David Cameron’s pledge to cut the benefit cap from £26,000 to £23,000 if the Conservatives win the next election could force housing associations to turn away families in need of social housing.
Mick Sweeney, chief executive of One Housing Group, which operates in London and the southeast, said associations may be forced to abandon plans to build much-needed new homes as result of the change. They may also have to turn away certain tenants, he added.
“We’re going to look at their income and we’re going to have to say, if they’re wholly benefit-dependent and they can’t afford even the sub-market or social rents that we’re charging, [then] we can’t house you,” he said.
“What happens to those families? There are lots of unintended consequences to this.”
Elizabeth Austerberry, chief executive of Moat, which also houses tenants across the southeast of England, said that rent was the biggest source of steady income for associations. Rental streams are already placed under threat by the introduction of universal credit.
“If the benefit cap goes down to £23,000, it will make certain types of home extremely vulnerable,” she said.
Between 40-50% of Moat’s residents are benefit dependent, Austerberry explained, adding that for some housing associations this figure is as high as 80%.
“For an association like that it [the reduction of the cap] will make it extremely difficult for them to generate new housing, particularly if they haven’t got a strong housing market. I suspect it will make it extremely difficult for us to build three-bedroom homes, and maybe two-bedroom homes in most of our areas.
“If we’re not going to be able to collect rent from people, then where is the money going to come from? That again will push us further towards the open market.”
Housing associations have increasingly pursued commercial projects to generate income since the government cut grant funding for new social homes by 60% in 2010. But securing finance for such operations is challenging if investors notice a risk to an association’s main income stream, Sweeney said.
“If the banks get nervous then they won’t lend us money. And if they won’t lend us money then we can’t build new homes.”
Richard Blakeway, director of housing for the mayor of London, said that housing associations have no choice but to raise money through commercial projects.
“There needs to be an acceptance that the landscape has changed. Some housing associations have responded brilliantly, others are still quite cautious. They need to stop thinking that there is going to be a significant change in terms of capital subsidy in relation to affordable housing, because I can’t see that happening.”
Uncertainty could not be cited as a reason for avoiding commercial initiatives, he added.
“The funding settlement that exists now will last until the end of the decade, and then the rent settlement goes into the middle of the next decade.”
Conference delegate David Hancock, representing Hyde Housing Group, questioned how associations could succeed in a commercial market under current regulation rules.
“We have to carry out commercial activity to meet our social objectives, but we’re regulated by a regulator which is principally driven by protecting public assets. At some point that has to give,” he said.
Sweeney agreed, stating that although the coalition’s decision to abolish the Audit Commission and the Tenant Services Authority was welcome, change to the regulation of the housing sector was still needed. The Homes and Communities Agency “needs to be put back in its box,” he said.
“It’s growing, it’s trying to extend its remit, its trying to second guess what our business plans are. I hope a conservative government would put regulation on a proper footing, and that is not interfering with building homes.”
Source – Welfare News Service, 01 Oct 2014