Driving the recovery through housing: an Autumn Statement submission from the Chartered Institute of Housing

Transcription

1 Driving the recovery through housing: an Autumn Statement submission from the Chartered Institute of Housing 27 November 2012 Page 1 of 8

2 CIH Contact: Gavin Smart Director of policy and practice CIH Coventry About the Chartered Institute of Housing The Chartered Institute of Housing (CIH) is the professional body for everyone involved in housing and communities. Our goal is simple to provide housing professionals with the advice, support and knowledge they need to be brilliant. Our work is driven by a passionate belief that our contribution as housing professionals is vital to making communities great places to live and work and that everyone is entitled to a decent, affordable home in a thriving, safe community. CIH is a registered charity and not-for-profit organisation. This means that the money we make is put back into the organisation and funds the activities we carry out to support the housing sector. We are a membership organisation with a diverse and growing membership of over 22,000 people who work in both the public and private sectors, in 20 countries on five continents across the world. Introduction With our economy struggling to recover from the impact of the financial crisis government has made it clear that driving economic recovery is top of its agenda. CIH shares this ambition and we welcome government s recent focus on driving growth through housing in its September stimulus package. CIH believes that there is still more that housing can do to help deliver growth. Housing and construction have huge potential to help push UK economic growth forward. Research shows that: for every 1 spent in building, 92p stays in the UK every 1 spent on construction generates a total of 2.84 in extra economic activity for every 1 spent by the public sector, 56p returns to the Exchequer, of which 36p is direct savings in tax and benefits 1 1 Construction in the UK Economy: The Benefits of Investment, LEK Consulting for UK Contractors Group, November 2011 Page 2 of 8

3 the construction sector has significant spare capacity so it is well-placed to respond to any additional investment. The government s September announcement included a number of welcome initiatives to boost housing supply including the 10bn loan guarantee fund to boost affordable and market rented provision, 300m of additional government investment into affordable housing and a 200m fund to stimulate the building of new homes for private rent. The Autumn Statement provides an excellent opportunity to maintain this momentum and to build on the housing sector s potential to support economic growth. In this Autumn Statement submission we propose that government should focus on the following five areas: confirm details about the operation of and allowances in Universal Credit promoting work whilst ensuring people have sufficient income to live on urgently clarify the operational detail of the 10bn loan guarantee fund - promoting maximum take-up and avoiding a wider funding hiatus amend Local Authority borrowing rules so they can invest more in developing new homes to help respond to our housing supply crisis provide certainty on rents in the affordable housing sector post April 2015 giving landlords the confidence to invest for the future. Explore combining planning changes and the self-build programme helping to tackle rising homelessness. Universal Credit Proposal Government should provide further details about the operation of the Universal Credit regime and particularly confirm the allowances that the scheme will use. Summary Government must give clarity about the actual allowances and disregards for Universal Credit and must ensure that the allowances, earning disregards and tax system combine to provide enough income for households to maintain a reasonable standard of living. It is now less than a year until the roll out of Universal Credit commences, and service providers and claimants both urgently need certainty about the design and operation of the new system. The final details of the design are critical to the ability of Universal Page 3 of 8

4 Credit to achieve its aims in terms of work incentives, reduction of the poverty trap, and simplicity of operation. Service providers who cater for Universal Credit claimants need to make preparations to change their business processes so they can operate effectively within the new system. In addition, landlords need certainty about the future to help them retain confidence to operate in that marketplace and to encourage additional investment. Social landlords are already working to adapt their businesses to and help prepare their tenants for both the benefit caps and the under-occupation restrictions and additional uncertainty will not help with this process. And private landlords will have similar concerns. As government itself has acknowledged, the allowances and disregards originally proposed in the November 2010 white paper 2 do not combine to create the advantages and smooth taper originally intended. It is essential that amounts and relationships finally adopted give an outcome at least as good as those proposed in October CIH research shows that many low income working households will be worse off with Universal Credit than they would have been under the pre-reform system. Many households with a single earner which include all single parent families and some two parent families will not see the gains originally promised from Universal Credit. Two parent families earning above around 300 per week will be better off than they would have been under the pre-reform system, but their gains appear to be at the expense of working families who are less well off than themselves. Government can address this by boosting earned income disregards in Universal Credit to give extra support to the lowest earners and ensuring passported benefits such as free school meals are available to low earning households. Government can provide additional help to low earning households to support the aims of Universal Credit by taking action to reduce the costs of childcare and rent, and committing to uprate Universal Credit by at least CPI each year to ensure that low earning households do not slip further behind the rest of the population. Loan Guarantee Fund Proposal: Government should provide further detail about the operation of the 10bn loan guarantee fund announced in the September Stimulus Package. 2 Welfare that Works 3 Policy Briefing Note 14 Page 4 of 8

5 Summary: Government s announcement of 10bn of loan guarantees for investment in affordable and market rented housing was a hugely welcome development. Government now needs to move quickly to maximise the impact that the guarantee fund can have. Government should take advantage of the opportunity presented by the Autumn Statement to provide the detail that housing organisations need before they are able to enter into funding arrangements backed by the guarantee. There is a risk that too great a delay in providing details of the scheme could create a hiatus in funding for housing with housing organisations postponing exploring other funding opportunities whilst waiting for further details about the guarantee scheme. The housing sector has the potential to play a massive role in returning the economy to growth and government guaranteed funding at such scale will help to maximise housing s ability to deliver on that potential. The guarantees scheme can play a central role in this, but only if organisations urgently receive the clarity they need to turn their initial interest into action. The September announcement generated huge interest and support and it is important to maintain this momentum. Many housing organisations are extremely interested in the potential of the guarantees scheme and keen to explore how they can use it to support building new homes. But before they can properly understand whether they will be able to take advantage of the scheme they need to see more detailed information about exactly how it will operate. Housing providers will need clarity in a number of areas including the precise nature and length of the guarantee, any minimum size requirement for funding to be covered by the guarantee, the nature of any conditions controlling access to the guarantee and the likely all-in price of funding available via the guarantee. Local authority debt caps Proposal: Government should raise local authority debt caps to increase the potential of local authorities to invest in growth through financing housing development. Summary: CIH strongly supports the reforms to council house financing that the government introduced in April. Under the self-financing regime for council housing, councils and ALMOs have new capacity to borrow independently to invest in their stock and to build new homes. However, despite this being a very welcome development local authorities ability to make best use of their newly liberated financial capacity is restricted by government controlled borrowing caps which strictly limit their ability to take on debt. Page 5 of 8

6 In practice local authority housing has very low levels of existing debt (around 17,000 per home) and consequently has the potential to support much higher levels of new investment. Current borrowing caps limit the total new housing debt local authorities can take on to 2.8bn, well below the levels at which they could borrow sustainably bn is sufficient to build around 3,000 homes per year over five years, but research suggests that were the caps lifted or removed councils would currently make plans to invest a further 4.2bn and, if encouraged to invest, their maximum potential borrowing appetite might be 7bn over five years, sufficient to build an additional 12,000 homes per year over that period. This new total build rate of 15,000 homes a year, a 10% increase on current new supply rates, would add 75,000 new homes to England s housing stock over five years, a significant contribution at any time, but especially during a period when house building is at an all-time low. This level of borrowing would be well within the levels sustainable from projected rental income; with total local authority financial capacity estimated at between 20bn and 27bn. Local authorities have a long track record of borrowing prudently and sustainably, and they comply with the CIPFA Prudential Code for Capital Finance. Indeed, CIPFA have argued that borrowing caps are unnecessary since borrowing can be controlled properly under prudential rules. It is important to recognise that additional local authority borrowing would add to total public sector debt levels under current fiscal rules; but the marginal increase in borrowing would create significant economic benefits and provide thousands of much needed new homes. Government s own analysis suggests that every 1m of new housing output supports 12 new jobs for a year. This suggests that a programme of 15,000 homes a year would support around 23,500 jobs a year providing a total value to the economy of around 5.6bn per year. And because of every 1 invested 56p returns to the Exchequer allowing Councils and ALMOs to invest in housing in this way is excellent value for money. Rents and investment post 2015 Proposal Government should commit to confirming the rent settlement for the affordable housing sector post April 2015 by Budget Summary The current rent and investment settlement for the social housing sector is due to come to an end in The rent settlement, with its built-in annual, inflation related 4 The financial analysis in this section is sourced from Lets Get Building - The case for local authority investment in rented homes to help drive economic growth, National Federation of ALMOs with ARCH, CIH, LGA and in association with CWAG, November 2012 Page 6 of 8

7 rent increases, has been a critical part of the successful funding model for the sector in recent years. It has given confidence to the institutions providing private lending for housing associations allowing both parties to plan for the future with a degree of certainty. And with the advent of local authority housing finance reform the rent settlement will become increasingly important to local authority borrowing and investment plans too. It has also allowed housing associations and local authorities to strategically plan their revenue expenditure. CIH recommends that government should conduct a thorough, but swift, review of the options for the future of rent setting in the social housing sector with a view to announcing a new rent settlement in the 2013 Budget. Both local authorities and housing associations need to plan for the longer term if they are to manage their businesses effectively and with the end of the current rent settlement approaching this is becoming increasingly difficult. Indeed many housing associations and local authorities will already be planning their post 2015 investment and expenditure strategies. Similarly lenders may become increasingly unwilling to commit to financial support for the sector if they cannot see certainty of revenue streams. Government could do much to address this uncertainty by announcing that it recognises that a new rent framework needs to be put in place in good time and by committing to do so by Budget Any review must necessarily also include consideration of the options for future funding of new social and affordable housing, the relationship between rents and welfare policy, and the overall purpose of social housing. In taking this decision government will need to consider the balance and trade off between affordability, landlords financial capacity and the demand on government finances, including the balance between capital and revenue subsidies. Tackling homelessness Proposal Government should combine planning changes and the self-build programme helping to tackle homelessness Summary Homelessness numbers, which had been reduced significantly from their historical high point, have started to rise in the last couple of years. They are now around a third higher than they were in 2010, and the number of families in bed and breakfast accommodation has more than trebled across the same period. Similarly the recent period has seen the numbers of households in temporary accommodation begin to rise again. Government has been very clear in its determination to address homelessness in all its forms and CIH is keen to support this ambition. Page 7 of 8

8 Government should take advantage of the recent amendments to planning use class change procedures and target funds from the custom-build programme towards organisations working to convert ex-commercial properties to provide housing for homeless people. As part of its strategy to increase housing supply government has recently moved to make planning applications to change a building s use from commercial to residential purposes easier. Elsewhere government has committed 30m to its custom build programme designed to support self-build developments. These two policy initiatives could be usefully combined to help address homelessness, provide skills training and bring empty commercial property back into use. There are already a small number of organisations, such as the Canopy project in Leeds, that work with homeless people to provide housing and training opportunities by helping them to bring properties back into use. These organisations typically work with empty properties rather than ex-commercial stock, but CIH believes this is a proposition worth exploring as a way of providing housing and training for homeless people and bringing unused property back into use. The recent Pop-up HAWSE (Homes through Apprenticeships With Skills for Employment) which Levitt Bernstein Architects entered for the Building Trust s Home competition explored similar territory using disused lock-up garages and was endorsed by Crash and the YMCA 5 This proposal is most likely to be useful in helping to house single homeless people and may be better suited to some locations than others. It provides a route to additional new housing supply for homeless people with training included, and it could be funded by a partial re-focussing of an existing government programme so requiring no additional funding. 5 Garage to provide pop-up housing for homeless people, Guardian, 12 November 2012 Page 8 of 8