This removes a number of previously important barriers, allowing smaller builders to participate in what would previously have been too big a project for which they would never have been able to raise the finance from banks. And as they are on public land where consent is already in place, the time-consuming planning process is also circumvented. The overall plan is to build 200,000 starter homes by 2020. Five sites have already been identified for work to start this year. These are; Connaught Barracks in Dover, Northstowe in Cambridgeshire, Lower Graylingwell in Chichester, Daedelus on Waterfront in Gosport and Old Oak Common in north-west London. But challenges remain, not least of which is a shortage of skilled labour. Increased demand for bricklayers and other tradesmen won't produce more workers overnight, but it will maintain upward pressure on wage costs. In addition, the nature of the new houses should include some architectural thought. No one wants to see acres of social housing with no real sense of community.
Building these homes will assume even greater importance when considering that local authorities are struggling to find a way of replacing existing housing stock that is being sold off under the extended Right to Buy (RTB) scheme for council tenants and the right-to-acquire scheme for housing association tenants. The headline news suggested that funds generated by selling council homes would be given to local authorities to replace stock, while any discount offered would be paid over by the government. The reality is that local authorities are only allowed to fund 30 per cent of the cost of a replacement using RTB funds; they are not allowed to use these to supplement government grants, and are being obliged to commit receipts within a three-year turnaround period. The rest of the proceeds go towards debt repayment, while the Treasury swallows the balance.
Proposals in the Housing and Planning Bill threaten to upset what has been a renaissance in council house building. Since 2012, more than 6,000 council homes have been built, with current construction at a 23-year high. But the bill includes measures that will force councils to sell their high-value homes to fund discounts offered to housing association tenants through the extended Right to Buy. Councils already have to find from their own resources the cost of discounts to their own tenants, and the extra capital requirements will make it extremely tough to continue funding the building programme.
The inevitable consequence is that 90 per cent of local authorities admit that they are unable to replace stock on anything like a one-for-one basis. The 2013-14 financial year provides a typical example. In that period, 11,261 sales were replaced with just 1,278 homes. In fact, one in three local authorities did not replace any homes after 2012. The problem is that these figures don't tell the whole story because the commitment to replace homes sold only applies to those sold under the enhanced Right to Buy terms announced recently, and not those that local authorities had already planned to sell before the increase in discounts was introduced.
There are other unintended consequences to consider. The Local Government Association suggests that at least 80,000 social rented homes could be lost by 2020 without providing the means for councils to replace them. If these losses become a reality, it will push up the housing benefit bill as councils are obliged to place more families into the more expensive private rented sector. There are already more than one million people on council waiting lists.
The situation for housing associations, which between them have 1.3m tenants, is hardly any better. Faced with plans in the government's election manifesto to introduce right-to-acquire legislation for housing association tenants, a slim majority voted for a voluntary agreement as a compromise that at least maintained their independence. However, associations are worried that they will also be left short changed after selling properties at discounted prices to tenants. At the moment, they have been left hanging in the air, with no timetable for change and no specific ideas about what the changes will be.
