The Government’s cuts to social housing funding have led to a situation which may not be workable in the long term, the chairman of the Commons Communities and Local Government Committee has warned.
Labour’s Clive Betts told MPs rents were rising, prompting concerns from housing associations that the model would not last much beyond the next General Election.
Mr Betts outlined fears that a number of associations thought they would end up paying more in borrowing costs, due to the possible issues of rising rent arrears.
He said: “The Government have cut social housing funding by 60% and effectively the Government are relying on housing associations, in particular, increasing rent levels up towards 80% of market rents, both on new properties and potentially on existing properties, to help fund their balance sheets.
“Rents are rising, and may take up the slack from the low amount of social housing grant that is available.
“The National Housing Federation and housing associations who came to us said very clearly they were concerned that this model wouldn’t last much beyond 2015, they didn’t think it was workable in the long term, and they asked for some degree of certainty in order to enter into borrowing arrangements, about what was going to happen.
“It clearly is an issue, we know Moody’s have downgraded the credit rating of 26 housing associations, and certainly the national federation again said to us that they thought a number of associations would end up paying more in borrowing costs because of the problems of rising arrears that would come with that.”
He urged the Government to adopt a number of the proposals contained in the report, saying if it made a clear commitment to implement them this would “go a long way to deliver the 250,000 new homes this country badly requires”.