2016 – What is ‘Affordable Housing’
and how did we get here?
It is clear to me that most people do not understand what is meant
by the term 'affordable housing' if you are one of them, you are not
alone. Affordable Housing is a misnomer
applied back in the noughties when 'social’ housing became socially unacceptable,
pure council housing became redundant as it was no longer being built and more
and more of it was sold off in Right to Buy. Public opinion on housing became
increasingly favourable to home-ownership.
Council Housing became social housing, developed by Registered Providers
and social housing has now morphed into ‘affordable housing’ a collection of
tenures that are increasingly less and less affordable.
History of
Social Housing
Once upon a time you either owned your house, or you rented
generally from a private landlord. Prior
to the Industrial revolution, land ownership was limited to the very wealthy
and housing needs were met by the great estates in the form of tied
accommodation for estate labourers and domestic servants or on tied farms. Even the middle classes rented their homes in
the main. Common land existed for the
use of everyone, but with a series of Enclosures Acts, this land was
partitioned off and gradually rural poverty began to grow and urbanisation of
our economy during the Industrial Revolution led to mass migration to cities.
Work houses sprang–up to accommodate the destitute in both rural and urban
areas.
 |
Parnell House, London built 1850 by the
Society for Improving the Condition of the Labouring Classes.
Purchased by Peabody Trust in 1994 |
The 1890 Housing for the
Working Classes Act heralded the development of the first Council houses.
It was the most important of a number of legislative initiatives aimed at
addressing the worst areas of housing unfit for human habitation and regulating
private lodgings.
Philanthropic associations formed and developed lodging houses for
the low-paid, organisations such as Peabody and Guinness, still in operation today. These were the forerunners of modern day
Housing Associations.
The aftermath of World War 1 was a turning point for the
legislative, funding and social acceptance of social housing. During the war there was a hiatus in housing
development and following the war there was a lack of funds, labour and
materials for any significant development programme. However a key piece of legislation, the Housing
and Town Planning Act of 1919 (the Addison Act) created the foundation
legislation for the development of what we now know of as Council Housing. Subsidies
for the first time were introduced to help build new housing as well as
issuance of housing bonds to raise money for development.
The concept of ‘general needs housing’ came into use, aimed at
meeting the needs of the working poor in quality developments with indoor
toilets and gardens. But as funding became more restricted in the 20’s and 30’s
the houses were built to higher densities with lower standards and were
increasingly being identified with the very poor. By the1930’s the focus of
council housing was centred on slum clearance and urban renewal. Most new council housing was built on new
estates on the city fringes. Allocations
policies began to emerge in this period and need became a factor above ability
to pay.
During the WWII all house building again came to a standstill due
to the war effort. Significant bomb damage led to mass loss of housing and
displacement of people from cities to the countryside. A severe housing crisis
and urgent need for the development of around 750,000 new homes resulted in a renewed
programme of slum clearance and New Town development.
Once again housing was forced to new settlements on the peripheries
of towns and cities. Modern high rise
blocks and planned estates became prevalent and attracted higher subsidies than
lower density houses. The modern council estates were very positively received
at the time with tenants thrilled to have modern amenities, but rapidly the use
of poor quality building materials and lack of sound town planning and social
principles took its toll and the new estates became undesirable places to live.
Right–to-Buy had almost always been permitted, but the 1980 Housing Act was the first to
enshrine it in legislation and to offer significant discounts and mortgage
incentives. Within ten years about 1
million council houses were sold under right to buy. Councils were not permitted to use receipts
to build new houses.
In 1979 42% of the British public were living in Council housing;
Council housing was viewed as an entirely acceptable tenure given the
displacement during the war. That figure
is now only 8%. The Right-to Buy movement shepherded in a rapid shift in public
opinion of social housing; housing that had been a norm was suddenly viewed as a
symptom of a welfare state catering to scroungers, single mums and
immigrants.
By the 1980’s Council stock was aging and in need of costly
maintenance and regeneration. The Housing
and Planning Act 1986 encouraged Councils to give up the management and
maintenance of housing stock and sell off to Housing Associations in Local
Stock Value Transfers (LSVTs). Councils were not allowed to use the receipts of
these sales to build new houses.
Social Housing
in the 21st century
The age of austerity defines housing policy thus far in the 21st
century. The 2008 financial crisis put
an end to private sector development and easy access to finance disappeared overnight. Previously ‘affordable housing’ was delivered
primarily through conditions on planning called Section 106. Usually in the region of 30% of a development
is meant to be ‘affordable housing’ but following the financial crash and as
part of the Localism Act 2011, Developers were able to renegotiate these
conditions on viability grounds.
The Government had less money to offer in the form of subsidies
for development and The Localism Act in
2011 introduced ‘affordable rents’
as a new tenure – designed to fill a gap between ‘social rents’ for poorer
people, and working people that had more disposable income and can afford to
pay more, but were still unable to affordable market rents. Affordable rents are rents that are 80% of open
market rents (including service charges).
However over time social rents have given way to ‘affordable’
rents, and there is no longer development grant available for social rented
tenures. Housing Benefit has had to fill
the gap in rental costs for families that cannot afford ‘affordable rent’
tenure.
By 2015 there was no longer grant for affordable rent tenures either–
such was the ambition of the Government towards home ownership. Housing
Associations wishing to develop homes for rented tenures must fund the
development from their own resources entirely.
This means more cross-subsidy with open market and shared ownership
development. In practice far fewer
rented homes are being developed.
Welfare Reform and the Housing and Planning Act of 2015 have
resulted in a number of initiatives that have reduced the provision of, and
access to affordable housing. These include: pay to stay, where people on above average
salaries will have to pay higher rents to stay in their homes, the ending of
secured tenancies, the introduction of the Voluntary Right to Buy for people renting
from Housing Associations (this was previously restricted to people in Council
houses).
So what is
affordable housing?
Affordable
Rents:
Homes to rent at 80% of open market rents (typically the cost to rent a 2
bedroom property in Windsor and Maidenhead is in the region of £1200 pcm)
Social rent: If you are lucky, you may
still be on an secure tenancy with an old social rent that is linked to Local
Council Housing Allowance Rates (In Berkshire in the region of£193.92 pw or around £840pcm). There is no longer Government grant to
build new properties for social rent, though some councils may use S106 monies
for this purpose.
Affordable
ownership tenures:
Rent to Buy – homes for working people
let at intermediate rent in order to provide the occupants time to save for a
deposit to purchase the home. Properties
will be let on an assured tenancy of less than 2 years, after 5 years the tenants have the option to purchase
the property. If the tenants chose not
purchase after 5 years the landlord has the option to continue to rent the
property or to sell it on the open market.
Help to Buy - Shared
ownership –
where a purchaser can buy as little as 25% of a property and pay rent on the
outstanding equity to the Housing Association.
Any uplift in the value of the property is shared in proportion to the %
of equity owned. The owner can
‘staircase’ upwards and buy additional shares in the property at any time. The
purchaser is responsible for mall maintenance and repair on the property.
Starter Homes – this is a new tenure
introduced in the Housing and Planning Act 2015. New homes will be developed specifically to
meet the need of first time buyers (at least one partner must be under the age
of 40). The houses will be for sale at
80% of market value but value is capped at £250,000 outside of London or
£450,000 in London. Additional
regulations are still to be determined.
Tenures and Rural
Exception Sites
Rural exception sites are special development sites identified to
meet exceptional circumstances (the affordable housing needs of local people) This is a special planning term for a site
that would not normally get planning permission (probably because it is outside
the development envelope or in an area of constraint) to meet exceptional
needs.
The majority of the housing must be affordable tenure on a rural
exception site (shared ownership or affordable rent) with some limited open
market houses allowable just to help make the development of the affordable
homes viable.
Starter Homes are a very new tenure and are not yet being
developed, however Local Authorities can refuse to allow Starter Homes on rural
exception sites as they are not ‘affordable’ in perpetuity. Likewise Rent to
Buy is not a suitable tenure on exception sites.
Contact us:
If you would like more information on how to get affordable homes
for local people in your Village, contact Arlene Kersley, the Rural Housing
Enabler for Berkshire on 0118 961 2000 or by email at arlene.kersley@ccberks.org.uk
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