How has the Social Housing Landscape Changed Since 1979?

by Floyd March

With local elections ending and a general election looming in 2024, house building and affordability are taking centre stage in political debate. A recent report by Joseph Rowntree Foundation sets out the timeline of events that have led to the UK housing crisis dating back from 1979.

Setting out the overall context of where the UK housing sector currently stands, rising rents have seen spending on housing benefits grow over the last 30 years, and three policy levers – cash payments, social housing and rent controls – all have the effect of lowering the net amount of rent tenants pay.

Non-cash housing subsidies have shrunk markedly over the past 40 years, even as spending on housing benefits has increased. The value of housing subsidies has fallen from 16.5% of the total dayto-day cost of housing services in the national accounts in 1979 to 11.5% in 2019–20.

Lots of things lie behind this change in the landscape; less generous sub-market rents for social housing contributed five percentage points to the reduction in housing subsidies as a share of aggregate UK housing costs seen between 1979 and 2009–10.

The report explored the above and highlighted: “The social rented sector shrank from 31% to 17% of the housing stock, and social rents moved from around half to two-thirds of market levels.”

Despite these advantages, fiscal constraints will always limit the optimal size of the social rented sector.

There are disadvantages for tenants: “Who have little choice as to the precise location or type of property they are allocated. This may prevent them from taking up employment opportunities outside their local area, hampering productivity in the economy.”

Therefore, many in the sector believe that housing policy needs to offer a balance of these two forms of subsidy. The appropriate mix should be determined by differentiating between the needs of different household types.

Local allowance freeze should end

Authors of the report argued: “That for 1.9 million low-income families with children, pensioners and people with a disability, more secure housing tenure should be the priority.”

The report explained: “This is chiefly due to the right to buy offered to social tenants from 1980 onwards. The size of the discounts offered to social tenants made it an attractive option for those able to afford the mortgage repayments.”

The 1980 Housing Act also gave ministers permission to set target annual rent increases for local authorities in an attempt to reduce housing grants to local authorities. This saw councils' rents increase by 165% in cash terms between 79-80 and 88-99, according to Balchin and Rhoden.

However, this caused disparities within the rent levels across the UK, and at the time, between housing association properties and local authority rented properties. This was further reflected when considering housebuilding across the UK was also disparaged.

Joseph Rowntree Foundation

An additional 700,000 social properties could allow the level of social renting among lower-income families with children to return to its 1979 level.

According to the report, in order to enhance the experience of renting in the private sector: “Policymakers should end the Local Housing allowance freeze and re-link rates to the 30th percentile of local rents and introduce the reforms to the private rented sector outlined in the recent ‘fairer private rented sector’ White Paper.”

The housing landscape has changed since the 70s

A big change to the social housing sector over the 1980s and 1990s was the reduction in its size. By the mid-2000s, far fewer households benefitted from the sub-market rents and security of tenure available to social tenants.

Fast forwarding to 2002, the Labour Government tried to rationalise rent levels by setting a new target rent for each property rather than each region. This rent was determined by property size, estimated value and local earning levels. At this period of time, target rents were below the market levels and were only increased in line with RPI + 0.5% each year. Shortly after the Coalition, further convergence of social rents was considered unnecessary, and it was announced that social rents would rise in line with CPI inflation + 1% each year for the next decade.

In a U-turn with the new Conservative Government, there was the introduction of a 1% nominal reduction between 2016-17 and 2020-21.

The report explained: “This effectively increased the subsidy provided through sub-market rents for social housing and decreased that provided through housing benefits – the key objective behind the measure.”