According to Crisis, to tackle new housing needs and address the backlog of overcrowding, sharing and unsatisfactory living conditions, we need to build 90,000 social rented homes per year in England. Yet currently we struggle to produce 5,000. This means that, far from meeting new needs, we’re not even building enough to replace the social rented homes that are regularly being lost. Theresa May promised to revive social renting “in those parts of the country where the need is greatest” but it’s in these parts where the supply is falling fastest.

CIH does an annual calculation of the loss of social rented homes since 2012, when new policies began that saw a dramatic switch of resources and existing stock away from social renting. It shows that over the six years since then nearly 166,000 social rented homes owned by councils and housing associations have been lost, even when new build is taken into account. This means that, instead of increasing as needs have grown, by April last year social rented supply had fallen by four per cent. Why is this happening?

For local authorities, the biggest cause of the decline is of course right to buy, with 67,000 homes sold in the six years after the policy was “reinvigorated” in April 2012 and discounts raised. In addition, some 2,000 or so homes are demolished each year. With fewer than 4,000 new council homes being built annually, the gap will continue to grow unless there is a radical increase in new development.

Of course, the government is hoping this will happen. It has made grant available to build social rented homes, and it has removed the caps on council borrowing. Councils might now be able to double their output – to perhaps 8,000 per year – although this still won’t be enough to replace the homes lost through right to buy.

For housing associations, which have 48,000 fewer properties let at social rent compared with 2012, by far the biggest factor is conversions. This happens when properties are relet at a higher, Affordable Rent when a tenancy change takes place. 111,500 lettings have been converted so far. In fact, conversions have supplied more homes for letting at Affordable Rent by housing associations over the past six years than new build. The second most important factor is “preserved” right to buy – the right that a former council tenant carries with them if their home is transferred to a housing association. This has resulted in 24,000 sales since April 2012. New building for social rent continues, but it’s now down to only a few thousand homes per year and can’t make good the losses in the rest of the stock.

Will these losses continue? Looking ahead to 2020, CIH believes the net loss could amount to almost 200,000 homes since 2012. But we think the rate at which homes are lost is slowing down. This is because some policy decisions that would have worsened the situation are no longer going ahead. The government has said it now won’t force councils to sell off their higher value homes, nor has it yet announced a long-term plan to extend right to buy to all housing associations (at the moment, there is only a limited pilot in the West Midlands). Conversions to Affordable Rent are also falling fast, and have now been banned in London.

But much more needs to be done. CIH has called for the right to buy to be ended in England, as has already happened in Scotland and Wales. If the Conservative government continues with the current right to buy and its higher discounts, it should at least allow all of the receipts to be recycled into new investment.

Now that borrowing caps on council housing investment have been lifted, the biggest obstacle to a bigger programme to build social rented homes is insufficient grant. Both the Greater London Authority and Homes England have introduced higher grant levels for social rent, but the pot of money is simply not big enough to pay for the number of homes now required. Whether social landlords will be able to get anywhere near delivering a target of 90,000 new social rented homes a year now depends on the forthcoming spending review. But, as the Institute of Fiscal Studies has just pointed out, the prospects for a major boost in spending are hardly encouraging. It is likely to happen only if the government is willing to alter its priorities for spending on housing: more than three-quarters of its investment is still going towards support for the private market, through schemes like Help to Buy.

Original post: Public Finance