Committee of Public Accounts - Financial viability of the social housing sector: introducing the Affordable Homes ProgrammeWritten evidence from the Department for Communities and Local Government

Thank you for a constructive discussion about our work on the Affordable Homes Programme at the hearing on 9 July. I committed to providing further information on Affordable Rent levels in comparison to other rented tenures.

The Affordable Homes Programme Framework document sets out the expectation the Homes and Communities Agency (HCA) has of providers seeking funding under the scheme. It makes clear that providers are able to let a property at an Affordable Rent (inclusive of service charges, where applicable) of up to 80% of the gross market rent which reflects the property size and location. The maximum rent level for Affordable Rent should be assessed according to the individual characteristics of the property. Landlords are required to assess the gross market rent that the individual property would achieve and set the initial rent (inclusive of service charges) at up to 80% of that level, using approved RICS valuation methods.

Table 1

COMPARING WEEKLY RENT LEVELS

Average weekly rent

Affordable Rent (2011–15 AHP allocations)

Market Rent (of comparable properties)

Affordable rent as %age of market rent

London

£182

£280

£65%

England

£133

£182

73%

Affordable rent figures above are based on the rents successful bidders to the Affordable Homes Programme proposed to charge, with the market rent figures based on these providers’ estimates of how much the rent on the same properties would be if let at market rates.

To put the above figures in context, the average social rent charged on new properties built in London under the previous National Affordable Homes Programme was £108 a week.

Table 2

PROPORTION OF NEW AFFORDABLE RENT SUPPLY HOMES OFFERED AT LESS THAN 80% MARKET RENT

Less than 80%

80%

London

95%

5%

England

37%

63%

We would normally expect Affordable Rent tenants would otherwise have been housed more expensively in the private rented sector; by taking an Affordable Rent property they are less dependent on the State for revenue support, increasing their incentive to work. Where appropriate, Affordable Rent tenants are eligible for housing benefit up to the full value of the rent, subject to any deductions such as the social sector size criteria and the overall benefit cap. The National Planning Policy Framework is clear Affordable Rented housing is a form of social housing in the same way as social rent and existing allocations procedures apply. Local authorities have considerable discretion in this area.

Yours sincerely
Sir Bob Kerslake
Permanent Secretary

23 July 2012

Prepared 9th October 2012