In London and the south east private sector rents can be as much as four times those charged for social housing. People on low incomes who have not managed to access the very limited number of social housing tenancies are, through their taxes, subsidising the lucky few who have.
Subsidised rents can also limit mobility and choice. If you have a tenancy for life and want to move under the current system, you either have the very difficult task of finding another social rented property or you have to make the big leap to paying private rent or buying. For many, this feels like no choice at all and they are effectively prevented from moving.
A fairer and more sensible approach would be to means test rent subsidy as we do other parts of our social safety net, such as housing benefit or income support.
Charging an intermediate or market rent for those who have found well-paid work would free up significant resources which could be used to build more social housing and upgrade existing stock.
It would also make it easier for social housing tenants in work to move, if they want to, because it would make the transition to renting at market levels gradual and manageable.
More social housing tenants may also choose to buy a property - once paying market rent, buying starts to seem an achievable option.
I would positively encourage housing association tenants to buy the home they are renting, in part or in full, so long as they pay near market price and that money is available to build more affordable housing. This helps to achieve strong, balanced communities.
What I am proposing does not need be complicated or expensive to administer. You could have three levels of rent - social, intermediate and market - which a household could move between depending on their income. Tenure remains secure, but rent varies over time according to ability to pay.
To keep things simple, households could be assessed by their landlord when they cease to be eligible for housing benefit and then at regular intervals, say every three years.
This challenges one of the sacred cows of social housing. But the financial crisis, and the inevitable squeeze on public spending, demands that the housing sector, like every other, asks hard questions about how we can best use our limited resources.
Subsidised tenancies for life have never made sense and the case for ending them is stronger now than it has ever been.
Karen Wilson is chief executive of Origin Housing Group
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Readers' comments (27)
Jester | 30/10/2009 8:14 am
Spot on!! I've been arguing this type if approach for some time!!
I'm used to seeing people coming to pay their social rent and turning up in BMWs and Mercedes' - this can't be right can it!?
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Joe Halewood | 30/10/2009 12:59 pm
These nebulous proposals are based on a superficially valid premise – after all why should high wage earners receive significantly subsidised housing? Yet this assumes there are many high wage earners residing in social housing. So can this be known? The simple fact is we don’t know.
This very cleverly drafted blog is the highest level of sophistry and the highest level of politically inspired dogma I have seen for a long time. Scratch the surface however and it all falls apart - including the fact it seeks to increase Origin Housing Groups rental income stream by about 50% as well - cleverly hidden.
What this means:-
KW proposes a mean test but only every 3 years. What if you lose your job in that time? The proposals make no room for this and this 3 year test is part of the simple administration claimed for the proposals. Yet 3 year tests can’t make subsidised housing the same as all other benefits that are mean tested – these change on circumstances like income whether redundancy or promotion. So to bring social housing subsidy in line with all other benefits would not be a simple and cheap administration process.
The major drawback in these proposals is in her first sentence when it states “...private sector rents can be as much as four times those charged for social housing.” Yes they can. However, the key purpose of these proposals is that if you are working the tenant should be means tested and charged a higher rent. This higher rent is either market rent (or 4 times higher) or an intermediate rent – somewhere between the two so say twice the rent.
If you wish to create a huge disincentive to finding or maintaining employment you couldn’t have devised a better proposal that this to do that.
This proposal boils down to a simple equation - find a job and we will double or quadruple your rent!
The vision here is that if a tenant’s rent is doubled or quadrupled they will want to buy a property rather than continue to rent. How naive (and politically motivated) is that assumption? Tenants will not seek work at all if that is the outcome of finding a job or even continuing in their existing one
Or another even simpler equation – social housing tenant equals unemployed or workshy. Thereby the only people accommodated in social housing will be the unemployed.
These proposals – that I restate are carefully drafted with a very sensible statement as the premise – are the death of social housing if implemented as social housing very quickly becomes the housing of no choice never mind last choice. The current poor reputation of social housing would fall dramatically and would be irrecoverable.
What foolish tenant would want to buy their property on a council estate if these proposals ever saw the light of day? Very few, if any at all. Yet this is a vision within these proposals that clearly would not come to pass. Those following recent debates will see the strong Conservative party influence here, more RTB and the much ridiculed ‘right to move.’
A bold and radical vision... is no doubt the perception sought by Karen Wilson personally and by Origin Housing Group else why would they draft this news release on such an emotive topic. Unfortunately the correct vision and outcome from these proposals is the death of social housing and the ridicule of Karen Wilson and Origin Housing group as dogmatic Conservative Party puppets.
Oh the rental stream - 70% of tenants on HB pay same. 20% working paying at intermediate rate (rent doubled) and 10% at market rate (quadrupled) This means the rental stream would be 1.5 times that of current to Origin Housing Group.
Nice try Karen Wilson - but do you believe your tenants are so gullible as not to see this cleverly drafted nonsense for what it really is?
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michaelbarratt | 30/10/2009 1:21 pm
Not unsurprisingly Karen Wilson would tout the end of council tenants’ secure tenancies and alternately promoting her vision of private rentals. Ms Wilson is after all the Chief Executive of the private sector Origin Group, comprising SPH Housing, Griffin Homes and Origin Properties.
Once upon a time in Britain, ‘a man’s home (and woman’s) was his castle’. It would seem that such an aspiration is intended in the future to be the aspiration of only the middle and upper classes and the rest can go to hell if they marginally improve their financial circumstances. What Ms Wilson and her breed appear to want, is to remove tenants rights of security and in place substitute the all powerful benign kindness and discretion of landlord in deciding who comes and who goes.
The property ladder is increasingly an unviable option for even the moderately well paid because of the price of homes has outstripped earning capacity. There is a lot of talk about fuel poverty yet rental/mortgage poverty is no less a problem with too many families’ plunged into dire straights because of the financial burden of private sector rentals and mortgages.
Ever increasing population levels combined with a lack of land and escalating building costs has necessitated in my view the housing sector should be considered in the future as a strategically important National asset too important to be run along the lines of a casino.
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St Alban | 30/10/2009 3:59 pm
The means testing of rent subsidy, as argued, seems sensible. What it fails to do is take into account the holistic view.
A stated aim of housing policy for many years has been to achieve mixed communities. In it's pure sense therefore, mixed financial demographics would be included in this. Any measure that moves away from mixed communities (and to the failed sink estate philosophy) must therefore be viewed with caution.
I cut my housing teeth leading a regeneration campaign on a notorious new town 'hell hole' which had 80% benefit dependency. The fact that some of the tenants were also company directors was relevant to the success in achieving the award of £45M for redevelopment. Whilst tenants from all backgrounds came together to achieve change for themselves, the financial ability to assist the campaign of these few 'well off' social tenants was crucial. Those same 'well off' tenants still live on the estate. Indeed through a rotating decant the entire estate population was preserved. The fact that the benefit demographic now matches the national average is also an indicator of the power of mixed communities to lift people out of poverty, as well as decent homes promote community generation.
Yes supply outstrips supply, but limiting access further risks further imbalance in communities and further social tensions. Looking for quick fix legislative solutions rarely produces sustainable outcomes. The housing sector needs brave and tenacious leaders prepared to fight for longer term solutions, and not knee-jerks.
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Eve Walker | 30/10/2009 7:25 pm
OMG how arrogant!! Can't you see what an excellent landlord social housing providers are and why people wish to remain so? They give people security and a rent which is affordable. As other people have stated, there is insufficient evidence supporting the view that they are many affluent individuals living in social housing anyway. Most are glad to have a home in an area where they know they can remain, in touch with neighbours and work colleagues. IF anyone in social housing become so wealthy, I would suggest that these people would endeavour to buy their own home anyway. But given that first time buyers need at least 5 times their annual salary to even consider purchasing, this is at the moment far out of the reach of 95% of the population - be they in private or social housing. I do agree however with the last part of the statement that 'others on lower incomes are denied affordable housing... this is NOT because people are selfish, which is the general gist of what is being said - it is because it is the only truly affordable and fair housing provision in this country. Private renting is fine for some, but the majority of the newly renting private tenants(many of whom are ex social housing tenants who have fallen into difficulties for a wealth of social reasons) are VERY unhappy and realise that they are in a complete and utter poverty trap - with no security - a 'temporary' house, together with lots of 'temporary' - i.e. agency, work is what is causing problems in this country. STOP this attack on social tenants and get on with what is really needed - more funding for social housing - NOT more HB payments to private home owners - who are quite frankly, the only people enjoying this current credit crunch.Why are we so keen to knock people who live happily and pay their rent, yet ignore the hundreds of private landlords who serve S21 notices with no thought for their tenants - in addition, raise rent levels to Local Housing Allowance at the very least, again ripping of the British tax payer... no way are the houses currently being let by Estate Agents worth anywhere near the rates that they are achieving - and why oh why would a person in a social rented house want to exchange their secure tenancy to live on a month by month basis. I dearly hope I am NEVER in a position where I have to rent privately.
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Jasper | 30/10/2009 7:38 pm
Finally, someone has hit the nail on the head. For those who are quick to dismiss the idea I would suggest you re-read the article again. Although it can be argued how many tenants living in social housing are on a medium or high wage, the fact is, why should those whose finaincial circumstances change for the better still benefit from subsidised rent? Why should a tenant who now earns between £25,000 or more p.a. continue to benefit from subsidized rent just becuase they have a 'secure tenanc or assured tenancy? It is not as some has suggested a deterrent for tenants to find work but it is about tenants contributing to society and paying there way just like everyone else. The proposals does not mean the tenants have to move out of their home but simply pay more in proportion to their salary earned i.e. intermediate rent.
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Dave Hollins | 31/10/2009 0:27 am
How extraordinary it is that the campaign to remove security from tenants and to push rents to market levels is led by the most overpaid people in our sector - housing association chief executives. Karen Wilson joins a little club of people, like Kate Davies and David Cowan, who live cosy lives so far removed from the lives of tenants that they have lost all sense of proportion.
The number of tenants who move into a higher rate tax bracket - which would be needed to pay these kinds of rents - is so minute that it is irrelevant to policy and to the finances of a large housing association, yet this argument is trooped out again and again to discredit social renting. Even then it makes no sense - they argue that there are too many social tenants on benefit yet want to remove anybody who isn't. And have they not heard of the credit crunch - a global collapse started by people like them insisting that poor people should take on massive loans they can't afford to repay to become home owners. Confidence in homeownership as a tenure has collapsed and demand for social rented homes has surged.
Housing association chief executives should focus on building a few more homes and improving their often extremely poor services - and leave the neo-Con politics to the Stephen Greenhalghs of this world.
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Len White | 31/10/2009 8:46 am
Karen Wilson says: "People on low incomes who have not managed to access the very limited number of social housing tenancies are, through their taxes, subsidising the lucky few who have."
What subsidy through taxes? Council housing receives no subsidy from taxes, the system breaks even or even shows a small surplus nationally and is projected to run into large surpluses in the future.
Housing associations receive a grant from government for new development and there is some internal cross-funding also for new development. Because new housing is an expensive investment, the alternative would be not to have new development of affordable homes at all, which would be a stupid policy. All of the homes being built will become hugely more valuable over the years, adding far more to the balance sheet than the liability of the original borrowing, and they will also show a huge operating surplus over the 30 year financing period. Housing association tenants receive no revenue subsidies.
So there is no 'subsidy from taxes', just a little (actually very little in real economic terms) investment in adding to the housing stock, which pays for itself in the long run.
Like so many others, Karen confuses 'economic subsidy' - ie the opportunity cost or difference between real rents and the market rent that could be charged - and a subsidy from taxes, which is a flow of real money and an entirely different concept.
There are thousands of 'economic subsidies' in the economy, this is what tax policy is all about - encouraging good activities (like affordable housebuilding) and discouraging bad ones (like smoking). The biggest economic subsidy in housing is probably tax reliefs on home ownership, but I never hear people like Karen complaining about that.
And most high earners like Karen get a huge economic subsidy through higher rate tax relief on their pension - despite being well off, she gets far more economic subsidy than any tenant is ever going to get on their home, despite being on low incomes. She will be rich for the rest of her life and tenants will be poorer to keep her there. Perhaps, as she feels so strongly about these issues, she will pay it back.
And before Karen says 'housng benefit' - that is an income subsidy, paid to people in all rented tenures who can't afford their housing costs, and increasingly available to home owners through the equivalent support for mortgage interest (ISMI), and cannot be regarded as a subsidy to social housing.
The whole basis of Karen's comment is simply wrong, it is actually based on Daily Mail-style prejudices about social housing and people on low incomes and what 'we' should do to 'them'. It has no foundation whatsoever in economics, let alone social justice.
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T Miles | 01/11/2009 5:41 pm
I agree with Karen, it isn't right that the privileged minority enjoy lifelong subsidy from the vast majority when their ability to pay changes. Means testing, although unpleasant and difficult to administer, is long overdue.
The welfare state was designed to be a 'safety net' in which to bounce into and out of; a perverse incentive exists to stay in social rented housing whilst the tax payer tops up the earnings of a tenant whose circumstances have changed. The rationale behind many of the principles on which housing policy was formed such as Security of Tenure and No rent reviews are grossly unfair to the upcoming generation who all too often find themselves shut out of both Social Housing and Home Ownership because of a lack of turnover in stock. In areas of London private rent is nearly 3 to 4 times the level of social rent, Islington is a good example of this. Private 2Bed flat rent 1200 PCM, yet the social housing across the road, which is bigger and has a garden, is let at nearer £300 PCM. Meaning the individual who occupies this house will receive a subsidy of £900 per month no matter what their income. Surely this is just plain wrong!
Karen is right to ask the question, many of these inherited policies are deeply political and grossly inequitable and would not stand up to scrutiny and have no political mandate to continue. They were policies dreamt up in a different time and era and were voted in by an electorate decades ago, often as short term solutions to the crisis of the day. The Housing agenda needs strong leadership to review its goals, part of this exercise will inevitably involve reviewing the piecemeal evolution of policy that has expanded with limited focus or review. This is definitely one area where tax payers’ money could be put to use in a much smarter way.
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Joe Halewood | 02/11/2009 11:18 am
Len provides a very knowledgable contribution to this debate and even exposes the seemingly correct premise that Karen Wilson employs to make her superficial points.
That level of knowledge of the tax system is very welcome.
In fact he turns the whole thing around and shows it is the rich and very rich who receive more tax breaks, far more tax breaks than the 'breadline' tenant. And in terms of pensions etc, the richer you are the more tax breaks you receive. it seems.
So not only does this cleverly drafted article expose the nonsense of the proposal it shows that the premise for it all is hypocritical. Nice to know that some of Londons HAs are run be people of such duplicity who clearly wish to pull the wool over the eyes of their tenants (while attempting a 50% increase in their income!)
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