Public Sector Focus

'Housing association new build will stop'

PSE’s Adam Hewitt reports from a Labour conference fringe event on welfare reform and the housing crisis.

The Government is determined to clamp down on the benefits bill, not least housing benefit, which now consumes a huge proportion of public spending and distorts the entire housing and rental market.

Reform is needed, most agree, but the Government’s current approach is far too clumsy and simplistic and will lead to damaging unintended consequences, critics say.

Chief among these consequences, said Brian Johnson, outgoing chief executive of housing association Moat, speaking at the Labour conference fringe event ‘A balancing act: reforming welfare while addressing the UK’s housing crisis’, is the impact on housing construction.

He explained: “Housing associations are charities, so every pound we get ultimately gets ploughed back into housing. We aim, when we build a new home, for it to break even over about 40 years: we lose money on it in the early years, we make money on it in the later years, and hopefully the two things balance each other.

“Absolutely intrinsic to that is the assumption that rents go up with inflation. If rents don’t go up with inflation, the model is broken.

“The thing that attracts private investors, whether it’s to affordable housing or the private rented sector, is rents rising with inflation. I have to really strongly reinforce the point that the benefits and the housing agenda have to work together. If benefits are constricted – if housing benefit doesn’t rise with inflation, or, more likely, if the £500 benefit cap doesn’t rise with inflation, and that’s the sense we’re getting as we talk around Government at the moment – then, within one to two years, we will be in a position where we can’t raise rents with inflation, and actually housing association new build will stop at that point.

“I just can’t stress enough how intrinsic [rents rising with inflation] is to the model we use.”

‘Not a good housing solution for anyone’

Johnson also questioned the motives behind the so-called ‘bedroom tax’, which will affect about 15% of its tenants.

He noted that there are simply not enough onebed housing units to move everyone who is currently in a house that the Government deems ‘too large’.

He said: “Even if I could wave a magic wand tomorrow and everyone suddenly said ‘I’m going to move to a home of a size where I’m not subject to the bedroom tax’, I’m still short of 5-7% of the stock [needed] of one-bedroom homes.

“Now, I’d question whether going out and building lots of one-bedroom homes is a particularly clever thing to do: I don’t think it is. I don’t think they’re a good housing solution for anyone. That’s pretty much mirrored throughout the south east: there’s a 7-8% structural shortage of one-bed homes as a result of the bedroom tax coming into force in April.”

No excuse

John Healey MP, Labour’s last housing minister up to the 2010 election, said he has noticed “a sharper edge of desperation” when people have come to see him at constituency surgeries over the last nine months, as a combination of cuts and rules changes to housing benefit have kicked in.

Universal credit “introduces an element of extra cost and extra uncertainty” for institutional investors, he said, that makes them less willing to build low-cost housing. ‘Public policy risk’ is therefore undermining investment in housing and infrastructure.

“Housing benefit is at the heart of the problem – and the heart of the solution”, Healey said, noting that in the 1970s, about 80% of what the Government spent on housing went into housebuilding, and 20% into the equivalent of housing benefit. Now, 95% of the housing budget goes in housing benefits, and only 5% into new housing. The cost of housing benefit is approaching £100bn – the same as it costs to run the NHS in England for a year.

More homes, not just decent homes

He admitted that during his time as housing minister, Labour’s focus on dragging social housing up to a decent standard everywhere meant it did not put enough investment into new housing. He also said the party did not do enough to reform housing benefit.

He said: “You can’t deal with the imbalance and problems of mismatch between demand and supply in housing unless you deal with housing benefit: we didn’t do that in Government. We have two and a half years and really no excuse for not now trying to do it in opposition.”

Leslie Morphy, chief executive of Crisis, the national charity for single homeless people, said government policy meant we are now “creeping towards the end of social housing”, and that homelessness is on the rise, especially in the capital, thanks to stagnant wages, unemployment, and high resnts.

She said far too much housing policy is based on “myth not reality”, noting that 93% of the increase in new housing benefit claims come from households with at least one working adult.

After discussions about private sector landlords profiting from over-generous housing benefits in some areas, and on the virtues of a return to rent control, shadow communities secretary Hilary Benn (pictured left) joined the end of the debate after watching shadow chancellor Ed Balls’ speech, in which he suggested using the £3-4bn proceeds of the 4G spectrum auction to fund 100,000 new homes.

Benn said: “This is a crisis that is very difficult for those experiencing it: but not yet fully understood by those who are well-housed and not entirely persuaded that we have a crisis that we need to address.”

Supply, supply, supply

Benn said the way to address all the problems at a stroke was increasing the supply of housing – but we haven’t been building enough homes for 30 or 40 years, he said, and doing so depends on three core factors: finance, land, and consent.

“At the moment we are seeing a catastrophic fall, in particular, in the supply of new affordable homes,” he said, adding that a combination of cuts to a variety of benefits meant many recipients would start prioritising food and heating over rent, meaning they will get into arrears and difficulties.

The bedroom tax is a “particularly shameful policy”, he said. “For many people, this is their family home. This is where they raised a family. The children may have left, but they come back to stay, the grandkids stop over at the weekend, perhaps it’s where a carer lives if they need support and a helping hand. That is what socalled ‘spare’ bedrooms are for.”

He said that when a think tank produced a report calling for owner-occupiers to downsize instead of ‘hoarding’ bedrooms, the then housing minister Grant Shapps attacked the report and accused it of bullying people out of their family homes. “But when it comes to the payment of housing benefit, the Government’s policy is that you should be penalised financially.”

He contrasted this approach to a policy in Labour-run Sandwell, where new two-bedroom bungalows were built to encourage older residents to move out of much bigger family homes – and which, “lo and behold”, worked. “As a result, two and three and four bedroom homes were freed up to let to people on the waiting list. That’s a different set of values and a different way of dealing with people.”

He said investing in new homes would not only help cut the housing benefit bill by dealing with the supply and demand mismatch, but it would also create jobs in the depressed construction sector – turning more people into taxpayers instead of benefits claimants.

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