is social housing subsidised?

squinty

There have been a number of threads recently where there have been different points of view on whether social housing is subsidised.

There is no simple answer to this, but I thought it could be helpful to explain the differences.

1. Council Housing.

Council housing finance is complex. Before the election all major parties committed to simplify this. However the current situation is that the government make a calculation for each local authority. This takes account of 2 factors:

Firstly, the income. This is the amount of income that the government expects the council to receive if they are receiving target rents (i.e. the rents set by following a government formula). It is worth noting that this is a notional figure.

Secondly, the costs. Another notional amount. This is based on the governments calculations based on the cost of management and maintenance of the properties. This is influence by the numbers of type of stock, where the council is located etc.

The government then work out the difference between the notional income and the notional costs. If the costs are more than income the council receive subsidy - if it is the other way round the council receive negative subsidy (ie they pay the government). More is paid in than paid out. The main `winners' are London Councils and large metropolitan councils.

Answer - most council housing is not subsidised by the taxpayer, but some council tenants subsidise tenants in other areas. Overall, council tenants subsidise tax payers.

1. ALMO's

ALMOs or Arms Length Management Companies manage the stock on behalf of councils. If they reach a good standard they may receive additional money from the government to ensure that homes meet the Decent Homes Standard.

It is very possible that at the same time as receiving funding that the council is in negative subsidy.

Answer - in the short term there probably is some subsidy. In the longer term see council housing.

1. Housing Associations.

Housing Associations are not-for profit organisations who own and/or manage homes. Some are involved in other activities, these may include market rent schemes or running care homes. They may cross subsidise housing from other activities.

Whilst housing associations do need to follow a similar formula to councils in order to calculate rents, they are not part of the national housing revenue account system and are able to retain any profit.

When looking at subsidy for housing associations it is simpler to make a distinction between existing stock (including the properties transferred from councils) and new build.

Existing Stock is not subsidised by the taxpayer.

New Build needs more explanation. If a HA are building new properties for rent, they need to know that the rents will be affordable and fit within the government calculations - i.e. to produce an affordable rent for a certain property type in an area there is a maximum value they can pay for the property - this is usually less than the market value or build cost of the property.

The gap between what is affordable to the association and the cost of the property can be filled in a number of ways:

• The local authority may give land to the association at little or no cost.
• The association may cross subsidise schemes from within their own costs and/or from commercial activities
• There may be grant available from the Homes and Communities Agency (previously the Housing Corporation).

It is very unlikely that the HCA will provide all the gap funding, unless the local council and housing association both also make contribution. Not all developments receive HCA funding.

Answer - Housing Association existing stock is not subsidised by the taxpayer. Housing Association new build may be subsidised.

There are, of course, a number of exceptions to the general rules above - for example last year a small number of local authorities received subsidy for some new build properties. This does, of course, not include Housing Benefit as a subsidy.

I hope this is useful for people to understand the funding of social housing. Apologies for the length of this

FOURCANDLES_2

Some one will be along soon to disagree , However very good and interesting post.

PasturesNew

squinty wrote: »

The government then work out the difference between the notional income and the notional costs. If the costs are more than income the council receive subsidy - if it is the other way round the council receive negative subsidy (ie they pay the government). More is paid in than paid out. The main `winners' are London Councils and large metropolitan councils.

Answer - most council housing is not subsidised by the taxpayer, but some council tenants subsidise tenants in other areas. Overall, council tenants subsidise tax payers.

So where do the Govt and the council get their money from that they're passing back/forth??

Er, the taxpayer.

Svenena

Thanks for posting this, it's useful. I have a question though - why do not-for-profit HAs exist? Why would someone run a business which didn't make a profit? Did people just decide to set them up to be charitable type-thing? I'm talking ones which aren't newbuild or affiliated with councils here.

poppysarah

LHA would be better paid to a council rather than private landlords...

Is there a total for entire LHA to private/social housing?

tbs624

Svenena wrote: »

Thanks for posting this, it's useful. I have a question though - why do not-for-profit HAs exist? Why would someone run a business which didn't make a profit? Did people just decide to set them up to be charitable type-thing? I'm talking ones which aren't newbuild or affiliated with councils here.

"Not for profit" doesn't mean they don't actually make a profit. It just means that there are restrictions on how they can use their surplus funds

PasturesNew

New developers get PP to build, by providing some free/cheap housing ... paid for by the sale of the private ones they're building.

So individuals are subsidising it ... a secret housing tax on people not lucky enough to be high enough on the list to get a freebie.

squinty

PasturesNew wrote: »

So where do the Govt and the council get their money from that they're passing back/forth??

Er, the taxpayer.

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No. Only the rents from Council tenants is included within the national scheme.

Svenena

What kind of restrictions are we talking about? I guess some invest it in buying more properties? But even then, if it's just creating further social housing, rather than lining people's pockets, isn't it still a mostly altruistic thing?

Wee_Willy_Harris

PasturesNew wrote: »

New developers get PP to build, by providing some free/cheap housing ... paid for by the sale of the private ones they're building.

So individuals are subsidising it ... a secret housing tax on people not lucky enough to be high enough on the list to get a freebie.

No. The developers foot the cost. Developers charge the maximum they are able to while spending the minimum. In between those two amounts are their profits. If costs rise, their profits drop. Simple.

squinty

Svenena wrote: »

What kind of restrictions are we talking about? I guess some invest it in buying more properties? But even then, if it's just creating further social housing, rather than lining people's pockets, isn't it still a mostly altruistic thing?

Any surplus must be used to further the objectives of the association.

All Housing Associations are not for profits, and most are registered under Industrial and Provident Societies Acts as Businesses that are for "the benefit of the community", these work in a way similar to charities.

Have a look at the National Federation of Housing website for more information