Money for social housing can be found

Civitas, 19 October 2010

The £6 billion council house budget is likely to be one of the major casualties of this week’s spending review. The National Housing Federation has said it is expecting “doomsday” cuts that will severely slow down the construction of affordable housing. But there are a few ways of cutting this budget while saving housing construction, writes Carolina Bracken.

As the waiting list for social housing reaches a record 2 million, the number of homes being built has dropped to its lowest level in over half a century. The Chief Executive of the National Housing Federation, David Orr, has forewarned that “brutal” cuts “would effectively shut the door on an entire generation which would be left with little hope of ever being allocated a social home”, and represents “a kick in the teeth to millions of people stuck on waiting lists”.

However, the Government intends to release funds for its building programme by increasing subsidised rent rates to 80, even 90, per cent of the market rate. In future, not only will tenants have their entitlement means-tested and reviewed at regular intervals, but no new tenant will have the right to a council house ‘for life’ – the right to keep their property indefinitely, unless they break the tenancy agreement.

Shadow Communities Secretary, John Denham, has derided the idea as “dreadful”, claiming that the policy “does nothing to address the real need – more council homes”. However, the problem is not so much the lack of affordable housing, but the need to redress the inefficient allocation of existing housing. Currently, 20 per cent of the 8 million council house tenants earn more than the average wage, and rents are often not based on tenants’ ability to pay. Instead, criteria which pertain to the house itself, rather than the occupants, such as its size and location, the number of bedrooms, and its condition, are used to calculate subsidies. Official figures have revealed the skew in rates that has been engendered, as let residential house prices have shot up and the cost of council housing has dived; whilst the average council house tenant pays only £280 rent per month, their private market counterparts must find £565.

Moreover, new figures, produced by the Department for Communities and Local Government in response to a freedom of information request , suggest that more than 90,000 individuals have ‘inherited’ council properties to which they are not entitled. At present, under the secure tenancy scheme, council tenants may ‘bequeath’ their tenancies when they die, and consequently pass the taxpayer-subsidised house to their family. This is costing the taxpayer more than £300 million a year. Some officials have indicated that this figure underestimates the true situation, as it excludes those who have already sold properties they inherited. Whilst no one should be removed from a home they have inherited, a sensible policy would gradually increase the rates of such tenants, eventually to 100 per cent of the market level, as and when they can afford it.

Government expectations that more tenants will move into the private sector have been met with doubts. Richard Capie, at the Chartered Institute of Housing, has dismissed the idea, claiming, “with high house prices, markets rents and low wages, this simply isn’t going to be an option or choice”. Yet keeping tenants who can afford to pay more in such heavily subsidised housing will only exacerbate the shortage of available accommodation for those most in need.

Housing Minister, Grant Shapps has admitted that the impact of the policy will not be felt for a decade, and is likely to attract immediate criticism. Nonetheless, his ideas extend still further, with hopes to introduce legislation creating a National Home Swap Scheme – a system enabling tenants to ‘swap’ their home for one more fitting their needs.

The full extent of the budget cuts will be revealed in tomorrow’s Comprehensive Spending Review.