefore that every possible assistance is afforded to all those at risk of being repossessed. We must try to enable as many people as possible to stay in their own homes.

  15.  The Government recently took action and invested significant amounts of taxpayers' money in bailing out the banks and it is therefore particularly unacceptable that these same banks are taking forward so many repossessions.

  16.  Government must also address the problems facing those renting in the private sector and ensure that for all people, whether homeowners or renting, there is a genuine safety net of support and assistance from their local authority if they do become homeless.

  17.  Crisis would like to see a specific legislative provision introduced so that all landlords and creditors are required to notify the relevant local authority when they raise repossession proceedings or serve other notices. This would alert local authorities to households at risk of homelessness and enable them to respond to prevent homelessness. This provision is already included in Scottish homelessness legislation and is due to come into force next year.[68]

Homelessness Assistance

  18.  Because of the way homelessness is defined and the way social housing is rationed in England and Wales, many vulnerable people are not entitled to assistance from local authorities. Every year, around 40,000 households are officially recognised by their local authority as being homeless but are not provided with any accommodation because they are not considered to be in priority need.[69] This is just the tip of the iceberg, we estimate that there are already tens of thousands of hidden homeless households.

  19.  All local authorities are supposed to provide "meaningful advice and assistance" to those homeless households who approach them. However, we know that too many homeless people are still being turned away from local authorities with nothing. Under the terms of homeless legislation in England, it is still only those who are considered in priority need and meet other tests that are entitled to housing assistance from their local authority (unlike in Scotland where all homeless households are entitled to accommodation).

  20.  We need therefore to look at the rights an individual has to homelessness assistance and the duty a local authority has to provide it, as well as the application of those rights and duties particularly at this time of housing insecurity.

Advice and Assistance for All

  21.  Crisis believes local authorities should have a new duty to take meaningful action to prevent all people from becoming homeless and to assist all who are homeless, which must move beyond the current statutory provision. We would like to see a new duty to prevent the homelessness of all. This duty should apply to all local authorities and require them to proactively work to prevent the homelessness of all people who approach them, not just those they currently have a statutory duty to, and to do so earlier than the current 28 days provision ie two months before someone loses their home. It should also include a responsibility to provide temporary accommodation for particular groups in immediate need, such as those faced with no alternative but to sleep rough, not just those in "priority need".

  22.  We need to move beyond the current system of very limited advice and assistance and we believe local authorities should provide proper, universal advice and support services to those at risk of repossession or homelessness, those struggling with housing costs and all in housing need. This service should offer a range of options and advice, ranging from assisting people to stay in their current homes, to offering people a social tenancy to helping people find accommodation in the private rented sector including by providing a private rented sector access scheme which is open to all.

  23.  Such a service would have immediate benefits for those facing homelessness in the short term but it would also have benefits in the longer term by assisting people to access the type and tenure of housing that is right for them. Greater provision of such advice may well have prevented many of those who have got into trouble from doing so in the first place by diverting them into housing options more appropriate to their personal and economic circumstances.

  24.  Government must make more financial advice available for those struggling with debt, and indeed for all those worried about meeting their housing costs or the rising cost of living. As well as taking moves to ensure people can access credit at reasonable rates and that lending practices are responsible. This is necessary to address both immediate need and the longer term underlying issues.

  25.  The Government must also take action to crackdown on unscrupulous lending, loan sharks and to better regulate sale and rent back schemes, all of which can take advantage of individuals in vulnerable situations. We welcomed the Office of Fair Trading's report on sale and rent back schemes[70] and urge Government to now act speedily on its recommendations.

Seizing the Opportunity for Long Term Reform

  26.  Government must deal with the immediate housing crisis but must also ensure that this is not an excuse for putting longer term reform on the back burner. It is more important not less to address some of the long term problems, demands and issues facing out housing system as well as immediate pressures.

  27.  As well as stepping in to build more social housing in innovative ways for singles and families, Government must also offer new options for intermediate renting not just shared ownership schemes.

  28.  As explained above, we need a new system of universal advice and assistance for all on housing issues; new duties and responsibilities on local authorities to prevent homelessness, including a wider homelessness safety net; greater integration between housing and work advice and concerted action to tackle all forms of homelessness.

  29.  There must be a better deal for those who fall between the social and owner-occupier sectors, many of whom are society's forgotten poor. This is a group which is in real need and is too often ignored. They are unlikely to ever be in a position to buy but at the same time they are not eligible for social housing.

  30.  There needs to be advice and assistance for renters, reform of the private rented sector and reform of Housing Benefit. In particular, we welcomed the recent review of the private rented sector by Julie Rugg and David Rhodes and call on the Government to implement its recommendations.

CONCLUSION

  31.  We believe that the measures outlined above should help to prevent what we otherwise expect to be a sharp increase in homelessness. In the current economic downturn, we are well aware of financial constraints and pressures on public expenditure but, with repossessions and unemployment soaring, Government action in the housing sector must be a priority.

  32.  Government must do everything possible to prevent people losing their homes and becoming homeless and to stop the financial crisis turning into a human one. It must also recognise the need to play a more activist role and step in to increase the supply of new social housing to tackle both growing immediate need and historic undersupply.

  33.  At the same time, Government should not put off radical reform and instead use the opportunity to expand the current system of very limited advice and assistance on housing, housing options and homelessness prevention and resolution and to reform the housing system more widely such as by taking forward the review of the PRS and comprehensively reforming the system of Housing Benefit.

  34.  As the economic downturn takes Britain into a recession, we are concerned that increasing numbers of homeowners and people renting privately will be facing the prospect of homelessness. This will only add to the already high levels of demand for social housing and other homelessness services. As well as addressing the needs of those being made homeless now, it is equally critical that we do not forget those who are already homeless, who risk being left even further behind.

ABOUT CRISIS

  Crisis is the national charity for single homeless people. We are dedicated to ending homelessness by delivering life-changing services and campaigning for change.

  Our innovative education, employment, housing and well-being services address individual needs and help people to transform their lives.

  We are determined campaigners, working to prevent people from becoming homeless and advocating solutions informed by research and our direct experience.

  We have ambitious plans for the future and are committed to help more people in more places across the UK. We know we won't end homelessness overnight or on our own. But we take a lead, collaborate with others and, together, make change happen.

Housing

  Crisis develops innovative solutions that help people into homes they can call their own.

  Excluded from social housing, the private rented sector is the only solution for many single homeless people. We work with partners across the UK to deliver Crisis SmartMove, a rent deposit and advice scheme, which has helped over 10,000 single homeless people into a new home. We are also making the social and financial case for greater use of the private sector and run a national advisory service for local authorities and others setting up and running schemes across the UK.

  We are also determined to realise our vision of a supportive housing model which combines affordable housing for low income workers and formerly homeless people with client-centred support and vocational services. We continue to explore ways of achieving this ambition.

Education and skills

  Homelessness deskills and isolates. Equipped with new skills people can regain control of their lives, raise their aspirations and break the cycle of homelessness.

  At Crisis Skylight, our inspirational learning and activity centres, we offer practical and creative workshops including art, music and drama, vocational workshops such as plumbing and carpentry and accredited learning opportunities in literacy, numeracy, IT and ESOL.

  We see success every day as people gain confidence and skills then move on to further education, training or employment. Our ambition is to open Skylight centres in more cities across the UK over the next five years.

Employment

  Crisis provides vocational opportunities and tailored employment programmes to help homeless people find and keep jobs.

  Our popular Skylight cafes are successful social enterprises that offer accredited training and an opportunity to gain work experience in a busy commercial environment.

  Crisis Changing Lives, our highly successful national award scheme, helps homeless people achieve their educational and vocational goals by awarding grants of up £2,500 to pay for training courses, tools and equipment or to help people set up their own businesses.

Health and well-being

  Homeless people face significant barriers when trying to access high quality healthcare. Many also battle with physical and mental health issues which prevent them from fully benefitting from the opportunities we provide. To address this we run workshops such as Yoga, Tai Chi and Pilates to improve physical health and are piloting a mental health scheme which we plan to roll-out across our new Skylight centres. We also provide links and guidance to appropriate health services.

Christmas

  At Christmas we run temporary centres that provide shelter for those sleeping rough and companionship and support to the vulnerably housed. The centres also provide life-changing services to help people to take their first steps out of homelessness and link people up to year-round support and opportunities. What makes our work possible is the help of thousands of volunteers and donors who generously give their time, energy, money and skills each Christmas.

Campaigning for change

  We are determined to prevent people becoming homeless. We combine a research-based understanding of the causes of homelessness with direct experience of helping individual homeless people transform their lives. We advocate solutions based on evidence and argue for improved services for single homeless people.

How we help to transform lives

  It is the hard work and commitment of thousands of volunteers that allows us to change people's lives. We are fortunate in our capacity to call on the support of thousands of volunteers. We plan to harness this support more effectively as we grow, including a mentoring programme which matches homeless people to volunteer mentors and coaches. We are also grateful for the support of 66,000 individuals and many companies, trusts and other organisations which fund our work through donations and grants.

November 2008







51   NHF (Sept 2008) http://www.housing.org.uk/Default.aspx?tabid=212&mid=828&ctl=Details&ArticleID=1420 Back

52   CLG (Mar 2008) http://www.communities.gov.uk/news/corporate/riseageing Back

53   LGA (2008) ( http://www.lga.gov.uk/lga/aio/569196 Back

54   CLG (2008) Housing and Planning Key Facts. Back

55   Hills J, Ends and Means (February 2007) The Future Role of Social Housing in England. Back

56   CLG (2008) http://www.communities.gov.uk/documents/housing/xls/140912.xls Back

57   NHF (2008) http://www.housing.org.uk/default.aspx?tabid=495 Back

58   NHBC (2008) http://www.nhbc.co.uk/Newscentre/UKnewhouse-buildingstatistics/Year2008/Name,35224,en.html Back

59   FSA (2008) http://www.fsa.gov.uk/Pages/Doing/Regulated/Returns/IRR/statistics/index.shtml Back

60   CML (Aug 2008) http://www.cml.org.uk/cml/media/press/1808 Back

61   FSA (Oct 2008) http://www.fsa.gov.uk/Pages/Doing/Regulated/Returns/IRR/statistics/index.shtml Back

62   CML (aug 2008) http://www.cml.org.uk/cml/media/press/1808 Back

63   CLG (2007) http://www.communities.gov.uk/documents/housing/xls/table-715.xls Back

64   YouGov/Shelter Poll (Sept/Oct 2008). Back

65   HM Treasury (Oct 2008) http://www.hm-treasury.gov.uk/press_108_08.htm Back

66   CLG (2008) http://www.communities.gov.uk/housing/buyingselling/mortgagerescuemeasures/ Back

67   CLG (2008) http://www.communities.gov.uk/housing/strategiesandreviews/housingpackage/ Back

68   Scottish Government http://www.scotland.gov.uk/Topics/Built-Environment/Housing/access/homeless/s11 Back

69   Crisis (2006) http://www.crisis.org.uk/policywatch/pages/about_homelessness.html Back

70   OFT (October 2008) http://www.oft.gov.uk/shared_oft/reports/consumer_protection/oft1018.pdf Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2009
Prepared 24 February 2009