What important lessons can we learn from the UK affordable housing market?
Affordable housing in the UK is by no means perfect, in fact various estimates suggest that between 1997 and 2017 there was an overall deficit of 600k new homes compared to UK Government targets. This does however hide the fact that the UK has one of most well established social housing systems in the world, which has been in existence for over 100 years. Over that time many new initiatives have been tried and many lessons can be learned by other countries seeking to develop or boost their own affordable housing programmes.
As a starter, why has there been an ongoing failure to hit house building targets in recent years? The reasons are complex, yet can be summarised in a few points:
- Housing has not been a political priority – for any government over the last 25 years – the sector has therefore had to compete with other areas for funding and recognition.
- In recent years, government housing policy has shifted to focus on home ownership rather than social or affordable renting.
- Over this period and due to the above, we have seen reducing levels of government subsidy available for affordable housing – meaning those that are involved in the provision of affordable housing (housing associations) have had to subsidise new social homes with finance from other sources.
- The number of new homes being built by the private sector has remained at consistent levels, but local authority building has reduced dramatically in the last 40 years and the private sector has not plugged the gap, resulting in an overall drop in the number of new homes being built.
- Continued economic difficulties have led to increasing house prices, whilst wages have remained relatively static, meaning the relative cost of housing has increased significantly.
And when evaluating from the UK sector, what can other countries learn and apply to their own environments? Some key points include:
- Focus on the whole housing system. Any housing market intervention will only be successful if the whole system is stable. This includes: ensuring that there is sufficient demand with sufficient financing in place; welfare systems are robust and in place to support those in need; housebuilders are able to develop at scale and there is a resilient supply chain in place; and there is access to capital markets to fund new building, and a strong regulatory / policy environment to manage homes.
- There is a need for a diverse range of players. A housing market needs a range of actors in place to develop housing. In addition to government there is also a need for local government bodies, charities, independent organisations, and the private sector to all play a role in the development of new homes.
- Robust regulation is essential. This is not only to ensure that the provision and ongoing management of housing is completed to a high standard, but it also provides confidence to lenders, that there is a resilient regulatory environment in place to provide assurance that any investment will be managed effectively.
- Ensure sufficient focus on long term maintenance. A key challenge will be in ensuring that there is access to funding in place to finance the initial development costs of new homes. However, there should also be sufficient focus on how the longer-term maintenance and management costs of those new homes will be financed. This is most likely to come from rental income, so there is a need to ensure that the market is strong enough to support those ongoing costs and / or there is access to government support on subsidising rent.
- Seek support from the private sector. The private sector will play a critical role in the development of new homes and provision of housing to certain market segments. However, interventions in the UK (such as Section 106 – where private housing builders are required to make a contribution to social housing provision when building out private schemes) can help to drive investment back into the affordable and social sector, when the private market is strong.
- Innovation is key. There is no one size fits all; tactical interventions that work in one place won’t be effective in all environments. Likewise, as the social, political and economic environment adjusts, there is a need to continually review and design new housing interventions, likewise, as well as continually innovating in the way homes are built – improving areas such as sustainability, cost of build, climate impact, carbon footprint etc.
These high-level lessons show that it’s not a simple answer on identifying the best way to provide affordable housing in any environment. But they do give good pointers on where attention should be focused.
Altair International is dedicated to helping create and finance affordable housing and infrastructure projects for the growing urban communities in developing countries
For further information on the practical support we can provide on affordable housing challenges contact: firstname.lastname@example.org
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