“On 6 May we had a housing crisis. We then had an election. On 8 May we still had a housing crisis,” says David Orr, chief executive of the National Housing Federation. “The election didn’t make any difference to the underlying fact that we hadn’t built enough new homes and we had not focused sufficiently on regeneration; unless we start doing both of these things very quickly we will not be able to house our children.”
For all that, a Tory majority government has changed the outlook for social landlords and their tenants, to the point where some observers worry that the housing association movement, or at least its traditional role as the guarantor of affordable housing for the poor and vulnerable, is under threat. Wednesday’s Queen’s speech is expected to contain two flagship policies with potentially profound implications for housing associations: the extension of the right to buy to housing association tenants; and the lowering of the household benefit cap from £26,000 to £23,000. Then there are the legacy policies which a different, or coalition, government may have scrapped: the bedroom tax and universal credit.
This comes on top of five years of rising levels of rent arrears and evictions driven by welfare reform. The reduced benefit cap heightens the financial risk of providing homes for benefit-dependent families, and threatens the viability of the sector’s ambitious plans to borrow to build tens of thousands of new affordable homes. It will impoverish many of its tenants. And right to buy threatens to eat into housing associations’ asset base.
Does this amount to an existential threat to housing associations? No, says Orr, but adds: “There is a potential combination of circumstances that could make it very very difficult for housing associations to develop new homes in future.”
“The benefit cap will reduce housing associations’ ability to borrow and that reduces the number of new homes they can build.” National Housing Federation modelling shows that a lower benefit cap will potentially affect 90,000 additional tenants, around 37,000 of whom will be housing association residents. The impact, currently fiercest in London, will extend to large parts of the country, making three bedroom-plus properties unaffordable for benefit-capped tenants. The housing consultant and blogger Joe Halewood has called the cap “the death of the social housing model”.
Several associations have said that the financial risk means they will no longer build family houses for social or affordable rent, and others warn they may refuse prospective tenants from council waiting lists if they are dependent on benefits. Where those tenants will be housed, no one seems to know.
The effect on tenants on low incomes who fall foul of the cap will be harsh, says Orr: “In London, if you are a [jobless or economically inactive] family with three children, you will only be able to afford a bedsit. Even a one-bedroom flat would take you above the £23,000 cap. I am not going to advocate that families with three children should be living in bedsits, or accept that a family with three children needs to leave London if they are not presently in work.”
Orr believes that the impact of welfare cuts, coupled with a move to a homebuilding financial model funded by high “affordable” rents (80% of the market rate) rather than capital grant, will inevitably widen the profile of housing association tenants. “If you have an affordable rent regime where the rents are not really affordable and the benefit structure means that benefit won’t cover the rent, you need to accept that different people will occupy these homes.”
Orr is not opposed in principle to this. He believes housing associations should offer a wide range of tenancies – social rent, shared ownership, and both affordable and market rent – appealing to well paid professionals unable to buy as well as the low paid. Income from wealthier tenants would cross-subsidise lower rents for the less well off. But to do that they would need more control over who they let their properties to, a task now largely carried out by local councils.
Open contributions: What has your experience been of right-to-buy schemes?
He believes the sector should be at the core of the Tory ambition to deliver 275,000 affordable housing units in the next five years. But do the Tories share that vision? Orr argues that a government aiming to adequately house its citizens must look beyond the private sector. Housing associations’ commercial nous and social entrepreneurship has delivered billions of pounds worth of housing. “I don’t think there’s another public-private partnership in the economy that has been as consistently successful as we have.”
But conflict with ministers looms over right to buy, which may see up to 200,000 housing association properties sold to tenants at discounts of up to £100,000. “If you are a board member of a housing association, you have an absolute legal obligation to manage the assets of your organisation in a way that protects its future viability,“ says Orr. “It is wrong for government to insert itself and instruct you in what you may or may not do with the assets you own.”
Orr does not rule out a legal challenge: “We don’t have an ownership crisis we have a housing crisis. If the government is able to find resources, it needs to be devoting them to new build and regeneration, not to giving large sums of money to individual citizens.”
Curriculum vitae
Age 60.
Lives London.
Status Married with three children.
Education George Heriot’s school, Edinburgh; Dundee University, MA, social administration.
Career 2005–present: chief executive, National Housing Federation; 1990-2005: chief executive, Scottish Federation of Housing Associations; 1986-1990: chief executive, Newlon Housing Trust; 1977-1986: co-ordinator, Centrepoint.
Public life Chair of Real Equity for All (formerly Homeless International); chair of Jobs at Home National; board member of My Home Finance; senior non-executive director and chair of the credit committee of Affordable Housing Finance.
Interests Cinema, theatre, sport, lifelong supporter of Hearts FC, singing.
