One third of new homes need to be submarket

The Chancellor has come under fire for tackling volume rather than variety in his approach to the housing crisis, as it is revealed that £2bn earmarked for affordable housing is being recycled from existing housing funds

Maximising value for money means using housing funding flexibly to help deliver the right homes in the right places, regardless of tenure, according to a recent Savills report.

At current pricing, one third of the 300,000 homes we need to build a year should to be submarket, and the scale and nature of this need varies greatly between regions, according to Savills.

The 2016-21 Shared Ownership and Affordable Homes Programme fails to acknowledge the different needs of local markets and isn’t necessarily delivering the most cost-effective housing across the country, Savills said in a recent report. Directing grant to the areas where it returns the most value in terms of benefit bill savings, ensuring it delivers the most appropriate tenures and plays a role in improving housing quality, is essential to solving the housing crisis.

“In 2015, we reported that 70,000 households could be in need of sub-market housing each year,” Savills said. “Using our modified version of the government’s proposed standard approach to housing need, and house price growth that has outpaced wage growth, this figure is now 96,000 per year.

“These are households who don’t have enough income to access their local market and their incomes vary hugely in different parts of the country. In London, 20% of these households have incomes over £35,000, and 20% have incomes under £10,000. In the North, 80% have incomes under £10,000 and none have incomes over £30,000. These income levels exclude housing benefit.”

A one size fits all housing policy fails to address the variety of issues faced in different regions. In markets where affordability is the most pressing issue, a range of tenures is needed to meet the varied needs of local households unable to access the market. In other areas, housing quality is a key issue, including a need to renew poor quality private rented housing.

In more affordable markets the income range of households unable to access the market is concentrated in the lowest income bands, Savills found. Low cost rental housing is essential in these areas whilst intermediate products and shared ownership don’t necessarily address the needs of the local community. Understanding the differences in sub-market housing need is crucial to getting the right affordable homes in the right places.

Bjorn Howard, group CEO of Aster Group, said, “A lot has been made in the run-up to the budget of the government’s expected target to build 300,000 new homes next year. We welcome the clear-cut push to increase housing stock, but would have liked Mr. Hammond to have acknowledged that variety is as much a problem as volume for the sector.

“Housing is increasingly a point of division in society. Remedying this depends on tackling affordability and choice in the market, including greater availability of alternatives to traditional rent and homeownership options, such as shared ownership. This is where housing associations, alongside local councils empowered by greater borrowing freedom, can play an important role in increasing the number of affordable homes across the UK.”

Sadiq Khan recently attacked the government for its ‘abject failure’ to tackle London’s housing crisis, as it was exposed that a major new £2 billion government housing fund, announced by the Prime Minister in her Conservative party conference speech and confirmed by the Chancellor in the Budget, is not new money.

Theresa May pledged to invest £2billion to build new affordable housing as the centrepiece of her Conservative Conference speech in Manchester in October, vowing to ‘take personal charge of getting government back into the business of building houses’.

Analysis from the independent Office of Budget Responsibility (OBR) shows that, far from being new money, the £2 billion is actually just a reallocation of previously announced but unspent housing funds – taken from the Accelerated Construction Fund and the Starter Homes Land Fund.

The Mayor of London, Sadiq Khan, said, “The government’s current spending on affordable housing in London is still less than half of what it reached in 2010 and less than a fifth of what we really need.”

The Budget Red Book also admits that £8bn – over half of what the government claims as new financial support for housebuilding in the Budget – in fact comprises guarantees that they “will explore options with industry to create”.

Mayor Sir Steve Bullock, London Councils’ Executive member for housing, said, “There are more than 50,000 homeless households in temporary accommodation in London and the need for 72,000 new homes a year to meet demand.

“The Chancellor has taken steps to acknowledge the housing crisis in London in the Autumn Budget but he has not gone far enough to empower councils to play their full part in fixing the capital’s broken housing market.”