The case for more investment in affordable housing is growing. Two reports launched this week looked at the arguments for a massive programme of affordable house building and both concluded that more investment would significantly reduce the welfare bill.
Wednesday’s report from social housing campaign group Shout and the National Federation of Almos warns that without a significant increase in truly affordable housing to rent, the costs of housing benefit could grow eightfold to £197bn over the next 50 years. Factor in the way that house building (through construction jobs, for instance) benefits the economy and the government’s deficit, and it builds a convincing case that government should invest now to achieve more sustainable public finances over the coming 50 years.
The next day brought another report – this time from the Joseph Rowntree Foundation, the National Housing Federation and Savills estate agency. This took a different approach. Using evidence about incomes and affordability for the lowest income groups, which are most dependent on renting, they urge the adoption of a “living rent”, closely attuned to local income levels, to ensure that average housing costs are no greater than 28% of incomes. This will, they argue, re-establish the crucial links between housing and the labour market and between rents and the ability of people on low incomes to afford them.
Coming at the problem from these different starting points, both reports make an estimate the gap between what genuinely affordable homes would cost to build and how much of the cost could be financed from rents. They both conclude that this gap is about £59,000 per house (on average, with considerable variation between London and the rest of England). This is the amount that would need to be provided by a combination of government grant, free or low-cost land from local authorities, contributions from developers and – potentially – cheaper debt through government guarantees.
The Shout/NFA report suggests that future savings in housing benefit alone would justify the government covering about £37,000 of this funding gap through an increase in its average grant (currently under £20,000).
At this point the reports diverge. The Joseph Rowntree report calls for a more ambitious affordable homes programme, aimed at building 80,000 homes per year (25,000 more than the government plans). Half would build homes for rent at a “living rent” and (like the present programme) the other half would be devoted to more expensive housing aimed at those on slightly higher incomes. The Shout/NFA report calls for a steady build-up to 100,000 social rented new homes by 2020, replacing, by implication, the current programme.
Both reports are calling for more public funding at a time when budgets are being cut back and the Treasury shows no desire to increase funding, which it would count as more borrowing. Neither takes account of new government housing policies, such as the extension of right to buy. But both take as a starting point the need to solve the conundrum posed by higher and higher welfare spending.
The growth of housing benefit spending is remorseless and the way welfare cuts are tackling the problem is like treating the symptoms rather than the cause. The two reports suggest a more radical but potentially more lasting solution to the burgeoning welfare bill: provide housing at rents that low-income tenants can afford to pay from their wages, with less or no reliance on housing benefit. What the two reports make plainer than ever is that any long-term plan for housing must address the links between welfare spending and housing costs: only if we do that will we find a sustainable way forward.
Original post and comments: Guardian Housing Network