1. HOUSING, POLICY REFORM AND CONSTITUTIONAL CHANGE: SCOTLAND AND THE UK Ken Gibb

3. 1. Scottish Housing Policy Framework 1998 – everything is devolved unless it is explicitly reserved Housing Division devolved covering: 1. Social housing investment, regulation and reform; 2. Private renting regulation, housing standards; 3. Housing-relevant bits of spatial planning and development control; 4. Standards for new build, relevant parts of climate change and carbon emissions; fuel poverty policy; 5. Low cost home ownership; Innovation in public and private partnerships; stock transfer and other tenure change e.g. RTB & ALMOs Paid for by DEL/Block Grant subvention and by HB (perceived asymmetry identified by IPPR) … but it is a little more complex.

4. Housing in Scotland – a Hybrid Reserved Most Tax & Benefits Public & Private Finance Rules Devolved Rent Sector/ Regulatory Policy Local Tax and LBTT

5. 1. Framework…./ Hybridity permits experimentation, innovation and divergence: - homelessness - initially in a context of growing real public spend - later as a response to the GFC and austerity Divergence is also about not following England e.g. Affordable Rent Model Barnett consequentials work in both directions: - big cuts to DCLG after 2010 were initially visited on Scottish housing programme - subsequent positive consequentials were often redirected to housing - UK policies like Help to Buy modified slightly - Financial Transactions provide limited further support

6. 2. Housing and the Smith Commission Response to the 2007 Scottish election was the UK parties signing up to the Calman Commission process and subsequent 2012 legislation made all the more urgent by the 2011 Scottish election SNP majority The 2012 Act: devolved 10p from each income tax rate and stamp duty creating Revenue Scotland and also limited borrowing powers – enacted April 2015 with the income tax provisions due April 2016 Referendum debate – housing did not really feature except as a proxy in the welfare reform and austerity debates and as a capital funding issue The bedroom tax SNP manifesto commitment in 2011 Post-referendum in the Smith Commission lead up to reporting – devolving HB was a ‘no-brainer’

7. Smith Commission Powers Administrative power to change frequency of UC payments… and pay landlords directly for housing costs Power to vary housing cost elements of UC, including varying the under- occupancy charge and LHA rates, eligible rent, and deductions for non- dependents DHPs to be fully devolved along with a number of other benefits Finance Control over income tax rates and threshold, but not personal allowance Half of VAT revenues assigned to Scotland Borrowing powers to deal with economic cycle but not much more

8. Bell, D and Eisner, D (2014) The Scottish Budget under the Smith Proposals

9. Draft Clauses In January we had the actual draft clauses for the prospective post election bill: Retains Barnett Complexity of the critical Block Grant Adjustment process Removed two critical proposals by Smith for the Scottish Parliament to have the ability to top up reserved benefits or to create new benefits. EVEL stalks the land and Housing Benefit is not after all devolved

10. 3. Key Policy Areas I want to now look briefly at four established or emerging key policy issues that are significant both in Scotland and rUK 1. Affordable New Supply 2. Investing in Private Renting 3. Housing Benefit 4. Council Tax Reform

11. New Affordable Supply Unmet need nationally 8-10,000 units (2006) Post 2007 recession crisis reaction was to accelerate spend, innovate with partnership models and redirect consequentials; there was a one year ‘innovative’ experiment with lower grants but it was then forgotten about Post 2011 and strategy development led to 5 year plan to build 30,000 social and affordable units, 2/3 of which would be social Essentially a different trade-off from England: Scottish decision to boost grant rates (£55K for HA & LA) which limits the size of the overall programme. Progress thus far

14. Investing in Private Renting

15. PRS Stock growing less dramatically than England but still a key trend and now largest sector for young households Major regulatory initiative in Scotland still underway – classic tension between antipathy to the market and well-grounded concerns regarding affordability and HB costs on the one hand and the desire to promote quality corporate and institutional investment on the supply side No build to rent in Scotland (yet) and no equivalent to S106 reforms in Scotland Homes for Scotland research, RICS Commission and the PRS Champion With rare exceptions, social landlords either not interested or focused on mid market rent at most Private investors/corporate landlords concerned with future regulatory stance but not wholly opposed to longer leases

16. Housing Benefit Welfare reform and constitutional tinkering make a badly designed HB system worse Our new report for Shelter argues for devolution with a purpose - doing it to improve housing and income maintenance policy The long term aim is to help shift subsidy from a demand to supply-side focus

17. Reforming Housing Benefit The constitutional debate around HB has obsessed with the bedroom tax and across the political spectrum has not coherently addressed what to do with it once it is devolved [even though it has not been!] At the heart of the problem is the age-old debate between HB as an income maintenance or as a housing policy Our view: - shift back over time to a general housing element in working age cash benefits - introduce a new but limited affordability based ‘gap’ allowance - transition slowly and protect losers over time Strong assumption about required political consensus to achieve this and recognition that shift to supply subsidy focus is far from straightforward.

18. Reforming Council tax

19. Council Tax and Alternatives The politics of council tax reduction and the council tax freeze SNP long term commitment to reform, formerly in favour of a local income tax; perhaps more open now LTC is an almost all party set-up (cf Burt Review in 2006) Reports in the Autumn to be ‘put’ to the electorate in the Spring of 2016. Options: - reformed CT (revalued, rebanded, reweighted) - Burt-like (NI) property tax - Local income tax with or without a further property tax - land value tax (local or national?) What to do about low income households and asset-rich cash poor households?

21. 4. Post-Election Progress? Stamp duty as example of policy competition Learning to live with considerable fiscal responsibility Federal asymmetries: city deals, Devo Manc, Scotland Poliitcal Uncertainty and instability ahead?

22. The big issue - building a big tent consensus for locking in long term housing policy solutions – more credible in Scotland and perhaps in a more regionalized England?

23. 5. Wider Lessons for the UK and Scotland Hard to imagine that the Draft Clauses of the Smith Commission will be the final word on constitutional change but nonetheless, there is huge change ahead that will impact to housing if it does stop where we are. Is there wider value in the distinctive performance framework and the Scottish approach to public policy? Rhetoric of outcomes, integration, prevention and partnership. HM Treasury, the UK financial regulators and the Bank of England remain the key players for the mortgage market and home ownership policy. Quasi-federalism and other constitutional change at different levels takes much time, so far remarkably ill-thought through in terms of knock-on and unintended consequences, and, it takes our collective eye off substantive policy work (or it obscures and confuses).

24. Wider Lessons…/ Austerity and Welfare reform remain key pressure points for both Scotland and the UK – how much will things change after the election? Housing supply: will the private sector retreat further from social/affordable housing work now that the market and profitability is recovering? How will that gap be filled? Can rUK emulate Scottish council house building? Can Scotland learn from rUK policies to support corporate and institutional investment in market renting? Hybridity and the macro importance of housing requires greater co-ordination between governments – a recognition of this would be a start to longer term consensus about means and ends of housing policy

25. Markets and Housing do not Welcome Uncertainty Quantum states of political uncertainty Not unlike September 18 2014 Schrodinger and the highway patrol