Bond markets now controls social housing thanks to Tory policy

I said over the weekend here that there will be no more social housing built and all social landlords will only ever build for full private rent which is the correct interpretation of the Tory policy in their recent white paper.

The title of the Tory housing white paper was “Fixing Our Broken Housing Market” and the Tory solution to decades of market failure is … to give 100% control of social housing to the bond markets!

To recap what the Tories housing white paper (HWP) says and means is:

• Council and ALMO landlords are forced to build else they will be sanctioned
• If councils or ALMOs build for social rent or affordable (sic) rent these properties will be subject to right to buy AND they will be subject to forcibly being sold to pay HA tenants right to buy discounts.
• Council and ALMO landlords will have to build yet will get no government funding and are FORCED to go to the private bond markets to get funding.
• Housing Associations who are NOT forced to build also get no government funding and will also go to the private bond markets to get funding.

The bond markets will ONLY lend money to social landlords IF they get the best return on that investment which is the highest income which is private rent.

This means what social housing gets built is decided not on housing need but on the greed of the bond markets.

The bond markets will demand ever increasing returns too so expect much greater cutbacks in both repairs and in social housing staffing.  This is already taking place anyway as housing associations have record surpluses and supersized housing associations such as Clarion et al are cutting staff and working conditions routinely, yet far worse will happen when the bond markets start to dictate to these alleged social landlords and this goes for council and ALMO landlords too.

The bond markets will also ensure that no wheelchair friendly housing is built as this is more expensive and thus provides less profit and that new developments will be smaller and maximise the footprint of the land available meaning 2 bed flats will be built not 3 bed houses or 1 bed flats.

As such there is no such thing as social housing any longer which is entirely 100% due to this Conservative government’s housing white paper released on 8 February 2017.

Let’s immediately deal with the likely knee jerk and deluded response from housing associations and the social housing sector who will say this is nonsense and we will always house those most in housing need or similar vacuous phrases such as social purpose. You wont as you can’t.

The simple fact is ALL social landlord types will only get the funding to build from the only one source of funding in the private bond markets IF they build properties at the full market rent level and at the maximum density and at the smallest size as those funders will insist on this as a condition of getting the funding in the first place.

Money always talks and in the Tories HWP it screams from the highest mountain top!

Further, because the Tories Housing White Paper (HWP) forces all new (formerly) social landlords to only build private rented housing this means that all existing private landlords now have genuine competition and competition that they cannot match in terms of scale and resources.

Make no mistake Tory policy is a seminal game changer for every form of UK landlord and for all UK housing not just the social rented sector which eventually disappears as existing social housing is ONLY replaced by private rented housing.

The above consequences are inevitable ones yet these impacts have not been reported or discussed by any political party or even in the housing media (social or private) yet as I strongly argue they are inevitable.

Every actor within rented housing is hugely affected and every pre-existing housing development programme will now have to be fully reconsidered.

• The 98 English local authorities (see here) who already have local housing companies (LHC) in place to deliver new housing will have to reconsider their pre-existing proposals for development.  The LB of Haringey proposal which has been dubbed the £2 billion gamble apparently saw Labour councillors there say the affordable rent properties this includes would NOT be subject to the right to buy yet they are subject to it as the Tory HWP confirms.
• In Liverpool the LHC newly set up by the city council intended to develop only at the affordable (sic) rent model to avoid the Right to Buy yet they are subject to the RTB.  Liverpool City Council now ONLY have one option but to develop at full 100% market rent levels and not at the up to 80% that the affordable (sic) rent allows.
• Housing Associations will find that any pipeline developments which include social rent or affordable rent elements will see the private funders now insist they are replaced with 100% private rent levels.

Yet the real issue is what are the consequences of this for the UK economy as every year a higher percentage of all rented housing will be at the higher private or full market rent level.

Working tenants will need to earn more to afford such housing and so pressure will be put on wage costs.  As landlords will be taking a higher percentage of tenant wages in rent those tenants will be able to save less for a mortgage deposit and making the housing crisis worse and have reduced home ownership levels.

Non working tenants will not be able to afford to live in such properties because of the overall benefit cap and so far greater numbers will become homeless as social landlords refuse to accommodate them as detailed here.  Local authorities onto whom this huge additional homeless costs fall will have to develop more and more (private rented) products to try to mitigate their huge added costs.  A vicious circle develops and the bond markets get richer still.

Pretty quickly there will be less and less genuinely affordable rented housing options left and the UK housing market will soon resemble the American housing market as the state will no longer provide for you.  That is what government pulling out of funding housing and leaving funding to the bond market means.

Tory social housing policy in the HWP is unadulterated ideological madness.