Budget: On housing this was about as bad as it gets

The chancellor is setting up an even bleaker future when it comes to housing


As budgets go, for those interested in a sensible housing policy and supporting the most vulnerable, this one was about as bad as they get.

There are five key elements to this.

Top of the list is the decision to freeze the Local Housing Allowance (housing benefit paid to tenants in the private rented sector).

Already, this has become a long way removed from what it actually costs to rent a property in many parts of the country, after rates of increase were capped at 1 per cent from 2014 (whatever real rents actually cost).

Shelter predicted that only 6 per cent of England would be affordable to those on housing benefit by 2017; that will now get even more extreme.

For those without a council or housing association tenancy huge swathes of the country will be no-go areas; councils will be under huge pressure either to provide financially unsustainable top-ups, or assist people to moving to the handful of areas where property could still be afforded.

Secondly, there are significant reductions in housing benefit entitlements more widely. Whether through the household benefit cap, the withdrawal of the family premium in housing benefit, the ending of availability of housing benefit to those aged between 18 and 21 who are out of work, the restriction of housing benefit entitlement to families with more than two children, or the ending of the family premium (part of the calculation of what families need to live on).

Having had a policy, in the last parliament, of increasing rents in council and housing association properties in order to partially replace capital subsidies for new build ‘affordable’ housing, the government is now cutting the entitlement of individuals to precisely those benefits.

Thirdly, rents in the social sector are to reduce by 1 per cent a year, ripping up a ‘ten year’ agreement issued as recently as 2013. This, in turn, drives a coach and horses through councils’ and housing associations’ business plans; there will be less money to invest in new build housing (the OBR anticipates this will lead to about 14,000 fewer homes being built), and less money to improve social housing stock and the communities in which it is located.

Fourth, and at the same time, rents for those with relatively modest household incomes in social rented properties (£30,000 per year outside London, £40,000 in London – curiously these are referred to as ‘high income tenants’) will see these jacked up to ‘market or near market’ rents.

Quite apart from the obvious financial penalties tenants will face if their income rises above this level (on top of the greater rate at which tax credits are withdrawn as income rises), this will create a much bigger incentive for those on modest incomes to exercise their right to buy. Sometimes, this will put those on relatively modest incomes into unstable mortgage situations; again, it will hammer councils’ and housing associations’ business plans, putting the brakes on housing development.

Councils are to be required to hand over the extra rental receipts to the treasury, and there is no suggestion these are to be earmarked for housing. The proposed ‘review of the use of lifetime tenancies’, instead sharing with those in the social sector the instability currently faced by private tenants, will have the effect of creating a further raft of perverse incentives (to meet whatever criteria are needed to stay put in one’s home), as well as further ‘residualising’ social housing stock, by making it only accessible to the poorest, rather than creating mixed communities.

Finally, beyond the announcement of a Land Commission in Manchester, and the promise of some planning reform on Friday, there is practically nothing in the budget which will boost housing supply. The many admirable recommendations of the Elphicke-House report, for instance, on how local authorities could contribute more to housing supply, don’t merit a mention.

Overall, then, this is a pretty bleak picture. House prices will go up (the OBR forecasts by over 34 per cent by 2021); those on lower incomes will find themselves with ever-increasing shortfalls in their rents; and councils and housing associations will be pushed by some bad policy choices to the brink.

Ed Turner is lecturer in Politics at the Aston Centre for Europe, deputy leader of Oxford City Council, and leads on planning for the LGA Labour Group. The views expressed are his own.

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4 Responses to “Budget: On housing this was about as bad as it gets”

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  2. robin field

    When will the ‘near market rent’ rises come into effect for people in social housing? I read FY 17/18.

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