Thursday, 21 August 2014

Affordable rent threatens house building goal

The London mayor’s homes target for 2015 may have to be extended as landlords struggle to build homes through the affordable rent model, a report out today says.

The London Assembly’s housing and regeneration committee published a paper today saying landlords faced various risks with the affordable rent model.

One of the concerns is the programme will ‘deliver a reduced level of social housing, since housing associations are not able to develop housing at more traditional social rent levels’.

Mayor Boris Johnson has pledged to build 17,000 affordable rented homes by 2015 but the committee points out there has been a ‘slow start’ to this.

Housing providers achieved 4,000 starts on site between the start of the programme in April 2011 and September, the report says. Although it notes a speeding up of progress in the six months to April 2013 with 8,500 starts, it also states ‘a “start” could just be the beginning of demolition work’.

The committee estimates to hit the current target this sustained level of activity would have to continue until September this year. But it also says that ‘it may not be in housing associations’ interests to start developments that may be at risk of overunning’ because the affordable homes programme requires housing schemes to be completed by March 2015. If they are not, the developers of the affordable homes will be in breach of their contracts and outstanding grants could be lost.

The report also identifies the risk to landlords of not being certain whether they will be able to collect the higher rents, particularly with the changes to welfare reform.

The affordable rent model was announced as part of the 2010 spending review and allows housing associations to charge rents up to 80 per cent of market rent level in a local area.  

‘New tenants of affordable rent houses may find themselves under increased financial strain as a result, particularly if they have been used to lower social rents in the past,’ the report says. It suggests this could lead to an increase in tenant arrears. ‘The model wil require the sector to take on more debt and increase the diversity of housing products on offer,’ the commitee says. ‘These risks will be compounded by increased uncertainty to housing association income streams as a result of changes to the welfare system.’

It adds: ‘If the result is higher borrowing costs, fewer houses than expected will be built.’

The committee is calling for secure, long-term funding for housing associations to build homes.

Chair Len Duvall said: ‘Across the board Londoners are struggling with spiralling rents and house prices that seem to be increasingly out of reach for even better-off Londoners. Housing associations have got to be part of the answer, but over the last 15 years the number of families on housing waiting lists has almost doubled to 380,000.

‘London’s housing associations have a proud history of providing good quality homes for people on low incomes and those who need specialist accommodation, but without a secure long-term source of funding, it is hard to see how they will be able to meet the ever-increasing demand.’

Earlier this month the mayor called the shortage of affordable housing in the capital ‘perhaps the gravest crisis the city faces’ in his vision for the future, arguing that a London rental standard should be brought in to offer certainty to landlords and tenants to combat ‘punishingly high’ rents.

Readers' comments (14)

  • John Moss

    Perhaps if all Housing Associations adopted income related rents, so Len's mate Bob Crow and others like him with high incomes paid market rents, then the cross subsidy from them would provide the support needed to provide homes at below market rents to those in genuine need - unlike Crow.

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  • michael barratt

    The problem with affordable rents is that they are neither 'fish nor fowl', neither one thing or the other and in reality for most of us they are unaffordable.

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  • If in 15 years the waiting list has increased to 38000 in London alone it begs the question how many of these people are UK born citizens, how many are in work, and if that is the London number what is it nationwide? How can we continue to provide homes at so low rents when people who are in work can afford to pay more, AND agree John Moss income related rents are acceptable but we have to be real and can no longer allow such low rents to those who can afford to pay more.

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  • "Affordable Rent" is eroding social housing and is not affordable to the very people - those on minimum wage - that HA properties are let to. This is a good description of the situation. "Affordable Rent" is not working:

    http://www.guardian.co.uk/society/davehillblog/2013/jun/24/future-of-london-affordable-rent-report

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  • Housing People Partnerships

    The 2011 figures aren't really connected with the current affordable rent model as the majority if not all would be based on the old program.

    I seem to remember housing providers achieved circa 450 starts on site between April 2012 and September 2012. I recall being shocked by the decline; a 97% fall from the same period in the previous year. Also something like 56 starts on site in London during that period.

    I just don't see the point of mentioning the 2011 figures in the context of this article. As a point of reference yes but as a start to the 2011-2015 program no.

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  • It seems sadly inevitable that London especially will soon be devoid of non working families reliant on welfare.

    No doubt other large cities will see a similar exodus - as LHA is increasing at below inflation - yet even social rents are increasing at well above inflation.

    Looking at national average increase in social rents from 1979 it was at 8% cagr - and from 1983 6.5% cagr - having doubled in 79 - 83 period.

    Tomorrow's spending review will no doubt set the parameters for increases over next decade.

    From 1997 to date there was more than a doubling - with wages only increased by around 60% over that 16 year period.

    In short there has been a progressive move away from truly affordable social rents over a third of a century - and with much of the Decent Homes work still to pay for - it is challenging to envisage any slowing of the rate of increase.

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  • Julie - From memory there are 1.8 million families nationally officially on SRS waiting lists.

    Not sure how frequently/robustly these lists are reviewed by the various LAs - but a good number of those families I guess would have "made their own arrangements".

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  • Realist, Surrey; The most expensive part of the welfare bill, after pensions, is 'working tax credits' it's not the unemployed that are strangling the system, it's the people on low wages! It's clear to everyone except government that the problem lies with 1, High rents and 2, Low Wages! Taxpayers need to realise that they are subsidising company profits!

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  • And most HB goes to unregulated, unrestrained private landlords. It is not the claimants getting the money.

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  • Bill - I have said this to friends for years - ie that Tax Credits are a subsidy for low wages.

    TCs were a good idea at outset - in that the unemployed were persuaded back in to work - to earn at least some of their total income - but have morphed in to something else entirely over the years.

    It would be interesting if one could model likely outcomes if TC s were deleted...

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