The question of how we can deliver more affordable homes is not new, but the need to find an answer is even more pressing today when affordable housing need has reached at least 180,000 homes a year and delivery is falling.
To find a credible answer, we need to be frank about what is driving demand up and delivery down.
The current system failed to keep up with demand even when the housing market was strong, and this failure is even starker in a challenging market.
Simply hoping a stronger housing market will lead to more affordable homes is foolish. We must accept that for too long affordable housing delivery has conveniently been outsourced to the private sector via planning obligations, with rigid affordable housing requirements not only reducing the number of affordable homes being delivered but also stopping schemes altogether.
FLAWED MODEL
The scale of need is widely recognised. Even in good years, we still fall woefully short of the number of affordable homes required.
This is because the current model is over reliant on cross-subsidy and private developers building affordable homes.
With private developers shouldering the cost and risk of delivering affordable homes, alongside infrastructure and an ever-expanding list of policy requirements.
In a buoyant market, that can work on some sites, but in a less buoyant market affordable housing is often the first thing to give.
The government estimates that over 180,000 affordable homes are required per year, which is no less than 60% of the 300,000 homes the government aspires to deliver in total. It goes without saying these homes will not be delivered by cross-subsidy alone. So what are the alternatives?
REALISTIC QUOTAS
Even when the affordable housing requirement is set at 35%, which is most common, this can reduce the number of affordable homes delivered in absolute terms.
All too often this is interpreted as ‘35% affordable or nothing’. Adhering to this rigidly, even in the face of changing economic climates, simply results in nothing being built.
The politicians may boast of delivering 35% affordable homes, but they never acknowledge the number of homes that are left on the drawing board.
Instead, there must be more room for professional judgement and for policy that recognises viability as a constraint.
While time-limited flexibilities, such as we are seeing in London currently, can be legitimate when markets shift sharply, we can’t assume everything will go back to normal when they come to an end.
CASH IN LIEU: NOT A FREE PASS
Increased use of cash in lieu of on-site affordable housing, as is proposed for small and medium sites in the revised NPPF, should be welcomed and not simply reserved for small and medium sites.
Many sites cannot sustain on-site affordable housing even where provision appears to be viable, isolated affordable homes or very small numbers can face limited appetite from registered providers.
In these circumstances, a commuted sum can unlock development while also contributing to meeting affordable housing need.
Yet cash in lieu of on-site affordable housing is only as effective as the system that turns cash into homes: in constrained urban boroughs, for example, where land availability is low and values are high, LPAs may accumulate substantial contributions but are unable to deploy these as there are few suitable or available sites on which to spend the money.
This challenge is evident in the HBF’s recent findings that local authorities are sitting on over £9 billion of unspent financial contributions, including over £700 million of affordable housing contributions.
TIME TO DELIVER
Therefore, if the use of cash payments is to increase, we will need rules that ensure delivery:
- A clear definition of purpose: cash in lieu should unlock homes that would not otherwise come forward, not subsidise homes that were already viable without it.
- Credible routes to deployment, whether through identified sites, partnerships or pipeline schemes.
- Transparent valuation and reporting. If commuted sums are to retain legitimacy, the method must be understandable and reporting must show how money converts into homes within defined timeframes.
- Capacity to deliver: not just cash but procurement, land assembly, design capability and programme management.
BUYER AND BUILDER
The gap in today’s model, compared to the 1970s when housing delivery was last consistently in the 300,000s, is the absence of the state as a delivery agent.
We need the state to do more than regulate: it must also act as landowner, commissioner, buyer and long-term partner.
Land held by the public sector should serve a public purpose. Government and local authorities can assemble land, set clear objectives for tenure mix, affordability and infrastructure and invite private partners to deliver against them.
Homes England and mayoral authorities can be pivotal in using land assembly powers, setting delivery frameworks and supporting schemes that would struggle under a pure cross-subsidy model.
THE POWER OF PARTNERSHIPS
An expanded public sector role can, in addition to allowing the public sector to do what it does best, let the private sector do what it does best too: delivery, innovation, risk management and access to capital.
A FUTURE DIRECTION
We must stop treating affordable housing as a by-product of private housing development and start treating it as critical national infrastructure.
In practical terms, that means increasing public delivery and commissioning, using quotas intelligently and flexibly, using cash in lieu strategically and investing in capacity, both in the public sector and public / private partnerships.
The answer lies in combining this into a system that produces more homes, more consistently.
