10/04/2015 By Nick Duxbury, Inside Housing
The government is taking credit for the achievements of social landlords when it makes its pre-election affordable housing boasts. Nick Duxbury explains why this matters and why Inside Housing’s campaign Housing Benefits campaign will set the record straight
‘We’ve invested £19.5bn in affordable housebuilding, with nearly 217,000 new affordable homes delivered since 2010,’ boasted housing minister Brandon Lewis, in a press release sent out to the nation’s media outlets on 18 February. And why not? After all, spending nearly £20bn of taxpayer’s cash on building affordable housing in an era of widespread cuts and austerity would be an unbelievable achievement. Were it true, that is.
Some 25 minutes later, the Department for Communities and Local Government issued a corrected release (after some prompting from Inside Housing) clarifying that there had been a ‘typo’. Instead Mr Lewis stated: ‘We’ve invested £19.5bn public and private funding in affordable housebuilding, with nearly 217,000 new affordable homes delivered since 2010’.
Spot the difference? Few outside the housing sector will have.
The clarified statement is true (insofar as a government can claim to invest private as well as public funding) – but it remains more than a little misleading.
Far from having invested £19.5bn, the coalition has in fact stumped up £4.5bn of capital grant. And of this, more than half – £2.3bn – was committed spending by the previous Labour government. Actually, only £1.8bn of new funding has been invested in building affordable housing by the coalition between 2011 and 2015. It is mostly housing associations that have stretched their balance sheets and borrowed billions (£11.1bn in the past two years alone) in order to plough a staggering £15bn into building badly needed affordable homes.
Yet no media outlets are attributing any of this £19.5bn of investment to social landlords. And nor are any reporting that the coalition only allocated £1.8bn to the current Affordable Homes Programme.
Does this matter? After all, the government would argue it has enabled, or ‘levered in’ the £15bn of private housing association investment, achieving more homes for the taxpayer’s buck than the previous Labour government.
Inside Housing believes this does matter for two reasons. First, because the government is failing to acknowledge the incredible return investing in affordable housing offers – a problem Inside Housing’s latest campaign Housing Benefits (see box: campaign aims) intends to correct by demonstrating benefits beyond bricks and mortar. And second, because such spin paints an illusory picture of the government’s commitment to housing.
Despite the country being mired in a housing crisis, the coalition chose to cease funding social rented housing, and then went on to slash affordable housing grant funding by 60% (instead only funding a new tenure, affordable rent, which charges rents as high as 80% of the market rate). Average grant rates have dropped from 41% under the previous social programme to 23%. On top of this, the coalition has eroded the power of section 106 planning agreements to pay for affordable housing.
This is especially the case when you compare with the rest of Britain: the Scottish government invested almost the same amount as the coalition. Between 2012 and 2016, it will have invested a total of £1.7bn into affordable homes – two-thirds of which are for social (rather than affordable) rent. In Wales there is a similar commitment.
Despite getting, in some cases, £7 of return for every £1 of grant funding, Westminster politicians remain unconvinced by the case for investment in affordable housing.
So why has the economic case for investing in affordable housing been so difficult to make? A report by Savills in January 2013 on behalf of the G15 group of London’s largest housing associations attempted to find out by probing the government’s assumptions around the case for investment – specifically the principle of additionality (ability to create more homes). The Treasury assumes that for every two affordable homes built, one market home would not be built. However, Savills concluded that this assumption of a 50% additionality rate was flawed. It concluded that ‘the case for government investment in affordable housing… should be based on the assumption that there is no displacement of market housing by affordable housing, with additionality of at least 100%’. In short, investment in affordable housing leads to double the number of homes assumed by the government.
The report found that in fact, in many cases, affordable housing development was a supply catalyst. In addition, the private sector had a maximum development capacity of 130,000 a year over five years and so reaching the required 240,000 homes a year would only be possible if more affordable homes were built.
‘Housing associations are the best example of a public private partnership there is,’ states David Montague, chief executive of L&Q. ‘There is a real commitment within the sector.’
‘It’s extraordinary that we are in a housing crisis and the government won’t even meet us half way,’ says Mr Montague. ‘We could do so much more.’
So, credit where credit is due: housing providers have invested £15bn into building 217,000 affordable homes in the past five years. Imagine what they could do in the next five years with more government support.
Mr Montague knows better than most. L&Q alone is planning to invest more than three times the entire amount the government has in the 2015/20 Affordable Homes Programme and build 16,500 ‘genuinely affordable’ homes over the next five years. This is part of a commitment to build 50,000 homes at a cost of £12bn, of which half will be affordable. Many others are also pushing themselves despite the lack of government support. And English councils are building the first council homes in a generation; the latest figures show they are building more homes than any year since 1992, starting 2,560 in 2014.
Where does the coalition’s £19.5bn come from?
£15bn: the amount of finance invested by housing associations
£2.3bn: the remaining amount committed by Labour under the 2008/11 National Affordable Homes Programme
£1.8bn: the amount invested by the coalition into the 2011/15 Affordable Homes Programme