House Hearing Compares Affordable Housing Models in the UK and the US

The House Financial Services Subcommittee on Housing and Insurance compared the affordable housing models of the United States and the United Kingdom during a hearing on May 12. Both countries have faced challenges in funding their public housing programs and have looked for new ways to attract private capital to finance them.

Housing Partnership Network CEO Thomas Bledsoe explained that a UK initiative called “Large Scale Voluntary Transfer” created in the 1980s “drove a broad shift in responsibility for affordable housing management in the UK away from public sector local councils (the British version of public housing) and toward nonprofit housing associations.” These associations now manage almost half the UK’s social housing stock. Before transferring ownership of a council’s assets, at least 50% of council tenants must approve both the transfer and the selection of the receiving entity. The housing association then drafts a 30-year business plan for the council’s properties, which includes how the association will attract private capital to redevelop the homes.

Dr. Susan Popkin of the Urban Institute noted that while there were some similarities between the two countries, there were also fundamental differences between their housing systems and markets. “First, housing in the UK is an entitlement and a fundamental part of the safety net. This entitlement benefit has provided a critical part of the funding for social housing organizations to develop affordable housing,” she testified. Because housing is an entitlement in the UK, a greater proportion of low income households receive housing assistance and live in social housing. Gregory Russ of the Cambridge Housing Authority added, “One reason the British system worked out reasonably well is the universal housing benefit provided to the families was calculated to produce enough income for the council (and later the housing association) such that they could pay off the loan for their part of their development cost that was not covered by the grant from the central government.”

Dr. Popkin also pointed out that privatizing public housing alone will not solve the program’s funding problems. “[P]rivate developers need resources to be able to effectively serve the poorest households. Without fundamental changes in the scale and scope of assistance, prevailing demographic, social, and economic trends will widen the gap between needs and assistance in the decades ahead.”

Jaime Lee of the University of Baltimore School of Law noted that when public housing is privatized, the rights of low income tenants are put at risk. She said that very little data is collected on whether these rights are being respected and that existing legal remedies are ineffective or ill-suited to the private context. She warned that the affordability of public housing may be jeopardized through privatization and that “legal tools that make it harder to get into and stay in privatized public housing may be used to exclude or evict those who may most need public housing.”

Financial Services Committee Ranking Member Maxine Waters (D-CA) and other Democratic members of the subcommittee voiced concerns about privatizing public housing given past problems with the Hope VI program that displaced families when it redeveloped public housing and allowed for overly rigid rescreening practices that effectively barred residents from returning to their revitalized communities. Ms. Waters stated, “Hope VI demolished 98,000 units and brought back only 48,348. I have asked my staff repeatedly, ‘What happened to those people? Where did they go?’” Mr. Bledsoe agreed that more has to be done to ensure current residents of public housing are able to enjoy the benefits of redevelopment but also spoke of the advantages in creating vibrant mixed-income communities.

The Democratic members also said that Congress had created the problems the public housing program now faces, including deteriorating units and long waiting lists, by failing to provide adequate funds for the program year after year.

Richard Gentry of the San Diego Housing Commission and Gregory Russ testified about their experience converting their public housing stock through the Rental Assistance Demonstration, Moving to Work, and Low Income Housing Tax Credit programs. They both said that these programs provided them the flexibility they needed to come up with innovative ways of redeveloping their public housing with private capital. Mr. Gentry stated that he believed all public housing authorities that are considered high performing should be designated a Moving to Work agency and endorsed the “Moving to Work Reform and Expansion Act of 2016” (H.R. 5137) that was recently introduced by Majority Leader Kevin McCarthy (R-CA) (See Memo 5/9).

Watch the archived webcast and read witness testimony at: