Bournemouth Uncut

Chasing the corporate tax avoiders & fighting the cuts

Social Housing Reform

The coalition agreement states:

We will promote shared ownership schemes and help social tenants and others to own or part-own their home.

We will phase out the ring-fencing of grants to local government and review the unfair Housing Revenue Account.

We will provide incentives for local authorities to deliver sustainable development, including for new homes and businesses.

In the longer term, we will radically reform the planning system to give neighbourhoods far more ability to determine the shape of the places in which their inhabitants live, based on the principles set out in the Conservative Party publication Open Source Planning.

The coalition government has announced legislation to introduce the following reforms:

LHA rate caps  from April 2011, local housing allowance rates will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more.

LHA rates set at the 30th percentile – from October 2011, local housing allowance rates will be set at the 30th percentile of local rents. At present they are set at the median (i.e. 50th percentile) of market rents. The median is sometimes referred to as the 50th percentile (50% of the way along your line of values). What the government proposes to do is to reduce that to the 30th percentile. This will mean that Housing Benefit will pay less out for the same accommodation.

Housing benefit to be cut after 12 months claiming Jobseeker’s Allowance – housing benefit awards will be reduced to 90 per cent of the initial award after 12 months for claimants receiving Jobseeker’s Allowance. This will be introduced in April 2013.

The age threshold for the shared room rate for housing benefit will be increased from 25 to 35 from April 2012

A new option for councils and housing associations to offer shorter-term tenancies to families on its council house waiting list

Housing associations will be able to charge new affordable rents set at up to 80% of market level.

A commitment to build an extra 150,000 social homes in this parliament.

The social housing budget will be halved from £8.4bn to £4.5bn for 2011 to 2014.

Discretionary Housing Payment fund increased – the government contribution to Discretionary Housing Payments will be increased by £10 million in 2011-12 and £40 million in each year from 2012-13.

Entitlement to space for a carer – from April 2011, housing benefit claimants with a disability and a non-resident carer will be entitled to funding for an extra bedroom.

Index linking of LHA – from 2013-14, local housing allowance rates will be uprated in line with the consumer price index (CPI). Currently LHA rates are recalculated monthly based on actual market rents in the area.

Non-dependant deductions to increase – deductions for non-dependants will be uprated in April 2011 on the basis of prices. This will reverse the freeze in these rates since 2001-02.

Social sector benefits to match household size – from April 2013, housing entitlements for working age people in the social sector will reflect family size.

How many and which people claim housing benefit 

There are currently around 4.7 million people claiming housing benefit, amongst those 2 million are pensioners, 500,000 are on jobseekers allowance and 700,000 are in low paid jobs. It is estimated the cumulative effect of the Jun’10 budget and Oct’10 spending review is a £1.8 billion cut in housing benefit. The coalition has stated these reforms are necessary because housing benefit is ‘out of control’ and these measures will drive down rent costs. However, whether rent costs are driven by LHA (Local Housing Association) rates or the private market is hotly disputed, so it is unclear how the market will react.   

Rent cap and lowering of percentile

The levels of the rent cap for some areas will be fair and reasonable. But in many, particulary cities like London, where housing and rent costs are very high, it does seem likely that many people will be forced to move and, in the worst case scenario, become homeless. It must be said that Labour did lose control and and a small minority were claiming for extragavent rents. In the Apr’10 budget, rather belatedly, Labour announced they would reveiw and deal with extreme cases.

Head of shelter Campbell Bell said, “It is absolutely clear from what they are saying, is that over the next few years a whole swath of London, a whole series of properties – 2-bed properties and bigger – will just become more unaffordable for those on housing benefit. In effect what will happen is the rents will be higher than the housing benefit that people get, so they would have to find their own money to meet the costs of rent before they have even started thinking about clothes and children and all those kinds of things. I am concerned the cuts could change ‘the very nature’ of central London, and other cities – and could mean tens of thousands of households forced from the centre, creating concentrations of poverty and inequality. Suggestions rents would come down if housing benefit was reduced were an ‘heroic assumption’ when they had steadily risen over the past few decades.”

Political expert Tony Travers speaking at the London School of Economics said, “The perception of many of the government’s opponents is that this (policy) will push the poor out of inner London… and into outer London, which will create greater concentrations of poor people. The opposition is very profound and there is a struggle going on which has not finally been resolved yet. The government has proposed fairly radical changes to the system of housing subsidy, which have a particular impact in London where housing is extremely expensive. The government ends up paying a subsidy to poor people to live in the city. That has the effect of holding a significantly larger number of poor people in inner London than you might normally see in, say, Paris. The government is changing the rules to reduce the level of subsidy and that is going to have an effect potentially of forcing such poor families to move out of the city centre. The term Parisification has been used — the idea that somehow the poor would be expelled from the central part and pushed into the suburbs, into the banlieue. We will have to wait and see how this works through, but it is a very controversial policy for sure.”

Nigel Terrington, Chief executive of The Paragon Group of Companies said, “The government has to be careful not to shift the role of housing people on low incomes on to the private rented sector without ensuring it has appropriate levels of support at both an economic and regulatory level. Failure to do so could be dangerous as it may lead to a shortage of rental property at a time of unprecedented tenant demand.”

Alex Fenton, Research Associate at Cambridge University’s Dept of Land Economy said, “It comes down to questions of how we use space, Do we want to have mixed or financially segregated communities?”

Leslie Morphy, Chief Executive of Crisis, “Cuts will be devastating to London but it is vital we don’t lose sight of the huge damage that will be done in the rest of the country. The impact is going to be felt from Cornwall to the Highlands – with 937,000 households affected by the first wave of cuts alone.”

Sam Lister, Head of Policy at the Housing Institute said, “Basically if you draw a line from the Wash [in East Anglia] to the Severn [at the Bristol Channel] that would be a southern England in 10-15 years where rents are simply unaffordable [for] those living on housing benefits. You then get people forced to move from where the jobs are to where there are far fewer. It’s making worklessness worse. It’s not relieving it. The government keeps saying that landlords will drop their rents, but there is no evidence for that, What we will see is the south of the country becoming just unaffordable and people forced to move out so far it becomes impossible to travel in to areas where there is work.”

Rowan Williams, the Archbishop of Canterbury said, “My worry there is that people’s housing is part of their sense of stability, part of their sense of having a secure future, and I’m also a bit worried about the way in which this could lead to a kind of social zoning, where middle-class areas get more solidly middle class and other people are pushed out to the edge. People who are struggling to find work and struggling to find a secure future are, I think, driven further into a downward spiral of uncertainty, even despair, when the pressure is on in that way.”

10% cut to long term unemployed

There is no doubt that some abuse the system but rather than penalise every long term unemployed person, seek out those who are not actively seeking work. There are already safeguards in place via Job Centres whereby, when it is proven, people who do not look for work have their benefits stopped (including housing benefits). Enforce the regulations in place, do not penalise the vast majority of the unemployed who do want a full time employment but find themselves among the average 5 to 1 ratio of those looking for jobs to job vacancies or those who live in areas where this ratio is higher.

Helen Williams, assistant director of the National Housing Federation said, “But if you’re on a low wage or reliant on Jobseeker’s Allowance, it’s a huge amount of money. It practically leaves them nothing to live on. And those living in ostensibly less affluent areas will be affected. Crisis estimates claimants in St Helens will be £15 a week worse off.”

Shelter’s Chief Executive, Campbell Robb, “Imagine if you are on jobseeker’s allowance of just £65 a week or a pensioner surviving on £98 a week, or those on the minimum wage of £218 a week. These losses represent a significant proportion of their income. They will really struggle to find the extra money they will need to keep a roof over their head. The focus of debate so far has been the cap to housing benefit and the impact on London, but this analysis shows that these cuts will affect hundreds of thousands of people across the country.”  

Reducing length of tenancies

Presumably, the concept of social housing is to give those people who are not in a position to buy their own house or flat,  an opportunity to live in a property they can call their home for life.

Chartered Institute of Housing Chief Executive Sarah Webb said, “There will be an increasing number of people who just won’t be able to afford somewhere to live. So while we think the government is right to reform, we are not entirely sure this is the way to do it. I don’t understand how this is going to help increase the number of houses available, because if you can afford to buy you will go and do that already, I think there are some people out there who would be quite happy to take a five-year tenancy but they’re the minority.”

Ruth Patrick, Disability Now columnist said, “Disabled people are twice as likely as non-disabled people to live in social housing, and so any changes would affect this group disproportionately.
Stacks of research show that the best social housing estates are those with low turnover of residents, where a sense of place and community becomes established. Changing the social housing offer so that tenancies are provided for shorter periods would only increase the disharmony and problems on some social housing estates. Further, changes could create an ‘aspiration trap’ as people would be fearful about accepting a job if that might put their home at risk”

The coalition have announced that social housing landlords will be allowed to check their tenants’ finances after 2 years in a property with a view to evicting those whose financial situation is deemed to have improved enough. The tenant would be given at least 6 months notice and the government are planning to introduce these reforms by the summer of 2011.

The Department for Communities and Local Government stressed that two years was a minimum and that the reforms were intended to give flexibility to local housing providers. Housing Minister Grant Shapps told the BBC that “two years won’t be the norm for tenancies, many years will be the norm”.

It must be stated that this seems to be a rather shambolic policy as, when it comes to property, most people need security and stability. Families have to be make plans for the schools their children attend. Also we could very easily see a scenario where a person is not incentivised to work or move employment to a higher paid job for fear of being forced out of their home.   

Charge new tenants 80% of the market rate and building new homes 

This seems a rather disjointed policy, it is unclear how people on benfits or low incomes will be able to pay these extra rent costs. If social housing is, in fact, meant for these people, then presumably they will claim housing benefit. The coalition has stated that money raised from this policy will be used towards the cost of the 150,000 affordable homes they pledged to build. If this is the case then why not keep the rent costs as they are now and fund the building projects directly. Another objective of this policy is to drive down market prices but as stated earlier it is not certain to work.

NHF Chief Executive David Orr said, “The new funding model for low cost housing is predicated on high rents, instead of on an adequate capital budget, and this means that the freedom of housing associations to respond to housing need in each area will be cut from beneath their feet. Housing associations had wanted the flexibility to build a mix of homes at intermediate rents and social rents – but now they have an imposed solution which replaces that mix with high-cost, near-market prices across the board. Because it is based on near-market rents, the new funding model will trap thousands of tenants in welfare dependency because they will simply not be able to earn enough money to pay for their homes without the support of housing benefit – which means the benefit bill for new low-cost housing will go through the roof.”

Nigel Terrington, Chief Executive of buy-to-let mortgage lender Paragon said, “The decision to move social housing rents more in line with the market rate will make private rented property an option for people who wouldn’t have considered it previously, whilst the end of social homes ‘for life’ will result in a higher turnover of social housing stock. However, private rented sector stock is under strain as more people look to rent than buy, and this surge in tenant demand is causing rental inflation. The government must be careful not to shift the role of housing people on low incomes on to the private rented sector without ensuring it has appropriate levels of support at both an economic and regulatory level. Failure to do so could be dangerous because it could lead to a shortage of rental property at a time of unprecedented levels of tenant demand.”

Alastair Stewart, an analyst at Investec Securities said, “Housebuilders we spoke to expressed bewilderment as to how 150,000 social housing units would be funded purely from the incremental rise in new intermediate renters paying 80% of open market rents. The combination of a surge in unemployment, uncertainty on the specifics plus cuts to social housing are, in the words of one major housebuilder, ‘sucking the life out of the industry’.”

Stewart Baseley, Executive Chairman of the Home Builders’ Association said, “Final detail and clear guidance on the new planning system is desperately required if the cuts announced are not to see house-building levels – already at an 80-year low – fall further.”

Martin Cook, Ernst & Young’s lead partner for government and public said, ”There is a desperate need for new provision now and the slashing of the capital programme to £4.4bn will have a devastating impact on new affordable housing starts.”

The “Right to Buy” council homes was introduced by the Thatcher government in 1989 and was both loved and hated. However, the fact is council houses sold far out-numbered those being built and maintenance of council homes was neglected. When Labour came to power in 1997, there was a £19 billion maintenance shortfall and 2.3 million were below acceptable living standards. During Labour’s 13 years, the standard of 1.5 million homes were raised to acceptable levels, 700,000 new kitchens and 500,000 bathrooms were fitted, and 1 million homes had central heating upgrades. Obviously this came at a cost and relatively few social homes were built and more emphasis was put on construction of affordable homes. Even when funds were made available to build social housing, it was quite often blocked by local councils not granting planning permission. And now we are where we are, a chronic shortage of both affordable and social housing which is being exploited by private landlords charging exorbitant rents.       

The alternatives

A regional rent cap on housing benefit phased in over a fixed period and based on a comprehensive review of rent costs throughout the UK.

More government funds made available to local authorities to build affordable and social housing. And yes that does say ‘more’! It is widely accepted that this would give a much needed boost to the construction industry and create jobs.

Legislation to ensure it is harder for local authorities to block planning permission for affordable and social housing unless there are exceptional circumstances.

Legislation to set the maximum levels of rent a landlord can charge (similar legislation was abolished in 1989 by the Thatcher government)


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