ESRC Research Centre for Analysis of Social Exclusion ENDS AND MEANS: THE FUTURE ROLES OF SOCIAL HOUSING IN ENGLAND John Hills CASEreport 34 ISSN 1465-3001 ASE CENTRE FOR ANALYSIS OF SOCIAL EXCLUSION An ESRC Research Centre Ends and means: The future roles of social housing in England John Hills CASEreport 34 ISSN 1465-3001 February 2007 CENTRE FOR ANALYSIS OF SOCIAL EXCLUSION The ESRC Research Centre for Analysis of Social Exclusion (CASE) was established in October 1997 with funding from the Economic and Social Research Council. It is located within the Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) at the London School of Economics and Political Science, and benefits from support from STICERD. It is directed by Howard Glennerster, John Hills, Kathleen Kiernan, Julian Le Grand, Anne Power and Carol Propper. In addition to our discussion paper series (CASEpapers), we produce occasional summaries of our research in CASEbriefs, and reports from various conferences and activities in CASEreports. All these publications are available to download free from our website. Limited printed copies are available on request. For further information on the work of the Centre, please contact the Centre Manager, Jane Dickson, on: Telephone: UK+20 7955 6679 Fax: UK+20 7955 6951 Email: [email protected] Web site: http://sticerd.lse.ac.uk/case © John Hills All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. i Ends and means: the future roles of social housing in England ii CONTENTS List of figures List of tables List of text boxes Acknowledgements Foreword by The Rt. Hon. Ruth Kelly MP, Secretary of State for Communities and Local Government SUMMARY 1 1. Introduction 13 PART 1: WHAT ARE WE TRYING TO ACHIEVE? 16 2. Aims 16 Why housing, not cash? 16 Why social housing? 17 Why sub-market rents? 19 The downside to sub-market rents 20 Summary 23 3. Policy instruments 24 Support connected to renting 24 Support connected to owning 26 Summary 27 PART 2: WHAT ARE WE DOING? 28 4. The overall housing background 28 The balance between dwellings and households 28 Overall housing conditions 31 Overcrowding and space standards 34 Indicators of stress in the housing market 39 Summary 42 5. Social housing background 43 The overall size of the sector 43 Who are the tenants? 45 Tenure change 51 Summary 54 6. What do we spend? 55 Conventional flows of subsidy and grants 55 Subsidy in economic terms 61 Summary 64 iii Ends and means: the future roles of social housing in England PART 3: HOW ARE WE DOING? 65 7. Decent homes? The quality of social housing 65 Housing quality 65 Energy efficiency and fuel poverty 67 Satisfaction with housing 69 Summary 75 8. A price within people’s means? 76 Average housing costs 76 The position of different tenures 83 Summary 84 9. Allowing a social mix? 86 New building 97 Summary 99 10. Supporting mobility and livelihoods? 100 Employment trends 100 Employment flows and mobility 105 Longer-term outcomes 110 Summary 111 11. Alternative forms of support 112 Cash benefits and tax credits 112 Housing Benefit 113 Housing Benefit and temporary accommodation 121 Assistance to owners 122 The Right to Buy and Cash Incentive Schemes 124 Intermediate tenures 128 Summary 133 12. Changing pressures 134 Demography 134 Affordability 138 The supply of lettings to new social tenants 144 Summary 148 PART 4: WHAT ELSE COULD WE DO? 149 13. Fundamental reform options 149 Market or “economic” rents 154 Variable grants and vouchers 156 Time-limited support 157 iv Flat rate benefits 158 Summary 159 14. The experience with recent reforms 160 Local housing allowances 160 Choice-based lettings 163 Preventing homelessness 166 Summary 168 15. The importance of the existing stock 169 Summary 178 16. Mixed-income neighbourhoods 179 Large scale remodelling and rebuilding 179 Allocations policies 180 Diversifying the social rented stock: Like-for-like sales and market renting 180 Densification and infill 182 Retaining higher income tenants 182 Improving the incomes of existing tenants 183 Summary 184 17. Supporting livelihoods 185 Housing Benefit 186 More integrated support 187 Local employment 189 Mobility 190 More fundamental reforms 190 Summary 191 18. Offering a varied menu 193 Motivation for encouraging equity sharing options 194 What would a “more varied menu” look like? 196 Implications for landlords 197 Summary 199 19. Conclusions: Ends and means 200 Annex: Terms of reference 205 References 207 v Ends and means: the future roles of social housing in England List of Figures 3.1 Scale and type of public support for housing 4.1 Trends in households and dwellings 4.2 New dwelling completions since 1946 4.3 New build and net additions 4.4 Vacant dwellings and second homes since 1990-1996 4.5 Housing standards and conditions, 1971-2004 4.6 Non-decent homes by tenure, deprivation and disadvantage, 2004 4.7 Overcrowding against the bedroom standard in England and London 4.8 Space per household and space per person by income and tenure, 2004 4.9 Distribution of households by living space within each tenure, 2004 4.10 Dissatisfaction with home by space per person, 2004 4.11 Trends in indicators of housing difficulties 5.1 Dwellings by tenure, 1939-2004 5.2 Net supply of social rented dwellings 5.3 Accounting for change in the social rented sector, 1996 to 2005 5.4 Employment status, 1981 and 2006 5.5 Disability in the social rented sector over time, and by tenure in 2003-04 5.6 Household type by tenure, 2006 5.7 Age of householder in each tenure, 2006 5.8 Ethnicity by tenure, 2006 5.9 Number of households moving into and out of sectors, 2005-06 5.10 Routes into social rented sector and owner-occupation, 2005-06 6.1 Housing Benefit gross expenditure 6.2 Aggregate estimated economic subsidy by region, 1996-97 and 2004-05 7.1 Vulnerable households, living in non-decent homes by tenure 7.2 Disadvantaged households living in non-decent homes by tenure, 2004 7.3 Age of householder and occupancy of least and most fuel-efficient homes by tenure, 2004 7.4 Households dissatisfied with their accommodation, 1993-94 to 2005-06 7.5 Renters dissatisfied with their landlord, 1994-95 to 2005-06 7.6 Renters dissatisfied with their landlord’s repairs and maintenance, 1994-95 to 2005-06 7.7 Households dissatisfied with local area, 1994-95 to 2005-06 7.8 Dissatisfaction with present accommodation by tenure and age, 2005-06 8.1 Mean house price (real terms) index 8.2 Private rented sector rents 8.3 Housing association rents 8.4 Housing association rents as a percentage of private rents vi 8.5 Local authority rents 8.6 Local authority rents as a percentage of private rents 8.7 Housing related subsidies and net tax advantages by income band, 2004-05 9.1 Household income distribution by tenure 1979, 1998-99 and 2004-05 9.2 European comparison of average after tax incomes by tenure, late 1990s 9.3 Distribution of social housing by 2004 level of deprivation of area, 1991 and 2004 9.4 Homes with liveability problems by tenure, 2004 9.5 Social sector stock: housing and neighbourhood conditions by area deprivation, 2004 9.6 Assessed problems by build type, 2003 9.7 Particular problems by tenure and area type 9.8 Not feeling safe alone: by area and tenure, 2004 9.9 Dissatisfaction with neighbourhood, 2004 9.10 Total number of new build housing association units by scheme size, 2002-03 to 2005-06 9.11 New Build by sector, ward deprivation and time period 10.1 Worklessness by tenure in Great Britain, Spring 2006 10.2 Worklessness by DWP public services agreement target group, Spring 2006 10.3 Employment rate of those with multiple disadvantages, Spring 2006 10.4 Distance moved by tenure 11.1 Gross and net incomes after housing costs at different rent levels, 2006-07 11.2 Housing Benefit costs of temporary accommodation 11.3 Income Support for Mortgage Interest, 1980 to 2004 11.4 Right to Buy sales since 1980-81 11.5 Numbers of Low Cost Home Ownership and new social rented units since 1991-92 12.1 Household projections, 2001 to 2026 12.2 International migration flows, 1975 to 2005, UK 12.3 Historic and projected affordability ratios 12.4 Proportions able to afford to buy by tenure and age, 1997-98 and 2004-05 12.5 Affordability for 30-34 year olds 12.6 Proportion of first time buyers under thirty receiving assistance with deposit, 1995-2005 12.7 Percentage of age group that are owner-occupiers, 1981-2006 12.8 Number of households newly becoming social sector tenants in last year and new social sector units, 1997 to 2005 12.9 Age of head of household in social rented sector, 1981 to 2006 14.1 Statutory homelessness acceptances (annual) vii Ends and means: the future roles of social housing in England List of Tables 4.1 Space per person by region and sector, 1996 and 2004 5.1 Changes in housing tenure in England, 1994-2004 6.1 Housing subsidy, 1975-76 to 2003-04 6.2 Real Housing Revenue Account Income and Expenditure, £/dwelling 6.3 Housing association income and spending, 2005 6.4 Estimated economic rents and net present value of economic subsidy by region, 2004 7.1 Energy efficiency and fuel poverty by tenure, 2004 7.2 Household disposable income spent on fuel by tenure, 2003-04 7.3 Type of housing would most like to live in by current tenure 7.4 Views on providing a good standard of repairs and maintenance 8.1 Percentage of household disposable income spent on housing by tenure 9.1 Location of social housing by build