Does Affordable Rent really mean the end of social housing?
17 Dec 2014
In 2010, Inside Housing ran a black front page predicting that the introduction of the Affordable Rent regime would mean the end of social housing. Yesterday we got a step closer to finding out if they were right.
The short answer is yes: at a time when we need more new social rented homes the Affordable Rent regime has shifted things further in the wrong direction by contributing to a net reduction in social rented homes of over 36,000 in 2013/14.
First, a quick refresh of what Affordable Rent is. The new regime introduced a new type of home (Affordable Rented homes) with rents charged at up to 80% of market rents and less secure tenancies than social tenants get (though they are more secure than typical private tenancies). Across the country rents in Affordable Rent properties are on average 71% of market rents. This compares to rents in social rented homes that are typically about 50% of market rents, with life-long tenancies. So social rented homes are – for low income families – much more affordable than Affordable Rent and much more secure.
There are two reasons for Inside Housing’s belief that this new regime could over time lead to the practical end of social rent. The first is that when it was introduced, government grant for new public sector rented homes was switched from social rent to the more expensive Affordable Rent. Most new social rented homes require government grant to get built, so the fear was this switch would lead to fewer and fewer new social rented homes being built.
This has proven to be correct. The number of new social rented homes built or bought each year has slumped from almost 40,000 in 2010/11 to just 10,000 last year. And it looks set to fall even further next year.
The second reason is that social landlords (both housing associations and council landlords) were encouraged to convert existing social rented homes to Affordable Rented homes when they become vacant and are re-let. So there would be more and more homes leaving the social rented housing stock.
This has also proven to be correct. Yesterday’s new stats on social lettings suggest that more than 16,000 social rented homes were converted to Affordable Rent last year.[ii]
When you add in the number of social rented homes demolished and the number sold (both through Right to Buy and other sales) the combined net effect is that there were more than 36,704 fewer social rented homes in England as of April this year than there were in April 2013.
This doesn’t necessarily imply that social housing is going to disappear entirely any time soon. There are roughly 4 million social rented homes in England, about 20% of all our homes, so at the current rate of loss it would take more than 100 years for the entire stock to be wiped out. And when compared to the number of homes taken out of the social rented housing stock when Right to Buy was in its heyday, the numbers still seem relatively modest. Almost 170,000 social rented homes were converted into private ownership through Right to Buy sales in 1982/83 alone.
But the long-term significance of Affordable Rent should not be underestimated. No matter what happens to the Right to Buy sales and demolitions in the future (and both are currently quite low by historical comparison), conversions of social rented homes to Affordable Rent look set to rise consistently. And vitally, the supply of new social rented homes has been all but turned off.
Managing the stock of social rented homes has always been a bit like running a bath with the plug out. But under Affordable Rent the plughole has both been made bigger and the tap has been turned off too.
All of this matters because we desperately need more social rented homes. Affordable Rent could be a good option for some people on middle incomes who just need a little help, but is unlikely to be affordable for those in most housing need. Without more new social rented homes, more and more people who are homeless or in housing need will be offered no option other than a home with a rent they can’t afford, forcing them to rely on housing benefit to bridge the gap. The housing benefit bill will continue to rise.
The realisation of Inside Housing’s grim prediction is something that we can’t afford to see happen. If we are to fully tackle the negative effects of England’s housing shortage, all political parties must commit to building more social rented homes.
[i] We are only able to estimate conversions because no official statistics exist. This number is the number of Affordable Rent homes that were let last year minus the number that were built last year. This does not take into account homes that have been built but failed to be let. This methodology will become increasingly unreliable as time goes on as more and more Affordable Homes are re-let. However, at present, only four years into the regime the risk of double counting is low.
[ii] These projections to not include social rented homes that have fallen out of use because they are no longer habitable or those that have been brought back into use because they have been made habitable. This graph currently also underestimates the number of social rented homes demolished in 2013/14 as no data on demolitions of council-owned social rented homes has yet been published. Given previous years this will likely mean a further reduction in social rented stock in 2013/14 of at least 1500 homes, as the smallest number of council-owned social demolitions recorded in the last decade was 1870 in 2012/13