The Homes and Communities Agency (HCA) has this year funded its lowest proportion of affordable housing starts since 2009, writes Emma Rosser.
It funded nearly as many private housing starts as affordable in the first half of 2017, according to its own housing statistics.
The HCA is under increasing pressure to add to England’s supply of homes, as private development stalls, and local authorities and housebuilders seek to contribute funds to both affordable and private schemes.
In 2017, private market starts made up 48% of the total homes, and reached highs of 95% in Salford where the council is investing ambitiously in commercial development opportunities while affordable housing share declines.
Affordable housing declines
Affordable housing is defined by the HCA as housing that falls into four groups: affordable rent, affordable home ownership, intermediate housing, and social rent. These homes meet certain criteria, for instance affordable rent prices must be under 80% of the average local market rent, and affordable home mortgage repayments should be under market levels.
In contrast, private market home prices and rents are set by the open market with commercial interest rates that provide better returns for local authorities struggling under central government cuts.
The general decline of affordable housing is well known, and it is the HCA’s responsibility to regulate this supply. HCA starts are also a major source of new housing, under a multitude of funding programmes, contributing to some 40,000 starts every year. But, in 2017 the number of affordable starts saw a substantial drop, while new private market home starts crept up.
Local councils and the HCA as developers
In the first half of 2017, affordable rent starts dropped by 40% against H1 2016, and private starts rose in equal measure. The uptick of open market builds has been largely concentrated in the North West and Midlands, where local councils are pursuing lucrative development ventures providing funding primarily under the Single Land Programme and the £3bn Home Building Fund.
On a local level, the highest number of private starts in H1 2017 were in Salford (1,539, 95% of total) and Manchester (708 starts, 89% of total).
Major funding from the HCA in recent months includes Quintain’s Wembley Park development, London’s largest build-to-rent scheme, which received a £65m loan from the Home Building Fund in August. More recently, Scarborough International Properties’ joint venture development company FairBriar secured £34.5m from Salford council, with £25.5m coming from the Home Building Fund to fast-track 2,215 new homes.
The £700m project is one of the largest in the Manchester region, an “urban neighbourhood” with restaurants, shops and leisure facilities.
The HCA will be boosted next year when it becomes Homes England. The recent budget indicated it could have £16bn to allocate through lending and guarantees. However, there have also been accusations that HCA market investments, along with the controversial Help To Buy scheme, have driven prices up through increased demand competing on open market sites.
Local council funding allocations have also come under scrutiny from the Treasury, which seeks to enforce limitations on council spending outside of local authority boundaries.
In September, speaking about Salford Council’s recent commercial investments, Shelagh McNerney, head of development at Salford Council, told EG: “The fact is that councils have to be more and more commercial now, so there is investment.
“The sad fact is that because of austerity, in a sense the frontline services are going to need that funding, and government support for local authorities has not worked out in the same way. So we have to be commercial, we have to get that investment into the city.”
