is social housing subsidised?

CLAPTON

squinty wrote: »

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

clearly we have a very different idea of what a 'subsidy' is.

COUNCIL HOUSING : nowhere do you actually mention REAL costs or REAL income nor do you mention the MARKET rate for the properties.

ALMOs : again no real mentiopn of REAL money.

HA: basically tha same above

neverdespairgirl

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.

there are lots of not-for-profit businesses.

BUPA is one, for example.

Wee_Willy_Harris

CLAPTON wrote: »

clearly we have a very different idea of what a 'subsidy' is.

COUNCIL HOUSING : nowhere do you actually mention REAL costs or REAL income nor do you mention the MARKET rate for the properties.

ALMOs : again no real mentiopn of REAL money.

HA: basically tha same above

The applicable costs and revenues are set by central government and work, if you like, as a target. Those LAs not meeting those targets will be fianncially penalised by the impact this will have on the cost/revenue calculation. Those who exceed those targets will benefit in the same way. It encourages things like efficient rent collection and timely repairs. Why should the LA who collects 98% of rental liability not see the benefit of that efficiency compared to a neighbouring LA who collect only 90%? Tenant satisfaction scores are also recorded to ensure that the service meets/exceeds expectations.

neverdespairgirl

In the borough where i live, there is a massive subsidy for social housing that I don't think the OP mentions.

If you build anything above 15 units of housing, either in one development or in linked developments, half of them have to be social housing, and sold by the builder to the HA / Council at a knock-down price.

terryw

The figures always become very skewed as no account appears to be taken of the actual capital cost of building the dwellings in the first place. This is usually borrowed and taking historical average interest rate and repayments of capital into account it is virtually impossible for the dwellings not be subsidized.

The original charitable artisans dwellings were established as trusts and they probably are not subsidised as, of course, the capital cost was donated or bequeathed by the philanthropists, consequently there is no need to take any capital repayment costs into account.

A_Nice_Englishman

Rents for social housing seem to be significantly lower than those for privately rented properties.

Looking at it simplistically, either social housing is subsidised or private landlords are making excessive profits - something I'm sure they would dispute!

Wee_Willy_Harris

neverdespairgirl wrote: »

In the borough where i live, there is a massive subsidy for social housing that I don't think the OP mentions.

If you build anything above 15 units of housing, either in one development or in linked developments, half of them have to be social housing, and sold by the builder to the HA / Council at a knock-down price.

That's not a subsidy, that's a planning condition and a cost of development. In much the same way that the developer will pay the brick merchant, not subsidise him.

Wee_Willy_Harris

terryw wrote: »

The figures always become very skewed as no account appears to be taken of the actual capital cost of building the dwellings in the first place. This is usually borrowed and taking historical average interest rate and repayments of capital into account it is virtually impossible for the dwellings not be subsidized.

The original charitable artisans dwellings were established as trusts and they probably are not subsidised as, of course, the capital cost was donated or bequeathed by the philanthropists, consequently there is no need to take any capital repayment costs into account.

Housing Associations are probably more transparent from a financial point of view and, almost without exception, run at a surplus. That surplus is then used to fund new build projects. They can also borrow against rental income in the same way that a business can.

terryw

Wee_Willy_Harris wrote: »

That's not a subsidy, that's a planning condition and a cost of development. In much the same way that the developer will pay the brick merchant, not subsidise him.

That just semantics. The developer is compelled to provide cheap housing to the council/HA, and in turn he must charge more to the private buyers to cover his costs. Effectively these private buyers are subsidising the tenants.

Svenena

A_Nice_Englishman wrote: »

Looking at it simplistically, either social housing is subsidised or private landlords are making excessive profits - something I'm sure they would dispute!

I don't know about excessive, but landlords are making large profits, surely? Well, maybe profits isn't the right word, but if there was no mortgage involved, they would me making quite a lot of money (after costs are taken into account), right? And if they are not making much (or any) money after paying mortgages, they are at least getting that mortgage paid, therefore in effect having a house bought for them?

Landlords usually go into it to make money, yes? Therefore it must be fairly profitable, or would not be done.

Of course I could be totally wrong. This is all a little over my head.