Affordable rent threatens house building goal

The London Assembly’s housing and regeneration committee published a paper today saying landlords faced various risks with the affordable rent model.

One of the concerns is the programme will ‘deliver a reduced level of social housing, since housing associations are not able to develop housing at more traditional social rent levels’.

Mayor Boris Johnson has pledged to build 17,000 affordable rented homes by 2015 but the committee points out there has been a ‘slow start’ to this.

Housing providers achieved 4,000 starts on site between the start of the programme in April 2011 and September, the report says. Although it notes a speeding up of progress in the six months to April 2013 with 8,500 starts, it also states ‘a “start” could just be the beginning of demolition work’.

The committee estimates to hit the current target this sustained level of activity would have to continue until September this year. But it also says that ‘it may not be in housing associations’ interests to start developments that may be at risk of overunning’ because the affordable homes programme requires housing schemes to be completed by March 2015. If they are not, the developers of the affordable homes will be in breach of their contracts and outstanding grants could be lost.

The report also identifies the risk to landlords of not being certain whether they will be able to collect the higher rents, particularly with the changes to welfare reform.

The affordable rent model was announced as part of the 2010 spending review and allows housing associations to charge rents up to 80 per cent of market rent level in a local area.  

‘New tenants of affordable rent houses may find themselves under increased financial strain as a result, particularly if they have been used to lower social rents in the past,’ the report says. It suggests this could lead to an increase in tenant arrears. ‘The model wil require the sector to take on more debt and increase the diversity of housing products on offer,’ the commitee says. ‘These risks will be compounded by increased uncertainty to housing association income streams as a result of changes to the welfare system.’

It adds: ‘If the result is higher borrowing costs, fewer houses than expected will be built.’

The committee is calling for secure, long-term funding for housing associations to build homes.

Chair Len Duvall said: ‘Across the board Londoners are struggling with spiralling rents and house prices that seem to be increasingly out of reach for even better-off Londoners. Housing associations have got to be part of the answer, but over the last 15 years the number of families on housing waiting lists has almost doubled to 380,000.

‘London’s housing associations have a proud history of providing good quality homes for people on low incomes and those who need specialist accommodation, but without a secure long-term source of funding, it is hard to see how they will be able to meet the ever-increasing demand.’

Earlier this month the mayor called the shortage of affordable housing in the capital ‘perhaps the gravest crisis the city faces’ in his vision for the future, arguing that a London rental standard should be brought in to offer certainty to landlords and tenants to combat ‘punishingly high’ rents.