April 2009 Archives

After all the fuss between the London Mayor and local councils about affordable housing targets earlier on in the year, Johnson has announced plans to "review" them.

Under Ken, the London Plan was full of specific targets - crucially, the target of 50,000 new affordable homes by 2012. As recently as February, Boris Johnson was declaring that he remained committed to the target (see EGi's story on this tug-of-war between the Mayor and boroughs), but yesterday he said that the recession had made it even more difficult to meet that already ambitious aim.

This might be a welcome relief for a lot of London councils - although the cynics out there could wonder whether the credit crunch is a rather opportune excuse to drop a contentious issue brought in by Johnson's Labour predecessor.

Inevitably in politics, these things take a long time to become reality. The full proposals will be consulted on until the autumn, when the responses will be considered and plans for a final version to be completed by 2011.

That's two years of consulting and planning, in a very unpredictable market (just look at Nationwide's house price index figures released today.

And, even without the tumultuous market, if rumours of Boris' plans to be Prime Minister are true , we might well be looking at a very different London by then.

Alan Sugar for Mayor, anyone?

Estate agent Foxtons is to appear in the dock this week in a long-awaited court battle with the Office of Fair Trading that could have major implications for the industry.

The case is one of several ongoing sagas for the London-based agency. Along with rumours of a £90m debt-for-equity swap , the firm owned by US private equity giant BC Partners also breached its banking covenants in January

Its next controversy will be this court case over the terms of its tenancy agreements.

The trial was called by the OFT over the issue of so-called "money for nothing" fees, where agents allegedly manage to charge extra commission from tenants staying in the property after the original tenancy has expired.

If the judge rules that these charges are unfair, it could start a rollercoaster of bad news for Foxtons  (ignore the date tipped on this RLA article - the rest of it is right).

Potentially, as with the debate over bank charges, tenants could try and claim back money from past tenancy agreements if the judge finds in the OFT's favour, leading to thousands of pounds in costs for Foxtons at a crucial time.

The trial starts tomorrow.

Further to my post yesterday - we understand that the Homes and Communities Agency is set to make an announcement on the private rented sector fund in the next week. This ties in with Sir Bob's comment yesterday that "talks are ongoing" with the private sector. Although we were expecting an HCA announcement on the PRS this Friday, this seems to have been delayed in the post-Budget world.

Watch this space!

Having just left a press conference held jointly by two of the most influential figures in the residential market - housing minister Margaret Beckett and HCA chief Sir Bob Kerslake - it is hard to see any glimmers of hope for an institutional private rented sector coming any time soon.

Sir Bob - about whom it is hard to find anyone in the industry who will say a bad word - and Beckett - about whom it is hard to find anyone with a good one - were not willing to comment on their own thoughts on the institutional private rented sector.

Changes to REIT legislation, state aid for institutional PRS funds, or amendments to Stamp Duty Land Tax which are all needed to make resi investment returns more attractive are outside the jurisdiction of the HCA.

They were painfully absent from yesterday's Budget, and without government support, they simply won't happen.

Sir Bob said today that whether to implement any changes was "a matter for the Chancellor to consider" and that the HCA's approach was "more broad than that - to explore with the sector what would be the conditions where they see the benefit of investing in a private rented sector. So, frankly, we are not at that point yet."

Unfortunately, the industry thinks that they are.

A meeting at the BPF yesterday exposed deep-rooted bitterness over yesterday's Budget. Agents, developers, landlords and housing associations said that market conditions had never been as good for a resi fund - with historically low capital values and soaring demand - and they might never be as good again.

As resi investors and developers sharpen their swords, rumours of tension between the government and the Homes & Communities Agency are circulating the market.

Certainly Beckett and Sir Bob did not seem to be the closest of friends this afternoon, with some mild bickering over who would answer which question and some politely awkward laughing at jokes from Beckett that "I think I'm right in saying that up to now every extra bit of flexibility Bob has asked me for I've agreed to". A recent squabble over a London-based initiative Up2U raised some eyebrows, and property insiders have begun to murmur that the two departments are pulling in different directions.

Perhaps not reassuringly for the sector, when first asked about the expected rental guarantees, Beckett looked a little puzzled and turned to Richard McCarthy, who hastily whispered "the private rented sector".

Whatever her commitment (or not) to an institutional residential fund, her only response when asked was: "There are various boring conventions that I know journalists deeply dislike, and one of them is that you don't discuss the things you asked the Treasury for, and didn't get."

I've just got back from the launch of a paper by Boris Johnson's mate Stephen Greenhalgh, the Conservative leader of Hammersmith & Fulham council that could have significant implications for social housing in the UK.

Greenhalgh and surveyor John Moss have co-authored a report that wants to see social housing rents brought up to near-market levels

The pair are suggesting setting rents against market levels for each area rather than a broadly set "social housing rent" rate. The theory is that this would massively increase the value of social housing stock and therefore the ability to borrow.

Other reforms suggested in the report include writing off some of the debt owed to central government by local authorities to plough back into housing in that area.In fact they estimate that their reforms would increase the money available to councils and RSLs by £5bn each year.

You can read their thoughts on the Conservative blog here

However - as was argued at the launch today - some of these proposals are treading a thin line between reforming and ring-fencing areas of deprivation.

If social housing rents are set by area and not housing tenure, to be a tenant in Kensington will be far more expensive than in Hackney, for instance. Inevitably "ghetto areas" where poorer tenants can afford to live will spring up, as opposed to areas for better off social tenants.

The paper unveiled today proposes adapting the personal income support per tenant to allow them to claim more or less depending on circumstances, rather than set regimented housing benefits, and get round the dilemma that way.

A lot of number crunching has gone into this report, which should be taken seriously by the sector. Grant Shapps, shadow housing secretary, had sent a member of his department to frantically take notes at the back of the room.

When asked whether Tory Central would take on these ideas on their almost inevitable election next year, Greenhalgh's response was "whether government adopt it or not, it is going to happen."

The housing sector is waiting with anticipation to hear what relief will be brought for them from this week's Budget. The unenviable task of answering bail-out calls from almost every industry in the UK lies before Alistair Darling this Wednesday.

As far as residential property is concerned, a raft of practical measures are being called for by submissions from the British Property Federation  and the National Association of Estate Agents , among other industry figures.

Promoting institutional investment in the sector is very much the theme of the BPF's lobbying, although, as one agent told me this week, any institution looking to invest would be after yields of 8% at the very least, or else it isn't worth their while.

But, there are literally billions of pounds waiting to be pumped in, as soon as the details of an institutional scheme can be worked out - particularly with some kind of government involvement to underwrite the value of the homes, as has been hinted by Sir Bob Kerslake.

Resi investors will be hoping that chancellor Alistair Darling will make changes to stamp duty land tax, making it easier to buy properties in bulk. After all, why would institutions feel encouraged to invest in buying up portfolios of properties when stamp duty is calculated by the cost of the entire portfolio rather than the worth of individual flats? The bill will always run into the highest categories.

Changes to the REIT structure  are also a possibility, although an issue that the industry and government have failed to agree on before.

It seems to me that calls to drop the much-maligned Home Information Packs (HIPs) are unlikely to be heeded - they are Labour's project after all, and with so few transactions going on at the moment that they are unlikely to be a high priority.

Nonetheless, the credit crunch is finally making long-lobbied for moves towards institutional investment look a genuine possibility.

Persimmon's annual financial results  (p31 for the pay report) this week revealed that the group's nine top directors saw their take-home pay fall by more than half in 2008 and there is not much better forecast for 2009.

Clearly it's the kind of measure companies are taking across the UK, particularly housebuilders, but the amounts involved always make for interesting reading - certainly it's the principal focus of the media's response to the results.

Chief executive Mike Farley might be deluding himself if he thinks he will take home anything like 2007's high of £1.8m again, and he can forget a potential bonus of £1.58m this year.

Nevertheless, he is still pocketing a cool £633,450 as basic salary, with the potential to double that figure in bonuses.

Not bad considering the dire state of the UK housebuilding sector at the moment.

Persimmon posted a full-year pretax loss of £780m only last month, down 78% from the £585.1m profit it recorded in 2007. In the face of figures like these, receiving any bonus at all seems to be, well, a bonus.

Hello, and welcome to my new residential blog. I'm the residential reporter at Estates Gazette, and this blog will be my take on the latest news from the resi world, and analysis of the biggest stories of the moment, along with hunting out highlights for you from across the web.

I also look forward to hearing your own thoughts, feedback and comments, so please do feel free to get in touch through the comment box below...