Why would Inside Housing want to attack the idea of councils having more borrowing power to build new homes? After all it runs campaigns like Grant Britain Homes that call for more investment in affordable housing. Yet it’s just labelled the demands for greater borrowing freedom a False and dangerous myth. The opinion column accompanies a piece of research which used Freedom of Information requests to find out how councils were using their current borrowing ‘headroom’. The data show that councils like Wigan and Kirklees had £45 million of unallocated borrowing power and that many others had not yet borrowed up to the maximum of the ‘caps’ set by government when self-financing began in April 2012.
There seem to be no problems with the data (although individual councils might have issues with how they’ve been reported). The problem is that a story about how the early stages of self-financing for councils are working out has been turned into an opportunity to try to rubbish the case for changing the borrowing rules.
The argument seems to hinge on the fact that ‘most of the £2.9 billion of investment already available is untapped’. That’s to say, in February, just 22 months after self-financing began, councils hadn’t yet borrowed to the maximum they will be allowed to borrow (if nothing changes) for the next 30 years. Well, that’s hardly surprising, is it? Even those many councils who are bursting to build new homes are hardly likely to have got new developments on site in less than two years. The fact that there was an upsurge in council starts in the first quarter of this year is probably still down to earlier grants made available by the HCA, rather than councils’ expanded programmes after self-financing began.
While it’s true that a number of councils don’t yet have firm plans to build, that’s not surprising either. Demand and needs will be different across the country: in some cases demand may be limited, in others investment in the existing stock is the priority, and others may have used up their available supplies of land. Undoubtedly, too, there is a degree of caution in the face of welfare reform and spending cuts that have hit other council services. But neither the purpose of a change in borrowing rules nor the forecasts of possible outcomes depended on all councils using their full borrowing headroom, much less within such a short time.
Strangely, in another article by the same journalist Keith Cooper, this time for the Spectator, with the provocative title Why Owen Jones is wrong on housing, he points out (correctly) that around half of councils have less than £10 million borrowing headroom. The ignorant reader might think this is a lot of money, but of course – even if all spent on new build – it would barely amount to 100 new homes over the course of 30 years, quite apart from finance needed to improve the existing stock. Perhaps inadvertently, he adds to the case that Red Brick and others have long been making, that the borrowing caps are far too restrictive. His other results confirm that, in addition, they are arbitrary in their effects, with some councils having no spare borrowing capacity at all and a large number only having enough for the investment they need to make in their own stock.
But the problem about the Inside Housing (and Spectator) pieces isn’t the detail – it’s the overall message that the need for more borrowing power is a ‘myth’ and those calling for it are ‘misguided’. In a robust response, Tom Copley, Labour spokesperson at the GLA, pointed out that even Cooper’s figures show that six out of ten councils badly want to build more homes, and many are held back by the borrowing caps. Keith Cooper and Inside Housing are to be praised for their detailed research on this and other issues about local authority housing finance, but they should be much more careful how they present their findings. Those who are opposed to building more council houses or who doubt local government’s ability to spend wisely will be only too quick to make use of alarmist articles like those that appeared last week.

The homelessness ‘safety net’ suffered another blow last week when Westminster Council decided to prevent homeless households from bidding for social housing for 12 months after the Council accepts it has a duty towards them. The Council plans to discharge its duty in most cases by identifying private rented accommodation for them.
Housing now receives quite a lot of media coverage but very little is devoted to homelessness. Last week there was a short Panorama programme and a few media outlets picked up on the latest increase in the number of households in temporary accommodation. But this is an era when it seems even ‘Cathy Come Home’ would leave the country unmoved.
It seems that homelessness has become part of the ‘scrounger’ narrative that rules the media so completely. Anyone seeking state help is fair game (unless you are a pensioner or a member of the royal family). The cynicism that has been deliberately engendered prevents almost any rational debate about serious issues like unemployment, disability and housing. Homeless people are contrasted with hardworking ‘aspirational’ people who want to become home owners and deserve help to get on the first steps of the home ownership ladder. No serious coverage is given to the fact that the huge commitment of subsidies, tax reliefs and guarantees to private property ownership dwarfs the trickle of grant into social housing and the costs of meeting the needs of homeless people.
There has been a complete turnabout in attitudes towards homeless people and in homelessness policy over the last decade. The high point of the 2002 Homelessness Act – when it looked as if Government had finally put together a package of strategies, policies and duties that would tackle the roots of the problem – seems a long time ago. By then the Labour Government had some achievements to its name: rough sleeping was being brought down, the long term use of bed and breakfast accommodation for families was being ended, the number of new homeless households presenting to local authorities was falling, and councils were to be required to take a long term strategic approach. The failure of affordable housing supply has caused a step-by-step transition away from a liberal and progressive policy.
Labour’s apparently well-meaning policies – setting a clear commitment to halve the numbers in temporary accommodation and introducing a more sophisticated ‘housing options’ approach to homelessness assessment – provided the cover for the introduction of a multitude of damaging ‘gatekeeping’ practices. However, the most important shift in policy has been the Coalition’s decision to allow councils to discharge their duty by securing a private letting for the household, removing the right to wait for a social home. Taken over a decade, all the changes mean that homeless households now face many more barriers to the process of presenting as homeless, and achieving a social rented tenancy is becoming much more rare.
Gatekeeping is the reason why the number of applications under the homelessness legislation has plateaued despite all the factors that would normally lead to an increase being present. You wouldn’t bother queuing at the bread shop if there was a big sign saying there was no bread.
It is a sign of the growing desperation many people face that the number of households in temporary accommodation continues to rise despite the increasing harshness of the system and the fact that many more people are found accommodation away from their home area. At the end of March, 58,520 households were in temporary accommodation. Of these, 12,430 were in TA in another local authority area, an increase of 36% from the previous year. 93% of these were from London, an increase of 40% in a single year. The number staying in TA for more than 2 years has also increased from 9% to 11% in one year. Between them, the 58,520 households contained 80,560 children or expected children.
The fastest rising reason for homelessness is the end of a private tenancy, now responsible for 27% of homelessness – up 14% in a single year.
The fact that 80,000 children are living in temporary accommodation, many of them away from their home area, should be seen as a national disgrace. It should be dominating domestic news. When Michael Gove says ‘nothing should be too good for the children of this country’ he apparently can’t mean the children of homeless families.

The SHOUT campaign (social housing under threat) got off to a great start with a successful launch event in Parliament last night. Speakers from the Labour, Conservative, Liberal Democrat and Green parties spoke in support of the importance of social rented housing as a major part of solving the housing crisis.

Speakers included John Healey MP, the former Housing Minister who wrote an article in the Guardian calling for such a campaign, the Conservative leader of South Holland District Council Cllr Gary Porter, who is also a vice chair of the Local Government Association, LibDem MP John Leech, Green Leader Natalie Bennett, current Labour spokesperson Emma Reynolds MP, and cross-bench Peer Lord Victor Adebowale. Speaking for the campaign steering group were Alison Inman, Tom Murtha, Camelia Borg and Colin Wiles.

Above: Gary Porter, John Healey, Natalie Bennett

 

Above: Victor Adebowale, Emma Reynolds, Colin Wiles, Tom Murtha

Several other Parliamentarians attended including MPs Karen Buck, Andrew Slaughter, Alastair Burt, Clive Betts, Andrew Love, Stephen Timms, Chris Williamson, Clive Efford, and the chair of the NHF Lord Matthew Taylor.
There was considerable cross–Party support for the SHOUT Manifesto. Although not everyone agreed with everything – with political differences most notable around the right to buy – there was a strong consensus in support of building more homes for social rent and in favour of the case for moving back from ‘benefits to bricks’. In an interesting contribution, Gary Porter called for all the political parties to put the removal of council borrowing for housebuilding from the public borrowing requirement in their manifestoes.
The 20 page Manifesto sets out the case for social rented housing as a central part of the solution to the housing crisis. It sets out SHOUT’s case, made in detailed evidence to the Lyons Commission, for 100,000 new social rented homes to be built a year, funded through raising the restrictions on council borrowing, increasing social housing grant, and making more robust demands on housing developers. It calls for RTB sales to be genuinely replaced with ‘like for like’ new homes and for rents to be continue to be based on an affordability formula like the ‘target rents’ regime. It criticises the ‘affordable rent’ regime and calls on providers to refuse to sign up to it as it currently stands.
A central plank of the Manifesto is the call for an end to stigmatising misrepresentations and demonisation of social tenants.
The SHOUT Manifesto can be found in full here . Yesterday’s blog by campaign organiser Colin Wiles can be found here. Another fascinating blog by Jules Birch on the background to the launch of SHOUT can be found here.
As Jules writes:

‘Here’s hoping today’s launch of the SHOUT manifesto can be the start of a new era for social housing.’

 
SHOUT on Facebook: https://www.facebook.com/pages/SHOUT-The-Campaign-for-Social-Housing/584137758345466?fref=ts
SHOUT on Twitter: @4socialhousing
 
 
 

The latest affordable housing figures show that numbers of new social rented homes have fallen by half. The year before, they’d fallen by more than half. So whereas for the three years up to 2011/12 we were producing around 34,000 new homes for social renting each year, now it’s less than 8,000.
It’s not as if this is a temporary lull. From 2015, there’ll be virtually no social rented output funded by the Homes and Communities Agency, so although local authorities will continue to build and let at social rents from their own resources, we can expect a further sharp fall in output. Furthermore, any recycled receipts from right to buy sales can only be used to build homes at higher, Affordable Rents (not social rents).
Despite these obstacles, councils recently said that they want to produce half their new build for letting at social rents, and that overall local authority output will rise to about 5,000 new units per year. But even if it does, it looks like total production of homes at social rents will fall by a further 50% and perhaps more.
This matters, because (as Red Brick readers know only too well) Affordable Rents are getting very close to market levels. The picture is shown in this year’s UK Housing Review. Affordable Rents for new build properties run at nearly 80% outside London and at 69% in London (but go up to 80% in some Boroughs). Overall, in 2012/13 there were some 27,000 lettings by associations at Affordable Rents, and on average the ‘premium’ on social rents is a startling 55%.
Even more important than the statistics on new build are those on the overall stock of housing let at social rents. Nick Raynsford MP has been doing some digging on this issue, but what this has mainly revealed is that the data are incomplete and confusing. Accurate and comparable data only seem to be available for the two years 2011/12 and 2012/13. These show that councils had a net loss of 11,769 social rented units in the year ending April 2013, while housing associations lost 3,278. By that date, associations owned almost 40,000 homes let at Affordable Rents and councils owned just over 1,000. We know that the current Affordable Homes Programme (that ends in March next year) is based on converting about 75,000 existing homes to Affordable Rents over the life of the programme: this undoubtedly explains some of the loss of social rented stock even though the AHP had (in April 2013) still two years to run.
The loss of around 15,000 social rented homes in one year may seem a small amount – given that the total social housing stock was still 4.2 million. But it’s the beginning of a worrying trend, given that almost all new build effort is going into producing homes that are more expensive than social rented ones (whether for rent or sale), and the existing stock is being eaten away by conversions, demolitions and sales (including, of course, the accelerating right to buy). With right to buy sales now running at 11,000 per year and rising, it’s a safe bet that the net loss of social rented homes in the year to April 2014 will turn out to be much greater than the year before, and that by April 2015 the loss will be bigger still.
Postscript (25 June 2014): Although the statistics are far from clear, a different calculation of the loss of social rented homes in the housing association stock in the year to April 2013 suggests a bigger figure than is shown in my original post. Using the stock losses and gains reported in section 5 of the HCA’s Statistical Data Return 2012/13, and deducting stock now let at Affordable Rents (section 3), the loss would be 23,025. Added to the fall in council housing numbers noted above, the total loss of social rented stock in the year ending April 2013 rises to almost 35,000, or about 20,000 more than in my original calculation.

Well, if Mr Jamie Ratcliff, a £100,000 a year housing official at the Greater London Authority, is right, Red Brick is ‘lazy’ and ‘facile’ in our opposition to the ‘Affordable Rent’ programme. Fortunately we are not alone, being joined by an increasing number of commentators, housing officials and people who work for organisations that deliver the scheme.
At the risk of sounding defensive, let’s look at the ‘lazy’ and ‘facile’ charges. Along with other bloggers and writers, we have done dozens of posts on Red Brick about ‘Affordable Rent’. We described the antecedents of the policy before the 2010 Election, when people within housing and within the Tory Party argued for less security of tenure and higher rents. We drew attention to and criticised various think tank reports setting out an agenda for the end of social housing.
After the Election, we pointed out that there was nothing in the Tory manifesto, the Lib Dem manifesto or the Coalition agreement which set out the ‘Affordable Rent’ policy for democratic scrutiny. We noted that the policy had come through the ‘back channels’ of the Tory Party rather than being debated publicly, and noted that it was incubated by the 60% cut in housing investment in the first spending review. We have banged on about it ever since. And, Mr Ratcliff, we are also guilty of calling it ‘unaffordable rent’. Sorry to be so trite.
Facile is another charge that doesn’t really stick. We have looked in detail at the problems the programme causes for providers as well as tenants. We have looked at the rent levels and their implications for housing benefit and work disincentives. And we have criticised the fact that the funding of the programme is dependent on the sale of existing properties and the ‘conversion’ of a proportion (what proportion?) of existing social rented homes to ‘Affordable Rent’ levels when they become vacant.
One of the barriers to being unfacile, if there is such a word, has been the complete secrecy with which the HCA and Mr Ratcliff’s employers, the GLA, have managed the programme. It took Freedom of Information requests to get the most basic of information about the programme, the contracts being let, the number of homes involved, and the rent levels. Information is still very scarce and I cannot remember a housing programme that has produced so little monitoring information about rent levels, size of units, distribution of units, and so on. What have they got to hide?
Secrecy has meant that it has taken some time for people to become aware of what is going on and for opposition to build. But building is what it is doing. More people are arguing that providers should boycott the whole scheme and force the Government and Boris Johnson into a rethink.
Alex Marsh wrote an interesting blog last week evidencing the fact that arguments for a change of gear in housing are growing louder and that a stronger case is being made for the sector to come out fighting.
One such example is that next week sees the launch of the campaign for social rented housing, SHOUT, which aims to be an all-party group making the case for more social rented housing, not less. The group has already put in strong evidence to the Lyons Inquiry and will hopefully have a big influence on the future debate. SHOUT can be followed on Twitter @4socialhousing
No doubt people like Mr Ratcliff will say that the SHOUT campaign is also lazy and facile because it too denounces the ‘Affordable Rent’ regime in strong terms. But then again, I suppose it is possible to be lazy, facile …. and correct.

I have been taken to task (gently and politely) on the Guardian website by Brendan Sarsfield, the chief executive of Family Mosaic and current chair of the G15 group of large housing associations, for my blog criticising housing associations for their role in the ‘Affordable Rent’ programme and, more broadly, for losing touch with their mission to house people in the greatest housing need and the homeless.
To recap, my piece supported comments made by Tony Stacey, the chair of the Placeshapers group of housing associations, who protested about housing associations ‘walking into acquiesence’ with the Government’s (unaffordable) ‘Affordable Rent’ regime – ‘the wretched thing’ as Tony called it.
I went further and argued that the industry had more to explain away than a naïve acceptance of the Government’s agenda; some leading lights were ‘complicit’ in the development of the policy in the first place. Market-related rents, reduced security and greater ‘conditionality’ on tenancies is exactly what some key people in the sector have argued for. For years they have been walking away from social rented housing, let on the basis of need, on secure terms and with affordable rents, preferring to provide more diverse products for a wider range of customers. They have stigmatised tenants by associating social renting with the ‘dependency culture’ and justify themselves by claiming to be on the side of ‘aspirant’ people who want to become home owners. In my view they have, in the process, lost touch with their mission to assist those in greatest need and the homeless. Some associations have become obsessed with building for its own sake, badging themselves as developers or regeneration agencies.
Brendan argues that successive Governments have reduced funding for social housing since the 1970s, which I fully accept, but there is a difference between stretching the financial model by reducing subsidy and ending it. He says that associations accepted the ‘AR’ model because it was that or nothing. When it was introduced it was common for people to say that AR was ‘the only game in town’ but the product is hopelessly unaffordable in high rent areas and the associated requirements to sell property and to ‘convert’ a share of existing social rented homes to ‘Affordable Rents’ on re-letting are extremely damaging. The Government (and the London Mayor) were (and are) desperate to keep up the number of ‘affordable’ homes being delivered; a principled refusal by the sector would have forced concessions.
Some associations were reluctant participants and have done the minimum they think they could get away. But others (and indeed some councils) were dead keen and more than happy to deliver this product.
I accept what Brendan says that associations like his have tried to minimise the impact of AR on residents, but that is not universal. He argues that, if associations had gone as commercial as I claimed, they would have charged the full rent and not built any social housing at all. The point is, some have charged the full rent and some have virtually ended building for social rent. Brendan believes they made ‘sensible, practical decisions driven by our longstanding social values’. It is the case that in London the average rent is 65-70% of market – but some of the contracts have rents at 80%. Not much mitigation there.
Brendan’s piece and my blog both suffer from the difficulty of trying to generalise about housing associations and their motivations when they are very diverse – and very secretive. Looking at a selection of their websites to find information about their development programmes, it is impossible to get any worthwhile evidence. They tend to have boastful pieces about how many homes they are producing in total, and PR pictures of individual schemes, but they never say how many of each tenure they are producing (market sale, shared ownership, AR, social rent). None of the ones I looked at even admitted that they are ‘converting’ social rented homes to ‘Affordable Rent’, nor do they provide much information about their market sales. Given that the programme information produced by the funders HCA and GLA is also very poor, it is hard for any commentator to compare associations’ strategies and performance. Too often they hide behind commercial confidentiality when in fact it is concealment and a lack of transparency and accountability.
But the thrust of my blog was that the AR abomination is precisely what some in the housing industry have argued for in the past. They have got what they wished for. Read for example, Kate Davies’ (CE of Notting Hill) Chairman’s (sic) introduction to the report of the committee she chaired, the ‘Housing and Dependency Working Group’ of Iain Duncan Smith’s think tank the Centre for Social Justice. The name of the group almost says it all, but her conclusion is: ‘social housing is not a desirable destination; private ownership is preferable to state provided solutions’. She and David Cowans of Places for People were also key advisers to the Localis think tank’s report on social housing which, I have argued before, became the road map for the Coalition Government’s housing policy.
I am on the record many times for supporting the provision of ‘intermediate housing’ and did some of the work that led to this being enshrined in Ken Livingstone’s London Plan. I have also supported associations building for sale to provide surpluses that can be used as cross-subsidy. But somewhere along the line, and in some places, the tail has started wagging the dog. Association must have, at their heart, a burning desire to meet the needs of the homeless and badly housed and not just to be big developers. The response to AR shows a dangerous drift towards the latter.

Will the government eventually respond to the Elphicke Review by boosting housebuilding by local councils?
While Red Brick has understandably concentrated on Labour’s Lyons Review, in the past week submissions closed for the more limited review being carried out for the government by Natalie Elphicke, due to report later this year. It’s limited because it focuses only on local authorities (both as housebuilders and as facilitators of housebuilding) and doesn’t go much wider. But more especially its remit specifically excludes any options that would involve more borrowing or changing the borrowing rules. So, can it achieve anything?
One of the few bright spots in recent housebuilding statistics was the number of new starts by councils in the first quarter of this year (1,090). Described by Eric Pickles as part of a ‘resurgence’ in housebuilding, he claimed the overall level of new starts was due to Help to Buy and higher council starts were down to increased right to buy receipts. More realistically, while it would be encouraging if council output were now to start to increase significantly, there are a number of reasons for being cautious. The first is that this is only one quarter’s figure. Second, we have the fact that the new Affordable Homes Programme virtually excludes social rented schemes, whereas councils want to build around half their new output for letting at social rents (according to research last year by ARCH). And third, as pointed out by Red Brick before, while right to buy receipts are increasing they are nowhere near allowing full replacement of properties sold.
One test of the rigor of the Elphicke Review will be whether it examines the claims about reinvestment of right to buy receipts and makes any proposals to change the current rules. It’s highly likely that several submissions will mention this issue, as it’s high on the list of local authority concerns. In relation to new build, another common worry is that, unless the so-called ‘cost floor’ rules are strengthened, councils could find themselves having to sell newly built houses through the RTB in 15 years time and in the process make a significant loss. Some councils are thought to be hesitant about building within the HRA for just that reason, preferring deals which allow them nominations to houses built without being subject to the risk of falling foul of right to buy in future.
Another test will be whether, even though it can’t recommend changes in the borrowing rules, Elphicke does at least review the evidence for what relaxed rules could achieve and the scope for minor changes. After all, the government itself has offered minor concessions in the scheme it announced in the Autumn Statement which might release an extra £300 million of borrowing.
The Elphicke Review will only have credibility with local authorities if it avoids the blame game and the temptation to recommend further sales of the family silver. It’s right for Elphicke to look at ways in which councils can raise their game in encouraging development, but if it criticises poor performers it should also be clear that councils only carry a small part of the responsibility for the failure to build enough houses. It should look critically at the changes to the planning system which Pickles has imposed, including the ending of regional housing targets, rather than simply repeating and endorsing his endless criticism of recalcitrant councils. Its remit doesn’t extend to the role of developers themselves, but it can at least point to some of the endemic problems that see their share prices and profits going up while their output only increases with painful sluggishness.
Above all, Elphicke should point out that is deeply cynical of government to criticise local planning authorities for not planning for sufficient housing when it lacks an adequate housing strategy itself. The one the coalition published in November 2011, Laying the Foundations, was little more than a ragbag of recycled policies, not a strategy with targets and the means to achieve them.
Curiously, insofar as Laying the Foundations mentioned a figure of how many houses we need to build, it used the DCLG’s then official projections of increases in numbers of households, by 232,000 households per year to 2033. This would exceed Labour’s 200,000 target, and be within spitting distance of the 250,000 per year target often mentioned as being required. The problem is that private housebuilders have, since 1980, only built an average of 125,000 dwellings annually and on only four occasions did they exceed 150,000. Even if we suppose their output might be pushed up to 160,000, this still leaves a lot to be built by social landlords and clearly won’t be achieved with anything like current funding arrangements which struggle to deliver over 50,000 homes.
Elphicke should say that a step change in output can only be achieved with a clear plan, that sets targets and plausible means of achieving them, allocates responsibilities and finance, gets buy-in from the different parts of the industry and is properly monitored. This goes against the grain of how the coalition conducts housing policy, but unless and until someone does it the “deep, deep structural problems” that Mark Carney says afflict the British housing market will remain unsolved.

An excellent opinion piece on 24 Housing last week by Tony Stacey reminds me just how supine – and in parts, complicit – the housing industry has become. From the off, Red Brick has objected to, criticised, parodied, and been outraged by the Government’s ‘Affordable Rent’ scheme. And in equal measure we have tried to expose the deliberate attempt to reduce and, we think, eventually eliminate social rented housing.
Tony, who is Chair of Placeshapers, says he refuses to use the term ‘Affordable Rent’ and describes ‘the wretched thing’ as ‘AR’. He finds the few references to people speaking out against AR and in favour of social rent, including the important ‘Just Say No’ blog by Colin Wiles, which in turn led to the creation of the SHOUT campaign for social rented housing. Tony hopes that Boards and Chief Executives will ‘find their voices’ having ‘sleepwalked into acquiescence’. He makes the simple but blinding observation that ‘subsidised housing needs subsidy’.
The reason I use the word ‘complicit’ is that some in the housing world have been rather more than naïve people going meekly along with an externally imposed agenda. Quite a few were actively involved in creating this whole plan. There are of course many honorable exceptions, but over the years I have experienced a considerable number of chief executives and other senior people distancing themselves from social rented housing, travelling away from their associations’ original mission to assist the homeless and people in greatest housing need, becoming obsessed with home ownership and equity stakes, prioritising what they called ‘aspirational’ people, and stigmatising people trapped in ‘welfare dependency’ in a way that would make even Iain Duncan Smith blush. In the words of one housing director, ‘it’s not the homes that need fixing, it’s the people’.
And so they would rather build for shared ownership or even private sale than social renting, even when their business plans allowed for a choice between them. Promises of future cross-subsidy from surpluses – we should make shed loads of cash, then invest it in rented homes, I can remember being told – never quite materialise in the way promised. Just like developers, they don’t want the value of their for sale products diluted by having social housing mixed up with them. They are in awe of ‘the market’ and the magical importance of ‘market rents’ even when it is so blindingly obvious that the market is completely dysfunctional. They have changed the brand and image of their organisations, becoming ‘developers’ and ‘regeneration agencies’ rather than housing associations building homes to meet housing need.
I have heard chief executives complaining about having to house ‘chavs’, objecting to local authority ‘dumping’ of tenants and demanding that landlords should have more power to evict tenants and to end the tenancies of people they feel don’t deserve them. Some even specifically advised the Conservative Party in the development of policies in favour of higher market-related rents and reduced security of tenure, which in turn mutated into the ‘AR’ policy. Too often they seemed obsessed with development, irrespective of what was being developed, and disinterested in existing tenants and housing management or old fashioned concepts like meeting housing need. Strategy was a word they applied to their own organisational objectives and not to the needs of communities.
Be careful what you wish for. The scene was set, the monster was created and then incubated by a 60% reduction in investment in the Coalition’s first spending review. The only way to build any new homes at all was to slash grant for each home and to massively increase rents – in new but also in existing homes. Now housing associations have to live with a product that is almost useless to their poorer tenants in high rent areas, stretches their own resources, and – what madness – costs more in the long term in public expenditure. And yet some of these same chief executives still sit smugly on CIH and NHF platforms telling the world what a wonderful job they’re doing.
If associations had refused to play ball in the first AR round the product would have been dead in the water. Some were just toadies but the depressing fact is that others were getting what they had been seeking for years. I’m not normally a bitter and twisted person, but if I was in charge if Labour wins the next Election, some of these organisations would never see another penny of public money.
So well done Placeshapers and well done SHOUT for helping to change the tone of the debate. The housing industry must stop failing the people.

New York Mayor Bill de Blasio is ‘going big’ on his plans for affordable housing, according to the New York Times. In his 116-page plan launched this week, the new mayor promised to build or keep 200,000 affordable units over the next ten years, trumping previous mayor Bloomberg’s 165,000 units over 12 years. De Blasio intends to invest $8.2 billion of city money, which he thinks will lever in sufficient funds to create over $40bn of investment in total. If it works, the plan will keep 120,000 apartments already let at affordable rents that are in danger of being lost, and create 80,000 more. He announced the programme at a new development site in Brooklyn which, when finished, will let 50% of its apartments at affordable rents.
As Red Brick has pointed out before, New York’s mixed communities are heavily dependent on rents kept low through regulation or subsidy. The new plans are specifically aimed at low-income families – those earning less than $25,000 for a family of four. This is because, of the city’s rent payers, one third spend more than half their income on rents and utility bills, whereas the city’s own guideline maximum is 30% of income. The current problem is that the city is losing more rent-regulated apartments than it builds, and once out of regulation rents go sky high. De Blasio wants to identify neighbourhoods vulnerable to gentrification, and “lock in” affordable rents before it’s too late.
Apart from subsidy, the essence of the de Blasio plan is to permit higher-rise developments providing they meet affordable housing quotas and that the units are guaranteed as affordable forever. This is thought to be risky, as some developers may simply refuse to build if they have to comply with the new norms. However, the president of the influential Real Estate Board of New York said the plan provides “a realistic road map for solutions”, so there is hope that the private sector will co-operate.
The ambition and pace of the plan is exciting given that the new mayor was only elected in November. His focus on very affordable housing is in complete contrast to the Johnson plan for London, whose result has been to push even so-called “affordable” rents up still higher. And as Steve said at the time of de Blasio’s victory, his ideas could be an inspiration for Labour: set an ambitious, well-constructed plan, and go for it soon after the election while your new mandate can help nullify any opposition.
 

There was genuine optimism. But in the years that followed it was all thrown away. Council housing investment tightened following the IMF crisis and its decline accelerated for ideological reasons under Thatcher after 1979. Councils were prevented from municipalising housing and both new build and rehabilitation programmes stalled. The much-heralded ‘third arm’ – housing associations – grew in status but crucially never came close to matching the number of homes that were previously provided by councils. Private enterprise continued to build in parallel with economic cycles. The pattern was set that has lasted since. The hole left by councils was never filled and the housing system could no longer respond to rising housing demand and need. Since that watershed period, we have failed to build enough homes of all types to meet the needs of the population and we have allowed, indeed encouraged, house values (and hence rents) to soar through successive bubbles, making homes increasingly unaffordable.
Although wholly discredited, the theory of ‘trickle down’ still infects housing policy – the belief that building executive homes in Cheshire or Hertfordshire will somehow eventually assist people in housing need in Manchester or London (in reality such additional supply leads to a more rapid rate of household formation before the trickle has got very far). For example, in the debate about building New Towns in the south east, the assumption is still made that somehow this additional general housing supply will benefit those in housing need in London.
We have failed to match the distribution of prices and rents in the housing system to the distribution of incomes. Inequality has grown and so has insecurity: the number of people with very low incomes in the ‘flexible labour market’ with zero hours contracts, casualised labour, irregular self-employment, and part-time work. The correct housing policy response to these changes is that homes need to be cheaper not more expensive.
For thirty years housing policy has suffered from the erroneous analysis that it is more efficient to let markets set rents and then to subsidise the individual household to find somewhere to live. Even worse was the growing belief that social housing rents should be closely linked to whatever the market comes up with. As a consequence, housing benefit has been rising and investment grants falling, to the extraordinary point where 95% of the money put directly into housing by Government is in the form of benefit and only 5% in the form of investment. People on low incomes, in or out of work, are charged increasingly high rents, making them more reliant on housing benefit and creating extraordinarily high marginal tax rates.
A rational housing policy would deliver homes in a way that is consistent with the income distribution and thereby maximises the advantage of working. Only a traditional form of social rented housing offers what is needed to people near the bottom, whether they are in or out of work.
Misguided policies have been compounded by the demonization of benefit recipients, including social tenants. The perceived wisdom that social tenants are ‘subsidised’ and that many of them live the life of Reilly on benefits is as dominant as it is inaccurate: but the prejudice is reinforced by the media, some politicians, and even some in the housing business, every day.
Better public understanding of the real pattern of flows of subsidies, discounts and tax reliefs (economically they are the same) in the housing system would transform the debate. All of the tenures are subsidised. One policy alone, the right to buy, has cost £50bn in discounts over 25 years. New social rented housing receives an initial grant per dwelling to enable it to be built but subsequently receives nothing towards running costs.
Different people draw different conclusions from each part of the patchwork of assistance to housing. But the most important lesson is that the system is expensive and incoherent, badly geared towards meeting primary housing objectives (increasing supply and making homes affordable), and detrimental to the wider economy. The narrative is even more damaging if you take a wider view of property and land taxation as a whole. Not fit for purpose is something of an understatement. In particular, the primary forms of support for home ownership over the past 50 years, from MITR to Help to Buy, have bolstered demand not supply: they have been hugely expensive and largely counter-productive. In renting, we have stopped funding the most efficient and value-for-money sector, social renting, and instead expanded subsidy to the least efficient and lowest value-for-money sector, private renting, a policy change that is now driving a very rapid increase in the cost of housing benefit.
Of course I do not argue that the world of social renting is some perfect nirvana. Many mistakes have been made in social renting over the past 50 years as well. I would name the failure of imagination in urban planning and its inability to create mixed neighbourhoods across the piece, the disaster of system-build and some gross errors made in the design and construction of large estates during the heyday of building in the 60s and 70s. And it is the case that social rented homes have often been badly managed both by councils and housing associations.
But my point is that the model of social rented housing has been tried and tested and it works. It is a wheel waiting to be reinvented. Targeting subsidy at building homes in the first place, with no subsidy for subsequent running costs: this is the most efficient use of resources. The focus is on construction and there are strong multipliers in the wider economy so that the Treasury gets a big slice of its money back. Rents rise over time while borrowing costs flatline, so the pooling of rents allows a cross-subsidy from older properties to newer properties, helping to keep them all affordable. Social landlords can borrow money to build at the best possible rates. Housing Associations get a return on their investment over the lifetime of the loans they take out; councils currently make a surplus on their activities with no general subsidy. Cost-plus rents mean there is a need for housing benefit but at much lower levels than that required for private rented homes.
So what’s not to like about social renting?
Neo-liberals assert that markets lead to an optimal use of resources. Economic theory would tell us that high prices lead to more homes being provided so that an equilibrium price is achieved over time to the satisfaction of those providing and those buying or renting the homes. And the evidence is?
It is a particular nonsense to have a dysfunctional housing market, inflated by demand subsidies, and then to require social rents to be tied to it, whether at 40% or 80%. Once council housing started to make a profit, people hostile to any form of public housing provision switched from complaining about cash subsidies to claiming that it was subsidised simply because it was sub-market. Of course it is fair enough for economists to identify the ‘economic subsidy’ or ‘opportunity cost’ involved – ie how much you could get for it if you sold it in the market instead and applied the money to some other activity – but it is unrelated to the cost of provision. In the real economy, where there are tens of thousands of market distortions caused by taxes, tax reliefs, imperfect competition, and even geography, the notion of economic subsidy makes little sense. Staying in hospital, for free, involves a taxpayer subsidy for the cost of treatment and the cost of occupying a hospital bed. No-one goes to BMI Healthcare, asks how much they would charge, and then says the subsidy for an NHS bed is the difference between free and private fee levels.
Social rents should be linked to the net cost of provision of the stock as a whole adjusted by local or regional variations in incomes. Hence rents in London would be higher than rents in Newcastle, which everyone would agree is fair.
Labour’s social rent policy, introduced in 2001, followed a review which concluded that social rent levels were set at broadly the right levels but needed to rise gradually over time (in those days incomes tended to rise faster than prices) to help fund investment. The outcome was too formulaic and centralised, with little local flexibility, but was quite well accepted, predictable and stable.
Since 2010 rent policy has gone haywire, but the underlying principle is that social rents will be much higher than in the past. A rapidly reducing proportion of ‘social housing’ lettings have been for ‘social rent’ under Labour’s policy and a rapidly increasing proportion have been tied to irrational and volatile market rents through the Coalition’s ‘Affordable Rent’ regime. Actual rents vary between 50% and 80% of the local market rate as determined in negotiations between providers (when bidding for contracts) and the Homes and Communities Agency or the London Mayor. As the investment programme was cut by 60% during George Osborne’s first spending review, it was always underfunded, so providers are required to help fund new build by selling some existing property and ‘converting’ a proportion of their existing social rented homes to ‘Affordable Rent’ levels when they are re-let. Councils building new council homes are charging a variety of rents to ensure that schemes are viable. The picture now is chaotic. A new ‘Affordable Rent’ tenant living next door to a social rent tenant might be paying as much as twice the rent, with less security of tenure.
The central argument deployed against an expansion of social renting is that it would require additional borrowing to fund a larger grant programme and that this cannot be afforded. Currently the programme is around £1.5 bn a year: chickenfeed in public expenditure terms, almost within the margin of error for housing benefit. Builders buy materials and newly employed workers spend their incomes. Tax revenues rise and benefit payments fall. Homes are let at rents that might be half the price of private lets, saving hugely on housing benefit in every future year. The net cost to the Treasury is significantly below the gross cost.
The new campaign group, SHOUT (Social Housing Under Threat), in its submission to the Lyons Commission, argued that half of Labour’s proposed target of 200,000 homes a year by 2020 should be homes for social rent. They estimate that the cost of these proposals would rise to £6bn a year by 2020 (an increase of £4.5 bn over current spending plans). A proportion of the cost would be borne by the private sector through planning gain and some of the grant could come in the form of free public land. There would be savings in other programmes, such as health. It would be an ideal form of investment because there are no additional revenue costs – management, maintenance, renewal and debt servicing would be paid for out of rents.
This kind of programme is achievable if housing is a genuine political priority. Additional spending on grant would clearly be an extra public spending commitment. But the headline cost is, according to SHOUT, “well under 1 per cent of planned 2013-14 spending; the equivalent of less than 1p on income tax, or just 13 days of welfare spending; and less than 15% of the planned cost of HS2.“
To achieve a new social rented programme of this size, changes will be needed to how both local authorities and housing associations operate. In the council sector there is considerable capacity for additional prudential borrowing within business plans following the reform of the housing revenue account subsidy system. Despite being a self-financed trading activity, borrowing by councils is artificially constrained by Treasury conventions which are different in the UK compared to the rest of Europe. By switching to international measures of public borrowing, it is estimated that councils could build an additional 12,000 homes.
For housing association programmes, additional private borrowing to match additional grant is already ‘off balance sheet’ and does not add to public borrowing. The issue here is a different one. It is hard to generalise because it is a more diverse sector than ever, but too many large housing associations have lost their way and have actively pursued a path away from social renting. They see themselves as large development and regeneration companies. They are not accountable and have lost sight of their mission to provide homes for the homeless and badly housed. Of course their activities contribute to the overall supply of housing but they detract from what should be their core product – social rented housing. Their mission should be rebooted.
Even if we begin to build many more social rented homes again, the gap between supply and demand will require a system of rationing and allocation. The question still has to be asked ‘who is social housing for?’
The mix of tenants living in social housing has changed over the years. In the 1950s the rents of high quality single occupation new council homes were often higher than in the multi-occupied poor quality private rented sector, and were out of reach of the poorest. Many families were deliberately excluded by devices such as assessing ‘housekeeping standards’. Council housing became focused on meeting the needs of the ‘respectable’ skilled and semi-skilled working classes rather than the unskilled. Homes were often allocated against unclear and unpublished criteria and frequently involved councillors making individual letting decisions. Judgemental attitudes, discrimination and favouritism were common. It was a long struggle to move to transparent housing allocations policies based on assessments of housing need, with no means test, with individual lettings decisions made objectively against public criteria by officers.
It is commonplace to be told that ‘the problem’ with modern social housing is that it is let on the basis of housing need and that too many poor and vulnerable people have been congregated together on ‘sink estates’. Thatcher pursued a deliberate policy of residualisation and a shift towards the American model of a small welfare housing sector, turning off the supply tap and selling hundreds of thousands of the best homes to better-off tenants. No-one should be surprised that over time this obligated the sector to restrict access to the most desperate applicants. In my view it was right, and still is right, to prioritise housing allocations to those objectively assessed as being in the greatest housing need, and the length of time they have been in need, and not on income or employment or community contribution or other factors. In the circumstances of a sector forced into decline it was right to focus resources in this way.
It was also inevitable that residualisation would have implications for housing management down the track. In my view many landlords failed to identify the challenge or to rise to it. Better and more intensive management was required but blaming the people was easier than fixing the problem. It would be wrong to respond to difficult management challenges by housing even fewer people in the direst housing need, just as it is wrong to be reverting to the 1960s by excluding homeless families from social housing by recycling them back into insecure private renting. It is a worthy aspiration to want social housing to house a wider cross-section of society, but it is a pipedream in the current circumstances.
In this short essay I hope to have conveyed the view that social rented housing has been a huge factor in the improvement in housing conditions in our country and in breaking the automatic link between poverty and bad housing. Over the last 35 years it has had the life squeezed slowly out of it by ideology and bad policy. But it can be reinvented. And the benefits of doing so could be great.
Steve Hilditch
May 2014