If the cap fits

Worried about the impact of the benefit cap, social landlords? You should be because what happens next seems to be your responsibility.

As housing organisations slowly wake up to the dire implications of reducing the cap to £23,000, Iain Duncan Smith was asked about it at work and pensions questions on Monday. Labour’s Clive Betts asked what consultations the DWP had done with social landlords on the effects of the introduction of universal credit and the benefit cap on direct rent payments to landlords. After the usual guff about roll-outs from IDS, Betts pressed him with a points raised by Tony Stacey of South Yorkshire Housing Association (and Placeshapers):

‘Currently, if a household is in rent arrears and gets housing benefit, the benefit can be paid directly to the social landlord. When universal credit is introduced, if the family also gets a welfare cap, it is the housing cost element that is squeezed by the cap. No longer will the amount of universal credit be paid directly to the social landlord to cover the rent. Can the Secretary of State not see that that could lead to a rise in evictions? Is he aware of the problem, and what will he do about it?’

The context for this was highlighted ahead of this week’s CIH conference in Manchester in a UK Housing Review briefing on Monday. After allowing for other benefits and tax credits, the £23,000 cap will leave a couple with four children just £33 a week to spend on their rent and a couple with three children just £110 a week. Here are the impacts by family size:

impact of 23k cap

Effectively that means larger families will be priced out of even social housing throughout the UK and a couple with three children will not be able to afford the average housing association rent anywhere in the Midlands or South of England. The impact will be felt far beyond inner London and the CIH estimates that four times more households could be affected than under the current £26,000 cap.

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Role model?

If we have a Living Wage, why not a Living Rent? Well, now we do.

With due respect to the Scottish campaign of the same name, the report launched this week by Savills, the Joseph Rowntree Foundation and National Housing Federation addresses directly what I’ve long thought to be perhaps the most important question in housing policy: how to make homes genuinely affordable to people on low incomes.

Current policy gets nowhere near that. Employment may be at a record high but millions of people are trapped in low paid work, in part-time jobs and zero hours contracts, and average earnings have only just begun to rise again after years of decline.

Yet private sector rents are too high, leaving families reliant on housing benefit whether they are in or out of work and vulnerable to cuts to come: projections by Savills suggest that one in four of us will be private renters by 2019. ‘Affordable’ rents are only affordable in relation to a market artificially inflated by speculative investment and the aftermath of the financial crisis. Even social rents rise by an inflation-plus formula regardless of what’s happening to earnings.

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Blind spot

Fiscal myopia: that’s the telling phrase in a report out this week on the long-term value of social housing.

In a way the verdict of Capital Economics merely confirms what we know intuitively: building social housing at low rents costs much less in the long run than not building it and instead subsidising high rents through housing benefit.

But the report for SHOUT and the National Federation of ALMOs demonstrates just how good long-term deal social housing represents. Capital Economics compared a programme building up to 100,000 social rented homes a year from 2020/21 with existing policies. Among the conclusions:

  • Looking over 25 years, lower housing benefit costs alone justify government investment in social housing in most parts of the country.
  • However, that takes no account of the value of the asset created that remains after 25 years. Once this is done, investment stacks up in most of the rest
  • In a handful of cases where the sums do not add up (mostly larger homes in areas where private rents are the same or lower than social rents) there are still good arguments for investment (urban regeneration, positive impacts on health and education etc).
  • Tenants will also be better off: the report estimates that families would see their net incomes after housing costs rise by £942 a year.

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Rentier nation

For all the political rhetoric about home ownership, official figures released today confirm that England continues to become a nation of private tenants.

The dwelling stock estimates published by the DCLG show that 137,000 homes were added in the year to March 2014. Of these, an astonishing 90 per cent were private rented (123,000). The owner-occupied stock increased by 24,000 but the social and affordable stock fell by 1,000 and the other public sector stock by 9,000. These figures reflect net changes in the stock, so they include existing homes changing tenure as well as new homes.

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Right to sell?

Can two former housing ministers, a flagship Conservative local authority and David Cameron’s favourite think tank all be wrong?

Conservatives may dismiss as self-interested scaremongering the hostile reaction to their manifesto plan to extend the right to buy to all housing association tenants. What happens when you deconstruct the plan using the statements and actions of people on their own side?

1) Because two former Conservative housing ministers say so…

We already knew that Grant Shapps told the 2012 CIH conference that it was not viable in the current financial climate. ‘If I wanted to extend right to buy, which I do, we would have to find billions of pounds,’ he said.

Over the weekend, the Observer reported that Kris Hopkins told Lib Dem MP Tessa Munt in a letter in late 2013 that:

‘Unlike local authorities, housing associations are independent, not-for-profit voluntary bodies and if they are obliged to consistently sell off their stock at less than market value they might find it difficult to borrow which could impact adversely on their repair and maintenance programmes and affect the future provision of affordable housing.

‘The government does not consider that it would be reasonable to require housing associations to sell these properties at a discount. Any increase to the discount available under the Right to Acquire would only be possible through upfront central government subsidy, potentially incurring a high liability for the public purse.’

The policy that was not viable as part of the ‘long-term economic plan’ now seems to make perfect sense in the financial climate of an election campaign. Little wonder that opposition to it is not confined to the usual suspects.

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From One Planet to Dr Earth

Part 2 of my blog on what housing could expect from a multi-party government looks at what the Greens and UKIP are saying.

I suspect many Inside Housing readers would welcome a Green housing minister committed to implementing its manifesto pledges to ‘provide 500,000 social homes for rent over the five-year parliament, control excessive rents and achieve house price stability’.

The manifesto is the only one from the English parties already represented at Westminster that offers a genuine alternative to the current system. While many will question its feasibility, few would quarrel with its principle of ‘making property investment and speculation less attractive and increasing housing supply’. Among the policies on offer are the removal of borrowing caps on councils, the end of the right to buy at a discount, more rights to homeless people, five-year private tenancies with rent increases limited to CPI, removal of tax relief for buy to let landlords and preparations for a land value tax.

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Village vision

Inner city council estates were once the solution to the housing crisis, then the problem. Now they could be the solution again. But for who?

There is arguably no more controversial issue in housing than the regeneration of existing social housing estates, especially in London. Schemes in boroughs right across the capital have hit the headlines, mostly for the wrong reasons.

In a report this week, the Labour peer Lord Adonis and the think tank IPPR presents a vision for what they call ‘city villages’. The scope is broad, with town centres, private renting and the great private estates of central London discussed alongside some opposing views about new towns. However, the focus is overwhelmingly on the densification of existing council estates with mixed tenure development. If anyone attending the launch needed any reminding that this is controversial territory, tenants from the West Kensington and Gibbs Green estates in Hammersmith & Fulham were protesting outside.

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