Housing associations are beset by cuts, but will survive – the real victims of the crisis are the most vulnerable people in society

In the past seven years there has been a systematic reduction in social housing. Since 2010, the construction rate has dropped by 97%, and projections indicate a loss of 370,000 social homes over the next three years.

This might matter less if the private housing market provided good, affordable homes for people on low incomes. But the opposite is the case. House prices have increased 259% since 1997 compared with a 68% increase in average earnings in the same period, making houses in England and Wales the least affordable they have ever been. The social housing system is effectively being dismantled with not much more than a whimper from those responsible for running it. Why is this?

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You almost have to admire the government’s cunning. In 2010 the coalition government had just been elected with a mandate to tackle the deficit. It applied the task to housing with zeal. Subsidies for the construction of new social housing were immediately reduced by 60%, but at the same time the coalition introduced a number of measures that allowed housing providers to raise income from rents. Perhaps intentionally, a tension was created between housing associations’ founding principles and their business interests.

The most blatant example was the introduction of affordable rents – charging tenants up to 80% of market rents. Before 2010 housing associations and councils provided almost all low-cost housing on what was called “social rent”. This was set at roughly half the cost of a home from a private landlord in the same area. The effect on tenants is obvious, but for housing associations the extra rental income to some extent offset the loss of housing capital grant, and made it viable for them to continue to carry on building new homes. Albeit not quite as affordable as before.

Another crafty move was the introduction of starter homes – new homes offered to people under 40 years of age to buy at a discount of 20% on the full market price – but which for planning purposes count as affordable housing. This meant new private housing developments could discharge their duty to build a share of affordable housing through offering a share of their homes at discount instead of building social housing. This significantly reduced an important source of new affordable homes, but also created a new business opportunity for some housing associations.

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There were other measures that unquestionably diminished social housing. Ending the so-called bedroom tax required that social housing tenants paid extra rent if their home was deemed too big for them. Research has shown that it has increased poverty and had broad-ranging adverse effects on health, wellbeing and social relationships. But, of course, it too has increased rental income for housing associations.

Faced with cuts to government funding and a cap on rents, housing associations have been left in an invidious position. Some have commendably stuck to their social values and found creative new ways to carry on providing new social housing. Some have redefined themselves as social businesses that seek to make profit for a purpose, while others are getting out of the social housing business as quickly as they can.

The effect is clear: the housing sector has let itself become the victim of divide and rule.

But don’t feel too sorry for them. Healthy balance sheets and surpluses show that they will survive. The real victims are those who have to pay more rent and the people with low incomes who, in another age, would be housed by the social housing sector but who instead have had to make do in an increasingly unaffordable private rented market.

David Ireland is director of the Building and Social Housing Foundation.

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