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Investment in social housing to halve

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Investment in social housing will almost halve over four years, chancellor George Osborne has said.

Investment in social housing will almost halve over four years, chancellor George Osborne has said.

The sector received £8.4bn in the last spending round and this will fall to £4.5bn, but the chancellor said he will expected this would still deliver 150,000 new affordable homes over the next four years.

This will be partly paid for by a new form of tenure that will allow social landlords to charge new tenants, but not existing ones, rent pitched at roughly 80% of open market levels.

There will also be £2bn for the remainder of the decent homes programme and support for elderly or vulnerable people through the £6bn Supporting People programme. Homelessness grant funds will total £400m by 2015/15. 

The long-trailed abolition of the housing revenue account will go ahead, allowing councils to reinvest rental income locally rather than pay it into a national subsidy system.

Next month will see a consultation paper on the new home bonus, a scheme designed to give councils a financial incentive to allow development.

Communities and local government secretary Eric Pickles said: “We are making the money available and delivering the reform to build and upgrade thousands of affordable homes for people on lower incomes over the next four years.

The National Housing Federation, which represents housing associations, said the cut in the social housing budget would leave tenants to make up the shortfall through higher rents.

It said many new tenants would be forced to rely on housing benefit to cover this extra cost, creating a perverse incentive not to lose benefits by taking paid employment.

Chief executive David Orr said: “The fact that the housing budget is being cut by 60% is deeply depressing – and shows that providing affordable housing is no longer a government priority.

Sarah Webb, chief executive of the Chartered Institute of Housing said: “The cut to the new building programme will have a major impact on how we deliver enough homes that people can afford to live in.

“The government commitment to deliver 150,000 new affordable homes is very welcome, and some new flexibilities around rents and borrowing are positive steps, but we are in midst of a housing crisis with less than half the homes we need being built.”

Richard Parker, head of housing at PwC, said the challenge facing the government was “how best to work housing grants harder, so they can continue to maintain supply at a reasonable level, particularly when there will also be less cross subsidy from outright sales and planning gain”.

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