Cameron launches attack on housing associations

Prime minister David Cameron has today launched an attack on housing associations, saying they were inefficient and that it was “about time” they upped their game.

Cameron made the comments, which have already prompted an angry response from the sector’s trade association, following questioning from new Labour leader Jeremy Corbyn at Prime Minister’s Questions in the House of Commons.

Defending chancellor George Osborne’s decision to cut the rents housing associations can charge by 1% a year for four years, Cameron said: “It’s vital we reform housing associations and make sure they are more efficient. Frankly they’re part of the public sector that haven’t been through efficiencies, and haven’t improved their performance and I think it’s about time that they did.”

Housing associations, which built 50,000 homes in 2014, are not actually classified as public sector bodies, despite receiving grant from government, with many set up as charities. The organisations add private sector borrowing against their existing homes and profit from private development to government funding in order to pay for the construction of new affordable homes.

Many have claimed that the planned introduction of the Right to Buy to housing associations and the rent reductions will undermine their ability to raise private finance to pay for new homes. The National Housing Federation (NHF) says the decision to reduce rents will result in 27,000 fewer homes being built.

Ruth Davison, director of policy and external affairs at the NHF, said associations were already becoming “ever more” efficient. “Housing associations are emphatically not part of the public sector – they are the most successful partnership between state and private enterprise in the UK’s history, having brought £76bn in private investment to the table over the past 30 years,” she said.

“Eight years ago [housing associations] matched every £1 of public investment with a further £2 of private finance, today this figure has risen to £6 of private investment for every £1 of public money, and they are committed to doing more.”

If housing associations were forced to become part of the public sector, then the £60bn of borrowing by associations would become classified as public sector debt.

Cameron’s remarks follow a less strongly-worded challenge to housing association by chancellor George Osborne during a select committee hearing last week.

Cameron’s comments came after Jeremy Corbyn used the first two questions of his inaugural Prime Minister’s Questions to challenge Cameron on the housing crisis. Corbyn said: “The decision made to cut rents by 1% in councils and in housing associations without thinking about the funding issues that those authorities face is a serious one.”

Corbyn quoted a question sent in by a member of the public, named Stephen, who said that  150 jobs would be cut at the housing association he worked for because of the planned cut in rent levels.

Cameron said previously rising rents had caused a “merry-go-round” in which rising rents led to higher housing benefit payments, which in turn led to higher taxation.