Selling expensive council houses can't accommodate the future

"What might be an appropriate tactical response in some cases could not be considered to be a comprehensive strategic solution."

According to the latest government figures, the number of households in England is expected to grow by 232,000 per year over the next twenty years. Last year, we completed just 109,000 homes, with rates falling again in the first quarter of 2012. How can we bridge this gap and what combination of tenures would best meet the needs of the population? With the economy in double-dip recession and access to mortgages constrained, most of these homes need to be for rent, although an element of housing for sale, possibly using a rent now, buy later model, would help to ensure more balanced communities.

A recent Policy Exchange report proposes that the volume of affordable housing could be increased by at least 80,000 homes per year by selling off social housing properties in high-value areas and replacing them with new homes in low-value areas. This might be an appropriate tactical response in some cases but could not be considered to be a comprehensive strategic solution to providing sufficient affordable homes.

There are a few difficulties with the Policy Exchange approach.

Firstly, it is a reactive approach that can only come into play once a home becomes vacant, so it is difficult to plan a new development when the timing of the cashflow to fund it is so uncertain. Inevitably, there would be a delay with fewer affordable homes available, before the new homes could be constructed.

Secondly, over the long term, we risk denuding high-value areas of all affordable housing, pushing families on lower incomes away from their places of work, reducing their disposable income and putting additional pressure on the transport system. It would also create greater pressure on public services in low-value areas. Having said that, many social landlords are making judgements about the appropriateness of their existing stock as they become empty, so this approach is already in place in some areas. Alternatively the homes may be retained by the landlord but let at 80 per cent of the market rent, which would generate a better income stream for the landlord while retaining the housing mix in the area.

The efforts of the coalition government to encourage house building, by streamlining the planning system and giving some support to stalled schemes, have failed because they are largely relying on the private developers to deliver the increase and they will only build where they can make a profit, difficult when first-time buyers find it so difficult to access mortgage finance. There are few private companies undertaking development for rent so this is a gap in the market that social landlords could exploit, at the same time as making a significant contribution towards bridging the gap between the number of new homes and new households.

Housing associations have access to relatively cheap finance, they have established development teams who know their areas and have good relationships with local councils, and they have the scale and housing management expertise to manage a large portfolio of rented stock efficiently. Under the current Affordable Homes Programme, most new affordable housing is being let at 80 per cent of market rent, well above social housing rent levels in most areas. This model requires relatively little capital subsidy (in many cases, none) but the higher rent levels are increasing the housing benefit bill for households on low incomes. Indeed the properties in high-value areas could be relet at market or sub-market rates and the cashflows from these used to support borrowing to build more homes.

Using their scale, financial strength and community knowledge, housing associations should be able to increase the volume of new rented housing without subsidy, while still being able to let at rents a little below the market rent level. These should be secure homes in which families could remain long-term without the fear of being pushed out at the end of a fixed-term tenancy introduced under the current regime. There would also be no requirement to means test the tenant population to identify the high earners who would be paying higher rents under the proposed “pay to stay” policy.

The government has begun to recognise that increasing the rate of house-building would also have a significantly positive effect on the economy, reducing unemployment and largely sourcing materials from within the country. An announcement is expected soon that the government will guarantee housing association loans, enabling them to further reduce the cost of capital and thus their costs of development. This is an opportunity to scale up the delivery of new homes for rent well above the level envisaged in the Policy Exchange report.

A man walks in late afternoon sunshine on the Heygate housing estate near Elephant and Castle on February 11, 2010 in London, England. Photograph: Getty Images

Chris Mansfield is a managing consultant at Hargreaves Risk and Strategy, a consultancy working in the housing association sector.

Photo: Getty
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What does François Bayrou's endorsement of Emmanuel Macron mean for the French presidential race?

The support of the perennial candidate for President will boost Macron's morale but won't transform his electoral standing. 

François Bayrou, the leader of the centrist Democratic Movement and a candidate for the French presidency in 2007 and 2012, has endorsed Emmanuel Macron’s bid for the presidency.

What does it mean for the presidential race?  Under the rules of the French electoral system, if no candidate secures more than half the vote in the first round, the top two go through to a run-off.

Since 2013, Marine Le Pen has consistently led in the first round before going down to defeat in the second, regardless of the identity of her opponents, according to the polls.

However, national crises – such as terror attacks or the recent riots following the brutal arrest of a 22-year-old black man, who was sodomised with a police baton – do result in a boost for Le Pen’s standing, as does the ongoing “Penelopegate” scandal about the finances of the centre-right candidate, François Fillon.

Macron performs the most strongly of any candidate in the second round but struggles to make it into the top two in the first. Having eked out a clear lead in second place ahead of Fillon in the wake of Penelopegate, Macron’s lead has fallen back in recent polls after he said that France’s rule in Algeria was a “crime against humanity”.

Although polls show that the lion’s share of Bayrou’s supporters flow to Macron without his presence in the race, with the rest going to Fillon and Le Pen, Macron’s standing has remained unchanged regardless of whether or not Bayrou is in the race or not. So as far as the electoral battlefield is concerned, Bayrou’s decision is not a gamechanger.

But the institutional support of the Democratic Movement will add to the ability of Macron’s new party, En Marche, to get its voters to the polls on election day, though the Democratic Movement has never won a vast number of deputies or regional elections. It will further add to the good news for Macron following a successful visit to London this week, and, his supporters will hope, will transform the mood music around his campaign.

But hopes that a similar pact between Benoît Hamon, the Socialist Party candidate, and Jean-Luc Jean-Luc Mélenchon, the Left Front’s candidate, look increasingly slim, after Mélenchon said that joining up with the Socialists would be like “hanging himself to a hearse”. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.