90,000 new social homes a year achievable with Government support, say MPs

The nation is in a social housing crisis. 83,700 households are in temporary accommodation, an increase of 82% since 2010, and the number of people rough sleeping has gone up 165% in the same period. Since 1981, over a million homes have been lost from social housing stock and in 2019 only 6,827 new homes were built. The economic and social consequences of the Covid-19 pandemic are likely to place greater burden on a social housing system that is already under significant strain.

Local authorities and social housing providers are at the limits of what can be achieved under existing funding mechanisms, and removal of the borrowing cap, while a welcome and positive action, will not have sufficient impact. The Committee found that around £10 billion extra grant funding would be required to deliver the homes needed, but concluded that the Government could significantly reduce the extra public spending required by reforming land value capture, assembling and using public land for social housing, and redistributing expenditure from existing budgets. As well as providing a social benefit, evidence indicates that investment in social housing provides an economic boost that pays for itself over time. A boost in house building would also provided much needed boost to jobs during the economic uncertainty caused by the pandemic.

The Committee urges the Government to reconsider how it disposes of public land, viewing it as something that can be used for the public good rather than simply a source of revenue. The current way Right to Buy receipts are distributed makes it difficult for social housing providers to fund replacements from the small share of the property’s value they receive.

Launching the report, Committee Chair Clive Betts MP said:

“The collapse of social housing building since the 1980s has had terrible consequences on our ability to provide adequate housing for those who need it. The last decade has seen a surge in families living in temporary accommodation and people rough sleeping, while at the same time we have come to rely on the private rental sector to shore up the creaking social housing capacity.

“We need at least 90,000 new homes a year to get to the level of social housing we need, but this is achievable. We believe this target can be reached in five years, but only if the Government gives providers sufficient financial backing and reforms the wider landscape that social housing providers operate in. They must ensure that the money is there to build, that land is available to build on and allow flexibility to buy surplus housing where it is not needed in the private sector.

“The system must ensure that any housing sold via Right to Buy is replaced like-for-like, and that local authorities are allowed to retain all the receipts produced to enable them to achieve this.

“This must be a long-term commitment to creating a social housing system that meets long-term demand. It will be challenging but it is achievable.”

Funding

The Government should invest in social housing, and provide the financial support and systemic change required to dramatically ramp up provision. It is estimated that at least 90,000 new homes will need to be built every year to arrest the historic decline in numbers and meet increasing demand. The Committee believes this target can be met within five years but only if social housing providers are supported in meeting it.

The existing cross-subsidy funding model will fail to allow for an expansion in home building and providers are likely to be placed under further pressure by the economic impact of the Covid-19 pandemic. Only grant funding will enable such a rapid growth in social housing building.

It is estimated that the annual cost of this level of investment would be around £10 billion more than current spending, however wider reforms could help reduce the cost significantly. Land value reform and better utilisation of public land could help reduce the cost of a programme of new building by up to 40 per cent. Reducing the use of private-rental properties to shore up the social housing system would create a significant reduction in the housing benefit bill. Allowing providers to be flexible in how grant funding is used, for example allowing them to buy home from developers that may go unsold during a recession would enable this to happen quickly.

Securing land to build on

It will be impossible to drive a significant year on year improvement in the level of social housing construction without sufficient land to build on. Given the desperate need for new land, the Government’s strategy of disposing of public land to the highest bidder is wrong headed.

The land disposal strategy needs a whole sale reform, with land being used first and foremost to help solve the housing crisis and not simply a means to raise revenue. Publicly owned land should be used for social housing, with Homes England taking a central role in identifying suitable land and working with local authorities to ensure it is utilised.

The Land Compensation Act should be reformed to allow local authorities and development corporations to compulsorily purchase land at a fairer price. The right of landowners to receive ‘hope value’ is reducing opportunities for social housing. The level of compensation should be determined by an independent expert panel.

Right to buy

Any system that enables social renters to own their own home must also ensure that there is sufficient funding for a replacement. Providers must be able to replace housing stock that is lost, yet by receiving only a fraction of an already reduced sale price this has become impossible. The ability to provide for one for one replacements must be a core principle going forward.

Local Authorities should receive 100 per cent of Right to Buy receipts, and the time limit for using them be extended from three to five years and have the flexibility to combine receipts with other forms of funding.