Affordable housing is a real issue in the UK. Because there isn’t enough of it.

Local authorities pretty much stopped building council houses in the 1990’s and indeed only 310 such properties were built in 2007/8 as opposed to 7110 in 1991/2 (Source: Office of National Statistics). Instead, responsibility for building ‘social housing’ was given to a body called the Housing Corporation, now the Homes and Communities Agency, which in turn funds and oversees Housing Associations (HAs). It gets about £4 BILLION from Government to dish out in grant monies each year to the thousands of HAs/Registered Social Landlords that have sprung up to facilitate the supply of such dwellings.

But the problem is that they just haven’t performed. Notwithstanding their crass public sector like inefiiciencies and lethargic approach to housing provision and, in particular, the deal making that is necessary to put the opportunities in place, they are also beholden in the main to large private developers that supply them with 58% of their opportunities via ‘106 agreements’, the legal deals that are attached to developers’ planning permissions and that are designed to ensure at least something in the way of community contribution in order to balance the effect that housing schemes have on a town or city.

Trouble is, that sort of works when the market is fizzing but not when volumes deplete and builders don’t build. But even in the good times, many 106’s don’t bear the fruit intended or they get renegotiated. So then, the promised housing doesn’t materialise.

The peak for the building of affordable homes was in 1995/6 when 74,530 were built. Of these, 56,950 were council house equivalent ‘social rental’ dwellings.

The average annual provision of this particular tenure of property since then? Just 28,000. HALF the level of the best year in the last two decades.

So affordable home supply has gone backwards. In real terms it is worse than that though because demand for housing generally, social too therefore, has gone up significantly at the same time.

The UK population has risen 7% since 1995. Social housing supply has dropped 26%. That’s some disparity particularly when home repossessions are touching 40,000 per annum now and will fuel demand for such properties further. There are now 1.8 million households (4.5 million people) on social housing waiting lists.

The previous Government said in 2007 that it would set a target (yes, another target) of 3 million homes to be built in England and Wales by 2020. It said that 1m of those should be affordable, a mix of shared ownership and social rental. That’s 77,000 per year over 13 years. Since then only 50,000 have been built each year and that number will fall over the next few years due to the state of the property market and its effect on housing starts. Estimates for 2009/10 are that just 26,000 affordable homes may have been completed.

Social housing provision, to coin a phrase, is broken. It’s not just the funding that is the problem (and will be more so in the face of unprecedented fiscal tightening). But it’s more the delivery ‘vehicle’, it’s efficiency and above all the fact that it relies so intrinsically upon a buoyant residential property market and resulting developer will in order to get anywhere near the volumes needed. As is plain to see, the current scheme hasn’t been a success.

This new Government needs to take a new approach.

Get rid of the cumbersome and expensive housing associations and give control back to local councils. Councils know best as to what their immediate area needs. Their members are accountable and ‘close’ to the population and able to hear and see what is needed. Two vital elements missing from RSLs. Councils also own acres and acres of land and brownfield sites and are best placed to utilise that in their housing plans and no doubt would if the responsibility to build was theirs again.

Yes. It’s time to start building council houses again. Never was provision of social housing better than when local authorities had that remit.

But not council housing in the conventional sense. By being a trifle more entrepreneurial I think that we can come up with cleverer funding streams that save the public purse heaps of  money but still allows control of supply, mix and occupation. That’s crucial.

63% of affordable housing is grant funded. That’s a lot of money to spend on accomodation needs when there is less money and more demand. That means that if the UK were to build the 77,000 homes needed in the public sector it would need £5 BILLION just to fund their construction. That’s without the land costs.

Currently, that’s just not going to happen. A boost is needed. Investment in fact.

And where better to get that investment than the private sector.

Here’s the idea…

Give full tax relief on corporate profits in exchange for those profits being harvested into social housing schemes. Allow the corporation to keep the asset on their balance sheet and ‘sell’ it to another corporation on the same basis after five years.

By encouraging the private sector to fund and hold housing stock, it frees up the private sector not to have to. UK PLC has more money in profits, especially the banks :-!, than Government does. Accountancy firms will fall over themselves to save their clients tax and thus more homes will be built. Lots more.

The Treasury scarifices the corporation tax but saves the difference between the housing grant funding and the tax. About 81% of each scheme. The only caveat would be a maintenance fund of a percentage of the build cost for each home, necessary to ensure an ongoing quality of stock.

The ‘investor’ gets to keep the rental revenue. Not the best return but still a return and greatly offset by the tax savings. And he is only locked in for five years and can trade the properties at whatever the free market for such things dictates they are worth. But the occupiers themselves remain unhindered by the corporate behind the scenes trading.

I haven’t ironed out the edges on this. It’s just an initial idea for a solution to a big problem. One that will just get bigger now. But these things have to start somewhere. And if we’re not careful we will end up either with thousands on the streets unable to afford to buy or to rent or millions of people languishing in expensive, privately rented accomodation at public expense which will become as unsustainable to the tax payer as the rest of the welfare state has in recent years.

What do you think?

Statistical acknowledgements. Knight Frank Research. Office of National Statistics. House of Commons Council Housing Group. LGA.

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