Patrick Mooney, housing consultant and news editor of Housing, Management & Maintenance magazine says supply of homes for social rent appears to be in terminal decline – at a time when they are needed the most
By some strange irony, at a time when the country is witnessing its worst cost of living crisis in decades, we also happen to be building fewer and fewer homes for social rent. Indeed without significant intervention from the central Government, this worrying trend could continue for many more years to come.
Affordability is the key issue here as the cost of housing plays such a vital part in determining the quality of life for millions of people across the country. It can make the difference between thriving and just about surviving.
In the more extreme cases, it can see people forced into unsuitable accommodation, or onto the streets. This is evidenced by the rising tide of temporary housing, evictions, homelessness and rough sleeping in official statistics. All are increasing at alarming rates at present and making a powerful case for action given their impact on people’s education, employment and health.
Social rent homes are an essential part of the solution to our current housing crisis, particularly for lower income households because social rents are pegged at about 50% of market rents, compared to the 80% figure associated with ‘so-called’ affordable rents.
But in the last financial year that we have figures for (2021/22), there was a net loss of 14,100 social homes across England as 21,600 social homes were either sold (mostly through the Right to Buy scheme) or demolished and only 7,500 new social homes were built to replace them.
The vast majority of new homes currently being built by housing associations are Shared Ownership for sale properties or the higher cost ‘affordable rent’ homes, which many of their new occupants struggle to afford.
In fact over the past decade, there has been a total net loss of 165,000 social homes. At the same time there are roughly 1.3 million households on local authority waiting lists, waiting to be allocated a home which they desperately need and can afford.
THE IMPACT OF RIGHT TO BUY
The role played by the Right to Buy scheme in creating the current crisis is a controversial one and it is difficult to reconcile the many conflicting views on it. But since 1980 when council tenants were first given a legal right to buy their home (with the benefit of a large cash discount) at least 1.5 million council homes have been sold.
Back in 1980, social landlords managed to build 94,140 new social homes, which makes the 2021/22 new build figure of 7,500 look so paltry. In fact since 1980 construction rates of social homes have progressively tumbled.
The number of properties sold through the RTB is not itself a problem. The current crisis lies in the fact that political commitments to replace the sold properties on a like-for-like basis have never been delivered and many of the sold properties have ended up in the hands of private landlords, who are now letting them out at considerably higher rents in the private rented sector.
It is estimated that as few as one in seven RTB sales has resulted in a new property being provided by a social landlord and many of these new homes are let at the higher ‘affordable rents,’ rather than on social rents.
Looking forward to the end of the decade, it is being forecast that nearly another 60,000 social homes will be sold and not replaced, as councils continue to be starved of the resources needed to build replacement housing.
A report from Savills for the Local Government Association, Association of Retained Council Housing (ARCH) and National Federation of ALMOs, estimates that 100,000 homes are likely to be sold through the RTB scheme by 2030, with just 43,000 of them being replaced.
The analysis warns that there will be no region of the country or local authority with the capability to provide one-for-one replacements of homes sold under RTB over this period.
The size of the discounts (available to tenants purchasing their homes) were increased in April 2012, and as a result the average discount has increased by 150% to nearly £68,000 in 2021/22. At the same time, this has led to a quadrupling in the number of RTB sales.
With RTB discounts set to increase by a further 10.1% from April this year, in line with last September’s rate of inflation, the LGA says it will become even harder for councils to deliver replacement properties.
CLEARING THE SOCIAL HOUSING SHORTAGE
The current problem has been neatly summarised by Polly Neate, chief executive of the housing charity Shelter, who said: “We are firmly in the red when it comes to social housing. We lose far more homes than we build every year and the losses are mounting up.”
She continued: “The social housing deficit is at the heart of the housing emergency. The fundamental lack of genuinely affordable homes has pushed millions of people into insecure, expensive and often discriminatory private renting. It is why we have over a million households waiting for a decent social home, and thousands of homeless children are growing up in temporary accommodation.”
“The solution is simple: build more social housing. The Government can’t afford to allow this decline to stretch into another decade if it has any hopes of meaningfully levelling up. Instead, it must invest in a new generation of the homes we really need – secure, genuinely social housing.”
The need for action is underlined by the revelation that more than half of England’s housing associations have recently reduced their house building plans, due to a combination of economic uncertainty and the soaring cost of building new housing.
The figure was revealed in the Regulator of Social Housing’s latest quarterly financial review of the sector. This showed the sector is forecasting £16.8bn in development spend over the next 12 months, down from its previous forecast of £17.3bn.
It means forecast development expenditure is at its lowest level for two years, which the regulator said “reflects the ongoing challenges in the sector and economic uncertainty going forward”. The cost of retrofitting energy efficiency and fire safety into existing properties, as well as higher costs in both day to day and planned maintenance is putting a huge strain on social landlords’ budgets.
One possible solution might be for the Government to allow councils and housing associations to convert tens of thousands of existing affordable rents to social rents, but that would require an enormous amount of investment into subsidising rents which politicians would probably prefer to see going into building new homes.
Another possibility would be to follow the example of the Scottish and Welsh Governments in ending the Right to Buy in their countries, but that does not appear to appeal to political leaders
In the absence of other solutions, the most obvious action would therefore appear to be pushing ahead with investment in building homes for social rent and at a scale big enough to make a real difference.
This has been achieved in the past, but significantly it required house building to be a national priority and for councils to be heavily involved in their delivery and construction. Will today’s politicians be
as brave as their predecessors in tackling this issue head on?