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Affordable Homes? The Government Should Back New Mayors To Drive House Building

Darren Baxter
England is falling woefully short of delivering enough affordable housing.

England is falling woefully short of delivering enough affordable housing. If the government is serious about delivering enough homes to tackle the housing crisis, it will empower local authorities and Mayors to deliver a mayor programme of genuinely affordable housing.

Figures released yesterday show that the delivery of affordable homes built with government grant are rising, government is still supporting far fewer than in previous years. What is more, the number of homes built at social rent, with deep subsidy and let at well below market rate to those in need, made up just 13% per cent of the total affordable housing stock. This is the lowest rate since the introduction of a broader definition of affordable housing in 2010.

This is unsurprising. Research we published at IPPR yesterday showed that 92% of all local authorities are failing to build enough affordable homes. This is set against the backdrop of poor housing delivery across the board. New estimates by government put England's housing need at 265,936 homes per year. Just 189,650 were built in 2015-16, a 29 per cent shortfall.

What is more, as a result of government policy since 2010, 'affordable' housing has become increasingly divorced from earnings and linked to out-of-reach market prices. This means that much of the affordable housing which is being built is out the reach of many of those who need it.

Our research looked at four combined authority areas, each of which elected a new mayor in 2017, the West of England, West Midlands, Greater Manchester and Tees Valley. In all but Tees Valley, affordable rented homes, which have their rents set at 80 per cent of the average local market rent, were unaffordable for single people on low incomes. In the West of England, which contains Bristol, an affordable rent home would cost a low income tenant more than half (56 per cent) of their take home wages each month.

Affordable housing models designed to help households into ownership are particularly failing to meet the needs of those on low incomes. In all of those areas studied, a low income family with one parent working full time and the other part time would be unable to afford any affordable ownership products.

This is significant. Affordable housing is an effective buffer against poverty and deprivation and high rents lead to overcrowding, higher reliance on borrowing and constrain household budgets. Furthermore, high housing costs impact negatively on public finances. year. Clearly, a lack of affordable housing is poor value for everyone.

So what is to be done? Government has pledged to tackle the housing crisis and has recently announced a number of measures which aim to do so. Theresa May has already announced that the government will find an extra £10 billion in equity loans for the Help-to-Buy scheme and an additional £2 billion in capital spending for affordable housing, hoping to build at least an additional 25,000 homes. These proposals have rightly been criticised. Not only do they fall woefully short of the action needed and fail to tackle the issues which underpin this crisis, such as the dysfunctional land market, a further boost to the Help-to-Buy scheme is likely to inflate house prices, deepening the crisis for many.

If it is serious about tackling the housing crisis government should pave the way for a large-scale council house building programme by empowering local councils. In doing so, it should allow local authorities to borrow to invest in the building of a new generation of council homes. At the same time, the government should implement a threshold of 35% for affordable housing to all private developments nationally, with a higher threshold of 50% on all public land, in line with the approach adopted by the Mayor of London.

Local authorities are by no means waiting on government and many are already making significant efforts to take on the housing crisis. Recent research has shown that as many as 150 Local Housing Companies (LHC) are currently in operation, owned wholly or partly by local councils and designed to build homes while circumventing the restrictions placed on councils by central government.

In our report, we call on England's mayors to build on the success of local councils and establish combined authority-wide Mayoral Housing Companies. These could then be used to bring land to market for social and affordable rent, addressing the affordability crisis while creating a long term revenue stream for the public purse.

Many of the arguments that surround the housing crisis are well rehearsed. It is well established that we are building too few homes, even fewer which are genuinely affordable, and that this is helping to drive up rents and house prices. What we need now is less tinkering at the edges and instead for the government take the bold action required to deliver the affordable homes we need.