All for affordable: why government should boost its investment in affordable homes

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 growing, but solving the challenge matters just as much to businesses. Without communities of diverse housing, talented staff are harder to attract and harder to retain. If homes are also unaffordable relatively to local economies, businesses can find their workforce priced out of the areas in which they operate.

Coronavirus will bring new challenges to the affordability and availability of housing. Undoubtedly, there is an urgent need to prioritise delivery of more housing for affordable rent, social rent, and shared ownership. With many billions of existing spending commitments and promises to fund, the government now needs to move quickly and creatively to attract and distribute finance that will genuinely stimulate demand and speed up supply of affordable homes, accelerating the UK’s recovery from coronavirus.

To support businesses in all parts of the country, diversifying and increasing affordable tenures will be an important part of sustaining a healthy private sector workforce.

Towards this ambition, the CBI’s recommendations include:

1. The government should move quickly to establish and agree on 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 and accelerated delivery.

We will continue making the case for more 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, working with our members to unlock funding, ease the burden of tightening rules on registered providers, and champion the role that affordable plays in a growing economy.

Get involved

Keep in touch and put your business at the centre of the CBI’s work on housing by contacting the CBI’s lead for housing and construction Tim Miller.