Monthly Archives: July 2012

Is the end nigh for social/affordable housing?

A recent article in a Royal Institution of Chartered Surveyors publication described how there had been a workable balance in house building, post WWII, between private and public sectors, at around 100,000 each a year.

That balance was broken around 1980 by the Thatcher Government, and not subsequently restored. Since then, the relative numbers of annual completions have been in the order of 100,000 by the private sector to 20,000 by the public sector.

This imbalance is due to political interference, not market forces: the private sector has continued to build what the market supports; social/affordable housing is not viable as far as the private sector is concerned, so it was never going to take up the slack.

In fact, as councils try to get the private sector to make up some of the shortfall, by requiring a proportion (30%, perhaps 50%) of house building schemes to be “affordable”, developers decide the profit margin is insufficient so schemes are not brought forward at all.

Politicians decided that councils would no longer be allowed to borrow as they had (which was at very low rates of interest), as this showed up on the PSBR, which had become unacceptable. Additionally, councils were not (are not, although this may be relaxed a little) allowed to use the billions of pounds in receipts from selling off council housing (Right to Buy) either to build replacement stock or against which to borrow cheaply to build more.

As an aside, there is a further, hidden, cost here for you and I. Depletion in council housing stock through Right to Buy has made it more difficult to match suitable properties to the right people/families, making duties to house certain people more expensive. Which we all fund.

And it can only get worse. A huge proportion of council housing stock has been transferred out of public ownership, most going to housing associations. Many saw as acceptable at the time, but analysis described by the Institution of Revenues, Rating and Valuation late last year is ominous.

Pilots of the Government’s intended Unified Benefit (involving three housing associations), where benefits (including what is now Housing Benefit) are paid to claimants (tenants), rather than directly to the housing association,  saw rent collection rates drop from 83% to 57%. If housing associations’ rent collection drops below 70% they will lose their “AAA” credit rating, making borrowing more expensive, and will “go bust”!

So who then will be building social/affordable housing?