The Week

The Week, 22 April 2022

On Wednesday, Secretary of State for Levelling Up, Housing and Communities, Michael Gove, addressed a conference organised by the charity Shelter, making the case for “addressing the lack of social housing and the poor quality of social housing”.

Gove argued that “we’ve reached a situation where ... the availability of social housing, is simply inadequate for any notion of social justice or economic efficiency”. Reform is behind the Secretary of State on this — we’ve long argued that much, much more social housing is needed.

Why? For a start, sky high private rents are driving low income households into poverty. People in the bottom quarter of the income distribution spend, on average, 37% of their incomes on rent — well above the 30% defined as “affordable”. Analysis by the JRF finds that 86% of the households with “unaffordable rent” are below the poverty line after accounting for housing costs (AHC) — or around 800,000 in total. By comparison, the rent for social housing is typically set at 50% to 60% of market rates. According to the JRF, this means 600,000 households renting from the private sector could be lifted out of poverty if they had access to social housing.

On top of affordability, many more families are living in substandard private rented accommodation than in social housing, though there has been some improvement in this area. Almost 1 in 4 private rented homes do not meet the Decent Homes Standard — e.g. being in a decent state of repair, and providing a “degree” of thermal comfort — down from a third in 2014. 12% of social housing, by comparison, fails to meet the Decent Homes Standard (albeit still a worryingly high number).

However, per the Levelling Up White Paper, Government is currently consulting on introducing a “legally binding” Decent Homes Standard in private rental accommodation for the first time — so watch this space.

Gove is also spot on when he argues that a lack of social housing is economically inefficient. Currently, housing benefit costs the state roughly £30 billion a year — up from £18 billion in 2000. The scale of this increase is largely due to the increase in the number of households in the private rental sector, and a reduction in those living in the much cheaper social sector.

We also agree with the Secretary of State that “one of the significant barriers” to owning a home is the difficulty, when renting from the private sector, to “acquire the capital [that is needed] for a deposit”.

However we’re less convinced that more social housing will enable low-income families to “save, one day, for a home that they might want to call their own”. We should absolutely want more social housing for the boost in living standards this would bring, but the idea that an increase in social housing will help crack the puzzle of access to ownership is a stretch. The average income of households in a social let — less than £260 a week — is surely the bigger barrier, with average house prices in England reaching £293,000 in December 2021.

Onto our recommended reads...

First up this week is an article by Yael Selfin in The Times. In it, she argues that constraints created by the cost of living crisis mean it is unlikely that Government “will be able to devote the funds necessary to achieve the transformation it seeks to the UK’s regional inequalities”. She says that this must not “derail progress” however, and instead furthers the case for the use of private finance — including pensions funds and insurance companies — in “advancing the performance of local areas”.

In February, we welcomed the Levelling Up White Paper’s focus on private sector led economic revival. Selfin’s article similarly makes a great case for local government helping to direct private investment, by “guiding where interventions would be most effective” — and therefore making it worthwhile for the private sector to get involved whilst “assuring them of a competitive return”.

Also worth reading this week is the IfG’s Progress Report on the Cabinet Office’s “Declaration on Government Reform”. It points to 30 specific actions mentioned in the annex to the declaration, but finds that progress across them has been mixed. For example, whilst a new digital and data office has been established, plans to move more civil servants out of London, and to increase the number of entry routes into the civil service are “behind schedule”. The report calls for tighter and more ambitious targets to be set to ensure reform at the centre is happening — particularly, for example, around reducing churn, increasing outside recruitment, and constructing clear accountability across Government. Well worth a read.