Affordable Housing: Supply

Lord Best Excerpts

Thursday 25th April 2024 Lords Chamber

[Lord Best (CB)]

My Lords, I thank the noble Viscount, Lord Chandos, for initiating this debate, I congratulate him on an excellent opening speech, and I look forward to the maiden speech of the noble Baroness, Lady Smith of Llanfaes.

The background to our debate is a rather frightening recent deterioration in the availability of affordable housing. I have just seen the figures out earlier this month, showing a rise of 21,000 children now living in temporary accommodation. The figure has risen from 121,000 to 142,000 over the last five quarters. Temporary accommodation is the best barometer of acute shortages. It is also a hugely expensive alternative to having a sufficient supply of genuinely affordable housing, to use the noble Viscount’s phrase, which is seriously compounding local authorities’ budgetary problems.

The simple reason why tens of thousands of children are being expensively and inappropriately housed in temporary accommodation is that there is just not enough housing to go round. The UK has not been building new homes at an equivalent rate to other European nations. If we had achieved the average new-build output for all members of the European Union, the Centre for Cities estimates that we would have an additional 4.3 million homes nationwide. When there is an overall shortage, it is, of course, those on the lowest incomes who are hardest hit.

The independent Affordable Housing Commission, which reported in 2020, spelled out the twin phenomena of, first, the decline of social housing—namely, provision by councils and housing associations—from 34% to 17% of the nation’s stock and, secondly, the growth of private renting from 9% up to 20%. Simultaneously, there has been the loss of more than 1.5 million social rented homes from sales under the right to buy—more than a third of these are now in the hands of private landlords at much higher rents. The private rented sector is unsuitable or unaffordable for many, so doubling this sector’s size and halving that of social housing has left many households with no options.

To rebalance the market between the private rented sector and the social rented sector, the commonly acknowledged solution is to increase the supply of social rented housing—that is, homes that are let at often half the market rents, according to a formula used for most existing social housing. Several studies have concluded that a figure of around 90,000 such homes should be built every year. Secretary of State Michael Gove told the Lords Built Environment Committee on 6 February this year that

“we need to aim to have a net addition of 30,000 homes for social rent every year”.

This target from the Secretary of State may sound unambitious, but it would mean far greater numbers of social rented homes than have been added in recent years.

However, without major changes, there is no possibility of achieving either the overall government target of 300,000 homes a year or, within that, 30,000 social rented homes. Indeed, rather than there being a growth in supply, output in both the private and social sectors has been falling significantly. Higher interest rates and inflation of building costs mean that social housing grants fund fewer new social rented homes. At the same time, it has become necessary to channel more social housing investment into the existing stock, rather than funding new supply. This follows a number of high-profile cold and mould cases, most notably causing the death of little Awaab Ishak.

With the Social Housing (Regulation) Act 2023 and more powers for the Housing Ombudsman, the housing associations and the stock-holding councils are rightly spending more on retrofitting their existing stock. The result of these trends is a big reduction in the pipeline of new affordable homes. One major housing association, for example, has self-imposed a two-year moratorium on any new development. Overall starts on site by social landlords are expected to fall by more than 30% this year. Meanwhile, because the private sector housebuilders, faced with lower profits, are postponing their developments, fewer new social rent homes are being achieved through planning gain contributions from the developers.

What can be done? I did not declare earlier my housing and property interests, as on the register. A starting point must surely be to have a national housing strategy. This would comprise an agreed vision for achieving the quantity and quality of new and existing homes that we all seek, with a road map to take us to this destination. Following the Church of England’s report Coming Home, a number of noble Lords have been supporting the Church’s subsequent efforts to help create such a strategy. We suggest the establishment of a statutory national housing committee, modelled on the Climate Change Committee. This would provide a long-term mechanism that holds government to account, irrespective of changes of Housing Ministers—we have had 16 in the last 14 years—and Secretaries of State, monitoring progress toward the agreed goals. It would be wonderful if this concept found its way into party-political manifestos.

In the short term, there is no escaping the need for government funding, principally via Homes England and the GLA. Most immediately, more investment is needed for property acquisition and modernisation to switch private rented sector properties into social housing and reverse the shocking rise in temporary accommodation spending—but more fundamental change is needed.

The Labour Party has made bold statements for growth through developing “grey-belt” land and building a new generation of new towns. For initiatives such as these, any Government will need to find ways of making available funding that goes much further and securing a better-resourced planning system. To that end, I advocate adoption of the model spelled out by Sir Oliver Letwin in his excellent report which, disgracefully, has been sitting on the shelf since 2018. The Letwin approach involves ending the dependence on the oligopoly of volume housebuilders, whose interests seldom coincide with the public good, and shifting the initiative for all major housing projects to locally established development corporations. These corporations—which are less susceptible to local opposition—would have CPO powers to acquire land at a price that reflects the content of a master plan that embraces the necessary infrastructure, green space and facilities. The site would then be parcelled out to the appropriate providers, including social landlords, SME builders, community land trusts, providers of retirement housing et cetera. By capturing the uplift in land value for the public good, this model makes possible affordable, quality homes at scale.

In conclusion, I therefore suggest that the way forward begins with establishing a statutory national housing committee, just like the Climate Change Committee, which sets out the path to agreed goals and provides the continuity and persistence to see the job done. To get there, as well as the necessity of more public investment—which is handsomely repaid in lower health, care and welfare spending and improved productivity—there are also bigger and bolder changes of approach to planning and land acquisition that could make a huge difference. It is certainly worth trying, against the backdrop of human misery that the severe underprovision of genuinely affordable housing has created.