Monday, September 06, 2010

Worth their weight in Gold: Long term tenancies must stay

The Coalition government has announced that it is considering ending life time tenancies for tenants of housing associations or local authorities. David Cameron’s reasoning behind floating this change is that:
“maybe in five or 10 years you will be doing a different job and be better paid and you won't need that home, you will be able to go into the private sector.”

The inference is that social housing should be only a safety net, not something that is potentially available to all.  That would represent a fundamental shift in the purpose of council and housing association properties.

Housing is a fundamental human need as every student of Maslow’s hierarchy of needs knows. Without security of shelter it is very difficult to think about working and contributing back to society. The stress of not knowing whether you’re safe staying in your house can be a massive emotional and physical drain. In a world where people feel that so much is changing and out of their control, security of tenure is a cornerstone in their lives.

If the coalition is serious about tackling the culture of benefits dependency by getting people back into work this is not the way to do it. Effectively penalising people by getting them to move from their home and pay private sector rents because they’ve got a job hardly helps incentivise people. It doesn’t matter that this might not be for years – the message it sends is that work still won’t pay.  Social Housing needs to be used more effectively and there’s room for reform, but redesigning it as a safety net is not the way to go.

The other thrust behind the coalition announcement on tenure is money. The communities department claims that Social Housing is subsidised to the tune of £35 per week by each tax payer.  If that were true there would be good cause to try and seek savings in economically tough times. In reality, housing association and local authorities fund all of their maintenance and running costs through rent receipts.

What the Communities department may be referring to is government subsidy for the building of new social housing – which stands at a total of £8.4bn over three years, although this still works out at considerably less than £35 per tax payer per week.

So what is the link between building new homes and the cost of renting one?

In the private sector when a building company has completed a new home they sell it (directly or indirectly) to the first owner. If the owner chooses to let the new property they effectively pass on the cost of the build, management fees and their mortgage through the rent to the tenant. Housing associations also borrow cash to contribute to new builds, but the full cost of the build isn’t passed on in rent because of the government subsidy. So the Communities department are right - social housing rents are lower because of the building subsidy. However, rents are also lower because Housing Associations don’t have to make a profit for their shareholders.

There’s another catch. Everyone seems to agree that we need more homes, but the private sector isn’t that willing to build them either and is crying out for – you guessed it – subsidy. Until 2006 the government funded, with some success the Business Expansion Scheme to encourage the private sector to build new residential homes and now the private sector are calling for its reintroduction. It looks like the tax payer is going to be forking out for new builds for some time to come. If the government is going to invest money in the new houses why not invest it where you know it will get passed onto those that most need it rather than ending up in the pockets of commercial builders?

If the coalition seriously wants to try and reduce public subsidy of new builds it could allow rents to go up in the social housing sector to allow greater reinvestment in new builds. This would mean people that were working in social housing were paying closer to the private market rent. It would also mean that it was paying more in Housing Benefit, but there would be the incentive for the coalition to get more people into work without having to end secure tenancies. However, the Housing and Council Tax Benefit system needs reforming because it is a massive disincentive to work because it effectively taxes a new worker at 85%.

Ah, what a tangled web. What was it Palmerston said about the number of people who understood the Schwelsig Holstein Question? Maybe subsidising social housing isn’t such a bad idea.

Social Housing secure tenancies are worth their weight in gold. They improve the quality of life for millions of people in this country by meeting a basic human need for the long term. Treating the national stock of four million Social Houses as a safety net by forcing people to leave their homes when they get work is short sighted, unlikely to save money or increase the total housing stock. Tackling the culture of welfare dependency is and should continue to be a top priority of this government, but ending security of tenure will damage, not contribute to this aim.