Social Housing Speed Read – Government announce £2bn for affordable housing

Housing and local government sector leaders have welcomed the announcements for an extra £2bn for affordable housing, raising the funds for social housing to almost £9bn. The PM said that the Government will aid the building of homes for social rent in areas of the country where “need is greatest”. Shortly after this speech, the Department for Communities and Local Government (DCLG) revealed the rent settlement would be CPI plus 1% for five years from 2020, providing much needed clarity for the sector.

Where will the money go?

A spokesperson for the Government said there will be a subsidy of £80,000 per home, meaning that the extra £2bn can pay for 25,000 new homes over the next five years. Housing associations have said that £80,000 per home is considerably higher than what is required to build new homes in all but the most expensive areas in the country. This therefore suggests that the investment may be targeted to the areas worst affected by the ‘affordability crisis’, such as London.

May’s speech also made it clear that the Government intends to remain in tight control of where the new social rent homes will be built, focusing on where ‘need is greatest’. Terrie Alafat, Chief Executive of the Chartered Institute of Housing (CIH), noted that in the amount of money that will actually be injected into social rented homes, the details will be ‘crucial’.

This view was shared by John Bibby, Chief Executive of the Association of Retained Council Housing who noted that he “would have liked to see much more resources allocated to social rent homes, certainly in comparison to £10bn for Help to Buy”.

What else?

The Government have also promised to encourage councils and housing associations to bid for the funding and to take charge over ensuring land is available for housebuilders to develop on. Ann Santry, Chief Executive of Sovereign, said that May’s ‘triple pledge – extra investment, access to land and promise of future rent certainty – shows how serious the Government are taking the difficulties people are facing in accessing an affordable home’.

The PM’s speech also emphasised her enthusiasm for reigniting the ‘British dream’ of homeownership. In an effort to restore ability to home-own for the next generation, the Government has pledged to invest a further £10bn into the Help to Buy scheme, with the aspiration this will help over 130,000 more families build the deposit the need to buy their own home.

Rent Settlement

This long awaited settlement of CPI plus 1% represents the Government abandoning the existing four year reduction of 1% per year, and restoring the original settlement proposed by the previous Chancellor, George Osborne, after 2020.

After their announcement, the DCLG said that this settlement will give “tenants, councils and housing associations the security and certainty they need.” David Orr, Chief Executive of National Houisng Federation (NHF), welcomed the settlement on rents saying it “will give the housing associations the confidence they need to build the homes our country so desperately needs.”

However, Peter Apps at Inside Housing recognises concerns of how tenants will pay the higher rent given that housing benefit will be tacked to frozen Local Housing Allowance rates meaning rents will increase whilst benefits remain flat.

If you have any questions on the above and how it will affect social housing providers, or any other questions as a social housing provider, please do not hesitate to contact John Murray or a member of our expert Social Housing Team.