Unlocking affordable homes

In this blog Denise Hatton, chief executive at YMCA England & Wales, discusses the challenges and opportunities YMCA have discovered in their latest report ‘Unlocking Affordable Homes: Boosting affordable housebuilding to solve the housing crisis’

Throughout the course of a year, YMCA provides safe housing for over 20,000 young people and adults around England and Wales. We work in many communities where poverty and homelessness are rife, and where the effects of the UK’s housing crisis are stark. We see firsthand how impossible it is for people to build healthy, happy lives when they don’t have a stable home. But at the same time as treating the symptoms of this problem, we are also trying to tackle the causes: by directly increasing the supply of affordable housing.

YMCA is a federation of 85 local YMCAs around England and Wales, which deliver a range of services in their communities including supported and affordable housing; youth services; early years education; health and wellbeing services; and many others. Some of our local YMCAs are already undertaking housing development, and more are exploring the possibility of doing so. We cannot continue to wait for the market to provide the affordable housing we so desperately need.

YMCA has recently published research on the barriers facing smaller or charitable organisations like local YMCAs which are looking to develop affordable housing. Our report 'Unlocking Affordable Homes: Boosting affordable housebuilding to solve the housing crisis’ highlights several key challenges.

The economic context

• Local YMCAs are facing very difficult economic and financial circumstances for development, including higher interest rates resulting in an increased cost of borrowing; higher construction costs; higher energy bills; the need to meet the decarbonisation agenda through maintenance and retrofitting current housing stock; increased regulatory requirements; and local authority funding cuts.

Access to land

• Many local YMCAs undertaking housing development are building on land that they already own, but eventually they will run out of land to develop on, and many YMCAs and other small organisations do not have these assets in the first place.
• It can be prohibitively expensive to acquire land for development, and many local YMCAs do not have sufficient cash reserves or assets to borrow against to fund this.

Working with local authorities

• Local housing authority planning processes can be slow and complex due to a range of factors, including understaffing as a result of funding cuts; this can make it difficult to acquire planning permission.
• Local authorities have a duty to dispose of land for the best value that can be reasonably obtained, and although there is an exemption for cases where undervaluing the land would benefit the economic, social, or environmental wellbeing of the community, many local authorities cannot afford to sell their land to affordable housing providers for less than a competitive market rate.
• We know that young people have a particularly acute need for affordable housing, but local housing authorities are not required to consider the specific needs of young people within their local housing needs assessments or housing strategies.

Access to Homes England funding

• Many local YMCAs and other smaller organisations found that Homes England’s processes seem to be geared towards large organisations which routinely undertake development.
• The level of grant rate makes it difficult for smaller providers to bring forward financially viable schemes in the current difficult economic context.
• Homes England’s ‘milestone’ funding model can be prohibitive for smaller organisations: the need to purchase the land or building before receiving funding, and the final 25 per cent of funding provided after completion, requires organisations to have significant cash flow to bridge these gaps. Smaller organisations, like many local YMCAs, struggle to cover these costs.
• Local YMCAs also expressed concern that some of the requirements for receiving Homes England funding are too restrictive. Grants remain on buildings in perpetuity, which increases the cost and financial risk if a housing provider needs to redevelop the same building in the future and makes it difficult to borrow against to access funding to maintain or improve the building.

Our recommendations include that the Government should offer upfront funding for land acquisition for organisations looking to develop projects of 100 per cent affordable housing, so that affordable housebuilding is prioritised. The Government should also increase funding to local planning authorities to enable them to fast-track applications and offer additional support to organisations delivering 100 per cent affordable housing, and enable local authorities to offer land or buildings for development at a below-market rate for affordable housing providers.

We recommend that Homes England should undertake a review of its application processes, funding requirements and funding model for smaller providers, and take action to mitigate barriers. It should increase its flexibility around grant rates and offer much higher grant rates for 100 per cent affordable housing projects to make it easier for applicants to afford to undertake these schemes. We also recommend that Homes England grants should depreciate over time rather than remain on buildings in perpetuity.

Local YMCAs and other smaller organisations are well-placed to tackle the housing crisis in their areas, by developing affordable housing that meets local people’s needs and provides good-quality, safe and stable homes. We need the Government to take action to enable this so we can deliver a new era of affordable housing.