The UK Housing Review – investment in housing

Over the last year the importance of having access to a good, safe home that you can afford has been brought sharply into focus. Those without have been more likely to be negatively affected by the pandemic – either in health or economic terms, or indeed both.

As we move tentatively through the steps of the roadmap out of lockdown, our attention now turns to how the UK can build back better. For those of us in the social housing sector there is a clear and obvious option; invest in and build more social homes. It drives growth, creates jobs and improves health outcomes.

This year’s UK Housing Review (UKHR) therefore provides some welcome news. Its analysis shows that of the £37.6bn that Government is making available for new homes in England through grants, loans and guarantees until 2024 / 25, 46% (£17.23bn) is for new affordable housing. The ratio of 54:46 market housing to affordable housing is against a backdrop of a 75:25 ratio in previous years – a significant step in the right direction.

Analysis published by Crisis and the National Housing Federation in 2018 showed that to meet housing need in full in England, 90,000 homes for social rent are needed – every year. And to achieve that, a Housing, Communities and Local Government Select Committee report published last year shows that a far greater level of grant funding is required.

While the Government’s £12.2bn Affordable Homes Programme over five years will not enable the sector the build the number of social homes that analysis shows are needed, it does represent the largest investment in social housing for a decade. The Government aims to deliver 180,000 affordable homes through it, and has forecast that at least 32,000 of them will be for social rent.

Perhaps one of the standout statistics of the UKHR’s housing expenditure chapter is that grant funding made up just 9% of development funding for housing associations in 2020. This was actually an increase on 7% in 2017. Income from sales, debt and other cross-subsidy makes up the rest of the funding required to build new social homes. Nonetheless, the most recent quarterly survey published by the Regulator for Social Housing shows that 12-month forecast spending on new development remains strong and is back to the level expected pre-pandemic.

The review tells a contrasting story for Scotland. The supply of homes for social rent has grown by 25,000 over the last five years, and 35,000 of a planned 50,000 new affordable homes will be for social rent. In Wales, 20,000 additional affordable homes over five years to March 2021 were financed by a £1.7bn investment. In Northern Ireland, capital funding for social housing has increased year-on-year to £131.5m in 2020/21 and just over 6,200 social homes were built from 2016/17 to 2019/20.

Planning reform has been a hot topic during the period of the review. Beyond the “mutant algorithm” headlines, last August’s Planning White Paper proposed to phase out Section 106 and replace it with a new Infrastructure Levy. The UKHR highlights the importance of S106 – 48% of total affordable housing (27,000 homes) came via this route in 2019 / 20 – and casts doubt on the argument that the new system will be more effective. We await the publication of the Planning Bill to find out what the Government’s plans are.

Overall, the review gives some cause for hope of a shift towards a greater emphasis by Government on investment in affordable housing, albeit at a level still a long way from that required to deliver the number of homes needed.

At Guinness, we are keen to play a significant part in tackling the country’s housing crisis. The extra certainty and stability of the funding we have received through our strategic partnerships with Homes England (a joint partnership with Stonewater) and with the Greater London Authority are helping us to achieve this.

But building new homes does not stand alone as a strategic challenge for social landlords. Elsewhere in the review chapters highlight: a potential lack of economic certainty post pandemic; that current low interest rates set by the Bank of England may rise; and substantial costs associated with zero carbon and building safety. With these wider challenges in mind, it is even more important that housing is an investment priority as the UK strives to build back better.