Will Privatization Of Public Housing Ease The Housing Shortage?

By Author: Bradley Weiss
Total Articles: 272
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Several Government changes relative to housing associations suggest they will cease to deliver homes as needed. Private investors might be the only builders.



Several significant factors in the UK housing association sector have cast doubt on whether the growing need for housing would be abated. Indeed, these factors suggest this need will not be met if trends continue.



The Government’s abdication from supporting housing associations comes at a time when private investors’ interest in house building is growing. Alternatively, from the private sector, real asset funds seek land where it can be acquired and where planning authorities will allow for building. This is where standard supply-demand dynamics play well: with high demand come higher real returns to those funds.



But at the lower end of the market, lower income families are seeing diminishing opportunities to find housing. Consider what has happened in 2015 alone:



• In October, the Office for National ...
... Statistics reclassified housing associations as non-financial public corporations. This effectively places £60 billion of privately procured housing association debt on the Government’s balance sheet. Observers speculate Chancellor George Osborne will then try to get this debt off the public books by selling it to private investors, or remove regulator burdens on housing associations that in effect enable them to become commercial property companies - setting rents as they wish. Note that Germany’s experience with privatisation (selling to large investors that included Vonovia, Fortress and Cerberus) resulted in one million fewer social dwellings and an overall increase in housing prices.



• A few months ago, Chancellor Osborne surprised many with a forced rent cut of 1% on housing associations, in contrast to the 1% increase plus inflation as they expected. Subsequently, a survey of providers by the Homes and Communities Agency found that the associations curtailed investment plans by about £1 billion for 2015, believed to be a consequence of this rent cut. This decrease is spread across more than 200 landlords, not due to a single large drop in individual plans.



• One of London’s largest housing associations - Genesis, which owns and manages 33,000 homes in the city and the South East - announced in August it would discontinue building social housing. Contributing to this, according to an article in The Guardian, were the Government’s decision in 2010 to cut funding for social homes by 60%, and welfare reforms that reduced tenants’ ability to pay rent.



To the dismay of social housing advocates, Genesis will build homes for sale and rent at full market rates.