Member Article

Is affordable housing history?

As the Government continues to try to steer the country out of recession, a worrying report has revealed the real financial implications of the coalition’s affordable homes programme.

The report published by the House of Commons Public Accounts Committee outlines serious concerns that a huge drop in Government grants for affordable homes will leave social housing providers with no alternative than to recover their build costs by putting rents up.

North East lettings expert, Ajay Jagota, fears the affordable homes programme has been yet another headline-grabbing ploy that has no real ability to deliver.

Ajay, managing director of KIS Lettings, said: “The Government has said that it will build 80,000 affordable new homes in the four years from April 2011 to March 2015, but the reality is the £1.8 billion set aside averages to just £20,000 – which is only a third of the funding that was available under the previous scheme.

“The Government expects social housing providers to make up for the lower grant, in part, by charging tenants higher rents. So, what should have been affordable homes to rent or buy may only be accessible to those that have a higher wage or those on the highest benefits, the poorest may not benefit at all from the scheme.”

The report estimates that higher social housing rents demanded as a result of the current affordable homes programme will push the Housing Benefit bill up by £1.4 billion over the next 30 years. It criticises the Government for switching costs from one department to another and is skeptical over whether there will be any real benefit in the long term.

There’s also criticism that the programme will account for just 2 percent of the affordable homes needed and most of them will not be built until the final year of the scheme. With 4.5 million people already waiting for an affordable home, the report calls on the Government to make it clear how the growing need for social housing will be met.

Ajay added: “The social housing shortage is growing and something needs to be done now to prepare for the future. In places like overcrowded London we are already seeing families being made to live in hostels and bed and breakfasts because there is no alternative accommodation and with the welfare cuts due in April, things are not going to get any better.

“What the report doesn’t address is the real problem – the availability of credit. Earlier this year, the Government announced that property developers no longer have to include social housing on new developments if it wasn’t financially viable. But even that announcement hasn’t created the construction boost that was expected.

“The fundamental problem for the property sector is the inability to access credit. Whether it’s an individual looking to move onto the property ladder and secure a mortgage or a housing developer looking to build a whole estate, they need access to credit and the banks are still very reluctant to give it.

“I’m not saying that we should be going back to the days of 120 percent mortgages but there needs to reach a happy medium between what we had then and what we have now.

“I agree with the many top economists that say construction is key to kickstarting the faltering economy, it creates jobs, new social housing and makes more homes available for first time buyers. We just need the banks back on board in order to get things moving.”

This was posted in Bdaily's Members' News section by Ajay Jagota .