Supply of affordable housing

On 25 April 2024, the House of Lords is due to debate the following motion:

Viscount Chandos (Labour) to move that this House takes note of the supply of genuinely affordable housing, its impact on the economy, and the steps needed to increase supply, particularly for key workers or those on lower incomes.

This briefing provides an overview of affordable housing in England. Housing is devolved in Scotland, Wales and Northern Ireland.

1. Definition of affordable housing

There is no statutory definition of affordable housing in England. However, in its revised ‘National planning policy framework’ (NPPF), published in December 2023, the government broadly defined the term in the context of planning purposes.^[1] It defined affordable housing as:

Housing for sale or rent, for those whose needs are not met by the market (including housing that provides a subsidised route to home ownership and/or is for essential local workers).

The NPPF noted that for housing to be considered affordable, it needed to comply with one or more of the following definitions:

• Affordable housing for rent. This must meet all of the following conditions: the rent is set by the government’s rent policy for affordable or social rent (these are explored in section 2 of this briefing) or is at least 20 percent below local market rents; the landlord is a registered provider, except where it is included in a build to rent scheme; and it includes a provision to remain affordable for future eligible households or for the subsidy to be recycled for alternative affordable housing provision.
• Starter homes. This is a building or part of a building that is a new dwelling, available for purchase by qualifying first-time buyers only, is to be sold at a discount of at least 20 percent of the market value and is subject to any restrictions on sale or letting specified in regulations by the secretary of state (as outlined in sections 2 and 3 of the Housing and Planning Act 2016 and secondary legislation made under these sections).
• Discounted market sales housing. These homes are sold at least 20 percent below local market value. Eligibility for purchase is determined by local income and housing price levels.
• Other affordable routes to home ownership. This is housing provided for sale that provides a route to ownership for those who could not achieve home ownership through the market. Examples include shared ownership, relevant equity loans, other low-cost homes for sale priced at least 20 percent below local market value and rent to buy.^[2]

Other attempts to define affordable housing have also been made by some parliamentary committees:

• In a report on the affordability and supply of housing, published in 2006, the House of Commons Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Committee defined the term as “subsidised housing that meets the needs of those who cannot afford [to] secure decent housing on the open market either to rent or buy”.^[3]
• In July 2020, in a report on building more social housing, the House of Commons Communities and Local Government Committee described affordable housing as “an all-encompassing term for ownership and rented properties below market value and market rent”.^[4]

2. Types of affordable housing schemes

There are several types of affordable housing schemes. These are categorised by home ownership and rental schemes. Below are definitions of the various schemes used by the Department for Levelling Up, Housing and Communities (DLUHC) in its housing statistical publications and in English housing survey reports.^[5]

2.1 Home ownership schemes

• Affordable home ownership. This is defined as “affordable housing provided for sale”. It includes relevant equity loans, alongside other low-cost homes for sale priced at least 20 percent below market value. It also encompasses rent to buy schemes, which include a period of intermediate rent. To ensure affordability for future eligible households, any public funding used for these homes should have provisions in place such as maintaining the homes at an affordable price.
• First homes. This scheme aims to help first-time buyers and key workers purchase a discounted property. Discounts must be at least 30 percent below market value. Further information on the scheme can be found in section 5.3 of this briefing.
• Shared ownership. This is an affordable housing scheme whereby the purchaser pays for an initial share of between 25 and 75 percent of the home’s value, with the option to gradually increase that share of ownership at a later date. The registered provider owns the remaining share and a rent of up to 3 percent is paid on the landlord’s share. These properties are always leasehold homes.

2.2 Rental schemes

• Affordable rent. Introduced in 2011, affordable rent is a form of social housing. It may only be delivered with a grant through the affordable homes programme 2011–15 and other subsequent government programmes or without a grant by local authorities and other providers, whereby a contract or confirmation of the ability to charge an affordable rent is in place. These homes, managed by local authorities or social housing providers, are capped at 80 percent of the market rent (including service charges) and offered to those eligible for social housing.
• Intermediate rent. This is defined as a “sub-market rent where the rent must not exceed 80 percent of the current market rate (inclusive of service charge)”. The department stated that this reduced rent is an “opportunity” for tenants to save towards a future house deposit. As part of the intermediate rent arrangement, there may be a “future opportunity” to purchase the property (or a share of the property) that is currently being rented.
• London affordable rent. This type of affordable housing is provided in London by the Greater London Authority (GLA). These rents must be set in accordance with affordable rent guidance by the Regulator of Social Housing. Landlords offering London affordable rent must also be registered with the regulator.
• Social rent. This type of affordable housing offers rents comparable to social housing. It is typically managed by local authorities or registered providers, with rents set according to national guidelines.

3. Recent statistics on the supply of affordable housing

3.1 Delivery of additional affordable housing

The DLUHC publishes data on affordable housing supply in England. In its latest statistical bulletin, published in November 2023, the department reported that there were 63,605 affordable homes delivered (completions) for both purchase and rent in 2022/23.^[6] This represented an increase of 4,428 (7 percent) compared to the previous year (59,177). The number of completions in 2022/23 was also the highest number since 2014/15, which marked the conclusion of the government’s affordable homes programme 2011–15. Additionally, the department noted that the increase in completions in 2022/23 coincided with the end of the affordable homes programme 2016–23. Further information on the government’s affordable homes programmes can be found in section 5 of this briefing.

The following figure details the total supply of new affordable housing completions in England since 1991/92.

Figure 1. Total additional affordable homes provided in England, 1991/92 to 2022/23

In addition to statistics on affordable housing, the department publishes annual statistics on all new housing additions, which it states is the “primary and most comprehensive measure of housing supply”.^[7] In November 2023, the department reported that the 63,605 affordable homes delivered in England in 2022/23 accounted for 27 percent of all new additions to the housing stock (excluding demolitions). The department noted that the proportion had “varied considerably” since 2006/07, with affordable housing peaking at 40 percent in 2010/11 and falling to 16 percent in 2015/16. However, there have been year-on-year increases since then.

The figure below details affordable housing compared with all new housing additions in England since 2006/07.

Figure 2. Affordable housing and all new housing additions in England (excluding demolitions), 2006/07 to 2022/23

3.2 Affordable housing by tenure

Additionally, the department gathers data on the delivery of new affordable housing supply by tenure.^[8] It noted that social rent was the most common affordable housing tenure for new housing supply up to 2011/12. However, affordable rent has become the most common tenure since its introduction in 2011/12. The department noted that this change was driven, partly, by the affordable homes programme 2011–15 and its subsequent iterations, which funded affordable rent as a tenure. The department also reported that recent government programmes have also funded shared ownership, which contributed to an increase in these types of properties, increasing from 4,084 in 2015/16 to 20,363 in 2022/23.

The following figure provides a breakdown of new affordable housing supply by type of scheme since 1991/92.

Figure 3. Total additional affordable homes provided in England by type of scheme, 1991/92 to 2022/23

Of the 63,605 additional affordable homes provided in England in 2022/23, the majority (24,303 or 38.2 percent) were delivered through the affordable rent scheme.^[9] The social rent scheme accounted for 9,561 (15.0 percent) affordable homes. In comparison, affordable home ownership schemes comprised 22,593 (35.5 percent) of new affordable homes. Shared ownership was the most common type at 20,363 homes (32.0 percent), followed by home ownership at 1,172 homes (1.8 percent) and first homes at 1,058 homes (1.7 percent).^[10]

3.3 Housing affordability based on house prices and earnings

The Office for National Statistics (ONS) calculates housing affordability ratios based on house prices and annual earnings. In its latest statistical overview, published on 25 March 2024, the ONS estimated that in the 12 months to September 2023, the average (median) house in England sold for £290,000, whilst the average (median) workplace-based full-time earnings were £35,100, giving a housing affordability ratio of 8.3.^[11] The ONS noted that this meant that full-time employees in England could expect to spend 8.3 times their earnings on purchasing a home in the local authority area that they work in. The ONS stated that this is a “statistically significant decrease” compared with 2022, when the ratio was 8.5 times an employee’s workplace-based annual earnings.

Examining data on housing affordability in England since 1997, the ONS reported that the affordability ratio doubled in England from the start of the series in 1997 to 2007 (from 3.5 to 7.1), stayed at a similar level until 2013, and then broadly increased until 2023, with a spike in 2021 (9.1). The following figure provides an overview of housing affordability in England since 1997.

Figure 4. Housing affordability ratio in England, 1997 to 2023

3.4 Waiting lists

The DLUHC also publishes data on social housing lettings in England. In its latest publication, updated on 6 March 2024, the department reported that there were 1.29 million households on local authority waiting lists as of 31 March 2023.^[12] This represented an increase of 73,000 households (6 percent) compared to 31 March 2022. It also was the highest number of households on the waiting list since 2014. The department noted that local authority waiting list size can be affected by different factors, including reviews by local authorities to remove households from the list if they no longer require housing. However, the frequency of these reviews “varies considerably”; therefore, the total number of households on waiting lists is “likely to overstate the number of households who still require housing”. Additionally, some households may be registered on waiting lists in multiple areas, leading to double-counting in national figures. It is worth noting that although data on waiting lists may highlight the demand for certain affordable housing options, they alone do not provide a complete overview.

Data from the department indicated that in 2022/23, 58 percent of households newly entering the social housing sector had been on the waiting list for less than a year. Conversely, 9 percent of households waited five years or more. The data also highlighted a difference between general needs and supported housing. Supported housing, which has special design facilities or features targeted at a specific client group requiring support, saw a higher percentage (74 percent) of new tenants waiting less than a year compared to general needs housing (54 percent). Similarly, supported housing had a lower proportion (7 percent) waiting for five years or more compared to general needs (10 percent).

4. Impact of affordable housing on the economy

Housing stakeholders, such as charities and housing trade associations, have argued that affordable housing can positively impact the economy. This includes by creating jobs and societal benefits, for example, reducing homelessness and making people less vulnerable to being victims of crime. This, in turn, could generate billions of pounds in savings.

In September 2023, analysis by the Greater London Authority (GLA) suggested that 140,000 new jobs had been created in the construction sector and associated sectors, such as housing management, in London as a result of the delivery of the affordable homes programme 2016–23.^[13] The GLA suggested that every new home built was associated with 1.2 direct jobs, which provided “significant benefits to the London economy”.^[14]

A recent report by the Centre for Economics and Business Research (CEBR), commissioned by the National Housing Federation and the housing and homelessness charity Shelter in February 2024, examined the economic impact of potentially building 90,000 new social rented homes in England.^[15] Discussing the benefits of building such homes, the CEBR stated that it would add £51.2bn to the economy.^[16] It also noted that it expected £32.6bn to be generated within a year of building homes, supporting nearly 140,000 jobs.^[17] The CEBR argued that within three years the programme would break even, and that within 11 years the initial government funding would be “fully paid back”. The CEBR said that over 30 years, building 90,000 homes would result in a £12bn profit for the taxpayer.

The CEBR also estimated that building 90,000 social rented homes could generate £31.4bn in societal benefits.^[18] These include:

• Higher employment. The report suggested that “a stable home helps people to get to work and reduces the long-term scarring effect that being homeless or in insecure housing can have on employment prospects”. This could generate £8.9bn for the economy and an additional £3.8bn in tax revenue.
• Lower benefit costs. With higher employment rates, the CEBR estimated a potential decrease in average annual benefit claims by £1,218 per household. This could generate long-term savings of £3.3bn.
• Improved healthcare. The report stated that social rented homes have fewer health hazards, such as damp or trip hazards, compared to private rented homes and are linked to better wellbeing. The CEBR reported that this could generate £5.2bn through NHS
• Reducing homelessness. Increased availability of social rented homes could lead to fewer people relying on temporary accommodation and homelessness assistance, potentially saving local authorities around £4.5bn.
• Reducing crime. The CEBR argued that people in “inadequate housing” were “more likely to experience crime”. Therefore, it stated that social rented homes could lead to fewer police callouts and reduced cost of crime, which could generate savings of £3.1bn.
• Better life chances for children. The organisation said that “unstable homes” could “harm children by disrupting their education, which leads to lower economic contributions, increased crime, and greater use of public services”. Therefore, the CEBR stated that “reducing these disruptions” could generate £2.7bn in savings.

5. Recent government measures to improve the supply of affordable housing

In recent years, the government has introduced several schemes to improve the supply of affordable homes. This includes the first homes scheme, which seeks to help first-time buyers and key workers purchase a discounted property in England. Additionally, the government announced its long-term housing strategy, which, among several measures, aimed to increase the affordable housing supply.

5.1 Affordable homes programmes since 2011

Launched in 2010, the affordable homes programme 2011–15 provided grant funding to local authorities and housing associations to help support the capital costs of developing affordable housing for rent or sale.^[19] The programme has since had further iterations based on funding periods or policy changes in 2015 and 2016.

In March 2020, the then chancellor of the exchequer, Rishi Sunak, announced an extension of the scheme.^[20] In September 2020, the government provided further information on the affordable homes programme 2021–26. It outlined that the programme would be supported by £11.5bn of funding and aimed to provide up to 180,000 new homes across England by the end of March 2029. The funding would be divided, with nearly £7.5bn delivered outside London by Homes England, and £4bn allocated to London and delivered by the GLA.^[21]

In September 2022, the National Audit Office (NAO) published a report examining the programme and its previous iterations since 2015.^[22] The NAO noted that the DLUHC’s central forecast for building affordable homes under the programme had ranged from 157,000 to 165,000 new homes.^[23] Of these, Homes England had a target to deliver between 122,000 and 130,000, and the GLA had a target to deliver 35,000. The report also revealed that the department had considered 165,000 new homes being built under the programme as a “stretch target”.

Following the NAO’s report, the House of Commons Public Accounts Committee launched an inquiry into the programme. Its findings were published in December 2022.^[24] The committee stated that the department’s central forecast was that housing providers would build 157,000 new homes. Therefore, it would miss its target for building 180,000 homes by March 2029. The committee also expressed concerns with the department, stating that it “does not seem to have a grasp” of “considerable risks ahead”, including construction inflation. Therefore, it called for the department to present a revised delivery plan to Parliament.

The government responded to the committee’s report in February 2023.^[25] The government acknowledged that the programme would miss its initial target and agreed to share a revised plan with Parliament.^[26] It stated that it aimed to deliver this plan by summer 2023.

Both the government and GLA have been criticised for failing to meet the housebuilding target under the scheme. David Renard, the housing spokesperson at the Local Government Association, said that the social housing supply was “not sufficient to meet the current housing demand”. He proposed that the government produce “long-term plans to give councils powers to build 100,000 high-quality, climate-friendly social homes a year.^[27]

5.2 Affordable homes guarantee scheme 2020

In the spring statement of 2019, the then chancellor of the exchequer, Philip Hammond, announced the creation of a £3bn affordable homes guarantee scheme to “support the delivery of around 30,000 affordable homes”.^[28] The scheme aimed to provide low-cost, flexible loans to registered providers. These loans could be used to fund the development of new affordable housing units or improvements to existing ones. The scheme officially launched in 2020, with investment management company ARA Venn handling its delivery.^[29]

The government announced an expansion of the scheme in the 2023 autumn statement. This expansion included an additional £3bn to the loan fund, aiming to support the construction of 20,000 new affordable homes, whilst also “improving the quality and efficiency of thousands more”.^[30] The scheme’s expansion was implemented in February 2024.^[31] As of February 2024, the scheme has helped 12 providers deliver 6,290 affordable homes, with the government stating that “thousands more” were “to be built in the coming years”.

The expansion of the scheme was welcomed by some housing organisations. This included the National Housing Federation, which stated that the additional fund could be accessed to improve the quality of existing homes “as well as for new much needed affordable housing”.^[32] However, other organisations called on the government to provide further funding for affordable housing. Mark Washer, chief executive of the Sovereign Network Group, a housing association that provides homes across the south of England, stated that although the government was “heading in the right direction with […] the doubling of the affordable homes guarantee scheme”, it “remain[s] a drop in the ocean against what is needed to deliver the places people need across the country”.^[33]

5.3 First homes scheme

The first homes scheme was introduced in June 2021 with the aim of helping local first-time buyers and key workers purchase discounted properties in England.^[34] For properties to qualify as a first home under the scheme, they must meet certain criteria:

• Homes must be priced at least 30 percent below market value. Local authorities have the option to set deeper minimum discounts of 40 or 50 percent in their areas to ensure affordability, but this requires evidence of such a need.
• The discount is to apply in perpetuity, meaning it carries over to future sales of the property. However, subsequent buyers must still meet the scheme’s eligibility criteria. A restriction will be placed on the property title to enforce this.
• After the discount has been applied, the price of a first home cannot exceed £250,000 (or £420,000 in Greater London).
• First homes are intended to be a person’s primary residence and should not be used for investment or commercial gain.

The first homes scheme requires properties to meet the planning definition of affordable housing.^[35] To support the development of first homes, the government revised its planning policy, which came into effect in June 2021. The policy required developers to allocate at least 25 percent of all affordable housing units obtained through developer contributions as first homes.

An individual is eligible for purchasing a first home if they meet certain criteria. They must:

• be at least 18 years old
• be a first-time buyer (according to the definition outlined in paragraph 6 of schedule 6ZA of the Finance Act 2003)
• secure a mortgage for at least half the discounted price of the home
• have an income that does not exceed £80,000 a year before tax (£90,000 if the property is in London)

Local authorities may establish additional eligibility requirements, such as prioritising key workers, local residents, or low-income individuals.^[36]

To accelerate the scheme’s rollout, the government invited house builders to bid for a share of £150mn by offering plots for sale as first homes. This initiative aimed to deliver 1,500 homes by March 2023.^[37] Additionally, to improve access to the scheme, several banks and building societies agreed to provide 95 percent loan-to-value mortgages for homes specifically for buyers eligible for the scheme.^[38] As of November 2023, the government reported that the scheme had delivered 1,093 homes.^[39]

However, the scheme has been criticised by housing charities and organisations. In an article for the Guardian in 2020, Polly Neate, the chief executive of Shelter, warned that the scheme was “a comfort blanket only, providing nothing for the people at the sharp end of the national emergency our housing crisis has become”. She further stated that “at a time when we desperately need properly affordable housing, policymakers are looking to give a lucky few a 30 percent discount on what are still going to be incredibly expensive homes”.^[40] Additionally, the Chartered Institute of Housing has expressed several issues with the scheme, including that it would cause a “hugely complex administrative burden” on local authorities and that it would still be unaffordable in “high value locations”.^[41]

5.4 Long-term housing strategy

In July 2023, the secretary of state for levelling up, housing and communities, Michael Gove, announced the government’s long-term plan for housing in England.^[42] The plan committed to regeneration, inner-city densification and housing delivery across England. This included the following policies:

• Regeneration of 20 places. Following a commitment in the levelling up white paper (published in February 2022) to regenerate 20 places, the government announced further plans to regenerate Cambridge, inner-city London and central Leeds. Discussing the regeneration of Cambridge specifically, the plan stated that any development of this scale would have “substantial infrastructure requirements”. This included delivering as much of the infrastructure and affordable housing as possible using “land value capture”, with the local area “benefiting from the significant increase in land values that can occur when agricultural land is permitted for residential and commercial development”.
• Building on underused sites in high-demand regions. The plan included launching a consultation on permitted development rights to “provide more certainty” over some types of developments, and how design codes might apply to certain rights to protect local character and give developers confidence. The government also said it would also establish a “super-squad” of leading planners and other experts, tasked with working across the planning system to “unblock major housing developments”, underpinned by £13.5mn in funding.
• Community empowerment. The plan also emphasised that communities “must have a say in how and where homes are built”. To achieve this, the government stated that it was establishing a new body, the Office for Place, to “ensure beautiful new homes are built according to a simple design code supported by local people”. Nicholas Boys Smith, the founder and chairman of the think tank Create Streets, had been appointed as the interim chair.
• Building safety. The government confirmed its intention to mandate second staircases in new residential buildings above 18 metres. It also opened its cladding safety scheme to all eligible buildings to ensure that “no leaseholder will be out of pocket to fix dangerous cladding in medium or high-rise buildings”.

In December 2023, Michael Gove outlined the next stage of the government’s long-term housing plan.^[43] In a written statement, Mr Gove said that the government was “committed to building more homes; more quickly, more beautifully and more sustainably” and that the “best” way to deliver the plan would be through revisions to the NPPF. These would be delivered through the Levelling-up and Regeneration Act 2023.

Amongst several reforms, Mr Gove announced changes to how local housing needs were assessed. He stated that the standard method for assessing local housing need ensured that plan-making was informed by “an unconstrained assessment of the number of homes needed, in a way which addresses projected household growth and affordability pressures; alongside an efficient process for establishing housing requirement figures in local plans”. However, he noted that these figures had “sometimes been difficult to achieve in some areas and blind to the exceptional characteristics of a local community”.^[44] Therefore, the revised NPPF made clear that the outcome of the standard method for assessing local housing need would be an “advisory starting point” when planning to establish the housing requirements for an area. Further information on these reforms can be found in the House of Lords Library briefing ‘Long-term plan for housing’ (13 February 2024).

In a debate which took place in the House of Lords in January 2024 on the government’s long-term plan, several members criticised the plan for failing to prioritise affordable housing. The shadow spokesperson for levelling up, housing, communities and local government, Baroness Taylor of Stevenage, said that the government’s plan was “neither long-term nor a plan to deliver housing”.^[45] Therefore, she asked the government how the plan aimed to provide “a safe, affordable and sustainable home for everyone”. Baroness Pinnock, the Liberal Democrat spokesperson for levelling up, housing, communities and local government, also criticised the plan, stating:

[…] there are 1.2 million households on the social housing waiting lists and the government’s own assessment is that 300,000 new homes need to be built every year. Having somewhere to live is a basic human right and a basic requirement that all governments should fulfil. We have a housing crisis, and the response as set out in this statement and the newly published national planning policy framework fails to address that crisis. The policies are incoherent and fail on many levels. For example, the newly published NPPF refers to social housing only once and in a single sentence. There is a desperate need for social housing to rent.^[46]

Responding on behalf of the government, Baroness Penn, parliamentary under secretary of state for levelling up, housing and communities, said that the government was “absolutely committed to increasing the supply of affordable and social housing”.^[47] She also highlighted that the government’s latest affordable housing programme had been “backed by more than £11bn” and that the government had increased the delivery of affordable housing.

6. Read more

6.1 Library briefings

• House of Commons Library, ‘First homes for first-time buyers in England’, 12 March 2024
• House of Lords Library, ‘Long-term plan for housing’, 13 February 2024
• House of Commons Library, ‘What is affordable housing?’, 20 July 2023

6.2 Parliamentary questions and debates

• QSD on ‘Long-term national housing strategy’, HL Hansard, 29 February 2024, cols 153–168GC
• House of Commons, ‘Written question: Homelessness: Affordable housing (14750)’, 27 February 2024
• House of Commons, ‘Written question: Affordable housing: Key workers (194550)’, 24 July 2023
• House of Commons, ‘Written question: Social rented housing (190394)’, 28 June 2023
• House of Lords, ‘Written question: Housing: Construction (HL4448)’, 6 January 2023

6.3 Press articles

• Joshua Oliver, ‘Housing associations in England warn ‘we can’t build houses’’, Financial Times (£), 4 April 2024
• Jack Simpson, ‘UK failure to build social homes ‘shocking’, says author of 2004 report’, Guardian, 4 April 2024
• Jack Simpson, ‘Construction of affordable homes in London is grinding to a halt, Gove told’, Guardian, 16 February 2024

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