Social rent increases may not ‘move dial’ on housebuilding, Rachel Reeves warned
Rachel Reeves’ plans to increase social rent may not “move the dial in a material way” on council housebuilding, a corporate finance firm is warning.
The Chancellor will reportedly up social rent by bringing in a decade-long formula to raise housing costs in England boosted by the CPI inflation measure – currently 2.2 per cent – plus one per cent each year, according to the Financial Times.
Reeves is expected to announce the proposals in the October budget, and the government hopes the plan will improve affordable house building rates by assuring councils cash flows.
Centrus CEO Phil Jenkins said the move was a “strong signal of support” and would be “welcomed by housing associations looking for long-term certainty in relation to their core revenue streams” and “may result in an uptick in development appetite for some”.
But the corporate finance chief also warned: “However, it is unlikely to move the dial in a material way.
“This policy won’t address some underlying constraints faced by the sector in the shape of increased spending requirements for existing assets, weak financial metrics/credit ratings and fundamental challenges associated with the current housing association funding model.”
Just yesterday, G15, an organisation of London’s largest housing associations, issued a call for funding certainty which it said was needed in order to continue building affordable homes.
Their report warned housing associations were increasingly reliant on private loan income and cash surpluses from the sale and letting of properties within the private rental market.
G15 chairman Fiona Fletcher-Smith stressed that the living in “the capital is increasingly unaffordable for many” with average private rents requiring annual income of £76,261 a year.
Housing secretary and deputy prime minister Angela Rayner previously said the government “recognises councils and housing associations need support” and pledged plans would be unveiled “at the next fiscal event to give councils and housing associations the rent stability they need to be able to borrow and invest in both new and existing homes”.
It comes as the Guardian also reported the Chancellor is set to increase taxes, cut public spending and take a tough line on benefits at the autumn fiscal statement.
Treasury measures reportedly being mulled include upping inheritance and capital gains receipts; a one per cent public spending rise which would be a real terms cut; maintaining the two-child benefit cap; and excluding the Bank of England from measuring national debt.
“Nothing in the recent data can offset the scale of the black hole in the public finances we’re looking at,” a source told the newspaper.
A spokesperson from the Ministry of Housing, Communities & Local Government (MHCLG) said: “Work is ongoing to fix the foundations of our housing and planning system and we will set out our plans at the next fiscal event.”