This was published in Inside Housing under the heading “Enough is enough – we need to call time on affordable rent“
When the government introduced the second round of its Affordable Homes programme there was no funding for social housing save for 8,000 supported housing units. Teresa May subsequently announced that there would be funding for social rent homes. Yet, by the end of last September, of the 57,543 homes funded by Homes England grant, only 2,972 were for social rent compared to 24,967 affordable rent and 24,964 affordable home ownership.
The problems this funding system creates are exemplified by Swindon council’s Queens Drive regeneration scheme. This involves demolition of 86 old social rent units. They will be replaced by 108 council properties, of which 76 will be affordable rent and only 32 social rent. The project includes 17 shared ownership and 24 market rent flats. The latter would be sold to the council’s private company to provide revenue stream to the General Fund. So instead of all the council land being used for council housing some of it will be used to bolster the General Fund, effectively circumventing the ring-fence of the Housing Revenue Account. Of the 149 properties which will be built on council land 41 will not be owned by the HRA. The increase in the number of council homes will be only 22.
The benefit of building social rent homes is negated by the fact that the low level of grant means that in order to finance the scheme 50 existing social rent homes will be converted to affordable rent when they become void; giving a social rent total of minus 18.
The cost of the scheme is estimated at £34 million of which £28 million is construction costs. Because the Homes England grant is less than £10 million the scheme involves £15.5 million extra borrowing by the HRA. So the balance sheet of this regeneration is an extra 22 council properties, with the loss of 18 social rent properties, despite 32 new ones being built.
When you add an extra £8.2 million of borrowing for a new build project at Windmill Hill, which will provide 64 affordable rent properties, the HRA will be saddled with an extra £23.7 million debt, not far short of a 25% increase. Windmill Hill will be part funded by 40 conversions of existing stock from social rent to affordable rent; 58 overall between the two projects.
What’s the difference between social rent and affordable rent in Swindon? The last data for 2018-19 shows that the average affordable rent is £29.73 higher than social rent. The more bedrooms the greater the difference. The rent for a 3 bed affordable rent home is an average of £48.72 a week more than social rent, £74.26 more for a four bed. These are big differences for low paid workers and those in precarious work. Certainly the impact of the coronavirus pandemic will have destabilised many council tenants financial circumstances. So the slow conversion of social rent to affordable rent properties will make council rents unaffordable to more people. At the end of 2018-19 council homes included 402 affordable rent properties (9,898 social rent).
So regeneration with the government’s funding regime produces more homes which are unaffordable to many. Swindon council introduced a “green light for housing” policy whereby even those people on the housing list who come top in the bidding for a tenancy are means-tested. Some are rejected because the council considers they cannot afford the rent. If they can’t afford a council rent what can they afford when private sector rents are so much higher? Even a lower quartile one bedroom property in the private sector in Swindon is £126.92 a week compared to an average of £72 for a social rent council property. For a lower quartile 3 bed in the private sector the rent is £174.23 a week compared to an average social rent for a 3 bedroom council house of £85.92.
Under the current funding regime every new build or regeneration project will involve rent conversions because of the low level of grant available. Whatever the efforts of councils like Swindon to build new homes, the absence of significant grant from central government means that they have been unable to stop the fall in stock numbers resulting from Right to Buy. As the town continues to grow Swindon has around 200 less council homes than in 2011.
Swindon exemplifies the failure of government housing policy. The situation underlines the need for a concerted effort to fundamentally change government policy. Ending right to buy is critical to stop the haemorrhaging of stock. Affordable rent, which irrationally increases the housing benefit bill, should be abandoned. There should be a return to funding only social rent homes. Grant on a scale that Labour was prepared to support (£10 billion a year for 100,000 council homes) is necessary. A large scale council house building programme, which even the Tories in the LGA say is necessary to tackle the housing crisis, would make a significant contribution to overcoming the economic impact of the coronavirus crisis and boosting socially useful economic activity.
Martin Wicks, Secretary Swindon Tenants Campaign Group