According to government figures, 63,000 units of affordable housing were delivered in 2022/23 and this was the highest in eight years. There are currently around 4.1 million social and affordable rented homes in England which accounts for 16% of all housing stock (around 20% in 2000).

Getting homes built

Planning reform is key to the government’s plans, but affordable housing experts argue this won’t solve everything. Thomas Parsons, managing partner at Citygate Housing, says funding is a significant issue. Unlike private housing, the money – and appeal – simply isn’t there.

“Traditional housebuilders are driven by market economics, which heavily favour developments that yield higher profits through open-market sales,” says Thomas.

“Affordable housing projects, by contrast, often suffer from funding shortfalls due to lower returns, making them less attractive to private investors without substantial government subsidies or incentives.”

This poses a challenge for a government that has already complained of finding a £22bn ‘hole’ in public finances, with a “painful” budget expected in October.

According to a 2022 Legal & General and the British Property Federation study, an additional 95,000 affordable homes are needed to close the nation’s shortfall, requiring an increase of £14bn a year in grant funding.

“Any subsidised housing needs subsidy,” says Paul Rickard, managing director at Pocket Living. “This can take the form of cross-subsidy from open market delivery or grant. In the current challenging delivery environment, we have seen that cross-subsidy has diminished significantly, exacerbated by the significant reduction in demand for s106 housing acquisitions from housing associations.”

Despite support being more likely to be lent than capital, as painted in labour’s rhetoric in previous weeks, Rico Wojtulewicz, head of policy and market insight at the National Federation of Builders, says funding needn’t be so difficult.

He argues that the government could fund affordable housing, but that it instead chooses to blame the private sector for falling behind.

“Market builders delivering affordable housing and selling at a discount often make a loss and currently, registered providers such as housing associations have pulled away from buying them due to higher borrowing rates and requirement to existing stock retrofitting,” adds Rico.

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“The government or local authorities could build social and affordable housing itself, but housing is predominantly a land use challenge. It’s easier to blame builders for under-delivery than to use land themselves.”

Different approaches

It was decades ago since huge numbers of affordable housing were built in the UK. According to Shelter, in the 35 years after World War II 4.4 million affordable homes were built with an average of 126,000 a year. The UK is now a very different place from the post-war era.

“Given the profound changes in the UK’s demographics and the housing industry, there’s a pressing need to rethink how we approach affordable housing,” says Thomas. “The traditional models that worked in the mid-20th century are no longer fit for purpose.”

For this reason, Citygate focuses on converting underused commercial spaces to create affordable housing, maximising the use of existing infrastructure, as well as avoiding the delays often associated with new builds.

Elsewhere, Dolphin Living has focussed on intermediate rent homes. These can be delivered quicker and with lower levels of grant funding, something the company’s CEO Olivia Harris says makes sense due to changes in affordability: “As renting becomes the norm for more households, particularly critical workers and those on modest incomes, we must rethink our approach to affordable housing.

“By focusing on quality and long-term affordability, particularly through well-designed and efficiently managed properties, we can better support Britain’s evolving housing needs.”

Pocket Living uses a discount-to-market sell model, selling units at a 20% discount to the market price - one bed, compact homes, focussing on those in the borough who earn below a £90,000 income threshold. Managing director Paul has previously suggested selling off the government’s £17.5bn help to buy portfolio to help solve this issue.

“This could be sold, in the same way the government sold part of its student loan book, to deploy capital and help support SMEs and deliver affordable housing,” says Paul. “You could even ringfence some of this for local authorities, so they buy s106 for affordable housing.”

The outlook

Labour only entered office in early July so it’s still early days to see how successful the new government are in delivering these affordable homes.

Some are taking confidence from the investment being made into planning reform, but others are unsure. Rico says the scope of work has to be extended beyond planning reform alone, with other steps taken to improve affordability among the masses.

“Many people say planning is the problem, but self-build is the most affordable housing type for many people, yet self-builders will tell you how hard and expensive the planning process makes it for them.”

Rico also believes the number of people on the self-build registers demonstrates a lack of council interest in delivering for local housing needs if it means enabling housebuilding.

Coming from a low base will help, and the rhetoric is encouraging, but Pocket Living’s Paul says there is no time for complacency.

“The only way we will get to the target, which I respect and think it’s important to have, will be a laser focus,” he says. “It has to remain a COBRA-level topic for the government every single day. The moment we lose focus, it will put that target at jeopardy.”