Many councils are unlikely to bid for a share of Theresa May’s £2bn funding pot for social and affordable housing because it will not be worth their time and energy, LGC has been told.
While the prime minister said the funding pot, which “councils as well as housing associations” will be encouraged to bid for a share of, would provide a “new generation of council houses to help fix our broken housing market”, sector leaders have warned the money is far from what is needed.
According to Conservative Party estimates, £2bn could deliver up to 25,000 homes for social rent but that is based on an assumption that all of the money will be spent on providing social housing.
Even if they were delivered, an extra 5,000 homes per year is just 1.9% of the 266,000 homes the government has estimated needs to be built every year.
Graeme McDonald, director of Society of Local Authority Chief Executives & Senior Managers, told LGC: “It [the £2bn] is a drop in the ocean in terms of what is required. Because it is so insignificant in terms of the challenge it is not significant enough for local authorities to respond [to the bidding process] as aggressively as they might have done to a more significant announcement.
“Bidding for the potential to build a small part of perhaps 25,000 homes over five years is not enough for local authorities to significantly change the way they build housing.”
In her Conservative conference speech, Ms May said “parts of the country where the need is greatest” would be allowed to bid for a share of the £2bn but it is not yet know what defines an area of greatest need.
Mr McDonald suspected the margin between successful and unsuccessful bids “will be so small” that it could put potential bidders off as councils will want “certainty they will get some reward at the end of the process”.
However, Mr McDonald added: “An awful lot of time and energy is going to be wasted by local authorities bidding for this money who are not going to get it while some who have a considerable housing need probably won’t bid for it because this [funding] is just not considerable enough.”
He hoped councils would work with housing associations on bids rather than compete, especially as housing associations are far more experienced at bidding for funding for housing schemes.
Sir Steve Bullock (Lab), London Councils’ executive member for housing, said the capital accounted for the “overwhelming majority of homelessness in this country” and questioned if that would be recognised in how the money is shared out.
Regardless, £2bn will “not remotely” solve the housing crisis, he said.
“If this is the start of a wholly different approach to social housing and affordable housing at a range of rents then we can make progress,” Sir Steve told LGC. “But if [Ms May] thinks that £2bn is the answer [to the housing crisis] then it’s not going to be more than a drop in the ocean.”
The estimate that up to 25,000 homes for social rent could be delivered is based on an assumption that each property will be subsidised by £80,000.
Southwark LBC leader Peter John (Lab) told LGC £2bn would only fund 10,000 new council homes in his borough at current build costs if all spent there, adding: “The government is still not facing up to the economic disaster that is housing at this current time.”
“£80,000 is not enough. If you’re going to change economics you’re going to have give us the resources to build and the entire build costs. We can build on our land so we can absorb the land costs but we can’t build out of fresh air and councils do not have the resources to do this at scale like they did in the fifties, sixties and seventies.”
In its Budget submission, sent before yesterday’s announcement, the Chartered Institute of Housing (CIH) asked the government to allocate an extra £1.5bn each year to affordable housing. Doing so could help provide an additional 28,000 homes at social rents per annum, the CIH said.
The organisation has previously estimated a loss of about 250,000 socially rented homes between 2012 and 2020 through the right-to-buy – an average loss of about 31,000 homes a year, so building an extra 25,000 over five years will not keep pace with that trend.
Martin Tett (Con), the Local Government Association’s housing spokesman, said there is an “assumption” new homes for social rent will qualify for the right-to-buy.
CIH’s head of policy Melanie Rees said that is “worrying” and added: “It’s like trying to fill the bath with the plug out. You’re putting all of your effort into this knowing that you could stand to lose these properties.
“We need to see the detail but there is no diminishing of commitment to the right-to-buy and I can’t see that changing.”