Capital Economics presentation to launch Build To Save Report for SHOUT and National Federation of ALMOs. The economic case for investing in social housing. Build 100,000 social rent homes a year and reduce government deficit. Long Term Economic Plan.

1. B U I L D I N G
N E W S O C I A L
R E N T H O M E S
Report launch
17 June 2015
Abbey Community Centre
#BuildtoSave

2. W E L C O M E
Martin Wheatley
SHOUT

3. Report Launch
17 June 2015
Abbey Community Centre
#BuildtoSave
wifi password: 2920b14e7c
(case sensitive, 4th character is numeral zero)

4. Programme
Welcome Martin Wheatley, SHOUT
Presentation Mark Pragnell, Head of Commissioned Projects, Capital Economics
Panel Kate Allen, Property Correspondent, Financial Times
Mark Winterburn, Researcher, Centre for Social Justice
Ophelia Bobori, Board Member and resident, Lewisham Homes
Ligia Teixeira, Head of Research, Crisis
Discussion
Close Chloe Fletcher, Policy Director, National Federation of ALMOs

5. Report Sponsors
Bushbury Hill Estate Management
Board
Campbell Tickell
Coast & Country
Contour Homes
EMH Group
Endeavour Housing
Association/North Star Group
Grand Union Housing Group
Human City Institute
Leeds and Yorkshire Housing Association
Leicestershire & Rutland Tenant Participation
Forum
Liverpool Housing Trust
Luminus Group
Riverside
Soha Housing
South Liverpool Homes
South Yorkshire Housing Association
Thrive Homes
Wellingborough Homes

6. Designer

7. Getting online
Wifi password: 2920b14e7c
(case sensitive, 4th character is numeral zero)
Report url
http://www.4socialhousing.co.uk/research

8. P R E S E N T A T I O N
O F T H E R E P O R T
Mark Pragnell
Capital Economics

9. Fiscal myopia and the housing crisis
Building new social rent homes report launch
Abbey Community Centre, 17 June 2015

10. Fiscal myopia and the housing crisis
Justin Chaloner, Alexandra Dreisin & Mark Pragnell
Abbey Community Centre, 17 June 2015

11. Thanks
• SHOUT
• National Federation of ALMOs
• Creative Bridge

12. Objective
• To highlight some of the key themes and findings of our
new report, Building new social rent homes

13. Agenda
• Back to basics on “investment”
• Fiscal arithmetic of Housing Benefit
• An opportunity to unlock new housing?

14. Agenda
• Back to basics on “investment”
• Fiscal arithmetic of Housing Benefit
• An opportunity to unlock new housing?

16. £0
£10
£20
£30
£40
£50
£60
£70
£80
£90
£100
0 1 2 3 4 5 6 7 8 9 10
Expected future profits without investment
Additional profit resulting from the investment
Businesses invest for direct financial benefit
Revenues
Costs
New costs

17. £0
£10
£20
£30
£40
£50
£60
£70
£80
£90
£100
0 1 2 3 4 5 6 7 8 9 10
Businesses invest for direct financial benefit
Revenues
Costs
New revenues

19. Public sector “investment” is less clear cut
Government investment doesn’t have to have a direct
financial benefit for the government itself
• Assets that have a social benefit
• Assets that have an economic benefit
• Assets that have a fiscal benefit
Distinction is
important to
bond markets

20. Agenda
• Back to basics on “investment”
• Fiscal arithmetic of Housing Benefit
• An opportunity to unlock new housing?

21. Welfare bill is biggest chunk of public spending
Share of public sector expenditure on services by departmental group, 2013-14
Work and Pensions
25%
NHS (Health)
18%
Chancellor's
Departments
14%
Education
10%
Defence
5%
Scotland
5%
Business, Innovation
and Skills
4%
Transport
3%
Northern Ireland
3%
Communities and
Local Government
2%

22. And a third of ‘unprotected’ public expenditure
Share of unprotected departments public sector expenditure on services by largest
fifteen unprotected departmental groups, 2013-14
0
5
10
15
20
25
30
35
40

23. With annual £24.4 billion bill for housing benefit
Nominal government expenditure on welfare, 2014-15 forecast (£ billions)
0
10
20
30
40
50
60
70
80
90
100
State pension Tax credits and
child benefit
Housing benefit Disability
benefits
Incapacity
benefits
Pension credit Unemployment
benefits
Income support

24. Benefits increasingly paid to private landlords
Share of housing benefit claimants in Great Britain by tenure type and number of
recipients in private rented sector (millions)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1995 2000 2005 2010 2014
Private rented sector tenants Registered social landlord tenants
Local authority tenants Number of recipients in private rented sector
3331202024

25. Private tenants cost additional £1,100 a year
Real government expenditure on housing benefit in the United Kingdom, £ billions
(2014-15 prices)
0
1
2
3
4
5
6
7
8
9
10
1994-95 1999-00 2004-05 2009-10 2014-15
Private rented sector tenants Registered social landlord tenants Local authority tenants

27. Brent
Camden
Oxford Milton Keynes
Leeds
Leicester
North Devon
Gateshead
Allerdale

28. Leeds family could save Osborne £3k each year
Ultra-low income single parent with 3 children living in Leeds in a 3
bedroom home
£91 per week
Total annual savings to exchequer:
£2,966
Private rent
£152 per week
£511 per week
Rent
Total received
benefits
Social rent
£454 per week
*Annual household income of £6,000

29. Savings in the south east generally higher
Zero income couple with 1 child living in Oxford in a 2 bedroom home
£111 per week
Total annual savings to exchequer:
£4,263
Private rent
£219 per week
£417 per week
Rent
Total received
benefits
Social rent
£335 per week
*Annual household income of £0

30. And especially in London
Low income couple with 1 child living in Camden in a 2 bedroom home
£149 per week
Total annual savings to exchequer:
£7,988
Private rent
£390 per week
£384 per week
Rent
Total received
benefits
Social rent
£231 per week
*Annual household income of £12,000

31. Although there are some counter examples
Ultra-low income single person aged 30 without children living in North
Devon in a 1 bedroom home
£82 per week
Total annual savings to exchequer:
-£956
Private rent
£98 per week
£49 per week
Rent
Total received
benefits
Social rent
£68 per week
*Annual household income of £6,000

32. Social homes would lower the
welfare bill for 89 per cent of the
households claiming housing
benefit in the private rented sector

33. And 82 per cent of the households
would have higher disposable
incomes

34. Agenda
• Back to basics on “investment”
• Fiscal arithmetic of Housing Benefit
• An opportunity to unlock new housing?

35. Around £150k to build a family home in Leeds
Building costs for a 3 bedroom home in
Leeds, £ thousands
0
50
100
150
200
250
Construction Land

36. Social rent revenues leave a £40k funding gap
Building costs for a 3 bedroom home in
Leeds, £ thousands
0
50
100
150
200
250
Construction Land
Potential sources of funding for a 3
bedroom home in Leeds, £ thousands
0
50
100
150
200
250
Social landlords Government

37. But welfare savings more than plugs the gap
Building costs for a 3 bedroom home in
Leeds, £ thousands
0
50
100
150
200
250
Construction Land
Potential sources of funding for a 3
bedroom home in Leeds, £ thousands
0
50
100
150
200
250
Social landlords Government

38. Savings can change the arithmetic in the north .
Building costs for a 2 bedroom home in
Gateshead, £ thousands
0
50
100
150
Construction Land
Potential sources of funding for a 2
bedroom home in Gateshead, £ thousands
0
50
100
150
Social landlords Government

39. as well as in the south of England
Building costs for a 3 bedroom home in
Oxford, £ thousands
0
100
200
300
400
Construction Land
Potential sources of funding for a 3
bedroom home in Oxford, £ thousands
0
100
200
300
400
Social landlords Government

40. Welfare savings could be substantial in London
Building costs for a 4 bedroom home in
Camden, £ thousands
0
100
200
300
400
500
Construction Land
Potential sources of funding for a 4
bedroom home in Camden, £ thousands
0
100
200
300
400
500
Social landlords Government

41. Welfare savings sufficient in 86% of cases
Building costs for a 4 bedroom home in
Leicester, £ thousands
0
50
100
150
200
250
Construction Land
Potential sources of funding for a 4
bedroom home in Leicester, £ thousands
0
50
100
150
200
250
Social landlords Government

42. Of course, investment requires initial borrowing
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
Change in interest payments Reduced borrowing from increased tax revenues
Welfare savings Additional borrowing by local authorities and public corporations
Additional borrowing by central government Net policy impact
Impact on annual public sector net borrowing as a percentage of nominal gross
domestic product
Construction itself
will boost economy
and tax receipts

43. But City will recognise and appreciate the logic
Public sector net debt as a percentage of nominal gross domestic product
0
10
20
30
40
50
60
70
80
90
100
Current policy 100,000 pa policy
5.2 percentage points
lower in 50 years
Only 0.5 percentage
points higher in 2029-30
Lower in 2040-41

44. Agenda
• Back to basics on “investment”
• Fiscal arithmetic of Housing Benefit
• An opportunity to unlock new housing?

45. Conclusions
• Taxpayers’ money is being wasted keeping families in the
most costly tenures
• Future savings in welfare spending are more than
adequate to remunerate construction of social rent homes
• Basic arithmetic dictates investment in new homes today
• It is fiscal myopia to do otherwise

46. Fiscal myopia and the housing crisis
Justin Chaloner, Alexandra Dreisin & Mark Pragnell
Abbey Community Centre, 17 June 2015

47. P A N E L D I S C U S S I O N
Kate Allen
Property Correspondent, Financial Times
Mark Winterburn
Researcher, Centre for Social Justice
Ophelia Bobori
Board Member and resident, Lewisham Homes
Ligia Teixeira
Head of Research, Crisis

48. F I N A L T H O U G H T S
Chloe Fletcher
Policy Director
National Federation of ALMOs

49. B U I L D I N G
N E W S O C I A L
R E N T H O M E S
Report launch
17 June 2015
Abbey Community Centre