29 October 2010
The Government's decision to slash the housing budget by 63%, and
pay for new low cost homes through massive rent increases, will
mean that no 'real new social homes' will be delivered during the
next spending period, beyond those already in the pipeline, and
lead to thousands more tenants being trapped on benefits –
according to the National Housing Federation.
Ministers plan to deliver 155,000 new low cost homes between
April 2011 and March 2015 and are promising they will be 'social
homes'. However, instead of funding the homes through the social
housebuilding budget – allied to private money raised by housing
associations, who build social homes – they plan to pay for all the
homes beyond those already earmarked under the last government's
spending plans through massively increased rents, at up to 80% of
the local market rate.
For ministers to be able to deliver the promised number of low cost
homes, the new intermediate rents will need be charged to all
tenants moving into newly built homes and at least one in four
tenants moving into existing social homes. As with traditional
social housing, the tenants offered these homes will be selected
from those on the waiting list maintained by councils in each
area.
The Government has also signalled that it expects that tenants who
move into newly-built homes will be placed on short-term tenancies
– effectively meaning the end of lifetime tenure in homes being
labelled as 'social housing'.
The Federation says that the 'new deal' over housing does not allow
housing associations to respond flexibly to local housing need, as
they will be denied the freedom to set rents at an appropriate
level and grant long-term tenures.
Disincentive to work
While most tenants who are being charged the new intermediate
rates will have their rents part- or fully-paid for through housing
benefit, the sums charged will be so high that if they do get a job
much of their earnings will be eaten up through rent repayments.
This is because every pound that claimants earn will be largely
cancelled out by the amount of housing benefit being withdrawn. As
a result, the new intermediate rents will act as a powerful
disincentive to work.
In higher value areas throughout the country, including places such
as Camden, Hackney and Haringey, many tenants moving into new
social homes charged at the intermediate rent of up to £340 per
week for a three bedroom property would have to earn at least
£54,000 before they could get off housing benefit and be in a
position where they could keep the bulk of their additional salary
and find themselves better off in work.
The new model for the delivery of 'social housing' was mapped out
under the Government's spending review announced last week, in
which the social housebuilding budget was cut by 63%, with the
amount of money provided down from £8.4bn over the previous three
year spending period to £4.4bn over the next four years, starting
in April 2011.
Much of the money will be spent on delivering the genuine social
homes that were already planned under the previous government's
spending programme – for instance in London and the South East
there are 12,700 properties already in the pipeline.
The rest of the money will part-fund the remainder of the 155,000
homes promised last week, with the Government expecting each home
built under the new model to be let out at the new intermediate
rent, with arrangements being enforced by the social housing
regulator.
'Lottery' for tenants
The new model also creates a 'lottery' for social tenants, some
of whom will access homes at the traditional social rent levels,
whereas others will have to pay rents at up to 80% market
rate.
Federation chief executive David Orr said: 'The real answer to
current concerns over housing benefit, and the intensifying housing
crisis, is to allow housing associations to continue building
social homes at scale. However, under this model no new real social
homes will be built over the course of this Parliament beyond those
already in the pipeline.
'The new funding model for low cost housing is predicated on high
rents, instead of on an adequate capital budget, and this means
that the freedom of housing associations to respond to housing need
in each area will be cut from beneath their feet.
'Housing associations had wanted the flexibility to build a mix of
homes at intermediate rents and social rents – but now they have an
imposed solution which replaces that mix with high-cost,
near-market prices across the board.
'Because it is based on near-market rents, the new funding model
will trap thousands of tenants in welfare dependency because they
will simply not be able to earn enough money to pay for their homes
without the support of housing benefit – which means the benefit
bill for new low cost housing will go through the roof.'
He added: 'The Government's strategy will turn the traditional
understanding of what constitutes social housing on its head by
creating a system based around high rents and short-term tenancies.
Ministers need urgently to rethink their plans and give housing
associations the flexibility to respond to the growing housing
crisis in the most effective manner possible.'