Chancellor must act at Budget to invest in affordable housing as housing crisis reaches new levels with rent and home ownership increasingly divorced from earnings
The vast majority of local authorities (92%) are failing to meet affordable housing needs, according to a new report from IPPR, the progressive policy think tank. The report calls for action from the Government, including allowing local authorities to borrow to invest in the building of a new generation of council homes.
IPPR’s new report, shows that there is a lack of affordable housing being delivered in the vast majority of area across England as local authorities also fail to build enough homes to meet the need for overall housing need. More than two thirds (67%) of local authorities failed to meet housing demand in 2015/16 according to the Government’s new projections.
The research also shows that whilst the range of housing products available have increased, models for rent, ownership and intermediate housing have become increasingly divorced from earnings and linked to out-of-reach market prices. This means affordable housing is out of reach for all bar the highest earners in many areas, posing significant problems for those on low incomes.
The new IPPR report, which examines the affordable housing markets in four combined authority areas (Greater Manchester, West Midlands, Tess Valley and West of England), further finds that:
- In only Tees Valley does house-building meet estimates of need. The west of England would need to build an additional 1,060 homes a year, and the West Midlands 2,812. This imbalance between supply and need is greatest in Greater Manchester, which misses its target by 42% or 4,518 homes.
- House prices are out-of-reach for many on average incomes. Median monthly rents do not become affordable (using the 35% of net monthly income measure) until after tax earnings of £33,167, in the west of England, £19,131 in the West Midlands and £18,959 in Greater Manchester.
- Most affordable housing products across combined authorities are out of the reach of single people.
On a national level the Government should take immediate action to boost affordable housing supply, including:
- Supporting a large-scale council house building programme by removing the arbitrary cap placed on borrowing through the Housing Revenue Account (HRA), allowing local authorities to borrow to invest in the building of a new generation of council homes.
- Adopting a threshold of 35% for affordable housing applied 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. Further to this, on a local level the IPPR report recommends that city-region Mayors should establish combined authority-wide Mayoral Housing Companies, using them to bring land to market for social and affordable rent and using mechanisms to capture public value from the land and that local authorities and local authority pension funds should work together to combine their land and investment to build affordable housing.
Furthermore, the Government should:
- Devolve great powers to Mayors to deliver the housing their regions need, including greater flexibility in the pooling and coordination of housing funding streams; the retention of stamp duty receipts on all new-build properties, to top-up housing investment funding; and council tax flexibility on empty sites and empty homes to accelerate the process of bringing unused homes back into use and putting unused planning permissions into action.
- Devolve a proportion of the budget for the Help to Buy Equity Loan Programme to combined authorities for the Mayors to use as they see fit.
- Re-allocate funding for the Starter Homes programme to a programme for investing in genuinely affordable homes for rent and devolve the appropriate proportion to the combined authorities.
Darren Baxter, Researcher at IPPR, said:
“This analysis shows that not only are local authorities failing to build enough affordable homes, those which are being built are often out of reach of those who they are intended to support.
“The newly elected Mayors should use their powers to take on the housing crisis and get their local councils building, including working to bring land to market for social and affordable rent.
“If it is serious about tackling the housing crisis, government will work with Mayors to ensure they are equipped with the powers they need to drive local house building programmes their regions need.”
Luke Murphy, Senior Research Fellow at IPPR, said:
“The decades long failure to build enough homes has seen housing become ever more unaffordable.
“But as this report makes clear, it’s not just about how many homes are built but how affordable they are too.
“The Chancellor should use the Autumn Budget to provide city-region mayors and local authorities with the powers and resources they require to build the affordable homes their communities need.”