Jul 11th 2018, 11:08
Blog 11th July 2018
In this week’s blog, I refer to: Local Authority Housing Finance; the Ministry for Housing, Communities & Local Government; Homes England; Lambeth Borough Council; the Local Government Chronicle; HM Treasury; the Trust for London; the Greater London Authority; Impact Housing Association; the Riverside Group; and the Regulator of Social Housing.
Yesterday, I presented our seminar ‘Developments in Local Authority Housing Finance’ in Leeds. Delegates said that the information provided was very relevant, the quality of the presentation was excellent and that the training met their needs fully. They described the seminar as: Interesting, Useful, Clear, Enjoyable and Valuable. Specific feedback received included:
Last week, I published a briefing paper on the recent announcements from the Ministry of Housing, Communities & Local Government on additional housing revenue account borrowing and grants for social housing. The purpose of this briefing paper is to summarise the government’s prospectus, Homes England’s addendum and the reaction to them of the sector and to provide some commentary.
The government has committed to building 27,000 new ‘affordable’ homes in London and 23,000 in the rest of England, as part of its £9billion investment in affordable housing. Of these 50,000 homes, roughly 22,500 will be for social rent, 12,500 outside of London and 10,000 within the capital. These numbers could increase if councils apply to the additional borrowing fund. However, they appear small in relation to council waiting lists. For example, there are 22,000 people on the waiting list in Lambeth Borough Council alone.
It is generally accepted that there is a need to build at least 300,000 homes a year in England. Taken in this context, the government’s programme is quite modest. The Local Government Association has consistently argued that the ‘borrowing cap’ should either be abolished or lifted significantly to enable local authorities to invest £7billion in new social housing but these proposals only offer one seventh of that borrowing to fund investment. They therefore fall short of the aspirations of those in local government.
The government’s calculations show that there is ‘affordability pressure’ in all the London boroughs and in most local authority areas in Eastern England, the Southeast and the Southwest. However, there are only 23 local authority areas in the Midlands and only eleven in the North that are found to be facing ‘affordability pressure’. 88% of authorities in the south (excluding London) will be eligible, compared with only 15% of authorities in the north. Furthermore, the government states that priority will be given to schemes that are in the areas of greatest ‘affordability pressure’. It is therefore clear that most of the additional investment will be in London and in relatively affluent areas of the East, South and West.
However, there are currently 376,297 people waiting for social housing in the north of England – including the north-east, north-west and Yorkshire & the Humber – compared with 258,135 in the south-west and south-east - 118,162 more people on council housing lists in the north of England than in the south outside London. There are 243,668 people on waiting lists in London.
Some commentators have suggested that, these programmes will not necessarily provide additional homes where they are needed most, and that they will also contribute to the increasing divide between the relatively prosperous parts of England and those that are in relative decline. They suggest that extending the scheme across the whole of England would be preferable.
It is also the case that most of the unused ‘headroom’ in housing revenue accounts nationally is currently in London with some borough councils unable to use the ‘headroom’ that they already have because of a shortage of revenue resources in their housing revenue accounts. This situation was created by the initial self-financing settlement and exacerbated by the rent reductions required by the Welfare Reform & Work Act 2016. Whether such councils will be able to make use of the additional resources that are now being made available is therefore open to some doubt.
In January 2018, it was reported in the ‘Local Government Chronicle’ that HM Treasury had only set aside £880million in its budgets for this initiative claiming it did not expect councils to be able to take up all the additional borrowing capacity that is being offered. This may reflect the shortage of revenue resources to support additional borrowing, especially in London.
Some commentators have suggested that if the government was serious about housing people who are on waiting lists in social housing, they would also be reducing the number of social homes that are being lost through the ‘right to buy’ scheme. The Scottish and Welsh governments have already abolished the ‘right to buy’ but in England, the United Kingdom government is still pursuing a policy to ‘re-invigorate’ the ‘right to buy’ through increased discounts and, in practice, the homes that are lost are not being replaced.
Some commentators have also suggested that the government’s definition of ‘affordability pressure’ demonstrates that their ‘affordable homes’ programme is not actually affordable.
Research by Trust for London states that the average rent for a two-bedroom property in London is £1,730 per month. Therefore, an affordable rented property would be available for around 80% of that figure that is £1,384 per month. Local authorities in London rent two-bedroom social housing properties at an average of £470 per month. This means an average £914 per month gap between affordable rented and social rented housing.
The £50 / week that the government considers produces ‘affordability pressure’ equates to £217 / month. That gap suggests that any new affordable rents would cost over four times the level the government itself defines as creating ‘affordability pressure’ in the case of London. This analysis suggests that the ‘affordable rent’ product is not actually affordable.
Any increase in resources for social housing either through borrowing or grants is welcome as it will help local authorities and housing associations to tackle the housing crisis. However, it appears that the additional resources being offered are probably not sufficient and that the government’s plans to target them at areas of highest affordability pressure may not be appropriate.
These papers apply to England outside London. The Greater London Authority is expected to announce the details of the scheme in London soon.
Readers of this blog will know that, following the takeover of Impact Housing Association by the Riverside Group, I wrote to the Regulator of Social Housing to make some suggestions for improvements to the processes for regulation, accountability and mergers for housing associations in future. I am grateful to Fiona MacGregor, the Executive Director of Regulation and the Regulator of Social Housing for replying to me.
Unfortunately, Fiona MacGregor’s reply focuses on explaining the current approach of the regulator and justifying its approach in the case of Impact Housing Association, rather than providing me with a reaction to my suggestions for reform. The letter concludes by saying:
“Thank you for setting out your suggestions for areas we might consider changing in future. I hope that this letter has helped to set out the regulator’s current position, both generally, and where appropriate, specifically to the case of Impact. As you may be aware the Government has announced that it intends to publish its housing Green Paper soon. As part of this it has been talking to tenants, including about views on the role of tenant involvement. Members of the public and organisations will be given an opportunity to respond to the content of the Green Paper once published. The forthcoming Green Paper on Social Housing may therefore provide a further opportunity for you to feed in views.”
I will obviously look forward to reading the Green Paper and perhaps responding to it.