2 Impact of the Programme on tenants |
11. The Programme will be delivered with less capital
funding than previous housing programmes. This reduction will
be partly funded by tenants paying more rent. Some two-thirds
of social housing tenants are supported by housing benefit so
this effectively shifts costs from the Department for Communities
and Local Government to the Department for Work and Pensions.
The housing benefit bill is expected to rise by £1.4 billion
over 30 years as a result of the Programme.
12. We debated the value for money case of shifting
from a capital subsidy to a revenue-based subsidy. Witnesses from
the sector told us that based on research and modelling, a capital
subsidy appears more cost-effective if over a longer period (say
eight or ten years). However, they acknowledged that this work
needed to be updated and was dependent on a number of factors
including: how long people are in receipt of benefit, what happens
to the home when people move on and whether the homes being built
should permanently be for people who will need support. 
13. Under the Programme, housing providers can increase
their rent levels - up to 80% of market rent, though in London
providers have committed to 65% on average. This equates to an
average rent of approximately £182 per week in London, compared
to a market rent of £280 a week in comparable properties.
The Department has done some work to analyse the costs of the
Programme to all tenants, but this was not presented in the impact
assessment for the Programme.
We were also surprised to hear that the Agency has not collected
information on the rents that tenants will be expected to pay
for individual properties, nor has it consulted with tenants to
understand how they will be affected by increased rent levels.
14. We asked witnesses whether the higher rent levels
charged under the Programme could have a negative impact on those
on lower incomes. In particular, we queried whether the homes
being built under the Programme would be 'affordable' to the people
in most acute need. Witnesses talked about a drift towards families
with higher incomes who could afford the higher rents.
We heard that those on low income or out of work will have to
earn more to be able to escape from being dependent on benefits.
Poorer tenants could find themselves unable to get employment
that pays enough to cover the higher rent levels charged.
 We are therefore
concerned that the 'affordable' housing may end up benefiting
those whose income is greater but whose need may be less.
The Department explained that housing delivered through the Programme
would still be cheaper than renting through the open market.
15. This Programme addresses a small fraction (2%)
of the unmet housing need in England and we were concerned about
the way the planned homes were spread across the country. Rather
than targeting specific areas in greatest need, the Programme
funds were allocated based on a broad geographic spread.
When asked about how the housing need was defined, the Agency
told us it considered a range of factors when assessing applications.
It assessed the value for money of the bids, the grant rates and
consulted with local authorities within Local Enterprise Partnership
(LEP) areas. The
Department told us that the Programme was heavily weighted to
the places of highest housing need with 23,000 homes (27%) planned
within London. Even
within areas of need, we questioned whether the properties are
going to the right-sized families. We are aware of cases where
four bedrooms homes have gone to a couple with no children or
a couple with one child. Witnesses told us that there was a drift
towards people on higher incomes as they can most afford to buy,
which seems to us to be against the spirit of an affordable homes
16. In some areas where rent is already low, the
Programme may not be workable, because housing providers would
have to charge above market rents in order to cover costs. The
Department told us that all areas, even those that appear to have
less need, received funding because they had specific housing
needs which were not being met by the current housing stock.
The Department explained that the Programme included a range of
property sizes and types with a third of the Programme made up
of larger properties and around 9,500 homes offering supported
accommodation to meet the needs of the elderly and those with
17. There are wider welfare reforms that run alongside
and will affect the Programme. One such change proposes that housing
benefit will be paid directly to the tenant rather than to the
housing provider. Our experience suggests that this may lead to
difficulties, with providers not receiving the money they are
owned in rental income on time.
The Department told us they have started running four demonstration
projects to test how these changes will impact on rent arrears
and speed of payment.
24 Q 22; C&AG report, para 1.8, Figure 6 Back
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