Budget 2015: the impact on social housing

Lots of house building – and house selling – measures were trailed before yesterday’s Budget. It seems though that we’ll have to wait for a planning announcement on Friday to know what most of them are. Most importantly we don’t know what funding, if any, there will be for urgently needed new affordable homes, or how the extension of the Right to Buy to housing association tenants and the forced sale of council homes will work in practice.

What we do know from the Budget is that existing social tenants will face some major changes – and that these will indirectly impact on the ability of social landlords to build more.

On the positive side, the announced reduction in social rents by 1% a year for the next four years will be good news for tenants, and will help to limit the rising housing benefit bill. What this will mean for social landlords’ financing plans, and hence their future pipeline of development is less positive – and don’t forget that this currently accounts for around a quarter of new homes built. The OBR estimate that the change will reduce the number of new affordable homes built by 14,000 over the next five years, homes we can ill afford to lose. NHF have initially estimated this figure at a whopping 27,000 homes lost.

Of course, pushing up rents was always a poor way to support new supply, as not all associations do development – we’ve long warned against relying on housing benefit rather than direct investment to build homes. In any case, the gain for tenants should outweigh the damage to association business plans – as long the government also provides sufficient direct funding to housing associations to make up the difference, and go further. That’s a pretty big ‘if’, so we’ll be watching Friday’s announcements closely to see if David Cameron will make good on his pledges to build the affordable homes we so desperately need.

The other changes to social tenancies are far more worrying. Firstly, they propose charging full market rents to existing social tenants with median incomes (£30k, or £40k in London). Whacking up rents for these households is brutal move, and one that could push more into reliance on housing benefit – reducing the benefit savings made by lowering social rents for other tenants.

We should remember that social rents are not artificially low: they reflect the cost of building and managing the homes, are linked to actual earnings, and in fact yield a surplus. It is private rents that are ridiculously high, and it is this fact that lies behind the burgeoning benefit bill. Punishing tenants who work hard in this way is counter to the rhetoric of supporting aspiration. Even worse, for council homes the additional rental income of £240m that this is expected to bring in will not go to councils to support more house building or better services – the Treasury will pocket it.

Likewise, in the context of diverging rents in social sector, the threat to remove secure tenancies is a severely retrograde step. With insecure private renting rapidly over taking social renting and homeownership falling, fewer and fewer families can get the security of a decent home to call their own. Pushing social tenants into short term, insecure tenancies can only make this worse. Everyone deserves a decent, secure home at a price they can afford. Removing security from the few lower income households who currently enjoy it is not the way to make housing fairer and better. It’s made even worse by the recent changes that mean social landlords can increasingly only offer people ‘flexible’ (ie short term) tenancies in ‘affordable rent’ homes (ie ones where the rent is pegged at up to 80% of market rents). Ending secure tenancies therefore means pushing people into less secure, shorter term, higher rent homes.

On balance, this is a worrying package, one that suggests the squeeze on genuinely affordable homes is set to continue. Only a massive increase in the supply of new homes in all tenures, particularly those that are really affordable to ordinary households, can hope to counteract these damaging effects. We’ll be watching tomorrow’s announcements on house building with baited breath – and pushing hard for the Comprehensive Spending Review later this year to invest in the homes we need.

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One Comment
  1. “We should remember that social rents are not artificially low: they reflect the cost of building and managing the homes, are linked to actual earnings, and in fact yield a surplus. It is private rents that are ridiculously high, and it is this fact that lies behind the burgeoning benefit bill. ”

    Councils got their housing stock in the 1960s. So they can afford to charge low rents. Unfair comparison. Private Landlord pay tax. Council don’t.

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