The Thatcherite Housing Association experiment has failed

Mention Thatcher and social housing and the Right To Buy springs to mind with housing professionals yet they only conceptualise that in social housing stock lost and not replaced, a very one-dimensional and errant perspective.

A critical other aspect of RTB was cultural.  It made merely renting a social housing property a second class option and only then for those who had no aspiration and those non-aspirants also became portrayed as feckless, indolent and a dependency culture with all that entails in political spin terms.

Yet Thatcher’s housing policy also saw the death of council housing and the primacy of housing associations as the major social landlords.  In simplistic yet very valid terms councils could not borrow against their housing stock in order to build more homes as their borrowings would go on to the Public Sector Borrowing Requirement (PSBR) – the total figure the public sector borrows.

Hence councils faced with either a choice of (a) adopting the “Militant” approach of Liverpool City Council who did borrow and built more than 50% of all council housing for which 47 councillors were personally surcharged yet the city got what it needed; or (b) transfer the council housing stock to housing associations who because their borrowings did NOT go onto the PSBR were seen as the only option – a contrived option that now sees Housing Associations have 63% of all social housing and of which circa 53% is former council housing.

While housing associations had existed for many decades before Thatcher they were very much the minority of social landlords and their huge increase in numbers was this Thatcherite contrived circumvention of the PSBR.

The rush to stock transfer saw council tenants – who for years had suffered poor quality housing as their councils were not allowed to borrow to improve their housing and again due to PSBR – were asked to vote for the stock transfer and the new landlord would put in double glazing, new central heating, new kitchens and/or bathrooms and guarantee no increase in rents for x number of years IF – and only if – the council tenants voted for stock transfer.

That was a no-brainer of an option for council tenants from the late Thatcher period on and created the housing association experiment we have seen ever since.  That housing association experiment has failed and we now see the impacts of that with the chronic housing supply shortage we have.

Today sees Inside Housing publish what is nothing more than an advert wrapped up in an alleged news story on behalf of the National Housing Federation (NHF) the umbrella body for over 1500 mainline housing associations and which proudly claims to have built over 40,000 housing units last year.  Yet even if those ‘best presented’ numbers are taken as read this is still just 40,000 units against an accepted need for 250,000 new housing units each year – less than 1 in 6 of all new housing.

These pesky facts prove the housing association experiment has failed and make the whooping-and-a-hollerin’ of the 18% of housing associations who do develop new units and bombard social media with their deluded PR to say they can step in when private developers such as Barratt and Persimmon will not build due to having 25% and 30% wiped off their worth with Brexit.

This NHF sophistry (the article is reproduced at the end) reveals that:

  • only 270 housing associations of some 1500 develop any units at all (18%)
  • that 82% of all NHF housing association members do not develop

The NHF issues deluded upon deluded spin that its members are the vehicle to alleviate the housing supply crisis yet only 18% of its members actually develop new units and I go on to show how deluded David Orr’s claims are with those peskiest of facts called numbers below in detail.

Here is one of the tamest claims the NHF and David Orr makes about his member the housing associations from the NHF Brexit meeting today – just give us the money with no strings attached and we will deliver, which I prove below that housing associations could not possibly do with those pesky little things called facts.

deludedorr

Of the claimed 40,000 new units that were developed by housing associations only 5,464 or 13.6% were for social rent.  Social rent is what council landlords did provide and still do before they were forced to stock transfer to the housing associations and even this pitiful 5,464 new social rent units sees Housing Associations charge a social rent that is 13% higher than the average council landlord social rent.

The other 86.4% of new developments by housing associations were for other ‘products’ with 5% for outright private rent; 13% for outright sale; 22% for allegedly ‘affordable’ shared ownership; and 46% were for so-called ‘affordable rent’ which equates to 70% more than the social rent level charged by council landlords.

HA’s will validly say they are forced to charge the tenant more through these higher cost ‘products’ because government has reduced and all but taken away the social grant levels they traditionally paid to social landlords in return for a social rent level that approximates to half the average private renting level, and which has saved every post war government billions per year in lower housing benefit payments and much more than the ‘subsidy’ or social grant governments put in.

Yet while that holds some validity the outcome is that new social housing developments as a percentage of all new housing has fallen from an average of 55% up until 1980 to an average of 19% now.  In short before HA’s became the primary vehicle, social landlords developed more than 1 in 2 of every new build yet since they have delivered less than 1 in 5 of all new builds.

The current housing supply crisis has been caused by every government since 1980 not investing in the social housing model and which the SHOUT report of last year by a hard right and self-titled laissez-faire economist says is still the most cost-effective way in financial terms to meet the UK housing need.

The SHOUT report, this laissez-faire economic analysis of the hard right of the political spectrum calls for exactly what the ‘Militant’ Liverpool City Council actually delivered in the mid 1980’s when they built more than 50% of the total council housing in the UK.

In short the economics of the right is precisely the same as the politics of the left when it comes to housing – and that statement is as bizarre to write as it is to read!

The SHOUT campaign group is not a left political group at all and its views are highly regarded across the entire social housing sector as being apolitical as well as being correct views when it calls for much more social housing for which the numbers stack up as the best economic option for government of any political persuasion.

However, the maximum level of HA new builds is a drop in the ocean to what is needed and is a pitiful output compared to what its predecessors as social landlords, the councils achieved.

Even after we dismiss the post-war housebuilding boom of the Churchill 51 – 55 administration and the next you have never had it so good MacMillan one that averaged just over 200,000 new council housing units per year, we see that councils landlords were still building 135,000 new housing units per year on average from 1960 right up until 1980 and Thatcher’s RTB.  Since 1981 social landlords have only developed 25,000 new builds per year on average.

They are stark figures and reveal the contrived experiment of the primacy of the Housing Association as the primary social landlord vehicle has failed the UK’s housing needs.

That model has failed and I stress the model an delivery vehicle not individual HA’s have failed … though with more than 4 out of 5 housing associations not developing at all there is much scope to say they have.

Now that we have universality from all sides that the UK needs 230 – 280,000 new housing units each year just to stand still let alone reduce the shortage create by non investment from successive governments, how is that ever going to be achieved?

Over the past decade the private developer, the Barratts and Persimmons of this world who have taken a post-Brexit hammering, built an average of 139,000 new units per year which if they can maintain that level which is questionable, leaves the social landlord needing to deliver over 100,000 new social housing units per year.

By social housing units I mean non home-owner or shared ownership units or outright sale or outright private rent new builds and last year the NHF ‘best presented’ figures in today’s IH article show just 18,592 AR units and 5,464 social rent units for a total of 24,056 new build against a need of at least 100,000 per year!

The NHF proclamation of a record new build last year needs to increase at least four-fold every year, a rise of 400% per year and just to meet the minimum need to prevent the housing crisis of supply getting any worse.

They cannot deliver that, end of.

The only way the UK government can prevent the only housing crisis (of inadequate supply) that anyone is talking about is to embark upon a massive council house building project that is also the most cost-effective way to meet this chronic economic need.

Do nothing or continue with the failed housing association experiment and the UK housing crisis will only get much worse.

__________________________

The IH article from behind the paywall is below.  All other figures come from DCLG Live Table 241 that gives housebuilding statistics by supplier since 1950.

The IH article with the NHF’s own figures aka shooting themselves in foot!

ih nhf build figures

 

 

 

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6 thoughts on “The Thatcherite Housing Association experiment has failed

  1. Hi Joe

    I’m not sure why or how you link the ‘fact’ that only 270 out of 1500 housing associations are developing is somehow linked to the failure or otherwise of the Thatcher experiment? For starters the ‘facts’ you use seem to have more in common with the ‘hatchet-job’ done on housing associations by Channel 4 News last year at the direct behest of No. 10 & 11 Downing Street? In so far as part of that suggestion being broadly correct, it of course fails to take into account the detail which as I understand it is that some of the remaining 1230 associations are in Group structures with the 250 and also that many of the 1250 are very very small and consist of as few as one development? As such they may not be in a position to develop even if they wanted to?

    Of course the danger of the double edged sword effect of this is to suggest that we should do away with all the smaller housing associations but since they tend to offer the sort of personal service that I would have thought you would have applauded (as opposed to their larger peers) I wouldn’t have thought you would have wanted to see this outcome?

    My small housing association continues to develop where it can, because we see the need for our services on the ground, but we are not a child of Thatcher (another mis-truth presented by Channel 4 News) rather existing as a result of the ordinary man and woman in the street wanting to take some direct action locally. We will develop or not to suit our local circumstance and not merely at the behest of the Government in power at a particular time. Having said that there’s still plenty to keep us busy.

    One final point to make about the detail. As I said we continue to sweat our assets to develop but this is probably counted through the procurement framework arrangements put in place by the HCA under the heading of the larger (preferred partner) housing association. Therefore it may be strictly more correct to say that there are 271 developing housing associations…or maybe more?

    Best wishes

    1. My point is that the HA sector – which we both know is diverse – cannot deliver the number of properties the UK needs and the total new build is constrained by the system which has HAs as the primary social housing developer as the LA development output is negligible.

      What flows from this is the housing supply crisis is only going to get worse as the shortages become more acute by the day.

      In context I drafted the blog to coincide with the NHF Brexit conference and the impact of Brexit on the development picture is huge and sees a likely reduction in output from the private developers which means the only other developers, the HAs, would have to do more to meet the need. Yet as the figures reveal there is no chance of that happening at all and so the system needs to change.

      The new housing minister says the commitment is still there for a million homes and even this lower 200k per year figure over a 5 year parliament sees HAs needing to develop at least 90k per year as the private developers will develop 110k at most – that is also not achievable under the current system.

      Even if the government give the £7bn figure with no strings attached that NHF want, it is still unachievable and nowhere near achievable unless the NHF can tel me how they will deliver 450,000 new developments for £7bn (£15.5k each) and even if they did this is still 50k less homes per year / 250k homes less per parliament than everyone accepts is needed.

      It was me having a go at the system that came to the fore under Thatcher and not at individual HAs as I stated

  2. Sorry I get the impression that OPEC (sic NHF) are crying wolf over a supply crisis, if an industry is worried about low supply there would increase it and/or lobby for policies to help increase it. The ‘sectors’ past and current apathy leads me to the impression that there are content on price manipulation by controlling supply.

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