This document provides an overview of affordable housing delivery in the UK since World War 2. It discusses how the definition of affordable housing has evolved over time to include more types of subsidized housing beyond just social housing. While affordable housing delivery rates have increased since 2002, this reflects a widening definition rather than an increase in social housing. Overall housing completion rates remain far below needs, and affordable delivery targets are still being missed particularly in London. The document examines potential changes to housing products, planning processes, and policies that could help boost affordable housing delivery.

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THE RACE TO ZERO?

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As ever, the reality is more complex than the
above summary might suggest and reflects
a combination of economic, financial and
demographic issues, alongside policy and
ideology responses. Figure 2 (overleaf)
provides an overview of these changes, which
can be divided into four main phases:
1945-1980
Increasing housing delivery and the significant
role of the public sector in this delivery. In fact,
during the 1950s and 1960s public housing made-
up approximately half of housing completions,
as Figure 1 illustrates, after which there was a
reduction in overall housing delivery rates.
1980-1990s
Significant policy change, with the de-regulation
of the private rented sector and a major sell-
off of council housing stock through the ‘Right
to Buy’ scheme and transfers of stock to
empowered housing associations.
1990s TO 2007
GLOBAL RECESSION
Increasing focus on planning and policy
regulation responses to try and boost
housing supply.
THE POST-RECESSION
RECOVERY FROM 2010
Further policy and ideological response to
tackling the housing crisis. This includes a range
of measures linked to the 2015 Budget and
Autumn Spending Review. The coherence and
consistency of some of these is still to be judged.
New house building rates are at an historical
low, and are far-away from meeting current
housing needs, let alone the backlog of
housing demand, creating a slow-burn crisis
in itself. As a result, with not even ‘market’
need being catered for, is affordable housing
being squeezed out of new developments?
We have looked at the evidence in order to
understand the implications for affordable
housing provision, and to identify potential
solutions to what appears to be an almost
unsolvable situation.
THIS PAPER PROVIDES AN ANALYSIS
OF THE CURRENT STATE OF THE
AFFORDABLE HOUSING MARKET
IN LONDON AND ACROSS THE UK.
IT ASSESSES HOW ECONOMIC
AND LEGISLATIVE CHANGES HAVE
IMPACTED ON THE DELIVERY OF
AFFORDABLE HOUSING SINCE WORLD
WAR 2 AND HOW THE DEFINITION HAS
EVOLVED. IMPORTANTLY, THE REPORT
EXAMINES POTENTIAL CHANGES TO
PRODUCTS, PROCESSES AND POLICIES
WHICH WOULD IMPROVE THE
DELIVERY OF AFFORDABLE HOUSING.
Figure 1
Average House Building Rates in England
(10 year averages)
HOUSING TIMELINE: FROM BIG BANG TO FLAT LINE
But first, the context. In 1970 over 300,000 new
dwellings were built in England the affordable
housing element of which was over 45%. It
remained at that proportion – or higher – until 1980,
when the ‘Right to Buy’ scheme was introduced
and the end of rent controls came into force. In
contrast, current new dwelling completion rates
have averaged at around 115,000 units a year
between 2009-10 and 2014-15, or almost a third
of the rate of the 1960s. The affordable housing
element of this is now down to approximately
22%, on the basis of local authority and housing
association delivery.
1946-55
1956-65
1966-75
1976-85
1986-95
1996-05
2006-14
50k
100k
150k
200k
250k
300k
Source: P2 returns from local authorities,
National House-Building Council (NHBC),
Approved inspector data returns
Public Sector
Private Sector

3. carterjonas.co.uk 54
Figure 2
House building completions in England
GENERAL
ELECTIONS
ECONOMIC
& FINANCE
POLICY &
REGULATION
1946
50,000
100,000
150,000
200,000
HouseBuildingCompletions
250,000
300,000
350,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014
SterlingCrisis(1967)
NewTownPlanningAct(1946)
Town&CountryPlanningAct(1947)
‘GeneralNeeds’subsidiesfor
LocalAuthoritiesre-introduced
(1961)
‘FairRents’mandatoryrebate
schemeforcounciltenants
introduced(1972)
HomelessPersonsAct(1977)
‘RighttoBuy’councilhomes
introduced(1980)
HousingBenefitsystem
established(1982)
BuildingSocietiesAct(1986)
HousingAct(1988)
EndofMIRAS(1989)
Town&CountryPlanningAct
(IntroductionofS106)(1990)
Planning&CompensationAct(1991)
‘DecentHomes’programme(2000)
‘StarterHomeInitiative’
forkeyworkers(2001)
‘SustainableCommunitiesPlan’,
IntermediateHousingmodel
created(2003)
‘BarkerReview’ofHousingSupply
(2004)
‘HomesfortheFuture’plan(2007)
IntroductionofCIL(2008)
NewHomesBonus(2011)
‘HelptoBuy:EquityLoan
Scheme’introduced(2013)
EnergyRecession
(OilCrisis&
Stagflation)
(1973to1975)SterlingCrisis&
IMFBailout
(1976)
Manufacturing
Recession
(1980to1981)
StockExchange
de-regulation
“BigBang”(1986)
ServiceSector
Recession
(1990to1991)
ERMExit
(BlackWednesday)
(1991)
GlobalFinancial
Recession
(2007to2009)
Local Authorities
Housing Associations
Private
Planning&Compulsory
PurchaseAct(2004)

4. However, we need to dig beneath the
surface to better understand how
matters have developed over the last
decade, and the appropriateness of
various policy responses. The general
trend has clearly been a continued overall
decline in total house building rates.
The picture is more complex in terms of
affordable housing, due, in part, to how
this sector is now defined.
In broad terms, the definition of
affordable housing has widened over the
last decade. Previously, the focus was on
‘social housing’, covering property rented
at approximately 50% of the market rate.
Affordable housing now encompasses
affordable rent and intermediate rent,
with rents set at closer to 80% of market
rents, along with shared ownership.
This wider definition of affordable
housing has resulted in a steady increase
in ‘total’ affordable housing completions
since 2002/3, and particularly since
2007/8, when above 44,000 units were
completed. This reflects a recognition
that there are households who do not
meet the eligibility criteria for social
housing, but who nevertheless cannot
afford to rent or buy at market rates.
The London Housing Strategy (2014)
notes that net total housing delivery
rates have averaged just over 20,000
dwellings per annum in London over the
last 15 years. This is despite an average of
55,000 dwellings per annum being given
planning permission. The planning system
is therefore delivering the potential
required, but somehow this potential is
not translating into bricks on the ground.
In terms of affordable housing
completions, whilst it is difficult to marry
national datasets with the London data,
in broad terms London is providing a
greater relative level of affordable housing
delivery than the rest of England on
average – at least 40% compared to 28%
for England as a whole – but then again, it
does have a greater relative need.
Despite the above-average relative
performance of London in terms of
affordable housing delivery, it is still
under-performing in terms of its own
CHANGING NATURE
LONDON
In overall terms, approximately 39,900
affordable dwellings per annum were
completed between 2002/3 and 2014/15
in England, which represents an average
affordable delivery rate of 28% (Figure 3).
However, there has also been a significant
element of displacement of activity, with
a major drop in the development of social
rented houses, being replaced by the new
‘affordable rent’ dwellings. Commentators
have raised concerns over how this will
impact on the stock and provision of
social housing, which has often been
difficult to manage and deliver. This has
been likened to running a bath with the
plug out, but the post-2011 affordable
rent regime has meant that the plug-hole
has got bigger and the tap has been
switched off.
Figure 3
Number of Affordable Dwellings Completed in England
6
AFFORDABLE HOUSING NOW
ENCOMPASSES AFFORDABLE
RENT AND INTERMEDIATE RENT,
WITH RENTS SET AT CLOSER TO
80% OF MARKET RENTS, ALONG
WITH SHARED OWNERSHIP.
affordable delivery targets. Over the
period 2004/5 to 2014/15 only 143,400
affordable dwellings were delivered
out of an expected 225,500 – just 64%
of the target. So, whilst London might
be achieving a greater proportion of
affordable housing delivery compared
with the rest of England, it is still well
below what it needs to deliver.
As a result, the current London Plan
(2015) has a target for delivering
42,000 new houses per annum over
the period 2015 to 2025. Of this, the
minimum target for affordable provision
is 17,000 dwellings per annum, or a
delivery target equivalent to 40%. The
Housing Zones approach, launched in
2014, aims to deliver over 57,000 total
dwellings by 2025 as part of the initial
set of 20 schemes, but only 33% of
the dwellings are affordable. Even so,
many of the Housing Zones represent
challenging regeneration propositions,
but - importantly - the affordable housing
Source: CLG Live Tables, 120, 209, 1009 (Totals may not sum due to rounding)
carterjonas.co.uk 7
70,000
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
CompletedDwellings
%oftotalcompletions
40%
45%
50%
60,000
35%
50,000
25%
30%
40,000
20%
30,000
15%20,000
10%
10,000
5%
0 0
Social Rent
Affordabe Rent
Intermediate Rent
Affordable Ownership
As % Total Completions (RHS)

5. carterjonas.co.uk 98
delivery rates have been agreed between
the public sector, landowners and the
development community.
However, it appears that other major
developments and regeneration schemes
are delivering substantially lower levels
of affordable housing. Elephant Park,
Embassy Gardens, New Covent Garden
Market, Nine Elms Parkside, and St
Georges Wharf are each developing over
1,000 residential units, yet the average
level of affordable housing provision
across these schemes is under 20%
(Figure 4).
The key question is, why? Is it a case
of ‘the rest supporting the best’ in
terms of affordability delivery for
London and elsewhere and how can
affordable delivery levels be increased?
Clearly, such large long-term schemes
are inherently more risky, which will
influence judgements on viability. Hence
the negotiation and re-negotiation of
affordable housing levels during the
planning process becomes critical.
In that context, the RICS guidance note
Financial Viability in Planning (2012) can
provide a key role in such negotiations.
Figure 4
Delivery of Affordable Housing in London
These negotiations can be complex, and
it is important for local authorities and
others to ensure they are fully aware
of the parameters of this guidance in
respect of determining the affordable
housing viability case. Particular attention
needs to be paid to the guidance in terms
of when a re-negotiation should take
place, the treatment of developer risk,
compliance with planning policy, and the
avoidance of fixed percentage uplifts
relating to returns on land values.
These points highlight the necessity that
all parties understand both the limits of
the guidance note and the appropriate
use of the approach outlined.
DESPITE THE ABOVE-AVERAGE
RELATIVE PERFORMANCE
OF LONDON IN TERMS OF
AFFORDABLE HOUSING
DELIVERY, IT IS STILL UNDER-
PERFORMING IN TERMS OF
ITS OWN AFFORDABLE
DELIVERY TARGETS.
DELIVERY OF THE ‘RIGHT’
TYPE AND BALANCE OF
AFFORDABLE HOUSING
SHOULD ADDRESS LOCAL
NEEDS – BOTH SOCIAL
HOUSING AND ‘OTHER’
AFFORDABLE AND
INTERMEDIATE NEED.
There is no quick-fix solution to
the lack of housebuilding in England,
either in the ‘market’ or ‘affordable’
housing sectors, but whilst it is a long-
term challenge it does require urgent
policy and industry action. However, there
is a risk in adopting the approach that
such a complex question has a simple
answer. Concerns have been raised
that this is the approach underlying the
Government’s response.
Nevertheless, fundamental to delivering
more affordable housing is to build
more dwellings overall. It is not simply
a numbers issue for affordable housing
provision though. Delivery of the ‘right’
type and balance of affordable housing
should address local needs – both social
housing and ‘other’ affordable and
intermediate need. In the case of London
in particular, it is important that all parties
help in delivering agreed targets for
affordable housing.
Recommendations on how affordable
housing delivery could be improved are
outlined below and grouped into one of
three categories: products, processes or
policy. The boundaries between these
categories are not fixed – they are better
seen as a convenient way of emphasising
the focus of a recommendation. It is also
recognised that not all the ideas offered
overleaf are necessarily easy to deliver.
However, that is no reason not to try.
45,000
London Target Housing Zones -
Planned Affordable
Housing Target
Major Regeneration
Schemes - Actual
Average Affordable
Delivery Rates
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0 0
20%
40%
60%
80%
100%
Total Housing Target (units per annum)
Affordable Housing Delivery (%RHS)
CHANGE

6. carterjonas.co.uk 1110
PRODUCTS
Product Diversity. A wider range of
housing products can be achieved
through further support for smaller-scale
builders and self-build approaches. The
Government has encouraged the latter
approach through the ‘Right to Build’
initiative, and local authority delivery
on this will help stimulate the overall
housing market. When linked to increased
activity by the smaller-scale building
sector – which constructs a fifth of homes
in England – this may help to deliver
additional affordable homes, albeit not
always under the NPPF definition.
Funding Re-Focus. The ‘Help to Buy ISA’
is expected to cost the Government £2.1
billion over five years. Commentators
have questioned the cost-effectiveness
of this measure, particularly given the
relatively small-scale and incremental
nature of the saving. It is estimated
that this fund could build 69,000 new
affordable dwellings over the next five
years, which would be a more useful
contribution to meeting housing need
than a marginal tax-saving scheme.
Competition Conflict. The ‘Starter
Homes’ and ‘Help To Buy Equity Loan’
schemes are likely to be competing with
each other and are not creating any net
addition to housing stock. Whilst the
Starter Home initiative may alter the
type of affordable housing that is built, it
will not result in any net addition to the
number of homes. To be relevant in terms
of affordable housing delivery – and not
just a discount scheme to any buyer –
an income cap needs to be applied to
this scheme. Consideration should also
be given to extending the scheme to
cover rented properties, which could be
supported by housing associations.
PROCESSES
Off-Site Provision. In the case of London,
over the last few years residential
planning approvals have exceeded the
London Plan identified need – 55,000
permissions a year against a future
need for 42,000 units a year. However,
only 20,000 of these permissions have
been delivered on the ground each
year. It is vital to increase this ‘delivery
translation’ rate, which would go a long
way to delivering the affordable housing
requirement.
One way of helping to achieve this is
to provide greater clarity and support
for ‘in-lieu’ or off-site provision, as
recommended by a recent London First
study. Approaches to this issue could
work from the following:
• Delivery on-site should still be the
presumption.
• Greater consistency and transparency
in terms payment in-lieu process,
including a more standardised
formulaic approach to calculation
across London, published KPIs
reporting on in-lieu income and
expenditure and a fixed time limit for
using funds (before default removal to
GLA as part of delivery of affordable
housing programme).
• Amending London Plan policy to
incorporate guideline criteria against
which proposals for off-site delivery
can be assessed.
• A cross-border approach to
matching delivery outside of borough
boundaries, with delivery against
borough-level targets.
Housing Association Capacity Building.
It has been estimated by Policy Exchange
that the housing association sector
could build up to 100,000 new homes a
year, with 60,000 being affordable and
40,000 market homes that would cross-
subsidise the affordable house-building
programme. This could be achieved by
providing the housing associations with
greater financial freedom given their
large financial surpluses, as well as by
Government adopting a new approach
to funding housing associations, based
on a repayable equity investment
rather than the current restrictive
grant arrangements. There are also
many housing associations which are
not actively engaged in building new
properties and could be drawn into this
process, either as part of consortia, or
by making use of available funding and
expertise.
Local Authority Building. The potential
exists for local authorities to become
more active in house-building once again,
if the restrictions on their borrowing
against the value of their housing stock
is removed, as argued by the London
Assembly and others. In principle
this offers the opportunities for local
authorities to leverage existing and future
housing assets to increase housing stock,
as well as to improve and maintain it, by
borrowing against their housing assets. In
view of the financial constraints imposed
by the borrowing caps, a number of
boroughs are considering, or have already
established, wholly-owned or joint
venture companies which will allow them
to develop outside the confines of the
Housing Revenue Account (HRA).
POLICY
Determining Financial Viability.
The RICS guidance on financial viability
in planning needs to be used critically
and in a balanced way, in order to ensure
that realistic outcomes for all parties are
achieved. It is important to be mindful
of the focus and limitations of the
guidance, particularly in relation to larger
development schemes, where there is a
record of under-delivery of affordable
housing against pan-London targets.
Revising Right to Buy. The ‘Right to Buy’
policy that is being applied to housing
associations may lead to an increase in
the affordable housing supply. However,
this could come at the cost of reducing
the stock of much needed social rented
housing, given that councils will need
to sell their high-value properties as
they become vacant to help fund this
initiative. There are more effective
ways of delivering additional affordable
housing without reducing existing ‘core’
affordable stock, such as through freeing
housing associations and local authorities
to build more homes, as noted above.
THERE IS NO QUICK-FIX
SOLUTION TO THE LACK OF
HOUSEBUILDING IN ENGLAND,
EITHER IN THE ‘MARKET’
OR ‘AFFORDABLE’ HOUSING
SECTORS, BUT WHILST IT IS A
LONG-TERM CHALLENGE IT DOES
REQUIRE URGENT POLICY AND
INDUSTRY ACTION.

7. Key Contacts:
Tim Shaw, Partner, Development
020 7518 3221
tim.shaw@carterjonas.co.uk
Darren Yates, Head of Research
020 7518 3343
darren.yates@carterjonas.co.uk
020 7518 3200
One Chapel Place, London W1G 0BG
chapelplace@carterjonas.co.uk
© Carter Jonas 2016. The information given in this publication is believed to be correct at
the time of going to press. We do not however accept any liability for any decisions taken
following this report. We recommend that professional advice is taken.
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