Social Housing Finance
I attended a presentation on Lewisham’s Housing policy last night and was wondering why the lifting of the borrowing cap wasn’t more effective. Here are my notes on social housing finance.
It would seem that the problem is that homes cannot be built in Lewisham, for rent or sale at a living rent price if the price to build includes the cost of land acquisition. (This is without repaying the loan, this just the cost to borrow; £500K @ 3.5% over 25 years = £437.5K, which is £1,460 per month just for the money.)
Should it? Tenants should pay the costs of maintenance + a margin payment representing an opportunity cost payment i.e. interest on the loan for the cost to build and any service charges but what effect does that have on capital management? The home’s owners only replenish the finance capital stock after the loan is complete, but the shorter the loan period the more expensive the required rent charges and should tenants alone replenish the capital account?
It has been an axiom in justifying social benefits that its from each according to their ability to each according to their needs. People need a home, and if they pay for it, it ceases to be a benefit which changes the contract between a social landlord and their tenants. It’s an important part of the social contract that social tenants cover their costs.
- Projects must be self financing. (This is the law and so of course can be changed by a Labour Government.)
- If the land remains socially owned, tenants shouldn’t pay for it.
- Mandatory sales at below market rates makes managing the stock in terms of project finance difficult. i.e. it’s not just housing list management that’s the problem.
- Land is too expensive.
- The only way to equitably finance social houses where land costs are as high as in London, is to build for sale or private rent and cross subsidise the social houses. (Or should we means test the rents? Surely not.)
- Otherwise redevelop estates where the Council is the Landowner
I suppose I should model the effect of a 20 year finance project against a 30 year tenancy, but I would need a living rent figure to do that. Here is a mirror of the spreadsheet from the GLA site.
The Labour Party have commissioned some research into Land policy, the report, Land for the Many , subtitled “Changing the way our fundamental asset is owned, used and governed” and written by Monbiot, Grey, Kenny, Mcfarlane and others, is here, and mirrored here.
If anyone reads this and has any ideas for reading please let me know via the comments section.
The featured image is one of mine, from Karl Marx Allee in Berlin, built by Socialists.