With a recession looming, the government needs to take swift and decisive action to protect the housing market. Recent attempts, such as the holiday on Stamp Duty, have merely delayed a crisis. We need a solution that matches the urgency of the situation.
A large number of diverse organisations are now calling for an emergency package of social housing investment. Joseph Rowntree Foundation, The National Housing Federation, the Greater London Authority and the Affordable Housing Commission have all, separately, made the case for stimulus package focussed on social housing. We at Shelter, in our report Building Our Way Out, have called for A New Homes Rescue Fund.
The consensus that more action is needed on social housing also extends onto the backbenches of the Conservative Party. Just this week we have seen 16 Conservative MPs write to the prime minister asking him to provide an ambitious plan for building the social homes this country needs.
This week the government has a chance to announce this ambitious plan through the Spending Review. It can, and should, commit to delivering the stimulus our housebuilding sector so desperately needs.
A stimulus package is needed
The government has said now is not the right time for long-term plans. The spending review has been trimmed from five years to one and the autumn budget cancelled. Week by week, existing plans are pushed back and new ones only cautiously pencilled in.
But the recession won’t wait around. The housing market is heading into a storm.
After a seemingly hot summer and autumn period, a cold front of redundancies and unemployment are beginning to move in over the housing market. As peoples’ ability to buy or rent new homes dry up, prices will drop, and housebuilding will freeze over. Recent RICs survey findings reflect these expectations. Reports of short term increases in demand are caveated with a gloomier outlook over a 12 months period.
The knock-on effects for housebuilding will be big. Research conducted by Savills on behalf of Shelter estimated that a slump in consumer demand would see us lose over 300,000 homes over the next five years, 244,000 jobs in construction and the wider supply chain, and a hefty £29.6 billion in contribution to the economy.
But we, alongside the rest of the sector, are determined that an injection of social housing investment next spring can breathe new life into the construction industry, protecting construction jobs and boosting the economy.
The countercyclical (steady) nature of social rented housing is well known. Social housing isn’t affected by the same drop in demand as homes for market sale or rent are. In fact, research suggests the number of households waiting for a social home could double as a result of the pandemic.
Housebuilders can be confident that they can fill a social home once they build it, even in a recession. But an immediate boost in grant funding is needed to deliver at a scale and pace that reflects the urgency of the situation.
We have already seen a commitment of £12.2bn to the Affordable Homes Programme (AHP) 2021-26, which will begin in April next year. But ordinary AHPs start slow. Grant is made available in tranches, with more funding loaded at the back end.
If we are going to build our way out of this recession, we need to hit the ground running.
We are calling on the government to speed up and scale up investment in a New Homes Rescue Fund. It should use this month’s spending review to bring forward the already committed £12bn and spend it over the next 2 years, instead of slowly ramping it up over five. And this money should be focussed on delivering homes for social rent – the only homes that will build us out of this recession.
This should then be backed up by a long-term programme for a new generation of social homes. £12.8bn a year for the following 10 years is what’s needed to break the back of our housing emergency, tackling homelessness and providing a safe, secure home for the millions without.
Time is running out
Between now and a Budget in March (likely the next announcement of major funding) is just too long to wait.
The Affordable Homes Programme is set to kick-in in April 2021. Social housing providers need to know now if they’re going to be asked to step up to deliver the boost in social homes we so desperately need. Investment needs to be announced before the market takes a dive, not when it’s already in the water.
Yet, so far there has been no indication of a sense of urgency, nor a solution to match the scale of the challenge. A consensus is developing. Concerns for the housing market are widespread. November’s Comprehensive Spending Review is the perfect time for the government to show that it has a plan.