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CHAPTER FIVE: SOCIAL HOUSING - MORE THAN JUST AN ASPIRATION?
Does social housing have a future? We believe that it does. For many it is the only means of making a good quality home a reality; for others it will play a vital role at particular times in their lives, whether providing a first home before moving on to owner occupation, or providing a safety net at a time of personal crisis.
Our investment in social housing is one of the most significant aspects of housing policy. It will continue to be very important and it will command the great majority of the resources that we devote to housing. But it must change.
As we noted in chapter 1, demographic, economic and financial factors have driven large changes in Scotland's housing market and in housing aspirations across society. In November 2006, the Chartered Institute of Housing Scotland published research on the impact of these changes in the nature of demand for social housing. This highlighted the effect of underlying economic trends on the tenant base of social housing. 27
Alongside these changes, Parliament has decided that leaving many people homeless is no longer something that we are prepared to accept.
The result of these changes has been a growing tendency for tenants in social housing to be more vulnerable and less representative of society as a whole than has been the case in the past. 28
At the same time, some social landlords have found it difficult to deliver the standards of service that their tenants might reasonably hope to receive. Underlying these developments, the costs incurred by social landlords in building new homes and managing their existing ones have risen inexorably above inflation in recent years. 29
Taken together, these things suggest that if Scotland wants to make sure that affordable housing for social rent is available in sufficient quantities to meet demand, and at a sufficient quality to provide individuals with good quality homes in attractive and sustainable mixed communities, then we need to think hard about the desirability of simply allowing the trend towards a more marginalised tenant base to continue.
In this chapter, we set out some of the main dimensions of the challenges that we must tackle if we are to re-invigorate social housing. In chapter 6 we set out our proposals for stimulating innovation and choice in social housing, and the way in which we hope to forge a new kind of partnership with social landlords - both local authorities and housing associations.
Long-term changes in the nature of demand for social housing
As owner occupation has grown in popularity, social housing as a whole has declined as a proportion of the total housing stock - from over 50% in 1981 to its current level of around 25%. 30 In fact, as chart 1 in the Introduction illustrates, the decline in the sector generally is the result of a large reduction in the number of local authority houses, which has taken place at the same time as the number of households renting from RSLs has grown gradually.
The decline in social housing has been accompanied by substantial changes in the profile of its tenants and of those wishing to become tenants. In 1981, the profile of social landlords' tenants matched quite closely the profile of households in society generally in terms of their size, composition and social and economic characteristics. 31
As charts 10 and 11 illustrate, this is no longer the case. Households in social housing are now far more likely to consist of single pensioners, single parents, and other single adults. Tenants of social landlords are less likely to be in employment than those in households generally, with over half of tenants of working age without work. They are more likely to be retired or unemployed or permanently sick than other households. Consequently, almost three-quarters have incomes below £15,000 a year and two-thirds are dependent to some extent on housing benefit.
Source: 1981 Census, 2004-2005 Scottish Household Survey
Source: Scottish Household Survey 2005 and 2006
In effect, the last 25 years have seen the role of social landlords change from that of meeting general housing needs to being increasingly the providers of homes for the most vulnerable in society.
This trend appears likely to continue, with owner occupation remaining the tenure of choice for the majority. 32 It is even cited as the tenure of preference among the majority of tenants in social housing in the 25-39 age group. 33
The fact that so many younger tenants would prefer to move into owner occupation may be explained partly in terms of perceptions that owner occupation has other, financial, benefits over social housing. Even so, it cannot be seen as an endorsement of social housing from those who have experience of it, or as an indication that social housing can be viewed as a choice that would be attractive to the generality of future households. 34
The result - in the eyes of many at least - is that social housing has become stigmatised. 35 It is viewed by many as being too closely associated with unpopular and unsatisfactory neighbourhoods. Chart 12 illustrates the extent to which this perception is shared by tenants of social housing. In every age group social renters are much less likely to be very satisfied with their neighbourhood than owner-occupiers and tenants of private landlords are with theirs.
In truth, the widespread perception of stigma oversimplifies an altogether more complex picture. It tends to overlook the extent to which many recent social housing developments have been part of mixed developments that have helped to reinvigorate areas as mixed communities; and it fails to represent the position in much of rural Scotland, where social housing is recognised as playing a positive role in sustaining fragile communities.
Source: Scottish Household Survey 2005 and 2006
Source: 2001 Census, Scottish neighbourhood Statistics
Nevertheless, it has sufficient basis in fact for all of us to be worried about the impact that concentrations of social housing have on particular neighbourhoods and the people who live there. The most deprived 15% of neighbourhoods are characterised by high concentrations of social housing and more generally, as chart 13 illustrates, there appears to be a strong correlation between concentrations of social housing and deprivation.
The benefits of avoiding concentrations of deprivation and social housing by creating communities with a mixture of tenures and a mixture of households have been recognised for some time. 36 They have been demonstrated in projects in areas such as Crown Street in Glasgow's Gorbals and Ardler in Dundee, where regeneration was delivered through the creation of mixed communities. Providing for a mixture of tenures and household sizes is the key to enabling aspiring and successful individuals to move up but not out of their communities.
We wish to build on the success of high quality mixed tenure developments and to look at ways of increasing variety and choice in housing and tenure. We wish to encourage approaches that enable people of different ages, lifestyles and incomes to meet their needs in neighbourhoods that are safe, attractive and sustainable. Increasingly, social landlords, working with partners, or through specialist subsidiaries, are contributing to these outcomes by building a mix of tenures. We want to ensure that our funding and regulatory regimes support and encourage this behaviour.
Variations in the performance of social landlords
In many respects, social housing's poor reputation is unjustified. Many social landlords provide high quality housing and deliver high standards of service to their tenants. Some have track records of building new stock that is attractive and popular with tenants and that has done much to improve the quality and appearance of the neighbourhoods where it is found. Despite a fair few and notable successes, however, there is an enormous variety in levels of performance.
The physical fabric of Scotland's social housing has, on average, never been higher. Significant investment has been made by many social landlords to achieve the Scottish Housing Quality Standard. Others, however, have found themselves for a variety of reasons, unable to overcome the weight of historical circumstance in order to renew the fabric of their homes to a level that meets the reasonable aspirations of today's tenants.
Taken as a whole, Regulation and Inspection reports suggest that social landlords' performance is variable. Of 58 landlords inspected since 2001 a third were judged to be providing only fair or poor housing management services and a half fair or poor maintenance services. These findings tend to undermine the reputation of social landlords generally, confirming in the minds of some the idea of a low quality service that would be unattractive to those with any choice in the matter.
Some might argue that poor performance might matter less if tenants were able to move with ease from poorer to better performing landlords. In practice, however, the tenants of poor performing landlords cannot respond to poor performance in the way that customers can do where a genuine market in services exists. Very often - where local demand for affordable housing exceeds supply - they do not have a choice and as a result, poor performance can persist. This is unfair to tenants served by poorly performing landlords: they are effectively trapped.
Moreover, it carries the risk, over time, that poorly managed stock will blight neighbourhoods and exacerbate the effect of deprivation. For as long as landlord performance remains so hugely variable, and the basic ability of landlords to modernise their stock in accordance with basic contemporary standards remains in doubt, neighbourhoods with high concentrations of social housing - and in the most deprived areas, social housing accounts on average for 68% of the total stock - are likely to remain difficult to integrate into wider society and become neighbourhoods of choice. 37
Rising costs
Changes in the types of people living in social housing, and the pressure to raise physical and other standards, have been seen by some as leading inevitably to higher costs. What is much more rarely illustrated, however, is the enormous extent to which social landlords' management and maintenance costs have risen in recent years.
It is difficult to compare the costs of local authorities and housing associations directly. Their accounting classifications, their stock, their tenants, and their financial arrangements all vary to some extent from social landlord to social landlord. It is, however, instructive to look at the trends evident for local authorities and housing associations. Chart 14 illustrates how the running costs of local authorities and registered social landlords have increased above inflation in the past five years.
Whatever the factors contributing to these rising costs, it seems evident that the costs of managing existing homes are rising rapidly to an extent that is not sustainable for tenants, landlords or the Government.
The problem, however, is not confined simply to existing social housing. It is endemic in attempts to build new social housing too.
Sources: Housing Bulletins and Annual Performance and Statistical Returns (Communities Scotland)
Increasing dependence on subsidy for new homes
The increasing cost of providing social housing has fed directly into increasing levels of subsidy paid by government. Social rents are affordable for those on low incomes because our practice over many decades has been to use public expenditure to subsidise new social housing.
Originally this meant subsidising local authorities to build council housing. More recently the policy has been to subsidise RSLs to build new stock. The present subsidy - Housing Association Grant ( HAG) - meets an average of 67% of the cost to RSLs of each new house they build. Over the three years 2005-08, most of the Government's £1.2 billion expenditure on affordable housing will be spent on HAG subsidies.
While the proportion of building costs per house covered by HAG has remained broadly constant, the amount of HAG per house has risen - from £52,000 in 2002-03, to £79,000 in 2006-07, an increase of 35% in real terms over four years. Part of these increases can probably be attributed to inflation in the construction industry and in the price of land. But whatever the cause, continuing to increase the amount of subsidy per house is unsustainable. It is also incompatible with our commitment to getting better value for all public expenditure.
Above all, the more steeply costs rise, the more difficult it becomes to increase the number of new houses we can build for social rent and other forms of affordable housing. If we are to meet the need for affordable housing without placing an unreasonable burden on public expenditure, we need to change radically the means by which Government subsidises, and social landlords build, new affordable housing.
As chart 15 illustrates, social housing in England - where land and construction costs are often higher - relies on substantially lower levels of subsidy than Scottish social housing. While we recognise that circumstances in Scotland are different in some respects, maintaining such a large difference will undermine our ability to meet demand for social housing. Even taking account of the impact of lower rents in Scotland, subsidies here are higher than in England.
Sources: Housing Corporation and Communities Scotland
Continued substantial real terms increases in management and maintenance costs, and the rising cost of building new homes for social rent, are an unsustainable combination. They put pressure on rents and on landlords' finances as one, the other, or a combination of the two bears the strain of the higher costs.
For government, rising costs bring pressures for increasing subsidy, intensifying pressure on public expenditure. In a tight fiscal environment their effect is to inhibit the provision of sufficient new social housing at a time when it is necessary to meet substantial demand. Something must be done.
Conclusions
We believe that social housing has a positive future. The steep rise in house prices that has taken place in recent years means that social housing, far from being an anachronism, is often the affordable and secure alternative to owner-occupation. But if we are to escape from the seemingly inexorable trends of the past 20 years, the future will depend upon a significant break with the past.
Along with social landlords and bodies working on behalf of those in housing need, we recognise that the present demand for housing requires there to be an increase in social housing stock that is affordable to those on lower incomes. Estimates of the extent of this need vary, but no one doubts that we must improve the supply of new affordable houses, including social rented houses.
Parliament has set an ambitious statutory homelessness target. We are committed to achieving that outcome by 2012. But like many others we recognise that doing so will require us to be innovative.
Some of our policy measures described in earlier chapters will help to improve the supply of affordable social housing. For example, the challenge of building more houses, of all types, will be made easier by the work that the Housing Supply Task Force has in hand. Improvements in the availability of private rented accommodation may help too, particularly where it is accompanied by future possible measures to improve the choices available to people who are homeless.
However, these developments do not alter the fact that social housing needs to change fundamentally.
If we manage that change successfully, tenants, current and future, can look forward to affordable rents, good service, and as much choice as possible. And taxpayers can be assured that the subsidies they provide are achieving as much as they possibly can.
In chapter 6, we outline our proposals for changes that will improve the supply, quality and choice of social housing.
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