What you say is true Gavin - which is why the rent levels currently charged in social housing exceed the allocation from Government (negative subsidy). Indeed the concept of Shapps to continue to increase rents and then let the local authority decided what to do with the extra income, after clearing the massive debts that have just been poured onto them, could potentially result in tenants exclusively funding the investment in social asset - saving the general taxpayer cost whilst ensuring the general taxpayer still enjoys the future benefits to the economy. The concept is justly called the Tenant Tax.
However, in a world where economic success is based on lowering wages and mass unemployment the reality is that higher rents will mean higher benefits. And when you take into account the government drive for the majority of rented housing to be privately rent, then the extent of benefit cost, without any new home generation resulting, will be even higher.
In the calculation of social housing being self funding the Tory concept has only ever added up the cost, but ignored the benefit, the value. In addition to the asset value and the potential rent stream value, both valid in business assessment, there is the socail value and the effect on the wider economy. I'd put forward that social housing was at it's most optimum in terms of self funding in these terms when there were nearer to 5 million Council let homes compared to the under 2 Million no remaining.
On the flip side - the approaching 4 Million private homes are not self funding in terms of State balances. They cost but there is little social gain to offset the cost, and no asset worth to the primary funder, who remains the taxpayer.