Truly Affordable Housing? Public Sector Can Do it Better . . . Or Maybe Not.

vacant lot
Woolwich, Beresford St - Macbean St vacant lot photo by Kleon3 is licensed under CC BY-SA 4.0
Regardless of whether social housing is publicly- or privately-built, good management is critical.

Who can best build truly affordable housing for low- and no- income citizens? The private sector? That’s been a popular government assumption, tried and tested in Public Private Partnerships (PPPs) where Public puts up the bucks and Private demonstrates how they can do it better. That is, “better” when it comes to building highly profitable not-so-affordable housing with tagalong caboose-sized handfuls of social rent housing add-ons — all there is to show for significant public investment.

One result: in some countries there has been at least a verbal backlash to an unfulfilled “private sector can do it better” mantra. That’s been a foundation of truly affordable housing construction for a quarter of a century and more in countries where Thatcherite “small government” philosophies have dominated regardless of the political party in power.

Here’s an example of an Irish city council’s indignant backlash. Dublin has totted up the costs and benefits of contribution to private enterprise housing schemes and now cries out for a public do-it-yourself solution for truly affordable housing. Try: Council-Built Housing: Pure Tomfoolery or Plain Good Sense?

A more recent article quarrels with this council presumption: Read more in the Irish Times:  Idea that only councils should build social housing is nonsense

It’s certainly seems left-leaning city councils with hands-on ambitions should beware. Life’s not that simple. In the United Kingdom, a growing number of city councils have decided that they can manage their social housing needs by setting up their own arms-length development countries.

A recipe for success? Not necessarily.

Maybe The Public Sector Isn’t Capable of Doing It Better

Here’s an article describing how the London Borough of Merton Council, has just finished scrambling to scrap just such a wholly owned council-owned housing company. Read more in Inside Croydon: Merton scraps building company to avoid Brick by Brick failure

Merton’s fear? That they, too, will suffer the mammoth cockup that has occurred in nearby Croydon. There, the lean, mean council housing machine envisaged by starry-eyed local politicians has imploded into a black hole of debt that has effectively bankrupted the borough. Read most recent news on the calamity in the Thornton Heath Chronicle: Brick By Brick Affordable Homes Sold In Deal Worth £29M and/or an earlier tale of woe in Inside Croydon: The Audit Report: Brick by Brick has paid nothing to council

But Could There Be Other Reasons For Failure?

It’s important to remember that housing associations and councils do not operate in a vacuum. The policy and funding support English councils and housing associations receive from their national government has changed substantially in the past decade.1

In 2010, the level of support actually encouraged local councils to think about building more affordable homes and seeing an end to homelessness.

In 2020, local councils continue to be duty bound to assist rough sleepers and families with children who are homeless when they ask for assistance. However, the funding they used to receive from the national government to assist people experiencing homelessness has largely vanished. Local councils today have more latitude to decide how they will assist people who are in housing difficulty than they did 10 years ago, but with much less national funding.2

On the new construction side, the rules governing the national funding to local housing bodies (whether councils or housing associations) changed recently with no notice. The changes raised the lending rate for borrowing from the national government. Councils and housing association are required to pay more for money they had borrowed or are expecting to borrow from national government for new housing construction. This completely changed the economic feasibility of building the housing, and made it impossible to proceed with many of the new housing projects that were in the pipeline.

Meanwhile, the terms of social assistance were also changing. This directly impacted people living in housing in the private rental sector. Some of the changes make it much more difficult for people to continue to keep their housing. For example, under the new social assistance program, all claimants wait for a minimum of five weeks before their first support payment is issued. Further, assistance is provided for no more than two children in a household. These changes have tipped thousands of households into homelessness and seeking assistance from their local council. Councils have been much busier finding temporary accommodation for newly homeless households, leaving much less time and resources to build and manage permanent housing.

Certainly There is One Moral To This Story:

Good intentions are not enough to create a successful affordable housing operation, whether the end product is juicy private profit or better bang for the public buck. A prerequisite, it would seem is an excellent development/building manager, together with excellent management of that manager.

Footnotes

  1. These examples clearly don’t apply to Dublin, but they do illustrate that external challenges can defeat even the most determined council.
  2. National funding for other Council programs has also been cut.

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