Chair's Blog

Ministers must think of housing as national infrastructure - not as an addition to national debt

The Spring Budget next month comes with extra baggage, as rumours swirl about the possible date of the next General Election.

With speculation about pre-election tax cuts rife, a key question remains. Will the Government take the necessary measures to ease the financial pressure on our housing system, and wider public sector?

For a glimpse into the severity of the strain our councils are under, you needn’t look further than the headlines. Local authorities across the UK continue to face increasing demand for services at a time when government grant has dropped by 40 per cent. Six councils have declared themselves bankrupt since 2021, with a raft of others warning they may have to do the same.

A day after the chancellor’s autumn statement, the Institute for Fiscal Studies said the £20bn package of tax cuts was almost entirely funded at the expense of public spending planned from 2025.

Housing associations do more than manage and build affordable housing. We are anchor institutions who are rooted in communities. Guided by ethical values, our spending decisions from charitable grants to procurement can support local economies to grow in a just and sustainable way. But as the public sector recedes, we can’t become the last bank in the village.

The first responsibility of any housing association is to provide quality, affordable homes in which people can live comfortable, healthy lives. We have committed to investing significant sums to bring our homes and services in line with changing regulatory standards.

But the costs of operating, borrowing and living remain high. We’re seeing repairs and maintenance costs up 17% and new build costs up by 25%. That’s on top of growing costs for gas, which are expected to rise by a staggering 573% from 2021/22 to 2023/24.

At the same time, sustained cuts in public spending are driving more of our residents to come to us for support. The L&Q Foundation is prioritising the essentials, helping residents sustain their tenancies, manage their finances and access employment and training opportunities.

We are here to help, but we need to be clear about what our role is, and the help we can provide effectively. Housing associations have a strong track record as service providers, but we can’t step into the shoes of the expert agencies we work with. We work at our best when we partner with others at a local level, from councils, health providers and voluntary organisations, to the police, ambulance and fire services.

Every penny has to go further. That’s why we’re looking at our supply chains and the social value we can generate through our procurement activities. In 2022/23, we generated £690,000 of community investment as part of our 15-year £3bn Major Works Investment programme. A new social value requirement will be part of every contract we sign.

However tough it’s becoming, as a sector, we cannot walk away from our responsibility to build new homes either. This is illustrated most vividly by the NHF’s predictions that by 2045, social housing waiting lists will grow to 1.8 million households and the number of children living in temporary accommodation will rise from 131,000 to 310,000.

How do we address this? Long-term certainty over our finances would be a start and would help to build investor confidence. We need consistency in the next rent policy framework, including a convergence mechanism so we can build back our finances after years of rents being capped below inflation. But something more fundamental is also needed: a shift in the Treasury’s mindset about what spending on housing actually is.

The current practice of treating investment in the same way as day-to-day spending leads to short-termism and missed opportunities in the name of "fiscal responsibility".

Our house-building efforts are currently regarded as borrowing or grant, and a drain on the economy rather than the creation of an asset. We need to shift our outlook and think of building social housing as something which contributes to our national infrastructure rather than adding to national debt.

Making the case for long-term investment isn’t limited to tackling the immediate and critical issues of undersupply and affordability. Every £1 invested in social housing delivers at least £2.70 in economic benefits, supporting long-term growth and underpinning local jobs, skills and supply chains.

New research from the New Economics Foundation reveals that the government is set to subsidise the private rental market by more than £70 billion over the next five years. Money that could be spent on building new homes, creating jobs and bringing down expenditure is instead flowing to private landlords.

We need to build to save with many more social rented homes, which will save councils massive sums in temporary accommodation costs. It will also give the 131,000 children currently without a permanent address a foundation for getting the best start in life. What would that mean for their health, wellbeing and economic prospects, as well as public spending in these areas?

The Spring Budget, and any decisions made after the next General Election, are an opportunity to grasp the potential of investing in our homes. If political parties of all stripes make a long-term commitment to housing and partnership working between housing associations, national and local government, we can finally start to imagine a future where everyone has a place to call home, in a community that supports them to live well.

You can also read more here: Ministers must think of housing as national infrastructure - not as an addition to national debt