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.
I welcome your comments however I do think you do not answer the question who is social housing for? According to shelter its ” Social housing is housing that is let at low rents and on a secure basis to people in housing need” 60% of social housing tenants are economically inactive, the median gross income for households in social housing in 2007/08 was £10,900, compared with £23,320 for households across all tenures. 44% of households in social housing have an annual income of less than £10,000 and only 7% of all households in social housing have a gross annual income of £30,000 or above. ( see their web site)
The SP HA or coucil will not need to monitor 4 million people; all landlords in social housing will know how many tenants are on benefits this is usually about two thirds of all their tenants; do the police monitor all the millions of drivers on the road to see if they are all drunk? No they do not. The amount of people who £60K and over is about 34,000 people.
This can be done more efficiently than you may think, at very minimum cost, and as with the” change of circumstances” requirement for people on social benefits, the onus is on the individual to tell the SP, HA, or Council, if they or the household earn over the £60K cap, just like people on benefits are meant to do also in terms of a change of circumstances; the the law changed so its an implied part of social housing tenancy. this type of requirement should have been done a long time ago. this could checked by access to the tax data base by the Universal Credit call center or in conjunction with the HMRC.
I do not want this reply to be longer than your blog, so I will finish with this; the low social housing rent paid by £60k earners is not fair to the people on the same wage, who have to pay rent in the PRS. Either “pay to stay” or move or buy it.
Social housing is not for £60K earners, they would not get that social housing now with that income, so they should pay the full market rent of the PRS for living in that social housing, which in my opinion seems only fair.
Thanks for the comments. The headline for the piece was really posing the question implicit in recent policy announcements, and indicating that policies are pushing social housing in a certain direction which may not be the one which social landlords and tenants would feel they are currently aiming for (albeit in a very difficult climate).
On the issue of scrutinising tenants’ income, there is currently no mechanism for landlords to do this and any mechanism must be a rigorous one if it is to be fair. Even if data from housing benefits can be integrated with tenancy data for landlords after the introduction of universal credit, that still leaves well over 1m households whose income has to be monitored. Given that most if not all of the tenants required to ‘pay to stay’ will never have had their incomes assessed, this implies such an income assessment taking place for – at the very least – all the non-benefit recipient households, in order to identify the ones with earnings over the threshold.
Good article, John. It is good to see a sensible and measured comment on government policy. You mention the right to buy. The social landlord for which I work usually gets over a hundred bids for each vacant property through a choice based lettings scheme. So, for the one household renting it is like winning a lottery. To then also be given a huge discount to buy is like winning a lottery again. However, the 99% of people who don’t get a social let get nothing. When the average household needs a mortgage of 10 times their earnings to buy the average house in this part of the country (SW England) they are dependant upon the private rented sector for somewhere to live. And the private rented sector offers no security and a myriad of rules. One lady I spoke to told me her 11 year old son had never had a bedroom wall on which he could put up a poster because the tenancy agreement forbad it in all the houses she had lived. And she had had a few houses because a shorthold tenancy gives no security. A social landlord gives people a home, not just somewhere to sleep for a few months. Yes, people who earn a lot of money should buy somewhere of their own. In my experience they do. But the issue of people who earn over £60,000 is just there to divert attention. The big problem is the lack of affordable homes which give people enough security to be able to bring up families and form a community. The right to buy just gives the lucky few yet another bonus.
Well written and nice piece John in tune with my thoughts. Good comments too. I have been very concerned about the paradox of the disparity between HomeBuy conditions and those of the Right to Buy esp in its re invigorated form.(see 24DASH contributions recently) Either market options are affordable to a household earning £60k – or they are not… so which is it? Homebuy applicants are also required to take the maximum mortgage that their income supports and with a guideline 45% disposable income as the affordability CAP this also leaves little flexibility or rainy day / room to manoeuvre for that household – I would add that of course most people buying a home for the first time without the benefit of government assistance also incline themselves to maximise their housing cost outgoings as a necessity in order to reach that first rung – although they choose to do so….rather than remain renting etc???
So where does this leave the Right to Buy ‘beneficiary’? Many would consider them ‘fortunate’ to have got hold of a secure affordable below market rented property in the first place…. indeed the social housing tenant is amongst the ‘fortunate few’ these days in this regard with demand well exceeding supply in almost every corner of the Isle… Housing ‘needs’ assessments to access ‘social housing’(which do not take any account of income or ability to pay or access other market options) is not currently part of most LAs allocations assessment policies – set to change maybe, but not so historically….. and once secured, the RTB confers great discounts as/ when they choose to exercise and there is no requirement to mortgage to the hilt but just take on enough to meet the discounted price….. leaving residual income – and on £60k plus there WILL be residual unused mortgage potential in the vast majority of cases – to spend as they choose on (as it is defined) non essential outgoings …like on all the stuff struggling open market first time buyers (and others buying and renting privately)cannot afford and of course the HomeBuy buyers are not permitted to afford – Holidays, new cars, new clothes, ‘big fat’ weddin’s and perhaps a villa on the costa?
Either market options are affordable on an income of £60k or they are not – but which is it? So David when you are looking at the structure of the consultation on ‘pay to stay’ please make sure that you address the Paradox.
To those who would criticise on the basis that we need mixed demographics in the community I would whole heartedly agree – households who are earning are the minority on estates these days and if all were unemployed there would be the risk of ghettoising – apply the same principle to the newbuild sites where planning permissions require on site s106 units ‘affordables’ – these are often pointed out by the sales team because ‘we have to’ and ‘we’d be lynched if we didn’t’ and ‘yes the homes adjacent to the affordable ones are marketed at a lower price because people don’t want to live next door to the affordable unless there is a discount!’ Great! THis is inclusive mixed communities working REALLY well then too isn’t it! We cannot force perception change just because we want to and we stand no chance of delivering truly inclusive mixed balanced and sustainable communities until we can created tenure which is invisible to the wider community – rug pulling on ingrained bias and prejudice.
In South Bucks we have started to deliver this ‘invisibility’ and it is very popular – ask us about it
Social housing has moved from the tenure of preference for households on steady low to middle incomes in the early 20th century to the tenure of necessity for those least able to cope with 21st century capitalism. Perhaps the questions could be what is social housing and what is it for ? Should we be thinking about how to make good quality homes accessible to all at prices they can reasonably afford and abandon the idea that social homes are only low rent or homebuy housing ? While Housing Benefit administration seems to be monstrously complex cannot we turn all publicly and non profit housing into flexible tenure where the payment is linked to what you can afford and buys you some equity (as long as you live in it as your main home) ? We might need to abandon leasehold enfranchisement and a few antique laws about leases to make this a practical proposition. The upsides would be that what is now social housing would generate money for more homes, and people would not leave social housing as soon as they could afford to. Mixed communities would reemerge. A flurry of disconnected policies without any clear vision do not help creat a dialogue about what works best in the long run – they lead only to similarly unhelpful knee jerks.
Thanks everyone for the excellent comments, I particularly liked John T reminding us that social tenants need ‘homes’ too and providing them is – or should be – the business we are in.
There has been a shift away from “social housing” to “housing welfare” for many years.
The bill for Housing Benefit is now over £23bn a year, dwarfing the rental subsidies on existing social properties, estimated by Hills at £6.6bn a year. Capital funding for new homes is around £1.5bn a year. This isn’t new. It started largely in the 1980s (the total Housing Benefit bill in 1980 was just £0.4bn) as subsidies started being moved from supporting house-builders to supporting households. This is a good thing and we ought to complete the move, ending our obsession with “social homes”.
Subsidised rents and tenancies for two lives distort the market and create opportunities for fraud – through unlawful sub-letting – and inappropriate subsidy with windfall gains for a few. Why should Bob Crow on £100k plus benefit from a below-market rent because his mum and dad were “poor”? Why should a City worker who grew up on a council estate in the East End inherit the tenancy of his mum and dad’s old Stepney council flat, which he uses as a handy pied-a-terre Monday to Thursday before returning to home counties at the weekend to wife and family in his “main home”?
A swift move to market rents, (probably generally in the lower quartile of all rents in existing social stock) and a shift of subsidies to households in need through Housing Benefit, would give us one system, which applied the same way to everybody. As income rose, welfare payments would fall. A general Right-to-Buy would allow tenants a choice of buying, paying market rent or moving out.
Higher rents would flow through to RSL and LA profit and loss accounts, boosting their ability to build, refurbish or redevelop. Stock would turnover become private, be bought back. The lines between private and social homes would be blurred and the concept of “the Council Estate” might disappear. Would that be a bad thing?
Alternately, “Social” landlords might operate on the basis of income-related rents, charging 30% of household income after taxes and benefits up to the market rent, to help reduce the Housing Benefit bill. The overall cost would likely be similar as some capital subsidy requirement might then remain and it does raise questions of privacy if you have to share your income details with your landlord as well as the Housing Benefit office.
What is not sensible is to create yet another rule with arbitrary income levels above which different rules apply, or to force higher earners out of social properties. Keep them there and let the locality benefit from their higher spending power. That is how you create your mixed communities.
But please, can we have one system of housing welfare and one set of rules for all landlords and tenants. In simplification lies reduced costs of operation and hence, more money for the actual support we need to supply.