Conclusions and recommendations
1. The Department has not done enough to understand
the full impact of higher rent levels on tenants. Housing
providers can charge higher rents than before (on average 65%
of market rents in London and up to 80% elsewhere). This will
affect tenants' ability to afford the new housing and may exclude
some of the poorest from accessing this new housing. Where higher
rents are paid through increased housing benefit, tenants may
find themselves caught in an even stronger benefit trap where
it has become even harder to find sufficiently well paid employment
to make working worthwhile, countering the Government's objective
of ensuring that the benefit system makes work pay. However, the
Department does not hold information on the rent levels being
charged for individual properties and it has not considered the
impact on tenants or prospective tenants of these rent levels
or the interaction with wider Housing Benefit reforms. The Department
should consult tenants and providers to understand the impact
of the higher rent levels on tenants, and commission research
into the financial and other characteristics of those tenants
living in 'affordable rent' homes and build the results into future
programmes.
2. The allocation of funds under the Programme
did not fully focus on the areas of greatest need. The
Agency allocated funds across regions, and the level of grant
per home was the main factor behind its decisions on which housing
providers' bids were successful. It was not clear to us whether
and how funds were targeted at specific areas of greatest housing
need. We are also concerned that people in the greatest need may
not benefit—higher rent levels may mean that new social
housing ends up with the 'richest of the poor' and we are aware
of areas where larger properties in London have gone to couples
instead of families. The Department and the Agency should ensure
that decisions to allocate resources in future social housing
programmes prioritise areas of greatest need and target families
in greatest need.
3. It is unclear whether the shift of public
resources from capital grants to increased housing benefits will
provide better value for the taxpayer.
The Programme will be delivered with an average government grant
per home of around £20,000, compared to £60,000 under
previous housing programmes. In part this will be funded by a
one-off use of capital surpluses held by housing associations.
In part it will be funded by providers charging higher rents to
tenants, two thirds of whom are supported by housing benefit,
with a consequential increase in the housing benefit bill of an
estimated £1.4 billion. To inform decisions on future housing
programmes, the Department should review whether and how the current
mix of revenue and capital funding provides best value for money
for the taxpayer and tenants over time and take the results into
account in future programmes.
4. The Programme has a risky delivery profile
with little room for slippage. Half of
the new homes expected to be built are planned for the final year
of the Programme, and half do not yet have confirmed sites or
planning permission. If providers fail to make agreed progress,
the Agency will need to reallocate funding to others. The Agency
should monitor providers' progress closely, and, in particular,
when funds are re-allocated, ensure that replacement schemes still
meet the specific housing needs previously identified.
5. The Programme has taken advantage of the
sector's current financial capacity but this may be a one-off
opportunity. With the rise in the value
of property in the preceding 10 years, housing providers have
strengthened their balance sheets and were able to use their surpluses
and borrowing, as well as other sources, to provide around £10
billion of funding alongside government's contribution. Whether
or not this approach is repeatable will depend on the future financial
health of the sector and its ability to continue to borrow on
the scale required, which will in turn depend on factors such
as interest rates and the strength of the housing market. To enable
the sector to play its part in meeting the substantial unmet demand
for social housing in the future, it needs clarity on the government's
plans and the role it will be expected to play. The Agency should
analyse the financial position of providers to assess whether
the model can be repeated, providing more certainty to the sector
on its intentions for social housing beyond 2015.
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