Housing benefit bill could increase by £210m

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Published by Rebecca McAdam for 24dash.com in Housing and also in Local Government

Friday 29th January 2016 - 8:19am

At least 80,000 social rented homes could be lost by 2020 unless councils are given greater powers to build new homes, new analysis from the Local Government Association reveals.

The LGA estimates this drop in affordable council rented housing would shift spending from bricks to benefits by driving up the housing benefit bill by £210m by the end of the decade as more families move into the more expensive private rented sector.

Town hall leaders forecast that 66,000 council homes will be sold to tenants under the existing Right to Buy (RTB) scheme by the end of the decade, with current complex rules and restrictions making it difficult for councils to rapidly replace the majority of these homes sold. Councils only keep a third of sale receipts to build new homes and have long argued for the ability to retain 100% of receipts locally.

The LGA predicts councils could then be forced to sell a further 22,000 ‘high value’ homes in order to fund plans to extend the scheme to housing association tenants, although this number could be higher depending on how government chooses to define ‘high value’.

The LGA is warning that some new housing measures, such as the loss of £2.2bn from council housing budgets by 2020 as a result of social housing rent cuts, risk making building any replacements all but impossible.

It estimates that 80,000 of these 88,000 homes sold under Right to Buy by 2020 will not be replaced as a result.

This fall would also increase rents across housing markets making it more difficult for working families to save for a deposit to buy their first home. Separate new research for the LGA by Savills shows the average first time buyer now needs a deposit 116 per cent greater than their annual income to get on the housing ladder.

The LGA, which represents more than 370 councils in England and Wales, believes the extension of RTB to housing association tenants should not be funded by forcing councils to sell-off their social housing. Councils should retain 100% of receipts from any council homes they sell and Right to Buy discounts should be set locally to reflect local house prices, it said.

Local government leaders insist this is the only way to ensure councils can replace vital homes and reinvest in building more of the genuine affordable homes our communities desperately need and which are crucial to keeping rents low, reducing homelessness and tackling council waiting lists.

Cllr Peter Box, LGA Housing spokesman, said: “Councils want to help the government shift spending from benefits to bricks and support measures to help people into home ownership but the Right to Buy extension must absolutely not be funded by forcing councils to sell off their homes.

“Not everyone can afford to buy. With 68,000 people currently living in temporary accommodation, annual homelessness spending of at least £330m and more than a million more on council waiting lists, it is clear that only an increase of all types of housing – including those for affordable or social rent – will solve our housing crisis.

“As a minimum, we forecast that 88,000 council homes will be sold up to 2020. There is a real risk that complex rules and restrictions will combine with certain aspects of the Housing and Planning Bill to have the unintended consequence of making building replacements almost impossible.

“Councils have long-called for the ability to replace housing sold through Right to Buy quickly and retain 100% of receipts from all sales. This is imperative to ensure that councils can to reinvest in rapidly building the homes that people in their areas desperately need.”