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Affordable homes scheme gets mixed review

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The government’s affordable homes programme has been branded a “success” by auditors for exceeding original targets at the same time as reducing public spending on housing.

But the National Audit Office has warned there remains a risk the scheme may not deliver the 80,000 promised houses because just over half of the schemes were still ‘indicative’ with contracts unsigned, sites unidentified or planning permissions still to be granted.

The scheme has also been criticised for transferring the financial burden on to tenants and the housing benefit budget, and government has been warned the additional debts taken on by providers may prevent a repeat of the programme.  

NAO head Amyas Morse said: “The affordable homes programme has made a good start, with providers committing themselves to building some 24,000 homes more than originally expected.

“There are key risks, however, including the fact that more than half of the homes are planned for the final year, with no room for slippage.”

The costs of the affordable homes programme, delivered by the Department for Communities & Local Government and the Homes & Communities Agency, to the taxpayer have been reduced from £60,000 per home to £20,000 under predecessor schemes.

This reduction was achieved partly through providers taking on extra debt risk, but despite this increased risk providers exceeded government expectations and put in bids to build 80,000 homes - considerably more than the 56,000 DCLG and HCA had expected.

The reduction in public sector spending was also achieved by increasing ‘affordable’ rents for tenants to around 80% of market rates, and this aspect of the programme was criticised by Margaret Hodge (Lab), chairwoman of the public accounts select committee.

“My concern is that the department is simply passing the costs of building new homes onto tenants who can ill afford to pay higher rents,” she said.

The NAO has calculated that the rent increases will mean the taxpayer will have to pay an extra £17,500 per house in housing benefit costs, an increase in the welfare bill of £1.4bn.

Ms Hodge described the knock on effect as “shocking”. She added: “The department has refused to be transparent about just how many tenants will be affected and by how much. My committee will want officials to regularly and transparently update their assessment of the costs and benefits of the programme so that we can hold them to account for the social and financial consequences of their decisions, particularly in light of changes to the welfare system.”

In other risks to the programme’s chance of delivering all the promised homes, the NAO noted, as of April 2012, almost a fifth of contracts - 26 in total - had not been signed. Of these, 23 were with local authorities “who had been delaying signing contracts pending confirmation of final borrowing capacity arising from the changes to the Housing Revenue Account”.

The report also noted there were fears in London, where agreements had been made on the basis of ‘affordable’ rents being 65% below market rent, that homes would not be delivered because providers would not be able to charge rents at the levels originally planned.

The increased financial pressure placed on providers, through the taking on of additional debts, meant DCLG would need to carry out a “thorough analysis” as to whether a repeat of the programme would be possible after the first round finished in 2015.

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