Opinion: Some food for thought for Brandon Lewis
Published by Jon Land for 24dash.com in Housing and also in Central Government, Finance
Opinion: If housing were retail, we’d be seen as focusing on new customers at the expense of our existing ones
As an antidote to the Wednesday ramblings of Brian Church, Halton Housing’s effervescent CEO, Nick Atkin, writes reasonably sensibly about the Homes and Communities Agency’s recent affordable housing allocations.
So, the eagerly awaited HCA allocations have been announced. Now the dust has settled, the general view is that it appears to have been good news for many of those who submitted bids.
The north has done well. With 43% of the £900 million allocated so far, the North West from a parochial perspective has a 20% share. Also gaining a greater share of the development pot have been smaller housing associations, as well as a number of councils who are building again.
At Halton Housing Trust we’re delighted to have successfully secured funding for a further 290 homes of the 800 we will be building over the next four years.
Whilst the focus has been on grant rates and (who has and who hasn’t bid and why) there are some bigger issues we need to face up to. As grant rates have fallen, there is an increasingly tougher choice on how to build new homes and fill the gap.
For many, this means that an increasing proportion of existing homes are relet at affordable rents. Others are turning to cross subsidy from either homes for sale, or profit from commercial activity by their non-regulated subsidiary businesses.
The new Housing Minister Brandon Lewis has urged housing associations to “think about how they can make every pound go further” to deliver more affordable homes. So here goes.
If housing were a retail business we would be viewed as focusing on new customers at the expense of our existing ones. This is what current housing policy encourages, through the depletion of the existing supply of affordable housing via right to buy (RTB), as well as asking existing customers to fund new development through affordable rents.
Until quite recently, RTB felt like the Emperor’s New Clothes equivalent in the housing world. Everyone seemed to think it must be right as everyone else was saying the same. However, an increasing number of people are now starting to change their thinking.
RTB isn’t right and we need to start making the case for the policy to be changed or scrapped.
As in several other policy areas, Scotland is way ahead of England on this too. Not only have they signalled their intent to scrap the policy, but they are now looking to accelerate this.
The current policy in England and recent further RTB discount changes seems to be at odds with the HCA’s focus upon protecting social housing assets.
So what’s the problem with giving people the opportunity to access a heavily discounted property? Well there are five. Rather than take up valuable space here they are summarised in my earlier blog.
Turning to new supply, the key to unlocking new affordable homes is money. This is in the form of both grant and rent levels. We know from the macro economic analysis, there isn’t going to be much financial headroom for any government elected for the 2015-2020 term. So, if there is limited or no grant, how do we continue to build homes for people they can afford?
One of the problems is our continued use of the complex and commonly misunderstood rent regime. There are very few people who fully understand and can explain the current rent framework. So why not move to a system that is fully transparent for customers, applying some of the principles from our European counterparts?
A simple system of charging by the square metre for both internal and external space (at two different rates) would enable each individual rent to be fairly and transparently explained. This could be underpinned by providing more flexibility for housing providers to increase and decrease rents, dependent upon an individual person’s financial position.
An argument against such an approach is that no other sector adjusts its prices based on the ability of the buyer to afford to pay and that this is taking the place of the welfare system. However we also need to acknowledge that very few sectors receive grant aid to build homes from which the recipient organisation then takes the subsequent rental income, albeit this being lower than the market would charge.
The G15 group of associations has recently commissioned further work to explore the options for setting rent policy linked to incomes, rather than property values and market rents. The outcome of this could be pivotal for the wider housing sector outside London too.
For some of those who are experiencing genuine severe financial hardship with the onset of Universal credit, rent adjustments (decreases) can then be made, using an evidence-based approach. It is acknowledged that this is potentially difficult to manage as customers circumstances can change and alter quite frequently. However in many cases housing providers are already made aware of these changes from their ongoing contract, frequently through the arrears recovery process.
Of course any such system would need safeguards in place to prevent a small minority from seeing this as an opportunity to raise rents across the board, or to make certain areas or types of homes unaffordable to lower income households. But if we are to think the unthinkable, don’t we need to start with what stops us doing the things we need to do now?
Then finally there is the cost of building. One of the main barriers to offsite construction is planning restrictions that prevent the construction of buildings off site. Currently these homes are transported without the roofs fitted. This is due to stringent planning restrictions on what materials can be used, which cannot then be easily transported. So what happens is that these buildings are delivered to site and scaffolding erected to enable the roof to be fitted. This adds both considerable time and cost to the process. A simple solution would be to exempt these from the existing planning requirements.
To gain further momentum, the government could consider incentives for the use of modern methods of construction to enable the demand to increase for the products and therefore bring down the cost. These ‘modern’ methods have in fact been around for a number of years but we haven’t moved towards their mainstream use.
So to sum up, it’s good news that outside London another 44,000 much needed homes are to be built between 2015 and 2018. But if we are to meet the estimates of between 200,000 to 300,000 homes per year it is apparent a much more radical approach needs to be adopted. This is now the time for us to be more innovative, and to think the unthinkable.