Affordable housing

Rachel Buttrick

Overview

There is no single definition of affordable housing upon which there is consensus, nor a statutory definition. The National Planning Policy Framework defines affordable housing as housing “for those whose needs are not met by the market”, which includes housing at social (around 50% market rate), affordable (up to 80% market rate) or intermediate rents, and affordable home ownership products.[1] This definition has been criticised as not genuinely affordable[2] and alternative, income-linked definitions have been proposed.[3]

Housing affordability is a widely acknowledged concern.[4][5] In March 2023, there were 1.29 million households on local authority waiting lists.[6] House prices have risen relative to earnings.[7] For example, in SW England between 1997 and 2021 there was an increase in house prices of between 318% in Swindon and 494% in Bristol, versus income increases of 64% and 85%.[8] The proportion of housing stock made up of social and affordable rented homes has decreased,[9] and between 2012 and 2022, England saw a net loss of 209,000 social rent homes.[10]^,[11],[12], 1.3 million households are on social housing waiting lists and a record number of households – including 160,000 children – are living in temporary accommodation.[13] There are also significant regional disparities.[14]

Lack of affordable housing is linked to worsened mental and physical health.[15]^,[16],[17]. Low-income households are more likely to experience damp in their homes.[18] The literature also highlighted links between affordability and urban displacement.[19]^,[20] Urban displacement is described in the literature as forced population movement from established housing and neighbourhoods arising from urban redevelopment processes and landlord actions.[21]

The Affordable Homes Programme 2021-2026 introduced in the previous parliament provided £11.5 billion grant funding for new affordable housing. [22] In 2022, the Public Accounts Committee found that the programme was unlikely to deliver its targets.[23] In 2024, a report by Savills, commissioned by the National Housing Federation, stated there was likely to be a shortfall of up to 95,000 new homes a year on average.[24] The previous government also introduced changes to enable local authorities to purchase land for affordable housing development at lower costs in April 2024,[25] and an additional £500 million of funding was announced in the budget.[26]

The current government have announced measures aimed at increasing supply of affordable housing, including increasing mandatory housing targets in areas with the greatest housing unaffordability, planned reforms to compulsory purchase compensation and to reduce discounts available to people who have the right to buy their social home under the Right to Buy, and are consulting on further changes.[27]^,[28],[29] The aim of these changes is to protect existing social housing and for local authorities to have more more flexibility to use the receipts from sales to fund replacements.[30] The 2024 revision of the NPPF requires greater consideration of housing for social rent by local authorities and developers, and more powers for local authorities on affordable housing.[31]

Challenges and opportunities

In 2024, the House of Commons Housing, Communities and Local Government (HCLG) Committee set out the constraints in capacity for social landlords to invest in new housing supply, as have others.[32]^,[33] Other challenges raised by contributors to the scan included:

Understanding and addressing barriers to delivering affordable housing, including the impact of planning rules,[34]^,[35] local authority planning capacity,[36] the role of Right to Buy,[37]^,[38] the impact of grant funding reduction and the shift to cross-subsidy[39]^,[40] and specific regional challenges, such as the right housing targets to meet historic undersupply.⁸
Research suggesting the need to address the effectiveness of Section 106 agreements, including barriers such as rising building costs risking profitability of developments and the delivery of affordable housing.[41] The Levelling Up and Regeneration Act 2023 legislated for a new Infrastructure Levy, which was being piloted and had been criticised by the HCLG Committee as risking a reduction in delivery of affordable housing.[42]
The HCLG Committee also raised concerns about the impact of high land prices and the opportunities for Land Value Capture reform and use of public land.[43]
The new towns programme announced in 2024 aims to create new settlements containing at least 10,000 homes, with a ‘New Towns Code’ requiring targeting rates of 40% affordable housing with a focus on affordable social rented homes.[44]
The HCLG Committee have raised concerns about rising decarbonisation, regeneration and fire safety costs leading to social housing providers deprioritising development to protect their viability.[45]^,⁸^,[46] However, affordable housing needs to be resilient to environmental change and provide high quality healthy places to live.[47] Research suggests while these costs can be used to argue against the viability of affordable housing schemes and add to capacity issues in Local Authorities, social housing providers focussed more on the sustainability of homes and places created to protect their assets.⁸
Researchers have set out challenges linked to policies aimed at increasing home ownership, including evidence some policies may inadvertently increase prices in areas with constrained supply.[48] The shortage of builders has also been identified as a major constraint in some regions.[49] The HCLG Committee have set out challenges associated with Shared Ownership, including high rents and repair costs.[50]

Opportunities raised by contributors included:

Addressing the decrease in social rent housing,[51]^,[52] and harnessing potential economic benefits of increasing social rent housing.[53] The Affordable Housing Commission and Shelter have criticised the shift from social rents to affordable rent, which is not affordable to those on lower incomes.[54]^,[55] The House of Commons Public Accounts Committee has recommended prioritisation of affordable home ownership in the Affordable Homes Programme.[56]
The New Homes Accelerator programme announced in August 2024 aims to foster collaboration between developers, landowners and local authorities to deliver large developments.[57]^,[58] The Home Building fund provides finance to finance small and medium (SME) developers was extended by £700 million in 2024.[59] Researchers have set out opportunities to greater leverage small community-based housing providers and examples of local authorities, SME builders and housing associations working collaboratively.[60]^,⁸
The HCLG Committee highlighted opportunities for an increased role for private finance in affordable housing.[61]^,[62]
The HCLG Committee noted the unaffordability of private rented housing,[63] with research showing this is where increasing numbers of low-income households are renting (PN 729, PN 730).[64] The literature highlighted the impact of welfare policy[65]^,[66],[67] and wage stagnation.[68] The Scottish Government have introduced rent regulations to address affordability.[69] Research evidence on the impact of rent regulation is mixed.[70]

Key uncertainties/unknowns

This is a rapidly developing area, with policy issues emerging since the horizon scan consultation was conducted.

The affordability of housing and the rates of development are influenced by the overall health of the housing market and economy.

The cost of maintaining social housing increased following the introduction of additional fire safety regulations after Grenfell,[71] and building costs rose due to the pandemic and invasion of Ukraine.[72] Similar unpredictable events in the future may impact the supply and delivery of affordable housing.

Key questions for parliament

Whether the government’s plans to increase the supply of affordable and social housing will deliver intended outcomes, including approaches to funding, potential planning reforms and reforms to land compensation?
What policies aimed at supporting affordable home ownership have evidence for effectiveness? What level of grant funding is needed under the government’s Affordable Housing Programme to achieve stated objectives?
What will be the impact of policies on the financial viability of social housing providers?
What are the links between a lack of affordable housing and rising levels of homelessness?[73] What are the links between welfare policy and affordability, and how effective are policies to improve housing security for those in the Private Rented Sector, including the policies in the Renters’ Rights Bill?
How to address the impact of lack of affordable housing on socio-economic and health inequalities?

References

[1] Commons Library Research in Brief, Affordable housing in England

[2] Commons Library Research Briefing CBP07747, What is affordable housing?

[3] Affordable Housing Commission, Making housing affordable again, March 2020, p66

[4]Commons Library Research in Brief, Affordable housing in England

[5] Anthony Breach, Samuel Watling, The housebuilding crisis, Centre for Cities, February 2023, p4

[6] Department for Levelling Up, Housing and Communities, Social housing lettings in England, tenants: April 2022 to March 2023, accessed 8 August 2024

[7] ONS, House price to residence-based earnings ratio, accessed 15 July 2024

[8] UWE Bristol and Homes for the South West, Housing Affordability in the South West of England, March 2023, p5

[9] Commons Library Research in Brief, Affordable housing in England

[10] Stephens, M., Perry, J., Williams, P., Young, G., & Fitzpatrick, S. (2021). 2021 UK Housing Review. Chartered Institute of Housing, p.79

[11] Chartered Institute of Housing. (2021). UK Housing Review 2021 highlights shocking fall in numbers of social rented homes

[12] Rose Grayston, Squeezed Out, New Economics Foundations, November 2021, p5

[13] Ministry of Housing, Communities and Local Government. (2024). Live tables on rents, lettings and tenancies. GOV UK

[14] National Housing Federation, The Housing crisis: what will happen if we don’t act, August 2023, p28

[15] Kate Dotsikas, David Osborn, Kate Walters, Jennifer Dykxhoorn, “Trajectories of housing affordability and mental health problems: a population-based cohort study.” Social Psychiatry and Psychiatric Epidemiology, Vol 58, 2023, p769

[16] Institute of Health Equity, Evidence Review: Housing and Health Inequalities in London, September 2022, p37

[17] Will Raderman, Nina T Rogers, Emily T Murray, “Variations in housing affordability and health relationships by measurement and sub-population assessment,” February 2021, p1

[18] Commons Library Research briefing CBP9696, Health inequalities: Cold or damp homes

[19] Urban Displacement Project, London – Gentrification and Displacement, accessed 5 August 2024

[20] Centre for Labour and Social Studies, Pushed to the Margins, June 2021, p5

[21] Watt, P., et al. (2024). Special Feature: Putting urban displacement in its place. City Analysis of Urban Change, Theory, Action, Volume 28, Issue 1-2, p 161-188

[22] MHCLG. (2024). Transparency data. Affordable Homes Programme 2021 – 2026: accounting officer assessment. GOV UK

[23] Committee of Public Accounts, The Affordable Homes Programme since 2015, 7 December 2022, paras 1-3

[24] National Housing Federation. (2024). Government to miss 1.5m homes target by half a million homes without funding and policy intervention, industry bodies warn

[25] Department for Levelling Up, Housing and Communities press release, New powers for councils to help build more affordable homes, 30 April 2024

[26] HM Treasury. (2024). Chancellor to unlock housing in first Budget

[27] Ministry of Housing, Communities and Local Government press release, Housing targets increased to get Britain building again, 30 July 2024

[28]The Prime Minister’s Office, King’s Speech 2024 background briefing, accessed 5 August 2024, p 17

[29] MHCLG. (2024). Open consultation. Reforming the Right to Buy

[30] MHCLG. (2024). Future of social housing protected through Right to Buy reforms

[31]

[32] Housing, Communities and Local Government Committee. (2024). The Finances and Sustainability of the Social Housing Sector

[33] Turner, G., et al. (2024). Why falling demand for Section 106 homes is a barrier to wider housing delivery. The Savills Blog.

[34]Anthony Breach, Samuel Watling, The housebuilding crisis, Centre for Cities, February 2023, p3-4

[35] Christian A.L. Hilber and Olivier Schoni, House policy and affordable housing, LSE Centre for Economic Performance, May 2022, p7

[36] Housing, Communities and Local Government Committee, Building more social homes, 20 July 2020, paras 104-105

[37] Local Government association, Right to Buy needs reform to avoid social housing stock losses, February 2024

[38] Housing, Communities and Local Government Committee, Building more social homes, 20 July 2020, paras 117 to 125

[39]As above, paras 11, 91

[40] Eleanor Benton and Anne Power, What is the role of housing associations in providing intermediate and market rented housing?, LSE Housing and Communities, October 2021, p6

[41]Rose Grayston, Squeezed Out, New Economics Foundations, November 2021, p3

[42] Levelling Up, Housing and Communities Committee, The Finances and Sustainability of the Social Housing Sector, 29 April 2024, para 142-144

[43]Housing, Communities and Local Government Committee, Building more social homes, 20 July 2020, para 36

[44] Ministry of Housing, Communities and Local Government. (2024). Policy statement on new towns. GOV.UK

[45] Levelling Up, Housing and Communities Committee, The Finances and Sustainability of the Social Housing Sector, 29 April 2024, paras 21-24

[46] Sandeman, G. (2024). ‘Perfect storm’ blocking thousands of desperately needed social homes. BBC News

[47] Roscoe, S. and Callway, R. (2024). Securing Healthy Homes at the local level. Town and Country Planning Association

[48] Christian A.L. Hilber and Olivier Schoni, House policy and affordable housing, LSE Centre for Economic Performance, May 2022, p17

[49] London Homes Coalition. (2024). Building Skills for the future.

[50]Levelling Up, House and Communities Committee, Shared Ownership, 26 March 2024, para 36

[51] As above, para 53

[52] National Housing Federation, The Housing crisis: what will happen if we don’t act, August 2023, p26

[53] Centre for Economics and Business Research, The economic impact of building social housing, February 2024, p5

[54] Affordable Housing Commissioning, Making Housing Affordable Again: Rebalancing the Nation’s Housing System, March 2020, p145

[55] Shelter, Brick By Brick, July 2024, p4

[56] Committee of Public Accounts, The Affordable Homes Programme since 2015, 7 December 2022, Conclusion 3

[57] Ministry of Housing, Communities and Local Government. (2024). New Homes Accelerator programme. GOV UK

[58] Lyons, C. (2024). The New Homes Accelerator: A (quicker) step in the right direction? The Planner

[59] Ministry of Housing, Communities and Local Government. (2024). Planning overhaul to reach 1.5 million new homes. GOV UK

[60] Eleanor Benton, Ruby Russell and Anne Power, Keeping Communities Together, LSE Housing and Communities, April 2022, p5

[61] Levelling Up, Housing and Communities Committee, The Finances and Sustainability of the Social Housing Sector, 29 April 2024, para 123

[62] Chartered Institute of Housing, 2023 UK Housing Review, 2023, p2

[63] Levelling Up, House and Communities Committee, Reforming the Private Rented Sector, 6 February 2023, para 94

[64] Shelter, Levelling up with social housing, November 2021, p6

[65]Rhiannon Sims, Michael Allard, Locked Out: Local Housing Allowance & affordability in the private rented sector in Scotland, Crisis, August 2023, p2

[66] Shelter, Nowhere left to go for private renters receiving housing benefit, June 2023

[67] Institute of Health Equity, Evidence Review: Housing and Health Inequalities in London, September 2022, p24

[68] Institute for Public Policy Research, Renting Beyond Their Means?, June 2020, p5

[69] Commons Library Research Briefing CBP09622, Housing and the cost of living, p10

[70]Alex Marsh, Kenneth Gibb, Adriana Mihaela Soaita A., Gibb, K., & Soaita, A. M. (2022). “Rent regulation: unpacking the debates.” International Journal of Housing Policy Vol 23(4) 734–757.

[71] Levelling Up, Housing and Communities Committee, The Finances and Sustainability of the Social Housing Sector, 29 April 2024, paras 43-45

[72] Rose Grayston, Squeezed Out, New Economics Foundations, November 2021, p3

[73] House of Commons Library. (2024). Statutory homelessness (England): Causes and government policy.

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