Spending Review 2013: Another missed opportunity
Why the 2015 spending round announcement is another missed opportunity to boost the supply of affordable homes.
So now we know the Conservative and Liberal Democrats plan to boost affordable housing.
The good news
Let’s start with the positives. The announcement that there is now a ten year rent settlement in place at roughly current levels is a start; this gives the sector the stability and security it needs. The commitment to release or sell public land for house building is equally welcome, as this is a fundamental means of enabling further development.
The headline figure announced by Danny Alexander to invest £3.1billion in affordable house building is in some ways good news. It shows that there is recognition about the need for investment in affordable housing and that the government is not ignoring the housing crisis.
The £3.1billion of investment, which will now sit alongside the £10bn of loan guarantees, will enable some continuation of affordable homes development. We are yet to get the detail of how the promised 165,000 homes will be provided by this money. It is worth noting that this is an actual drop in the level of funding by a significant amount; it will mean the grant rate per home will fall from an average £22,000 a home under the present affordable homes programme to between £18,000 and £20,000 in future. But, with the range of cuts elsewhere, at least it is something.
Why would higher capital investment in affordable homes have done that?
Because building affordable housing creates so much more than simply a house. It creates an economic boost throughout a huge range of industries right down the supply chain; it creates opportunities for those so often marginalised - for example, apprenticeship opportunities for young people; it reinvigorates forgotten communities, fostering aspiration and opportunities; and, particularly in London, it enables people working in essential low wage jobs are able to continue to afford to do so, by maintaining affordable homes in the centre of the city – which is hugely important for our employers.
All of which means a massive boost to our economy, offers sound return on the original financial investment and helps create thriving communities. In the long run, high capital investment in affordable housing is the most cost effective way of providing the homes people need.
More "affordable" rent
As a sector, we are now soul searching to look at what we can continue to provide these homes. With the lower level of grant funding for the sector, development will be contingent on social housing providers committing to more affordable rent conversions, and more cross-subsidy. I am concerned the result will be fewer homes at rents that people on low wages can afford. With housing benefit being capped as well it would appear that many hard-working people will simply not be able to live in London. For many, renting a home in the capital will be too expensive even at “affordable” rents.
The government has chosen to prioritise spending in other areas and the result may be higher rents, fewer affordable homes, and continuing sluggish growth until at least 2015. Increased capital grant investment in affordable housing is still a prerequisite for tackling the supply crisis and boosting jobs and growth. It is a shame this opportunity to make a real difference was passed over.
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