What a way to run a housing system

Originally posted on September 14 as a column for Inside Housing.

The balance of funding between government funding for home ownership and affordable housing schemes continues to astonish even after the change in emphasis under Theresa May.

Revised figures prepared for Thursday’s publication of the UK Housing Review Briefing Paper show that total support for the private market up to 2020/21 is set to total £32 bn compared to support for affordable housing investment of just £8.6 bn.

This pie chart really brings it home:

These are revised figures that take account of the extra money for affordable housing announced by chancellor Philip Hammond last November. Even after that, even after adjustments for lower than expected spending on mortgage guarantees, and even including the Right to Buy pilot in the pink part of the graph, we are still spending £4 on support for the private market for every £1 we spend on support for affordable housing.

What really leapt off the page at me in this chart was that the government is set to spend £4.2 bn on Help to Buy and Lifetime Individual Savings Accounts (ISAs) over the same period as it spends £4.3 bn on the main Shared Ownership and Affordable Homes programme.

This is of course not the only imbalance. A report by the National Audit Office (NAO) in January estimated annual net government spending on housing at £28 bn. Of that, £20.9 bn goes on housing benefit and just £2.4 bn on investment in new affordable homes via the Home and and Communities Agency (HCA).

To hammer home the first point, the ISAs have the same priority as affordable housing when they essentially give free money to any first-time buyer to buy a home (Help to Buy) or anyone aged between 18 and 40 to buy a home or start a pension (Lifetime) provided they save money of their own (or get it from their parents).

And all the time the cost of that free money will keep escalating: after 2020 the cost of those ISAs will rise to over £2bn a year.

Speculation is growing about a new government announcement on housing at the Conservative conference or in the Autumn Budget but the odds look good that it will go towards the blue part of the chart rather than the pink.

As Rachel Sylvester reported in The Times on Wednesday, the perception among Tory MPs is that they lost their majority because of young people and that problems getting on the housing ladder were even more of a factor than tuition fees.

The immediate housing challenge is the response to Grenfell Tower, though without extra government funding that could easily mean fewer new affordable homes.

Beyond that the Tories are said to be looking at home ownership measures that may even include some building on the green belt.

The latter might do some good, especially if the government revives its manifesto plan to reform compulsory purchase legislation and the land can be acquired at close to existing use value.

As for Help to Buy, financial results reported in the last week could hardly make it clearer that the main beneficiaries of the billions poured into it have not been first-time buyers but executives and shareholders in the big housebuilders.

Back with ‘affordable’ housing, the UK Housing Review Briefing Paper also investigates the shifting meaning of an adjective that now covers everything from social and affordable rent to shared ownership starter homes before it reaches its apotheosis with ‘affordable private rent’.

This graph shows the changing nature of affordable housing completions funded by the HCA and Greater London Authority and the way that social rent has more or less disappeared:

That’s not the full story, though, as it points out. A recent survey by the National Housing Federation said that total affordable supply by housing associations was just over 32,000, with 4,775 (or 15%) for social rent.

The difference is that they are not grant funded but (presumably) come from cross-subsidy from development for open market sale.

Meanwhile affordable rents do not inevitably mean ‘unaffordable’. In some parts of the country, they are close to social rents anyway and in others some associations are cross-subsidising to keep rents close to social levels. The UK Housing Review also says the GLA’s £60,000 grant under London Affordable Rent should achieve the same thing.

However, those caveats aside, that still leaves affordable provision at half the levels needed with questions about how affordable it really is.

The implications of that were brought home in a quietly devastating report on homelessness from the NAO on Wednesday.

Rising homelessness is now costing local authorities in England is more than £1 billion a year. That’s mostly the cost of temporary accommodation and does not include costs for the wider public sector.

The faster rising cause is the end of insecure private rented tenancies, which as the UK Housing Review points out were devised in a very different age to restore investor confidence but look increasingly inappropriate now.

As private rents riser, cuts in housing benefit that leave tenants with bigger and bigger shortfalls against them.

Yet neither of the main government departments is doing much to monitor the situation even as they claim that discretionary housing payments will mitigate all the costs of welfare reform.

And, in a post-Supporting People world, the NAO concludes that ‘local authorities have increased their spending on homelessness while simultaneously reducing spending on preventing it’.

What a way to run a housing system.


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