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When social housing turned into a money spinner

The bedroom tax and the housing benefit cap which will hit tenants next April are now being joined by another, more insidious destroyer of housing security. The social housing sector, which originally was intended as an alternative supplier of affordable housing in place of local authorities, has now been turned into a pure market operator funding huge surpluses from sharply inflated rents on a par with the rest of the private market.

Social housing landlords generated their largest profit ever last year, a total of £1.4bn on a turnover of £14.2bn, i.e. a return on capital as high as 10%. All the big corporate landlords – L&Q, Guinness, Circle HG, Sanctuary HG, Places for People – made a profit per unit of stock of between £250 and £1,380.

Not only that, the government has almost wholly abandoned any responsibility in this area. Central government government spending on new affordable homes, which in 2009-10 amounted to £3bn a year, has now been cut back by 85% to just £450m a year. The government has now said it expects housing associations themselves to make up the difference, and is clearly intending to withdraw completely from any financial underpinning of the sector.

Rents are being required by law to rise to 80% of local private rent levels, even though the poorest quarter of the population who are the largest users of social housing cannot conceivably afford increases at anywhere near this rate. A full-blown housing crisis is imminent, even before the housing benefit cuts scythe their way through home affordability.

Previously new social housing was funded by capital grants from goverment which over the last 30 years amounted to £51bn. Now that this source of funding has been largely withdrawn, the social housing sector has been forced to rely on high rent increases, low interest costs and cutbacks in spending on maintenance and new development.

Their previous role of quality provider of affordable housing has been squeezed out as they have been told by government that they must now provide new social housing entirely from their own resources. The prospect is potentially explosive: either they force up rents even further to fund new homes or the absence of the already wholly inadequate supply of social housing can only push up homelessness.

One Comment

  1. Robert says:

    Tents anyone….

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