Wednesday, 29 October 2008

Financial turmoil slows PFI deals

Could Leeds Housing PFI schemes be in trouble? Little London and Beeston Hill and Holbeck PFI schemes have yet to reach contract and there are signs that PFI might be on the way out...
Leon Walker, Regeneration & Renewal, 24 October 2008

The credit crunch is delaying several regeneration-related private finance initiative (PFI) deals, the Treasury admitted this week.

"Some PFI deals are suffering as a result (of the economic crisis) and are taking slightly longer to close," a spokesman for the department said. But the Treasury remains committed to PFI, he added.

The Treasury said that more than a dozen PFI deals have been signed this year, the majority of them in the second half of the year, despite the growing problems over bank lending.

However, public finance experts have warned that the recent turmoil on the financial markets may sound the death knell for the controversial PFI programme, which includes roads and housing schemes.

"The Government has relied so heavily on PFI for so long, and that may not be available any longer," said Chris Leslie, director of think-tank the New Local Government Network. "I think we are going to go through a major shift in the way regeneration is funded."

Trust between government and the private sector - a vital component of PFI deals - has been shattered by the stock market collapse, according to Leslie.

Tony Travers, director of the Greater London Group at the London School of Economics, added: "Much of regeneration funding in Britain is based on cheap credit, which has to drive long-term return on investment. I'm pretty sure that (banks) won't be so keen to lend in the future."

In March, the Government said that deals for PFI projects totalling £23.3 billion are due to be signed over the next five years.

Tuesday, 28 October 2008

EASEL update - Joint Venture Company set to launch?

Attendees at the Council's East (Inner) Area Committee on 23 October 2008 heard a latest update on the East and South East Leeds Regeneration Project.

It is anticipated that a report seeking to progress the establishment of the Joint Venture Company will be taken to the Council’s Executive Board in November. The Company will be a joint venture between the Council and Bellway Homes.

Download a copy of the Council Report

This is interesting news given the current housing slump and credit crunch, which, as this blog shows, is decimating house sales, prices and affordability all at the same. It will very interesting to see what kind of deal is struck with Bellway given that the original plan was to build 5000 new homes over the next 15 years. Land values have slumped in Leeds, meaning that the Council's share of any regeneration - which comes through selling its land holdings - does not currently look very good.

Home repossessions and arrears rise as borrowers struggle

by Hilary Osborne
The Guardian, Tuesday October 28 2008 10.53 GMT

The number of properties repossessed by lenders in the second quarter of this year was up 71% on the same period last year, figures showed today.

Rising household bills and increasing mortgage costs resulted in 11,054 new possessions cases in the three months between April nd June this year, compared with just 6,476 in the same quarter of 2007.

The figures, from the Financial Services Authority, also showed an increase in the number of homeowners who had fallen behind on mortgage repayments.

The City watchdog said while the number of new arrears cases had stayed constant, at around 54,000 each quarter since early 2007, consumers were increasingly struggling to clear their arrears. Consequently the total number of accounts in arrears was rising.

At the end of June there were 312,000 loan accounts in arrears, an increase of 3% on the first three months of this year and 16% up on a year earlier.

Over the past year borrowers have been hit by a double whammy of rising mortgage costs and inflation.

Borrowers coming to the end of cheap fixed-rate deals have seen repayments jump, with the credit crunch forcing lenders to reprice deals upwards.

Some have stopped lending to borrowers with big mortgages, leaving those who took out large loans with lenders like Northern Rock unable to move away from high standard variable rate (SVR) mortgages.

The figures still represent a small fraction of the mortgage market, with just over 2% of outstanding mortgages in arrears or possession. However the rising number of people unable to catch up with repayments they have missed suggests repossession rates will continue to rise.

Last year, the Council of Mortgage Lenders predicted the number of homes repossessed this year would rise by 50%, to 45,000, and the FSA's figures for the first half of the year are broadly in line with that, showing just over 20,000 properties were repossessed.

However recent economic news has been more gloomy than anticipated, and rising job losses could push many more homeowners than expected into difficulties.

Monday, 27 October 2008

Council issues affordable housing consultation

Leeds City Council is currently consulting on its Draft Affordable Housing SPD (Supplementary Planning Document). It sets out the Council’s proposed requirements for the provision of affordable housing on planning applications submitted for residential development.
The SPD, once formally adopted, will replace the existing Supplementary Planning Guidance (SPG) on Affordable Housing.

The public consultation period is for 6 weeks from 29th September to 7th November 2008.

We urge everyone to download a copy from the Council's website and send comments in before the 7th November 2008. It is vital that at this time of housing unaffordability and the proposed regeneration schemes that imply a net loss of affordable housing that we send a strong message to city planners about the need for tough and ambitious policies to ensure affordable housing in Leeds.

Hands Off Our Homes is currently studying the Council's proposals and will publish our comments here.

Sunday, 26 October 2008

Millions threatened with negative home equity and repossession

By Jordan Shilton, World Socialist Website

A report by Standard & Poor's revealed that 335,000 households in Britain now find themselves in negative equity, meaning that the value of their homes has fallen below the cost of their mortgage. This is an increase of 250,000 in only four months, and the report makes clear that this may only be the beginning. By 2010, it predicts that as many as 2 million households could be threatened with falling into negative equity.

Ernst & Young believe that house prices will have dropped 14 percent by year's end and will fall a further 10 percent in 2009. Halifax, part of HBOS, claimed that the fall in the value of homes was the greatest in over 50 years. The most severe decline in prices has been forecast by Capital Economics and Standard & Poor's, who both see values dropping by 35 percent. In the case of Capital Economics, they predict this will take place by October 2009. One thing which almost everyone is prepared to agree on is that the current fall in house prices is unprecedented.

Figures also show a sharp increase in the number of repossessions, with 19,000 homes in the first six months of the year taken over by lenders, an increase of 40 percent over the previous six months. Leading the way in repossessions is the now government-owned Northern Rock, which has evicted nearly twice as many customers compared with the industry average. Of the 19,000 repossessions in the first half of this year, Northern Rock was responsible for over 4,000. Predictions suggest that in the second half of 2008, overall repossession numbers will increase to 26,000 households.

With increasing numbers of workers out of a job as the recession bites, many will find it impossible to meet the cost of everyday living, including keeping up with mortgage payments on their homes.

Banks are continuing to increase the pressure on people trying to re-pay their mortgage. When the Bank of England announced its emergency 0.5 percent interest rate cut earlier this month, mortgage lender Abbey revealed that it would not pass on any of it to its customers. Within a week, Nationwide, Woolwich and Cheltenham & Gloucester all announced that rates for new customers would increase by as much as 0.7 percent.

A week later, Nationwide announced a second increase, particularly targeting borrowers with small deposits i.e. those who are least able to make payments. "It is regrettable that we have to increase our tracker rates, but we must take into account ongoing volatility in the wholesale markets and the high cost of funding," said Matthew Carter, divisional director for mortgages at Nationwide.

Proceedings to permit banks to repossess homes have been started against people who have fallen behind by as little as £800 with their payments, or against homeowners who have missed only two monthly instalments. In one case cited in the Times, Esther Spick, who had fallen behind by only three installments on her mortgage with Northern Rock, was facing eviction despite the fact she only owed the bank £1,200.

Housing charities have raised concerns about the mounting rate of repossessions, particularly as they are forced to deal with more people facing homelessness. Adam Sampson, head of Shelter wrote in the Daily Mirror of October 22, "The financial crisis has its roots in the housing market, and that's where the effects are most serious. Frighteningly, one in every 25 of us is at least one month behind with our mortgage payments. Millions more are crying out for somewhere to call home.

"These are the true victims of the credit crunch, and they are the voices which the government must listen and respond to. It would cost the Treasury far less to meet their needs than the £500 billion to bail out the bankers."

That those facing homelessness will have to rely on charity for support is testimony to the complete absence of any social programmes from the government to provide people with housing. Since coming to power in 1997, Labour has continued where the previous Conservative administration left off, encouraging people to take out a mortgage to purchase properties—including many that were once council houses. Next to nothing has been done to build affordable social housing for those who need it most.

One story reported to the BBC was typical. Charles Okwalinga, a father of two from London, had been persuaded to purchase a council house through the government Right to Buy programme, a scheme where the government pays a percentage of the deposit on a mortgage. Unable to keep up with the payments on his mortgage, Okwalinga has been facing the prospect of eviction for over a year. He commented, "Family and friends started to bail us out as we began to have problems. In court, it was decided we could continue the repayments and stagger the outstanding payments. We paid most of it, but irregularly, so in March this year, the court granted the lender repossession."

Another person threatened with losing their home revealed the dangers of the sale-and-rent-back scheme, which has flourished as people try desperately to remain in their home. The scheme allows people to sell their home to a company and then continue living there by renting it back. Facing eviction, Shirley Hayles took up this option in 2006, selling her house to a firm called Repossessions Stopped. Describing the visit she received from the company representative, she told the BBC, "He came and he liked what he saw... he said ‘we can't offer the £85,000 that you say it's worth, but I can offer you the £60,000 and offer you a lifetime of living in it at £300 a month rent'. And I thought, that's brilliant."

Within a year, her house was repossessed in spite of her meeting her rent payments, since her landlord had not paid the mortgage. A spokeswoman from Shelter commented that this was a common occurrence. "People are going from being homeowner to homeless in (a) matter of months. It's an extremely distressing time... we need to do something about it."

The fact that Northern Rock, which received vast sums of taxpayers' money, now leads the way in evicting people from their homes is deliberate policy. When £50 billion was made available to Northern Rock when it was nationalised earlier this year, the Brown government claimed that far from handing a blank cheque to the banking executives to continue with their operations, it was meant to safeguard ordinary people from the dangers of financial collapse.

Notwithstanding these claims, the reality of the situation is now clear. Enjoying the full financial backing of the government, the bank is now emboldened to step up the pressure for ever greater returns on its loans to maximise its profits. Having extended mortgages to some of the people with the lowest finances, with many having little prospect of paying back their loans, it has decided that repossession is the best option.

With the rising threat of homelessness, the government has been compelled to issue statements claiming that it will "do everything it can" to prevent people losing their homes. Treasury Secretary Yvette Cooper attempted to reassure people that the government would take measures to support them. "We need a more responsible approach to repossessions," she said. "What we are looking at is something looking much more widely at all of the banks, because I think repossession needs to be a lot rarer. We need to do everything that we can to keep people in their own homes."

Announcing government changes to repossession regulations, Prime Minister Gordon Brown stated that mortgage lenders would have to demonstrate that they had "exhausted every avenue" before they could issue repossession proceedings.

These claims will mean nothing for those struggling to meet their payments. Writing in the Telegraph, Tracy Corrigan observed, "The Government has been having discussions with the banks to ensure that strict criteria are followed in repossessing homes. This is clearly desirable, as are possible measures, such as more guidance for the courts on repossession. But I cannot see how any of this will result in repossession becoming, as Miss Cooper suggested, ‘a lot rarer', as house prices continue to fall and job losses to rise."

Monday, 13 October 2008

Defend Council Housing Conference - 25 November 2008

The DCH conference on Tuesday 25 November provides an important opportunity for tenants and other supporters of council housing to sharpen our arguments and directly contribute to the government's 'Review of Council Housing Finance' (plenary session and workshop with Steve Hilditch and Steve Partridge).

We urgently need to reunite the council housing family (authorities directly managing their homes and ALMOs) to secure the future for council housing and give those facing 'stock options appraisals' and transfer ballots the opportunity to hear the argument for an immediate moratorium and the case against privatisation.

Organise a delegation from your area to take part. Circulate the programme and registration form to tenants reps, trade unionists and councillors in your area and use the new DCH 'HRA Ready Reckoner' to publicise how much your authority would get if government agreed to fully fund allowances as the outcome from the review.

Download registration form here:

Local authorities pay for tenants to attend all sorts of conferences and events. Ask yours to sponsor tenants to attend this conference so that they can hear from a wide range of speakers, participate in the workshops and meet tenants from other areas.

The growing crisis in the private housing market reinforces the arguments for investment in a first class public housing sector. Tenants, trade unionists and councillors in authorities directly managing their homes and ALMOs need to come together to assert our common interests and secure a strong financial future from the government's review. And with the private housing sector shutting up shop there is increasing support across the UK for a massive programme of investment to build a new generation of first class council housing providing secure tenancies, low rents and an accountable landlord that people need.

Contributors to the conference include: Professor Peter Ambrose; Weyman Bennett, joint secretary, Unite Against Fascism; Lesley Carty, DCH; Frank Dobson MP; Jack Dromey, deputy general secretary UNITE; Wilf Flynn, UCATT executive council; Steve Hilditch, facilitating workshops for Review of Council Housing Finance; Dave Gibson, housing consultant and Moonlight Robbery campaign; John Grayson, housing researcher; Paul Holmes MP; Adam Lent, TUC Head of Economic and Social Affairs; Linda McNeil, chair, Leeds Tenants Federation; John Marias, Cambridge Tenants Against Privatisation; Michael Meacher MP; Austin Mitchell MP; Paul O’Brien, chief executive, APSE; Steve Partridge, director, HQN; Alan Rickman, chair, Winchester TACT; Patricia Rowe, Taunton tenant; Eileen Short, Tower Hamlets Against Transfer; Heather Wakefield, national secretary UNISON; Alan Walter, chair Defend Council Housing.

Attend workshops on ‘Stock Options and Stock Transfer; ‘Housing Finance – how it works’, ‘What tenants want from Review of Council Housing Finance’; ‘Post transfer experience’; ‘ALMOs: avoiding ‘two-stage’ privatisation’; ‘Tenants Movement and tenants representation’; 'Tenants Against the Nazis'; ‘Organising effective local campaigns’

Letters to the Yorkshire Evening Post

We've had a number of letters published recently in the Yorkshire Evening Post.

1 September 2008:

In response to the horrifying story on 26 August 2008 that the 'affordable' housing units in a city centre residential development had been fitted with 'plastic' gas pipes, we wrote:

'Danger in our homes'

YOUR article on the "plastic timebomb" in the YEP of August 26 made interesting yet worrying reading.

So a housing development can be created, part of which is classed as "affordable". Only the affordable section happens to contain gas piping made of polythene "which would have been quicker to install and therefore cheaper".


That really must be reassuring to those residents of Leeds who face the loss of a council house as part of a "regeneration programme" who then have to purchase alternative accommodation in private sector developments which will have some "affordable" housing.

Having saved a deposit of £20,000, paid an arrangement fee of £1,000, paid solicitors and removal fees, the once happy council tenant could find themselves in a property that is not only not up to standard but could be potentially dangerous while still having to meet mortgage repayments of £600 each month.

Maybe Leeds's housing policy should come with a Government warning – your new home will not be affordable and may also damage your health.

John Davies, Hands Off Our Homes

Then, on 7 October 2008, we responded to a news story in the Yorkshire Evening Post that called for more family homes in the Holbeck and Beeston Hill PFI Regeneration Scheme.

We wrote:

Housing plan fails to add up

Published Date: 07 October 2008

AS you point out in your comment in the YEP of October 1, it is always necessary to look behind the numbers when looking at house building particularly if the 'Folks who live on the hill' are to be helped.
The demolition planned for Holbeck will remove 685 council housing units yet the "social housing" element of the proposed regeneration programme will only provide 350 housing units. The rest of the development will be homes for sale.

We have seen in Gipton that when private developers are relied upon to provide homes they fail to provide houses which are affordable to those who have been "cleared".

Coun Congreve says he is not keen on PFI (private finance initiative). We fear that the good people of Holbeck and Beeston Hill will, in due course, discover that the private sector will not be providing them with decent and affordable housing.

So where will people go? With the council house waiting list getting ever longer and people "bidding" for a home each Wednesday in competition with hundreds of other people we expect that many people will join the desperately unfortunate Thackray family described in the YEP of September 30 who have been split up to live with members of the extended family.

It is about 45 years since Ken Loach produced the TV drama Cathy Come Home but the problems of housing provision still remain. The Government has the money for banking bail-outs and wars so why no money for housing of a decent standard?

John Davies, chair of Hands Off Our Homes, www.handsoffour