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Theresa May's speech and the challenge to expand English social housing

Theresa May. portal gda/Flickr, CC BY-NC-SA

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Amid the drama of Theresa May’s conference speech was the announcement of new funding for social housing and “a new generation of council houses” in England. This follows long-term under-investment in social and affordable housing. Council housing in England has not been built on any kind of scale since the late 1970s. Meanwhile the market rented sector has grown dramatically and waiting lists for social housing have grown inexorably.

So the principle of extra funds has been welcomed by leading figures in the housing sector, but all will hold back their full judgement until they know the details. Whether the scale of new builds for social renting is translated into a “new generation” of council house building remains to be seen. But the tenor of the statements made and the sense of what government ministers think is required feels different to recent years. It marks a shift back to recognising the importance of homes developed and managed by the council and not-for-profit housing sectors.

What we know so far about the proposal is that social housing at below market rents will be supported for areas in greatest need. In her speech, the prime minster promised another £2 billion in addition to the previously announced £7 billion affordable housing programme. The additional money will provide funding for council and housing associations who can “bid for funding” from this new pot. It is also understood that there will be a greater push to increase the supply of public land on which such new social housing may be built.

In perspective

The government said the extra £2 billion would produce 25,000 homes by 2021. To put this in perspective, English housing associations started more than 45,000 affordable, for market and social housing units last year according to the National Housing Federation (NHF), which represents housing associations in England. Scotland’s affordable supply programme, meanwhile, plans to build 35,000 social rented properties over the life of the current Scottish parliament. There is in short a degree of political choice about how much government wishes to invest in social housing – it could be more.

The additional funding – welcome though it is – is also small in comparison to the extra £10 billion in funds announced for Help to Buy earlier in the week. It is difficult to believe that a cost benefit analysis of investment in social housing versus Help to Buy would suggest that the latter would offer better value for money for the public purse. Help to Buy has often not been well targeted and there is evidence that it pushes up house prices. The NHF reckons that an additional unit of new social housing provides six times its value as a social and economic return on that investment.

A social housing green paper, recently proposed by the communities secretary Sajid Javid, will initiate a wider policy review. This should promote genuine change that helps expand the country’s supply of affordable housing. It, for example, could include reinvesting resources switched out of less effective or more risky policies such as the Starter Homes Fund (which provides discounted owner-occupied homes to first time buyers).

Funds could then be rechannelled into low-cost rented housing provided by housing associations and councils. If this was then established as a sustained programme, this would also allow providers to operate in a more stable environment, giving confidence to tenants and landlords alike. There were other indications at the Conservative Party conference that more is to come on social housing funding and this could be one area of opportunity.

The details matter

The experience of the Scottish council house building programme over the last two parliaments suggests that even with grant funding, the ability of councils to borrow matters greatly. As things stand, Scottish councils do not face the housing borrowing cap that materially constrains English authorities.

It also took councils in Scotland some time to pick up the pace as they rebuilt capacity to build homes – even with the money available, it will not happen overnight. Moreover, Scottish councils unlike those in England, did not have Right to Buy on new council homes to worry about and so were better incentivised to contemplate building because they would not have to risk new developments subsequently being sold out from under them. All these details matter.

The importance of this new announcement is that it reinforces the more positive tone and language recently deployed by the government when it comes to social housing. It follows the announcement of Sajid Javid’s green paper, talk of improving protection for tenants, and the aforementioned increased funding for Help to Buy.

Even before the general election, the government’s earlier 2017 housing white paper, in seeking to “fix the broken housing market”, recognised that solutions had to cover the whole range of housing tenures, including the non-market sector. Affordable and social rented housing is part of the solution to homelessness, high pressure housing markets and excessive housing costs.

The forthcoming green paper on social housing will provide more flesh on the bones – but it needs to create the funding and regulatory environment to enable the not-for-profit and public sectors to build and grow. And to do so on a sustainable basis at genuinely affordable rents.

The ConversationKenneth Gibb receives funding from ESRC, AHRC, the Joseph Rowntree Foundation and the European Housing Partnership. He is the chair of Sanctuary Scotland housing association.

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