Three years of ad hoc changes to social sector rents have left them in chaos. What do we do now to restore a sensible rents policy?
A new report from CIH and London & Quadrant, We need to talk about rents, is an attempt to begin a much-needed debate. Much needed because rents are not only crucial to the sector’s affordability, but also because they drive investment and are a key element in defining the purpose of social housing.
Why is policy a mess? Although the rents policy which Grant Shapps inherited from Labour had in its time been controversial, at least it embodied affordability and consistency, and was known and accepted by lenders. Shapps didn’t so much dismantle the policy as ignore it, sticking on new bits without any regard to the overall outcome.
Furthermore, while the remnants of the policy still embrace the crucial link to average regional incomes, most of Shapps’ initiatives have pulled in the opposite direction, eroding affordability and – surprise, surprise – helping push up the housing benefit bill. So as pointed out in the latest UK Housing Review, not only will we eventually have 67,000 new houses let at rents that are far much less affordable, but we have so far sacrificed lower rents on over 70,000 properties that have been switched to ‘Affordable Rent’ to support the borrowing needed to build the others. The ratio of homes removed from the social rent portfolio to pay for AR homes is likely to be 3:2, i.e. three are lost from social rent for every two gained for AR. This confirms the result of a Freedom of Information request done by Red Brick last year.
As everyone suspected would happen, and as the Review also points out, the limited experience of the new AR lettings at higher rents shows that they are nevertheless going to the same target group as social lettings, i.e. 79% of lettings are to tenants partly or wholly dependant on HB in both cases: there is no sign of more AR lettings going to better-off tenants. In other words, housing benefit will again ‘take the strain’ and tenants trapped in benefit dependency will face higher barriers to escape it. Duncan-Smith must have been looking the other way when this policy change was slipped through.
As the CIH and L&Q discussion paper points out, even more important than the immediate practical effects are the longer-term consequences. One of course concerns the sustainability of an investment model which reduces the average grant input to only 14% of the cost of a new dwelling (from a previous average of 39%), relying for the rest to be loaded onto rents or to come from asset sales or free land.
But arguably even more important is the role that rents policy plays in any vision for what the aims of social housing are. Here, Shapps and now Prisk have vacillated between aiming the sector at higher earners through AR rents, penalising higher earners through the still-threatened pay-to-stay policy, pushing more benefit dependent families into the sector through LHA changes, pushing them back again through the bedroom tax, and encouraging local authorities to give the impression they can reward long-term, working residents through their allocations policies – even though in practice landlords are struggling with the chaos caused by the combination of rising homelessness and the tenant transfers now needed because of the bedroom tax.
The only comfort to be drawn is that it is not only in England that policy is in confusion. The report makes clear that policy changes in Australia, Canada, France and Sweden have also had unintended consequences. In Canada for example, a programme very like our Affordable Homes Programme and with almost the same name now caters for new, better-off tenants previously excluded from Canada’s small social sector, but adds nothing to the much needed supply of lettings at ‘rents geared to incomes’, leaving providers unable to cope with demand.
The report doesn’t reach conclusions, as it’s a call for debate, but it does ask if rents could support a redistributive element so that richer tenants help keep rents down for poorer ones. Something similar has just been proposed in a report by Demos for Family Mosaic and Home Group. While this may be a desirable objective, it seems unlikely that it can squared with rents being relied on as a source of investment, unless grant rates can be restored to something much more generous than 14%.
The lesson for Labour’s housing policy is that it can’t put rents policy into the ‘too difficult’ box, it is too important for that. The risks of ignoring the issue are evident from the way the Tories’ half-baked policies have pulled in conflicting directions. A debate is needed about social rents and the wider issue that lies behind them of what the sector is for. The Tories have ducked it; Labour shouldn’t.