Why social rented housing?

Social rented housing has historically delivered rents at around 50% of market rates along with long-term security of tenure, so it is perhaps inevitable that there are widespread calls for a large-scale delivery programme to revitalise the sector and address housing deprivation. These calls pre-dated the coronavirus (Covid-19) pandemic but they have been given new impetus with evidence pointing to connections between inadequate housing and poor health outcomes in the context of Covid-19. The disproportionate impact of Covid-19 on the Black, Asian, minority ethnic and refugee (BAMER) communities has been linked with a housing aspect:

Black, Asian, minority ethnic and refugee (BAMER) communities have been hit hard, with coronavirus intensifying their housing stress. Evidence shows BAMER households are more likely to live in overcrowded, inadequate housing, within our most disadvantaged communities. They are also less likely to own their home, and more likely to be private renting than white households.

Other arguments advanced in favour of social rented housing include the need to move rising numbers of homeless households out of temporary accommodation; unaffordability in the private rented sector; and the potential to reduce expenditure on housing benefits by moving private renters into social housing. Commentators also argue for a social housing delivery programme to provide an economic stimulus, pointing to housebuilding as a proven form of counter-cyclical investment.

How much social rented housing is needed?

Current levels of development are significantly below various estimates of identified need for social rented housing:

  • Shelter’s commission on the future of social housing published A Vision for Social Housing in January 2019 which recommended a total of “3.1 million more social homes” be built over a 20-year period, representing an average of 155,000 new homes per year.
  • Research conducted by Heriot-Watt University, published in 2018, for the National Housing Federation (NHF) and Crisis, called for 340,000 new homes each year up to 2031. This research identified a need for 145,000 affordable homes per year of which 90,000 should be for social rent.
  • The Affordable Housing Commission, which reported in March 2020, called for a rebalancing of provision between the social rented and private rented sectors. Specifically, the Commission endorsed the imperative of providing at least 90,000 homes to let at social rents per year.

These organisations recommend increasing the supply of social rented housing as a remedy for unmet housing need, evidenced by increasing numbers of homeless households in temporary accommodation and growing overcrowding in the social and private rented sectors. Commentators also point at affordability problems in the private rented sector, particularly in London, as an indication that more genuinely affordable options are needed.

The social housing sector has declined in size in the long-term. 5.5 million homes were provided by local authorities and housing associations in 1979. This number declined by a quarter over the next 40 years, reaching 4.1 million in 2019. Growth in private-sector housing means that the proportion of homes rented from social providers has also declined, as the chart below shows:

31% of all homes were rented from a local authority or housing association in 1979. This has fallen steadily, reaching 17% in 2019.

While the number of homes provided by the sector has grown slightly in the last decade, the availability of homes for social rent has fallen as different affordable products – such as Affordable Rent – have become more common. Around 93% of social housing providers’ stock was let at social rent in 2018/19, compared with 98% in 2012/13.

The focus on Affordable Rent and affordable home ownership products has meant that new supply of homes for social rent has declined. 11% of the 57,000 new affordable homes delivered in 2018/19 were for social rent. This is a sharp decline compared with the period before 2011/12, when social rent made up the majority of affordable housing supply.

The social housing sector also loses stock through sales and demolitions. Right to Buy sales account for most of the losses.

Prospects

Following Theresa May’s reference to building a “new generation of council homes to help fix our broken housing market” in August 2018, and the subsequent lifting of Housing Revenue Account borrowing caps, the sector began to consider a return to large-scale development of social rented housing. The Government envisioned that lifting the caps would enable councils to build around 10,000 new homes per year.

The sector was optimistic, research identified a clear appetite amongst authorities to take advantage of the new borrowing freedoms. This optimism existed despite the existence of other barriers, such as limited grant funding and restrictions on the use of Right to Buy receipts. Research published in January 2020 concluded that, despite wide variations in authorities’ plans and approaches, most with retained stock planned to expand their housing delivery and the Treasury’s estimate of authorities delivering 10,000 homes following the lifting of the borrowing caps would be met, and possibly exceeded.

In preparation for the Comprehensive Spending Review which was expected in 2019, the Chartered Institute of Housing (CIH), Shelter, NHF, Crisis and the Campaign for the Protection of Rural England, joined forces to call on the Government to provide subsidy of around £14.6 billion per year (£12.8 billion in today’s prices) over ten years to secure 90,000 new social rented homes annually over the period.

The March 2020 Budget announced funding over five years from 2021 for the Government’s Affordable Homes Programme:

…an additional £9.5 billion for the Affordable Homes Programme. In total, the programme will allocate £12.2 billion of grant funding from 2021-22 to build affordable homes across England.

The sector welcomed the certainty delivered by this funding but is pressing for information on the proposed tenure-mix the Government has in mind, particularly the number of social rented homes.

The Covid-19 outbreak and subsequent lockdown have shifted the landscape in ways that are still becoming apparent. The experience of the post-2008 financial crisis is leading commentators to predict a contraction in the construction industry as the economic downturn takes hold. The Local Government Association (LGA) is calling for the response to the pandemic to include “steps, measures and reforms” to “support councils to work towards delivering a new generation of 100,000 high quality social homes per year”. The National Housing Federation (NHF) would like to see the next spending review used to “transition to a longer-term plan and investment programme to build a new generation of social and affordable homes to rent and buy.” The NHF has launched a Homes at the Heart campaign which is described as a “national campaign and coalition calling for a once-in-a-generation investment in social housing.”

When giving evidence to the Housing, Communities and Local Government Select Committee on 8 June 2020, the Housing Minister, Christopher Pincher, said “We need more homes and more affordable homes, and more socially rented homes” but he refused to be drawn on any tenure-mix targets. A response to a PQ of 25 June 2020 refers to the Government’s commitment to “increasing the supply of social housing in view of the social and economic benefits this will generate”.

It seems likely that the housing sector will look towards the forthcoming Comprehensive Spending Review as an opportunity to further press the case for a large-scale social housing delivery programme.


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