Richard Carr discusses unspent housing budget

It’s recently come to light that MPs are demanding an explanation from government ministers about a huge amount of money from the housing budget that hasn’t been spent.

They were informed that £817 million that was allocated for the UK’s desperately needed affordable housing schemes and other projects has ended up back at the Treasury.

Cross-party committee

News of this unspent cash has apparently astonished members of the cross-party housing, communities and local committee. It certainly seems to directly contradict the prime minister’s recent assertion that housebuilding is at the top of the Conservative’s priority list. In addition, it must have been shocking to hear for local authorities, many of which are becoming desperately mired in financial problems due to constant cost cutting measures from central government.

The committee discovered the colossal underspend for the financial year 2017-2018 and confronted both the homelessness minister (Heather Wheeler) and housing minister Dominic Raab. The government is under massive pressure from MPs and the Local Government Association (which is also controlled by conservatives) to implement some helpful measures for the local authority sector, which has endured budget cuts of 50% since 2010.

Strain on local authority budgets

Bob Blackman, Tory MP and acting chair of the committee, said: “We will be wanting to know why this very large sum has not been spent at a time of great strain on local authority budgets, and why it was not channelled to other spending projects.

“It does not help those of us who argue that more should be given to local authorities if the chancellor knows money he gave last time has not even been spent.”

MPs want to argue for more money for local authorities, given that unexpectedly high tax receipts have left the Treasury with between £7bn and £10bn extra.

Public finances

On the government’s side, the Chancellor explained that much work had gone into putting public finances back in order, and they’re now ready to pump money into services, which includes housing.

He said: “We’re making good progress on building the homes this country needs with, last year, a 20-year record high for housebuilding. This is how we build an economy that works for everyone.”

Affordable housing

However, this doesn’t fit with evidence regarding the number of affordable properties that have been built. Helen Hayes, MP for Labour said she thought it was astonishing that this amount of money is unspent when the number of affordable homes built by local authorities has plunged since 2010.

She said: “This is the biggest issue for families up and down the country. It is simply astonishing and unacceptable that there is so little urgency being shown.”

Since around 1988, local authorities have consistently cut back on social housebuilding due to the impact of increasing budget cuts. Councils have also been discouraged from building new houses by the government’s ‘right to buy’ scheme, which lets tenants buy council properties at a discount of 40%.

Council development companies

richard carr houseMany councils have implemented their own property development companies to get around the rules set by government, so that they can get on and build homes. However, progress has been limited, partly die to the threat from the government that they might extend ‘right to buy’ to the new development companies owned by the council.

While shadow housing minister John Healey said that housing and local government secretary Sajid Javid’s department is ‘selling families short by surrendering much-needed cash for new homes’, a housing ministry spokesman said:  “We are investing £9bn in affordable homes, including £2bn to help councils and housing associations build social rent homes where they are most needed.

“All of the affordable housing underspend from 2016-17, including £65m returned by the Greater London Authority, has been made available to spend on similar schemes.”

Potential council insolvency

The National Audit Office estimates that 10% of local authorities and county councils have less than three years left before they are vulnerable to insolvency. It seems many people agree that urgent action is now needed.

Some developers have always been positive about affordable housing, yet have had their hands tied. At Fortitudo, we always strive to be part of the solution for people who need affordable homes, and hope that the government will act to make it easier for their own housing goals to be met.

– Richard Carr