Expanding rented sector 'will not help homeless'

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PROPOSALS to boost provision of private rented accommodation will not help the homeless and people in low-paid jobs who need it most, opposition MPs and housing experts warned yesterday.

Proposed reforms being pushed by Sir George Young, the housing minister, are likely, moreover, to meet a barrage of ministerial and Treasury opposition over the cost.

Sir George's suggestions - using tax breaks, grants or cheap loans to persuade banks, building societies and pension funds to invest substantial sums in the private rented sector - had 'total support' in Government circles, one minister insisted yesterday.

But while the plan sounds attractive, providing flexibility for young people searching for jobs and those not ready to embark on home ownership, there were warnings yesterday that massive amounts of public money would be needed if the scheme was to tackle the wider housing crisis.

Institutions could build new properties or buy some of the 600,000 now standing empty and rent them out using housing associations as managing agents. Discussions over the past few months with the institutions had gone quite well, Sir George said in an interview with BBC Radio 4's The World at One.

But he conceded that while potential investors were interested, 'at the moment the sums don't quite add up. They can get a better return by investing elsewhere. The decision the Government will have to take . . . is whether they are prepared to meet that gap.'

Sir George argued yesterday that the extra spending could prove a good deal for taxpayers, who would foot lower bills for bed and breakfast and other forms of temporary accommodation. 'I think one has to look at the totality of property investment and see what the savings would be.'

But that argument comes against a background of an impending row between ministers over ways to keep public spending and borrowing under control. Ministers opposed to raising taxes during a recession are likely to oppose more spending. The Treasury is understood to be sceptical.

At the same time, ministers will stick in the foreseeable future to the manifesto commitment not to spread help with housing costs by phasing out mortgage interest tax relief for owner-occupiers.

Echoing the views of some ministers, John Battle, Labour's housing spokesman, said the upshot could be a clawback from funds for social housing. 'Will the private sector be revived at the expense of the local authority sector?' he said.

Mr Battle said the Autumn Statement had already forced councils to raise rents by 9 per cent to avoid capping, while Government funding for housing associations had been cut from 70 to 67 per cent. In later years the ratio of public to private funding, forcing associations to raise rents, would fall to 60:40, then 55:45. 'You will have to be, and remain, on housing benefit,' he said. 'If you get a job but it's not well-paid, you lose your home.'

Sir George said people in bed and breakfast accommodation had most to gain from the scheme. But Sheila McKechnie, director of Shelter, said rents were too high in the private sector. She told the programme: 'If you have the level of subsidy that is going to be needed to bring them down to affordable levels, then the return on investment even for the big lenders is not going to be satisfactory.'

John Wriglesworth, housing analyst with UBS Phillips & Drew, said reviving the private sector was commendable, but added: 'The type of money that would really have to be available to alleviate the problem of the homeless is just not available.

'Mortgage interest relief has to eventually go,' he said. 'You can't subsidise the home ownership part of the population at the expense of the renting sector which obviously includes renting for the homeless.'