Government fiscal watchdog, the Office for Budget Responsibility, predict that social landlord rents will be 12% lower in 2020 than previously expected prior to the July budget announcement.
This is as a result of reforms to the budget which will require social landlords to reduce their rents by 1% a year over the next 5 years – a stark contrast to coalition promises made in 2014 that allowed landlords to raise their rent charges based on inflation predictions over the next 10 years or so.
Chancellor George Osborne explained the decision as an effort to end the ratchet effect that have steadily inflated the housing benefit by 21% (up to £24.2bn) since 2010.
Many housing bodies have expressed disapproval for the changes, with many fearing that the cuts being made to UK social housing will result in a £2.6bn loss for local councils over the coming 5 years.
Umbrella body the National Housing Federation have suggested that - as a direct result of the Chancellor’s cuts - a minimum of 27,000 housing association homes in planning will be cancelled at a time when the country is in dire need of housing to meet demand.
Credit rating agency Moody’s stated that Osborne’s cuts would lower the annual turnover for housing associations by up to 7%, depress operating margins and steadly erode cash reserves.
The Local Government Association (LGA) think that the Conservatives should lift the current cap in place on council borrowing in a bid to assist local authorities in funding the delivery of more quality affordable housing.
Local Government Association chairman LGA Gary Porter “if we are to see the crucially needed numbers of homes built, councils must have a lead role in house building and be allowed to reinvest in the homes and infrastructure that they are best placed to help deliver.”