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Custom Social Housing Sector essay paper
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The introduction of social housing in Britain can be traced late after the Second World War. It was introduced to provide affordable housing to the vulnerable in society. The rent of social houses is lower than the market rate rent charged by the private rental housing. Social housing is allocated based on the basis of need in Britain. The councils and housing associations, which operate as non-for-profit generally, own social houses in Britain. Tenants Services Authority and local government is the general overseer of the social property owners, and it is the regulatory authority, while Homes and Communities Agency (HCA) is the means, by which government funds the housing association to facilitate the development of new social houses. The conservative coalition government, that was elected in May 2010 and the policy implication to address the public finances due to credit crises. The pursuit of a counter-cyclical investment challenged the previous housing policies and investment in the housing sector reduced. Nevertheless, the policy on housing aimed at reducing both demand and supply side subsidies on housing. However, the policies were in conflict with the introduction of localism, this has prompted various players in the housing sector like the national housing federation (NHF) and the CIH to respond giving different approaches.
However, the social housing sector has been facing various challenges due to increased demand that surpasses the supply of the social houses. The changes in the economic sector have also affected the private housing sector enormously. The deflation that has been experienced in Britain has led to reduced value of rents paid for the social houses. The increased overcrowding in areas with social house has led to immense pressure on the social amenities like the health facilities and schools.
This paper seeks to analyze critically the status of social housing sector in Britain, which has been facing various challenges and changes in the recent history under the coalition government. Various players in the social housing sector have stepped up to address various challenges facing the sector like the national housing federation (NHF) and CIH. The current restructuring in the social housing sector due to transition to the new coalition government will be critical when reviewing the current challenges facing the sector. It will also be critical in understanding the reforms put in place to deal with the challenges facing this sector. Government has also changed various regulations in regard to the social housing sector, these changes in the regulations affects the social housing sector and will be reviewed on this paper.
Status of social Housing in Britain
The coalition government social housing policy has been characterized by reduction in funding which has had a negative effect on the supply of social housing. The funding of construction of new social houses has been cut substantially and more than five million households have been locked out of the social housing programs. This has led to increased shift from the aspect of social housing to the aspect to the aspect of affordable housing. This was because the social housing program was introduced to provide affordable housing but has significantly failed to do so. The current focus is on the provision of affordable housing. The social housing sector has seen the introduction of intermediate rent tenancy. The coalition government has brought substantial changes to reduce public debt through reduction in public spending. The new coalition government has brought suggestion to abolish the Tenants’ Services Authority (TSA) and transfer its regulatory authorities to Homes and Communities Agency (HCA).
There has been competing needs in the provision of social housing. The increased urge to meet the escalating demand of social housing, and the rising demand for transferrable welfares to the tenants have been some of the current issues in the social housing sector. The players in the sector have also been faced by the need to create sustainable neighborhoods and promote choice. There has been a huge disparity in quality, price and security of tenure between the private rental sector and the social housing sector. On average, the rent in the social housing sector was 70 pounds, while that of the private sector was 115 pounds in a research done in 2006 (Lund 2011).
However, various issues have affected the social housing sector in Britain in the recent history. The change in governance and accountability has led to immense changes in the social housing sector, with a new approach of replacing councils in the new social housing production. Introduction of stock transfers and regeneration to replace the councils has led to changes in the management of the social housing sector. Tenants have also been given the right to buy the social houses after meeting certain criteria. This has raised concerns on the ownership and control of the social housing sector in Britain. However, subsequent tenant is not given the rights to buy for reasons of maintaining financial stability of the housing associations. The increased demand for private housing has led to a shift in the general housing sector, where more individuals are opting to buy their private homes (Hemingway 2011).
There has been increased pressure on policy changes to offer more subsidies to the vulnerable groups rather than reduced wages. This move was brought forward to achieve fair level playing across tenures. This policy was introduced to facilitate the reduction of disparity between the social rent and the private rent. However, security of tenure requires more policy changes to enhance achievement of a level playing between the two sectors. Homes Communities Agency has been introduced as the new national housing and regeneration agency. It will oversee the development of new social houses national wide to increase the supply of social houses and reduce the gap between supply and demand of social houses (Ethridge & Handelman 2009).
A recent research has shown that the majority of the occupants of the social houses are young people. The issue of overcrowding has also been a major issue in the social housing sector. The tenure system has also changed significantly in the recent history with the private sector emergence. The private rented sector has increased its tenure due to economical and demographic changes. There population has been increasing sharply in the recent history, and the number of young people seeking for jobs has increased. Since the majority, of the people in England in the social housing sector are the young people, the demand for housing has been increasing
Policy Changes under the Coalition Government
There has been plans to abolish the Tenants Services Authority and transfer its some of its regulatory functions to Homes and Communities Agency (HCA). This will lead to consolidation of the regulatory authority and reduce conflicts in the management of the social housing. The coalition government pledged to abolish the housing finance system and establish a more transparent and self-financing system, the established system will enhance devolvement of power between the councils. The system will ensure those property owners are accountable in ensuring quality housing to the taxpayers and the tenants. The conservative coalition government has also pledged to abolish the current benefit regime to housing, income support, and benefits to the incapacitated people. This will be replaced by a universal credit to be introduced by 2015.
The tenure system and changes in the system are essential in understanding the social housing system in England. There are three main tenures in the UK they include owner occupation, private rented sector and the social housing sector. The differences in these tenure systems are due to differences in taxation, benefits, economic equality, and security of tenure, mobility, satisfaction and impact on the wider economy. The private rental sector had experienced a decline from 1980s up to 2000. Owner occupation started to rise sharply from 2000 at the expense of social housing, and there was a relative increase in private rented sector. The coalition government has focused on the current security of the tenure system as it has introduced plans to phase out the current long security of tenure with a shorter flexible security of the tenure system. This system will be applicable to new tenants. This will enhance the coalition government to monitor and control the growth of the social housing sector. There has been a proposal to change the tenancy system to a new tenancy, which will be affordable to housing associations, the new system will charge to re-let tenants and facilitate construction of new social houses. In its plan to provide sufficient social housing the coalition government has set out funds to facilitate the construction of new social housing units through borrowing, grants and rent charged from the affordable tenancies. This represents a substantial shift from the current supply side subsidies to demand side subsidies.
The coalition government has developed an ambitious plan to develop 150,000 new homes through this shift from the supply side subsidies to the demand side subsidies. However, this has been questioned since the reduction of benefits to the vulnerable in the community in the short term will cause adverse effects to the welfare of these people who has survived on the benefits granted by the government. The regulatory authority has also reduced this will cause the lenders to scrutinize the business plans presented to them by housing associations if any significant borrowing is to be secured by the rents charged. The introduced reforms in the council will facilitate the council to construct more units however, that will depend on any borrowing controls introduced by the lenders. The changes in the security of tenure and rent will cause different impacts depending on tenants and property owners response to these changes.
The coalition government also introduced the Decentralization and the localism bill, which, was introduced to scrap regional based strategies on housing. The bill stated that any decisions relating to housing land and planning would be entirely handled by the local authorities. The bill created a provision for creation of a new trust that will facilitate the provision of affordable housing to the local people. The changes made in the housing revenue authority HRA and the incentive created to the local authorities would facilitate sustainable development of new affordable social housing. The coalition government also introduced a proposal to announce a New Homes Bonus where the government would match the tax raised by the local authorities for a unit dwelling for six years. The government provision of incentives to local authorities would authorize local authorities to approve development of new homes (Bochel 2011).
The housing model in Scotland is much similar to the housing model used in England. Both system were characterized by demand side subsidies which were provide to tenants. The supply side subsidies and grants provided to housing associations these were supported by borrowings from banks and building societies. However, the subsidy system at local authority level is different and has been discussed in details in the formulation of housing policies under the new coalition government. Before the 2008 credit crunch, the Scottish government introduced a housing policy framework, which would oversee the construction of 35000 new units in 2007 of social and affordable housing (Lund 2011). This was achieved by the introduction of a policy to reduce the cost of development through reduced subsidies per unit constructed. The massive construction were funded by grants given to housing associations and the economies of scale of scale achieved from large-scale construction. However, the credit crunch affected the government plans severely and much of the planned construction was not made. The government, also abolished the plan of the right to buy to all new tenants, this arose from the need to encourage the local authority to build new social housing units. The limited public funding to the social housing sector prompted the Scottish government to explore alternative approaches to funding development of the social housing sector. This has led to introduction of the housing bill in 2011, which will focus on financial innovations that will facilitate the development of the social housing sector. The bill is meant to explore new ways that the housing corporations and the councils will cooperate with even the private sector to provide new funds for development of the social housing sector (Alcock, et al 2012). This will enhance provision of more affordable social housing units. The Scottish government has been developing plans to establish a national housing trust, which will facilitate local authorities to expand provision of more affordable social housing. The national housing trust will oversee the development and purchase of new housing units from developers and lenders. The national housing unit does not bear any risk during development since it chooses sites, which are fitting to the housing needs and demand of the social housing. The government also formed the Calman Commission on Scottish Devolution, which made recommendations on devolvement of housing benefits. The commission proposed devolvement of stamp duty revenues, which would provide revenue to policy formulators who seek a more radical approach.
The Scottish government has also introduced new housing policy, which aim at evaluating new ideas to increase the supply of affordable housing. This has led to development of diverse ideas like the introduction of the national housing banks, which act as a conduit of finance, through the securing of debts held by social housing providers. The credit crunch of 2008 had some severe impacts on social housing. The credit crunch led to loss of confidence in lending by banks to housing associations and interbank lending. This led to shortage of credit to housing associations as defaulters of loans previously borrowed increased, which led to increased of lending margins by banks to cover the increased risks of lending. The credit crunch also led to a significant fall of the price of land and property in general. This produced adverse effects to developers and housing associations as the value of the property plummeted. The unavailability of credit to housing corporations and developers led to reduced rate of development and reduced diversification of risk by housing corporations and developers. The shortage of credit also led to increased cost of funds used to finance new development; this increased the risk associated to borrowing as a source of the fund to finance the developments (Hemingway 2011).
The social housing sector has offered poor quality housing, which are overcrowded, damp and lack repair. The tenants are lowly paid hence poverty and homelessness is a common feature to these occupants. The insecure labor market does not offer job security hence majority of the social tenants are lowly paid and vulnerable since they cannot afford better housing. The purchases of social housing stock by housing corporations, which have mixed features of non-for-profit and private, have changed considerably. They have focused on the private feature hence increasing the rents charged hence reducing further the welfare of the tenants. The volatility of London housing stocks has been high that even international organizations like International Monetary Fund (IMF) have called on the government to reduce the volatility to enhance mobility in the labor market. The large-scale transfers of council stocks caused this volatility (Bochel 2011).
The political environment also has led to reduction of the social housing sector. The various political leaders have brought conflicting policies in the social housing sector causing confusion. After Thatcher administration introduced the right to buy, Tony Blair’s administration was reluctant to make reforms that would ensure implementation of the right to buy. This caused a reduction in the discount that was offered to occupants who wanted to buy. This was one of the major causes of reduction of the right to buy option given to occupants of the social housing sector. This translated to losses on the council and the inability to maintain and construct new housing units to meet the rising demand. The right to buy option has also attracted speculators who have led to diminishing of the interest rate and deterioration of the housing habitation. This has led to decline of the social stock, which has led to call for suspension of the right to buy option in the social housing sector. The diminishing quality of housing has led to loss from the sale of additional houses. This has been stirred by the increased sale to the private sector and increased transfers. Lack of regulation that guided the sales and transfers of the housing units led to these irregular transfers (Bochel 2011).
The coalition government introduced the universal credit, which was to replace the current benefit system to the vulnerable. The credit system would incorporate payment of mortgage interest to the people who were receiving benefits. The new credit system would also involve direct payment of cash to social tenants to facilitate payment of rent. This system would facilitate the provision of stable rental income to social property owners to facilitate the development of new homes. The universal credit was developed to protect the social property owners’ financial positions in the effort to provide affordable housing. The direct system of payment introduced would ensure the availability of funds to social property owners. This would encourage people to manage their own budgets, as the rental income of social property owners would be safeguarded. The coalition government also encouraged mobility through right to move through the introduction of the National Affordable Home Swap Scheme. This was implemented by the introduction of a policy which would end the security of the tenure system from life tenancy to any new tenants. The coalition government also allowed the local council to offer flexible tenancies, which had a statutory period of two years. At the end of flexible tenure, the tenant would seek an extension or offer other forms of agreement these would include secure and starter tenancies. The rationale behind these changes was localism. However, the introduced security of tenure and provision of subsidized rent in the social housing sector do not assist tenants to independence and self-sufficiency. The coalition government led to the establishment of the Local Housing Trusts, which would enable local people to promote new social house construction without the need to request for permission (Beevers and Struthers 2011).
Response to Policy Changes
The campaign towards affordable homes in England has attracted a lot of response from various players in the in the industry. The election of a new coalition government in May 2010 has led to major policy changes in management of social housing and increased push towards affordable housing. The management of social housing has seen million of council homes sold to housing association. This has led to the housing association to overtake the local authorities in management of the social houses. The coalition government has introduced new plans to strengthen the council as the new social housing providers. This led to the establishment of the homes revenue authority (HRA) which would work with the council to facilitate construction of new homes. This has attracted diverse response from various organizations in the social housing sector. These include the National Housing Federation (NHF) Chartered Institute of Housing and RICS, which have analyzed the implication of the introduced policies by the coalition government (Beevers and Struthers 2011).
The policy, which led to introduction of New Homes Bonus that the coalition government introduced to provide an incentive to the local government to approve construction of new houses have various implication on the social housing management. The coalition government also introduced an alteration to classification of the garden to prevent garden grabbing. According to the chartered institute of housing (CIH) and national housing federation (NHF), they have argued that planning reforms may lead to serious implications on development of new homes. NHF had already warned the government of its plan to replace the regional planning system with localism where decisions are made by the local authorities. According to NHF, this would lead to an overall reduction of the house constructed hence failure of the objective to increase the housing unit. According to an opinion poll taken by CIH, minority groups were opposed to new constructions and such opposition would block the construction of new houses. The introduction of new bonus was received with mixed reactions with concerns being raised that it may not work. The reduction of public spending policy introduced by the coalition government according to NHF, it has magnified the problems of reducing the number of new houses being built. Even though, the government wanted to reduce its deficit funding the implication on the social housing would be adverse. NHF has been lobbying for consideration of the social housing in the capital expenditure of the government. This policy of reduction of public spending in the social housing sector will cause a reduction of affordable housing. Reduction of public spending will also have adverse consequences on employment levels. Since the social houses built will be less and the current number of people on the waiting to social housing being 5 million reduction of spending by the government would only aggravate the problem. This would create more pressure on the existing housing association as the demand of the social housing would surpass the supply. The increased pressure on housing association will lead to the formation of new partnerships by the housing association and the local government to reduce the gaps created (Hall & Gibb 2010).
The reduction of benefits and allowances to the vulnerable in the society will only increase poverty levels of the people who have been depending on the allowances. The property owner could also refuse to provide housing to people who depended on the housing benefits since they stand a high chance to default payment of rent. This would lead to increased homelessness and increased rent arrears to property owners. The dismantling of the national housing system and introduction of the local council with the help of housing revenue authority would lead to the creation of positive and negative subsidies in different local authorities. The introduction of a more flexible security of tenure will increase mobility to different tenures. This may reduce the number of people currently on the waiting list to join the social housing sector. However, it may increase the uncertainty of social tenants on their future tenancy (Alcock, et al 2012).
The policy adopted by Scottish government has led to introduction of National Housing Trust, which has led to many large-scale social housing developments. This has been successful due to the establishment of joint ventures between the private developers and the local council. These will steer the development of new affordable homes to low income earners and the vulnerable group in the society who are not in a position to afford the market rents. The Scottish government has developed clearer policies as regarding the new council housing. This has been the introduction of the construction and funding of 3300 new council homes. Legislation has also been passed to scrap the right to buy option (Beevers and Struthers 2011).
The introduction of Tenants Services Authority (TSA) as the new regulatory authority from the previous regulatory authority under Housing Association is a development that will bring order in the regulatory environment. The need to move from liberalism in the market to a more controlled market has led to introduction of the TSA. This regulatory authority will bring order in the social housing sector to provide affordable housing to the vulnerable in society. Homes and Communities Agency (HCA) was also introduced to facilitate funding for development of new social housing units that will meet the rising demand for social housing. The agency will also oversee the maintenance of the existing units to improve their status and ensure they are inhabitable.
The government should introduce both fiscal and monetary policies to reduce unemployment among the youth. This will increase their income and purchasing power of the people who will be able to afford proper living houses and improve their standards of living. By the provision of employment, the government will address the issue of unemployment, which will generally improve the economy. The government should also increase their social transfers to the vulnerable in the society like the old aged and the disabled. This would uplift their standards of living and facilitate reduction of poverty in these areas. This would facilitate the vulnerable group in the society to achieve decent housing and a better standard of living.
In conclusion, the housing policy has undergone various challenges under the coalition government that was elected in May 2010. These policy changes have elicited different reactions among different players in the provision of affordable housing. The Scottish government policy on provision of affordable housing has been clearer than the policy adopted by the London government. This has led to inefficiency and questioning of the policy adopted by the coalition government in addressing the provision of affordable housing.