Burnham Government will need new approach – and new money – to really ramp up affordable housebuilding

The new Prime Minister will need to redirect grants towards ‘council homes’, allow private developers to build fewer social rent homes and utilise low-cost loans to housing associations if he’s to deliver on his promise to build more council housing, according to new Resolution Foundation research published today (Friday).

The latest Housing Outlook notes that with a near-record 134,000 families in England living in temporary accommodation, and 1.3 million on the housing waiting list, the need for more affordable homes could not be clearer.

Andy Burnham has pledged to increase the supply of ‘council housing’ – most commonly used to refer to homes for social rent. These homes offer tenants the greatest discount compared to market rents, regardless of whether the property is owned by a local authority or a housing association.

However, this change creates a trade-off between affordability and building at scale. With a higher upfront cost per unit, building more social housing would reduce the overall number of affordable homes being built. Nonetheless, the Foundation argues there is a way for the new Prime Minister to square this circle by:

• Ringfencing the £39 billion Social and Affordable Homes Programme (SAHP) exclusively for social rent homes over its ten-year lifespan. That would increase the supply of social rent homes but leave a 5,000 homes a year shortfall in the programme’s overall target of building 300,000 affordable homes by 2036.
• Allowing private developers to build fewer social rent homes in a period when they face weak demand for private sales in exchange for more affordable rent units, which need less subsidy to build in the first place. This could boost supply by an additional 2,000 affordable homes a year.
• Utilising the as yet untapped £2.5 billion low-cost loan facility in the National Housing Bank to stimulate affordable housebuilding by housing associations, which has the potential to add another 4,000 to 6,000 affordable homes a year.

Taken together, this package would be a win-win for the government, allowing it to deliver more social housing than is currently planned, while still increasing the total number of all affordable homes by between 1,000 to 3,000 a year, all within the current funding envelope.

In total it would mean building 66,000 affordable homes a year, matching recent highs and remaining within the government’s budget. But it’s but a far cry from the post-war era when local authorities themselves were building 100,000 homes a year. More money will be required to prompt a genuine gear-change in affordable housing supply.

And whatever choices the government makes, housebuilding takes time. The author warns that the nearly one million low-income private renters who get help with housing costs through the benefit system cannot wait for the diggers to arrive.

These families are already facing an average 20 per cent gap between local rents and the housing support they receive, further squeezing their living standards. Without immediate government action, the gap between the rents families pay and the support they can get will reach a record shortfall this autumn.

To address this, the new Government should relink housing support in Universal Credit to the 30^th percentile of local rents to ensure low-income families are not pushed into further hardship still. That, too, will mean finding real money at the next budget.

Hannah Aldridge, Senior Research and Policy Analyst at the Resolution Foundation, said:

 “Andy Burnham has put boosting affordable housing centre-stage and with 134,000 families in temporary accommodation in England and 1.3 million on the housing waiting list, this ambition is welcome and necessary.

“The government will need to strike a balance between affordability for tenants and building at scale. By making careful use of the Social and Affordable Homes Programme, private developer contributions and the National Housing Bank, the new Government can boost the supply of social rent housing and build more affordable housing overall.

“But building takes time. Close to one million low-income renters already face a shortfall between their rent and housing support, and that gap will hit a record high this autumn. With housing support frozen for the rest of the decade, the shortfall in support will get deeper unless action is taken swiftly. The new Prime Minister should commit to relinking housing support with local rent levels in the upcoming Budget.”