'Labour must offer a social housing funding mechanism that not only provides new supply, but tackles the systemic need for rehabilitation of existing stock.'

Christopher Worrall is a housing columnist for LFF. He is on the Executive Committee of the Labour Housing Group, Co-Host of the Priced Out Podcast, and Chair of the Local Government and Housing Member Policy Group of the Fabian Society. 

At UCL’s Here East innovation and technology campus in Queen Elizabeth Olympic Park, Leader of the Opposition Sir Keir Starmer made a key speech on the 5^{th of} January 2023 – promising a decade of national renewal. A renewal that was more relaxed about bringing the expertise of public and private sector together to help bring pride back into British communities. Lisa Nandy’s recent meeting with property developers exemplifies Labour’s seriousness about working in partnership with local and national government, local communities, unions and the private sector.

One area crying out for national renewal and better partnering is England’s social housing sector. A sector under the Tories that has been mired in failure and demise. Feeble housing targets, weak regulation, and registered social housing providers synonymous with poor outcomes have dragged the sector’s name through the mud. All of which has been systematically intertwined with England’s planning and unaffordable housing regimes. Untying this gordian knot requires political leadership, practical informed policy-making, and new innovative approaches to how power is devolved locally given the extremely poor outcomes for many residents.

Combined with an unsustainable funding model for the rehabilitation of existing and the construction of new social housing, it is no wonder why the sector sees no alternative other than to mega-merge its way out of poor performance. Merely washing bad KPI’s from one organisation to the next.

Council-owned housing companies, many of which have been Labour led, have failed in places quite spectacularly.  Maladministration is becoming more common place in local authorities and housing associations. The Housing Ombudsman is dealing with a rising tide of complaints year-on-year they are having to investigate. Complaints for damp and mould have risen 17-fold in recent years. Yet England’s social housing sector seems to have little to offer in response, other than think tanks and trade bodies asking for more subsidy without addressing the core issues affecting management.

I would argue now is the perfect time to explore the “pay for success” model suggested by Low-Income Housing Tax (LIHTC) expert Mark Shelburne, who advocated for it to be considered here in Britain on a recent Priced Out Podcast. Under such a system, tax credits are awarded to developers to offset the cost of constructing rental housing in exchange for agreeing to reserve a fraction of rent-restricted units for lower income households. Such a system would put local authorities in control of who they allocate funding towards. Funding that would be allocated on the basis that is politically-led, with conditions attached, incentivising local priorities. It would provide local authorities a funding pot they can decide on how much to allocate to new supply or towards the rehabilitation of existing stock.

Instead of Westminster handing out grants to all and sundry, where local authorities have no control over who manages stock within their boundaries following the purchase of homes through Section 106, local authorities should have public and private enterprise compete for credits. These credits would in effect amount to tax relief. Tax relief that sees corporations who wish to reduce their tax base in a corporate social responsible way exchange cash (equity) for tax relief. In most instances for ninety pence in the pound. These credits have said conditions attached set by the local authority, often linking rents to certain rent burden levels relative to those at or below the local poverty threshold (60% of Area Median Income). These are in addition to location or physical attributes each new development or rehabilitation must entail.

Instead of feebly “naming and shaming” failing social landlords, LIHTC utilises mechanisms that has real teeth and financial incentives and disincentives to perform. Legal agreements between the tax credit investor and the developer-operator place performance requirements, which if there is failure to comply, can result in the tax authorities reclaiming back the credit. The tax credit investors then sue the developer-operator unless the issue is rectified to the satisfaction of local compliance.

Recent events brought into tragic light how weak and toothless social housing regulation is following the death of two-year-old Awaab Ishak. Under a pay for success model, social and private landlords would not only have to compete for the allocation of funding, but there would ultimately be recourse to ensure management focuses on repairs, maintenance, and appropriate rent levels. It could even attach the need for union access for construction workers, strengthening the link between the Labour movement and local projects.

Whether it is for the parents of Awaab Ishak, the children of Hollie Brown, or families faced with an out of area placement, one thing for sure is that England’s social housing sector is not fit for purpose at present. Labour needs to offer an alternative for families across England who are constantly faced with unaccountable housing associations, or local authorities who find themselves slapped on the wrist with insultingly low fines.

Labour must offer a social housing funding mechanism that not only provides new supply, but tackles the systemic need for rehabilitation of existing stock. LIHTC can complement council housebuilding programmes and incentivise the best bits of the public-private sector to work towards a common goal, with both a carrot and a stick. Labour can reverse the dangerous trend towards deregulatory measures common place under the Tories, in turn creating a system that ultimately pays for success.  

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