There's a lot of window-dressing in Chancellor George Osborne's plans to build 150,000 affordable homes over the next four years. The £4.4bn of capital for social housing announced at Wednesday's spending review is nearly half of the £8.4bn National Affordable Housing Programme (NAHP) for 2008 to 2011.
Facing what looks like a 50 per cent cut, how can the UK's housing associations and registered social landlords afford to fund 37,500 new social homes every year for the next four years? Last year (with full grant funding) the industry managed to construct around 31,860 social homes, according to the Home Builders Federation - thus falling short of Mr Osborne's target before it's even started.
The focus of his ire is clear. A decade ago, one in ten social households had nobody working. Today, Mr Osborne says, that figure is one in three. So his announcement that new social tenants will have to pay rents set at 80 per cent of the market rate sounds more like a sop to middle-class renters priced out of buying a home.
In London and the South East, high levels of private rents mean only hard-working professionals will be able to afford these "affordable" homes. And there's no leeway, because the increased rental levels are being relied upon to fund the programme. Coupled with the incoming , predictions of benefits ghettoes where housing costs are low, and employment prospects are bleak, look scarily accurate.
But enough moralising: how will all this affect Britain's battered house builders? Social housing accounts for 20-30 per cent of the current quoted sector output. "They make good money out of social housing," says KBC Peel Hunt real estate analyst Robin Hardy. "Margins of 15 per cent are possible, and there are no selling or administration costs. The cuts could mean they lose a reasonably profitable side of their business."
Coupled with the curtailment of government subsidies like , which loaned deposits to first-time buyers, housebuilders' revenues will be under pressure. They hope to fill the gap with their own shared-equity schemes, with Barratt and Persimmon leading the way. But commentators fear these are storing up future liabilities, and mortgage lenders are increasingly wary.
If the house builder model can't provide more homes, and mortgages remain scarce, is this good news for existing landlords? Listed residential investor Grainger predicts the new 80 per cent level will trigger the creation of a new housing tenure; a "stepping stone" between social housing and home ownership. “It is clear that a new dawn of housing is upon us," says chief executive Andrew Cunningham dramatically. "Mortgages are becoming even more difficult to get one's hands on. It is inevitable that more people will be relying on the private rented sector."
When it comes to existing social housing stock, the Chancellor confirmed the Decent Homes programme would continue to be funded - good news for Balfour Beatty and other contractors who have a track record of winning contracts. But for those struggling to get on the housing ladder, the cupboard remains bare.
