Housing demand is not just about numbers - it's about tenures too

Access to good, affordable housing is critical if we are to reduce poverty in the UK and make sure housing is affordable for future generations, says Brian Robson.

To prevent levels of poverty from rising we need to:

  • Build far more homes – both to buy and to rent;
  • Limit rent rises; and 
  • Maintain support with housing costs.

It is good to see the recent Budget and Productivity Plan recognising the centrality of these issues and we strongly support the government’s aim to build enough homes to keep up with demand. However some of the solutions adopted risk higher levels of poverty and could be improved to create an effective land and housing market which promotes productivity.

Building more homes to buy AND rent 

It was great to see the Productivity Plan recognise the importance of building more homes, and acknowledge the dangers for productivity and the labour market if we fail to do so. We need to build at least 200,000 a year to avoid rising poverty levels. Some of the changes to planning, particularly those that ensure plans are put in place at local level to provide new homes, will help us meet this target.

Housing is not just a numbers game, though. Tenure matters, too. If further rises in poverty are to be prevented, we need more homes to buy and more homes for rent.  We need to maintain the supply of low-cost rented homes. Too many government proposals may come at the expense of reduced supply of genuinely-affordable housing for those on low incomes. We need more homes of all tenures, and JRF has worked with the housing sector to develop a costed proposal that could deliver the low-cost supply we need.

Limiting rent rises 

In his speech, the Chancellor noted that rents in the social sector had increased by 20% since 2010. JRF’s evidence predicts social rents would rise by 160% in real terms by 2040 if previous policy had continued. Instead social sector rents are to be cut by 1% a year for the next four years. That will benefit tenants who pay their own rent. But it will come at the expense of new development. The independent Office for Budget Responsibility estimates it will result in 14,000 fewer affordable homes over the period. Rather than an across-the-board reduction, the Chancellor could have targeted the highest rents – the market-linked ‘Affordable Rents’. Moving to a Living Rent linked to local incomes, and increasing up-front capital investment, would have improved affordability.

Support with housing costs 

The rising housing benefit bill was another factor in the decision to cut rents. Modelling for JRF suggests this is set to rise by a further £20bn by 2040. But short-term fixes aren’t the answer. Removing Housing Benefit from 18 to 21-year-olds affects 20,000 young people and saves just £0.1bn. Reducing the benefit cap will save more, but in many areas, it risks pricing families with kids out of even low-rent social housing.

The only way to sustainably reduce the housing benefit bill is to switch from housing benefit towards up-front capital investment. Increasing capital investment by £2bn per year now could support 80,000 new homes per year, the majority at Living Rents, and reduce the housing benefit bill by £5.6bn by 2040.

Small changes to housing policy can have a big impact on poverty levels. The budget focussed on many of the right issues, but broader solutions and a proper long-term plan to build homes of all tenures are needed to prevent more people from living in poverty.