It seems an age ago that we were welcoming in the new decade, wondering what 2020 would have in store. But in a matter of few weeks, coronavirus swept across the world bringing profound changes to society and the economy. While COVID-19 presents a new and unprecedented challenge in itself, it has also exacerbated and brought to the fore some of our society's long-running, systemic issues – one of which is the UK's housing crisis.
Coronavirus poses a variety of challenges for the housing sector, presenting particular threats to rough sleepers, the homeless and those living in social housing. Sector experts have known for some time that the reduction in affordable housing has contributed to a rise in homelessness. Analysis from CIPFA's Housing 360, a suite of new tools that pool an extensive range of housing data, allowing both historic and predictive analysis, shows that, from 2013 to 2018, the number of council-owned homes reduced by around 84,000 in England. In this already fraught housing environment, last month, councils were given only 48 hours' notice by the government to house rough sleepers to support social distancing. However, with rough sleeping having doubled since 2010, this was no easy task.
Housing 360 shows that the cost of providing temporary accommodation to homeless people of all kinds, not just rough sleepers, had already increased by 76% to just over £663m from 2013 – 2018. And that was without a pandemic accelerating demand on authorities whose resources were already stretched to the limit. Suffice to say, the drive for immediate provision has placed a spotlight on the distinct absence of affordable social housing in the UK at a time when it is most needed.
The pandemic is having a wider impact on housebuilding as infrastructure and development projects are mothballed. Housebuilders Persimmon, Barratt and Redrow have all suspended work on many sites to protect construction workers. Work is limited to making partly-built homes safe, and completing builds where customers would be left vulnerable if they were due to move in imminently. Some construction partners to local authorities such as Morgan Sindall are only closing sites where there is agreement within the partnership. This could pose a substantial barrier to the government's target to deliver 300,000 new homes each year, and store up problems for the future
More immediately there are the financial difficulties of rent and service charge arrears. The projections from the predictive tools in CIPFA's Housing 360 were already indicating that rent arrears are set to rise by 0.83% by 2025 due to rising rents. This equates to a rise in average debt of £237 per property, or over £375.5m in total, in 2025. Now let's add the pandemic into the mix.
Social housing tenants are most likely to be adversely affected by the economic crisis arising from the pandemic The Resolution Foundation has found four out of five social housing tenants either work in sectors directly affected by the lockdown, are unable to work from home, or have caring responsibilities for school-age children. These tenants will almost inevitably experience difficulties in paying rent and service charges well beyond our business as usual projections.
The need for social distancing creates further problems, including suspended repairs and maintenance work. Our analysis showed that repairs and maintenance expenditure was already set to increase by over 10% in England by 2025/26. The suspension of vital repairs will increase cost pressures later in the year and could have long-term consequences for an already growing maintenance backlog. Furthermore, repairs before the re-letting of properties are likely to take longer as some of the maintenance workforce self-isolate. This will increase the timescale in-between lets, reducing rental income assumptions in Housing Revenue Account 30-year business plans and the business plans of housing associations.
To date, only £3.2bn has been committed to support the entire gamut of local government services in the fight against COVID-19. Our analysis clearly shows the strain on housing resources alone was already close to breaking point. The present crisis is yet another pressure for authorities to bear. We call on government not to allow COVID-19 to be the straw that breaks the camel's back.
Dave Ayre is the property networks manager for the Chartered Institute of Public Finance and Accountancy (CIPFA) UK.
CIPFA Property: www.cipfa.org/services/property
