Institutional chaos

The Chief Executive of the National Housing Federation, David Orr, spoke last week about the ‘institutional chaos’ facing housing associations and the need to think carefully about balancing the needs of their business with their mission. 

He said “You might take a strategic business view that the smart thing to do is wait until all the moving parts have settled down and not take any risks. But that is pretty disastrous in mission terms with the scale of the housing crisis.”

Housing associations (HAs) certainly face huge dilemmas in the current policy framework.  It is no longer possible to build what is needed most – social rented housing at genuinely affordable rents – except in tiny numbers as a special case.  So, if HAs with development programmes want to keep them going, and most are assembling their bids at the moment, there is little choice but to plan a mix of private housing, shared ownership and the new, grotesquely-named ‘Affordable Rent (AR)’ product (which is little different from the intermediate rent products we have seen before).  Of course it can be argued that building almost any housing is useful given the current shortage, and AR at 80% of market rent is not that much different from social rents in those parts of the country with the lowest values.  But everywhere else, the virtual removal of social renting from the mix totally disregards the needs of communities and the people on lowest incomes.    

One thing HAs with a development programme can and must do is protect the existing stock of social rented homes when they become available for re-letting.  The government wants them to re-let a share of their existing homes at AR rent levels to generate funding for new development.  I think they should demonstrate their commitment to their mission, to borrow David Orr’s word, by refusing to do so and by re-letting these homes at social rent levels.  Councils, in revising their housing strategies and setting their new ‘tenancy strategies’ under the Localism Bill, should set out their opposition to existing social rented homes being re-let at such high rents. 

Lettings policies, already the art of getting a quart in to a pint pot, will come under even greater strain.  Demand for homes that are re-let at social rents will increase as supply contracts even further.  Who will the new AR tenancies at up to 80% market rents be allocated to?  The government argues that the profile will be the same as those who currently get allocated social rented homes, but they also say that the new policy will not impact on the requirement for housing benefit – and they can’t have both of these.  Higher rents require more housing benefit, as we have argued before and as Family Mosaic’s research showed.  Once again their housing policy and their welfare reform agendas are in direct conflict. 

HAs caught in the middle say quietly that this is an argument that the lenders may ultimately decide – they don’t like it when the tenants can’t pay their rents and this will be reflected in their risk assessments of new schemes.  One middle course would be for HAs to refuse to set AR rent levels above the limit for Housing Benefit, irrespective of local market rent levels.  That would reduce the yield but would keep the homes available for people on housing benefit.  But, in higher value areas, it is the total benefits cap (rather than the housing benefit limit) that will prevent many tenants from being able to pay their rent.  This will be reflected in the risk assessment for new schemes and the pressure will be on to let to people with sufficient income to be able to afford the rent. 

So, there are dangers both ways.  If AR homes are let to people on low incomes who would previously have qualified for a social rented home, then housing benefit spending will go up.  If AR homes are let to people who can afford the higher rents, then people on lower incomes will be squeezed out and more will end up in private rented accommodation at higher rents with a higher requirement for HB support.  Either way, there is likely to be upward pressure on HB spending: the government will have to find more money or look for more cuts.  The prospects are grim.

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2 Responses to Institutional chaos

  1. Pingback: Institutional chaos « Progressive Middlesbrough

  2. S A Barker says:

    The same Right to buy scheme(same rules)as applies to LA housing should be in place.A level and equal rights housing scheme should be in place.I know that HAs want to retain and expand their Empires(under a Charity,banner?).But this does not help the poorest in society.
    Options exist in Park Homes,Low cost Static and Chalet homes.This will expand as Planning comes through.
    By the right to buy(Reduced cost).HAs stock will reduce but will allow Finance for New Build Social Housing of the Two,Three and Four Bed Type.The equation will be 3 to 1 but this will expand the social housing at NO extra cost to HAs or Gov.It must be noted that HAs aquired much stock for NIL outlay and transfer,free land from councils etc.HAs have systematically Drawn funding from the Housing Corporation(as was),and still draw as much as possible from Councils with little in return.But Gosh what Empires have been aquired by various HAs,Mansion type offices,flash cars and huge expenses.This off the backs of the very poor and vulnarable.

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