Affordable renting that only the jobless can afford

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?