I share an ambition with the Communities Secretary to provide more affordable, more sustainable homes for the future. The question is, at a time when private sector rents are set to rise by 20% over the next five years, how are we going to achieve this?
Certainly there are efforts on the part of the government to increase the availability of social housing by grants and by stimulating the housing industry through mechanisms such as a £500 million scheme to front load building projects as outlined by Chief Secretary to the Treasury, Danny Alexander. Unfortunately these will only scratch the surface of the current waiting list, not to mention anticipated future demand.
There are those activists who point to second homes and buy to leave landlords as the source of potential solutions to a housing crisis which has begun to grip the nation. Indeed many local authorities preside over large stocks of housing that lie empty, vandalised and unused - most recently highlighted by Channel 4's Great British Property Scandal. A large number of properties lie empty with a view to potentially being demolished. Yet, in those same areas, where houses stand derelict for decades, housing waiting lists are growing ever longer and the number of homeless people continues to grow.
Rent levels are going up, driven by a substantial undersupply of affordable social housing. And as they do, attempts by Her Majesty's Government to force them down are destined to fail if it does not substantially increase the amount of social housing stock. What is needed is a systematic rolling program which utilises properties which can be returned to available stock alongside new developments.
It concerns me gravely that government ministers charged with reviewing the current housing benefit scheme are of the view that private landlords use housing benefits as a benchmark for the rents they set. They are wrong. Many private landlords do not accept tenants on benefit and those that do expect tenants to pay the rent in full without regard to the housing benefit that they receive. In turn these tenants are forced to top up their rent charges from other income and benefits. Lowering housing benefits is not the answer.
So what is the answer? In the face of a chronic undersupply of housing, accepting that rent levels are going up doesn't do anyone any favours. Grants alone can't fix the problem either. What we need is a new funding mechanism; a new strata of funding for social housing which utilises private finance. This funding would be directed and guaranteed by the local authority. The money would be borrowed on terms and at rates that substantially undercut the return rates required by private landlords. It could provide a midpoint cost option which lies in-between the fully grant aided and the private landlord. But where will this money come from?
The government's QE programme of buying bonds from banks to recapitalise has already been written off by economists. If instead Cameron & Co injected money directly into this new tier of housing finance by purchasing bonds issued by a Social Impact Organisation, this tier of funding could be placed at the disposal of local authorities. They would service it through new rental flows.
The consequent creation of jobs would be direct and immediate: employment premiums and availability of low cost social housing that would release families and individuals from "rent poverty". With lower rents to pay, more money would be leftover in the household budget. The government would gain substantially from any measure that reduces rent cost and, in turn, housing benefits.
Finally, and this is a caution for private landlords. If we can make realistic progress on the provision of an adequate supply of low cost social housing, then the very same laws of supply and demand that work so well for landlords today will finally turn to favour tenants. Rents will come down and then the battle will shift from price to quality.
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