A concrete plan for social housing
CLASS has been arguing since it was founded that the Government should focus on funding social housing rather than giving financial support to would be home-owners, an approach which only increases house-prices further. We have also argued that investment subsidy to build new council and housing association homes which are let at rents lower income households can afford is much more effective than letting rents rise and then having to pay tenants housing benefit, which is then passed onto landlords. We therefore welcome the new report by Capital Economics, published by SHOUT (Social Housing Under Threat) and the National Federation of ALMOS (Arms-Length Management Organisations) – Building New Social Rented Homes. This is an economic appraisal which demonstrates that the Government would achieve better value for taxpayers money if it was to part fund the delivery of 100,000 new social rented homes a year, than to continue the current programme of funding rented homes at rents which are only 20% or so below market rent. This is because housing at lower rents reduces the need for housing benefit, a bill which is currently £24.4 billion a year. As more households move to the private rented sector – mainly because they can’t afford to be home owners and they are unable to access the ever reducing supply of social housing –private rents have continued to increase and the housing benefit bill climbs and climbs, however this payment to private landlords does not lead to the provision of additional homes. The report estimates that if current trends continue, the national housing benefit bill could climb to £197.3 billion by 2065-66, a figure that no sane politician would wish to contemplate.
The report reviews historic trends. The current Government funding programme provides grants at only 15% of capital costs, so it is not surprising that rents get pushed up to market levels. The old mixed funding regime of the early 1980’s could fund over 75% of capital costs, with rent income needed only to cover the remaining 25%. Councils have not built a significant number of new homes since the early 1980’s. The new report argues that building significantly more social rented homes is a realistic and practical policy. Not only would there be a saving in the welfare budget, but an active housebuilding sector also generates receipts for the exchequer. The proposed programme should generate a net surplus by 2034-5. The quality of life of thousands of lower income households would be improved. This would mean fewer costs to the NHS budget, the education system, the social welfare system and the police and criminal justice systems. A well housed family is healthier, children will lean faster, families will need fewer interventions from the social welfare system, and family members are less likely to commit criminal offences. These savings may be indirect and difficult to quantify, and the report limits its analysis to the contrast between bricks and mortar subsidy and subsidy to households.
The report proposes that 24,500 homes a year should be built by Councils and ALMOS, with 85,000 new homes a year receiving government grants averaging £59,000 a home. This is a practical proposition and the government should be urged to put the proposals into effect. The current housing funding system is wasting money. The report shows how the waste can be stopped, and how peoples’ lives can be improved. The proposal is for a managed combination of private and public finance but which quite rightly focuses on funding investment, being preferable to funding unmanaged private consumption.