The National Housing Federation has today slammed the Government’s decision to cut the affordable housebuilding budget by 60% – with ministers looking for social housing tenants to pay much higher rents to make up for the shortfall.
However, the Federation has welcomed proposals by ministers to grant social housing providers flexibility around setting rents, and the length of tenures for new lets, with increased flexibility being a major issue over which the Federation has lobbied the Government in recent years.
At the same time, the Federation has warned that if social housing providers feel compelled to charge new tenants up to 80% of the market rate – because of the shortfall in the capital funding – thousands of social housing tenants could be trapped in a lifetime of poverty, suffer a strong disincentive to work and increasingly depend on benefits.
Although as the Chancellor confirmed today there is a benefit cap at £26,000 a year or £500 a week. This makes it difficult to see how people can cope with higher rents.
The Federation calculates that thousands of low-income families could end up having to pay £9,000 extra a year in social housing rents, as the Government looks to make up for the 60% cut in the housing budget – one of the biggest cuts made to any budget for a key frontline service.
The Chancellor announced the cut in the capital budget in today’s spending review – down from £8.4bn over the previous three year period to £4.4bn over the next four years. Ministers however believe 150,000 new affordable homes could still be built in England between 2011 and 2015 – but only if social housing providers dramatically increase rents to fund new schemes.
The average rent for a three-bedroom social home is £85 a week. But under the plans to allow increases in rents of up to 80% of the market rate, that figure could triple to a staggering £250 a week.
Many new tenants would therefore be heavily dependent on housing benefit to cover the extra costs. Those gaining work would see their housing benefit payments fall – meaning they would be forced to pay even more from their own pockets, acting as a powerful disincentive to get a job.
Social homes for life could also end for new tenants, who might be handed fixed term contracts, under the Government’s proposals.
Swingeing cuts to services for vulnerable people will also hit the poorest hardest and increase housing demand for social housing.
On the 60% cut and end of lifetime tenures
Federation chief executive David Orr said: 'The fact that the housing budget is being cut by 60% is deeply depressing – and shows that providing affordable housing is no longer a government priority.
'Cuts on this scale will come as a devastating blow to the millions of low income families currently stuck on housing waiting lists.The harsh reality is that because of these cuts, the new social homes this country so desperately needs, can now only be built by dramatically increasing rents for some of the most vulnerable and poorest in our society.
'Most tenants simply won’t be able to cover these extra costs, and as a consequence make it more difficult than ever for people to escape the poverty trap and benefits dependency that the Government has repeatedly said it wants to tackle.Higher rents work for people on higher incomes, but not for those on very low ones.
'The Chancellor said that those with the broadest shoulders should carry the biggest burden of the cuts. By dramatically slashing the housing budget today, Mr Osborne has spectacularly failed his own test of fairness.
'We do however welcome the Government’s decision to give social housing providers greater flexibility as to how they deliver their services.
'We are prepared to look at anything that increases flexibility in the provision of social housing, but we would not support anything that undermines tenants' sense of being safe and secure in their homes.'
On funding for the vulnerable people’s services
Over 122,000 vulnerable people who rely on support services to live independently could be forced to fend for themselves after the Chancellor announced a cut of 11.5% to the Supporting People budget, which funds such schemes.
Added to which, Supporting People will now be routed via the formula grant, so it will no longer be possible to track the allocation from central government to frontline expenditure. Local government will have complete freedom to make bigger cuts to the Supporting People programme and many will feel forced to do so.
The Federation estimates it would also cost the taxpayer hundreds of millions of pounds in the long run as demand increases for acute hospital services, policing costs and specialist long term care.
Mr Orr said: 'The cuts announced today could see thousands of vulnerable people, such as the elderly and women fleeing violence, losing the specialist support they need – leaving them isolated, abandoned and forced to fend for themselves.
The Government has repeatedly said it wants to protect the vulnerable and yet these cuts could see services and support for the disabled, the elderly, and domestic abuse victims all potentially reduced or withdrawn.
It is vital that cash strapped local authorities are totally transparent on what services they will fund and how their local area budget is meeting the needs of the most vulnerable.'
On housing market renewal
The Housing Market Renewal Fund, which funds regeneration schemes in some of the poorest neighbourhoods in the North and Midlands, will be moved to regional growth funds, with total funding being cut. The Federation says that plans to build or improve up to 23,000 social homes are now at risk.
Mr Orr said: 'By cutting investment in the regeneration of these deprived communities, the Government is breaking faith with some of the poorest people in the country.The promise of new and improved homes will have disappeared in many areas and, with it, the hope of regenerating and rejuvenating their communities.
'We estimate the intended cuts mean that plans to build or improve up to 23,000 new and improved homes will be shelved. It will be essential that those few local authorities that gain access to the funding that is left, account openly for how they use the resources.'
On housing benefit cuts
The Chancellor announced the extension of the single room rate to people under 35, up from those aged under 25. This will mean that people under 35 in the private rented sector will only receive housing benefit for living in a shared flat. Many of those affected are employed on low wages and the change will push them further into hardship.
The Chancellor announced that the new Universal Credit, where all benefits will be rolled into one single payment will go ahead as proposed over the course of the next two parliaments, at an estimated cost to set up of £2bn. The Work Programme will help and support people into work and off benefits.
The Chancellor also re-stated that the total amount of welfare benefits that claimants will be able to receive will be capped at the level of average earnings, which is £26,000 for a families, couples and lone parents. A new cap was announced for single people of £18,200.
In addition, the Chancellor announced the removing of the mobility component of Disability Living Allowance for younger people living in care homes – which will reduce the freedom and independence of severely disabled people. This benefit is intended to help with the extra costs of transport for people in care homes. The Federation says such people should have the same rights to it as a disabled person living with their parents.
A Housing Futures’ Commission
The Federation – along with Shelter and the Chartered Institute of Housing – is today establishing a Housing Futures’ Commission to look at the impact of the austerity programme, possible changes to the allocations systems and tenure, the mortgage market review and other issues that affect the delivery of a functioning housing market.