150,000 more social housing units by 2015?

Speaking on Radio 4’s Today programme on Monday, 22 November 2010 Housing Minister Grant Shapps pledged a 150,000 increase in social housing units in the lifetime of the current parliament. I don’t think there’s any change the government will achieve even this modest target.

The government is cutting central government capital funding for social housing by roughly 50% – from £8.4 billion to £4.4 billion a year. Perhaps about half of the grant will be spent on new social housing, the rest on mortgage to rent, keyworker and shared ownership type schemes.

With £8 billion available about 25,000 new homes were started over each of the last few years. So the coalition government plans to invest enough to deliver about 10,000 units a year, or 50,000 over five years. The preceding figures are a bit of a guess but at least indicate Shapps is aiming a bit high.

Last year about 8,500 social housing units were sold for one reason or another. If the economy recovers this is likely to rise as Right To Buy sales pick up. There will also be other losses, eg, demolition of unwanted stock in some northern cities (although as the Pathfinder initiative has been cancelled this may be minimal). Let’s predict a minimal rise and say 10,000 units a year are going to be lost. Again, this is a speculative guess.

Taking the scratched-on-the-back-of-a-fag-packet figures above, the government is on course to deliver an increase of, er, zero houses by 2015 when the next election is due. Oh dear.

Ah, but what of the proposed 80% market rent allowed by new flexible tenancies – won’t that allow councils and Housing Associations (HAs) to unleash a new wave of building? Maybe, but I can’t really see it as currently proposed.

The big developing HAs were borrowed up to the hilt and relying on shared ownership buy-outs to keep afloat when the recession and housing price fall hit in 2007. For a while it looked like some of the real biggies – Places for People in particular – might be about to go belly up. There’re not in a position to take on more debt. Additionally, the proposed attachment of a Right To Buy to the new flexible tenancies will prevent HAs using these to fund development.

Local council finances are outside my expertise. In the early part of the decade when target rents were introduced to push up council rents they squealed “this will put up rents for our tenants and we don’t need the money!” But then when it came to bringing all their properties up to Decent Homes standard they squealed equally loudly “we can’t afford it can we need more time!” It is possible councils are in a position to fund their own development programmes but my gut feeling is not.

A slight curveball is there’s no legal reason I’m aware of to stop both HAs and councils increasing all their rents – including current tenants – up to 100% of the market rent. Some landlords may interpret the smoke from central government – encouraging 80% of market rent for new tenants – as meaning no objection to an across the board rent hike. This could certainly fund additional development although the Housing Benefit bill would increase by a fair old amount.

Meanwhile, outside the not-for-profit council and HA world there’s the private sector which has long wanted to get its hands on government social housing capital grants. I suspect the government is relying on these to step up to the plate and make up the numbers of new units. How realistic this is time will tell but surely tying Right To Buy in with the new flexible tenancies will make private developers run a mile?

So, here’s my prediction: the government will fail to provide Shapps’ additional 150,000 units by 2015 without putting in significant additional funding. They’ll need to bring the grant up to something like £6 billion a year. With the current grant social housing stock will stay static or increase only slightly.

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