A government that spends around £21bn each year on housing benefit does not know what contribution this money makes to the supply of new housing.
Now, a key Commons committee has put the DCLG on notice, wanting a report back within a year on identifying metrics that can be used to establish the full impact of housing benefit on building new homes and scope for this financing to be used more innovatively to increase housing supply and home ownership.
In a report, the Public Accounts Committee says it specifically wants to see research into the estimated £8bn in housing benefit a year spent on subsidising rents paid by tenants in the private rented sector.
According to the latest available data – dated to 2014 – the private rented sector had the highest proportion of non-decent homes (29%), compared with 14% in the social rented sector.
Acknowledging DCLG as accepting 29% is too high, the committee cited the department as seeming ‘reluctant’ to use the leverage from the money it is paying to private landlords to encourage the provision of accommodation comparable to the social sector.
The committee says DCLG and DWP should work together on research as to how many ‘non-decent’ homes in the private rented sector are being subsidised through housing benefit, the total amount of housing benefit this represents, and potential policy mechanisms for utilising this funding to raise quality.
Overall, the committee was told total government spending on housing amounted to approximately £28bn in 2015–16 – of this around three-quarters (£20.9bn) went on housing benefit.
Some £8.4bn of the spending on housing benefit went to housing associations, which use rental income such as this to borrow to invest.
However, neither the DCLG or the DWP was able to quantify to the committee the impact of this funding on the construction of new homes.
Another £8bn of housing benefit went to private tenants. While this funding subsidises rents it does not contribute to the financing of new social housing.
The committee also found the DCLG as not being transparent enough about its overarching housing objectives and the progress of individual programmes which will contribute to meeting them.
To the committee, DCLG did not announce publicly its ambition for one million new homes over five years was actually to be achieved in nearly six years, making it easier to achieve.
Neither did it announce formally that it had changed this ambition back to be delivered within five years, within a month of the National Audit Office’s January 2017 report.
The committee found only metric of progress towards the one million new homes ambition in the DCLG’s Single Departmental Plan to be a ‘backward-looking’ figure for net additions in the previous year.
And the department was said to be taking a similarly ‘backward-looking’ approach to judging its progress against meeting a commitment for a one-for-one replacement of council housing sold under the reinvigorated Right to Buy.
To the committee, this does not enable Parliament or the public to judge whether the department is on track while the department’s plans to develop metrics for public land disposal, and for the efficiency of the planning system were said to have been ‘very slow in coming’.
Going forward, the committee particularly wants the Single Departmental Plan to set out the cumulative total of net additions since the beginning of its one million homes ambition, showing how many homes need to be completed in future years; and how its individual programmes and spending are contributing to that ambition.
Housebuilding in England has been lagging behind demand for decades, and, while DCLG acknowledges the scale of the gap between supply and demand, the committee says its ambitions do not come even close to addressing it.
Between 2001 and 2010, for example, an average of only 144,000 new homes were completed annually—100,000 fewer per year than in the 1970s.
DCLG acknowledges that to make up for this long-term shortfall, and to keep up with population growth, between 225,000 and 275,000 additional homes are now needed each year.
Despite this, its ambition of overseeing the construction of one million additional homes over the five years of this Parliament equates to an average of only 200,000 net additions per year.
In the absence of any clear plans for raising supply further, the department conceded that the fundamental flaws in the housing system could persist for decades to come.
The committee calls itself “highly concerned” by this lack of urgency and ambition, most of all in view of the rising costs, both human and financial, of homelessness, specifically the additional strain on public spending.
Councils’ spending on temporary accommodation amounted to £840m in 2015–16, a real-terms rise of nearly half (46%) in just five years.
DCLG is recommended to publish an annually updated ‘housing gap’ figure showing the difference between the latest rate of net additional housebuilding and estimates of the rate required to meet demand as identified in its recent White Paper.
To the committee, a DCLG that acknowledges that the housing market is ‘broken’, it is still reliant on the market to achieve its housing ambitions.
The private housebuilding market is dominated by around 10 large firms, between them accounting for nearly two-thirds (around 60%) of new private homes and the Home Builders Federation agrees that such firms limit the rate at which they build to what they believe the market can absorb.
To DCLG, big housebuilders have little incentive to accelerate housebuilding through investing in innovative methods of construction.
In the housing White Paper, the government accepts that the housing market is ‘broken’.
But, to the committee, DCLG remains dependent on those big housebuilders to deliver its one million homes ambition, and accepts that its ambition therefore depends on the health of the wider economy.
And, to the committee, dependence on the market means even the social housing sector is increasingly reliant on profit from private sales to finance construction.
Local government stakeholders, meanwhile, complain that councils are being prevented from building more homes because of government policies which limit their ability to borrow.
However, the committee acknowledged DCLG remains confident that councils retain the capacity to build new homes, and that, in the event of a downturn, it had the tools to facilitate public investment.
The committee is also enthusiastic to see an increase in rates of self-build and other more innovative forms of housebuilding.
To aid acceleration, DCLG is urged to review international evidence and report to Parliament on lessons to be learned from the housing policy of other countries with higher rates of housebuilding than England – in particular focusing on innovative methods of accelerating construction and improving affordability.
Again, the committee expects a report back – this time within six months – offering estimates of how many homes councils will be able to build up to 2020 under current financing arrangements and details on what other, more innovative measures councils can pursue to develop new housing.