‘To tackle the housing crisis, the Treasury must rethink how it values social housing investment’

The task of starting to fundamentally get to grips with the crisis in escalating housing needs begins and ends with changing the way HM Treasury appraises investment in building social rented homes.

Currently, Treasury Green Book appraisals of capital investment for public infrastructure projects does not fully take account of the benefits and returns that specifically derive from capital expenditure on social housing.

To back this up I point to three particular areas.

Firstly, funding to build social rented homes produces a safe, direct and predictably enduring revenue stream through rental income. This is unlike most other forms of public investment.

READ MORE: ‘Labour is being badly misled on housing’

Secondly, investing in genuinely affordable homes generates better life outcomes for residents and that means better physical and mental health resulting in fewer demands on health and care services. Producing the right mix of homes includes supported housing for older and other vulnerable people which promotes and extends independent living. Not only does this contribute to cutting social care costs but it also increases wellbeing and reduces levels of isolation and loneliness.

Thirdly, such a move would curb the nation’s welfare benefit bill in a positive way that produces wins all round (except perhaps for some private landlords). Social rent levels for new build homes are substantially lower than private market levels. In my Dagenham and Rainham constituency the figure is something under 50% of what you pay for a similar size private rented property. That means much lower Housing Benefit bills nationally. Currently, the combined cost to central and local government of Housing Benefit and other top up subsidies paid by councils is running at almost £35 billion a year.

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Let’s remember that a great part of that taxpayer subsidy is going straight into the pockets of private sector landlords, in some instances for poor quality homes that do nothing to promote good health outcomes.

If you needed to see where and how we have gone so wrong just consider that in the post war decades leading up to the mid 1970s about 90% of all public spending on housing was devoted to bricks and mortar subsidy, that is building new social rented council housing. Just 10% went on equivalents at that time of Housing Benefit and the former mortgage tax relief system. Fast forward to the early 2020s and the position has totally reversed. Only about 10% of all public expenditure on housing is to subsidise new build affordable homes, the vast bulk goes on Housing Benefit. This is short term thinking and flies in the face of our mission to bring down spending and promote economic growth.

It is fair to say that the Labour Government has made a start on redressing the balance. The Comprehensive Spending Review released £39 billion over the next 10 years for the affordable housing programme. That doubles the previous commitment and is really welcome. The recent announcement that the Public Works Loan Board will continue to discount the interest charge to councils for building homes, is another good move in the right direction.

For all the reasons I set out above, I want to see that this spending on ‘affordable housing’ is focused on building social rented homes – homes that are truly affordable for households – not unaffordable ‘affordable’ properties with rents up to 80% of local private rented levels.

If we really want to get a sea change in social housing delivery, the way HM Treasury views investment in housing must shift. The term ‘invest to save’ comes to mind.

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