The power of choice

The traditional model of allocating social housing used to be to assign the next available house to the person with the greatest need for a home of that particular size, irrespective of whether they liked the house or not.

Under the choice-based lettings system social housing agencies advertise all available houses to people near the top of the waiting list. Individuals then ‘bid’ for the properties they like. If more than one person bids for a house, it is generally given to the person who is defined as having the greatest need, with some consideration of the length of time they have been on the waiting list.

Choice-based lettings have been an unambiguous success for both tenant and landlord. Unsurprisingly, applicants prefer the system. The ability to choose a property that suits their individual needs and preferences means that there is less turnover in the first year, as tenants are less likely to ask to be rehoused.

This is not only good for the tenant but also for the landlord, as it reduces their costs. In addition, the number of applicants for traditionally hard-to-let properties has increased as people realise they are more likely to get housed if they bid for less popular properties.

This is part of the reason why choice-based lettings have reduced the time that it takes to let a typical property once it becomes vacant.

As the government noted: ‘Choice-based lettings represents a radical departure in the traditionally rather paternalistic world of social housing.

Although it implies some transfer of power to the customer, the choice-based lettings concept has caught the imagination of many housing staff . It has been embraced by numerous landlords as symbolising a commitment to modernisation.’ Although choice-based lettings systems are welcome, the extent of the choice offered to tenants is extremely restricted. Furthermore, once the choice has been made the tenant cannot choose again as, or if, their needs change.

In addition, since most of the people currently living in social housing were allocated their houses prior to the introduction of the system, only a tiny proportion of the current stock of social housing tenants were given any choice as to the property in which they live.

Given its popularity, and given the savings that choice-based lettings offer, it is sensible to think about how to expand the system.

The obvious way to do this is to include existing residents. Some, although not all, social housing tenants would like to move. The question is how to include them in the system of choice-based lettings, and more particularly how to decide the relative priority of current tenants and those on the waiting list if both people bid for a particular house.

Clearly, if the only things taken into account is the degree of need and the duration on the waiting list, then an existing council tenant is unlikely to ever get to move. Instead, we need to be aware that if a current tenant moves, it creates a new choice for someone on the waiting list: the house that tenant has left behind.

Since people’s preferences are heterogeneous, there is no reason to assume that the house that has been vacated is worse than a house to which the existing tenant moves.

Indeed, if someone on the waiting list prefers the existing tenant’s house to those which are currently vacant, and if the current tenant prefers one of the houses currently vacant, then we have an obvious potential for gain: the person on the waiting list can move into the occupied house, and that occupier moves into a house that is vacant. Everybody is happier than they would be under the current version of choice-based lettings.

That suggests the following process: all current tenants would be allowed to advertise their property, using the choice-based letting system available locally. At that point they would be allowed to view vacant properties, not to bid for them.

They would be allowed to bid for the vacant properties when someone currently on the waiting list bids for their property. The tenant would then be awarded the degree of priority of the person who made a bid for their house.

This system makes sense. If your house is desirable to someone who is in pressing need and at the top of the waiting list, it is sensible to allow you a wide range of choice in order for the person in desperate need to be allocated your house. In contrast, if your house is desirable only to people whose need for social housing is relatively low, it makes sense to restrict your choice to properties that are hard to let.

Such a change would be relatively easy to implement but would have powerful and far-reaching effects, increasing the range of choice available to both existing tenants and those entering the sector. Let us hope that it will be embraced by landlords committed to modernisation.

Dr Tim Leunig is an academic in the department of economic history at the London School of Economics

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