Affordable homes – the challenge for councils

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The LGA argue that councils must have the flexibilities to shape the number, location, types and quality of starter homes to ensure that they meet local need, alongside other affordable homes for rent…

Councils share the Government’s ambition to increase house building and enable home ownership.

Measures within the Housing and Planning Bill – currently being debated in the House of Lords – risk combining to reduce the number of existing council homes, which local authorities will be forced to sell and will then struggle to replace.

This could lead to an increase in the housing benefit bill as more people are forced to move into the more expensive private rented sector. It will do nothing to help councils reduce homelessness and the use of temporary accommodation.

It has been a priority for the Local Government Association (LGA) to try and mitigate any of the unintended consequences of government housing reforms. We oppose plans to force councils to sell off homes to fund the Right to Buy extension to social housing and are raising concerns around a mandatory ‘pay to stay’ policy for councils and the provision of starter homes, at the expense of affordable homes to rent.

Government plans for more starter homes, for example, will help support home ownership in some areas, but will be out of reach for all people in need of affordable housing in 220 council areas, according to a report titled ‘The Impact of New Housing Measures on Development’ by real estate services provider Savills. We have argued that councils must have the flexibilities to shape the number, location, types and quality of starter homes to ensure that they meet local need, alongside other affordable homes for rent.

The LGA also strongly opposes the proposal to require councils to charge mandatory market-based rents for higher income tenants and to take a sum of money from councils based on a national estimate of the additional income from higher rents. Many social housing tenants across the country will be unable to afford market rents or take up the offer to buy their council home under this policy.

The ‘pay to stay’ policy needs to be voluntary for councils – as it will be for housing associations to protect social housing tenants – and avoid hard-working families being penalised. It needs to protect people being disincentivised to work and earn more, and key workers, such as nurses, teachers or social workers, having to move out of their local area. Councils must also retain any additional income generated from rents to reinvest in new and existing homes.

The LGA insists the extension of Right to Buy to housing association tenants must not be funded by forcing councils to sell off homes. As a minimum, the LGA forecasts councils would be forced to sell 22,000 ‘high value’ homes to fund the extension.

This number could be much higher depending on how the government chooses to define ‘high value’. Councils should always be free to manage their assets to meet the needs of local communities and must retain 100 per cent of all receipts to reinvest in new and existing housing.

Analysis: Impact of the Housing and Planning Bill

Savills and the LGA project that 66,000 council homes will be sold to tenants under the existing Right to Buy scheme by 2020.

Local authorities could then be forced to sell a further 22,000 ‘high value’ homes by the end of the decade to fund plans to extend the scheme to housing association tenants. This could vary depending on how the Government defines ‘high value’ for different areas

Required rent reductions, of 1 per cent a year for the next four years, take out £2.2 billion from council housing budgets by 2020 – making building replacements extremely difficult. There is a risk that of the 88,000 homes sold up to 2020, 80,000 will not be replaced, and this will add £210 million to the housing benefit bill.

Forcing councils to sell off homes to fund the extension of Right to Buy to housing association tenants could cost councils £6 billion by 2020, according to Savills. A total of 5,500 homes would be sold each year should ‘high value’ be defined as the top third value of the regional market.

Discounted starter homes will be out of reach for all people in need of affordable housing. The affected would have to spend 30 per cent of their household income to buy or rent a home – in 220 council areas (67 per cent) and for more than 90 per cent of people in a further 80 (25 per cent) council areas.

Should the ‘pay to stay’ policy be mandatory for all social tenants, around 50 per cent of them deemed high income in the South East, East of England and London would not be able to afford to pay market rents or take up Right to Buy and would need to move out of the area to find a similar property. ■

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Local Government Association (LGA)

Tel: 020 7664 3000

info@local.gov.uk

www.local.gov.uk

@LGANews

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