The government’s housing policy makes no sense

The chancellor continues his irrational mission to reduce social tenants to second-class citizens

 

In the two weeks since a disastrous Budget for social housing and social tenants was announced, the government’s ‘housing strategy’ has been revealed in all its irrational glory.

In particular, a government which says it wants to simulate house building has introduced a proposal to reduce social rents by 1 per cent annually over the next four years, which the Office for Budget Responsibility (OBR) says will result in at least 14,000 fewer homes being built.

The 1 per cent rent cut in reality leaves a bigger hole in the business plans of social landlords, since they had planned rent increases of CPI + 1 per cent. So the actual annual cut is probably closer to 3 per cent annually and 13 per cent compound over the next four years.

The National Housing Federation (NHF), the representative body for housing associations, calculates that 27,000 planned homes will not be built as a direct result of the proposed cuts in social rental income. Yet the spiralling rent increases in the private rented sector remain untouched, exposing the government’s cover story that social rent cuts are designed to bear down on the ballooning housing benefit bill.

A recent report by social housing campaign group SHOUT illustrates the irrationality of the government’s approach: tenants in the private rented sector are charged rents averaging £1,000 more than those charged to social tenants. So the easiest way of reducing the housing benefit bill would be to cap or force reductions in private rents, but this goes against the grain of the government’s increasingly right-wing political philosophy.

A further irrationality relates to the extended Right to Buy, where sold housing association homes will be replaced by homes let on so-called ‘affordable rents’, which are 80 per cent of market rents. This can only drive-up rents in one part of the social housing sector while rents are forced down in other parts.

Meanwhile social tenants are being put under increased pressure by a new raft of ‘welfare reforms’. Perhaps the most significant proposes that tenant households with earnings over £30,000 annually (and £40,000 in London) pay market rents to their social landlords. The measure, referred to as ‘pay to stay’, will affect perhaps 300,000 social tenants, or 6-7 per cent of the total.

A couple both in work and earning £15,000 each will now have to find another £1,000 a year on average to stay in their current home, or face moving into the private rented sector.

George Osborne has also decided to make local authorities pay the extra rental income raised through ‘pay to stay’ to the Treasury while housing associations will be able to keep the money from the measure. The result will be at least a 10 per cent cut in planned council house building.

Many housing commentators now agree that the government intends to eradicate the social housing sector by a thousand cuts while promoting unsustainable levels of home ownership, so repeating the mistakes that led to the financial crisis and pushing increasing numbers of people into expensive, insecure and short-term private renting.

A more economically rational approach is investment in new social housing, which offers a better solution to the nation’s housing problems that is fiscally sustainable, economically efficient and socially progressive.

As well as meeting the nation’s housing requirements, every additional pound of investment in social house building provides a Keynesian economic stimulus of almost £3 to the wider economy, through the supply chain and in employment creation.

Social housing investment also helps to keep net public sector debt lower. The OBR’s long-term fiscal projections suggest a debt to GDP ratio of 86 per cent if current housing policies are continued, whereas building social homes reduces the ratio over time to 81 per cent.

In place of a rational housing strategy that places affordable house building at its core, the chancellor is continuing his ideologically-driven process of mean sleights that collectively intend to reduce the social housing sector to a rump, and social tenants to second-class citizens.

Kevin Gulliver is a contributing editor to Left Foot Forward and a director of Birmingham-based research charity the Human City Institute and chair of the Centre for Community Research. He writes in a personal capacity.

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