23 Jul 2015

Why are housing associations failing to build enough homes?

Economics Correspondent

Government plans to build more affordable homes are being frustrated by the poor performance of housing associations, official figures show.

Housing associations have delivered just 26,000 net new homes a year between 2000-2014 – half the amount required, writes Channel 4 News Business Correspondent Helia Ebrahimi. That is despite taking £62bn in funding, as well as taxpayer-funded rent drawn from housing benefit, according to a Channel 4 News investigation.

David Cameron’s government has argued that more needs to be done to address Britain’s housing crisis. But much of the new social housing reforms have been met with bitter criticism from the sector, stirring up controversy about how much taxpayer value is being delivered.

The official figures also reveal that on average housing associations spend 74p in the £1 on operating costs (see video below). This compares to some of the most efficient operators in the sector, who spend just 57p in the £1 on operating costs, and some of the worse examples, who spend more than 90p in the £1.

Housing associations come in all shapes and sizes, with many varied objectives, so it is difficult to compare like with like. But these differences in operating costs have a massive impact on how much money associations have left over to spend on building more homes.

In the UK, 5 million people are waiting on local authority waiting lists. For many politicians, including Conservative Bob Blackman MP, the problem is caused by a failure to build enough homes over the last decade and a half.

“The principle problem of housing in this country is the lack of supply,” said Mr Blackman. “Everyone says, oh, the government has to do more. Well, the housing association sector are the principal provider of affordable social housing. But they are just coasting.”

According to the regulator, management costs have increased in recent years because more staff have been taken on and wages increased. Also, the industry pays a final salary pension scheme, which is expensive to run – and now almost extinct within the private sector.

The housing association sector are the principal provider of affordable social housing. But they are just coasting. Bob Blackman MP

According to the Global Accounts (the regulator’s aggregated accounts for the sector), in the last year management costs have gone up 4pc per social housing unit to £990 (see video below). However, the most efficient operators in the sector, like L&Q, spent just £541 in the same year on management costs per house, much less than the national average.

One of the country’s oldest and best-known associations, Peabody, saw management costs swell to £1,229 per house. Peabody says that because 100pc of its housing stock is in London and they have a higher percentage of older properties, costs are skewed higher. The company also says it spends less per house on management than the average for the biggest 15 associations.

The political debate over the scope and responsibility of the sector is set to intensify in coming months.

The House of Lords voted in favour of a crossbench amendment to the charities bill which seeks to block the government’s right to buy policy. Although the amendment does not mention housing associations, it states that charities are not “compelled to use or dispose of their assets in a way which is inconsistent with their charitable purposes”.

This is the most successful public-private partnership in the history of our economy. David Orr, National Federation for Housing

As housing associations often have charitable status, it would block Tory plans to force them to sell their stock to tenants at a discount, which will be included in the housing bill and presented to parliament later this year.

David Orr, chief executive of the National Federation for Housing, said: “This is the most successful public-private partnership in the history of our economy. These are by miles the most effective social enterprises in the country. The fact that they don’t fit neatly into boxes that you can then stack on top of each other and they say that they all look the same, may make life a little more difficult.

“But if we did that, there would be a lesser outcome. You would have poorer organisations, doing less good work and having less of an impact both on the economy and on the social prosperity of our nation. So complexity, we just have to live with, and I’m sorry that that makes counting difficult.”