Building more social housing Contents

Conclusions and recommendations

History of social housing

1.The housing market in England has changed substantially since the last time there was political consensus on the need to build large numbers of social housing. The decades in which social housing was delivered at scale featured different mechanisms than are used today—some of which might be revived and reused in modern circumstances—but ultimately the most important factor was shared political will. (Paragraph 16)

Definitions of affordability

2.We believe rents are only affordable when they do not exceed one third of household income. There are numerous ways to define this income and other related factors and the Government should identify its preferred method, in consultation with the Local Government Association, the National Housing Federation, Shelter, and other key players in the sector. It is crucial that the Government links local incomes to a definition of affordability, rather than using “affordable” as a synonym for below market rent or market value. (Paragraph 23)

3.The Government must publish statistics on net additions of the different tenures of affordable housing per year, taking into account completions, sales, demolitions and conversions. These statistics are currently disparate or not collected. This is especially important to track changes in social rented stock which has been affected by significant number of conversions to affordable rent and Right to Buy sales. Data will need to be collected on Right to Buy sales for each tenure, demolitions per tenure, change of use per tenure, and all other reductions. This will bring social housing data in line with overall housing supply data. (Paragraph 29)

Land

4.Reform of the Land Compensation Act 1961 is well overdue. We reiterate the recommendations of our predecessor Committee. The Government should amend the Land Compensation Act 1961 so local authorities and development corporations have the power to compulsorily purchase land at a fairer price. The present right of landowners to receive ‘hope value’ reduces revenues and opportunities for social housing. Compensation paid by landowners should be determined by an independent expert panel, which we expect will deliver a fairer deal than the current model. (Paragraph 36)

5.We agree with the Public Accounts Committee that the Government missed a crucial opportunity to alleviate the housing crisis through its disposal of public land. While we understand the constraints around managing public money, it is nonetheless short-sighted to sell public land to the highest bidder when social housing providers struggle with the cost of land. The programme has not addressed the housing shortage nor the social housing shortage. (Paragraph 44)

6.The Government’s public land disposal strategy needs a wholesale re-design, not more of the same. We recommend the Government thinks less about disposal, and more about assembly. Homes England should take a central role in co-ordinating public land to be used for social housing, by being tasked with identifying suitable land, including a joined-up approach with land owned by local authorities, as well as purchasing private land suitable for social housing. With our suggested reforms to the Land Compensation Act 1961, this land would be easier to purchase and more affordable. (Paragraph 45)

Increasing social housing supply

7.There is compelling evidence that England needs at least 90,000 net additional social rent homes a year. We recommend that the Government publishes annual net addition targets for the following tenures: social rent, affordable rent, intermediate rent and affordable homeownership. This will improve transparency and accountability of the Government’s record on affordable housing. It will also make clear the contribution affordable housing will make to the Government’s 300,000 new homes per year target. This is crucial as housebuilding in England has only ever surpassed 300,000 in a year when social housing has made a significant contribution. (Paragraph 53)

8.It is disappointing that the Government does not have a published plan on social housing, nor has its own assessment of social housing need. We regard an estimate of need to be essential to calculating how much investment the Government may need to make to meet social housing need and deliver such a “step change”. (Paragraph 54)

9.The cross-subsidy model has reached its limit. Without grant funding from central Government, providers will be vulnerable to the economic impact of COVID-19. Housing associations have commendably made up for reduced Government grant investment in the last decade by developing homes for sale and investing these proceeds, but the subsidy gap remains high for social rent. The Government believes housing associations can continue to financially innovate to build more homes, despite registered providers telling Ministers they have reached the limit of their flexibility. If the Government does not increase grant funding, social rent housebuilding will not increase and may drop even further. (Paragraph 67)

10.A social housebuilding programme should be top of the Government’s agenda to rebuild the country from the impact of COVID-19. The crisis has exposed our broken housing system. Families in overcrowded homes have faced worse health outcomes. Private renters have struggled to meet housing costs. A large social housebuilding programme will provide jobs, boost the economy, and help the Government meet its 300,000 homes a year target. (Paragraph 70)

11.It will take time to meet social housing need. In the short-term, we support the Government’s intention to improve the experience of tenants in the private rented sector, including on security of tenure, quality of housing, and affordability. We encourage the Government to bring forward legislative proposals as soon as possible. While councils need to be better at enforcing standards, the Government needs to provide more resources for councils to ensure they have the capacity to enforce the law. In the longer-term, the Government should ensure there is sufficient social housing for those that require it. (Paragraph 75)

12.The Government should count investment in social housing as infrastructure spending, rather than day-to-day spending. Evidence shows that spending on a long-term social housebuilding programme pays back to the Exchequer over time. Furthermore, such a programme could be counter-cyclical, both protecting and creating jobs during a wider housing downturn caused by COVID-19 economic uncertainty. (Paragraph 89)

13.It is time for the Government to invest so the country can build 90,000 social rent homes a year. We appreciate that even with the funding we set out below, any programme will take time to scale up, but we expect the Government should be able to increase delivery to 90,000 within five years. (Paragraph 90)

14.The sector estimates that £12.8 billion a year in grant funding will be needed to deliver 90,000 social rent homes every year, alongside continued support for affordable rent and shared ownership. Central government grant funding is necessary because the current funding model is not delivering the numbers required to meet demand. The removal of the borrowing cap for local authorities will contribute only a small percentage of what is needed. This is around a £10 billion increase on current future funding for affordable housing. (Paragraph 91)

15.We estimate that land value reform could reduce the cost of the programme by up to 40 per cent. By building more social housing on Government-owned public land, the overall cost of the programme could be further reduced. Some of the money could also be redistributed from existing budgets within the Department, and the rest could be borrowed while interest rates are historically low. While the overall savings gained from the long-term reduction in the housing benefit bill are difficult to quantify, it is clear that, over time, as the programme delivers social rent homes, the Government could use savings in housing benefit to subsidise the programme. Therefore, although there are many factors that might impact the overall cost of the programme, it is unlikely to cost £10 billion in extra spending. (Paragraph 92)

16.To ensure the programme can get off to swift start, we recommend the Government allows grant funding to be used flexibly to allow providers to purchase new build homes or homes close to completion from developers which may go unsold in a recession. We suggest the Government looks at the National Clearing House Scheme from 2008—which served a similar purpose during the last recession—as a starting point. (Paragraph 94)

Changes to the planning system

17.We are concerned the Government is letting history repeat itself, rather than learning its lessons from Starter Homes consultation. The Government has not conducted an analysis of the impact of implementing First Homes on the delivery of social housing through section 106 agreements. The Government has not conducted an analysis of the impact of implementing First Homes on the delivery of social housing through section 106 agreements. First Homes should be added as an affordable housing scheme under Annex 2 of the National Planning Policy Framework, so that local planning authorities can set out polices for which affordable tenures, including First Homes, best meet the needs of their local communities. The current proposals have the potential to negatively impact on social housing delivery. Furthermore, significant regional variations in the value of planning obligations, which are especially low in the North of England, would mean on some development sites, First Homes might squeeze out all other tenures or by itself make the development unviable. (Paragraph 99)

18.Permitted development rights can be a route to provide fast and cost-effective housing, but given that the Government is aware of concerns around their use, it should publish its review as soon as possible. We remain concerned about the lack of affordable housing obligations and lack of safeguards for quality. Without reforms, it is likely the planned expansion will further reduce the delivery of social housing through the planning system. (Paragraph 103)

19.It is right that the Government has identified the importance of reforming planning fees to support the capacity and skills of planning departments. It is imperative that local planning authorities have the right resources to deliver the social housing this country needs, and to ensure private developers deliver sufficient social housing on new developments. We recommend that the setting of planning fees should be devolved to local authorities, with a national minimum rate. (Paragraph 109)

20.We are mindful that the Government expects to implement substantial changes to the planning system in the near future. We will continue to monitor the impact of these changes on social housing supply, as well as scrutinising the reforms more generally. (Paragraph 110)

Right to Buy

21.Local authorities should receive 100 per cent of Right to Buy receipts. The time limit for using these receipts to fund a replacement should be extended to five years, rather than three. Councils should also be allowed to combine receipts with other pots, like grant funding, to maximise flexibility. Receipts must be used to fund like-for-like tenure replacements: a sold social rent home should be replaced with a new social rent home. Without these changes, Right to Buy will make achieving the development of the desired 90,000 properties per annum unachievable. (Paragraph 125)

22.The purpose of Right to Buy is to introduce a route into homeownership, and not reduce the number of social homes or to supplement the private rented sector. (Paragraph 131)

23.We recommend that, in line with the five year period which covers discount repayment, the Government prevents Right to Buy homes being privately let within five years of purchase. This will require legislating to implement a covenant against letting for a five year period. This is not without precedent: Help to Buy properties include a covenant which prevents private renting. The Government’s justification is that Help to Buy is designed to assist you to move on or up the housing ladder, words that could apply just as aptly to Right to Buy. (Paragraph 132)

24.If the Government’s intention is that the Right to Buy should both give people an opportunity to own their homes, but also to provide resources which will then be reinvested into social housing to ensure one-to-one replacements, then consideration must be given to local authorities who are unable to deliver sufficient replacements because of constraints on land availability. We recommend that the Government has discussions with the Local Government Association about ways in which they could ensure Right to Buy does not lead to a reduction in social housing. (Paragraph 133)

25.We caution the Government not to make Shared Ownership Right to Buy a condition of affordable housing grant funding, until our suggested reforms on receipts are implemented. When Right to Buy is implemented for all housing associations, like with the pilots, the Treasury should reimburse housing associations for the cost of discounts. This aligns with the recommendation we made in our report on housing associations and the Right to Buy in 2016. Otherwise, housing associations will face the same difficulties as local authorities in replacing sales. (Paragraph 134)

26.The Government must keep a careful watch on the rate of replacements. If, despite these reforms, replacements are still below a one-for-one rate, the Government must intervene further. The Government should fully disaggregate its quarterly Right to Buy data by tenure for sales and replacements, and publish a full review of the Right to Buy scheme by the end of this Parliament, assessing a full range of options for its future. (Paragraph 135)





Published: 20 July 2020