Housing plans will trap thousands dependent on benefits

However, instead of funding the homes through the social housebuilding budget – allied to private money raised by housing associations, who build social homes – they plan to pay for all the homes beyond those already earmarked under the last government’s spending plans through massively increased rents, at up to 80% of the local market rate.
 
For ministers to be able to deliver the promised number of low cost homes, the new intermediate rents will need be charged to all tenants moving into newly built homes and at least one in four tenants moving into existing social homes. As with traditional social housing, the tenants offered these homes will be selected from those on the waiting list maintained by councils in each area.
 
The Government has also signalled that it expects that tenants who move into newly-built homes will be placed on short-term tenancies – effectively meaning the end of lifetime tenure in homes being labelled as ‘social housing’.
 
The Federation says that the ‘new deal’ over housing does not allow housing associations to respond flexibly to local housing need, as they will be denied the freedom to set rents at an appropriate level and grant long-term tenures.
 
While most tenants who are being charged the new intermediate rates will have their rents part- or fully-paid for through housing benefit, the sums charged will be so high that if they do get a job much of their earnings will be eaten up through rent repayments. This is because every pound that claimants earn will be largely cancelled out by the amount of housing benefit being withdrawn. As a result, the new intermediate rents will act as a powerful disincentive to work.
 
In higher value areas throughout the country, including places such as Camden, Hackney and Haringey, many tenants moving into new social homes charged at the intermediate rent of up to £340 per week for a three bedroom property would have to earn at least £54,000 before they could get off housing benefit and be in a position where they could keep the bulk of their additional salary and find themselves better off in work.
 
The new model for the delivery of ‘social housing’ was mapped out under the Government’s spending review announced last week, in which the social housebuilding budget was cut by 63%, with the amount of money provided down from £8.4bn over the previous three year spending period to £4.4bn over the next four years, starting in April 2011.
 
Much of the money will be spent on delivering the genuine social homes that were already planned under the previous government’s spending programme – for instance in London and the South East there are 12,700 properties already in the pipeline.
 
The rest of the money will part-fund the remainder of the 155,000 homes promised last week, with the Government expecting each home built under the new model to be let out at the new intermediate rent, with arrangements being enforced by the social housing regulator.
 
The new model also creates a ‘lottery’ for social tenants, some of whom will access homes at the traditional social rent levels, whereas others will have to pay rents at up to 80% market rate.
 
Federation chief executive David Orr said: ‘The real answer to current concerns over housing benefit, and the intensifying housing crisis, is to allow housing associations to continue building social homes at scale. However, under this model no new real social homes will be built over the course of this Parliament beyond those already in the pipeline.
 
‘The new funding model for low cost housing is predicated on high rents, instead of on an adequate capital budget, and this means that the freedom of housing associations to respond to housing need in each area will be cut from beneath their feet.
 
‘Housing associations had wanted the flexibility to build a mix of homes at intermediate rents and social rents – but now they have an imposed solution which replaces that mix with high-cost, near-market prices across the board.
 
‘Because it is based on near-market rents, the new funding model will trap thousands of tenants in welfare dependency because they will simply not be able to earn enough money to pay for their homes without the support of housing benefit – which means the benefit bill for new low cost housing will go through the roof.’
 
He added: ‘The Government’s strategy will turn the traditional understanding of what constitutes social housing on its head by creating a system based around high rents and short-term tenancies. Ministers need urgently to rethink their plans and give housing associations the flexibility to respond to the growing housing crisis in the most effective manner possible.’

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