CSR could herald the slow death of affordable housing

Our guest writer is Jenny Jones AM, leader of the Green Party on the London Assembly

The Comprehensive Spending Review, followed up by a letter from the Minister for Housing to local authorities, together herald the near collapse of affordable housing policy in the UK. For the most expensive parts of the country like London, they could herald the slow death of affordable housing altogether.

The headline cut in the national affordable housing budget is from £8.4 billion over the past three years to only £4.5bn over the next four. Crudely, that will see the building of affordable homes fall off the very low cliff it has clung to through the recession.

The government’s claim that they will build 150,000 new affordable homes over the next four years needs to be understood alongside the previous government’s target for 155,000 affordable homes over the three years 2008-11.

The government has tried to hide the impact of their cuts behind past failures. First, they correctly point out that the previous government only managed to build net 20,000 social homes because of the lost stock from Right to Buy sales. Second, their £4.5bn investment in affordable housing is indeed similar to the level of investment in the last-but-one round under the previous government. These may both be true, but it is worth unpacking.

The Mayor of London’s commitment to build 50,000 new affordable homes over his Mayoral term – downgraded from a commitment to do so in three years – was funded by that surge in funding London received in the 2008-11 investment round. This good fortune coincided with high house prices and poor Right to Buy discount rates that saw the number of council tenants buying their homes drop dramatically.

So the low benchmark set by the previous government was a result of low funding and a failure to get to grips with Right to Buy, whilst the more rosy story in recent years was a result of slightly better funding and the sidelining of the Right to Buy. The cuts announced will unpick this good news story.

The actual impacts of the cut, however, are difficult to estimate due to a number of related policy changes.

First, there is some positive news. Reforms to let local authorities keep their rent could see greater reinvestment in council housing – the New Homes Bonus could help local authorities with a strong commitment to new housing, especially in London which retains its regional planning document the London Plan with its per-borough targets.

But the other bad news is the worst sleight of hand. A new “Affordable Rent” tenure will be offered as an option for housing associations and local authorities who want an alternative to the secure tenancies for social tenants. This new form of tenure will be insecure – though with five or ten year fixed terms, not nearly as insecure as the 6-month tenancies most private tenants are stuck with. It will also be wholly unaffordable if it really is set at up to 80 per cent of the local market rent. The National Housing Federation predicts that in places like London rents may double.

Let us not be fooled. In more expensive areas this isn’t social housing, this isn’t even very affordable housing. It will be helpful only to middle-earners struggling to find the right home in a tough market. Building new homes with this tenure will not remedy past failures to provide net increases in genuinely affordable housing.

How local authorities and housing associations will use this new form of tenure is impossible to predict. There is a distinct possibility that some local authorities in more expensive areas might switch to it wholesale, so that the only affordable housing available will dwindle as tenancies are renewed until there is none left.

The madness of this is that higher rents only push up the housing benefit bill, despite the government’s efforts to force it down with caps and cuts. In London the increase in housing benefit claimants renting privately between 2002 and 2007 (67,000 households) almost exactly matches the shortfall in the provision of social rented homes – 66,700 homes. As my report last January made clear, at the same time that housing benefit costs rose, the social housing waiting list grew by 80 per cent.

We spent five times as much on housing benefit as we did on building new affordable homes. The tragedy of the Government’s cuts and caps is that they will neither build the new affordable homes we need and bring the housing benefit bill down fairly, nor reform the private rented sector to bring rents down and improve the security of tenure for people without any other choice.