The Madness of Social Housing in the United Kingdom

Welcome to Show Don’t Tell.
In today’s episode we’re going to talk Social Housing, and inspect the leaky roof of the
welfare state. With over a million names on waiting lists,
ever increasing housing benefit costs due to incredible political games around building new social houses it’s about time we explored the facts and figures to see what
is really going on in social housing and why it’s in the state that it is. This is Show Don’t Tell, so let’s get into it. Social Houses are homes owned by Local Authorities
or Housing Associations, where the rent is set by Central Government far below market
price. So to set the scene, in England the total
number of all types of homes is 24 million. Of the 24 million total homes in existence,
4.1m of them are social homes. So, 17% of all homes in England are social homes.
Let’s put this number into context by comparing it to the number of people most in need of
social housing, which I’ll broadly define as people receiving housing benefit, and in England
that is 3.5 million people. Housing benefit is available if you are unemployed
or on a low income with dependants. Not every person receiving housing benefit needs a social
house, but as a benchmark, there are 100s of thousands more social homes than housing
benefit claimants. But what proportion of housing benefit claimants
actually live in social housing, and perhaps more importantly, how many social homes are
occupied by people who don’t receive benefits, but get to pay a considerable discount to
market rent when they could free up a social home and rent on the private market?
The answer to the first question is that just 2.5 million housing benefit claimants live in social
housing. That’s 2.5m in the 4.1m social homes. Which, means 1.7m social homes, are
occupied by people who don’t need benefits at all. And this is while we have a waiting
list of 1.2m people looking to move into a social home. All of which leaves us with remaining 1.1m
housing benefit claimants. Because they don’t have, or more likely are on the waiting list
for social homes, they are forced to use their benefits to pay rent to private landlords, who
last year received £7bn of housing benefit in England alone.
Demand for social housing is closely linked to the state of the economy, which has been
relatively strong. As a result, fewer people claim housing benefit, waiting lists are reducing,
and the housing benefit spent on private accommodation is also declining. As a result, let’s focus our efforts on
understanding the numbers which continue to get worse.
1. That percentage of social homes occupied by benefit claimants, which has been in a
state of constant decline. In 1997, 35% of social homes were occupied
by people not receiving benefits. By 2007 that that was 37% and the most recent data
shows that number now 41%. So let’s see what we can understand about
these tenants who occupy social homes but don’t claim benefits. Statistics show, 28% of people in social housing
are working age and not claiming benefits presumably because they are in employment and their earnings are too high for them to receive benefits. As the table shows there are some extremely high
earners in this group, around 3,000 households benefit from social homes while earning more than
£100,000 a year, and it’s perfectly legal to own a second home while renting a social
house. We can also look at data on housing savings,
in this table, we can around 20% of people who live in social housing have over £16,000
in savings, which is the magic number for losing your entitlement to housing benefit entitlement, and 5% of tenants have over £50,000 in
their bank accounts. The simple answer is that 41% of social housing
tenants are basically middle class, who rather than rent on the private market like the majority
of their peers, prefer to retain the price benefits of social housing. The reason for this situation lies in the
fact that social housing is rented on a lifetime tenancy basis, despite this being ended in the private sector 30 years ago. Once you’re in the social housing
system, you’re in life, or even beyond as older tenancies can be inherited. The fact
that so many social tenants no longer claim benefits is an interesting statement
of social mobility, but I digress. And do not by any means underestimate the
political power of this group. At 1.7m households, this is about 4.2 million people, a vocal
and well-financed political force whose very homes are at stake. They have fought off announcements to charge them market rents, called “Pay to Stay” and even efforts to limit lifetime tenancies. And when debating social housing, their sheer
numbers mean you’ll inevitably encounter them too. But we should all recognise it takes
something special to see whole families living in one room at a hostel or temporary accommodation
for months on end and feel nothing, well other than the dirt on your hands from climbing
up the ladder, pulling it up behind you and closing the door on all the people below.
The impact of people not vacating social homes falls on the 1.2m people on waiting lists.
Because to come off a waiting list, either an existing house becomes vacant, or a new
social house is constructed. In 2017, 313,000 social houses were let, that’s
7% of the social housing stock and implies people spend an average of 14 years in each
social house. The recent history of reletting rates is similarly depressing, 80,000 fewer
social homes were relet last year compared to 2014, a reduction which completely negates
the effect of adding 40,000 new social homes a year. Reletting numbers also have huge regional
variations. If you live in Northern England, the turnover rate of a social house is typically
less than 10 years. But in the South and particularly in London, turnover is atrociously low at
less than 4% a year. This implies some truely extraordinary tenure lengths in London. In several London boroughs, a council house will change hands less than twice in a century. Which brings us to just fraud. If you are renting your social house, especially
in London, you’re paying a rent over a £1,000 per month cheaper than the equivalent market
rent. Which means, let’s say you want move out,
do you simply give up that council house, or do you let it out at market rent?
I mention this because it’s a huge problem in London, the Audit Commision
has estimated that’s 5%, that is 1 in 20 social houses in London are being illegally
sublet at market rents, with those tenants pocketing the difference, which may also have
something to do with the incredibly length tenures that we see in London social housing. So what is the force that is driving all of these effects?
Social housing is not an island, completely separate from the private housing market.
Many of the issues in social housing are driven by the housing crisis and the general lack of affordability.
If people cannot afford anything even close to the standard what they can access through
social housing, combined with lifetime tenancies there is very, very little incentive for people
for to leave attractive social accommodation. So all of these various facets if the social housing crisis
are inevitable consequence of the UK’s overall lack of housing affordability.
Now let’s talk about the second trend that continues to worsen, the percentage of housing
in the UK that is social housing. If we look at a graph of social housing over
time, it’s a depressing story, any growth is lacklustre, and the percentage is constantly
decreasing. We need to understand a bit more about what’s
changed since 2010 in social housing as a result of the 2011 Localism Act. This I
will disclaim, is specific to England, devolved regions have their own programmes. The first thing was to “reinvigorated”
Right to Buy, which gives people who have lived in a social home for a number of years
have the right to purchase that home at a discount to the market value, and currently
around 10,000 people exercise this right every year.
It was a huge policy in the 1980s, and in total nearly 2 million houses have been sold
through Right to Buy. But after making the first section of this video, I’m embarrassed
to admit a grudging sympathy, because it seems to me the people who perform right to buy
are in employment to acquire a mortgage and like their house so much that they want to
buy it. I would guess those people were never going
to give up their sizable discount to market rent, and saying “Why don’t we let you
buy it for 70% of market value”, may actually benefit both sides.
That said, it seems the Government doesn’t use the money to build enough replacement
social houses, and they can be criticised on that basis. The second thing and more significant changes,
particularly in relation to housing benefit was in how the construction of new social
houses was financed. Here’s how a financing new build social
housing works if you are a housing association, who construct 90% of new social houses. As a housing association you borrow money from the bank on the private market, which means explaining to the bank how much income
you expect to earn from your new social house, and they will lend you some multiple of that
amount. The challenge is that social housing had “social
rent”, usually just 50-60% of market value, reducing the income that can be borrowed against, and leaving too little to build a new social home. To bridge this gap, the Government has to
provides a capital grant to make up the difference and allow new social homes to be constructed.
So what changed? Well in 2010 the Government wanted to reduce
spending, so it quite simply slashed the available capital grant from £11.4bn to just £5.3bn.
But, this would obviously have a very negative effect on social housing construction, so
perhaps there was an old trick to get around the problem? How about rather than charging that lowly
“social rent” of 50-60% of market value, we create a new tenancy called “Affordable
Rent”, which was rent or a price that is up to 80% of market value. This higher rent
increases the amount of private debt you can raise, and reduce the amount of capital grant
required. And to really send the message, of that £5.3bn
grant now available, not a single penny would be permitted for social rent properties. It
would only be allowed to be used to build Affordable Rent houses. So what were the consequence of this policy?
Naturally, construction changed to affordable rent properties. But the real cost of this
new policy, the real means by which construction was being financed, is apparent when looking
at the rental price, and by association housing benefit cost for social houses. You see, Affordable
Rents, which is the majority of new social housing has by definition much higher
rents the pre-existing social rent. So if you are concerned about the increasing
housing benefit cost it’s not just because of private renting, it’s also that the cost
of new social housing is fundamentally higher than existing social housing.
The old trick you see, is a little thing called PFI. Rather than make capital outlays. agree
to pay higher rental costs. It allows you to build the infrastructure without the upfront
costs, and by the time the higher ongoing costs become prohibitive you’ll be long
gone. By 2015, the Government seemed a tad put out
by, you know, the inevitable consequence of its own creation. So without missing a beat
in 2015 the Chancellor announced: [Osborne clip]
Aside from completely glossing over the fact of why the increase had occurred, with all
rents decrease in value, so life gets tougher for social landlords, unless, they increase
conversions to Affordable Housing to get access to a step change of higher rent levels, which
now represent 20,000 new lets each year. Combine this with the incoming supply of high
rent Affordable homes it’s not a surprise that as a result of their increasing proportion,
despite the Chancellor announcing in 2015 that social housing rents would fall by 1%
each year, the actual cost simply continues to increase often in line with inflation. And it also meant,
[Section 106 clip] Ah, Section 106. As I spoke about this nefarious
legislation at some length in my previous video the Madness of Housing in the UK, I won’t explain
the whole background. Suffice to say, one of the consequences of the reduced capital
grant was local authorities massively increased their demands on private developers to build
social homes as part of Section 106 agreements. If you look at this graph you can see just
how substantial the changes were. Prior to 2013 housing developers supplied
between 2 and 4 percent of new homes under Section 106, that equated to about a quarter
of all new social housing. Today that number is closer to 8%, nearly half of all new social
home construction, entirely contributed by the people buying newbuild private housing.
Councils now demanding such an obligation on housebuilders is one of main reasons why
I believe small housebuilders have exited the market, large housebuilders are cleaning
up and why we have such a low level of new housing construction. Given the substantial level of social housing
in the UK, it make more sense to try and fix what we already have either directly through
social housing reform or building more houses in general rather than the more aristocratic
approach of paying ever more money that never really resolves the problem. And what money
we do spend, could at least be spent directly, rather than through housing benefit, as these
effects of the Affordable Homes Programmes are going weigh on the budget for a very,
very long time. And that brings us to the end of today’s
long and rather technical episode, congratulations for making it all the way this far. Hopefully you’ve enjoyed this episode,
feel free to like, subscribe or just watch some of my other videos, and I’ll see you
next time.

24 thoughts on “The Madness of Social Housing in the United Kingdom

  1. People who get into social housing have a provable need. If you force them to move out because their situation improves then they will make sure their situation doesn't improve.

    Also you appear to criticise people who have built savings etc. for a rainy day.

    It is also worth pointing out that not being able to claim benefits isn't the same as being able to afford local rent near to where you have built your life to earn enough to get off benefits.

  2. It's also worth pointing out that housing associations are not allowed to make a profit, this despite renting out houses for 60% of their original purchase cost per year. Most social housing stock is old not new (which is fine because quite a lot is reasonably well built). Instead they seem to piss money up the wall on executive pay.

    Also new affordable housing doesn't cost what new housing costs because:

    1. Fixtures and fittings are not as expensive.
    2. Social housing is built on cursed land, that is, as a planning requirement to build social housing there particularly as a condition of building private housing.

    The overall answer is of course to build more houses.

  3. So politicians are scared of the public and take the easy route out and fiddle with the figures. And as always, whenever the government meddles with a market they always make it worse, they never make it better.

  4. Taxpayer Assistance with Housing Costs is a complete mess. Take for example a new development by a major builder with two identical properties, one purchased by a social housing organisation for 'Affordable' letting and one purchased by a private landlord for renting at the market rent. Lets say that the properties are around the 50% decile, that is half the properties in the area rent out for more and half for less and the market rent is £1,000 per month. The Housing Association is able to buy the property at a discounted price, due to S106 and receives a capital grant from the Government on top. Due to this it charges £800 rent per month and the tenant can claim £800 Housing Benefit. The Private Landlord's purchase price will in fact be slightly inflated due to having to contribute to the developers S106 obligations. They charge the tenant the full £1,000 per month market rent but will not be able to obtain tax relief on the mortgage interest they pay, unlike the Housing Association. Whilst the tenant pays the full £1,000 rent, their Housing Benefit, as a Private Tenant, is capped at the 30% decile so may be only £850. This means that the tenant, despite being entitled to full Housing Benefit, has to find £150 per month from their own resources to rent an identical property simply because they were lower down the waiting list. This is clearly unfair.

    The Government needs to claw back all previous Capital Grants and convert them into interest bearing loans. S106 should be repealed and potentially reversed. All notion of reduced rents for 'Social' and 'Affordable' housing should be scrapped and the full market rent charged at all times (with the possible exception of special needs housing). There should be a single fair system of Housing Benefit, incorporating the Universal Credit maxim that a person who works and claims benefit should be better off than one who just claims benefit. Paying Housing Benefit on full market rents compared to previous 'Social' and 'Affordable' rents will of course cost the Government more, however they will get the benefit of the interest on the reversal of the previous capital grants to offset against this.

    One advantage of doing things this way is that the entire process is a lot more transparent. Both 'Social' and 'Private' landlords are treated the same as providers of rented property. There are no hidden subsidies and market rents charged across the board, so all tenants pay the fair rent. The Housing Benefit system reflects the full cost of TAwHC and ensures that such support is provided to those that currently need it.

    @Show Don't Tell @Benedict White

  5. If Council house/Social house rent was set at one third of gross household income (like people in the private market pay) those on high incomes would pay their fair share or move. Those on the lowest incomes would have their rents reduced. Homes for the needy not for the greedy!

  6. A good video, but I find it a bit blamey on the current tenants. Social housing was not originally designed to be a safety net. It was seen as a way to build a better society. It's only with the gutting from Conservative and sadly neglect from other parties that it was re-invented as part of a safety net system. The blame entirely lies on the government for not building more and not for people choosing to stay in it, which you do say later in the video.

    It's tough times at the moment when stock is limited and waiting lists are crazy long but if you start pressuring people to move if or when their circumstances improve then it's setting bad precedent and will further the stigma that social housing is for poor people, and potentially uproot them from their current life. On both sides it's unfair and the solution is just mass social housing building.

    Again though, good video, and I'll be sharing this with my group. What future videos have you got lined up?

  7. An interesting an well-researched video. One positive thing the government has done that you don't mention are measures to discourage buy-to-letters profiteering from people who can't afford their own homes.
    The housing benefit system really needs to become a graduated means-tested benefit. If all housing was private and benefits were paid to those most in need, there wouldn't be a pressure to move higher earners out of social housing, or an incentive for anyone to stay on housing benefit.
    To combat greedy developers, the government should favour non-profit housing associations to help keep rents affordable. Non-profits should have first pick of development land in locations where key workers are most in demand.

  8. I would recommend drawing a line is what actually qualifies someone for social housing. I mean the problem with social housing is that as a location, you shouldn't have to force people out of homes because they earn too much or are earning a lot and saving to afford a private house.

    I'd recommend having the occupied housing lose its discounted rate depending (more liberally for me, personally) with savings and income situation taken into account. With the house then regaining its usual rate when there's a new tenant. I would approach it case by case honestly, no-one should have to be punished for actually making a reasonable living.

    What about giving the tenant a temporary discount on moving to private housing?

  9. The population is growing very fast, the waiting lists are growing very fast, for example Barking Dagenham is turning in to a toilet, and now the average working person needs to wait 25 years for a single bedroom flat it's turning in to a nightmare, and it doesn't help when we have people who abuse the system and the vulnerable get Pushed to one side the social housing was designed for poor people not middle class it's a state the system is in now

  10. This is good information but goodness you really turn it into a maths quiz in parts of it! I'm overwhelmed by all the numbers; it would be easier to understand if you had interviews or clips of people who represent those math problems rather than just spew numbers at us.

  11. Summarises living quality in the UK: We sell houses price based on how many bedrooms they have not by square foot. people actually buy such a space for money and suddenly it becomes acceptable to live in small houses that are overlooked and you can hear your neighbours. If everyone just out rite refused to live like this then houses would be built better and bigger. unfortunately British people and immigrants who flock here accept living like this and that fuels the property market selling boxes for millions. I would take an american house made out of wood that turns up on a lorry as flat pack but at least is big enough to live a real quality life in. as long as it wasn't overlooking or being overlooked by other people. American houses are just so much nicer even though they are made fast and cheap at least the quality of living is good inside it and it was cheap all along. English houses and living standards are actually disgraceful when you think about it. 95% of the population live on top of each other and can see into neighbours houses and hear their neighbours when sat inside! Everyone has a meaning of what makes a house a home. well mine is: A house cant be a home if the neighbours can see you or hear you when you are at home. this includes the garden and driveway area! Is it just me? we dont just have a housing crisis in the UK, our actual houses are the crisis!

  12. My social worker complained about being made to wait years on the list for her council house!
    Its only just occurred to me now how bizarre this is.
    She has a secure Norwich city council job, can afford to rent privately, buy or use buy to let schemes. With her partner also earning, I cannot understand NORWICH city council justifying this family with grown up children, taking a low rent social house away from a homeless family.


  13. If Dobby had a council house he would be better off than master who worked very hard for his insanely overpriced house. All made possible by overpopulation caused by greed. They don't want millions of new people for fun or niceness.

  14. Until the end of time, we will be have awful politicians, senior civil servants and think-tanks running the country.

  15. If you work you cannot get a council house /flat for love nor money where I live !!! You are talking out of your ass !!!!!!

  16. Wouldn't the answer be for the Government to directly build more social homes, scrapping the grants, vastly reducing the housing benefit bill and reducing borrowing costs for councils and housing associations?

  17. Maybe those social housing tenants with a few thousand pounds saved up are hoping to buy a house?

  18. This could also be a result of increased homelessness in the UK. The Housing Act 1996 does not include any provision to bar people from homeless assistance because of income. A lot of working families who have been served with a valid Section 21 Notice end up getting an allocation from the housing register even though they could afford to rent privately, or even buy a house. I think due to instability in economy and jobs people are avoiding taking on buy a house or renting privately if they can. No matter, as with the government's proposal to have Local Hosuing Companies (local authorities owning a private housing management company) soon most tenants will rent from the Local Housing Company of their Council at 85% more of the price. Happy days all round!

  19. Full time working families should be entitled to council, good quality homes, cos they pay for that through tax. But system here protect business and council housing is provide partially to keep control over society. people in need like those who are disabled, single mothers, pensioners ..etc. But this country is completely fu…ed

  20. I pay 1500usd Dollars a month for a studio apartment in Queens. I sure wish I could move to the UK and only pay a percentage of my income.

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