Earlier on in the year we were informed of the newly elected government’s legislative plans. While we still don’t have any concrete time scales on Right to Buy, there are two Bills scheduled for the Autumn session which will have a major impact on the sector.
The key Bill for our sector is the ‘Welfare Reform and Work Bill’. Amongst others, the Bill seeks “to make provision about the benefit cap; to make provision about social security and tax credits and to make provision about social housing rents”.
The First Reading of the Bill took place in the House of Commons on 9 July 2015. The Second Reading then took place on 20 July, when MPs debated the main principles of the Bill. The next step will be further examination of the Bill at the Public Bill Committee and this is due to be concluded by Thursday 15th October, but may finish earlier.
The Bill outlines how the Government aims to deliver £46.5bn in savings from the welfare budget, with £12bn projected to occur over the next two years. The savings will largely come from cuts which include:
- The income threshold in tax credits will be reduced from £6,420 to £3,850.
- The rate at which a household’s tax credits are reduced as they earn more will be raised, by increasing the taper rate to 48 per cent, and the income rise disregard will be reduced from £5,000 to £2,500.
- The benefits cap will be lowered from £26,000 to £23,000 for those living in London and £20,000 for those in the rest of the country.
- Tax credits and Universal Credit will be restricted to two children for families who have a third or subsequent child after April 2017.
- 18-21 year olds will no longer be automatically entitled to housing benefit.
There are concerns that the proposed cuts are going to impact the most vulnerable in society. The Social Mobility and Child Poverty Commission says any cuts to tax credits will cut the incomes of 45% of working families. Children’s Society also fear that restricting child tax credits will increase child poverty.
The Bill also outlines that rents paid in the social housing sector will be reduced by 1% a year for the next four years. This will likely be positive news for many current social tenants, however the proposal has not been welcome by all within the sector.
There are fears that the change will have an impact on the number of new homes that can be supplied by Housing Associations and Local Authorities. The Office for Budget Responsibility suggested that 14,000 fewer affordable homes will be built. The result will be a further strain on Registered Providers, potentially undermining their Business plans and their long term forecasts.
Another Bill which will be important for the sector is the ‘Cities and Local Government Devolution Bill’. The Bill is designed to allow for the devolution of powers (housing, transport, planning and policing) from the UK government to some of England’s towns, cities and counties. The Third reading which was the final chance for the Lords to change the Bill took place on 21 July. The Bill will now be taken to the House of Commons for its consideration.
The Bill will also allow for the introduction of directly-elected mayors to combined authorities, however following opposition from Labour and Lib Dems, this will no longer be mandatory. Cornwall is expected to be the first county to adopt this Bill and Greater Manchester is expected to be the first city region to elect a “metro-mayor”. As the powers are offered to combined local governments, criticisms of the Bill include fears that smaller towns will be “lost” under a devolution deal.
Altair is very much part of the debate in this area, with Altair partner Steve Douglas part of the Northern Commission for Housing, which will inform a clear overall approach to housing and regeneration strategy taking into account Northern markets and opportunities.