CBI calls on government to boost affordable housing investment to accelerate recovery

Why affordable housing is important for businesses

Affordable housing plays a critical role in the success of the economy. Not just as a significant part of government spending that creates jobs and training; high-quality, safe and sustainable homes increase the wellbeing of their tenants or owners, underpinning prosperous, vibrant communities in all regions of the country.

The government knows that the demand for affordable homes is great. But solving it matters just as much to businesses: without communities of diverse housing stock and tenure types within a reasonable proximity to workplaces and offices, talented and productive staff are harder to attract and harder to retain. If homes are also unaffordable relatively to local economies, businesses can find their staff – and customers – priced out of the areas in which they operate.

This has been a growing problem: for first-time buyers, the cost of a deposit required to buy a home is now four times as high as 1990, while in most recent MHCLG figures, the number of households waiting for local authority homes exceeded 1.15 million. In July this year, a group of MPs in the Housing, Communities and Local Government Committee acknowledged a need for action, saying there is “compelling evidence that the UK needs at least 90,000 net additional social rent homes a year”.

Now, coronavirus is set to complicate affordability and availability issues further. While the economy is expected to recover to pre-pandemic levels at some point in 2022, certain industries will be permanently reshaped. Thousands of jobs that existed before the pandemic will no longer be needed, and many businesses will have disappeared with them. Supporting citizens with truly affordable housing will be vital.

What the CBI recommends

There is an urgent need to prioritise delivery of more housing for affordable rent, social rent, and shared ownership. Having already committed in excess of £12bn through Homes England for the Affordable Homes Programme in the next five years, and with existing finance and spending promises to fund, the government should move quickly and creatively to attract and distribute funding that can genuinely stimulate demand and speed up supply of affordable homes, supporting the UK’s recovery from coronavirus.

Evidence increasingly suggests that some of the changes caused by the pandemic may be permanent, which is likely to include a shift in where employees are located, where their places of work are located, and what those workplaces are used for. To support businesses in all parts of the country, diversifying and increasing affordable tenures will be an important part of sustaining a resilient and productive private sector workforce.

Our recommendations include:

1. The government should move quickly to establish and agree plans to be delivered through the Affordable Homes Programme, so providers and supply chains can plan for a pipeline of work over the period to 2026.
2. Homes England should encourage the use of Affordable Homes Programme funding to be used by housing associations and registered providers to purchase unsold units or undeveloped land from private developers. Any units transferred must meet suitably high quality, safety and energy standards.
3. To ensure money set aside for Homes England’s existing Home Building Fund does not go unused, a portion of the Development Finance in the Home Building Fund should be ring-fenced to support SME builders to unlock and develop sites for affordable homes until the current funding period closes in March 2023.
4. The government should bring forward its planned 10-year £3.8bn Social Housing Decarbonisation Fund, outlined in its 2019 manifesto, and commit to releasing £350m per year for 2022-23 and 2023-2024 during this parliament, to support the decarbonisation and energy efficiency of social housing in line with future standards.
5. The government must work with the affordable housing sector to assess the scale of building safety remediation that will soon be required, and how this will be funded.
6. Homes England should launch a pilot investment vehicle, backed by a government guarantee, that can link private investors with housing associations and registered providers. The pilot should be structured to allow smaller providers to participate either individually or as part of a joint venture.
7. Homes England should expand its function for attracting institutional investment into affordable housing to:
   • Promote UK affordable housing domestically and internationally as a destination for institutional investors;
   • Work with housing associations and registered providers of all sizes, either as individual applicants or a joint venture of several providers, to secure investment;
   • Identify and assess suitable ESG funds that align with the ambition of investing in affordable housing, and attract interest in the opportunity;
   • Monitor market conditions and advise on opportunities and risks to investors and affordable housing providers;
   • Support the creation of competitive, low-risk investment vehicles and financial agreements that deliver steady long-term returns for investors while ensuring capital reaches and remains with providers of affordable housing for the duration of need.

Next steps

Following the November 2020 Spending Review, which will set out one-year spending plans, the CBI will review announcements that can support more affordable housing, and identify where we and our members can be part of successful, accelerated delivery.

We will continue making the case for a boost to spending on affordable homes with HM Treasury, the Ministry of Housing, Communities and Local Government, and Department for Business, Energy and Industrial Strategy over the medium term.

We will also be looking at longer-term steps beyond the next 12 months, particularly to speed up decarbonisation of social homes and help manage the cost of building safety remediation, supporting housebuilders and registered providers

The CBI responded to the recent Planning White Paper and raised members’ feedback and concerns about reforming Section 106, which we currently believe is not the right route forward. We continue to lobby on members’ behalf regarding changes to this and other areas of planning and housing policy, such as the First Homes scheme and a new Standard Method.

Get involved

Keep in touch and put your business at the centre of this with the CBI’s lead for housing and construction Tim Miller.