The government is set to fall short of its ambition to build 1.5 million new homes over this Parliament by nearly half a million homes – almost a third of the target – without significant government support for social housebuilding and first time buyers, the National Housing Federation (NHF), the Home Builders Federation (HBF) and Savills have warned.
The findings are from a new report by Savills, commissioned by the NHF, which examines how the government can deliver on its 1.5 million new homes target in the current housing and economic climate. It reveals that there is likely to be a shortfall of up to 95,000 new homes a year on average.
Whilst the ambitious planning reforms announced by the government are vital in increasing the number of plots available to build on, the number of new homes built will still be determined by local demand to buy those homes, particularly in the five years of this Parliament.
The state of the housing market limits this demand - high interest rates, high house prices, and fewer mortgages available to first time buyers are barriers to purchasing homes on the private market.
Without additional funding to build social housing, the government’s target relies on delivering an average of 200,000 new homes per year for private sale as the key component in the 300,000 net additional homes per year required. The report reveals this to be near impossible to achieve by 2030 without additional government support, based on historical trends and on current and projected market conditions.
This is not due to capacity or lack of ambition within the housebuilding sector, but to the likely state of the wider housing market over the next five years.
Since the 1940s, net housing supply has only reached close to 250,000 homes per year on a sustained basis either alongside a substantial social housebuilding programme, or with government support for first time buyers, as with Help to Buy between 2013 and 2022.
Furthermore, because new private homes are sold into a market dominated by the sale of existing homes, new private homes typically make up about one tenth of all private sales in any given year. This means we would need total sales of over two million homes a year to achieve 200,000 new private home sales. Projected market conditions, without any intervention to support first time buyers, would indicate total sales of around half this level (1.16m).
According to the findings, the quickest way to plug the gap in delivery is through targeted grant funding for social housing, including social rented homes, as part of a wider support package for social housing providers. This would also help ensure that councils and housing associations can afford to buy so-called Section 106 social homes from private developers, which they are struggling to do at present because of the strain on their finances. This could sit alongside a government support scheme for first time buyers which in turn would increase the demand and delivery of new homes for sale in the private market.
Demand for social housing is at record levels. As of last year, there were 1,287,180 households on social housing waiting lists in England. This is affecting families across the country, with 1 in 5 children currently living in overcrowded homes, and over 150,000 children homeless and growing up in unsuitable temporary accommodation – the highest level on record.
Since grant-funded social housing doesn’t rely on market conditions, it is resilient to market downturns and can help ensure a steady demand for homes, propping up the construction industry, securing jobs and boosting growth.
The NHF and HBF are calling for support to bolster the financial capacity of social housing providers at the upcoming budget and spending review, through a long-term rent settlement, funding to invest in existing social homes, a rapid boost to the current Affordable Homes Programme and commitment to a new long term and expanded programme. This would complement any support that the government offers to first time buyers and ensure that all housing providers are able invest with confidence in the new sites and labour to get Britain building again.
Kate Henderson, Chief Executive of the National Housing Federation, says: “The findings from this report are clear. An immediate and substantial boost in investment and funding for new affordable homes, particularly those for social rent, is the best way for the government to meet its housing targets and its ambition to build a generation of new social homes.
“Today over 8 million people are living in unsuitable, unaffordable homes, or they are homeless. Housing associations are ready to work with the government to end this crisis, but they are under huge financial pressure due to rent caps, increased spending on improving the quality of their existing homes, and building safety costs, which has affected their ability to build. Ahead of the Autumn Budget, we’re calling on the government to rebuild capacity within the social housing sector by providing long term certainty on rent policy, funding for investment in existing homes, and boosting and extending the Affordable Homes Programme.”
Neil Jefferson, Chief Executive of the Home Builders Federation, says: “Government has rightly outlined its enormous ambition for housing supply and the swiftly announced planning reforms are an essential first step on the road to meeting its bold targets, but the scale of the challenge necessitates continued boldness, working at pace with private and affordable housing developers to stimulate more investment in our communities and build the new homes that are so desperately needed.
“As well as the performance of overarching planning system, housing delivery is greatly influenced by the markets for different forms of housing. With no home ownership support in the market for the first time since the 1960s, it’s never been tougher for first time buyers to make the step into home ownership. Meanwhile, housing associations are lacking the capacity to invest in their own developments or acquire the homes delivered through cross-subsidy by private home builders
“More and more households are dealing with the consequences of the housing crisis so tackling the undersupply of housing in this country cannot wait a moment longer.”
Chris Buckle, director of residential research at Savills, says: “The proposed reforms to the planning framework in England are positive, but we need a clear route for these homes to be absorbed into the market. Government needs to support a diverse range of delivery, including support for home ownership and an expanded grant programme for affordable housing.
“The latter could quickly increase demand for new homes from housing associations and other registered providers. These new low cost rented homes could quickly be absorbed into local markets, providing homes for people on social housing waiting lists and homeless households.”
