£42bn required for new social housing

Housing associations have called for £42bn from the government to build new social housing.

The calls for £42bn far outstrips the pledge of £2bn for social housing made by Theresa May over the summer. Whilst May’s plans for £2bn achieved reasonably positive headlines, the property industry knows that there is a requirement for hundreds of billions of pounds to be ploughed into house building to reinvigorate the failed market.

May’s promise came as part of her address to the National Housing Federation conference, however, whilst this was positioned as an extra £2bn from 2021, it didn’t clarify house much the public sector would be able to access after the current 5-year budget of £9bn comes to an end in 2021.

The National Housing Federation has argued there will need to be around £40bn invested into social housing during the 2020s in order to build enough houses. Paul Hackett, the chairperson of the largest housing association body, the G15, also argued the sector would need around £35bn to £42bn from 2021 to 2028.

The projections of the social house building requirements are based on the report by Heriot-Watt University, which produced the report for the National Housing Federation and the homelessness charity, Crisis. Whilst only 217,000 houses were built last year, the report projects that the UK will require around 340,000 houses per year up to 2031, of which 90,000 houses should be available for social rent.

Commenting on the Prime Minister’s announcement, Mr Hackett said: “The principle of providing long-term funding that spans a longer period is welcome.” Going on to say: “But clearly that would be insufficient for what is needed.”

Commenting on the current level of investment in social housing Mr Hackett went on to say: “The last really large allocation of funding we have had was under Gordon Brown, then we had the financial crisis. Social housing has been under-funded for too long.”

Of course, local authorities have had their hands tied when it comes to building new housing, meaning the majority of social housing has had to be built by and for mainly not-for-profit social housing associations.

During the Conservative Party conference, the Prime Minister announced that the local council borrowing cap would be lifted, meaning council will be able to borrow more to build affordable homes.

However, it will take a long time for councils to build up the house building capacity as they will have to borrow against their stock in order to finance the new building, The NHF has argued the government could raise additional funding for house building by “capturing” the increased value of land associated with granting planning permission on land. However, this would require changes to the planning system and changes output from the spending review.

The government is also best placed to stimulate the private rental sector, where one of the biggest issues facing tenants is the cost of rents, which itself is being driven by the costs landlords face through financing and changes to legislation which landlords are forced to pass on to tenants through rents.

It’s estimated around 40% of new housing will have to be built-for-rent properties, which represents a huge level of investment for the private rented sector to generate and which it’s likely the government will have to support or fund.