Press Release

Repossession Rise Could Mean 5 Million People Waiting For Social Housing By 2010 Warn Council Leaders

8th August 2008

Responding to the latest figures which show that house repossessions have risen by 48% in a year, council leaders have warned that the number of people who could be on the social housing waiting list could top 5 million in less than two years.Concerns have been raised by council leaders that the bank’s aggressive lending policies over recent years have overheated the economy and brought misery to borrowers. The LGA is also concerned by the failure of the recent cuts in interest rates by the Bank of England and the £50 billion bail-out extended by the government to cash-strapped banks have not been passed on to consumers.

A recent report finds that factors which are set to push up the demand for social housing include:

• A 48% increase in repossessions compared to same period last year as people fall into negative equity or are made redundant.
• An increase from 1 million in 2001 to 1.6 million households - or four million people - last year on social housing waiting lists. 
• House prices rising by 156 per cent in ten years while wages have risen by just 35 per cent. 
• Around 40 per cent of new mortgage offers withdrawn and deposits needed to get a mortgage have increased, making it harder for first-time buyers to get on the housing ladder. 
• Lowest mortgage approvals on record, reducing demand for new-build where affordable housing is built. 
• Developers reduce the amount they build and consequently the amount of new affordable homes reduces. 
• Local authority and housing association new-build over the last decade is at its lowest since 1947.
  

A new survey by the LGA of Council Heads of Housing also found that two out of three blamed large increases in house prices for increased demand in social housing. Nearly half insisted that their current allocations policy cannot cope with the increased demand in social housing. Nearly half also said lack of housing stock was the main challenge facing councils in housing allocation.

To alleviate some of the pressures on the current social stock the LGA is call on government to:

• Allow councils to borrow on the open market in the same way that Housing Associations have freedom to borrow.
• Reform housing finance to enable greater freedom in the way that councils fund their housing through so-called ‘capitalisation’ – whereby local authorities can re-mortgage their assets to invest in house-building. 
• Give greater flexibility for local authorities to allocate housing based on local area need.
  

Chairman of the Local Government Association Environment Board, Cllr Paul Bettison, said:

“With the banks overstretching their credit facilities it could well mean that in the coming months that councils will have to help pick up the pieces as people end up on social housing waiting lists.

”The days of excessive lending and risk-taking, which lead to this credit crunch may be over, but consumers have yet to see the government’s £50 billion bail-out to cash-strapped banks filter down to mean lower borrowing rates for potential homeowners.

“Even when the economic good times were rolling, councils saw ever increased pressure on their social housing stock. Now that the credit crunch is upon the country it appears that many thousands more people will be looking to councils to provide them with a permanent home as they either find it impossible to get on the housing ladder or see their home repossessed.

“With on average every year 90,000 more households joining the ever increasing social housing waiting list over the seven years, experience has taught us that demand will grow even faster.

“Councils want to provide decent homes quickly for those who cannot afford to rent in the private sector or buy their first home but have been hamstrung by the lack of freedom to borrow off council assets in order to invest in building or buying new homes for those who need them most.

“Although house prices are slowly falling, they are still beyond the reach of many. The slowdown in private sector house building will eventually affect that amount of affordable housing that is being built. This will mean fewer new social homes at a time when there will be more demand for them.

“Social housing has to be a top priority because the harsh reality is that fewer people are getting on to the housing ladder.”