The housing crisis is acute and the facts are stark: almost 1.3 million families in England are currently waiting for a home.
In the year up to March 2023, local authorities spent £1.24 billion on reducing homelessness, including providing temporary accommodation – no small sum given the significant funding pressures that many are facing.
Against this backdrop, the new Labour government has made the delivery of high-quality homes a key priority, pledging to create 1.5 million homes over the course of this Parliament.
In the first 100 days of the new government, we have responded to this pledge, publishing a new report, Foundations for the Future: a new delivery model for social housing. In it, we propose a strategy for delivering some of the mixed-tenure homes the country desperately needs.
The need for social housing
For the vast majority of people experiencing housing insecurity, social housing is the only route through which an affordable, secure home can be accessible. However, current levels of delivery fall short of what is needed.
Recent research identified a need for 145,000 new affordable homes per year up to 2031, including 90,000 for social rent. However, over the last decade, only 36% of the identified need for affordable housing has been met.
Historically, the private sector has not delivered the numbers we need, and this is unlikely to change in the future. This means that public sector provision is the only way to build social housing at the scale we need to meet the challenge we are facing.
With the public sector provision of social housing having stalled, we have identified a way to meet some of the identified housing need.
What is our model?
Our model is based on a one-off initial investment from central government to local authorities in order to deliver social homes. This is used by local authorities to build homes for both social rent and market sale on land which is free at the point of use, such as local authority-owned land.
The receipts from market sale homes are then reinvested to build further homes for both market sale and social rent. Not only does this promote mixed-use development, but reduces reliance on continuous central government funding to secure social housing provision.
Our new model is based on the following key assumptions:
- The land being used for development is publicly owned and free at the point of use. As land cost is eliminated or substantially reduced, the cost of delivery is driven down.
- Local authorities will deliver the housing stock, so the proposed model does not account for profit.
- With land cost and profit being removed, the only costs remaining are the construction costs of building the new housing stock.
- The market value of new homes is considerably higher than build costs in each region because land and profits are excluded. This means that in each region, for every market home sold, more than one home can be built. Our analysis shows that the ratio ranges from 1.4 new homes for every home sold in the North East, to 2.8 in the South West.
- All revenue from the sale of homes on the open market is retained and reinvested for local authorities to use to build more social homes at a lower net cost.
What would need to change?
The model described above is just one piece of a complex puzzle, and it will take a number of initiatives to solve the housing crisis. There are also practical considerations to think about. Issues such as remediation costs, build costs and regional variations in sale price will affect the viability of the model in practice.
In addition, new policy mechanisms and approaches would be required to enable this model to reach its full potential. For example, local authorities need to retain and fully reinvest all proceeds from the sale of homes on the open market. Existing research from the Local Government Association calls on the government for a similar mechanism to allow local authorities to retain 100% of receipts from Right to Buy.
There is also an urgent need for local authorities to be allocated significant, ongoing investment from central government to deliver the high-quality, sustainable homes and places we desperately need.
Funding shortfalls also impact local authorities’ ability to develop land in other ways – for example, most local authorities do not have the resources nor in-house expertise to directly deliver the construction and maintenance of major projects, including housing.
We have long called for local planning departments to be comprehensively resourced and will continue to do so.
Thinking in a wider sense, the delivery of new homes must be accompanied by the amenities and infrastructure that communities across the country need to thrive – including public transport links, green space, and access to retail, community, and civic life. Achieving this on a broad scale requires an overhaul of how we think about, resource, and understand the creation of the built environment.
What next?
By demonstrating a different approach to housing delivery, we hope to encourage others to imagine and bring to life new ways to tackle the housing crisis and boost the number of social homes throughout the country.
The RIBA Policy and Public Affairs team will soon be at Labour Party and Conservative Party Conferences, discussing our new model for social housing delivery and the vital role of architects in building high-quality homes and places which are fit for the future.
