How to build affordable housing
Any plan to actually deliver the 1.5m homes the government has committed to must be guided by pragmatism, not dogma – and lower targets for affordable housing can often result in more actually getting built, says Marc Vlessing
The sudden departure of both senior leaders at Homes England is an opportunity to rethink the role of this essential government organisation in light of its ambitious commitment to deliver 1.5m new homes.
From 2018-2022 Homes England successfully supported the development of 152,700 new homes, unlocked land capable of delivering 380,000 homes and helped 228,996 households into home ownership. Today the 2023 to 2028 strategic plan rightly sets out an expanded mission to make place-based working central to how it operates. However, it is clearly going to take a lot more than a change of senior leadership to deliver affordable and other housing on the scale required. At present, neither Homes England nor our key metro mayors have the powers or resources to actually make that work.
So, any new Homes England team needs to think even more ambitiously and create a new, radical and overarching plan which will fundamentally overhaul how we deliver all housing, and particularly affordable housing, in the United Kingdom. This conviction comes from my experience as founder and until recently chief executive of developer Pocket Living, where I have overseen delivery of more than 1,500 affordable homes in London over the last 20 years. These have been sold at 20 per cent below market rate, mainly for essential workers.
I believe that the first part of a new plan must recognise the requirement for a variety of strategies across England, depending on actual affordable housing need but also based upon the requirements of business as well as the public sector. Looking across England, we should create a heat map showing where the true demand for affordable housing lies: this should be focused on business growth as well as societal needs and form part of properly based regional spatial strategies the like of which we haven’t seen since New Labour’s attempt to make this work under English partnerships. To get it right this time, any growth-led affordable housing agenda has to be led by the mayors of our combined authorities, in close collaboration with Homes England and with the required regional spatial development plans firmly in place.
Lessons from Livingstone on affordable housing
Next, the plan needs to be pragmatic: Ken Livingstone’s successes as Mayor of London came from an understanding of London as a national and international dynamo and “getting things done”, rather than sticking to political dogma. A pragmatic approach would be to reduce the affordable housing demands within existing planning consents for a while. We should consider establishing an amnesty in relation to places where affordable home building has ground to a halt. This will certainly result in more being built. And why not try setting the level of affordable housing at 25 per cent of London planning consents rather than 35 per cent or 50 per cent for a few years? Something, anything, is better than nothing in the capital right now.
A similarly pragmatic approach needs to be adapted for our big regional cities. Outside London the problem is not necessarily a shortage of land but it is currently hard to make development viable in the face of high remediation costs and reluctant lenders. In these situations, the Treasury should allow Homes England to be a land buyer and a long-term equity investor in projects at below market rates, with the full buy-in of our metro mayors – particularly where the latter have pledged public land to a development proposal.
A pragmatic approach would be to reduce the affordable housing demands within existing planning consents for a while
In addition to having a clearly defined regional strategy and pragmatic approaches to the hotspots within that, the third element of any effective plan should be a determination to support and grow the ecosystem of small and medium-sized enterprise (SME) developers and builders. In 1939 SMEs built 60 per cent of our housing annually; today they barely reach 12 per cent and the insolvency rate amongst them and SME contractors is at an all-time high. Indeed, why would anyone set up a development business today? Planning is far too difficult; financing is costly and there is more chance than not that house prices will fall in the coming years while costs continue to rise. Homes England, therefore, needs to be at the forefront of providing a large injection of equity – to be repaid on completion of developments – to the SME developer and contractor world.
The final element of any plan to meet the government’s housebuilding objectives should be a nationally co-ordinated drive to develop precision-built modular housing, adding the capability to deliver up to 30,000 homes a year of the 300,000 promised. If there was a nationally backed plan for modular housing it would definitely create the critical mass to take off – other countries have thriving factory-built housing industries, so why can’t we?
The importance of meeting the government’s housing target is a foundation for so much else that it needs to achieve in growing the economy, supporting the NHS etc. In short it is mission critical. If it is to support this, Homes England should be wholly focused on housing delivery and pass on other activities that are better handled by central government like oversight of build-to-rent and building safety.
Only through the development of an overarching plan that is responsive to regional needs, pragmatic, focused on building capacity of SME developers and builders, and realising the potential of modular housing can Homes England hope to build the affordable housing we so badly need.
Marc Vlessing is founder and chair of Pocket Living