More homes – but can we afford them?
As austerity bites into affordable housing budgets, should we be looking harder for ways to use the homes we already have better?
There is of course welcome news by the big builders that private house builder completions do appear to be on the increase. The reports stem from statistics released by the Office for national Statistics that show a steady increase since 2010. The first quarter of the financial year April to June saw the fastest growth in housing orders (19.4 per cent) since the autumn of 2010. These will no doubt be further stimulated by putting increased air into the ‘housing bubble’ by the chancellor’s help to Buy scheme and in part to ensure that inflated house prices remain high to ensure that negative equity doesn’t creep any further or at least is manageable.
However, the major push by the UK coalition to demonstrate that ‘trowel ready’ projects are underway, demonstrated to great fanfare in London recently, begs the question, are these the right homes that we need? Where are the ‘affordable homes’ that we need for tomorrow’s low-income earners?
As we know, ‘affordable housing’ is set out in technical advice note 2 which defines affordable as: ‘housing where there are secure mechanisms in place to ensure that it is accessible to those who cannot afford market housing, both on first occupation and for subsequent occupiers’. This is not only true of low-income households, but for the average income earners also. TAN 2 therefore is often a key focus for subsidy and has historically driven thinking about supply.
As many in the past have argued, housing subsidy is a societal necessity. It is required to
• address market failure
• offset affordability constraints on low income earners and finance constraints on landlords and investors
• achieve economies of scale • address the consequences of new policies, for example WHQS, energy efficiency targets, building regulations and fire safety etc.
Not forgetting that subsidy can be in many forms such as land, rents, taxes, grants and investments. Above all, subsidy is required as a ‘social justice measure’ to respond and provide access to a basic human need. The Welsh Tenants argued as much in the 2010 affordable housing inquiry.
The government has a responsibility to build homes for those not able to access the market. Not to do so will render them prey to the private rented markets which has a consequence on housing benefit and social mobility and has been one of the main reasons why housing benefit has increased, as PRS charges on average a 1/3 higher rents than the social housing sector. Furthermore, if not checked it widens the equality gap and can fuel wage inflation.
It was and is a policy of successive governments that rather than put subsidy into new affordable homes, we have put increasing amounts of money into the pockets of private landlords to pay for the renovation of the PRS. Now that hasn’t been all bad, since there are many renters who do not want to access the social housing sector, while we have seen huge home quality improvements in the private sector through the buy-to-let market, however the danger is that we again inflate house prices as landlords chase profits in an already inflated market.
In Wales we are seeing a steady decline in subsidy via the social housing grant programme. For 2013/14 (£53.4 million) and for 2014-15 (£46.9 million) SHG will be the lowest in decades despite a relatively good start between 2008-11, (the lowest in any of the UK administrations)1 and while there are several initiatives being developed to utilise existing capital within the sector, clearly this would not be sufficient to meet yesterday’s, today’s or tomorrow’s demands.
However, while the fall is partly due to the inadequacy of the Barnett formula as well as the austerity measures, it is also due to preferential choices in favour of health and education. As long as that remains it is difficult to see how we are going to provide the much-needed homes for the future. So what else can we do? Clearly there is a great deal of spare capacity within the existing ‘owner-occupied sector’ and people do want choices to shrink their expenses to maintain homes as they get older. We should therefore be taking a long hard look at how we can help them to do so, freeing up existing homes within the system. We said as much in 2010.
We pride ourselves at looking differently at the problem in Wales. The problem is that we seem to be fixated on the need to build new homes because this creates jobs and stimulates spending, providing a much needed economic boost. Perhaps now is the time to look long and hard at how we can create better choices for people to free up their homes so that we can utilise better what’s already there, rather than continuing to chase the carbon intensive option of new build. Not to do so will feel like chasing a motorbike on a tandem – uphill!
1. Steve Wilcox and John Perry 2013 UK Housing Review briefing, CIH
Steve Clarke, managing director, Welsh Tenants
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