Hearts sink in the housing sector as Right to Buy is rolled out
The government’s answer to the affordable housing shortage in the UK is raising concerns in the housing sector. Andrew Weston from NPC reports on the potential consequences of the Right to Buy scheme and the housing association identity crisis.
There is a near universal acknowledgement that the UK housing system is in crisis. Homes are increasingly unaffordable for people on average salaries, private sector rents are on the rise, and there is a critical shortage of homes, particularly in London.
The government’s plan to expand of the right to buy scheme is key to their attempt to counter the crisis. The hope is that, by allowing residents to purchase their housing association homes at a discount, funds will then be freed up to build new homes, relieving the shortage while simultaneously transforming working families into homeowners.
But this policy has been met with concern from across the housing sector. At their heart is a fear that it simply won’t work—that the housing stock will not be replenished, and that instead of alleviating the crisis the policy will make it worse.
There are some troubling figures that support this claim. In 2011, Shelter looked at the previous major expansion of a right to buy scheme – one which increased discounts available to purchase socially-rented homes and made a similar promise that new homes would be built on a one-to-one basis. Looking at a sample of 26,184 London homes sold, Shelter found that only 2,712 homes had been built, were in the process of being built, or had been purchased to replace them.
This is a pretty poor return, and it comes when housing associations are already under financial pressure. As NPC noted in a previous report, the introduction of financial penalties associated with the Welfare Reform Act 2012 (colloquially known as the bedroom tax) has increased spending on income management teams at a time when resources are badly needed elsewhere.
The gloomiest predictions suggest that things may get worse still. Jim Ripley, the CEO of Phoenix Community Housing, warned this year that building new stock in this way is almost impossible in areas of the country where property values remain stubbornly low. He spoke about the "slow death of social housing in all those areas of the country". Worryingly, in these regions we could see a rate of replacement even worse than that identified by Shelter in high-cost London.
This is a very big problem for the charity sector to try and tackle. Indeed, it’s probably too big to make a meaningful dent in issues around the quantity of UK housing, but there are patches of strong work. The Dolphin Square Foundation, for example, which builds and rents out affordable housing in the area around Westminster, has built or is in the process of building an average of 50 homes a year since it was founded a decade ago. According to Shelter, Westminster Council by comparison replaced on average just 2.5 of the 28.2 homes it sold each year between 2011 and 2015. Working on a local level, there are examples out there where charities seem to have hit on solutions that outperform public bodies.
At the same time, though, charities in the housing sector are going through a bit of an identity crisis. It is easy to forget that housing associations, for all their closeness to the state, are independent, non-profit bodies. Many, such as the Peabody Trust were set up by philanthropists. They are not part of the government – yet the state has effectively forced through the sale of their assets.
There can be few illusions about the challenge here. As the ONS recently announced, the ratio of renters to homeowners is up in the 10 years to 2011, the first time in a century that owner occupation has declined. The aspirational, home-owning class about which so many politicians speak is actually proportionally shrinking. Good practice by charities should be scrutinised and scaled-up to meet the demands of one of the great policy challenges of our time—but the newest legislation offers them little encouragement.
NPC will be running a event asking Have charities neglected the question of rent for too long? in September. To find out more, click here.
Photo credit: David Wilmot