Two-way street

Originally published on December 7 on my blog for Inside Housing

The minister announces more investment in social housing – social, not affordable – and signs a pact with housing associations and local authorities.

This is not a fantasy or a trip down memory lane but something that happened last week in Wales, a country where the government and the housing sector are very much in sync.

Carl Sargeant, communities and children secretary, told the Community Housing Cymru (CHC) annual conference that Social Housing Grant (SHG) will be increased by £30m this year, or 44% on previous plans. He also signed a pact with CHC and the Welsh Local Government Association to deliver 13,500 affordable homes by 2021.

Though CHC is the Welsh counterpart of the National Housing Federation, the pact is not a deal that requires forced conversion to the merits of homeownership or that turns a blind eye to forced sales of council homes.The Right to Buy is being scrapped rather than extended and the pact sets out a series of other aspirations on everything from jobs and training to energy efficiency and rents to homelessness.

Housing in Wales works very differently to England thanks to devolution and a political culture that works on consensus.While London and Manchester are blazing a trail with new investment powers, Wales can make its own legislation. Greater regulation of the private rented sector and homelessness prevention are already in force, the end is nigh for the Right to Buy and stamp duty is being replaced with the first Welsh tax for almost 800 years.

But devolution only goes so far. Look again at the pact and you’ll find a series of references to the impact of policies such as Universal Credit and the Housing Revenue Account borrowing cap. Powers over housing may be devolved to the Welsh Government but the UK Government retains control over overall fiscal policy and social security. That means not just continuing austerity but also back-door control over key levers of housing policy.

And behind the scenes at the CHC conference one subject dominated the conversation. As elsewhere in Britain (Northern Ireland’s devolution works slightly differently), the big issue is the imposition of the Local Housing Allowance (LHA) cap on supported and social housing. Rent policy is devolved to Cardiff Bay and an increase of Consumer Price Index plus 1.5% still applies rather than a cut of 1% a year. However, Westminster is effectively (to coin a phrase) taking back control via housing benefit and Universal Credit.

The UK government confirmed two weeks ago that the cap will apply to existing claimants of Universal Credit in general needs housing from 2019, rather than just new claimants. The biggest impact will be on single people under 35, who will be subject to the Shared Accommodation Rate (SAR), and in areas with the lowest LHA rates. Only one Broad Rental Market Area in Wales has a SAR lower than the average one-bed social rent for the area compared to 12 where the shortfall is more than £10 a week and six where it’s more than £20.

With LHA rates frozen until 2020 and social rents in Wales still rising, this gap will only grow in future. This prospect is starting to prompt calls from housing associations for freedom to set their own rents.

On paper, lower rents for smaller homes could be balanced by increasing the rent differentials for more bedrooms. However, that would raise a series of other issues, especially if it applied to existing tenants. And it could also increase the impact of another Westminster-inspired cut in housing benefit.

The £20,000 overall benefit cap will affect almost 6,000 households in Wales, 10 times more than when it was set at £26,000. Where the LHA cap affects single people with no children, the overall cap hits families with more children and larger homes. Between them they act like a vice, squeezing social housing from both ends.

And then there’s the impact on supported housing. Read between the lines of the recent consultation and evidence review, and it’s clear that one driver of the decision to impose the cap is that monitoring of quality and value for money fell away after the removal of the ringfence on Supporting People funding in 2009.

However, that only applied in England. Wales has retained Supporting People, a decision supported by increasingly robust evidence about value for money. Now top-up funding to ensure that funding continues ‘at current levels’ will be devolved to Wales and Scotland and English local authorities.

It’s a similar story with another big topic at the CHC conference: the reclassification of housing associations as public sector by the Office for National Statistics (ONS). The decision applied first to England and though officially it relates to changes made before 2010, it was English proposals on the Right to Buy that brought the issue into the spotlight. Sargeant promised to do whatever it takes while reassuring tenants there will be ‘no deregulatory free-for-all’ and the Welsh regulator proposed changes at the conference.

And things can also work in the opposite direction. The 13,500-home target in Wales is part of a 20,000 ‘affordable home’ target that includes the Help to Buy scheme created at Westminster. Increases in housing investment in England in the Autumn Statement will trigger extra funding for the devolved nations. The decision by the English government to ban letting agent fees to tenants leaves its Welsh counterpart looking behind the curve.

Looked at like this, it’s clear that devolution remains a two-way street for housing. The traffic may be flowing nicely in Wales but when you cross the street make sure you look both ways. And look out for potholes and car crashes.