The government could help establish a fund which could see major backers and housing associations come together to solve the housing crisis
The government has clearly set out that England needs an additional 300,000 homes a year. What is less clear is how ministers plan to hit the target, especially when it comes to social and affordable homes.
The government has announced an extra £2bn for affordable housing, estimating it will deliver around 25,000 homes for social rent over the next three years. This is a step in the right direction, but the sector knows that it does not come close to tackling the UK-wide shortfall.
Nor can we rely on the private sector ‘volume builders’ which are responsible for delivering the bulk of UK housing. In recent years it has become increasingly apparent that these players lack both the capacity and motivation to increase the number of affordable homes they deliver.
While the country is in urgent need of an answer to the challenge of delivering more affordable housing, it is emphatically not being provided by the private developers.
Against this backdrop, housing associations should seize the initiative. If we are prepared to take risks and embrace new ways of thinking, the sector could potentially do much more to get Britain building the affordable homes that are needed.
One radical new approach that could get results is a new government-backed fund, through which pension schemes would be able to invest directly in affordable housing construction. Such a fund would be run by the housing association sector and would offer reliable returns from large-scale, affordable rented housing developments.
It also would encourage the use of modern methods of construction in order to quickly mass produce new homes – imagine affordable homes being built at scale and speed, churned out by factories in the Northern Powerhouse and Midlands Engine. Most importantly, the fund would comprise genuinely additional housing funding that debt-constrained house associations could access to build homes.
Of course, a link-up between pension funds and new rental developments is not a new idea. The big issue is that such partnerships are few and far between and so small in scale that they cannot hope to make a dent in current levels of demand.
The other issue, as ever, is funding. There is a potential market for investment in affordable housing, but it needs government to step in to accelerate its development. To kick-start affordable development on a mass scale and make a meaningful contribution to tackling the housing crisis, action by government is needed to set up the fund and provide a £2bn seed loan.
Having considered this concept for some time, my sense is that policymakers are becoming increasingly interested. There is a growing appetite for innovative answers to the affordable housing crisis and politicians know they cannot afford to ignore any credible solutions.
Crucially, our model is also attracting interest from key figures in the pensions industry, who recognise that affordable housing could provide pension schemes with a reliable, socially responsible, long-term investment option.
“A pensions-backed affordable homes fund would be a radical but simple way of reducing the UK’s reliance on these private sector volume builders”
Our report on the model, with analysis by a former government economist, sets out in detail how a pensions-backed affordable homes fund would work and what it would achieve. It comes after recent research for the National Housing Federation showed that England’s total housing need backlog has reached four million homes.
To both meet this backlog and provide for future demand, the country needs to build 340,000 homes per year until 2031, with 90,000 for social rent and a further 30,000 for intermediate affordable rent.
Perhaps the biggest scandal in housing today is the way the big developers that dominate the market are deliberately failing to deliver the affordable homes we need. A pensions-backed affordable homes fund would be a radical but simple way of reducing the UK’s reliance on these private sector volume builders.
The fund could be operational within two years. By this point we anticipate that it would be capable of financing the delivery of the 30,000 affordable homes each year that we need.
However we proceed in tackling the housing crisis, it demands that housing associations embrace new ways of thinking and politicians look carefully at radical solutions. In light of the inability of existing market players to step up to the plate, policymakers should now work with housing associations to make a pensions-backed affordable homes fund a reality.
Source: insidehousing
