What is needed to build affordable housing?

In the UK, there is an immediate need for affordable housing. The previous government, run by the Conservative Party, stated they wanted to build 300,000 new homes every year, but between 2022 and 2023, fewer than 250,000 were built – causing a housing shortage across the nation.

With a new government in place following Labour’s general election victory in July 2024, eyes have already turned to how they can improve the housing problem in the UK.

The Chancellor, Rachel Reeves, has claimed that during their five-year tenure, Labour aims to build 1.5 million homes. The Labour Party’s election manifesto promised their government would deliver “the biggest increase in social and affordable house building in a generation”.

But, what is affordable housing and how can the government ensure enough homes are built?

What is affordable housing in the UK?

Affordable housing in the UK is a collection of schemes that make renting or owning a home more affordable and accessible for adults with lower incomes.

The affordable housing schemes are:

• Intermediate Rent – Properties available to rent up to 80% of market value rent.
• Shared Ownership – Buyers can purchase a share – between 25% and 75% – in a new build or resale property.
• First Homes – First-time home buyers can buy a new build for 30% to 50% less than market value.

Affordable housing schemes vary around the UK and change from area to area.

How does affordable housing work?

As the type of affordable housing scheme varies depending on your area, it’s hard to say for sure exactly how it works for each person in the UK.

Typically, though, there are a few things that apply around the UK. To qualify for affordable housing, you must fall into the following categories:

Total household gross income must be lower than £80,000.
You’re unable to purchase a home at market value in your local area.
You must show that you have strong links to your local area. For example, you must have lived there for at least five years.

If these points relate to your situation, you should be able to apply for one of the above schemes to get on the property market.

How is affordable housing planned?

Affordable homes in the UK are planned and built by local authorities, housing associations and private developers.

According to Gov.UK, half of all new affordable homes in the last five years were delivered through developer contributions. The majority of the remainder were delivered through the government’s Affordable Homes Programme, which between 2021 and 2026, is targeting 180,000 new, affordable homes.

The National Planning Policy Framework requires at least 10% of new homes in residential developments to be designed for affordable home ownership.

What has happened to housing affordability?

Over the last 20 years, it has become increasingly difficult for people to access affordable housing in the UK.

The Office for National Statistics published data in March 2023 showing the huge difference between housing affordability in 2002 to 2022.

In 2002, the median salary in England was £20,739 while the average house price was £102,000 – an affordability ratio of 4.92.

In 2022, the median salary had increased to £33,208 but the average house price was £275,000 – an affordability ratio of 8.28.

A severe lack of affordable housing

In 2020, Thinkhouse released a report that found there was a shortage of social housing in England. In 2022, the Conservative government agreed that there was an immediate need for more social housing and promised that more would be done.

However, by 2024, not much had changed. In fact, Lloyds Bank warned that the “UK needs to address the chronic shortage of social housing”.

A report by the Centre for Cities showed that the UK was missing 4.3 million homes and clearing this backlog would require a 15% boost to the total number of homes, and the current plan of 300,000 new homes per year would take almost 50 years to clear.

Between 2022 and 2023, 240,000 homes were built in the UK with only 41,000 designed for affordable or social rent. When accounting for the 16,000 homes sold through the Right to Buy scheme, the net number of homes built in that period was just 25,000.

How many homes does the government need to build?

So, how does the new Labour government tackle the affordable housing problem in the UK?

For decades, England has built far fewer homes than other countries around the world. For example, Japan builds 860,000 new homes every year while France is estimated to build 380,000.

In England, only 220,000 to 240,000 new homes are built each year.

Thinkhouse’s 2020 report on social housing stated that England required 90,000 social rent homes to be built each year. Indeed, in 2024, Professional Glen Bramley – Professor of Urban Studies at Heriot-Watt University in Scotland – concluded “that it is reasonable to plan on the basis of a total supply of at least 300,000 new homes, including 60,000 – 70,000 social rented homes” by 2030.

He continued: “From 2030, the conclusion is that output should rise to 350,000 [newly-built homes], of which 90,000 should be for social rent.”

This would demand a sudden and immediate change in social homes being built. In 2022/23, only 9,561 social rent homes were built in England.

How do the Labour government ensure enough affordable housing is built?

A large reason for the shortage of homes being built in England is that the planning system makes it difficult to do so. It imposes strict bans on new construction in many parts of the country, including the green belt.

Also, the planning process is highly discretionary with nearly all decisions made case-by-case, creating uncertainty in development, which ultimately reduces the number of new homes.

The Labour government has already made steps to remedy the situation, though. New deputy prime minister, Angela Rayner, alongside the planning minister, Matthew Pennycook, will lead a review of the boundaries of the green belt.

There is also a plan for 300 additional planning officers to be appointed to work with local authorities.

Labour can improve the number of homes being built in England with major planning reform.

UK planning reform for affordable housing

Planning reform is a big target for Rachel Reeves, the new Chancellor of the Exchequer. In her first speech to the Treasury, she revealed the following plans and changes:

• Reform for the UK’s “antiquated planning system” that leaves “too many important projects tied up for years”.
• Kick-start economic growth to build the infrastructure needed – including 1.5 million new homes in the next five years.
• A new growth-focused approach to the planning system – including restoring mandatory housing targets.
• Decisions on large developments will be taken nationally, not locally.
• A task force will be created to “accelerate stalled housing sites” – these will start in Liverpool, Worcestershire and Sutton Coldfield.
• Changes to the way ministers use powers for direct intervention in the planning system.
• Reviews of green belt boundaries.
• Prioritise brownfield and grey belt land for development to meet housing targets.

Affordable housing summary

It is clear that the UK is in dire need of immediate affordable housing growth, and it appears the new Labour government are not only aware of this but are planning to improve the situation.

Planning reform is required to loosen the restraints on private and local developers while mandatory targets are also essential.

It is a huge task at hand for the new government, and only time will tell if they can achieve their aims.

If you have any questions about the affordable housing situation in the UK or anything else related to housing, don’t hesitate to contact us. A member of our experienced team will be happy to help.