Love interest

Like many relationships, it has had its ups and downs. But that between the Treasury and the social housing sector has been more on-off than most. There were the glory days of the 1960s when politicians vied with each other over how much money they could throw at the sector to build hundreds of thousands of homes, then the doldrums of 1980 when the Thatcher government wielded its funding axe.

Since then successive occupants of Number 11 Downing Street have courted the social housing sector only to ultimately dash its hopes of any longer-term commitment. Following Gordon Brown’s ninth Budget last Wednesday, however, all that now seems set to change.

It’s pretty easy to find evidence of how this relationship has improved over the past few years. The chancellor’s announcement of nine “mixed-community” pilots has built upon a growing number of spending commitments to the sector (HT 18 March, page 8). In the last three Budgets and pre-Budget reports the Treasury has made significant spending announcements for social housing. The most obvious of these was the pledge – made in the Budget last March – of increased funding.

This amounted to a total spend of £20bn by April 2008 when the government’s plans were unveiled in the comprehensive spending review last July.

There’s more still. Take, for example, the £500m pot set up in February 2003 to allow nine (now 12) housing market renewal pathfinders to intervene to tackle the spread of empty housing in the North and Midlands. Or the £180m pot set up to aid negative value stock transfers, tipped to rise to £1bn over the next 10 years.

So is it love or merely a passing infatuation? Jim Bennett, senior research fellow at the Institute for Public Policy Research, isn’t convinced: “Latterly the Treasury has woken up to the importance of housing in terms of delivering Labour’s agenda. The reality, however, is that housing comes a long way down the government’s spending priorities. The Treasury is getting increasingly interested in the key issues but spending-wise on housing it is starting from a very low base.

“Housing is now very well placed to make arguments for additional public expenditure. However, had the thinking in the Treasury been where it is now three years ago when the government had more money to play with, it would have done much better.”

So not quite happily ever after just yet.

But could the mixed-community pilots be the reassurance the sector needs that Brown’s intentions – despite his demands for annual efficiency savings of £835m – are not only honourable but long-term?

The Treasury plan is to target the 2% of most deprived areas in the UK and, according to Whitehall sources, it has been personally driven by the chancellor.

It’s very positive that the Treasury seems keen to tackle long-term deprivation 

Jim Coulter, chief executive, National Housing Federation

It is based on the Hope VI project in the USA, which has had £2.8bn invested in it by the federal government since 1992 (HT 10 December, page 8). The programme – which is effectively social engineering – regenerates homes and neighbourhoods and aims to reduce high concentrations of low-income families.

The key point for the sector in the UK, however, comes from a well-placed Whitehall source familiar with the chancellor’s plans. “If this works, it is something we would want to see happening in every area where it’s appropriate. I have a figure in my head as to how much this process will cost. It is pretty large but will depend on how each individual project works out and what is required to be done.

“The feeling is that more of the same wouldn’t work for the most deprived areas. It has not been clear to us that what has been done for those 2% of worst areas is working. Areas on the cusp of failure have been helped by other programmes such as the New Deal for Communities, but we feel larger intervention – such as with the low demand pathfinders – may be needed.”

Jim Coulter, chief executive of the National Housing Federation, feels that a turning point has been reached. “A whole range of things have come together in the Treasury where long-termism has taken over from short-termism. It's very positive indeed that it now seems keen to tackle long-term deprivation. “This is typical Gordon Brown stuff – looking at the big picture. If it works then it will make a lasting difference. The obvious concern about all this though is whether or not the government will have enough money come next summer’s spending review to continue in this direction.”

Karen Buck, Labour MP for Regent’s Park and Kensington North, agrees that a recovery in the long-term funding for social housing can’t afford to break down. “I think we hit the buffers on housing [funding] big time in the 1990s – all we built were luxury homes.

This has now filtered its way through to policy-makers and the philosophy about investing more money in social housing is definitely right. I think underlying economics mean that the argument for more money for housing has been won and it will stay won.

It is economically dangerous not to go down this route – the Barker report [on housing supply] has proved that.”

Social housing providers hope that Treasury mandarins continue to heed this case – especially if Brown departs the Treasury following a Labour re-election.

If that does happen, the hope will be that a promising partnership will be cemented into a lasting alliance in the spending review next summer.