ROOF Blog

Figures from the Office for National Statistics show the UK economy shrank by 2.44 per cent in the first quarter of 2009 – the fastest rate in more than 50 years, and much worse than expected. Gross domestic product has fallen 4.9 per cent in year on year figures – the largest drop on record.

In related news the Organisation for Economic Cooperation and Development has told the government to cut its budget deficit by a larger amount than it currently intends, or it will face major problems in the coming years. The OECD said that Britain’s deficit would climb to 90 per cent of economic output – much higher than the 80 per cent projected by the Treasury in the Budget – and in order to maintain the economy the government should target ‘more ambitious’ budget cut backs, rather than raising tax.

Communities and Local Government (CLG) has called on councils not to sack planners despite a fall in planning applications. It follows news that Bournemouth is axing 13 positions as a result of a 34 per cent drop in applications, while others are reviewing planning jobs. A Local Government Association survey recently found that 83 per cent of councils across England have seen a fall in income from applications, and a CLG spokesperson expressed concern that councils are losing their planning expertise.

A growing number of older people are being denied proper access to housing choice according to the Home Builders Federation (HBF). Housing minister Margaret Beckett has been urged to ensure that older people are not forgotten in favour of first-time buyers and homeowners as the housing market crisis continues. The HBF said that significant social and economic benefits come from the provision of good quality specialist housing - not least that retirement housing frees up under-occupied family sized housing - with beneficial results to the whole housing chain.

Rural communities are struggling to adapt to the ‘unprecendeted’ level of migration of non-UK workers into their areas, says charity Business in the Community.While migrants had brought a number of benefits, helped boost the economy and filled gaps left by Britons who ‘prefered to remain jobless’ there had been an increase of 186 per cent in their numbers in rural communities between 2003 and 2007, which was leading to tensions breaking out and posed challenges to community cohesion and in the provision of adequate housing and services.

According to research by the Times more than one in five homes have been put on the market because their owners cannot afford the mortgage repayments. A survey by the National Association of Estate Agents (NAEA) for the Times said that at least 5,000 properties a week are being put up for sale by ‘forced downsizers’, or people who are forced to move to smaller properties because of financial difficulties. Many estate agents said that at least 20 per cent of their sellers were having difficulties paying their mortgages. The number of househunters has also fallen, down 211 to 196 on average a month per agent.

The number of properties repossessed by mortgage lenders rose by 12 per cent to 11,300 in the third quarter of the year according to figures from the Council of Mortgage Lenders (CML). The number of borrowers in arrears also increased by 8 per cent from the previous quarter, while the number of repossession orders issued by the courts went up 3 per cent for the same period. The data indicated that 1.44 per cent of mortgages were at least three months in arrears by the end of September, up from 1.33 per cent at the end of June. The CML said its forecast had not changed in light of the figures but that it would be ‘premature’ to predict what might happen in 2009.

The Rugg review – published yesterday – has set out a swathe of proposals designed to tighten up regulation in the private rented sector and protect tenants in the event of their landlord defaulting on the mortgage. The report proposed a series of recommendations that would turn letting property into a business. Under the proposals, landlords would require a ‘licence to let’ and would have to use a business plan in order to take out a mortgage. The report also proposed tax incentives that could include changes to stamp duty and capital gains tax for professional landlords to encourage them to buy more property. Landlords who fail to measure up would have points deducted or lose their licence altogether and be banned from letting property.

A third of the £200 million set aside by the government to buy unsellable private homes has been allocated to housing associations. More than 2,000 homes built by developers have been bought by associations in the past three months, with the largest deal so far coming this week when Sanctuary Housing Group bought 335 homes from Bloor Homes. Communities and Local Government said ‘many more deals’ were in the pipeline.

Analysts at Capital Economics warned today that house prices could fall by a further 25 per cent from today’s prices by late 2009 – even if interest rates are cut to 2.5 per cent. It also dismissed the government’s recent bank bail-out as a short term fillip, claiming it is failing to shore up the property market.

Meanwhile the number of mortgages approved for house purchases rose in September, but was 57 per cent lower than a year ago, according to figures from the British Bankers’ Association. Between August and September there was a 10 per cent increase in loans. But the BBA said it was no surprise that lending levels remained low despite the government’s move to kickstart the housing market by raising the stamp duty threshold, and before money was ploughed into the financial system. The BBA also added that the mortgage market had become more concentrated, with the high street banks now providing more than two-thirds of all new lending.

In America, foreclosure rates increased 71 per cent in the third quarter, leaving more than 750,000 homeowners in danger of eviction. A million foreclosures are expected by the end of the year, amounting to a third of all properties for sale. Previously booming states, including California, Arizona and Florida, are now feeling the brunt of the downturn.

Household bills are starting to go unpaid as the credit crunch hits. According to information from Moneyexpert.com the number of electricity bills that have gone unpaid in the past six months has increased from 1.31 million to 1.96 million, and around 1.6 million households have missed a gas bill compared with 1.16 million in the final six months of 2007. In total more than 5 million people have missed a household bill of some sort in the past six months.

But under a new campaign launched this week, low-income householders will receive help from specially trained workers from Citizens Advice, housing associations and credit unions to find the best energy deals. Research from Ofgem found that many vulnerable customers needed more guidance about tariff and payment options, accessing grants to install insulation and central heating, and managing bills. Pensioners, the unemployed and low-income earners are switching suppliers in the lowest numbers.

Gordon Brown announced yesterday that new guidance will be issued to judges in England and Wales in an attempt to ease the repossession rates. In the pre-action protocol plans for mortgage arrears, mortgage lenders will have to prove that they tried to help struggling homeowners before they can repossess a house – this help may come in the form of agreeing a full or partial repayment holiday until the borrower can resume full repayments, and changing the type of mortgage or extending the terms of repayment. The government also announced that it planned to bring firms offering mortgage rescue schemes under the regulation of the Financial Services Authority.

However the new proposals will not apply in Scotland and opposition parties are calling for Scottish homeowners to receive the same protection from repossession as householders in England and Wales. The Scottish government said it had already put measures in place to help people experiencing difficulties with mortgage repayments, including a support fund which aims to allow homeowners in trouble to retain ownership of their house and it is also planning a publicity campaign urging people to seek help through Citizens Advice and Debtline.

The number of people renting a property in the UK has increased by 50 per cent in the past 12 month. It is estimated that 1.6 million 20- to 39-year-olds are renting because they cannot afford to buy a place, and even a 20 per cent fall in property prices would still only open the housing market up to 600,000 buyers.

London mayor Boris Johnson is expected to move today to abolish the 50 per cent affordable homes target in London. He believes the ‘one size fits all’ target is out of place and wants to allow borough councils greater flexibility in setting the number of affordable homes they can deliver.

The South East Regional Assembly has objected to the government’s plans to build a minimum of 33,000 homes a year in the region. The assembly said there is a clear mismatch between the government’s figures and their lack of commitment to invest in roads, transport, schools, and health services. It also said it was unrealistic to increase the annual house building target in the current economic climate.

Child poverty costs Britain at least £25 billion a year, a new report from the Joseph Rowntree Foundation has found, if measured in terms of poor health, education failure, crime and subsequent lack of employment of children affected. A spokesperson for JRF said that tackling child poverty ‘would bring a double benefit – for the families… and for society’.

A national points system for the care of elderly and disabled people has been recommended by the head of the social care inspectorate in England. The present system was described as ‘so flawed and heavily criticised that immediate changes are needed’. Eligibility requirements show big variations between councils, and help to millions of vulnerable people is being denied by those that apply the measure of incapacity too strictly.

The House of Lords has ruled that a rough sleeper with mental health problems and in receipt of income support was justifiably discriminated against when the government denied him an additional disability premium because it is not paid to a person who is ‘without accommodation’. The defendant argued that this breached his human rights and he was discriminated against due to his status as a rough sleeper. While the House of Lords agreed he was discriminated against, it said the government was entitled to have a policy that encouraged disabled people to seek shelter before paying money that is unlikely to be put towards the additional household expenses faced by a disabled person.

In a joint letter to housing associations the Housing Corporation and Local Government Association have called on them to continue to work closely with local authorities to help boost affordable housing supply. The letter says that while housing delivery targets for 2008/09 remains on track ‘more than ever we will need to work together to adapt to the current environment and be willing to flex current models to ensure continued delivery’.

Banks and mortgage lenders have been accused of not passing on interest rate cuts by consumer group Which? It has called for ‘quid pro quo’ between banks and consumers, as a Moneyfacts survey recently found that the interest rate cuts have been passed on by just 25 per cent of lenders. A spokesperson for Which? said that with the worsening economic times, in the current circumstances the ‘consumer deserves a break’. This comes as Nationwide, the UK’s biggest building society, raised its rates on all of its tracker loans.

Meanwhile Barclays is to become the first lender to use the government’s £250 billion bank debt guarantee. It plans to raise up to £1 billion through the sale of three-year notes. Ray Boulger of John Charcol said the key to success in kickstarting the mortgage market would depend on the government not charging the banks too high a fee.

The Audit Commission is to extend short notice inspections to council housing services and arms length management associations. They are expected to vary in scope and duration – from looking at single service areas such as tenancy management, to cover the whole of the landlord service for tenants and leaseholders. Councils and ALMOs are invited to volunteer for the pilot scheme expected to start in the new year.

The High Court has warned magistrates’ courts not to make antisocial behaviour orders (Asbo) against individuals whose mental state made them ‘truly incapable’ of compliance. The High Court said that such orders would not protect the public and would be wrong in law to make them, after two senior judges were asked to clarify the law in the case of a homeless drug addict banned from Nottingham town centre. While the High Court declined to intervene in the case, it did issue guidelines for treatment in the future, when lawyers for the man said that the Asbo against him ‘criminalised his mental health problems’ and this prevented him from understanding and complying with the Asbo.

Londoners suffer the worst housing conditions in the country, after more than 750,000 were found to be living in overcrowded homes and more than one in 10 people living in the capital are on a social housing waiting list. Research from the National Housing Federation says the number of people waiting for social housing has increased by nearly 50 per cent in the past five years, and overall London needs at least an extra 11,000 new homes a year to meet demand. House prices cost more than 14 times the average Londoner’s income and private rents are more than twice expensive as social rents.

The gap between rich and poor in the UK has decreased ‘remarkably’ since 2000, a survey by the Organisation for Economic Cooperation and Development (OECD) has found. However, while ‘the poor have been getting richer more rapidly than the rich’ the UK still had one of the highest levels of income inequality in the developed world. The main reason that fewer people were living in poverty, the report said, was higher employment rather than the redistribution of wealth.

However, the number of children living in poverty has risen for a second time this year. The amount of children in poverty rose by 100,000 in 2006/07 to 2.9 million before housing costs, while the level of pensioner poverty increased for the first time since 1998, rising by 300,000 to a total of 2.5 million. These numbers increase once costs such as rent and mortgages are taken into account; with the number of children living in poverty up by 100,000 to 3.9 million. The increase may threaten the government’s target of halving child poverty by 2010.

Work and pensions secretary James Purnell has ordered an enquiry into a local housing allowance loophole that pays local councils to house people in properties ‘they would not be able to afford if they were in work’. Mr Purnell said new rules for claiming housing allowance should include a cap in rent for houses with five bedrooms or more by next April; and he wants council leaders to be given the power to move a family after a year if a cheaper home becomes available. Mr Purnell also ordered that the council finds a cheaper home for an Afghan family of eight, living in a house costing the council more than £12,000 a month in rent.

In London, two of the main venues at the Olympic Park may have to be nationalised if they are to continue being built. The £1 billion athletes’ living accommodation and the £400 million media centre are both facing funding shortages due to a lack of investment and the government is resisting allocating more money. So far, no money has been guaranteed from the private sector or housing associations who were expected to fund up to £850-£900 million needed to complete the Olympic village.

Meanwhile some of Britain’s biggest companies have deferred paying business taxes, creating a £2.5 billion ‘black hole’ in council budgets. Many businesses are rescheduling their payments, but around 8,000 businesses have closed since January, resulting in a cashflow problem for councils that may cause higher council tax bills or cuts in services for residents. Local authorities receive more than £17.5 billion from businesses.

Analysts fear that more money will be taken out of the housing market than is put in by the end of the year. Figures from the Council of Mortgage Lenders showed a 10 per cent decline from August, and a year on year drop of 42 per cent in gross mortgage lending.

First-time buyers are being warned that private sector shared equity schemes do not offer the same level of protection as government funded schemes. Notting Hill Housing, a housing association, said that private schemes are designed to lure in the most vulnerable sector of the market, and can leave buyers severely out of pocket once the initial deals have run their course.