The government has a problem when it comes to house building. It desperately wants to see more so-called 'affordable' homes built by housing associations, private builders and even local authorities, but it hasn't got much money to pay for it.
The solution it has come up with is called affordable renting. In future, most households moving into new housing association properties (as well as some existing homes) will pay higher rents. The extra money raised will be used to fund borrowing, so that associations can build additional homes without being as dependent on government grant.
But what exactly is affordable renting, and who exactly will be able to afford it? In the prospectus for its 2011/15 affordable homes programme, the Homes and Communities Agency describes affordable rent as a form of social housing. Except it's not.
Associations will be able to charge up to 80% of market rents and, given that the idea is to raise money, will have every incentive to do so. Higher rents can be charged on new homes and existing ones when they are relet to different families (but not when tenants who currently pay social rents remain in the same home).
In some areas, particularly London and Southeast England, affordable rents could be as much as £200 per week higher than social rents. The only constraint will be the housing benefit system. If associations charge rents that exceed the maximum that qualifies for local housing allowance, they risk not picking up the full sum from households on housing benefit.
For in many cases, it will be housing benefit that funds affordable renting, not individuals. Crazy as it sounds, the government is cutting the amount it invests in affordable housing through grants, and then picking up the majority of the bill when households move into homes where rents are significantly higher.
The problem for housing associations in the north and midlands is that, in some areas, the difference between social and market rents is negligible. But even they hope to find some areas where they can use affordable renting to raise money.
The difficulty for individual households, especially in the south, will be affording the higher rents assuming they are not on housing benefit. Will they really seek jobs if it might mean finding somewhere new to live and whatever happened to the idea of making work pay?
Meanwhile, the government has made it clear that it will only provide grants to build new social housing in exceptional circumstances. As increasing numbers of homes are switched to affordable renting as they are relet, we could end up with situations where families pay vastly different rents for neighbouring properties that are virtually identical. Then again, will tenants really mind if the government is footing the bill?
Wednesday, 23 February 2011
Friday, 11 February 2011
Little comfort from being in the big society
Scarcely a day seems to go by without someone mentioning the big society. Regardless of whether you think it's a cloak for cutting public spending or a panacea for improving community services, David Cameron's project is virtually impossible to ignore as politicians and others vie to declare themselves true believers.
This week housing minister Grant Shapps declared that some of the best examples of people being part of the big society can be found on council estates. But before social landlords get too excited, he wasn't exactly praising them.
Instead, Shapps seemed to be doing the precise opposite, as he bemoaned the fact that just 2% of council homes are managed directly by tenants. An otherwise cashstrapped government has found £8m so that tenants panels can be set up to hold landlords to account by demanding faster repairs and other service improvements. If necessary, they could demand to take over the running of their homes under what in future will be called the 'right to manage'.
Council tenants have had the right to take over local housing services since 2008. The fact that there are so few tenant management organisations suggests that either tenants are generally happy with the service they receive or, in all likelihood, they can't be bothered taking on a direct role in improving things.
At the same time, councils and housing associations have been falling over themselves to show they believe in proper tenant consultation and empowerment. Not all achieve it, that's true. But surely there are better ways of spending £8m, particularly in the current spending climate?
Prior to last year's comprehensive spending review, housing associations claimed they were examples of the big society in action through the work they do at community level - not all of it directly related to housing. But now the National Housing Federation is warning that the £435m housing associations spend each year on education, health and other community projects, many delivered through voluntary groups, may be a victim of budget cuts.
So where does that leave households that depend on social housing and associated services? It is all very well being able to set up a panel and even sit on a management committee, but ultimately most people would probably prefer that what little money is about was spent on better homes and services.
This week housing minister Grant Shapps declared that some of the best examples of people being part of the big society can be found on council estates. But before social landlords get too excited, he wasn't exactly praising them.
Instead, Shapps seemed to be doing the precise opposite, as he bemoaned the fact that just 2% of council homes are managed directly by tenants. An otherwise cashstrapped government has found £8m so that tenants panels can be set up to hold landlords to account by demanding faster repairs and other service improvements. If necessary, they could demand to take over the running of their homes under what in future will be called the 'right to manage'.
Council tenants have had the right to take over local housing services since 2008. The fact that there are so few tenant management organisations suggests that either tenants are generally happy with the service they receive or, in all likelihood, they can't be bothered taking on a direct role in improving things.
At the same time, councils and housing associations have been falling over themselves to show they believe in proper tenant consultation and empowerment. Not all achieve it, that's true. But surely there are better ways of spending £8m, particularly in the current spending climate?
Prior to last year's comprehensive spending review, housing associations claimed they were examples of the big society in action through the work they do at community level - not all of it directly related to housing. But now the National Housing Federation is warning that the £435m housing associations spend each year on education, health and other community projects, many delivered through voluntary groups, may be a victim of budget cuts.
So where does that leave households that depend on social housing and associated services? It is all very well being able to set up a panel and even sit on a management committee, but ultimately most people would probably prefer that what little money is about was spent on better homes and services.
Friday, 4 February 2011
It's crunch time for council housing
Listen hard, and you will hear the sound of number-crunching among councils across England. Strangely enough, this is not due to the massive cuts in public expenditure being demanded by government, but rather the result of accountants mulling over the terms under which their local authorities are likely to leave the national housing finance system in just over a year's time.
To explain briefly, 171 English authorities that still own council homes are currently part of the housing revenue account (HRA) subsidy system and pool their rent income and other receipts. The government redistributes the money among councils, with any that is left over being gratefully claimed by the Treasury.
Labour spent the best part of 10 years deliberating over how to reform, or most likely scrap, this system. In March last year, less than two months before the general election, it finally came up with firm proposals and presented councils with figures showing how they would fare if they kept their own money following a one-off resettlement of historic debt between themselves and the government.
Thankfully, the coalition government agreed in principle to continue this process, with 2012/13 identified as the year in which the HRA subsidy system would disappear. It has taken another few months for the new government to revise last year's figures but, in spite of the tough economic climate, it appears on the face of it that any extra pain for councils will not be too great.
The Department for Communities and Local Government has come up with a valuation figure for each local authority's housing stock based upon the rent income it can expect to raise over the next 30 years and how much it is likely to need to spend on maintaining its properties. Other factors have also been built in, including a projected loss of homes (and rent income) due to right to buy (RTB) sales.
Prior to D-day in April 2012, this valuation figure will be compared with the notional debt each council is in theory paying off under the current system. Providing the valuation figure is higher, the council will make a one-off payment to the government. If it is lower, mainly because the council has larger historic debt and is in a weaker position to maintain its housing, money will flow the other way.
According to this week's figures, a total of £19bn will change hands in order to get what is called 'self-financing' underway. The government, meanwhile, will accrue £6.7bn more from councils than it hands out - £1.8bn more than was forecast last March.
The vast majority of councils (136) will either take on new debt or add to their existing debt. But in the long run, they may consider it is a price worth paying to avoid having to continue pooling rent receipts. There are still obstacles to overcome. Councils are angry that the new government plans to continue clawing back 75% of receipts from RTB sales. They are also concerned about caps on borrowing and the possibility that the debt resettlement may be reopened in the future.
But on the whole, it seems to be full steam ahead. Whereas Labour was offering councils the opportunity to leave the HRA subsidy system, the coalition government has gone as far as drafting legislation to abolish it and included this in the Localism Bill.
From April 2012, councils will be out on their own so far as housing finance is concerned. Whether that means that the big hand of central government is finally lifted from local authorities remains to be seen.
To explain briefly, 171 English authorities that still own council homes are currently part of the housing revenue account (HRA) subsidy system and pool their rent income and other receipts. The government redistributes the money among councils, with any that is left over being gratefully claimed by the Treasury.
Labour spent the best part of 10 years deliberating over how to reform, or most likely scrap, this system. In March last year, less than two months before the general election, it finally came up with firm proposals and presented councils with figures showing how they would fare if they kept their own money following a one-off resettlement of historic debt between themselves and the government.
Thankfully, the coalition government agreed in principle to continue this process, with 2012/13 identified as the year in which the HRA subsidy system would disappear. It has taken another few months for the new government to revise last year's figures but, in spite of the tough economic climate, it appears on the face of it that any extra pain for councils will not be too great.
The Department for Communities and Local Government has come up with a valuation figure for each local authority's housing stock based upon the rent income it can expect to raise over the next 30 years and how much it is likely to need to spend on maintaining its properties. Other factors have also been built in, including a projected loss of homes (and rent income) due to right to buy (RTB) sales.
Prior to D-day in April 2012, this valuation figure will be compared with the notional debt each council is in theory paying off under the current system. Providing the valuation figure is higher, the council will make a one-off payment to the government. If it is lower, mainly because the council has larger historic debt and is in a weaker position to maintain its housing, money will flow the other way.
According to this week's figures, a total of £19bn will change hands in order to get what is called 'self-financing' underway. The government, meanwhile, will accrue £6.7bn more from councils than it hands out - £1.8bn more than was forecast last March.
The vast majority of councils (136) will either take on new debt or add to their existing debt. But in the long run, they may consider it is a price worth paying to avoid having to continue pooling rent receipts. There are still obstacles to overcome. Councils are angry that the new government plans to continue clawing back 75% of receipts from RTB sales. They are also concerned about caps on borrowing and the possibility that the debt resettlement may be reopened in the future.
But on the whole, it seems to be full steam ahead. Whereas Labour was offering councils the opportunity to leave the HRA subsidy system, the coalition government has gone as far as drafting legislation to abolish it and included this in the Localism Bill.
From April 2012, councils will be out on their own so far as housing finance is concerned. Whether that means that the big hand of central government is finally lifted from local authorities remains to be seen.
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