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Rentplus has contributed to the House of Lords’ Built Environment Committee’s enquiry. You can read our Executive Summary below or the full response here.
Last year, the supply of new affordable homes was just 40% of what the sector estimates is required to meet housing need.
At a time of tight Government spending allocations the only way to deliver the amount of new affordable homes needed is with a significant injection of private sector investment.
Privately funded providers can also help to deliver a diverse range of tenures to meet the overwhelming aspiration of home ownership across the population, supplementing Government funded models.
At present, first-time buyers are concentrated amongst those on higher incomes due to this group being better able to save for a deposit. This has been exacerbated by the pandemic. Whilst middle to higher-income households have generally been able to save more as outgoings decreased, many of those on lower incomes have had to dip into their savings or take on more debt, pushing any hope of saving for a deposit even further away and generating adverse credit history.
This growth in savings inequality will translate into inequality of opportunity for thousands of people to own their own home unless more is done to address the deposit barrier.
At an average of £59,000, saving for a deposit is impossible for many renters on lower incomes who struggle to save each month and 60% of private renters have no savings at all.
To meet the UK’s housing demand, we need to ensure that a wider range of people can achieve their home ownership ambitions, not just those on middle to higher incomes. There need to be accessible routes into ownership for those who struggle to save. This group are also locked out of schemes such as Help to Buy and Shared Ownership which still require upfront deposits.
Affordable rent to buy is a model which meets this need and opens up home ownership to a wider group of households overall. The average income of tenants is over £20,000 lower than those using Help to Buy.
There is increasing interest from institutional investors in the affordable housing sector as providing a long-term, steady return on investment, including investing in affordable home ownership tenures. This includes the likes of pension funds for major UK companies.
However, many local authorities are reluctant to accept affordable housing funded privately rather than through the more familiar route of Government grant. Anecdotally, the primary reason for this is a lack of confidence from housing officers that this is supported by national policy, as well as a preference for sticking to the ‘traditional’ methods of delivery. This means that the country is losing out on additional affordable housing that could be delivered at no cost to the Treasury, and the Government will fall short on their targets to deliver the amount of new homes required.
We have been encouraged by the Housing Minister’s comments that the Government is keen for housing associations to explore new funding
streams to support the supply of new affordable homes, and similarly from the chair of Homes England that the agency is “keen to hear” from institutional investors looking at the affordable housing sector.
This needs to be backed up by clear guidance from the Government that encourages and directs local authorities to welcome institutional investment in their affordable housing provision and to consider innovative models.
There are billions of pounds waiting to be unlocked if local government was more amenable to accepting institutional investment and if the Government did more to encourage local authorities to do so and break down the existing cultural barriers. This will enable the scaled-up delivery of additional homes at no cost to the Government that can meet a wider range of housing need.