Personal subsidy or capital grant? Housing in the new world

Published by 24publishing for 24dash.com in Housing and also in Central Government, Communities, Local Government

It has been used nearly as many times as the 'no silver bullet' analogy (we've also had gold and bronze) at this year's Chartered Institute of Housing conference, but the sector's leading figures continue to press home that "subsidised housing requires some form of subsidy."

Hard to disagree with - you'd think - as sub-market housing, by definition, is built at a loss.

The two obvious levers at the Government's disposal is capital grant to build housing let at cheaper rents or supporting people in higher rented homes through personal subsidy i.e. housing benefit.

Thus, it was very interesting to see that out of 16 housing professionals, the majority of which worked for registered providers, 67% said it should be bricks and mortar subsidy that should be prioritised.

The poll took place at one of the Chartered Institute of Housing Conference 'Sacred Cow' sessions yesterday.

Perhaps even more interesting was that 93% of the same sample agreed that social rents should increase as household incomes increase, reflecting a view that personal subsidy should be reduced as your circumstances change.

One delegate in the sample - who favoured the personal subsidy approach - believed the tax system could do both jobs - effectively allowing people to move in and out of subsidy as their circumstances dictate and at the same time leaving providers with cash to build new homes.

She said: "If you charge a market rent you have more money to build, then if the person needs subsidy you give them personal income subsidy through the tax system. If they get a job or their money goes up, their personal income subsidy goes down but they get to stay in the same house. You end up with greater revenue to build and replace stock and target subsidy at those that need it at a time in their life when they need it without causing them to leave their home."

However, she warned the Government that cutting both the capital grant to build new homes and capping personal subsidy i.e. housing benefit risked exporting the vulnerable and least capable families to the poorest areas with the lowest rents.

The Government, if you like, is pulling at both ends of the rug leaving a big tear in the middle for the most vulnerable to fall down.

It has cut the capital subsidy to build new social housing and replaced it with a revenue-based system where new homes are built from charging higher rents.

Obviously fractious because housing associations, who provide sub-market housing, are now having to increase their rents to build new homes.

In response the Government says the housing benefit bill will take the strain - the other side of the subsidy chain - but that is being capped too. In April next year a £500 a week household benefit cap will kick in.

 "I don't think the Government has thought through the unintended consequences of this shift," the delegate added.

Ross Macmillan is the deputy editor of 24housing magazine.