The government should end “affordable rent”and Right to Buy

This is a letter to Michael Gove in response to his speech at a Shelter in which he said that he would look at ways to produce more social rent homes.

These comments are welcome but if you seriously want to see a big increase in the building of social rent homes then it is necessary to clear away the obstacles that your government’s policies place in the way of achieving that.

Dear Mr Gove

In your recent speech to the Shelter conference you said that your party had focused funding on “products that are not truly affordable”, and have not enabled housing associations and others (councils) “to generate the housing at the social rent they need”. Inside Housing reported you saying that you were exploring ways in which more social rent housing could be provided.

These comments are welcome but if you seriously want to see a big increase in the building of social rent homes then it is necessary to clear away the obstacles that your government’s policies place in the way of achieving that.

Affordable rent

The introduction of affordable rent was designed to enable a 60% cut in funding for social housing, as part of the austerity agenda. It was said that this would facilitate the building of more homes but that has not been the case. As you implied in your speech, affordable rent is not “truly affordable”. In England it is on average 35% higher than social rent (in London it’s 68% higher). This is a waste of resources since the housing benefit payable is higher than it is for social rent.

Because of the low grant currently available for new build (it is actually lower than the National Affordable Homes Programme of 2008, which was around £60,000), to make the finances stack up landlords are converting social rent homes to affordable rent. So in the housing association sector 10% of homes are now affordable rent. While it is only 2% for councils, nonetheless year on year social rent homes are being replaced by affordable rent which in some areas is reaching the threshold of the Local Housing Allowance (failing to cover the full rent).

We believe that you should abandon affordable rent and only offer grant for social rent homes. It is more economical and more affordable for the tenant.

Grant for new build

Initially, the second round of your Affordable Homes Programme had no funding for social housing save for 8,000 supported housing units. In her leader’s speech to the October 2017 conference Teresa May promised “a new generation of council houses”. She committed to funding for social rent homes; an extra £2 billion on top of the £7 billion Affordable Homes Programme. She said that “We will never achieve the numbers of new houses we require without the active participation of social and municipal housing providers.”

However, rhetoric wasn’t matched by practice. Homes England statistics show that between 2016 and the end of March 2021 only 15% of funding was for social rent homes. Moreover, the average funding for social rent homes was only £57,580.

There has been no “new generation of council homes”. To the contrary, since 2010 the stock of council housing in England has fallen by more than 200,000.

According to Homes England’s summary of funding from 2016 up to the end of March 2021 nearly £1.7 billion had gone towards affordable rent homes and only £886 million to social rent. Ending funding of affordable rent homes would mean that whatever money was available could be devoted to social rent, though clearly there needs to be a higher level of grant than currently available. We would add that the nearly £1.4 billion towards Shared Ownership is a waste of resources. Shared Ownership was introduced as a substitute for traditional home ownership via a mortgage precisely because the house price inflation resulting from, amongst other things, Help to Buy, made home ownership impossible for more and more people, especially the younger generation. Funding currently available for Shared Ownership should also be directed to social rent homes.

Right to Buy

In relation to Right to Buy, as you know, the LGA has long demanded that councils are allowed to keep all their receipts, and local authorities allowed discretion to suspend sales. There are even restrictions on how councils can use what receipts they get. No more than 40% of the cost of a new home can be covered by RTB receipts. This means that councils have to borrow and/or convert social rent homes into affordable rent. These restrictions should certainly be ended.

However, we are strongly of the view that RTB is one of the main reasons for the housing crisis in this country and that it should be ended. When you add RTB sales together with demolitions then councils have to build more than 13,000 homes a year on average just to maintain current stock numbers (see table below), something that has not been achieved in any year since of your various administrations.

It is common knowledge that many homes bought under RTB end up as private rental homes. Some estimates suggest that 40% of them end up in the PRS with rents much higher than council rents and with an insecure tenure.

Before the introduction of RTB many council tenants who wanted to buy a home were able to save a deposit for a mortgage because council rents were good value. They then handed the keys back to the council and somebody on the waiting list was given the property. That can’t happen in the private rented sector because the rents are so high. Start building council housing on a large scale again and you will take the heat out of the market. If hundreds of thousands more people had the possibility of a council tenancy you are likely to find house prices and private rents coming down. A side-effect of large scale council house building is likely to be more people who want to buy a market home being able to afford to as prices come down.

Polly Neate, chief executive of Shelter, was certainly correct when she said

“A long line of governments have focused on home-ownership schemes that are only for the better off, rather than what most local families need – a secure home they can afford….Unstable private renting is a lifetime prospect for millions of people, who are stuck paying private rents that leave them with no breathing room or opportunity to save for their future. Families want to put down roots and be an active part of their community, but their housing is holding them back….Good social housing is as vital as education or healthcare, but it has been de-prioritised for decades. If we try to level up without social housing, we will only push people out.”

You told the Shelter meeting that

“The quality of the private rented sector, the circumstances in which people find themselves, the inadequacy of so many of those homes, the fragility and vulnerability that so many people find in their daily lives … is insupportable and indefensible … that is a function of broader supply questions, but it is also a critical function of our failure to ensure that there are homes that are genuinely affordable for rent, our failure to ensure that there are more social homes.”

The only way to remedy this is to provide the necessary funding for social rent homes, at least 100,000 a year, and to stop the loss of stock resulting from RTB.

Right to Buy Sales and Demolitions, England

EnglandRTB SalesDemolitionsTotal

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