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Private housing slowdown threatens affordable home supply

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A slowdown in the private housing market will make it impossible to rely on planning gain to deliver sufficient affordable homes, the leading property firm Savills has warned. 

In a research report Additionality of Affordable Housing, conducted for the major housing associations, Savills said the government’s 300,000 homes-a-year target can only be met by the mid-2020s only if it increases direct funding for affordable housing instead of relying on councils to generate these homes through planning conditions imposed on private housebuilders.

Councils typically use these deals – known as section 106 agreements – to require developers to contribute to affordable housing, but they can be used only where private housebuilding is taking place.

Emily Williams, associate director for residential research at Savills, said: “Private sector housebuilding for market sale has underpinned the rapid expansion in housing supply since 2013, including affordable housing delivery through section 106. But that growth is slowing against market headwinds.”

Savills said a slowing private market, hit by a tailing-off of the Help to Buy scheme and a potential Brexit downturn would deepen the housing shortfall and so give fewer opportunities for section 106 deals.

New home completions look set to reach 260,000 homes a year by 2021, Savills said, but housebuilding might need to increase by up to a third between 2021-25 to hit the 300,000 homes a year figure.

The report said the government directly funding housing associations to build “would be critical to closing this gap and delivering more affordable homes”.

It assumed that councils would use their financial flexibilities, inlcuding the relaxed housing revenue account borrowing cap, to contribute 5,000 homes a year by 2021, filling part of the supply gap.

Savills said increased government funding for affordable housing would add to, rather than displace, private sector investment.

The research was conducted for the National Housing Federation (NHF), and regional housing association bodies G15 and Homes for the North.

NHF chief executive Kate Henderson said: “This research shows that relying on private developers to end the housing crisis is fatally flawed.

“Without government investment in affordable housing, it just won’t be possible to build enough homes to ensure that everyone can have somewhere stable and affordable to live.”

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