All posts tagged: affordable rents
“You don’t know what you’ve got till it’s gone”, sang Joni Mitchell.
The creeping privatisation of social housing continues, but few people are noticing. One person who is, Steve Hilditch at Red Brick, has produced an interesting update on the so called “affordable rents” programme which, he claims, is “sucking the life out of social housing in London”. He reveals that five social housing properties are being converted to affordable rents for every property built. As he points out, “these new tenants are even more reliant on housing benefit. Not only have social rented homes been hijacked but also the pain will be felt through increased housing benefit payments for many years to come.”
For London, at least, it seems that every pound invested in the “affordable rents” programme is going to cost the taxpayer significantly more on the housing benefit bill, something that was completely ignored iin the CLG’s impact assessment. The CRS settlement suggests that the new average grant level for each “affordable home” will be £20,000, yet the average “affordable” rent in London will be £180 a week, leading to an HB bill of £9,360 a year for tenants on full benefit. So after just two years the the tax payer will be shelling out more in housing benefit than the initial up-front grant. Every year and for ever. As Steve Hilditch also points out, from 2015 for every £1 spent on grant, (administered by a large bureacracy - the HCA), the government will spend £20 on housing benefit. This is the economics of the asylum. Where is Margaret Hodge when you need her? It’s yet another brick removed from the wall of a sensible housing subsidy system.
One of my first jobs in Camden way back in 1980 was working as a tenant liaison officer, dealing with in-situ improvement works to blocks in King’s Cross and Camden Town. I dealt with many single tenants living in one-bed flats who were paying a rent of around £10 a week. That would be £36 a week today if rents had increased in line with general price inflation. But the actual rent of a one-bed council flat in Camden is now around £110 a week, so roughly three times general inflation. Nearly all the working-age tenants I dealt with were in work. I remember one man who worked as a gallery attendant in the National Gallery. The average gross salary in 1980 was £6,000 so his rent would have been around 10 percent of his salary, leaving him 90 percent of his wages to spend on other things, rather than wasting it on rent. Today someone in a one bed flat in Camden would have to be earning at least £66,000 to be paying 9 percent of his or her salary in rent.
Some of you may recall Sir George Young, the housing minister, in 1991, saying “housing benefit will take the strain”. It certainly has. Back in 1970 the housing support bill, (the equivalent of today’s Housing Benefit budget) was £22 million. That would be £288 million in today’s money, so the actual housing benefit bill, at £23 billion, is 80 times greater than it was in 1970.
In economic terms, Housing Benefit is a classic demand-side subsidy. Like Help to Buy, it does not boost supply;instead it allows rents to rise to the level of the subsidy, so it is inherently inflationary. It allows private landlords to milk the public purse and it allows affordable housing providers the chance to become lazy, as they receive a guaranteed government-set rent with very little effort. It also means that one government department (DWP) has had to pay for decisions made by another (CLG). Back in 1980 around 80 percent of housing subsidy went to bricks and mortar and 10 percent was personal. Today the ratio is 5 percent bricks and mortar and 95 percent personal.
Going back to 1946, the subsidy for council house building was £22 per house per year for 60 years – the Treasury contributed around 75 percent and councils put in 25 percent. Even allowing for inflation that subsidy would now be a tiny fraction of the value of the stock. Yet by switching it to rents, it becomes a burden on the taxpayer in perpetuity. Of course, the rental income for landlords would have been less if this switch had not taken place, but then their costs, particularly loan payments, would also have been less. There is a also a good chance that the sector would be less residualised than it is now because our tenants would be less reliant upon benefits to make ends meet. There would not exist the same problems of worklessness and all the social problems that go with it.
I think the history books will judge this switch of subsidy from property to people to be one of the most stupid policies of any government in any period, ever.
Do you remember this iconic Inside Housing front-page headline on the 29th October 2010, announcing the launch of the government’s “affordable rent programme?
Continuing on the same theme, I don’t like to say I told you so, but the news that the overall benefit cap could force housing associations in the south-east to stop building “affordable” family homes came as no surprise to me.
In July last year I wrote this about the affordable rents’ programme:
“Our sector appears to have swallowed the affordable rent canard hook, line and sinker. Admittedly it is the only game in town, but are some associations really so desperate for growth at all costs that they are willing to sell themselves for a few extra units? …. There is a danger that housing providers are about to fall into a trap that will further stigmatise the sector, similar to the trap we fell into thirty years’ ago when we complied with a purist needs-based approach to allocations, shutting the door upon large sections of the working working-class and causing the sector to become residualised.”
The way that the overall benefits cap works is that income comes first and rent comes last. So, according to figures provided by the CIH, an out-of-work family with 4 children will receive JSA, child benefit, child credits and council tax benefit of £397 a week, leaving just £103 a week for the rent to keep them within the £500 overall cap. I can’t imagine many housing associations in the south east being able to provide an 80 percent of market rent “affordable” 3-bed property, let alone a 4-bed, for £103 a week or less. A family in this situation paying more than £103 a week in rent will therefore have two choices – either they use their income to top up their rent (thus making themselves even poorer), or they move to cheaper accommodation.
I must say, I’m surprised that the Equality and Human Rights Commission hasn’t taken up this issue. The fact that the cap blatantly discriminates against larger families must surely have some race or equalities implications, I would have thought?
But this conundrum is just part of a wider squeeze on social housing. We seem to be only belatedly waking up to the fact that this government views our sector with disdain. It’s great that several prominent chief executives have recently gone public with a robust rebuttal of Grant Shapps’s characterization of the “lazy consensus” and the “injustice” that we are apparently responsible for. But where were they, and our representative bodies, in 2008 when Policy Exchange published this report, or in 2010 when the Centre for Social Justice published this? Everything that is now happening to social housing can be traced back to the thinking contained in these reports, and others like it. Collectively, I think we have failed to respond with enough muscle to these changes. I hate to say it, but if we had reacted to these reforms with even a fraction of the campaigning zeal that the National Trust has deployed in response to the National Planning Policy Framework we would not be where we are now!
The truth is that we have walked into a trap and it’s hard to know what the answer is. Does anyone seriously believe that the affordable rents’ programme is going to be replaced in 2015 with social rents set at 50 or 60 per cent of market rents? If not, where does that leave us and our mission to help the people in the greatest housing need?
It’s hard to predict how the social housing sector will look ten years from now as a result of these changes. I think it could go in two directions, depending on whether we go on developing or not. It’s quite clear to me that the affordable rent programme is a potential poverty street for many of our traditional customers. Therefore if providers carry on building new homes and converting voids to “affordable” rents we could be forced up-market, providing homes that are only genuinely affordable to people on middle incomes, leaving the poorest to fend for themselves, and failing to provide any family homes across much of the south east. But if we stop building, we will be left with a shrinking sector that will start to look increasingly like the USA model of social housing – residualised, stigmatised and catering only for the poorest and most vulnerable. Either way, we are, if you will excuse the pun, in a bit of a pickle!
A few weeks ago I wrote that the new “affordable rent” programme would produce unaffordable homes and that social housing providers were in danger of falling into a trap that could lead to the sector becoming more stigmatised and more residualised.
New research from Cambridge academics confirms my worries. The Cambridge Centre for Housing and Planning Research looked at five areas of the country on behalf of provider Affinity Sutton, and found that the new market-pegged rents will be unaffordable to families with three or more children - and would also breach the benefits cap - in four out of the five areas studied: Brighton and Hove, Bromley, Hertsmere, and Mid Sussex.
In Brighton and Hove a parent with two children would need to earn a gross annual salary of £39,450 to afford one of Affinity Sutton’s two bedroom flats without support from benefits.
Christine Whitehead, who led the research, hit the nail on the head when she said: “The big question now is, who is to be housed under the new regime? The low-income employed or those who will need housing benefit to pay the increased rents?”
Affinity Sutton say that the new regime could help people who are currently housed in the private sector. Well, up to a point Lord Copper. They are living in the private sector because they do not qualify for social housing, and the guidelines for the affordable rent programme are clear – housing is to be allocated under existing needs-based arrangements, either through Choice Based Lettings or through the traditional local authority needs register. This means that the new “affordable” homes will go overwhelmingly to people on benefits, precisely the group that the Cambridge research shows will suffer from the new rents once benefit caps kick in.
To his credit, Keith Exford, Affinity Sutton’s CEO, recognises this. He says the new programme will need “new thinking about housing priorities from local authorities when making nominations to new homes.” But I have seen nothing to indicate that this is about to happen. Moreover, as a result of the Cambridge research, Affinity Sutton say they will concentrate on building smaller homes under the new programme. If that becomes a general trend then there could be a widespread under-supply of family homes.
Today’s announcement of the “affordable rents’ programme show that 90% of the new homes will be provided by housing associations. But there are quite a few local authorities on the list and also some private developers like Keepmoat, Persimmon and Taylor Wimpey. After years in the wilderness it will be interesting to see how new council housing will look and feel.
So London gets 36% of the national cake to produce 27% of the homes. A good result for London and Boris. The North East and the North West get around 10% of the cake each, but the East and South East only receives 13% of the national total, less than the Midlands and the South/South West, even though housing needs in the south east are acute. A quick analysis of the cost per home shows that the East and South East can produce a unit for less than £16,000 whereas in London it costs nearly twice as much, at almost £29,000. My guess is that the Eastern region accounts for most of that favourable figure, because they were producing homes with the lowest level of grant under the previous system. It’s also interesting to note that it costs over £22,000 to produce a single new home in the North East, the second most expensive region after London. This highlights the fact that the affordable rent programme does not work in most of the north and requires a larger subsidy. Moreover, you can buy a decent terraced house in Middlesbrough for £10,000. I’m sure additional analysis will follow, but these are my initial thoughts.
In the doublethink world of George Orwell’s “1984” words mean the opposite of their true meaning. So the Ministry of Truth deals in lies, the Ministry of Peace wages war, the Ministry of Love engages in torture and the Ministry of Plenty is concerned with starvation. The three slogans of the Party are War is Peace, Freedom is Slavery, and Ignorance is Strength. Orwell also wrote that, “Political language ….is designed to make lies sound truthful and murder respectable…”
In the housing sector we are sometimes rather keen on words and phrases that either mean the opposite of their true meaning or that make “lies sound truthful”. The biggest current culprit is, of course, the “affordable rent” programme. I can remember a time when an affordable rent was defined as 25 percent of net income. Webster defines affordable as, “to manage to bear without serious detriment.” That may be slightly vague, but to me it means that you should be able to pay your rent and then live reasonably well, perhaps run a car, have a holiday and save a bit for the future. So how is a rent of £300 a week in Cambridge (where I live) or £450 a week in London remotely affordable to people on low and modest incomes? Yet our sector appears to have swallowed the affordable rent canard hook, line and sinker. Admittedly it is the only game in town, but are some associations really so desperate for growth at all costs that they are willing to sell themselves for a few extra units? For big developers in the south, particularly those bidding for 100 percent conversions of voids, the profile of their stock could change dramatically - within five years more than a third of their homes could become unaffordable, forcing thousands of people into poverty. Have they really thought this through? There is a danger that housing providers are about to fall into a trap that will further stigmatise the sector, similar to the trap we fell into thirty years’ ago when we complied with a purist needs-based approach to allocations, shutting the door upon large sections of the working working-class and causing the sector be become residualised. At Harrogate a couple of weeks ago there was much discussion about re-naming the affordable rent regime. A few suggestions were: “so-called affordable rents”, “naffordable”, or simply “unaffordable rents”. I prefer the last one. Words should mean what they say and say what they mean.
Whilst I am on the topic of words and their meaning, another phrase that should be binned is “social housing”. Why do we persist with it? For me, it conjures up images of National Health spectacles and coal in the bath. Does it mean that non-social housing is anti-social or asocial? Do we really believe that private developers, and the planners and architects they work with, don’t have a social purpose, an interest in building sustainable homes and viable communities? We should move on from this kind of segmentation – increasingly we are taking an holistic view of housing markets and considering how different providers can meet the differing needs of customers. If we are to have “social housing” then why not “social greengrocers” or “social dentists”? The phrase is out of date, degrading and meaningless. Why not just “housing” or, more clunky perhaps, “housing provided by councils and housing associations”?