The government’s focus on reviving right to buy, and insisting on market rents for replacement social housing, undermines the aim of creating mixed communities.
Housing professionals might be forgiven for feeling unclear about the policy directions they are getting from government. The Localism Act made big changes to decision-making about who gets housing, pushing more responsibility down to local level.
In response, councils have been revising their waiting lists and allocations policies, taking advantage of the new flexibilities. Whether or not you agree (for example) that Bournemouth should cut 5000 people from its list, this is at least localism in action. Local decision-making was also reinforced by the new financial freedoms council housing was given from 1 April.
But the government can’t stop worrying about social housing, who lives in it and how it’s paid for. There’s nothing localist about the revitalised right to buy, in which councils are required to give discounts to a maximum of £75,000 regardless of location or household income.
Nor does the right to buy fit with other initiatives such as HomeBuy, where help to buy a share of a home is restricted to households earning under £60,000 per year. Paradoxically HomeBuy income thresholds do fit with the government’s latest announcement, that it plans to legislate to make tenants whose household income is above this level pay full market rents.
So if you earn more than £60,000 you should be paying more – unless of course you want to buy your council house in which case you can get up to £75,000 in subsidy. In Westminster, 175 high-earning tenants are forecast to do this over the next three years, costing a potential £13m. This is a real loss to the public sector, unlike the current ‘subsidy’ they receive which is simply the gap between social and market rents.
The mooted ‘pay to stay’ plans would bring in a claimed £21.6m per year by hitting the pockets of better-off tenants, but at what a price? While some tenants might pay up, most are likely to hit the right to buy button and claim their big discounts. Furthermore, to make a surplus from this exercise at all implies being able to assess and monitor the incomes of four million tenants for less than £5 per tenant per year, which is clearly absurd.
While the latest government announcement has little to do with localism, it does fit a pattern. Reviving the right to buy and insisting that replacement houses are let at ‘affordable’ (i.e. closer to market) rents, combined with the ending of any grants for new homes at ‘social’ rents, are all measures which affect supply and make tighter rationing of the available homes seem highly justified. This inevitably means that on average tenants will be poorer, thus confirming the impression that social housing (and government ‘subsidy’) is only for people on low incomes or without a job.
For those landlords who have been trying to meet a range of needs and create mixed communities this is bad news. But it also makes no economic sense. There are plenty of sectors where apparently indiscriminate subsidy is there for a purpose (eg parks, libraries, motorways). In a society where a significant and growing proportion of workers are on low or insecure incomes (or both), access to housing at a rent they can afford is a stabilising factor both for the households and for the economy as a whole.
Pushing them into possibly unaffordable homeownership is not – as current concerns about levels of mortgage arrears and repossessions remind us.
Original post and comments: Public Finance