Social housing has had a rough time of late especially with the extension of the Right to Buy scheme threatening to deplete social housing stock and the much needed income to build new affordable homes.

But the challenges don’t stop there. The new Tory budget has set out even more challenges for housing associations trying to provide affordable housing solutions for local communities.

We take a look at the hurdles that have been put in place and what this means for the providers of social housing and their tenants.

What do the changes mean for Housing Associations?

Proposed changes:

  • 1% cut to social rents

Problems faced:

The fall in rental income will mean housing associations will have less money to spend on building new homes. According to Jenny Brown, Head of Social Housing at Grant Thornton this decrease will equate to as much as £4.28bn in lost income over the next 5 years. But not only that, the cuts will jeopardise the interest received from investors to help fund the building of new social homes. Previously, interest was generated based on a future rise in rental income, so with the proposed cut to rental income it will be more difficult for housing associations to access the bonds offered by investors. In fact, figures have already shown an increase in prices on housing association bonds following the announcement in the budget. This will pose a real threat to housing associations as this is the main source of funding for building new homes.

How will councils be affected by the changes?

Proposed changes:

  • Councils at risk of losing planning powers

Problems faced:

There is a possibility that councils could lose the ability to grant planning in their local areas if they take too long to process planning applications. If councils do not process over 50% of applications within the required time limit of 13 weeks for standard applications and 8 weeks for minor applications they could lose all planning powers and decisions would be made centrally by government inspectors.

What about the tenants?

Proposed changes:

  • 1% cut to social rents
  • Tenants earning over £30,000 (or £40,000 in London) will be required to pay market rents
  • Benefit cap will be reduced from £26,000 to £20,000 (£23,000 in London)
  • Secure tenancies may no longer be available
  • Changes to eligibility criteria for child tax credits (i.e. families with four or more children are no longer eligible)

Problems faced:

On first glance the reduction in the cost of rent could be seen as a good thing for tenants, but with the other changes to benefits many people will see little or no benefit. The cuts to benefits and changes to the child tax credits could even mean that tenants are in a worse position where they are struggling to afford rents. The new minimum wage threshold for tenants in social housing could lead to an increase in uptake of the Right to Buy scheme or cause tenants to remain in lower paid jobs just to stay in their homes! Not to mention that if secure tenancies are no longer available tenants could face an unsecure future where they are forced to sign short term contracts with regular rent increases.

As you can see from the proposed changes the social housing sector faces a number of challenges over the next 5 years if they are to continue to provide the affordable homes our country so desperately needs.

For more information on the budget check out our blog on the factors affecting the housing industry following the new budget announcement.

By Anna Cross

Please Note: Every care was taken to ensure the information in this article was correct at the time of publication. Any written guidance provided does not replace the reader’s professional judgement and any construction project should comply with the relevant Building Regulations or applicable technical standards. However, for the most up to date LABC Warranty technical guidance please refer to your Risk Management Surveyor and the latest version of the LABC Warranty technical manual.

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