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The case for one million new social homes

A new generation of housing would benefit everyone.

By Emily Cox

Home: it’s a simple word that for most of us means comfort, support and security. However, for too many, a secure home is a pipe dream. 

In the north east, more than 75,000 households are on social housing waiting lists, an increase of almost 51 per cent on 2022. Across the country, 139,000 children will go to bed tonight in temporary accommodation. Over the course of their lives they will earn less, and suffer worse health and education outcomes than those in a secure home. This damages their futures and contributes to the stark regional differences we see in health, education and prosperity. 

If, as a country, we are serious about stimulating regional economic development, we need to build more affordable homes – and we should start with social housing. 

In England, there are now 1.4 million fewer households in social housing than there were in 1980. In 2022/23 there was a net-loss of over 12,000 social homes. Against a backdrop of rising rents in the private rented sector and increasing homelessness, this trend is leaving millions without a secure home. It is also costing central and local government billions every year in rising housing support and temporary accommodation costs. 

Lloyds Banking Group has been a champion of social housing for decades, providing more than £17bn of finance to the sector since 2018. We see the value that high quality social housing provides. 

For instance, according to the Centre for Ageing Better, every £1 spent on improving warmth in homes occupied by vulnerable people yields £4 in health benefits. Children in better housing do better at school, with one in four children in poor housing failing to achieve any GCSEs compared to one in 10 of those in satisfactory housing. Providing homes for 30,000 people who are currently homeless could mean an extra 6,500 people in work too. 

We’ve joined with the homelessness charity Crisis to campaign for one million more homes for social rent over the next decade. It’s a substantial challenge and will require a concerted effort from both the public and private sectors. We believe there are three areas the government should consider in order to accelerate the delivery of more social homes.

Funding and subsidy

There is no policy solution to this issue that does not involve an increase in the grant subsidy available to social housing providers to offer housing with below market rents. Inflation, the cost of living crisis and the transition to net zero have stretched the balance sheets of housing associations, with increasing amounts required for the maintenance and retrofitting of existing social housing stock. 

While there is significant pressure on government finances, the economic case for more spending on social housing is clear. Lloyds’ research indicates that every £1 of extra subsidy can be linked to around £7 of new capital expenditure on social housing, thanks to the private capital it helps to attract. This could be further improved if an increase in grant subsidy was accompanied by greater flexibility over how this funding can be used to help housing associations and housebuilders deliver more homes for social rent. In England, this could mean the use of grants where developers negotiate with local authorities to deliver more homes for social rent as required under the Town and Country Planning Act. 

The sector can be incredibly attractive to long-term institutional investors seeking reliable and stable income streams. This is underpinned by a clear understanding of the level of rent that can be charged by social housing providers, as set by central government. A simple step to stimulate this investment would be to extend the next long-term rent settlement period until 2035 and commit to leave this methodology unamended, which would provide investors with the certainty needed to support more house building. 

Repurposing empty homes

Distressingly, given pressures in the housing market, more than 261,000 residential properties in England are classed as long-term empty. That’s up by 16 per cent since 2019. There’s a significant opportunity to repurpose long-term empty buildings into genuinely affordable homes. 

However, to do so will require government support. One solution could be the development of a national empty homes initiative, backed by a targeted national funding programme, which would act as a powerful incentive for local authorities to make tackling long-term empty properties a strategic priority. 

Land use and planning

Reform of the planning system will be fundamental in delivering new social homes. Capacity and capability in local authority planning departments will also need to increase if we are to deliver homes at scale. 

Acquiring land for building social homes is expensive and slow. To make it easier and cheaper, an expanded remit for Homes England could allow it to work with local authorities and housing associations to coordinate the procurement and remediation of land for social housing.  

Increased investment in social housing will give more people a secure and stable home, and deliver significant benefits for the economy. Homelessness in the UK is estimated to cost the government £6.5bn every year. Every homeless household moved into social housing saves the government £7,760 in temporary accommodation costs and a further £1,250 is saved in housing benefit for every household moving from the private rented sector into social housing. 

The case for more social housing is clear. We urge everyone to join our call for one million more homes for social rent to help tackle homelessness. 

This article first appeared in a Spotlight print report on Economic Growth, published on 3 May 2024. Read it in full here.

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