Where Have All The Houses Gone?

 

In 2012-13, 35,000 social rented homes were lost. How has this happened...and how can we stop any more being lost?

In 2012-13, 35,000 social rented homes were lost. How has this happened, what is the impact…and how can we stop any more being lost?

The Story

For the first time in a decade, we are seeing a downturn in social lettings.

Research from the Chartered Institute of Housing (CIH) reports that in 2012-13 the number of social rented homes in Britain fell by 35,000. At a time when there is a supply crisis in social housing this loss is keenly felt. But what do we mean when we say that social rented homes have been lost? What is happening, and what can we do to make sure we don’t lose anymore?

Where Have All The Houses Gone?

I should point out that 35,000 houses haven’t literally gone missing – the properties haven’t vanished (as much as certain politicians might want social housing to disappear…) Rather, a number of coalition housing policies have led to an unprecedented decline in housing stock available for the social rented market.

Firstly, a reinvigorated Right-To-Buy (RTB) scheme has, with its significantly increased discounts, been responsible for almost 27,000 homes being sold since the coalition came to power.

Secondly, social landlords are now required to convert a portion of social rented stock – new build and existing homes – to new ‘affordable’ rent, which can be set at up to 80% of the local market rate.

The sale of homes through RTB and the reclassification of once social rented homes to affordable rent schemes, means that the sector has seen a net loss of 35,000 properties in 2012-13. And while data for 2013-14 is not yet available, an increasing number of new builds set to affordable rent rates and increased RTB sales suggest that this loss of social rented homes will not just be a one-off occurrence; worryingly, it could be the start of a trend.

My views on RTB are contrary to those of the coalition – I believe the policy should be revoked. You do not resolve a supply crisis by reducing supply. Promises made by the government to provide new homes on a one-to-one basis following RTB sales have not been met, and even if they had been there wouldn’t be a net increase in social rented stock – receipts would be used simply to maintain current, inadequate stock levels.

The affordable homes programme provides funding for new homes, so would seem on the surface to be a solution to the UK’s housing shortage. Affordable rent properties may no longer be called social rented homes, but they still designed to provide for those on lower incomes – after all, they are…well, affordable, right?

The Problem of ‘Affordable’ Rent

Inigo Montoya (The Princess Bride) knows something the government doesn't, and it has nothing to do with him not being left-handed...

Inigo Montoya (The Princess Bride) knows something the government doesn’t, and it has nothing to do with him not being left-handed…

Quite simply, ‘affordable’ rent is not affordable. At least, not for those who have traditionally been housed in social rented homes.

While affordable rent is advertised as being ‘up to’ 80% of market rent, according to the CIH’s UK Housing Review 2014 most affordable rents on new build properties are already close to the maximum 80% of market rent permitted by the policy, both within and outside of London – indeed, even the average within London (69%) exceeds the target average of 65% promised by the Mayor.

But even setting rents at 65% will not be of much help to many – in the London borough of Southwark, for example, a two-bed flat set to 65% of the market rate would still require prospective residents to earn more than £35,000 a year.To put this into perspective, Westminster council have estimated that half of its social rented household received an income of less than £12,000 a year.

The Cost of Affordability

“We have suddenly shifted from a [social housing] system based on high capital grant rates and low rent to a system with low grant rates and high rents, and people have really struggled with this.” – Andrew Cowan, partner at Devonshires solicitors

Social housing, when based on traditional formulas that combined local wages and local property value, meant that rents would be set at around 50% of local market rents. This allowed even those on low incomes to live and work without being dependent on housing benefit.

The problem with affordable housing is that when set to 80% of market rent that same scenario is not possible – that is, people on low incomes are not able to live and work without being dependent on housing benefit…if they are able to live there at all.

Those with the highest housing need are being placed in affordable rented properties, despite the fact that their circumstances mean they are unable to meet the cost of renting unsupported. In these cases housing benefit is being used to bridge the gap – nearly three-quarters of tenants who have moved into homes with ‘affordable’ rent are receiving housing benefit to help with the cost – meaning an increase in housing benefit expenditure to assist those to live under ‘affordable’ rent

The housing benefit bill was £24bn last year, up 20% since the coalition came to power. If the affordable homes programme is contributing to this, then the policy runs contrary to its initial remit: building more homes for less money.

Conclusion

For every affordable rent property that is built, one or more existing social housing property will be lost. – Colin Wiles, The Guardian

The UK is struggling to supply enough homes to meet demand; building more homes makes sense as a way out of the crisis. But average levels of grant (per property) have fallen beneath levels originally planned – as of September 2013, the average level of grant per unit across England was £18.868 compared with the £20,000 average grant envisioned by the Homes & Communities Agency (HCA) when the affordable homes programme began. (After 2015 this average grant is set to reduce further, to £17.400 per unit.) This further forces affordable rents to be set as high as possible in order to meet the cost of development, which in turn increases the housing benefit bill and consequently locks people into a cycle of benefit dependency.

It is of great concern when policies such as RTB and affordable rent appear to be partially targeted to remove social rented housing from available stock altogether. Social housing is a valuable and viable tenure – efforts to undermine this have wide-reaching repercussions regarding how social housing is regarded, how its tenants are treated, and what options and opportunities we as a sector are able to provide prospective tenants, many of whom rely on, choose, or desire social housing as the most suitable accommodation for their needs. Affordable housing is no substitute for true social rented housing, and while Secretary of State Eric Pickles has argued that RTB sales receipts of £420m will be used to help pay for the construction of new homes for affordable rent, any number of new homes built will not help solve the housing crisis if people cannot afford to live in them…or, if in doing so, the housing benefit bill continues to rise.

CIH chief executive Grania Long has said affordable rent has its place – it can offer a useful housing option where the rent is genuinely affordable and there is appropriate demand. But one size doesn’t fit all, and affordable rent doesn’t work uniformly across the country.

What would help across the country is a commitment to building a much larger number of social housing at social housing rent rates. The SHOUT campaign holds this as part of its key aims: to build 100,000 more social rented homes each year – partly through a significantly larger (not shrinking) social housing grant programme – with rents set using an affordability formula. This approach would mean more housing that tenants could genuinely afford, as well as providing a much more robust and understandable platform for rent – currently, as L&Q’s chief executive David Monague notes, affordable rent has nothing to do with a tenant’s ability to actually pay.

Even if the government do not actively assist in building new social rented homes – in spite of evidence advocating such a commitment – I would hope that in the run up to the General Election in 2015 serious discussions are had about the impact that housing policies are having on existing social rented stock.

We can’t afford to lose any more.

References

  • UK Housing Review 2014, Chartered Institute of Housing, 2014 (Section 2, Chapter 4)
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