Resetting the relationship between local and national government. Read our Local Government White Paper
Building a better future: An assessment of the economic and social benefits of five-year housing regimes
This report was commissioned to develop the evidence base to further support our six-point action plan for housing, specifically the point to roll-out five-year local housing deals to all areas of the country that want them by 2025 – combining funding from multiple national housing programmes into a single pot.
Executive summary
Room for improvement with housing funding
An alternative to the way social housing is funded is needed. One option is to supply local authorities with consistent, ring-fenced funding over longer periods of time.
Over the last 30 years, growth in the housing stock has stagnated. The number of housing completions is failing to keep up with demand. Around eight per cent of renters are living in overcrowded accommodation, over 1.1 million households are on local authority waiting lists, and there are 110,000 households in temporary accommodation in England. Conservative estimates suggest 272,000 people are currently homeless in England. Challenges are compounded by a fragmented housing landscape that distorts need and encourages competition.
The recent funding landscape for housing has largely been made up of the Housing Infrastructure Fund (which is now closed for new applications), the Brownfield, Infrastructure and Land Fund and the Affordable Homes Programme. The One Public Estate Programme provides funding to support cross public sector partnerships to work collaboratively on land and property initiatives.
The devolution of previously centralised power in policy areas such as housing under the recent Trailblazer deals for Greater Manchester and West Midlands Combined Authorities marks the first time the Affordable Homes Programme has been devolved outside of the Greater London Authority. Moving towards a system that allows local management of housing funding is a step in the right direction, though devolution is only part of the story. Greater consistency of funding is key.
Figure 1: Number of permanent housing completions per year, England, thousands (Office for National Statistics)
Original data available through these links: Department for Levelling Up, Housing and Communities and Office for National Statistics
Five-year regime will deliver more social homes
The certainty of a regime, where local authorities are given secure ringfenced funds for housing for sequential five-year periods, will lead to hundreds of thousands more homes for social rent being built.
By reducing volatility in construction and its supply chain, resource can be better utilised across years with shorter lead times, speedier delivery of projects and reduced risk. Analysis of historical social housing build rates versus long-term trends indicates the potential for eleven per cent more homes to have been built if the peaks and troughs in activity were evened out. Five-year regimes can reduce the costs to local authorities, Homes England and central government of administering the current multiple, complex, short-term interventions; our interviews suggest savings roughly equivalent to the cost of building five per cent more social homes are possible. Over time, better resource utilisation will stimulate higher returns and wages, and greater innovation and investment. The scale of this impact is unclear but something in the order of five per cent would be a cautious estimate.
With the appropriate devolution of decision making, we estimate that the impact of five-year funding regimes could be equivalent to an additional 21 per cent on social housebuilding. There will be a transition period – as the new processes bed in, and industry and investors gain greater comfort that the regime is permanent, but benefits will be felt within the first parliament after implementation.
Under a scenario where there is no change in real terms funding, nearly 200,000 additional social homes are projected to be built over the span of 30 years with the introduction of a five-year funding regime. If the government were to take a more proactive approach to addressing the housing crisis, the impact of five-year housing regimes will be magnified. Over the course of 30 years, an increased funding scenario could result in almost 500,000 additional new homes for social rent being built. Both scenarios assume devolution of housing funding and decision making for those local areas who want it at the geographical level most appropriate to them.
- Published by:
-
LGA
- Reference code:
-
5.185