Shout NFA Build To Save Report Launch 17 June 2015

B U I L D I N GN E W S O C I A LR E N T H O M E S

Report launch

17 June 2015Abbey Community Centre

#BuildtoSave

W E L C O M E

Martin WheatleySHOUT

Report Launch

17 June 2015

Abbey Community Centre

#BuildtoSavewifi password: 2920b14e7c (case sensitive, 4th character is numeral zero)

Programme

Welcome Martin Wheatley, SHOUT

Presentation Mark Pragnell, Head of Commissioned Projects, Capital Economics

Panel Kate Allen, Property Correspondent, Financial TimesMark Winterburn, Researcher, Centre for Social JusticeOphelia Bobori, Board Member and resident, Lewisham HomesLigia Teixeira, Head of Research, Crisis

Discussion

Close Chloe Fletcher, Policy Director, National Federation of ALMOs

Report Sponsors

Bushbury Hill Estate Management BoardCampbell TickellCoast & CountryContour HomesEMH GroupEndeavour Housing Association/North Star GroupGrand Union Housing GroupHuman City Institute

Leeds and Yorkshire Housing AssociationLeicestershire & Rutland Tenant Participation ForumLiverpool Housing TrustLuminus GroupRiversideSoha HousingSouth Liverpool HomesSouth Yorkshire Housing AssociationThrive Homes Wellingborough Homes

Designer

Getting online

Wifi password: 2920b14e7c (case sensitive, 4th character is numeral zero)

Report url

http://www.4socialhousing.co.uk/research

http://www.4socialhousing.co.uk/research

P R E S E N T A T I O NO F T H E R E P O R T

Mark PragnellCapital Economics

Fiscal myopia and the housing crisis

Building new social rent homes report launchAbbey Community Centre, 17 June 2015


Justin Chaloner, Alexandra Dreisin & Mark PragnellAbbey Community Centre, 17 June 2015

Thanks

• SHOUT• National Federation of ALMOs• Creative Bridge

Objective

• To highlight some of the key themes and findings of our new report, Building new social rent homes

Agenda

• Back to basics on “investment”

• Fiscal arithmetic of Housing Benefit

• An opportunity to unlock new housing?

£0

£10

£20

£30

£40

£50

£60

£70

£80

£90

£100

0 1 2 3 4 5 6 7 8 9 10

Expected future profits without investment

Additional profit resulting from the investment

Businesses invest for direct financial benefit

Revenues

Costs

New costs

£0

£10

£20

£30

£40

£50

£60

£70

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£90

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0 1 2 3 4 5 6 7 8 9 10

Businesses invest for direct financial benefit

Revenues

Costs

New revenues

Public sector “investment” is less clear cut

Government investment doesn’t have to have a direct financial benefit for the government itself

• Assets that have a social benefit

• Assets that have an economic benefit

• Assets that have a fiscal benefit

Distinction is important to bond markets

Agenda




Welfare bill is biggest chunk of public spending

Share of public sector expenditure on services by departmental group, 2013-14

Work and Pensions25%

NHS (Health)18%

Chancellor's Departments

14%Education

10%

Defence5%

Scotland5%

Business, Innovation and Skills

4%

Transport3%

Northern Ireland3%

Communities and Local Government

2%

And a third of ‘unprotected’ public expenditure

Share of unprotected departments public sector expenditure on services by largest fifteen unprotected departmental groups, 2013-14

05

10152025303540

With annual £24.4 billion bill for housing benefit

Nominal government expenditure on welfare, 2014-15 forecast (£ billions)

0

10

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30

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50

60

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State pension Tax credits andchild benefit

Housing benefit Disabilitybenefits

Incapacitybenefits

Pension credit Unemploymentbenefits

Income support

Benefits increasingly paid to private landlords

Share of housing benefit claimants in Great Britain by tenure type and number of recipients in private rented sector (millions)

00.20.40.60.811.21.41.61.82

0%10%20%30%40%50%60%70%80%90%

100%

1995 2000 2005 2010 2014

Private rented sector tenants Registered social landlord tenantsLocal authority tenants Number of recipients in private rented sector

3331202024

Private tenants cost additional £1,100 a year

Real government expenditure on housing benefit in the United Kingdom, £ billions (2014-15 prices)

0123456789

10

1994-95 1999-00 2004-05 2009-10 2014-15

Private rented sector tenants Registered social landlord tenants Local authority tenants

Brent

Camden

OxfordMilton Keynes

Leeds

Leicester

North Devon

Gateshead

Allerdale

Leeds family could save Osborne £3k each year

Ultra-low income single parent with 3 children living in Leeds in a 3 bedroom home

£91 per week

Total annual savings to exchequer:

£2,966

Private rent

£152 per week

£511 per week

Rent

Total received benefits

Social rent

£454 per week

*Annual household income of £6,000

Savings in the south east generally higher

Zero income couple with 1 child living in Oxford in a 2 bedroom home

£111 per week


£4,263

Private rent

£219 per week

£417 per week

Rent


Social rent

£335 per week

*Annual household income of £0

And especially in London

Low income couple with 1 child living in Camden in a 2 bedroom home

£149 per week


£7,988

Private rent

£390 per week

£384 per week

Rent


Social rent

£231 per week


Although there are some counter examples

Ultra-low income single person aged 30 without children living in North Devon in a 1 bedroom home

£82 per week


-£956

Private rent

£98 per week

£49 per week

Rent


Social rent

£68 per week


Social homes would lower the welfare bill for 89 per cent of the

households claiming housing benefit in the private rented sector

And 82 per cent of the households would have higher disposable

incomes

Agenda




Around £150k to build a family home in Leeds

Building costs for a 3 bedroom home in Leeds, £ thousands

0

50

100

150

200

250

Construction Land

Social rent revenues leave a £40k funding gap


0

50

100

150

200

250

Construction Land

Potential sources of funding for a 3 bedroom home in Leeds, £ thousands

0

50

100

150

200

250

Social landlords Government

But welfare savings more than plugs the gap


0

50

100

150

200

250

Construction Land

Potential sources of funding for a 3 bedroom home in Leeds, £ thousands

0

50

100

150

200

250


Savings can change the arithmetic in the north .

Building costs for a 2 bedroom home in Gateshead, £ thousands

0

50

100

150

Construction Land

Potential sources of funding for a 2 bedroom home in Gateshead, £ thousands

0

50

100

150


as well as in the south of England

Building costs for a 3 bedroom home in Oxford, £ thousands

0

100

200

300

400

Construction Land

Potential sources of funding for a 3 bedroom home in Oxford, £ thousands

0

100

200

300

400


Welfare savings could be substantial in London

Building costs for a 4 bedroom home in Camden, £ thousands

0

100

200

300

400

500

Construction Land

Potential sources of funding for a 4 bedroom home in Camden, £ thousands

0

100

200

300

400

500


Welfare savings sufficient in 86% of cases

Building costs for a 4 bedroom home in Leicester, £ thousands

0

50

100

150

200

250

Construction Land

Potential sources of funding for a 4 bedroom home in Leicester, £ thousands

0

50

100

150

200

250


Of course, investment requires initial borrowing

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

Change in interest payments Reduced borrowing from increased tax revenuesWelfare savings Additional borrowing by local authorities and public corporationsAdditional borrowing by central government Net policy impact

Impact on annual public sector net borrowing as a percentage of nominal gross domestic product

Construction itself will boost economy and tax receipts

But City will recognise and appreciate the logic

Public sector net debt as a percentage of nominal gross domestic product

0102030405060708090

100

Current policy 100,000 pa policy

5.2 percentage points lower in 50 years

Only 0.5 percentage points higher in 2029-30

Lower in 2040-41

Agenda




Conclusions

• Taxpayers’ money is being wasted keeping families in the most costly tenures

• Future savings in welfare spending are more than adequate to remunerate construction of social rent homes

• Basic arithmetic dictates investment in new homes today

• It is fiscal myopia to do otherwise


Justin Chaloner, Alexandra Dreisin & Mark PragnellAbbey Community Centre, 17 June 2015

P A N E L D I S C U S S I O N

Kate AllenProperty Correspondent, Financial Times

Mark WinterburnResearcher, Centre for Social Justice

Ophelia BoboriBoard Member and resident, Lewisham Homes

Ligia TeixeiraHead of Research, Crisis

F I N A L T H O U G H T S

Chloe FletcherPolicy Director

National Federation of ALMOs

B U I L D I N GN E W S O C I A LR E N T H O M E S

Report launch

17 June 2015Abbey Community Centre

Shout NFA Build To Save Report Launch 17 June 2015

Economy & Finance

Transcript of Shout NFA Build To Save Report Launch 17 June 2015