Industry news
£2 billion boost for affordable housing & 5 year deal for social rents
confirming inflation busting rent increases for the sector. With much focus given to housing during the
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party conference season, the Government sought to take the initiative with several high profile announcements, including: • Funding for affordable homes being increased by a further £2 billion to more than £9 billion;
• Increases to social housing rents at upto one per cent above the Consumer Price Index (CPI) will be allowed from 2020; and
• A Green Paper to focus on the future purpose and use of social housing will be launched. Although the additional funding was welcomed
across the sector, it soon became clear that social landlords will have to bid for the funding and as Ministers look to maximise output, the money will probably be used for all types of new housing – shared ownership, affordable rent and social rent. There was however criticism that the
Government failed to make an announcement on Right to Buy for HA tenants or the enforced sale of high value council homes. Similarly it was unwilling to pause the planned roll-out of Universal Credit, which even its own backbenchers appear critical of.
SOCIAL HOMES The numbers of new homes delivered will be determined on the type and location of housing. With a typical £80,000 subsidy, a DCLG press release stated the £2bn investment could supply around 25,000 more homes at rents affordable for local people. Under the new rents proposal set out, increases
to social housing rents will be limited to the Consumer Price Index (CPI) plus one per cent for five years from 2020. Ministers said this will give social tenants, councils and housing associations the security and certainty they need, while also hoping it will encourage more housebuilding. When the former chancellor, George Osbourne, introduced the rent cutting policy up to 2020 it
he Government has set out plans for increased investment in new council and housing association homes, while also
resulted in development programmes being slashed, with plans for tens of thousands of new homes scrapped, in a short-term measure to reduce the housing benefit bill. Ironically the savings have been dwarfed by increases in private sector rents and the sums being paid to rogue landlords. The Government’s affordable housing policy
has until now primarily supported ‘affordable rent’ – rents of up to 80 per cent of local market level – and low-cost home ownership. This announcement now extends support for ‘social rent’ – which are lower rents, set according to national guidelines. The announcement on rent policy beyond 2020
will be reflected in a direction to the Social Housing Regulator, which the Government will consult on next year.
FURTHER WORK Chartered Institute of Housing chief executive Terrie Alafat CBE welcomed the announcements on extra money and rents. "As we have been saying for some time, social rents, which are significantly cheaper than market rents, are the
only truly affordable option for many people on lower incomes, so the recognition that we need more of these homes is a vital step forward. "It’s also encouraging to hear that Theresa May
agrees councils have a central role to play in building the homes we need at prices people can afford. The details of exactly how these new homes will be funded and just how many will be for the lowest social rents will be crucial.” Ms Alafat pointed out there was a lot of room to
be made up. “The number of homes for social rent funded by the government collapsed from 36,000 to just over 1,000 between 2010/11 and 2016/17. Reversing this trend will be a significant task – how much of this new funding will be dedicated to building these kinds of homes?” Her head of policy at the CIH, Melanie Rees
remained cautious, highlighting the disparity between support for private market housing and the social rented sector. “Though £2bn is a good amount of money, our recent analysis showed that there was £40bn earmarked for housing until 2021 and of that just 21 per cent was directed towards affordable housing. It’s clear straight away then that £2bn will not exactly even that balance.”
Renters pay £54bn to private landlords in buy-to-let boom
Rent paid to private landlords is more than double the amount of mortgage interest paid to banks by homeowners, as the number of people living in the rental sector continues to grow. Private tenants paid about £54 billion in rent to
their landlords in the 12 months to June, according to figures published by the estate agency group Savills. Younger people contributed around
£24bn of the total. Mortgage rates have stood at historically low
levels since the banking crash of 2008/09, with the amount of interest paid by home owners to banks and other lenders falling to £26.5bn in the same period. Home ownership has fallen to its lowest level for a generation, while sizeable deposits are difficult for first time buyers to raise.
8 | HMM November 2017 |
www.housingmmonline.co.uk Lucian Cook, head of residential research at
Savills, said that despite low interest rates, it has become increasing difficult for people to save for a deposit due to slow wage growth and rising house prices. “Fewer people have been able to benefit from the low mortgage rates and we know that people are renting longer into later stages of life,” said Mr Cook
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