In the beginning there was George...

Harsh cuts make a devilish deal for housing

George Osborne’s delivery of the 2010 Comprehensive Spending Review (CSR) may not have been the most charismatic piece of Parliamentary showmanship, writes Mark Cantrell, but it was nevertheless a practised exercise in the dark arts of politics – with some cruel implications for social housing

First published in Northern Housing 

THE Chancellor of the Exchequer George Osborne (pictured) makes for an unlikely Mephistopheles, but nonetheless the dark arts of his trade have worked a Faustian deal for the housing sector, not to mention wider society, with terrifying implications for the future.

The bitter irony – one among many – is that the sector never sought this pact with the devil’s envoy in the first place. Nevertheless, it remains bound by the deal. It doesn’t have much choice, after all, but to work with the Government, whoever is in government, and play the cards it is dealt, even when they come from a marked deck. And what a hand it was too.

As we know, housing took one of the hardest hits in the Comprehensive Spending Review (CSR). The Department of Communities & Local Government (CLG) saw its overall budget cut by 51 per cent while its capital expenditure was hacked to the bone, losing 74 per cent over the next four years.

This is a massive hit on affordable housing capability, but the sector has taken a second, even a third, whammy if we factor in the 7.1 per cent a year budget cuts for local authorities, along with the additional £7 billion clawed back from welfare benefits, bringing the total benefit cuts since the Budget to £18 billion. Such was the yield of cuts that the Chancellor has now surely earned himself the nickname ‘Guillotine George’.

“It is a huge blow to see that housing, one of the most basic needs for every single person in the country, is facing some of the biggest cuts,” said Campbell Robb, chief executive of Shelter. “A succession of governments has failed to address our housing crisis and [the CSR] suggests the Coalition has firmly joined them in denying responsibility for an entire generation’s ability to access decent, secure, affordable housing.”

The housing sector is still reeling from the impact; much like the country as a whole. This was nothing less than economic ‘shock and awe’ and it would be incredible indeed if the Chancellor’s measures did not bring about some serious ‘collateral damage’. There is little clear indication of actual consequences as yet; only dark forebodings of a country on the verge of tearing its already frayed social fabric apart. But it is perhaps telling that councils in London have been busily booking up B&B accommodation the length and breadth of the South.

David Orr, the chief executive of the National Housing Federation (NHF) said: “The fact that the housing budget is being cut by 60 per cent is deeply depressing – and shows that providing affordable housing is no longer a government priority. Cuts on this scale will come as a devastating blow to millions of low income families currently stuck on housing waiting lists. The Chancellor said that those with the broadest shoulders should carry the biggest burden of the cuts. By dramatically slashing the housing budget, Mr Osborne has spectacularly failed his own test of fairness.”

Brendan Barber, general secretary of the Trades Union Congress (TUC) said: “The poorest have become the victims of a political jape.”

If so, nobody is laughing, except a few die-hard Tories who cheered as some of the most savage cuts to welfare spending in a generation were announced to the House of Commons. Certainly, Osborne’s axe – or guillotine if you will – took many lambs to the slaughter and his speech liberally seasoned his many cuts with a decidedly Orwellian flavour.

The narrative for this massive socio-economic restructuring has been carefully crafted for some time and featured prominently in the spending review speech: a story of high drama with a real crisis to give it extra oomph.

As a nation – as a people – we have our backs to the wall. There are tough times ahead, but we are in this together, we shall all contribute fairly – those with the “broadest shoulders” bearing the greater burden – and we shall, of course, overcome and make our way to a better brighter future.

The Chancellor promised as much; the Promised Land of a new tomorrow will make the hardships and the pain worth our while. So, it’s not exactly Churchill at “our finest hour” but it is an invocation of a paler theme.

So much, then, for showmanship and what passes for oratory in this age of typescripts and autocues; as the CSR progressed, it was clear that in Osborne’s perception some of the broadest shoulders are found amongst the poorest. But at least the bankers got their comeuppance – to the tune of a £2.5 billion permanent levy. Small change, it must be said, compared to the total clawed back from the budgets that help some of the poorest and most vulnerable people in society – the very people the Chancellor vowed to protect.

“Right across government the Chancellor has announced eye-watering cuts that will have a desperate impact on communities, business, and hard-pressed families. But he has not had the guts to spell out the detail, and instead tried to talk up a few crumbs of good news,” Barber added. “But the biggest tragedy of all this is that the spending review is likely to fail on its own terms. There will be plenty of pain, but little to gain.”

Baroness Margaret Eaton, Chair of the Local Government Association (LGA), said: “This spending review hits councils and the residents they serve very hard and will inevitably lead to cuts at the frontline. These are some of the biggest cuts in the public sector and we have to be honest about their impact. Town halls will now face extremely tough choices about what services they can keep on running. These cuts will cause real pain and anxiety for millions of people.”

Let them eat toast

Among the crumbs of good news, the Chancellor promised funds to guarantee the delivery of 150,000 new affordable homes over the next four years. That’s 37,500 a year but it didn’t stop the Government from talking it up with all the bold aplomb of Gordon Brown’s three million new homes by 2020.

“I believe that we have secured a package that will help deliver the homes this country needs over the Spending Review period,” said Housing Minister Grant Shapps in a letter conveying the settlement for housing. “Despite the fiscal constraints, the Government is still investing nearly £6.5 billion of taxpayers’ money in housing, with £4.5 billion to fund new affordable homes.”

The Minister’s standing among housing professionals may be left somewhat ‘toasted’ by his Chancellor’s choice of cuts, be that as it may, he is left talking up a settlement that the sector knows is little more than a starvation diet.

“The proposed figure of up to 150,000 affordable homes over four years represent less than a third of what this country urgently requires to bring the housing system from its knees, notwithstanding the half a million ‘lost’ homes referenced by the Chancellor himself,” Shelter’s Campbell Robb added.

“The combined worry of cuts to housing benefit and the slashing of the affordable house building subsidy, coupled with the absence of a long term strategy, will be devastating for the housing aspirations of thousands of young people consigned to increasing costs and bringing up their families in an insecure private rented sector.

“Despite the range of housing policies announced we have heard nothing on some of the most fundamental issues, such as tackling this country’s exorbitant house prices or improving our ever growing private rented sector. The Government must urgently set out its long-term vision to solve our entire housing crisis or accept responsibility for the impact these policies will have on entire generations for years to come.”

The numbers of new homes promised are somewhat curious, it must be said. Think back to the NHF’s annual conference and exhibition in Birmingham and recall what the organisation’s chair Matthew Taylor told delegates: “Let’s not forget that last year only 113,000 new homes were built across England – the lowest figure since 1923,” he said. “When the Minister [Grant Shapps] says he will be judged by providing more homes not fewer he sets himself a pretty low benchmark as his starting point.”

When combined with some of the devilish detail in the spending review, such as the decision that 100 per cent of all future Right to Buy receipts shall be surrendered to the Exchequer, these curious figures are difficult to interpret as anything other than a calculated insult to the housing sector’s concerns.

Priced out and stay out

There’s no secret given away to say that the Government wants to embark on a massive and historic transformation – politically, economically and socially – of British society. That’s precisely what the ‘localism’ and ‘Big Society’ rhetoric has been about.

Social engineering of this depth is normally regarded as the Left’s forte, but for once the Conservatives, assisted by their LibDem Lieutenants, have picked up the gauntlet (or should that be cudgel) to beat the drum of change. The Chancellor’s package is a part of this; not just a ‘business plan’ to tackle the budget deficit, but an architectural blueprint intended to create this Brave New Britain. So the CSR is not just for the next four years – it is intended to set the tone for generations to come.

The fear is it will do exactly that – and not in a positive way – while at the same time proving every bit the [alleged] failure that tends to be the hallmark of the Left’s tinkering exercises. Taken together with the drop in the delivery of new affordable homes, Osborne’s cuts and reform package has raised the very real prospect of tenants becoming not just squeezed out because of an under-supply of homes but actively ‘priced out’ of social housing too – and where then will they go? The possible answers to that question are already haunting housing professionals.

“Traditionally people who need a home could turn to private landlords or housing associations like ours as a safety net, but this isn’t going to be the case,” said Debbie Griffiths, chief executive of South Staffordshire Housing Association (SSHA). “We will not be able to meet demand and we are already seeing a dip in the availability of private rented properties as landlords face tough times and cash in their assets. So where will these people go – on the streets?”

Given that a disproportionate number of social housing tenants rely on benefits to make ends meet, the massive cuts, combined with the proposal to end lifelong tenancies for new tenants, the Government has crafted for them – and their landlords – a difficult situation to say the least. It’s a gritty problem, especially for local authorities and registered social landlords in the capital, but the implications of the cuts and reforms have implications further afield than London.

“London Councils has already warned that up to 82,000 households could become homeless in the capital as a result of the Government’s cuts to housing benefit next year,” said Sir Steve Bullock, the Mayor of Lewisham, and London Councils’ executive member for housing. “It looks like London will now see a 52 per cent reduction in the number of new social homes that are built, with an estimated 4,990 new homes completed in the capital each year compared to a previous estimate of 10,356.

“This reduction will only deepen this crisis, leading to more people becoming homeless or having to leave their job and, quite possibly, the capital. Cutting social housing funding without any alternative significant new supply either from private landlords or funded through institutional private investments is reckless and irresponsible. The Government has now put in place the ingredients for a swiftly escalating housing crisis across the capital – one that will touch the majority of Londoners and place council budgets under severe pressure.”

There is a widespread fear that the imposition of such stringent benefit cuts will lead to increased rent arrears, evictions and homelessness. Furthermore, the prospect of ‘social cleansing’ – bitterly denied by the Government – will lead to those on low incomes being driven out of affluent areas, leading to “ghettoes” of poverty and social exclusion.

While tenancies and rent levels will remain the same for existing social housing tenants, new tenants will face restrictions on their security of tenure. They will also be offered so-called intermediate rents “around 80 per cent of the market level”. The money raised from these higher rents is supposed to contribute to the funds needed to deliver even more homes, and also open the door to the potential for extra funding from institutional investors. But, it’s fair to say, it’s a long-shot and has in itself profound social implications.

“The cuts announced in the CSR will have a devastating impact on council tenants,” said a spokesperson for Defend Council Housing (DCH). “Combined with cuts to Housing Benefit and the attack on secure tenancies, they break the Prime Minister’s pre-election promise. They are not ‘fair’: this is an assault on tenants’ rights that will drive up arrears, evictions, poverty and homelessness.”

Tom Murtha, chief executive of Midland Heart said: “The spending review was supposed to aid the poorest and most vulnerable members of our society, but the reduction of social housing expenditure by 51 per cent coupled with changes in welfare benefits, is going to push those in need into greater poverty.

“Demand for affordable housing already outstrips supply and the new changes will see poorer people no longer able to find suitable affordable housing. Those new tenants who will be looking at 80 per cent intermediate market rent rates could be pushed into long-term poverty and will never be able to step onto the property ladder. The reality will be a greater risk of people being forced into poor quality over-crowded homes or made homeless.”

Also facing up to the reality of this new world at the local level is Mike Creamer, chief executive of Contour Housing Group, who said: “Limiting the security of tenure through intermediate tenancies will not improve the supply of affordable rented homes for those on the lowest incomes in the short term. Far worse, in the long term, insecure tenure will drive out the economically active from neighbourhoods, leaving residual communities on permanent benefit – a return to the early 1980s.

"The prospect of more new homes at near market rents should also not be misunderstood. Something is needed for the millions of younger people who can’t afford to buy, but who are not poor enough to qualify for traditional social rented homes. However, Government will not want housing benefit to be paid on these higher rents. It is unlikely therefore that these ‘150,000 new homes’ will be made available to those in greatest need.”

Nor may they end up going to those in low wage employment, if the Government does indeed prove loath to subsidise people with Housing Benefit. A further sore point as regards the feared ‘London clearance’ is that many of those at risk from the changes are working, but on a low wage. The NHF points out that the average price of a social home is £85 a week, but if raised to 80 per cent of the market rent, that figure could rise to £250 a week. So if low-wage earners renting privately in London cannot afford their rents without subsidy, will an 80 per cent rate become any more affordable in real terms? It certainly doesn’t bode well for the brave new world Osborne ushered in with his rhetorical invocations of ‘reform, fairness and growth’.

“Halving the social housing budget will cause a major crisis in housing, and simply putting up rents and removing security of tenure won’t be enough to prevent it,” said Charles Seaford, head of the Centre for Well-Being at thinktank the New Economics Foundation (NEF). “If the Government cuts housing benefit without making changes to the rental market, we run the risk of ghettoising our cities, driving out poorer renters from wealthy areas, especially in London and the South East. The Chancellor promised 150,000 new homes, but there are 1.7 million households with 4.5 million people on the waiting lists.”

The fears raised by industry figures, and interested observers, paint a grim picture of the future. Certainly, it no longer seems outrageous to ask if Britain is on the verge of witnessing the rise of its own equivalent of the shanty town.

One might say that we lack the climate for such scrap-built, hand-assembled structures, but some have expressed the worry that we will see the return of so-called cardboard cities, so is it really much of a leap from cardboard boxes to scrap-wood and corrugated iron shacks? Perhaps that is a step too far. After all, there is a far more likely, and one might say very British, outcome – one is an increase in the incidence of squats. The other is the return of the good old-fashioned slum landlord who came to be epitomised by Peter Rachman in the 1950s and 60s. Is this to be the legacy that the Government leaves to future generations?

They think it’s all over

Over the last decade or so, the social housing sector has worked hard to tackle a host of social problems, from social exclusion and deprivation, worklessness, to more generally empowering communities. It has striven to build a rapport with tenants and residents, to be a force for the community rather than just a provider of ‘bricks and mortar’ that otherwise stands aloof from the neighbourhoods where its works. The social landlord has been very much a part of the community, but all of that is surely threatened by the extent of these cuts.

Herein lies the Faustian twist to the Chancellor’s Machiavellian deal for social housing – if the consequences of the cuts and reforms play out as feared, forcing housing providers into making ever-tougher choices that can only impact adversely on families and communities, then will this positive social compact actually be able to survive?

It all sounds grim, sometimes bordering on the dystopian, but the Chancellor, along with his Government peers, is adamant that there is no alternative but to grab the budget deficit by the throat and squeeze it down to size. At £109 billion it is said to be the largest in Europe, accruing £43 billion a year in interest payments alone, and so urgently needs addressing if future generations are not to be left shackled by debt. The trouble is he risks millions of vulnerable people paying a price that leaves them in penury. In the cold calculations of political high office it is, perhaps, a small price to pay to secure the national interest, but for those tasked to pick up the pieces it’s a step into purgatory.

For the Chancellor, beginning his speech, it was the day when Britain “steps back from the brink” of bankruptcy. “It is a hard road, but it leads to a better future,” he said. “Tackling this deficit is unavoidable. The decisions about how we do it are not. There are choices. And today we make them.”

Nothing is written in stone, however, not even the Chancellor’s road map to tomorrow. Rumblings of discontent, even the dreaded spectre of poll tax style civil unrest, may scupper Osborne’s Machiavellian deal. It isn’t over yet – but those choices may yet come to haunt the country in ways nobody expected. Our children may have little call to thank us for their inheritance.

This article first appeared in Northern Housing magazine, circa October 2010. It was subsequently republished on the Housing Excellence website, 3 November 2010.