LGA First | Making sense of housing policy

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No. 597 | March 2016

Features | Making sense of housing policy

Cllr Peter Box

Councils are keen to build more homes and the LGA is working hard to ensure proposed housing reforms don’t make that job more difficult.

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

From the outset, the LGA has been working privately and publicly to try to mitigate any of the potential negative impacts and unintended consequences of Government housing reforms on behalf of councils and local communities, But it is clear that the Housing and Planning Bill has wide-ranging implications for local communities.

Measures within the Bill – currently being debated in the Lords – risk combining to reduce the number of existing council homes, which local authorities will be forced to sell and 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. This will do nothing to help councils reduce homelessness and the use of temporary accommodation.

The LGA has opposed plans to force councils to sell off homes to fund the Right to Buy extension to social housing, and a mandatory Pay to Stay policy [see below] and the provision of Starter Homes at the expense of affordable homes to rent. Meanwhile, we have been working at real estate services provider, Savills to understand the impact of these housing policies, as part of our effort to make the case for additional flexibilities to Government, Parliament and partners.

Plans for Starter Homes at discounted prices, for example, will help support home ownership in some areas but will nbe out of reach for all people in need of affordable housing in 220 council areas, according to 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 to 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 by their council house under this policy.

This 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, 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 in order to fund this 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% of all receipts to reinvest in new and existing housing.

The LGA will continue to firmly make the case – in both private and public – regarding the importance of councils playing a  lead role in house building, reducing homelessness and benefits, and enabling home ownership.

Cllr Peter Box is Chair of the LGA’s Environment, Economy, Housing and Transport Board.

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% a year for the next 4 years, take £2.2bn 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. This will add £210m 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 £6bn 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 – defined as those who would have to spend 30% of their household income to buy or rent a home – in 220 council areas [67%], and for more than 90% of people in a further 80 [25%] council areas.

Should the Pay to Stay policy be mandatory for all social tenants, around 50% of tenants deemed high income in the South East, East of England and London would not be able to pay market rents or take up Right to Buy, and would need to move out of the area to find a similar property.

SavsMa_451
The areas of the country that need affordable housing that can afford a Starter Home

FURTHER READING:
LGA Media Release Starter homes will be out of reach for majority of families in need of affordable homes in England  [17 February 2016]

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