Why politicians should get behind a new affordable homes fund
Brian Cronin, Group Chief Executive
| Your Housing Group
As a general election gets closer, Brian Cronin, Group Chief Executive of Your Housing Group urges politicians of all stripes to give serious consideration to a new pensions-backed affordable homes fund.
In many sectors of the UK economy, politicians have been long been keen to encourage innovation and new ways of thinking. Housing should not be an exception and yet radical policy solutions in housing have often failed to get traction or have been put on the backburner.
With the country in urgent need of an answer to the challenge of delivering more affordable housing, this urgently needs to change. The private developers who dominate the market have simply failed to address the affordable housing shortage and if incentives stay the same they will never be particularly motivated to do so.
A different approach is needed and at YHG we believe the answer is a radical new expansion of housing delivery by the housing association sector, underpinned by a government-backed fund.
A new affordable homes fund would aim to attract private investment from trusted sources, particularly pension funds, offering reliable returns of around 4 per cent from large-scale, affordable rented housing developments. A new report we have produced, with analysis by a former government economist, sets out how the fund would comprise genuinely additional housing funding that debt- constrained house associations could access to build homes.
Link-ups between pension funds and new rental developments are not a new idea, and the partnership has mutual benefits. Giving housing providers comparatively low-cost finance, in addition to the rental yields on new developments, would give funds a return over a long period that matches their liabilities very well.
The big issue is that such partnerships are few and far between and so small in scale that they cannot hope to make a dent in current levels of demand. Policymakers are, however, becoming increasingly interested in expanding this model as a means to providing a solution to the present crisis in affordable rented housing in the UK.
The recent Labour party green paper ‘Housing for the many’ makes it clear that the policy is under consideration. “A Labour Government will look to lower the cost of finance for housing associations and others, including with new affordable housing borrowing guarantees and housing association access to Public Works Loan Board finance. We will encourage long-term investors such as pension funds,” it states.
As a general election gets closer, I would urge politicians of all stripes to give serious consideration to a new affordable homes fund. We need hundreds of thousands of new units in every region over the next decade, just to meet the present level of demand. The issue, as ever, is funding. There is a potential market for investment into affordable housing, but it needs government to step in to accelerate its development.
The fund would create an appealing investment proposition for pension fund investors and an opportunity for all local authorities in England to generate revenue from their land holdings, reducing their reliance on central government money.
It would also directly finance areas in need of affordable housing delivery and would also encourage advanced offsite manufacturing capability, so that new homes could be delivered at much greater speed. The result would be a radical addition to the affordable housing output of this country.
Our projections suggest that the fund would be capable of financing the delivery of 30,000 affordable homes each year becomes operational within 24 months. This would eliminate the annual deficit in affordable house building, stopping the housing crisis getting worse each year due to the annual under-delivery of this stock.
With more and more people renting, the need for more quality affordable housing has never been greater. The case for government intervention to help create this new driver of housing output is now extremely compelling, especially in light of the inability of existing market players to fill the gap in affordable delivery.
The time for innovative policy action is now. Politicians should be bold and get behind a new affordable homes fund to get the UK building the homes we need.
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