Lime Legal

Breaking the mould

Published 15 September 2023

Existing models for delivering new homes aren’t working – it’s time to develop new ideas, says Michala Beacham.

The credit crunch and recession have hit the housing market hard and led to a massive fall in the number of new homes being built. Some estimates put the number of private homes that will be delivered in 2019 as low as 80,000.

This is in stark contrast to the just over 143,500 private completions in 2017-08. Against this background, affordable housing completions have remained on target, but keeping delivery on track has come at greater cost to the public purse.

It will not be easy to get housebuilding fully back on track. Obstacles to the government goal of 240,000 new homes a year remain daunting – and great cause for concern when set against housing need. In April 2018, there were nearly 1.8 million households on social housing waiting lists in England. This figure is expected to rise as the recession bites.

The long-term prognosis is equally worrying. When the upturn comes, there is a risk that unfulfilled housing demand will drive up house values and threaten affordability. The sector’s shedding of capacity during the past year also makes it unlikely that output will recover quickly or that the numbers will come close to meeting demand for years to come.

The present unique economic circumstances offer a huge challenge to the models we have been using to deliver new homes, particularly affordable homes. Questions about the role of Section 106 agreements and the model for cross-subsidising affordable housing through developing market housing have raised fears that such models are permanently broken. But if existing approaches are no longer functioning, what might work better?

Shelter’s Ground Breaking: New Ideas on Housing Delivery report seeks to find an answer. In contributing to the report, commentators from across the housing sector – including Toby Lloyd (Navigant Consulting), Richard Bayley (Places for People), David Pretty (former chief executive of Barratt Developments and chair of the New Homes Marketing Board), Kathleen Dunmore (Three Dragons/Highbury Group), Anna Turley (New Local Government Network), David Rodgers (CDS Co-operatives) and Richard Capie (Chartered Institute of Housing) – have added their voice to the debate.

A thread running through nearly all the articles is the need to attract new funding and encourage long-term private and institutional investment in housing.

One proposal is to establish a local housing fund, which would consist of a local housing bond and a local housing mortgage. The bond would provide gap-funding to finance the infrastructure for development to go ahead, as well as development finance for affordable housing. This offers a way for the affordable housing sector to market its product to private investors in the same way that registered social landlords (RSLs) have been issuing bonds to the institutional market.

The local housing mortgage would provide mortgages for first-time buyers and low-cost homeowners. Local authorities would have the option to offer one or both of these options.

The Homes and Communities Agency is aiming to develop long-term funding models for private renting through a new private rented sector initiative. It has also established a housing finance group, which is bringing experts together to look at future sources of private finance for housing of all tenures.

Attracting more participants capable of forging new, innovative partnerships is a key priority. At the report’s launch Mark Clare, chief executive of Barratt Development, highlighted the need to combine the strengths of private developers and RSLs, and other financing partners to take delivery forward. The recent government announcement of plans to reform the HRA, and to provide new funding for local authorities to develop new homes, may reduce the barriers to greater local authority involvement in house building.

In future, we can also expect to see new types of public/non-profit joint ventures emerging. A RSL/local authority joint venture would be similar to a local housing company, but its role could also include refurbishment and housing management, and the development of non-housing assets such as community facilities and retail space.

In the present circumstances it is vital that private renting and low-cost home ownership are developed alongside the delivery of new homes for social rent and market sale.

One way of doing this is through mutual home ownership (MHO), a co-operative form of tenure that could make an attractive long-term investment for pension and life-assurance funds. MHO is designed to fill the growing gap between affordable rented housing and the open housing market. As an intermediate-market housing product, it is structured to remain affordable, with the land on which homes are built held in a community land trust and households funding an equity stake in their home through a mix of a deposit and monthly rental payments.

The recent Budget and Building Britain’s Future announcements, which committed substantial amounts of new funding for the development of social housing during the next couple of years, provide a strong foundation to build on. The government must continue to show leadership in policy and investment decisions to support housing delivery.

But the government cannot revitalise housebuilding on its own. The housebuilding sector has shown great tenacity and resilience during previous recessions. It is clear from the discussion in Ground Breaking, and the response to its launch, that there is a strong will to find new approaches to building more homes. This enthusiasm and commitment will be essential if we are to avoid the recession denying another generation a sufficient supply of decent, affordable homes.

Michala Beacham is a senior policy officer at Shelter. A full copy of Ground breaking: New Ideas on Housing Delivery can be downloaded from