Social housing is ‘subsidised’ to the tune of £13 billion annually said George Osborne in his Budget. So ‘it’s time to act’ on the higher earners who use these taxpayer-funded subsidies. In the Guardian, Zoe Williams says that his message is that the state is for losers. In the Sun, Osborne retorts that it’s a simple matter of fairness.
Let’s deal first with the dubious claim that social housing costs the taxpayer £13 billions per year. This calculation is based on social rents being on average £3,500 below market rent levels. But calling this a subsidy is to assume that it would make economic sense to raise rents to market levels. Not only would much of the saving be absorbed by increased housing benefits, but there would be a severe work disincentive effect. In other words, the potential savings are fictional. That this is obvious is clear from another Budget measure, to bring down social rents by one per cent per year. On the same logic as the ‘subsidy’ calculation, this should require even more tax-payer subsidy. But it turns out that the Office for Budget Responsibility thinks this will save money: indeed it will be ‘the largest single measure’ in savings in the housing benefit budget apart from the overall benefits freeze. What it will do, of course, is deter social landlords from building, but perhaps we are meant to be grateful that the threat of even more ‘tax-payer subsidised housing’ has been successfully thwarted by the Chancellor.
The pay-to-stay measure has another particularly nasty twist: while housing associations will be able to keep any extra income they collect, councils will have to pay it to the Treasury. While this may well be chicken feed, along with the enforced sale of high-value properties it is yet another way in which councils are being undermined. It adds a tenth point to my recent list of government threats to social housing. Indeed, it also directly undercuts Grant Shapps’ council housing finance reforms of three years ago, when he promised in Inside Housing that from now on council housing would cease to be controlled by central government, and that councils would have the freedom to make local decisions and no longer have to ‘pay their council house rents to Whitehall’. Even the coalition’s official announcement on self-financing said that ‘councils are best placed to make decisions about how they spend money they raise locally’. Can promises made while in coalition now be broken with impunity by the new government?
But Zoe Williams puts in the wider domain a thought which must preoccupy all those who support SHOUT’s campaign for social housing: that the government’s aim is to whittle away at the sector until only a rump remains, fit only for ‘losers’. Under this scenario, better housing association property will be let at near-market rents to those who are earning half-decent incomes, but council housing that hasn’t been sold off will be let at low rents aimed at those who will never learn their lessons from Iain Duncan Smith on how to stop being feckless.
One respected housing policy commentator said immediately on hearing Osborne’s proposals that if we were going to adopt means-testing for social housing, the logical next step would for rents to be set as a percentage of incomes as in Canada and other countries where social housing is a residual sector. He added: ‘…which is also where we now look to be heading’.
In a prescient article on the role of social housing back in 2008, Mark Stephens described it as providing a ‘safety net’ in England rather than having the wider ‘affordability’ role that it has in several Northern European countries. While many housing professionals wanted social housing to cater for a broader range of income groups, the threat was a move in the opposite direction, to provide only an ‘ambulance service’. As he pointed out, in several English-speaking countries (USA, Canada, Australia and the Republic of Ireland) the social sector is much smaller as a proportion of the stock, is specifically aimed at low-income families (often with some degree of means-testing) and may even cater especially for those with support needs (e.g. what the Tory government calls ‘troubled families’). As the name suggests, the aim of an ambulance service is to move the patient on as quickly as possible, in this case into the private sector. Of course in England such an aim is undermined by so-called ‘lifetime’ tenancies, which is why another of Osborne’s proposals is to look into how they can be scrapped.
When pay-to-stay was originally proposed there was an excellent analysis of its effects by the Swindon Tenants Campaign Group. They called it a ‘petty and stupid proposal’ which would turn social housing into a tenure ‘only for the poor’. Tenants don’t want this, nor do councils or housing associations. Creating a totally false label that it is ‘tax-payer subsidised housing’ when other housing sectors are all subsidised is not accidental, it is a deliberate step towards reducing social housing to the ‘ambulance service’ that Mark Stephens warned us about. If less than a month ago it looked like social housing as we know it might be faced with either a slow death or a killer blow, after July 8 the prognosis looks even worse.