Housing associations in London are to venture into the private property market on a grand scale for the first time in an attempt to extend their social housing mission to "generation rent" – the growing number of people who can not afford to buy in the capital and are vulnerable to exploitation from unscrupulous landlords.
The 15 biggest social landlords in London are working together to build 13,000 affordable homes by 2015 – but they will also provide an additional 4,000 properties for rent at market prices and at least 1,100 homes for sale at regular London prices. They will use the profits to fund further affordable housing.
Housing associations have traditionally focused solely on affordable housing for low earners and key workers such as teachers and nurses. The new strategy is a widening of their scope to help those in their 20s and 30s who have become known as "generation rent" – those trapped renting at sky-high prices, at the mercy of sometimes exploitative landlords.
The "G15" group of housing associations – which houses one in 10 London residents – is promising to grant more secure tenancies than those available on the private market. The intention is to allow tenants to settle down for longer with a plan to "kitemark" label these better quality homes for those who rent in an attempt to go head to head with the rest of the private market.
A board paper, seen by the Guardian and approved by the group, sets out the problems: "The average home in London costs more than £400,000 and is 15 times the median income for Londoners – the highest in Britain. And while wages are higher too they are not nearly high enough to allow most people to meet their own housing needs … Younger people are increasingly priced out of home ownership and find renting takes a growing portion of their salaries. Those without access to capital may become lifetime renters."
Housing associations insist moving into the private market to capitalise on the increasing rental and sale prices in London will not undermine the social purpose of its members – to provide affordable housing for those who can not meet their own housing needs.
Keith Exford, chief executive of the Affinity Sutton housing association and chair of the G15, said it was not true private renting would make a vast profit for social landlords.
"The yields in private rent are insufficient to do much more than cover the running costs," he said. "The only profit to be made is from the sale of stock at a later stage as values rise. A well-managed, reputable private rented sector is an important part of our offer to London."
Homes built for private rent can also be turned into affordable housing or shared ownership properties by housing associations, or sold for profit according to changing business plans, he said.
The move is being welcomed by some tenants and staff working to tackle rogue landlords in the capital. Ben Reeve-Lewis, a tenant liaison officer in south London who also rents privately, said he would be interested in one of the properties himself. "Housing associations don't have a great record for speed of repairs, but that pales in comparison against the security they provide. In private rent you never know if you're going to get home and find a note on the doorstep because the landlord is likely to sell."
Vincenzo Rampulla, a policy officer in his early 30s who rents in west London, said the exorbitant cost of market rent was tied up in letting and management agency fees which could be cut out by social landlords. "A lot of the skills that they have developed in managing housing association stock are really needed in the private rented sector," he said.
The G15 will also for the first time set up a cross-London allocations agency to help find homes for families qualifying for social housing in London, with each local authority invited to join. This could help councils and housing associations manage the impact of welfare reform and house homeless families more quickly.
To date, those looking for social housing only qualify for tenancies in their local area, even if a suitable property is available elsewhere in the capital.
"We're going to have to manage mutual exchanges and more movement than we have before," said David Montague, chief executive of L&Q, another G15 member. "We have people who are under-occupying and will have to pay a penalty [through the bedroom tax] and we have people who are overcrowded. We need to work together more creatively.
"There aren't many good things to be said about austerity, but one of the good things is that housing associations are working together more than ever before."
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