Is social housing the solution to, or the cause of, poverty? Steffan Evans investigates the issues.
Recent years have seen a slow but steady increase in the number of homes available at social rent in Wales. This number is set to increase further over the next year as the Welsh Government seeks to meet its objective of constructing 20,000 new affordable homes by 2021, but the experiences of the last few years have raised serious questions about the ability of the social housing sector to solve poverty in Wales.
Housing costs are one of the major drivers of poverty. Increasing the number of social homes available and thus reducing the need for tenants to move into the private rental sector is therefore a crucial part of the solution. Significant increases in social rents, however, have served to undermine some of the potential benefits bought about by the modest increase in the number of social homes.
Between 2014/15 and 2018/19 social landlords in Wales were permitted to increase their social rent by CPI inflation + 1.5 per cent plus an additional £2 per week. Increasing inflation, particularly ahead of the setting of rent for 2018/19, combined with welfare reform and stagnant wages saw social rents become unaffordable for an increasing number of families.
There was recognition within the sector that the situation was becoming unsustainable, and rents were only permitted to rise in line with inflation in 2019/20 ahead of the completion of the Welsh Government’s rent policy review. With that process having now come to a close the Welsh Government has announced a new five-year rent policy, with social landlords being permitted to increase their rents by an average of CPI inflation + 1 per cent.
There is much to welcome about the new rent setting policy. It provides landlords and tenants with a degree of certainty about their rents. New expectations placed on social landlords with regards to evictions, for example, should also afford tenants greater security within the social housing sector, a step to be welcomed. There is some concern, however, that the new policy will not get to grips with the fundamental problem of affordability within the sector.
The new policy does not only lock in the above inflation increases in social rents we have seen over the past half-decade but it also continues to accelerate the process of social rent becoming more expensive relative to other living costs. Shelter Cymru has already found examples of social housing property being more expensive to rent than private rental sector properties available on the same street. Furthermore, whilst the benefits freeze may have been lifted, families who are in receipt of benefits are still worse off than they were in 2015, whilst wage growth remains anaemic at best. Many of these issues are likely to worsen as the impact of Covid-19 continues to hit our economy.
Of course, social landlords are not required to increase their rents at the maximum rate permitted by Welsh Government. Many landlords have not chosen to raise their rents at the maximum rate every year, whilst others have adopted new approaches to rent setting, trialling models such as Living Rents. To ensure that social rents actually remain affordable ,however, whilst also seeking to construct new social housing, there is need to shift the dial on how much the Welsh Government is investing in the sector.
The Welsh Government’s budget for 2020/21 makes £223 million available for social housing grant. This was a significant increase on the £138 million that was made available in 2019/20 but it’s only a modest increase on the £207 million that was available in 2018/19. These sums are not sufficient to allow social landlords to construct enough new housing to meet the Welsh Government’s 20,000 affordable homes target, leading to social landlords having to turn to the private finance which, in turn, puts pressure on rents.
Rents and private finance are always going to play a crucial role in financing the construction of new social housing, but there is more money available for the Welsh Government if it wants to develop a more redistributive approach. Since 2018/19 the Welsh Government has spent approximately £220 million on Help to Buy Schemes. Just this month the Welsh Government announced the creation of a £210m self-build fund. Could these funds have been spent more effectively by using them to support the construction of social housing?
If we are serious about solving poverty in Wales these are the conversations that we should be having. Improving the affordability of housing will not as of itself solve poverty, but if no action is taken, the housing sector will be part of the problem, not the solution.
Dr Steffan Evans is policy and research officer at the Bevan Foundation