Extra funding released for affordable housing

Published:  06 October, 2017

An extra £2 billion allocation of funding for affordable housing, such as council and social housing, has been announced by Prime Minister Theresa May in her speech at the Conservative Party Conference in Manchester.

The funding, which was first outlined in the Conservative Manifesto, will be made available for councils and housing associations, who can then bid for the cash to build affordable housing. In areas with high rent, the homes can be used to build houses under 'social rent', which can be up to 80% of full market rent in those areas. This takes the total budget available for affordable housing up to almost £9 billion.

This extra funding will build up to 25,000 homes over five years - or 5,000 per year.

Industry response to the announcement with mixed. While many welcomed the additional funding and the signal it sent about the importance of housebuilding to the Government, others said this was just a small step in the right direction.

Julia Evans, Chief Executive of BSRIA, said: "This is an important first step: undoubtedly – the UK's housing shortage needs action, not only to help people in communities across the country, but also for the construction industry to attract and retain workers. This announcement will revitalise industry confidence, but we must see a spade in the ground. Increased housebuilding is an absolute must for the industry but the proof has to be in the pudding and words must turn into action. It shouldn't be a case of sticking plasters around the edges of this crucial societal and industry issue."

Meanwhile Carolyn Fairbairn, CBI Director-General, said the construction industry would welcome the announcement. She said: "There is no question that the UK’s housing shortage needs action, not only to help people in communities across the country, but also for businesses to attract and retain workers. Strong, decisive intervention alongside the UK’s many world-class homebuilders is the key. The Prime Minister has called on business to respond and get building; she will get the answer she has asked for."

Brian Berry, Chief Executive of the Federation of Master Builders (FMB), also welcomed the news, saying that her announcement was a "braver and bolder" stance on housebuilding than any Prime Minister in recent years.

He commented: "The Prime Minister's plan is also an opportunity to help shape a stronger local housebuilding industry. If councils can start to engage with smaller, local builders to deliver this new generation of council housing, it could further help to diversify the industry. This would also boost the capacity of the private sector through the provision of more public sector work. Indeed, the increased use of small and medium-sized building firms will limit the problem of land banking, as this is something small builders simply don’t do."

Brian warned, however, that there were still significant roadblocks to the Prime Minister's vision of a buoyant housebuilding market. "Following Brexit, the serious shortage of skilled labour the construction industry is already dealing with will be exacerbated if it becomes much more difficult for EU tradespeople, who have come to play a crucial part in plugging the industry’s chronic skills gap, to move to and work in the UK.

"Although the industry must seek to overcome this crisis by recruiting and training many more young people than we currently do, the Government must also be mindful and realistic about the continuing need there will be for skilled EU workers as it puts in place its post-Brexit immigration policy. Otherwise it will risk jeopardising the delivery of the bold new housebuilding ambitions the Prime Minister outline today."

For the House Builders' Association, the additional funding will help create a new generation of council houses, but is unlikely to have a significant impact in solving the overall housing crisis. According to the HBA, planning reform is needed in order to help industry build more houses.

Rico Wojtulewicz, HBA policy advisor, said: "Removing the borrowing cap on local authorities would certainly enable them to invest more in their local communities, but only radical planning reform will allow us to tackle the current housing crisis.

The current planning process remains a considerable barrier to many SME housebuilders and developers and we can only assume Councils will fall foul of the same barriers. Overhauling the planning system is vital to building more homes and ultimately solving the housing crisis."

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