Championing affordable housing and choice: What does Labour need to do to fulfil their manifesto commitments?

What does Labour want?

Labour want to deliver the biggest increase in social and affordable housebuilding in a generation. 

What needs to happen to meet this ambition?

Affordable housing requires subsidy so that its rent or price is below that of market housing. This can be created by cross-subsidy from market housing (for instance via S106 conditions) or by government grant. 

Cross-subsidy from market housing to create more social housing

Labour have several proposals which seek to increase the amount of social housing that can be subsidised via market housing. They advocate strengthening planning obligations to ensure new developments provide more affordable homes. 

The Housing Forum welcomes Labour’s ambitions to improve the existing systems of S106 and CIL, rather than introduce a new system that may not have the flexibility needed to deliver the most from affordable housing.  

We would like to see more Affordable Housing built, to meet the urgent housing needs of people in temporary accommodation and others in housing need. We are also aware that there are some situations where site viability may be threatened if the affordable housing requirement is too high.  

• Planning policy should require a higher proportion of Affordable Housing via S106 on greenfield sites than on brownfield sites. This will ensure that brownfield development remains viable whilst maximising the affordable housing output of greenfield sites, which are generally easier to develop. 

• National government must provide a stable and predictable policy environment so that the expectations in terms of Affordable Housing contributions are clear at the point when a developer bids for a new site. Flexibility may be needed if the housing market has changed in unexpected ways, or policy has changed since the land was purchased.  

Labour propose further reform compulsory purchase compensation rules to improve land assembly, speed up site delivery, and deliver housing, infrastructure, amenity, and transport benefits in the public interest. The pledge to take steps to ensure that for specific types of development schemes, landowners are awarded fair compensation rather than inflated prices based on the prospect of planning permission. 

The Housing Forum’s Councils Network includes many local authorities across the country who are keen to take a bigger role in bringing forward housing delivery in their area, particularly council housing. There is a clear interest in stronger CPO powers. However, we are aware that some authorities lack confidence in using their existing CPO powers and are afraid of legal challenge.  

• The Government should work closely with local authorities to improve their skills and confidence with using CPO powers and ensure that the legal framework for using them is robust. 

A range of models can be used to bring forward new housing, including Development Corporations, Joint Ventures and partnerships involving Registered Providers and housebuilders as well as local authorities. The Housing Forum’s local council members would welcome more support on how to identify the best way forward in their area and this is something that we will be doing more work on ourselves over the coming year. 

Grant subsidy

The manifesto says that Labour will make changes to the Affordable Homes Programme to ensure that it delivers more homes from existing funding, but also to prioritise the building of new social rented homes. 

Without a substantial increase in funding it is hard to see how both of these can be achieved, as social rented homes require the highest amount of grant per new home. The Housing Forum urges the new Government to put more funding into affordable housing so that both these ambitions can be achieved. 

There is an historic supply-side deficit of affordable homes for both rent and shared ownership. Capital funding for affordable homes has not kept pace with population and household growth. This has left many without access to homes that are affordable. Government should make an unequivocal commitment to funding an increased level of affordable homes. Funding for affordable housing can also help to keep the housebuilding sector building at times of uncertainty in the housing market.  

• Government should create a Housing Accelerator Fund to tackle the affordable housing backlog.  

A £4bn fund could provide 60,000 new affordable rented homes to reduce homelessness by more than half over three years and slash expenditure on temporary accommodation.  

There is a particularly acute shortage of larger homes, causing severe overcrowding of larger households across much of the country. Building larger homes can also generate moves within the social housing sector (as overcrowded households move, freeing up smaller homes for others). The grant regime does not currently encourage building larger homes, and nor is this encouraged by targets that count only the number of dwellings, not the number of people who will live in them.  

• Grant rates for affordable housing should be reformed so that they are at a rate per habitable room in order to encourage building larger family homes where needed. 

• The Government should collect data on the number of different sized homes created. 

Registered Providers increasingly borrow on commercial markets in order to part-fund their housebuilding activities. Long-term visibility of grant funding and of future income streams would help them to plan with certainty, leveraging in additional funds from the private sector.  

We are also aware of situations in recent years where Registered Providers were forced to return unspent grant funding because it was no longer sufficient to facilitate the new homes as planned.  

• Government should commit to a long-term grant settlement for building affordable homes, with the flexibility to deliver value in changing market conditions.  

• Government should commit to a long-term rent settlement for the social housing sector, to help business planning and leveraging of private sector finance. 

 Council housebuilding

Labour say they will support councils and housing associations to build their capacity and make a greater contribution to affordable housing supply. 

They have pledged to review the increased right to buy discounts introduced in 2012 and increasing protections on newly-built social housing. 

• Government should end the Right to Buy in order to preserve the current stock of affordable housing for future generations.  

• It is particularly important to end the Right to Buy for new-build council housing so that councils have a stronger incentive to build. 

The pursuit of value for money through least initial cost procurement has failed the industry in quality and resulted in high profile failures. Public sector procurement obligations result in delays and numerous obligations to be satisfied before building can commence. The way construction is procured must change and the opportunity must be taken to reform this process and see construction as value added service with improved supply chain resilience. We support and encourage the adoption of the government’s Construction Playbook and encourage a whole life cycle approach to procurement. 

Local authorities are well placed to develop lasting partnerships which use the financial freedoms and resources available to them to build.  

• The Government should use its capital funding tools to encourage and reward local authorities forging strategic investment at scale.  

We welcome the continued activity of Homes England acting as the Government’s housing accelerator, increasing engagement with local authorities, encouraging delivery partnerships.  

• The Government should do more to encourage local authorities to commission housing and find ways to increase local authorities’ borrowing capacity in order to increase their ability to develop new homes. 

Supporting first time buyers and tenure choice

Labour recognise that the ambition of many households is to own their own home. They propose to work with local authorities to give first-time buyers the first chance to buy homes and prevent entire developments being sold off to international investors before houses are even built.  

They also plan to offer a permanent mortgage guarantee scheme, to support first-time buyers who struggle to save for a large deposit, with lower mortgage costs. 

There is value in targeted homeownership, demand side measures and a specific supply focus through fiscal incentives such as stamp duty exemptions to support young household formation. Intermediate housing options and Build-to-Rent can also help to extend choice and increase overall supply. Specialist housing for older people is part of the mix that is needed.  

• Government should support households who aspire to home ownership but cannot afford to buy unaided.  

• The income thresholds for shared ownership should be updated to keep them in line with earnings. 

Community-led approaches can help build local support for housing, by allowing those who will live in it to be at the heart of the process. This may include multi-generational housing and co-housing for older people. Support needs to be reflected in planning policy and by reinstating the Community Housing Fund as a feed-in to the Affordable Homes Programme for undercapitalised community organisations. 

• Government should underwrite borrowing for social landlords and the Build to Rent sector, to bring down the costs of raising private finance to fund housebuilding. 

• The Community Housing Fund should be renewed in order to support community-led development, self-build and custom-build.  

Caps on Local Housing Allowance which are not inflated with market rents pose a barrier to building market housing for lower income groups, including refugees. The Government should commit to ensuring that Local Housing Allowance remains pegged to the 30th percentile of market rents, and changes as market rents change. 

• The DWP should ensure that Local Housing Allowance is uprated each year to remain pegged to private rents, to ensure that low-income households can rent in the private sector.  

The costs paid by residents of different types of affordable housing are not always fair. In particular shared owners pay more in rent and maintenance than other subsidised homeownership products, and Affordable Rent tenants pay more than social renters for the same product. Reforms to the costs of social housing would bring fairness. Alongside this, there is a need for rent settlements to consider the costs incurred by housing providers, and to give them the security needed to invest.  

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