The Housing Times Issue 2
If proof were needed by anyone of the impact that the Housing and Planning Bill will have upon people struggling to keep a roof over their heads they would have been left in no doubt had they attended the packed meetings held at Islington and Camden town halls in February as part of the campaign to inform, organise and preventing the proposals ever receiving the Royal Assent. In particular the proposals requiring registered providers, including both housing associations and local authorities to charge higher rents (at market rate, or a proportion of market rates) for those tenants who had a higher income, a policy known as “pay to stay”. The summer budget of 2015 defined high income as £40,000 in London. For one couple at the meeting in Islington this would mean their rent rising from £140 to over £600 a week. They are one of many people in the same situation. Whilst forcing people to pay more to live in their homes the government is introducing a twenty per cent discount to first-time buyers who are under the age of 40.
The House of Commons Communities and Local Government Select Committee in its report on the government’s plans to extend the right to buy to housing associations was critical of the proposal that placed a new legal duty on councils to guarantee the provision of 200,000 ‘Starter Homes’ on new development sites. The proposal was announced by the Prime Minister in his 2015 conference speech. He told his audience that, ‘Starter Homes’ would be counted as ‘affordable housing’ for planning purposes including section 106 agreements, previously one of the main means whereby ‘affordable housing’ was provided. The report states that “Starter Homes will instead only allow people who could afford to buy anyway to purchase a more expensive home. Given that the discount will only last for five years, Starter Homes would likely be an extremely attractive investment for prospective buyers with an almost guaranteed profit if sold after five years”
To emphasise the committee’s concern at the proposal, their report states – in bold print – that the proposal should not lead to fewer ‘truly’ affordable homes to rent build but “There is a finite amount of money available from developers to deliver affordable housing, and the duty placed on councils is likely to mean that building Starter Homes could be prioritised over other types of affordable housing. Local authorities will be under pressure to satisfy their legal obligations, and this could make negotiations with developers extremely difficult and could undermine Local Plans.”It ends by saying that Starter Homes should not be built ahead of other forms of tenure where the need exists and that it is vital that homes for affordable rent are built to reflect local needs and circumstances.
The report also commented on the impact that not only the measures contained in the Housing Bill but also the July 2015 Budget and November Spending Review would have on the plans of housing associations to build more homes. In the 2015 summer Budget it was announced that all rents in social housing would be reduced by one per cent for four years, with housing associations and local authorities expected to meet the shortfall in income through more efficient use of their grant funding. The announcement came shortly after the start of a ten-year rent settlement, and caused concern significant concern to housing associations. The reduction in rent income for housing associations will curtail their ability to build more homes. The abandonment of the ten year agreement has created also significant uncertainly among the financial sector that ultimately fund their development plans.
George Osborne was obviously irked by the £2.4 billion profit made by housing associations in 2014 and of the salaries of some of its chief executives. He decided therefore that housing associations should share the burden that other sectors of society were experiencing. The Select Committee report fears that the first consequence of the rent cut will be reduction of non-statutory services. It cites the survey of housing association chief executives conducted by Inside Housing which found that 72 percent of housing associations who responded were likely to consider cutting back or scrapping non-core activities as a result of the rent cut. (No mention was made whether their salaries would be cut back.)
One of the reports mentioned in the House of Commons Select Committee report was the study by the Cambridge Centre for Housing and Planning Research on understanding the likely poverty impacts of the extension of the right to buy on housing association tenants from the forced sale of higher value local authority homes. The Joseph Rowntree Foundation commissioned the study to explore the implications of the two stands of the Bill over the first five years after it became operational. Without doubt the most significant sentence in the report is the one that states that the research did not consider whether the homes sold could be replaced but what would be the tenure of the homes that they replaced.
The report considered three different sets of situations. The first situation is where homes are replaced and let at the same rent levels, the second where the replacement stock was let at affordable rent levels. (The third situation is where new homes are built for sale as shared ownership.) In the first instance the report found that there would be a positive impact on poverty levels. With the higher rents in the second situation, poverty levels would be expected to increase.
All the plans of the government are resting on the funds from the sale of high-value council homes – the brood mares that the government hopes will produce the funds which will make all the other outcomes possible. Suffice it to say, a heavy burden has been placed on their backs. The report notes that the impact of the sale of council homes will present enormous challenges to local authorities who already face difficulties in meeting housing need and that a dramatic reduction in lettings through selling off high-value homes is likely to cause severe difficulties. The report concludes that in the longer term subsidy for right to buy discounts cannot be found solely from selling off council homes without a continual stretching of the definition of high value, meaning that local authorities may be forced to sell increasing numbers of lower valued homes of its housing stock. If people were in any doubt that the Conservative government has declared war on social housing, the Housing and Planning Bill provides the proof, if proof were needed.