Affordable housing solution #1: make new homes an engine for growth

Today we hear from Luke Tozer of Pitman Tozer, who has helped draw up a 20-point ‘positive’ manifesto for change alongside fellow collective members Assael, HTA Design, Bell Phillips, Grounded, Mae and Mikhail Riches.

Each week architects from this group of leading housing specialists will explain how its five priority action points could work.

Source:Luke Tozer

Luke Tozer

Priority 1: Prioritise affordable housing to deliver growth

Many studies have shown how building homes helps to deliver growth. The construction sector is an engine of growth, especially in challenging times.

We can all easily understand how a lack of affordable housing is a drag on economic growth when workers can’t afford to live within reach of their jobs.

But even more pernicious is the way a lack of affordable housing creates a drag on prosperity – through poor health, sickness and education for those experiencing homelessness and in temporary accommodation.

Homes with affordable rents enable more residents to spend more on local businesses.

Building more affordable homes for the long term reduces the housing benefit bill (£15.4 billion in 2023) and sufficient good-quality affordable housing delivers long-term economic benefits.  This is economics 101.

1.1 Establish cross-party working group to produce 20-year National Affordable Housing Plan to increase supply

The dysfunctional situation we’re in has been a long time in the making. Successive governments have underdelivered. Only a long term, national, cross-party plan can really deliver the affordable homes we need. It needs a body that can plan for the long term and that can provide a structured, common agenda that all parties should sign up to.

This requires thinking of affordable housing as national infrastructure and adopting an infrastructural approach to delivery. This is beyond the ability and reach of Homes England.

With broad agreement between the main parties’ promises of numbers of homes, this really shouldn’t be a political issue (1.5 million = 300,000 a year over five years).  The five-year parliamentary cycle is too short for the long-term commitment we need. The National Affordable Housing Plan should set progressive, deliverable and ambitious targets and report annually on its progress.

1.2 Elevate the importance of housing to a cabinet position, avoiding revolving door of housing ministerial appointment

A lot has been said on this in the AJ already.  We agree. What we need in the sector is a long-term commitment from government, with a recognition of housing as national infrastructure at cabinet level. Nye Bevan was minister for health and housing for five years, delivering a million new homes as well as establishing the NHS.

1.3 Better resources for local authority planning departments, with a shared vision and mission to provide more affordable housing

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The planning system – that curate’s egg: the promise of planning reform solving so many problems and unlocking growth; and the difficulty of achieving it in practice. The system is failing and understandably so. If you starve something of financial and human resources, can you really expect any different?

So, we are calling for a new funding model where planning fees are higher than the cost of dealing with them to an agreed timescale. This should be a significant increase, enabling good staff to be retained, rewarded for performance and recruited into the profession, especially bolstering their design support.

We also want a planning system with a plan and mission to provide more affordable housing, planning at local level in co-ordination with the National Affordable Housing Plan. Such a vision is surely not beyond a new government?

As Chloe Phelps of Grounded says: ‘What we, as architects, need from the planning system is greater certainty, clarity and consistency.

‘There is a great deal of talent in the planning system and as a key part of the development process, they often get wheeled out to blame, which isn’t always fair.

‘They are, however, chronically underfunded, which does lead to issues with very long decision periods, last minute changes to schemes and occasional inconsistent advice.'

1.4 Incentivise the industry with higher grant rates for higher percentages of affordable housing in each scheme

Higher levels of affordable housing, over and above the minimum requirement, should be rewarded with higher grant levels, which could be determined by what’s needed to enable the project to come forward. No longer should the local authority be strong-armed into accepting ‘have this or have nothing’ ransom negotiation, determined by a viability assessment they have limited capacity to challenge.

A higher grant level for a higher percentage of affordable housing sounds expensive. So this one comes to the crux of it: the money. Where could it come from?

In short: patient private capital and the not-so-patient. There are already many socially and environmentally conscious funds, looking for long-term investment returns, which already patiently invest in the long-term equity of the housing asset class. They sit alongside banks that are committed to providing some start-up and term debt funding too (note the recent announcements by NatWest, Lloyds and Barclays).

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The challenge is finding the much larger amount of leverage, also known as debt funding. This is in the context of a UK government that needs to borrow more than £1 trillion over the next parliament.

One idea put to me recently has two parts to it: Firstly further funding from the social housing covered bond market – a 20-year-old established bond market – that with renewed focus from institutional investors and investment bank dealers would provide billions more debt capital. The renewed focus would come from a tweak to the ISA rule: the most recent budget included an additional UK ISA (individual savings account) limit of £5,000, aimed at supporting the UK equity capital markets.

A worthy cause, but so is confronting the UK housing emergency by helping the UK housing capital market with a new £5,000 allowance that is ringfenced for social housing covered bonds. There are 22 million ISA accounts. These could, potentially, provide debt funding of over £100 billion a year, every year, dedicated to social housing debt funding. Even if take-up is only 25 per cent, that’s a significant funding stream.

This could be a way of helping to address the intergenerational imbalance, where the property wealthy could invest and get a steady, attractive long term return above gilts secured on housing assets that would underwrite more affordable housing for the younger generation.

To support the campaign visit the website or email mail@5affordablehousingpriorities.co.uk