The challenges facing Scottish housing

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By Chris Cunningham

Housing is devolved isn’t it?  That’s clear then, the Smith Commission won’t have much impact on it?

Wrong!

The Scottish Parliament is currently responsible for about 40% of housing within Scotland.  Primarily this is around the regulation and supply of social housing, regulation (to the extent there is any) in the private rented sector and some aspects of encouraging owner occupation eg help for first time buyers.

What’s missing is just as significant.

Obviously the setting of interest rates and bank regulation is not devolved, and isn’t ever going to sit in Edinburgh this side of independence.  Indeed under the Scottish Government’s White paper proposals they would still have sat with the Bank of England in London even if we had voted Yes on 18th September.  This is the big issue in terms of owner occupation.

Mortgages, their cost and availability, (and the size of deposits for first time buyers in particular) will all continue to sit with whoever controls the banking system in the UK.  At the height of the boom, that system covered the majority of people, as most aspired to home ownership and as the young, of whatever occupation, sought to get onto the property ladder.  The fact that this isn’t the case anymore is obviously the downside of the bust and the collapse in building that followed, but the consequent adjustment of the housing system that has begun to follow will, to be charitable, take its time to arrive at the right solutions.

Right now those same young, and others, have had no choice but to look for an alternative in the private rented sector – hugely expanded, under regulated, fragmented, in poor physical condition and still thirled to short term tenancies and short term thinking.  The private rented sector has literally filled a gap created by the post-2008 collapse in building and in mortgage availability, but neither the sector nor the government have come to terms with the scale of the change that has occurred over the last 15 years.  Does the private rented sector have a long term role in Scottish housing provision or will it lapse back into a niche market once the next housing boom gets under way? The fact that this question is still asked is indicative of the lack of clarity around what kind of housing system we want.

The Scottish Government has responsibility for private sector regulation.  It’s dipped its toe in that water but compared to the uber-regulation of social housing its small beer.  If you have a spare home and want to get into the landlord business, there’s almost nothing stopping you short of a few bits of form filling and now, a bit more security around rent deposits. Should the Government get tougher?  Yes, it should.  There’s far too many rogue landlords still out there exploiting the young and the vulnerable with poor housing and next to no security. But if there’s a regulatory crackdown will that just scare landlords out of the sector?  That might well be the dilemma that’s driving the current policy uncertainty.

But that issue pales into insignificance compared to the policy elephant in the constitutional housing room – the welfare system.

Scotland has no control over the welfare system.  It’s reserved.

However around two thirds of your average housing association or council housing department income is made up of Housing Benefit, a key element of the welfare system and one that is going to be bound in even more when Universal Credit comes into effect.

At the moment Housing Benefit is administered by local authorities on behalf of the DWP.  It sits alongside all the other welfare benefits administered directly by central government and it can be paid directly to the landlord, which at least means the rent is paid for the tenant and the landlord gets the money.  Under Universal Credit all of this is slated to change.  Housing Benefit will be subsumed within the overall Universal Credit (the name is the hint to its purpose) and paid directly to the tenant.  That’s not been welcomed by local authorities and housing associations, who see the security of their rental income put in jeopardy.  Within the sector we’re all living in a kind of twilight zone, as the introduction of Universal Credit lurches from one crisis to another blockage.  My money remains on computer failure to bring it down but who knows?  Government, being government, will introduce something like it, even if it knows it isn’t the right way forward – there’s way too much face riding on that particular policy.

Do we want this to happen?  Does it make sense for our housing system and for the poor and the vulnerable who will end up with more money in their hands but more obligations to go with it?  Right now those questions aren’t even being asked outside the sector, but all the evidence from the pilot direct payments projects that have been going on around the UK, including Scotland, is that rent arrears go up and landlords struggle with the consequences – which include their impact on overall finances and the interest payments on private loans.

One reason it isn’t a hot topic is that it isn’t happening right now.  The other reason of course is the Bedroom Tax – why look to the longer term to see a welfare policy screw up when there’s one right in front of you?

Most people are aware of the issue. Reduce housing benefit payments by 14 or 25 per cent if there’s one or more spare bedrooms in the house.  As a policy it must have looked good to a Tory Government looking to please their supporters, not many of whom live in social housing. Leave aside the fact that down-sizing is difficult when there simply aren’t enough smaller properties in existence. If the aim is saving money it’s surely a winner.

So what to do about it?  The Scottish Government have stuck a large sticking plaster over the problem for the moment, throwing a big chunk of money (£50m) at Discretionary Housing Payments. Somewhere in John Swinney’s budget a Peter got robbed for the benefit of that Paul. But everyone must know, even the Labour Party, that this isn’t a solution to the problem, it’s just a stay of execution.

To those who call for housing benefit to be devolved I would say stop and think.  Dealing with the “bedroom tax” required additional money.  Devolving the current level of HB will not solve that problem, it will just pass on a Westminster decision to Scotland and the same shortfall will still need to be filled.

Devolving welfare as a whole – i.e. the administration of the current system – might allow for internal tinkering, but if the overall sums remain the same the tinkering will not be massive.  For the restrictions within the housing benefit system read the whole welfare system.

That system is ultimately one big expenditure item, and the choices we make reflect our priorities.  If we are to make meaningful changes to the welfare system we have to have control over the taxation system that funds it.  And that, of course, brings us slap bang round to “devo max” and the Smith Commission.

Devo max, as I understand it, would give us control over all taxation and  expenditure, with payment to Westminster for foreign affairs, defence and the overall financial/banking system.  There is clarity to this and within that structure the decisions the Scottish Government made would reflect its priorities, which will presumably reflect those of the Scottish people.

More money on housing, more on elements of the welfare system, less on other expenditure?  These are choices that can be made. The question is, will we be in a position to make them once Smith has done his work?

* Chris Cunningham has more than 30 years’ experience in the housing sector and is director of a housing association in Glasgow