Liberating the social housing sector

It has often been said that Britain has the best-housed poor in Europe. Social housing is provided to a high level with heavily subsidised rents and with further assistance to help non-working households. The result is that there are weak incentives for social tenants to enter the labour market or to move to where jobs are more plentiful. Instead households stay put, comfortably housed, but entirely dependent on the state and with no incentive to better themselves by getting a job.

The coalition government has put forward what appear to be some radical reforms for social housing. They propose a new so-called Flexible Tenure, which would be for a minimum of two years, but the actual length of tenancy and the possibility for renewal left to the discretion of the landlords. This new tenure would apply to all new social dwellings as well as a number of re-lets, again as determined by the landlord. Flexible tenure is to be offered at affordable rents, which are to be set at 80% of local market rents. Development grants for social housing are to be virtually ended and social landlords will be expected to develop using private finance with their income stream as security. The government, therefore, has created some incentive to shift tenancies to the new Flexible Tenure as quickly as possible. However, there is to be no diminution of regulation by central government over rent levels and standards of provision.

This is a potentially interesting reform, but it does have a number of problems. The first, and by far the biggest, is that nearly two-thirds of social tenants are in receipt of Housing Benefit. The government is commendably seeking to deal with worklessness through the introduction of the Universal Credit, but is increasing rents to near market levels a terribly effective way of encouraging social tenants into work? More thought is needed with regard to how the Housing Benefit system might interact with the new rent levels, and whether there is indeed a contradiction here.

A related issue is that social landlords let their properties according to priority need. If you are working and in a stable relationship, you are unlikely to be a priority. Those housed are much more likely to be homeless, unemployed and vulnerable. They tend to need the support of Housing Benefit. The government has made noises about widening the catchment for social housing to include those currently deemed too affluent for social housing. But this can only be achieved if social landlords deprioritise certain groups, or if they are able to build new dwellings at a faster rate than in the last decade. Yet a new funding regime for social housing development is likely to create uncertainty rather than an increase in output, at least in the short to medium term.

The key problem is that government is persisting with the division between social and private renting as if they ought to fulfil some different functions. Clearly there is the need for some form of specialist supported housing for those incapable of looking after themselves, but for most households there need be no distinction between landlords. The government therefore should liberate social landlords from the panoply of regulation that currently hampers them and let them compete with private landlords and manage their borrowing as they see fit. Government is still not prepared to let go, even if it has gone some way towards a more market-based system.

Key problem has been granting independence to the Bank of England, and thus ignoring the oplitical responsibility of allowing a primary commodity price - the family home to be inflated to the point where it causes massive social distress. Which is only good news for people in the Charity sector.

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