Posted by: Adrian Waite14/03/2011
Traditionally, intermediate rent housing (at 80 per of market rent) has been developed for key workers who are unable to afford to buy or rent a home in high value areas; rather than for the groups that have traditionally rented social housing. It is likely that this will continue to be the case with the new intermediate housing predominantly being built in high value areas and rented to working households with relatively modest means.
Two distinct tenures will therefore develop for two different groups. Increased numbers of intermediate homes will be provided for working households with modest means while the stock of social housing will continue to decline because of right to buy sales and the re-letting of homes at intermediate rents.
The fact that intermediate rents and social rents are already similar in low value areas means that the new policy will not bring forward any additional homes in these low value areas.
In high value areas – especially London – there is a significant difference between social and intermediate rent and significant demand for intermediate rent homes. It is likely that the policy will have its most significant effects in London and other high value areas in bringing forward more intermediate homes but at the same time reducing the stock of social housing. There are fears that this could lead to people who need social housing having to move out of high value areas into low value areas. This would include a gradual exodus of social tenants from inner London.
The programme is said to be open to local authorities as well as housing associations. However, the government’s self-financing proposals for local authorities include the introduction of a borrowing cap that would effectively prevent local authorities from undertaking any new borrowing and therefore prevent them from doing any new build. The headroom that the previous government intended to create for local authorities to fund new development by using a 7 per cent discount rate in calculating opening debt with self financing will now not be created as the present government has decided to use a 6.5 per cent discount rate.
There are those in the sector who consider that the provision of additional social homes should be a higher priority than the provision of additional intermediate homes. This is certainly the view of elected members in a number of authorities and the view of board members in a number of housing associations. They may wish to look at ways of developing social housing without grant. One way of doing this would be to develop to building regulation standards rather than to Homes and Communities Agency standards.
A housing association chief executive recently told me that he regarded the Homes and Communities Agency standard as adding significantly to costs while providing nothing that would be valued by tenants. In contrast a civil servant at Communities and Local Government told me that developing at building regulation standards would be regarded by government as a backward step. It will be interesting to follow developments here.
Finally – will the policy deliver the 150,000 new homes that the government would like to see? Many in the sector have suggested that with the banks still unwilling to lend at favourable terms this will not be the case.
Adrian Waite is managing director of management consultancy AWICS and a member of Inside Housing’s expert panel covering management, finance and strategy. A full briefing on affordable rent is available on his website
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