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Social Housing Speed Read – the benefits of social housing – £1.8bn in savings lost

Research published by the Local Government Association (LGA) has estimated that £1.8 billion could have been cut from the housing benefit bill had more social housing been built over the last 20 years. The analysis assumes that, if 100,000 homes let on social rent had been funded by the government in each of those 20 years, both tenants and wider society could have benefitted from the economic and social impacts brought by social housing.

Click here to view the research.

The analysis, carried out by Cambridge Economics, asserts that if such a number of socially rented homes had been built, all claimants of housing benefit would have been able to leave the private rented sector and move into social housing by 2016.

Whilst the country has experienced a shortage of social housing for decades, the number of households in the private rented sector (PRS) doubled from 2000 to 2011. This trend has meant that many tenants that would traditionally have used social housing have had no alternative but to turn to the PRS, where rents on average tend to be more expensive. The National Housing Federation (NHF) have reported this week, for example, that half of children living in PRS homes in England live in poverty. Whilst this cannot be attributed solely to higher rents, the NHF cite insufficient social housing and high prices as contributing factors. This is coupled with the fact that social housing can often be more secure than the PRS, and the rollout of Universal Credit and welfare cuts has meant that landlords can be less willing to rent to benefit claimants. It is arguable, therefore, that government assistance to low-income tenants in the form of housing benefits has supported some of the growth of the PRS In any case, the housing benefit bill has doubled since the early 2000s, which could have been reduced had more social housing been built.

Another knock on effect of the increased number of tenants applying for housing benefit in the PRS has been the added strain on services. This increase in payments has, in turn, increased the caseload in government departments who process the payments– resulting in a £7 billion increase in costs in the last 10 years.

One of the issues preventing the building of homes has been access to funding. The 2018 Budget published last Autumn abolished the cap on councils borrowing for housing, which could facilitate the building of social housing that might otherwise be unaffordable.

Despite this, the LGA research makes clear that as long as councils can fund social housing, they will see a return on their money. Whilst the Government would have needed to borrow an additional £152 billion to build the yearly 100,000 social rent homes assumed by the LGA research, they would have recouped £2.84 for every £1 spent; with extra tax revenue from the construction industry, and the aforementioned welfare savings contributing to a significant return upon the investment.

LGA housing spokesperson Councillor Martin Tett said: “Every penny spent on building new social housing is an investment that has the potential to bring significant economic and social returns”.

He also added that: “by scrapping the housing borrowing cap, the Government showed it had heard our argument that councils must be part of the solution to our chronic housing shortage. Allowing councils to keep 100 per cent of their Right to Buy receipts is the next step to deliver the renaissance in council housebuilding we need as a nation.”

Research and analysis such as this make clear the potential long term benefits of investment in social housing. Objective economic assessments, together with the associated social benefits as to an increase in social housing (for example, reducing homelessness and increasing tenants’ quality of life) will hopefully continue to encourage policy changes that promotes and encourages the building of more social housing.

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.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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