£2bn boost for affordable housing and long-term deal for social rent

£2bn boost for affordable housing and long-term deal for social rent

Government confirms plans for a new generation of council and housing association homes. Funding for affordable homes will be increased by a further £2bn to more than £9bn.

Prime Minister Theresa May announced the headline figures during her speech at the Conservative Party Conference in Manchester. The numbers of homes will be determined on type and location of housing, and bids received for funding. With a typical £80,000 subsidy, this £2bn investment can supply around 25,000 more homes at rents affordable for local people.

Ministers also confirmed plans to create a stable financial environment by setting a long term rent deal for councils and housing associations in England from 2020.

The funding will further support councils and housing associations in areas of acute affordability pressure, and where working families are struggling with the costs of rent and some are at risk of homelessness.

The Government’s Affordable Homes Programme will increase from £7.1bn of public funding to £9.1bn, and the £2bn additional funding for affordable housing could lever in total investment by housing associations and councils of up to £5bn.

As set out in the Housing White Paper, to help encourage more investment in social housing, government will create a stable financial environment by setting a long-term rent deal for councils and housing associations in England.

Under the proposal set out today, increases to social housing rents will be limited to the Consumer Price Index (CPI) plus 1% for five years from 2020. This will give social tenants, councils and housing associations the security and certainty they need.

Previously, the Government’s affordable housing policy primarily supported ‘affordable rent’ — rents of up to 80% of local market level — and low-cost home ownership. This announcement now extends support for ‘social rent’ — which are lower rents, set according to national guidelines.

The Prime Minister said: “We will encourage councils as well as housing associations to bid for this money and provide certainty over future rent levels, and in those parts of the country where the need is greatest, allow homes to be built for social rent well below market level, getting government back into the business of building houses, a new generation of council houses to help fix our broken housing market.”

Here LABM rounds-up opinion to the announcement from across the sector:

Lord Porter, Chairman of the Local Government Association, said: “It is good that the Government has accepted our argument that councils must be part of the solution to our chronic housing shortage and able to resume their historic role as a major builder of affordable homes. We hope that the speech by the Prime Minister signals an important shift in the Government’s housing vision and are pleased that there will be additional funding for affordable homes.

“Councils are working with communities to approve nine in 10 planning applications but it is clear that only an increase of all types of housing — including those for affordable or social rent — will solve the housing crisis. A genuine renaissance in council housebuilding would increase housing supply, boost home ownership and reduce homelessness.

“The last time the country was building more than 250,000 houses was in 1978 — when councils built 44% of new homes. Councils want to get on with the job of building the new homes that people in their areas desperately need.

“Every housing market is different and the only way councils will be able to significantly deliver the new homes we need is if they are given genuine powers to invest in housing that meets the needs of communities in every town and city across the country.

“This means the ability to borrow to invest in new council housing, to keep 100 per cent of Right to Buy receipts to replace sold homes, certainty over future rents, powers to make sure developers build approved homes in a timely fashion, and adequately funded planning departments so that they can cover the cost of processing applications.”

David Orr, Chief Executive at the National Housing Federation, commented: “The announcement is a watershed moment for the nation. In the aftermath of the tragic fire at Grenfell Tower, the Prime Minister said that we as a nation have not paid enough attention to social housing. Today, she is right to make a bold break with the past and commit to building the homes we need most — genuinely affordable homes for those on the lowest incomes.

“The additional £2bn will make a real difference to those let down by a broken housing market. Building homes for social rent will make work pay and help bring down the housing benefit bill in the long run by moving people out of costly private lets.

“Housing associations have been unequivocal about their ambition to deliver the homes the nation needs, be that homes to rent or homes to buy. Improved access to finance and land will see housing associations able to unleash their full potential, building on the 48,000 homes they started last year.

“Building with housing associations represents excellent value for taxpayer money; for every £1 the Government puts in, housing associations raise a further £6. We are ready to work with the Government to deliver a new generation of genuinely affordable, high quality homes for rent.”

Brian Berry, Chief Executive of the FMB, said: “Despite the Prime Minister’s precarious political position since the General Election, Theresa May has managed to take a braver and bolder stance on house building than any Prime Minister of recent years. The private sector will continue to expand the number of new homes it builds, particularly so if the Government succeeds in its aim of removing barriers that hold back small scale housebuilders. However, in the housebuilding heyday of the 1950/60s, a healthy private sector was always complemented by significant levels of social housebuilding. Indeed, we have only ever built at the level we need to keep pace with demand when both the private and public housebuilding sectors have been firing on all fronts. In the 1960s, for example, we were building around 400,000 homes per year and half of those were social housing.

“The Prime Minister’s plan is also an opportunity to help shape a stronger local housebuilding industry. If councils can start to engage with smaller, local builders to deliver this new generation of council housing, it could further help to diversify the industry. This would also boost the capacity of the private sector through the provision of more public sector work. Indeed, the increased use of small and medium-sized building firms will limit the problem of land banking, as this is something small builders simply don’t do.”

Lindsay Judge, Senior Policy Analyst at Resolution Foundation commented: “The commitment of an extra £2bn for affordable and social housing is a very welcome first step towards tackling Britain’s housing crisis. With over a million people on local waiting lists for social housing, it is a timely and necessary intervention.

“We are facing a huge social housing shortage. Back in 1981 three out of every 10 families rented their home from the council or a housing association. Today, that figure has halved.

“But the size of the challenge is huge. During the Macmillan years more than 100,000 council homes were built each year. Last year there were just 1,840 new council homes built by local authorities, with housing associations adding another 25,000 affordable homes. The announcement could mean a further 5,000 homes a year. That is welcome but it’s equally clearly more action will be needed.

“If Theresa May wants to lead the way on facing up to our housing challenge she will need to ensure building happens on a scale we haven’t seen for a generation, with councils backed all the way to do so. And in the meantime, families in the private rented sector should get the greater security they deserve.”

Nicholas Harris, Chief Executive, Stonewater said: “The Prime Minister’s promise to build hundreds of thousands of truly affordable new homes across a range of tenures is great news for the many people currently struggling to afford decent housing across the country and who are stretched to breaking point to pay their mortgages and rents. As a major social housing provider, we support the proposals to make more funding available and the plans to build more desperately needed social housing, which supports the nation’s most disadvantaged and vulnerable groups. This requires politicians of all parties and at all levels to work with local communities to address the need for new affordable homes.

“We welcome the opportunity to work and share our expertise and solutions with national and local government to get Britain building as quickly and cost-effectively as possible. By working together, we can tackle the nation’s chronic housing crisis and create the vital affordable housing, which is the lifeblood of a successful economy and key to the creation of thriving and sustainable communities.”

Hastoe Chief Executive Sue Chalkley said: “This is a welcome shift in Government policy and I am delighted that attention will once more be paid to building genuinely affordable homes for those who need them most.

“However, it is crucial that this new programme does not only benefit our towns and cities. Villages need affordable homes too. England’s rural areas house 9.3 million people — that’s 17.6% of England’s population — but are facing a crisis of housing affordability and availability. Just 8% of rural homes are affordable compared to nearly 20% in urban areas, and the average rural property costs 11 times the average rural salary.

“If this drive to provide new homes only addresses urban needs, our rural communities will continue to slowly suffocate and die out as young people cannot afford to stay in the rural communities they were born or grew up in.”

Lovell Managing Director Jonathan Goring commented: “We support the announcement by Theresa May that increased funding will be available to councils and housing associations to deliver the new homes which are so urgently needed across the UK. As a developer of homes across all tenures, Lovell works with local authorities and other partners to unlock the potential of their unused sites and create high-quality homes — available for social and affordable rent and for sale — in the places where people want to live.  We believe more flexible and creative use of public land, as well as more widespread use of modern construction techniques, have a crucial role to play in getting more homes built, delivering them more quickly and helping more people to attain the homes they desperately want.”

Sara Hanrahan, a Partner at Blake Morgan who specialises in advising affordable housing schemes, said: “There is no question that radical measures are needed if, as a nation, we want to significantly increase housing supply. However, the market will remain ‘broken’ if new homes are not made available at genuinely affordable prices.

“The Government’s September Consultation Paper on ‘right homes in right places’ does not really offer any new radical solutions. The Government is pinning its hopes on the cumulative effect of small changes to the system – but more is needed.

“Savills, for example, comment on moving instead towards ‘mass market’ sites in areas where housing is generally less expensive.  This would certainly help, but only if greenbelt land is released in order to create properly laid out new towns, which will be sustainable.

“The Government could also be looking at other options, including providing better assistance to new home buyers by way of tax savings and reduction in stamp duty land tax. One option could be the purchase of a first home being linked to pension contributions that could be offset against part of the purchase price.

“The report also touches on more purpose-built rental accommodation. In England there was shift towards home ownership several decades ago that has become embedded in our psyche. However, in many European countries there is much more flexibility in tenures and in Germany over half the population rents.

“As a result the standard of rental accommodation is generally much higher. Removing the stigma that surrounds renting and providing better quality housing is something the Government needs to examine in more detail. Probably not so popular a concept post Brexit, but essentially we need to become more ‘European’ in our thinking.”

Steve Collins, CEO of Rentplus, commented: “The £2bn of new money for affordable housing shows this Government is committed to rebuilding our broken housing market. By expanding Help to Buy and supporting more working families into social housing they have recognised there is no one fits all solution to the housing crisis. However, we must be realistic about the scale of the challenge. Figures from TwentyCI show that the number of 18-35 year olds buying a home has fallen by a staggering 21.6% in the last quarter. In addition, today’s money will only lead to a further 5,000 affordable homes being delivered out of a target of 200,000 new homes every year for five years — or 2.5% of the total needed. Given the number of homes we built for social rent fell from 40,000 in 2011-12 to 1,102 in 2016-17 the funding boost is welcome, but ultimately it is merely a drop in the ocean.

“In this Autumn’s Budget and the Housing White Paper response the Government has two further opportunities to light a rocket under the building of affordable homes in this country. We want to see them open the doors to institutional investors who have the capacity to fund the rapid roll-out of affordable housing.

“From our conversations with the City we believe that with a few tweaks to housing policy, such as recognising innovative new affordable housing tenures — including affordable rent-to-buy — in the National Planning Policy Framework, up to £40bn of investment could be unlocked. On the basis of the Government’s figures this could fund hundreds of thousands of new affordable homes.”


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