The importance of affordable homes

Wednesday, 5 March 2014 - 9:29am

Against a backdrop of welfare reform and caution among private landlords, what will it take to increase the building of new homes?

The housing market is a large and complex organism with many different facets and idiosyncrasies. Yet, if there is one area where people have reached a general consensus, it is in the acknowledgement that not enough homes are being built to meet rising demand. The preface to the recent Lyons Housing Review sums this up neatly:

‘If homeownership is to be a realistic aspiration for working people, and rents are to be affordable, then we will need a step change in the scale of house building in England.’

Given that we are only building half the number of homes required to meet estimated levels of demand, it is of no surprise that people from all sides of the discussion have reached this conclusion. Although the message is clear, not enough consideration has been given to what these homes should look like. We do not simply need more homes; we need specific types of homes.

The fact is that you cannot alter one element of the housing market without having a wider effect on the whole. Nowhere is this more clearly embodied than in the need for a healthy supply of properties at sub-market rents (50% - 60% of market rates). Unless we are seriously prepared to engage with the diverse range of housing options we need, it will become increasingly difficult to find a lasting and coherent solution to the current housing crisis.

If homeownership is to be a realistic aspiration for working people, and rents are to be affordable, then we will need a step change in the scale of house building in England.

In 2004, the Barker Review estimated that in order to create a well-balanced housing market, the Government would be required to build 26,000 social housing units per year. Since publication of the review 10 years ago, new supply in the social rented sector has slowed, while the disparity between private sector rents and wages has continued to increase.

This divergence appears to have as much to do with wages as with rents. The most recent London Housing Survey indicates that the median weekly rent in the private rented sector has remained at £138 for a second successive year. Leaving aside the question of whether £138 is a genuinely affordable amount, statistics from the Department for Work and Pensions reveal that the number of people in work claiming Housing Benefit has risen by 104% since 2009.

This increase in working claimants has helped to fuel rises in the total cost of Housing Benefit, which has more than doubled in the last 15 years. This in turn has helped to subsidise low wages and rental increases, sometimes above inflation.

Rather than focus on the relevant structural issues contained within the housing and employment markets, many of the recent welfare reforms have instead focused on reducing Housing Benefit payments to tenants. This has reduced the pool of accommodation that is genuinely affordable to those in receipt of social security, as well as destabilised the relationship between those claiming Housing Benefit and private landlords. 

A number of high profile, large-scale property owners have openly stated in the media that they are no longer willing to rent their properties to those claiming Housing Benefit. Recent statutory figures published by the Department for Communities and Local Government for the third quarter of 2013, also show that 26% of all households accepted as homeless by local authorities lost their accommodation due to landlords opting not to renew their tenancies.

The weakening of this relationship and the issues behind it have been particularly damaging for homelessness charities that have spent years building and sustaining productive working relationships with private landlords. This pattern was clearly reflected in our Survey of Needs and Provision 2013, which highlighted the need for appropriate move-on accommodation as one of the biggest gaps in service provision.

Once we start to piece the relevant statistical and anecdotal evidence together, we can begin to see the inextricable links that connect the different sections of the housing market and beyond.

In the absence of an adequate number of affordable social homes, people have become reliant on the private rented sector. A combination of high rents and low wages has seen more and more people seek help from the state to meet their rent costs. The state has responded to the rising Housing Benefit Bill by cutting the amount of Housing Benefit available to tenants. Lack of certainty around the levels of Housing Benefit available, has led to landlords withdrawing from the market, forcing many tenants to approach local authorities for help with homelessness.

As part of the Lyons Review, Ed Milliband has announced his plans for Labour to begin building more than 200,000 homes by the end of the next Parliament should Labour win next year’s general election. The Coalition Government too has attempted to stimulate the market through initiatives such as the Affordable Homes Programme and Help to Buy. 

If we consider the figure of 200,000 to be a reasonable target, then to even fulfil the quota of 26,000 affordable homes per annum set a decade ago by the Barker Review, one in every seven of these new builds would need to be social housing, available at sub-market rents. 

To truly understand the benefits of this investment, it is vital that we continue to discuss the different elements of the housing market as part of a comprehensive whole. The acknowledgement that we need more homes represents the start, not the end, of this particular conversation.