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Where next for social housing? This is the question that communities secretary Ruth Kelly has posed to Professor John Hills to contemplate over the next few months. It is the right time to ask the question. Two years ago, when I came to the Housing Corporation, it was the first time I had worked directly in the social housing field for a decade. I discovered a sector that has become tangled in myths and contradictions, many of them with an outdated, historic base.

The first and most misleading myth is that social housing is housing of last resort. The reality is that the large majority of social housing is of a decent standard, (at least 90% by 2010), and many of the homes are located in attractive and friendly communities and neighbourhoods. If you gain a secure or assured tenancy, you have the right to a home for life and, in some cases succession rights as well, regardless of whether your needs or circumstances change. As a social tenant you will be paying a rent that is low, way below market level. The standard of service you receive is regulated and usually high quality. It is therefore no surprise that many households who enter social housing, stay there, often for life.

The reality is that almost all the housing of last resort is in the private sector, where levels of decency are far lower, conditions far less regulated and costs much higher. The 鈥渓ast resort鈥� is the family living in damp, overcrowded temporary accommodation on an assured shorthold tenancy, trapped in worklessness by a 拢300+ per week rent, paid for by the state through housing benefit.

The 1980s legacy: the pressure to buy

And yet social housing still carries a stigma, one that is complex to understand. It derives in part from the lasting, unwanted legacy of the worst of the post-War social housing estates 鈥� places where people with choice, choose not to live. It is also rooted in the legacy of the 1980s, that social rented housing equals nanny state equals dependency. People with aspiration, people who are 鈥済etting on鈥�, buy their homes. More insidiously, it is the notion that people who live in social housing are more likely to do wrong, to be antisocial, not to care.

A final contradiction is that at the same time as we talk of social housing becoming a residualised form of tenure, so we have more people wanting, or at least needing, to access it. It is estimated that 65% of existing social tenants are on housing benefit and 67% of households taking up a new tenancy with a housing association are in the same position. At the same time, there are about 95,000 people on local authority housing waiting lists and some 100,000 households in temporary accommodation. There are also probably as many as 500,000 households who really need a larger property.

The latest figures from Heriot-Watt University suggest that nationally, only 50% of working households under 35 can afford to buy in the open market, and this decreases to 35% in London. Although the market rented sector and their parents鈥� homes or wallets will take some of the strain, the simple fact is that some of those households will be contemplating the attractions of a form of tenure which their parents may have clambered away from just a generation earlier. Whether they will be able to access that social housing is of course another matter.

In contemplating this complex landscape, I have reached a number of conclusions 鈥� some firm, some tentative. The first is simple. State-supported affordable housing will remain an important form of social provision for the foreseeable future and we should celebrate and embrace its role, proud that collectively we can help our nation meet its housing needs. The key question for John Hills is therefore not whether we should provide such housing but rather how we should provide it, including on what terms to the residents.

The main barrier to building more affordable homes is not capacity or skills or money, it is land. Only the planning system can deliver the required increase in supply. 好色先生TV our way out of our current difficulties is the only long-term solution. More resources from the Treasury are always welcome, but it will also need housing associations and local authorities using their assets and asset value more ambitiously and creatively than has hitherto been the case.

The reality is that almost all the housing of last resort is in the private sector

My second conviction is that we must blur the tenure divide between social and market housing by expanding the intermediate market, primarily through new build properties. Indeed, I am convinced that expanding the intermediate market is the only foreseeable way to combat the growing gulf between an asset-owning class of increasing wealth and a sub-class who have no means of sharing in that growth in wealth.

This means both shared ownership and intermediate rent. After more than 10 years of supporting low-cost home ownership, we have only provided 60,000 or so shared-ownership properties throughout the country. I would like to see a market where there were 10 times that number of shared owning households, perhaps even more, a scenario where it became absolutely the norm for households to take an equity stake in a property and then staircase up or down as their circumstances allowed.

Taking on equity risk

But to achieve this we need a fully functioning commercial market in housing equity risk; investors willing to mix the prospect of long-term capital value gains with relatively small income streams. The introduction of the four lenders into the Open Market Homebuy market is an important breakthrough, particularly the involvement of Morgan Stanley. But in future we are going to need players willing to take on 70% or more of the equity in an initial transaction.

My enthusiasm for the intermediate market does not stem just from concerns about distribution of asset wealth. It plays another crucial role. If we can achieve real scale and flexible staircasing, then we will start to break down any notion of social housing as a stigmatised tenure. Instead, the state becomes a partner in helping individual households to realise a level of aspiration that is sustainable for them. As we also have the potential to extend this opportunity to existing social tenants to purchase a share in their own homes through Social Homebuy, the shared psychology is that all have an opportunity to take a stake and grow it, but that there is no obligation to do so.

I should also make clear that my enthusiasm for low-cost home ownership is not in a swap deal for less social rented housing. I know that is where certain local authorities are trying to head for ideological reasons. Those authorities that have contacted the Housing Corporation to try to change the mix of a scheme at the expense of social rented housing have been given very short shrift. We need more of both while recognising that at some point in the future, with flexible staircasing, we might not even need to maintain the distinction.

Finally, in addressing the supply side, there is no question that social housing providers themselves should be doing more. We have run the numbers and it is clear that many housing associations have the capacity to increase their development programmes significantly without jeopardising their long-term financial position at all. I am therefore genuinely perplexed that at a time of national housing pressure, some housing associations are prepared just to live the comfortable life. In response, we will need to use a mix of stick and carrot to drive associations to lever their assets more aggressively. And this cannot be just about the corporation imploring from the sidelines 鈥� rationalise, land bank, raise more finance. We also need to consider the barriers that we have some control over, including the role of historic public debt embedded in those assets and, of course, the impact of the regulatory system.

If, however, we are to achieve a true blurring of the tenure divide and provide a genuine balance of need, expectation and aspiration, then we need to ask some serious questions about the demand side of the equation, and in particular, how we provide social rented housing.

Obsession with ownership over service

Hundreds of thousands of households are benefiting from social housing when they could afford to move into the market

One of my observations after two years back working with the sector is that there is still a deep-rooted tendency to think of social rented housing as a physical product rather than a public service. A string of historical events have conspired to create an obsession with owning bricks and mortar, over the provision of a service.

It is only when one looks abroad that one realises how relatively unusual an obsession this is. The Germans purchase their social housing provision from a range of providers on contractual terms, the Dutch have moved down a similar path in liberating housing association assets, including the write-off of historic public debt. The North Americans of course never really got there at all. Only the embedded welfare-based culture of the French really compares, and even they are re-examining historic assumptions following last year鈥檚 banlieue riots.

But if we can separate out the notions of asset ownership and public service then other possibilities start to come into play 鈥� routing capital finance through an even smaller number of expert developers at a lower cost to the state, choosing purposefully to purchase some elements of social rented provision on fixed terms rather than in perpetuity, the more liberal trading of social housing assets, and enabling residents to choose who manages their dwellings without having to impact upon long-term ownership. This shift would also enable the creation of a more rational regulatory system, more akin to the utility industry where there is a split between public interest in continued availability of the assets and the day-to-day consumer concerns over quality of service supply.

Finally, we come to the nature of social renting as a tenure. There is something incongruous about the fact that the need for shelter appears to be the only call upon the state that is answered with lifetime security at a subsidised level. It is akin to going to hospital for an operation for a routine operation and never leaving, regardless of whether or not you have been cured. It is particularly troublesome in a context where hundreds of thousands of households are benefiting from social rented housing when they could afford to move into the market sector at the same time as we have so many households in temporary accommodation and living in overcrowded conditions. And we also have to factor in that the strength of security of tenure is one of the main depressors on the value of social housing assets in high value areas, limiting the ability to lever more borrowing.

Flexibility vs stability

I also recognise, however, that there would be many difficulties in moving away from long-term security of tenure. Many of the households moving into social rented accommodation are in desperate need of some stability in their lives, a platform on which they can re-build. This is particularly true where children are involved. At the same time, as many as 40% of new lettings by housing associations are to tenants who have some sort of support need that means they are very likely be unable to sustain any other form of tenancy in the long term. And finally, if we start stripping away social tenancies at the point that need is eliminated, we risk destabilising communities and accelerating the residualisation of social housing stock.

Towards a halfway house 鈥� Assured-lite

On balance, there may be some limited scope for moving away from full secure or assured tenancies for certain groups 鈥� for example, new tenancies for younger households without children 鈥� but any attempt at a wholesale shift away from security of tenure is likely to lead into a minefield. The only possible alternative I can envisage is if we could create a halfway house, a souped-up version of the Assured Shorthold Tenancy or an Assured-lite that provided many of the same rights and protections as a full secure or assured tenancy but without full lifetime security. Such an approach might be worth piloting for some new tenancies.

Where, however, we could possibly make more progress is in relation to rental policy. There is a serious moral question about whether it is right that two households in identical circumstances should be paying more than 拢200 difference in rent each week because one happens to be fortunate enough to be in a social rented dwelling and the other a private rented one. Particularly for those social tenants earning a decent income, it is difficult to see why the state should be continuing to subsidise their housing costs to such a level. The direction of this argument leads of course to the complexities of means testing and potential benefit traps. Perhaps, however, there is a simple deal to be struck within a reformed social tenancy agreement, that if one reaches a certain level of earnings, one has to choose between three options 鈥� moving out of the social sector, staying in the home but paying a more market-sensitive rent, or part-purchasing a home.

I started with myths and paradoxes; I have probably ended by challenging one or two taboos. But if John Hills鈥� work is to be truly useful, then it has got to open a debate on these difficult issues. As a densely populated nation, our housing stock will be a scarce resource for the foreseeable future. We must therefore find the very best ways of using our existing stock and of maximising the provision of new homes.