Nearly a year into the Government’s term, housing delivery and planning reform is clearly a top priority. The recently introduced Planning and Infrastructure Bill aims to support its ambitious target of delivering 1.5 million more homes over the course of this Parliament, while reforms to the National Planning Policy Framework (NPPF) were also pushed through by the end of 2024.
But we need to focus not just on delivery, but also on tenure. Research has identified a need for 145,000 new affordable homes per year up to 2031, including 90,000 for social rent. However only 36% of identified need for affordable housing has been met over the last decade. With 1.3 million households in England currently on social housing waiting lists, there is a clear moral imperative to act.
Measures to boost affordable housing provision, such as through a recent injection of £2 billion of funding to the Affordable Homes Programme are welcome and long overdue. With the aim of building up to 18,000 new social and affordable homes, it’s clear that this alone comes nowhere close to meeting the scale of need we face. The upcoming Comprehensive Spending Review (CSR) is a perfect opportunity to provide some certainty via multi-year funding settlements for social housing provision. With a long-term housing strategy also due for imminent publication, it’s high time to see ambitious and innovative measures to tackle the housing emergency.
RIBA’s report Foundations for the Future: a new delivery model for social housing aims to do just this. In it, we outline a new model based on a one-off initial investment from central government, which is used by local authorities to build homes for both social rent and market sale on land which is free at the point of use, such as local authority-owned land. This then eliminates, or at least significantly reduces, land cost – which can often stand in the way of building new homes.
The receipts from market sale homes are retained and then reinvested to build further homes for market sale and social rent. Not only does this promote mixed-use development, but reduces reliance on continuous central government funding to secure social housing provision – a real positive in the wider fiscal context.
Our model is based on the following key assumptions:
- The land being used for development is publicly owned and free at the point of use. As land cost is eliminated or substantially reduced, the cost of delivery is driven down.
- Local authorities will deliver the housing stock, so the proposed model does not account for profit.
- With land cost and profit being removed, the only costs remaining are the construction costs of building the new housing stock.
- All revenue from the sale of homes on the open market is retained and reinvested for local authorities to use to build more social homes at a lower net cost.
The market value of new homes is considerably higher than build costs in each region because land and profits are excluded. This means that in each region, for every market home sold, more than one home can be built. Our analysis shows that the ratio ranges from 1.4 new homes for every home sold in the North East, to 2.8 in the South West.
This model is not intended as a silver bullet to provide an immediate fix, but instead as part of a wider suite of solutions. To illustrate its potential, a one-off investment of £1.24 billion – equivalent to local authority homelessness reduction spend in 2022/23 – from central government would build 20,350 homes, including 13,475 for social rent.
We know that the causes of the housing emergency are complex and broad, and the best solutions often context-dependent. What works well in London, for example, may not meet challenges in Tyneside. But what we hope the model does is demonstrate the potential of innovative approaches to housing delivery, and identify what is needed to enable us to build more social housing at scale.
Local authority budgets are a key factor here. Planning departments experienced one of the most severe cuts in terms of real terms budget allocation from 2010 to 2020, with research showing that spending on planning is still down 40% from 2010/11.
These funding shortfalls have a real impact on local authorities’ ability to develop land, with most local authorities unable to access the resources or in-house expertise to directly deliver the construction and maintenance of major projects, including housing. Attention paid to this in the upcoming housing strategy and CSR could make a world of difference, allowing a boost to truly affordable housing while providing local authorities with an asset they can retain.
Margaret Mullane, Labour MP for Dagenham and Rainham, says:
I have consistently made the case for social housing since entering politics, and fully endorse RIBA’s contribution to the debate. An initial increase in capital investment allowing councils to build as part of the Spending Review will help increase revenue and cut Housing Benefit bills over time, paving the way for more truly affordable homes in areas like mine.
With clear political appetite to boost housing supply, and a strong economic and moral case behind it, investing in models like ours is a chance for the Government to make a bold statement of intent – one that the wider housing sector is standing ready to help them deliver on.