The rent settlement is good news, but ministers need to ensure welfare caps don’t push up homelessness and prove to be a false economy, writes Paul Hackett (source: InsideHousing).
Amid the various mishaps at the Conservative Party conference, there were two monumental announcements for housing associations and local authorities.
The announcement of a further £2bn was significant, not so much for the level of funding, which estimates suggest will enable 5,000 affordable homes to be built each year, but the return of funding for homes for social rent.
The second announcement was arguably even more significant. A return to CPI+1% funding for the five years from 2020 is hugely positive news.
Some had speculated the introduction of CPI-flat rent rises or even a rent freeze. The worst of all would have been a continuation of the 1% cuts. But government kept its word and returned to the original agreement first set out in 2013.
“From 2020 there is the potential for a real disconnect between rents and residents’ ability to pay.”
As we’ve seen this week, certainty over our rental income reassures lenders and ratings agencies. Since housing associations invest £6 of our own finances for every £1 of government investment, confidence in our ability to deliver is paramount.
But despite the good news on rents, a bigger issue remains: the ongoing disconnect between rent policy and welfare policy.
Welfare benefits have been frozen since 2016, while wages have risen below inflation. Until now the impact has been cushioned by falling rents.
In 60 seconds: the English social housing rent settlement
But from 2020 there is the potential for a real dissociation between rents and residents’ ability to pay.
On top of that, there are several welfare reforms, further reducing residents’ incomes. Frozen as it is at £23,000 inside London and £20,000 outside, the overall cap to benefits will bite harder, given rising rents.
Then there is the extension of Local Housing Allowance (LHA) capping to the social rented sector in 2019 and its particularly severe consequences for young single residents and those in supported accommodation.
The impacts on our existing residents – and our ability to house the least well-off – will be significant.
“We can only protect our residents so far.”
Housing associations have a track record of being resilient to change and helping residents through welfare reform.
We are uniquely placed to offer personalised financial inclusion work and innovative jobs and training programmes.
This will continue to be a major focus at Optivo. But we can only protect our residents so far.
That’s why we urge government to take a joined-up approach to housing and welfare policy.
Ideally we need an approach that can simultaneously enable more housebuilding, improve affordability and reduce the housing benefit bill.
One that will address the fact that three-quarters of government housing spending currently goes on housing benefit, £9bn of which is spent in the private rented sector.
“We urge government to take a joined-up approach to housing and welfare policy.”
Investing in social rent is a good start. We’ll need more than £2bn, though, to deliver the volume of affordable homes the country needs.
In the long term, freedom to set our own rents could reduce welfare spending, especially if residents on low incomes aren’t routinely obliged to draw upon housing benefit to pay their rent.
A pilot would help demonstrate what can be achieved with a more creative approach.
Uprating benefits, especially LHA, to reflect actual costs could avert an affordability crisis. Since rising inflation has produced higher-than-expected savings, there might be some money around to achieve this.
We also need government to consider savings over the long term.
At the end of June more than 78,000 households were living in temporary housing, the highest level for a decade.
If policies result in increased homelessness and a greater reliance on temporary accommodation, a failure to uprate benefits could be a false economy.
Last week marked a real step change in government’s approach to social housing and a real vote of confidence in the sector.
According to the communities secretary, the Green Paper is an opportunity for a “fundamental rethink about social housing in this country”.
The desire for ‘big picture thinking’ is to be applauded, as is the timing of the green paper. Let’s work with government to help shape that future vision.
Paul Hackett, chief executive, Optivo
Paul Hackett is the chief executive of Optivo and chair of the G15 group of housing associations in London.