Housing associations: Myth vs reality
Created on Friday, September 4th, 2015
by Peter McCormack
Following an election where housing finally became a campaign issue, housing associations have found themselves on the back foot facing four years of rent reductions and potential stock depletion through right to buy. With the media painting an increasingly negative picture of social housing and the companies that provide it, I’m taking a look at some of the myths that surround affordable housing and want to highlight the importance of the work being done to try and address the housing shortage.
Housing Associations are anti-home ownership
While many of the 27,000 homes Derwent Living owns and manages around the country are rental properties, we and many other providers also help people on to the housing ladder through a scheme known as shared ownership. Shared ownership allows people to gradually build equity in their home while paying rent on the part they don’t own.
We have provided over 300 new shared ownership homes in the last five years and have around 1200 in management. We also sell around 25 empty properties each year to home buyers. The money that Derwent Living receives from the sales and rental goes towards funding the building of more affordable homes, which eases pressure on the housing market and in turn makes home ownership more affordable for everyone.
You’re using public money to build homes, why shouldn’t we be able to buy them under right to buy?
Housing associations aren’t public bodies, but private entities. Derwent Living is a private company with commercial subsidiaries offering many services to different markets. We sometimes get a small percentage of public funding (around 25% comes from the public purse) in our core business for new homes but the overwhelming majority comes from money raised through our own sources, mainly borrowed from banks and building societies. We think it will be difficult to provide replacements for houses sold under right to buy and selling off homes we already have means we have fewer homes to rent out, and less borrowing power to build more.
Do you still build homes? Where does all the money come from?
Housing associations as a whole have continued to build throughout the difficult financial climate of recent years; however some have stopped or reduced the size of their programme. Derwent Living builds hundreds of new homes every year in areas where they are needed most. (In 2014, 85% of the funds for building new homes came from private funds.)
Where does all the profit go? Aren’t you just making money off people who can least afford it and lining the pockets of chief executives and shareholders?
Derwent Living makes surpluses which we plough back into building new homes. This includes money from our commercial subsidiaries, which means we aren’t reliant on public money, it’s what we call ‘profit for social purpose’. Derwent Living is one of the largest businesses in Derby, but it doesn’t have any shareholders to pay and directors and executive officers are paid significantly less than those in similar sized businesses. My own salary is no more than 10 times the average in the organisation.
What’s a Housing Association’s purpose these days? Why don’t we just let the Government handle housing?
The government doesn’t usually build homes directly; it creates conditions where private companies, housing associations and local councils do the building. In the distant past, local councils were responsible for a large proportion of rented properties, but in recent years stock has transferred to housing associations or been managed by arm’s length management organisations.
Few councils build new homes and if they do it is in small numbers.
It isn’t just about creating new homes as places for people to live. Housing associations like Derwent Living also help stimulate the economy and create jobs: we have over 600 direct employees, and every year our building programme generates another 500. For every home we build we add around £70,000 to the economy.
There’s been a housing shortage for ages, why haven’t you done something about it before now?
Derwent Living is over 50 years old; having been formed in 1964 in response to legislation aimed at fighting a post-war housing crisis. Throughout the 60s and 70s Derwent Living flourished as successive governments supported us to build more homes. Over the past twenty or so years the construction of affordable housing has been seen as less of a priority and recent spending cuts threaten to reduce that supply even further.
As we face a modern housing shortage, housing associations are needed to help provide the solution and we want to work with the government to increase housing supply. Indeed it’s clear that if you increase supply and provide sustainable homes that people can genuinely afford prices come down. If we don’t act the housing problem our country faces will get even worse.