While the drama of Brixit occupies the UK, June 23 is not just about the UK and Europe for the government. Behind the scenes, the House of Lords just finished debating the final amendments to the Housing and Planning Act 2016 c.22 which became law on 12th May 2016. No fanfare, no rush to publicise the changes, a quiet process.
The Act promises drastic change to the fabric of social housing and the fundamentals of the welfare state. The Lords have done their best to inject a level of reason into the bill with amendments, but now we will find out what the real impact will be. Once Brexit is over of course because it is too late to do anything about it.
Not only will social housing tenants end up being means tested, with social landlords given the power to access income figures direct from HMRC if they think you are not being honest, they may also be forced down the shared ownership route assuming that they are earning enough to get a mortgage.
As the Chancellor wants the combined earning cap for couples in London to be set at £40,000, one does have to ask just how that translates into saving for a mortgage, maintaining mortgage payments while paying a much higher portion of rent and having a basic standard of living.
Let’s do the math: £40,000 per year means approximately £30,154.72 after tax and NI. Monthly take home pay is £2512.89.
Now let’s look at a typical London new build in Southwark. The current full asking price is £510,000 with a minimum share £127,500 (25%). Did I mention it is a one bed flat by the way?
Using the minimum deposit figures of £6375 (Don’t forget the necessary £4000 to pay the legal costs) you can expect to pay £542 in rent on the 75% you don’t own, service charge of £274 and an estimated mortgage of £659.
The highest social housing rents by housing associations in London do exceed £600 per month, so we will use a cost of roughly £7200 per annum. The government has got wise to social landlords who increase rents to match the housing benefit cap so that will probably change soon.
By moving to the shared ownership property in the example you are now paying £17,700, an increase of £10,500 per year, leaving £239 per week to pay for council tax, insurance, travel, food, mobile etc. while saving up to buy the rest of the property. Good luck!
Under the new legislation, the Chancellor expects to impose full market rents on those earning over the income cap and anticipates this will hit 320,000 families earning him £250 million a year.
So it is little wonder that the government sneaked the housing bill through the back door while we were all distracted.
Views expressed here are those of the author and not necessarily shared by HomeSwapper or Housing Partners Ltd.