Rent reduction 'will lead to 14,000 fewer homes built'
The government’s policy of reducing social rents by 1% annually over the next four years will lead to 14,000 fewer homes being built.
That is the forecast from independent fiscal watchdog Office for Budget Responsibility (OBR) following the Budget announcements today. George Osborne announced that social rents will reduce by 1% annually over four years.
The OBR said the measure, which comes into affect next April, will ‘directly reduce social landlords’ rental income, and therefore their financing for, and returns to, investing in new housebuilding’.
Because of this, the OBR has reduced its forecast for residential investment by 0.7%. It says housebuilding by housing associations will drop by around 4,000 homes in 2019/20 and 14,000 over five years.
The National Housing Federation (NHF) has calculated, using figures for rental income, that 27,000 homes will now not be built due to the changes. David Orr, chief executive of the NHF said: ‘A cut in rents over the next four years will be a real help for some tenants, but will massively constrain housing associations’ ability to meet the shared ambition of themselves and government to drive housing growth and new jobs.
‘At the very least 27,000 new homes will not now be built, though that figure could be much higher.’
After 2020, the rent formula will revert to the consumer price index plus 1%.