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April 23, 2015

Barnet Council is planning to build houses by raising rents for the borough's poorest people

By City Monitor Staff

So we all agree we need to build more houses, right? Economists and housing charities alike estimate that we need to build about 250,000 a year just to keep everyone in the country under some sort of roof. Yet MPs and councils seem a lot keener on keeping housebuilding on the national agenda, and away from their backyards. 

Not so in the pragmatic London Borough of Barnet. No, that borough (which has a Conservative MP and a split Labour/Tory council) has devised a brilliant scheme to top the record three council houses it built in 2014, by building, er, around 40 this year. The report laying out how it plans to do this,”Commissioning Plan 2015-2020“, starts off with an explanation of the council’s focus on “opportunity, fairness and responsibility”. Then, on page 10, we get to the meat:  

• There is a link between the level of rent that is charged for council housing and the amount of resource available to invest in the construction of more homes that are affordable.

• The Council needs to strike the right balance between setting council rents at a level which is fair and generating income to increase the total number of homes that are affordable.

• In view of this, the Council will charge an affordable rent at Local Housing Allowance (LHA) levels or 80 per cent of average market rent, whichever is lower, for all new council homes it builds. This will generate an additional income to be reinvested in building more homes that are affordable.

This, to be clear, is the weasel version of “affordable”: the one that means “slightly less agonising than private rents” rather than, y’know, actually affordable. At present, council rents in the borough are around 35 per cent of market rents; this plan suggests raising rents by as much as 125 per cent for all new tenants in both new and existing council properties.

Barnet is taking advantage of new powers created under the Localism Act, which allow councils to charge 80 per cent of market rents in new flexible council tenancies. According to housing lawyer Giles Peaker, this plan makes Barnet the first council to push rents quite this high.

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Now we’re not here to dispute the fact that balancing council accounts is hard, especially when they’re facing regular budget cuts. But come on. 

Barnet claims these changes would be brought in gradually, and in practice, rents would normally be around 65 per cent of market rates. For those on housing benefit, the government would be picking up the bill; for those not on benefits, the hike would come out of their own pockets.

Yet in a recent blogpost, Peaker points out that even for those on benefits, the increased rents will push many over the London benefit cap of £26k a year, leaving them with a shortfall. He gives the example of a single mother in a 3-bed flat, whose income and housing benefits would rise to £581 under a 65 per cent market rent, but whose benefit income would be capped at £500, leaving her with £81 to find herself. And the Conservatives also plan to reduce the London benefit cap to £23k, which would only make the situation worse. 

It’s likely, then, that the move would force many, especially single parent, families out of the borough or into arrears and then homelessness. Perhaps that’s the intention: housing chair Tom Davey recently stated that Barnet council is “on the side of working families”. By raising rents and selling off of housing association homes under the Conservatives’ Right To Buy policy, the council may find itself with no council tenants left. Job done.

h/t the Guardian.

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