It is increasingly clear that the UK housing crisis can only be addressed by building more social housing. Ross McKibbin wrote in the LRB last year that this should be a priority for a future Labour government, and even the coalition belatedly accepted the economic benefits of social housing construction in the run-up to the Autumn Statement. The problem is that they are actually doing the opposite. Social housing ‘starts’ fell to a miserable 454 in the last six months, and although they will start to increase soon, the new investment will have two very important downsides.
First, since their funding from the government has been cut, housing associations will only be able to pay for new housing if they put up their rents, especially in London. This is deliberate government policy: it was announced in October 2010 that housing associations are to be encouraged to charge new tenants ‘affordable’ rents, up to 80 per cent of the market rate. One association says that this would mean rents in central London going up by more than £200 a week. It has also calculated that the housing benefit bill for tenants would rise by more than 150 per cent, mainly because tenants who can afford to pay their own rent at current levels couldn’t do so at the new ones.
Second, without more help from the government, housing associations that intend to keep building will have to borrow more money. The government is already talking about what might happen after it has exhausted all the potential development on the back of the new higher rent levels, but doesn’t have a clue what to do next. Four years from now, the Tories will have exhausted the options and the ‘affordable rent’ programme will have created only half the number of houses built in the last three years of Labour’s programme, itself inadequate.
At the Tory conference, David Cameron threw into the pot (without letting his housing minister know in advance) the idea of selling more council houses under the right to buy. This potentially generates some cash, but means losing houses at lower ‘social’ rents and replacing them with ones that have both higher rents and higher debts linked to them. This is not a sustainable solution, even if enough potential buyers are found – which, given that sales are supposed to reach a target of 100,000 and there were only 3700 last year, seems unlikely, even with the increased discount announced just before Christmas.
If there is to be a supply of new low-rent housing after 2015 – when millions of people with low-paid and insecure jobs will still need it – then it will have to be subsidised. Government doesn’t need to meet the whole cost, because part can be met from rent. But the subsidy does need to go back to somewhere near the levels of Labour’s programme: about £50,000 per house, compared with just over £22,000 now. If housing is a high-profile issue now it will only be even more of one in four years’ time, as waiting lists continue to grow and homeownership (now in its sixth year of decline) falls even further.
Original post and comments: London Review of Books