PAC: Government set to miss its targets for building new homes

• Government set to miss its targets for the number, area and type of new homes 
• No target set for affordable homes amid national housing crisis  

Government is likely to fall short on its housebuilding targets says the Public Accounts Committee in a report today. Government is likely to come up 32,000^[1] homes short of the aims of its 2016 and 2021 building programmes. The Department for Levelling Up, Housing and Communities admits it does not expect to deliver the intended benefits of the 2021 programme and has already downgraded its forecast, expecting to achieve 157,000 new homes in its 2016-2021 programme of house building against a public target of 180,000. 

The Committee says that DLUHC does not seem to have a grasp on the considerable risks to achieving even this lower number of homes, including construction costs inflation running at 15-30% in and around London.  

Government has committed to building 300,000 new homes overall every year by the mid-2020s. It says some of these homes will be delivered through the Affordable Homes Programme, but there is no target for how many of the new builds should be affordable. 

Homes for social rent are the only affordable option for many people and provide the highest value for housebuilding money. Government recognises the saving on future housing benefit costs of building homes for social rent. But a ministerial decision means that half of the homes in the 2021 programme will be for ownership rather than rent.  

Government has not calculated potential savings from reducing the number of people in temporary accommodation, though it is costly for taxpayers and potentially disruptive for families. It is also set to miss targets to deliver 10% of homes in rural areas and may struggle to deliver 10% of homes as supported homes - though that would save on social care costs. The failure to set any standards for homes to be net-zero may necessitate “expensive retrofitting in the future”. 

Councils face penalties have few powers to insist that housing providers build the right type of homes for local people The committee has called on DLUHC to publish transparent data on where homes are built by local authority, or information about the type or size of homes in annual reports to the Committee.   

Chair of the Committee, Dame Meg Hillier MP, said: “The Government knows affordable rented homes offer the best value for money. Many people in high-cost areas simply can’t afford to rent privately or buy their own home and there’s a desperate need for affordable, secure rented homes. But amid all the building targets there isn’t one for affordable or socially rented homes. 

“Local authorities know where and what homes must be built to address the national housing crisis but don’t have the power to act. The human cost of inaction is already affecting thousands of households and now the building programme is hitting the challenges of increased building costs. This does not augur well for ‘generation rent’ or those in desperate need of genuinely affordable homes  
 

^[1] Figure 1 on page 7 of the attached pdf report summarises progress against the home-building targets in the 2015, 2016 and 2021 programmes 

PAC report conclusions and recommendations 

1.      The Department will miss its target under the 2021 programme for 180,000 new homes by March 2029. Disappointingly, under the 2021 programme, the Department forecasts it will deliver just 157,000 new homes against its target of ‘up to 180,000 new homes should economic conditions allow.’ It only expects to deliver 5.0-7.5% of homes in rural communities, against a target of 10%. The Department will also struggle to meet its target for supported homes (where support, supervision or care is provided alongside). In total, for the 2016 and 2021 programmes, the Department forecasts it will deliver 32,000 fewer homes than its published targets. Significant risks, such as cost inflation and labour shortages could mean that housing providers build even fewer homes than current forecasts.  

Recommendation: The Department should share with Parliament a revised delivery plan for the 2021 programme. 

2.      Housing providers do not always build in areas of higher demand. There is a mismatch between where housing providers build compared to areas of highest need. The Department tells local authorities how many homes, not just affordable homes, they should deliver each year but does not use the Programme to target local authorities with the highest need for housing. Under strategic bidding, housing providers only state the region, not the local authority, in which they intend to build. Local authorities lack power to shape development in their local areas and have few powers to insist that housing providers build the right type of homes for local people.  

Recommendation: The Department should consider how it can work with local authorities to take greater account in the Programme of local need for affordable homes. 

3.      We are concerned that the number of homes being built for social rent is not enough to meet demand. There is huge demand for social rent homes which is the only real, affordable option for many people. Despite this, the Department has a target for just 33,550 homes for social rent under the 2021 programme. The Department has shown that homes built for social rent provide higher value for money than those built for ownership, but decisions around tenure are policy decisions made by ministers. The Department notes that building more homes for social rent within the existing funding envelope would lead to fewer homes overall. The Department is consulting on capping the increase in rent that housing providers can charge, which risks reducing the number of new homes built for rent in future.   

Recommendation: The Department should assess how much demand there is for social rent and set out how it will use the Programme to better meet this. 

4.      The Department does not quantify potential savings in some areas, such as temporary accommodation, into the Programme. Surprisingly, the Department can identify, but not quantify, savings in areas such as temporary accommodation and adult social care that the public purse could make through the Programme. For example, from the estimated 8,500 households that could move out of temporary accommodation by 2026-27 through the 2021 programme. The Department needs to improve its knowledge, so it can factor in these further savings when it allocates funding. The Department urgently needs to understand and quantify the savings that building more supported homes can make to local and central government spend on adult social care. It then needs to work harder with the Department of Health and Social Care to overcome the barriers to delivery, particularly in London. The Department does consider welfare savings such as savings to housing benefit and quantified these for the 2021 programme.  

Recommendation: Before the next iteration of the Programme, the Department should quantify the wider savings it could make to areas such as adult social care and temporary accommodation. 

5.      New homes built under the Programme may need expensive retrofitting to meet net-zero standards in the future. The Department did not set any standards around net-zero for the Programme and relies on housing providers to comply with relevant standards. This lack of foresight when setting up the 2021 programme means that housing providers may need to retrofit the homes they are currently building. The Department has not quantified this potential cost, and we are not convinced by its claim that introducing net-zero standards for the 2021 programme would necessarily have led to housing providers building fewer homes. Housing associations warn that retrofitting their existing stock will increase strain on their funding and resources, potentially limiting future delivery of housing. The Department says that the future homes standard should ensure that homes built after 2025 do not need to be retrofitted.  

Recommendation: The Department should clearly set out the impact of including net-zero requirements in the next iteration of the Programme. 

6.      The Department does not publish satisfactory data on the type, tenure, size, quality, or location of homes built under the Programme. The Department does not, for example, publish data on the number of homes built, where they are built, what size they are or whether they are for ownership or rent. Furthermore, the Department does not routinely publish data on the Programme’s progress. The public, parliament and stakeholders understanding of the programme and its performance is hindered by the lack of meaningful data available in the public domain. The Department agreed to the notion of annual reporting and acknowledged that updating forecasts is useful and sensible. The Department could learn from High-Speed 2 where we called in 2020 for more transparency and open reporting from the Department of Transport, since when the Department for Transport has been providing six-monthly updates to Parliament which have been useful to all parties. 

Recommendation: The Department should report annually to Parliament on the performance of the Programme with detail on types, tenure, size, and quality of homes built by local authority area.