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Five unanswered questions about May’s housing announcements
Theresa May has pledged an extra £2bn for affordable housing to help fix the ’broken housing market’.
However, there are many questions that need to be answered before we can assess the likely impact, as Pete Apps explains.
Five unanswered questions about May’s housing announcements #ukhousingThis article, originally published yesterday afternoon, has been updated following the government’s announcement of rent settlement details last night
How much of the money will be for social rented housing?
A Conservative Party press release said the £2bn extra money "can" pay for 25,000 homes over five years. This would work out to an average 5,000 a year, at a grant rate of £80,000 per unit.
But this means using the entirety of the £2bn of the funding on social rent though, which is quite categorically not what Ms May said in her speech, when she said some of the funding would be directed to social rented housing in areas where demand was highest.
So is all this £2bn going to social rent or not? Canny readers of the press release note that the government has not promised this, it has only said the money can fund 25,000 social rented homes not that it will.
But even if it does, the total of 5,000 a year is also some way short of the new generation Ms May promised - in 2010/11, before the Conservatives came to power, Labour built a shade under 40,000 homes for social rent in England.
So could Ms May have other plans up her sleeve? There is a total pot of £9bn now, which is substantial and much of the previously announced £7bn is as yet unallocated. Some of this could easily be shifted to social rent - in fact £2.3bn of the funding is intended for Starter Homes, a product pushed by David Cameron which looks to have been totally dropped. It is understood sector leaders are yet to be briefed on the detail of the funding, and will push for the money to be used as flexibly as possible. Watch this space.
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And where will the homes be built?
Ms May spoke of “parts of the country where need is greatest”. But how will this be assessed?
In London, which is the most obvious candidate, mayor Sadiq Khan’s programme is already delivering rents at fairly close to social rent levels, and he will surely want some of the new cash as well.
Ms May’s language (“we will allow”) suggested the government plans to keep fairly tight control over where the new social rented housing is built. So what mechanism will it use to assess where need is great, and where it is not?
What has become of the bespoke deals?
Before the election all the buzz was about bespoke deals on borrowing powers and rents with councils, which the government has actually been piloting with three town halls.
Ms May promised a new generation of social rented housing in her manifesto and it was understood to refer to this work.
If she wants councils to truly get involved in the building of new homes, she will need to address their power to borrow as well as offering grant.
This work on bespoke deals will hopefully inform the policy then, but was notably absent from the speech today.
What is the rent settlement going to be?
Some questions don’t stay unanswered for long. Yesterday evening, around seven hours after Ms May sat down, the Department for Communities and Local Government revealed the settlement would be consumer price index inflation plus 1% for five years from 2020 - which upholds the promise pre-rent cut and provides the certainty the sector called for.
There remains an issue though of how tenants will pay the higher rents - housing benefit will be tacked to frozen Local Housing Allowance rates throughout this period, so rents will rise but benefits will stay flat. This could present real challenges for tenants reliant on benefits and landlords collecting the rent.
And what of the Right to Buy?
This question really needs an answer now. Are the Conservatives pushing ahead with their extension of the policy to housing associations, and the associated fire sale of high value council housing to pay for it?
If so, then lots of these homes (especially those built by councils) are going to be sold fairly promptly.
Why then would councils build new social homes to just sell them and hand the money to the Treasury?
While this policy has gone so quiet to almost be scrapped by default, it remains the law of the land – having passed through Parliament in the Housing and Planning Act. Before councils put their hands up for this money, they will want an answer.
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