While much of the focus has been on the private rental market and the impact on private landlords and tenants, maybe we should look at social housing. Since the 1980s when the right to buy scheme was introduced by the then Conservative government, successive governments have continued with this huge sell-off. It was only recently that some areas of the UK withdrew the right to buy council housing despite the fact this had been decimating social housing stock for years. So, how will social housing be impacted by the coronavirus going forward?
Huge stock shortfall
It has been common knowledge for many years now that councils up and down the country have been running on relatively low levels of social housing. Even the introduction of housing associations has not had a major impact on the supply and demand ratio. Indeed, over the years we have seen a significant amount of council housing stock transferred to housing associations. This effectively takes social housing stock off the council’s books while also taking advantage of government funding available to housing associations.
Recent governments have promised to increase social housing stocks but so far we have seen minimal impact in the wider context. As a consequence, when more and more private tenants are unable to cover their monthly rental we will see even greater demand for social housing stock.
Rental income for local authorities
As with private landlords, many of whom are facing significant write-offs against tenant rental arrears it is safe to say that many councils will also face similar challenges. Indeed a number of councils have brought forward their “rent free 2 weeks” to cover the coronavirus and at least try to maintain as much of their rental income as possible going forwards. However, behind-the-scenes councils are ready for a deluge of cries for assistance once the lockdown is over and the economic impact becomes clearer.
In many ways this is a double whammy for local authorities, many will need to write off rent arrears and tenants will need to use the universal credit system to cover rental payments in the future. It isn’t difficult see that there will be a huge squeeze on local authority budgets in the short to medium term with a likelihood that council taxes will increase significantly. This in turn will impact taxpayers who will see their direct and indirect state contributions increase for many years to come.
Release housing budget funding
If we cast our minds back to the December 2019 election, Boris Johnson made huge promises with regards to social housing (as did all parties) and affordable properties. While this was supposed to be spread over the next five years, there are growing demands for as much of this money as possible to be released now. Whether this will challenge government debt/budget commitments, in light of the £330 billion budgeted and open-ended coronavirus support, remains to be seen.
What we do know is that with social housing stock in limited supply, this will place greater pressure on the private rental sector. However, this is a sector which has been hit hard with tighter regulations and ever-growing tax liabilities in recent years. Figures also suggest that over the last 12 months we have lost 500,000 properties from the private rental market as a consequence of tax/regulatory changes.
Governments were warned about limited social housing stock, minimal newbuilds and the ever-growing tax/regulatory burden placed on private landlords many moons ago. While nobody could have foreseen the huge health, economic and social consequences of the coronavirus, a lack of planning by the UK government and local authorities has been laid bare. This will almost certainly place greater pressure on the private rental market and normally the authorities would sweeten this pill with reduced taxation. However, in the short to medium term government debt needs paid back, interest will pick up significantly and tax income streams have been decimated.
Can the government really afford to offer any financial assistance to private landlords?