National social housing supply at risk from increased build costs, report suggests

One example, Salford, would see social and affordable housing delivery slashed to two per cent to protect profit, reduced from the 35 per cent required by its local authority policy, a rate achieved in 2019-20.

The research suggests that Worcester is the only council sampled across the Midlands and the North of England that could absorb build cost increases and maintain social and affordable housing supply.

NEF listed a number of recommendations in the report to help protect housing supply from rising build costs.

It highlighted England’s rate of selling or demolishing social housing faster than it is built, with a net loss of 209,000 social rent homes between 2012 and 2020.

NEF analysis also found that in 1992-93, social rented units made up 87 per cent of the 66,000 affordable homes built in England, while in in 2019-20, 11 per cent of the 59,000 affordable homes built were for social rent.

The report made a raft of policy and practical recommendations for central government and local authorities such as ensuring that the proposed Infrastructure Levy is reflective of local market conditions and set using evidence on the level of developer profit required for schemes to go ahead.

The Planning White Paper, published in 2020, outlined a new Infrastructure Levy to replace the current system of Section 106 agreements and the Community Infrastructure Levy between developers and local planning authorities.

Both are designed to ensure social or affordable housing, as well as improved amenities, are included in new developments.

The new Infrastructure Levy, which has been paused since Michael Gove assumed the role of housing secretary, would charge a fixed proportion of the final value of each scheme, rather than a negotiated agreement between parties.

The NEF report states that this would create a situation whereby local authorities must borrow against expected levy revenues to forward-fund developments, pay interest and manage risk, which could lead to lower levy revenues.

“This will reduce the levy revenues available for social and affordable housing, infrastructure, and other community benefits, particularly on larger developments with longer time horizons,” the report says.

It also recommends early sales receipts from bulk sales to social housing providers and that rented affordable housing should be delivered before low-cost homeownership and market tenures. The thinktank said this would help to “de-risk development and guarantee social housing delivery as part of market-led schemes”.

Rose Grayston, senior programme manager for housing at NEF, said: “Our new research shows that across councils in every region of England, the social and affordable housing is under threat from continuing build cost increases.

“But for many councils in the North and the Midlands, our modelling shows a risk that social and affordable housing supply will disappear entirely, posing a threat to the government’s ‘levelling up’ agenda.

“Communities in the North and Midlands could be left without the same tools as southern councils to prevent homelessness and sustain construction jobs, making it harder for these places to bounce back from the ravages of the pandemic.”