Private developers don't build the affordable homes we need. Government must step up and do it themselves |
London is now building homes at a lower rate than any other major city in the developed world.
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We should all be ashamed of this statistic. Housing is the lifeblood of any city and if people cannot find a suitable place to live, then it is not a sustainable model for building community.
As the Director of an architecture practice, I see this in our work in two ways. First in the housing projects we have on the ‘drawing board,’ which have slowly declined over the last ten years. Working specifically with SME developers, generally on schemes ranging from 10 to 50 homes, we see far fewer schemes coming to the fore each year due to regulatory and budget constraints.
The second way I see this in our practice is the impact on our team, many of whom are bright young graduates whom London should be desperate to attract and retain. What they find is a completely dysfunctional housing market where they struggle to get a decent, affordable home to live in, and as they get older, struggle to secure somewhere to raise a family.
We all know the reasons for this: increased building costs, increased regulatory burdens, still-high land costs, and flat sale and rental values upon completion mean that the spreadsheets do not add up anymore.
Last year, London was set a target of delivering 88,000 homes by the Greater London Authority (GLA), but the actual number of homes built was just 5,891. When we talk with our SME developer clients, they are clear that unless something changes in the equation, they are unable to bring forward or fund schemes that will ultimately result in a loss.
A fundamental reset in how we view the housing market is required. Whilst the government can tinker with the planning system, and there are some particularly good initiatives right now in terms of small sites, it cannot in good faith unpick regulation related to life safety, carbon or biodiversity without the risk of creating a new generation of homes that are bad for people and planet. But there is one key shift which I think it should consider.
The vast majority of affordable homes in the UK are delivered as a percentage of allocated residential units in private development. When times were good, this made sense, but increasingly, the logic of this system is flawed.
Firstly, with tougher budgets, Housing Associations are now hesitant to take on the geographically dispersed homes this system creates. With the very best of intentions, developers and designers pepper-pot the affordable homes throughout a scheme, so you cannot tell the difference between market and affordable homes. However, with the exception of very large projects, this quite often creates a maintenance and management headache for registered social housing providers.
But more importantly, when the economics of building homes do not make sense, it is incredibly difficult to justify loading the vital delivery of affordable housing onto a dysfunctional market. It does not seem logical that the buyer of a new-build property should pay more for a home, for example, to subsidise the creation of social housing, compared to the option of purchasing an older home.
Other countries in Europe have demonstrated that it is possible to deliver affordable housing through state-backed, long-term financing, delivered directly to either registered providers or municipal companies. This creates a stable and scaled system that facilitates access to low-cost finance for social housing, repaid over decades so that it can align with requirements such as affordable rent. Importantly this system does not rely on developer subsidies to operate and at the same time, it is not always reliant on direct government grants either.
There is an argument that the market will adjust, that land values and build costs will decrease, that interest rates might go down, and that the system will ‘spring back’ without a radical intervention, and I am not saying that there should be no tax on development to help fund the delivery of affordable housing.
But given the incredibly low levels of housing delivery in both London and the UK, and the government's brilliantly ambitious target of 1.5 million homes, it feels like we really do need to consider removing the conflation between affordable and market housing delivery. This would help housebuilders get building again while providing a much clearer route to delivering the social housing we need.
Jerry Tate is the Founder and Director of Tate+Co.
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