CSR: Social housing cuts will lead to carnage
Speaking to the House of Commons this afternoon, Chancellor of the Exchequer, George Osborne confirmed that social housing is “currently failing to address the needs of our population”.
Osborne announced that while existing social tenants will not suffer changed terms, new social tenants will be charged up to 80% of market rate rents to live in social housing. Osborne says this will help to pay for new affordable housing.
He said: “Taken together with continuing, but more modest, capital investment in social housing, this will allow the Government to deliver up to 150,000 new affordable homes over the Spending Review period.”
But pundits have hit out at the plan with concerns that the private rented sector will not cope without mortgage market support to fund investment.
Alan Cleary, managing director of buy-to-let lender Precise Mortgages, says if the government fails to provide some safety-net for the private rental sector “we could be heading for a housing disaster”.
“Now that the government has effectively handed social housing to the private sector, we’re destined for carnage if lending continues at the current rate,” he said.
“The private rental sector needs to be thriving if it’s expected to cope with the massive rise in demand,” he added. “At the moment, lending in the buy-to-let market is down 80% on its peak and there’s little sign of it clawing back any lost ground.
“Only a handful of lenders are interested in servicing it and that’s nowhere near enough to meet the oncoming tsunami of demand. The government should have considered this when it planned its cuts to social housing.
“It must provide incentives for lenders to lend and for professional landlords – who are in the market for the long term – to invest further in the sector.”
Nigel Terrington, chief executive of The Paragon Group of Companies, says the government “has to be careful not to shift the role of housing people on low incomes onto the private rented sector without ensuring it has appropriate levels of support at both an economic and regulatory level”.
He added: “Failure to do so could be dangerous because it could lead to a shortage of rental property at a time of unprecedented levels of tenant demand.”
David Salusbury, chairman of the National Landlords Association, said: “As cuts in public spending and changes in tenure make social housing less accessible, pressure on the private rented sector will further increase.
“Without measures to encourage private landlords to invest in their rental portfolios it is hard to see how the private rented sector will be able to expand to meet increasing demand.”
And David Whittaker, managing director of buy-to-let broker Mortgages For Business, said: “The government has to take responsibility, it’s about to flood the rental market having cut social housing so it needs to encourage lenders and landlords to increase activity.
“With lending now as low as in 2000 and house prices around double the value, it doesn’t take a Nobel mathematician to work out that we can’t continue like this.”