5 million people waiting for social housing by 2010

LGA media release - 16th May 2008

A new report by the Local Government Association published later today warns that the impact of a slowdown in the economy combined with the credit crunch could lead to two million households, or 5 million people, on the waiting list for social housing in less than two years.

The report by council leaders analyses academic and social policy research on previous and future economic downturn and warns that a series of inter-related economic factors are creating unprecedented demand for council and housing association homes, which councils are struggling to meet.

Concerns have been raised by council leaders that the bank’s aggressive lending policies over recent years have overheated the economy and brought misery to borrowers. The LGA is also concerned by the failure of the recent cuts in interest rates by the Bank of England and the £50 billion bail-out extended by the government to cash-strapped banks have not been passed on to consumers.

The report finds that factors which are set to push up the demand for social housing include:

• An increase from 1 million in 2001 to 1.6 million households - or four million people - last year on social housing waiting lists.
• House prices rising by 156 per cent in ten years while wages have risen by just 35 per cent.
• Around 40 per cent of new mortgage offers withdrawn and deposits needed to get a mortgage have increased, making it harder for first-time buyers to get on the housing ladder.
• Second lowest mortgage approvals in 13 years, reducing demand for new-build where affordable housing is built.
• A 16% increase in repossessions compared to same period last year as people fall into negative equity or are made redundant.
• Housing associations struggle to secure loans to create new affordable housing due to the credit crunch.
• Developers reduce the amount they build and consequently the amount of new affordable homes reduces.
• Local authority and housing association new-build over the last decade is at its lowest since 1947.

A new survey by the LGA of Council Heads of Housing also found that two out of three blamed large increases in house prices for increased demand in social housing. Nearly half insisted that their current allocations policy cannot cope with the increased demand in social housing. Nearly half also said lack of housing stock was the main challenge facing councils in housing allocation.

To alleviate some of the pressures on the current social stock the LGA is call on government to:

• Allow councils to borrow on the open market in the same way that Housing Associations have freedom to borrow.
• Reform housing finance to enable greater freedom in the way that councils fund their housing through so-called ‘capitalisation’ – whereby local authorities can re-mortgage their assets to invest in house-building.
• Give greater flexibility for local authorities to allocate housing based on local area need.

Chairman of the Local Government Association Environment Board, Cllr Paul Bettison, said:

“With the banks overstretching their credit facilities it could well mean that in the coming months that councils will have to help pick up the pieces as people end up on social housing waiting lists.

”The days of excessive lending and risk-taking, which lead to this credit crunch may be over, but consumers have yet to see the government’s £50 billion bail-out to cash-strapped banks filter down to mean lower borrowing rates for potential homeowners.

 “Even when the economic good times were rolling, councils saw ever increased pressure on their social housing stock. Now that the credit crunch is upon the country it appears that many thousands more people will be looking to councils to provide them with a permanent home as they either find it impossible to get on the housing ladder or see their home repossessed.

“With on average every year 90,000 more households joining the ever increasing social housing waiting list over the seven years, experience has taught us that demand will grow even faster.

“Councils want to provide decent homes quickly for those who cannot afford to rent in the private sector or buy their first home but have been hamstrung by the lack of freedom to borrow off council assets in order to invest in building or buying new homes for those who need them most.
 
“Although house prices are slowly falling, they are still beyond the reach of many. The slowdown in private sector house building will eventually affect that amount of affordable housing that is being built. This will mean fewer new social homes at a time when there will be more demand for them.

“Social housing has to be a top priority because the harsh reality is that fewer people are getting on to the housing ladder.”

Author: LGA Media Office
Contact: Richard Stokoe, 0207 664 3225

NOTES TO EDITORS:

A copy of the full report is available here: Councils and the housing crisis

The predicted overall impacts on councils of an economic downturn are:

• More pressure on social housing due to fewer houses being built and increases in homeless people.
• Failure to pay council tax due to more people building up debts.
• More people on benefits due to increased unemployment.
• More demand on social care due to decrease in equity in homes which many retired people use to pay for care homes.

Waiting lists for council or housing association homes have nearly doubled in London and the South-East. In London, where the queues are longest, the waiting list went up from 178,660 in 1996 to 333,860 last year. Overall, queues in England have lengthened from 1,062,180 households in 1996 to 1,674,420 last year, a jump of more than half.

In response to the 1992 crash, housing market packages were introduced to capitalise on the housing market recession. A select group of housing associations were given 100 days to spend £557 million of government grants, plus £400 million of private cash on 180,000 empty homes, which had already been built.
 
There were nearly 75,540 properties repossessed in 1991, 68,540 in 1992, 58,540 in 1993, and 29,990 in 1999, compared to 44,895 predicted for 2008.