Housing

Affordable Homes: how many do we need?

24 November 2015

Article by Jonathan Baxter National Assembly for Wales Research Service

At the start of the fourth Assembly the Welsh Government set a target of “delivering” an additional 7,500 new affordable homes by April 2016. In 2014 that figure was increased to 10,000. The Welsh Government announced last month that it was on course to exceed that increased target.

Today, Assembly Members will have an opportunity to debate the provision of affordable housing and the government’s progress towards meeting its own target.

What is an affordable home?

The definition used by the Welsh Government comes from Technical Advice Note 2 (PDF, 271KB), which is part of National Planning Policy. It covers housing where there are secure mechanisms in place to ensure that it is accessible to those who cannot afford market housing, both on first occupation and for subsequent occupiers.

“Affordable housing” includes social rented housing provided by both local authorities and housing associations, as well as intermediate housing. Intermediate housing means properties where prices or rents are above those of social rented housing but below market housing prices or rents.

How many homes have been delivered?

In 2014-15, 2,218 additional affordable homes were delivered across Wales. The Welsh Government doesn’t build any homes itself. The term “delivered” in this context means that the dwelling is completed and is available for occupation. In most cases it will have actually been built, acquired or converted into an affordable home by a housing association.

Over the course of the fourth Assembly an additional 9,108 additional affordable homes have been delivered so far. This is over 91% of the Welsh Government’s target. A breakdown of these figures by local authority area is available in Affordable Housing Provision in Wales, 2014-15.

Many of these homes have been delivered with the assistance of Welsh Government support through the Social Housing Grant programme and a smaller number through the Housing Finance Grant. Overall, 69% of all new affordable homes were built, acquired or converted with the assistance of capital grants. Public sector land, primarily owned by local authorities, has also been made available for development. This resulted in 563 new homes being delivered during 2014-15.

The vast majority of all new affordable homes, nearly 90%, were delivered by housing associations and, of those, 61% were social rented homes. Thirty-two per cent were made available at intermediate rents, and 7% were shared equity (a type of low cost home ownership).

How many new affordable homes does Wales need?

Future Need and Demand for Housing In Wales (PDF, 1.44MB, no Welsh translation available) was released in October 2015 by the Public Policy Institute for Wales. The research was commissioned by the Welsh Government and undertaken by a leading academic in this area, Dr Alan Holmans.

The research presents two estimates of future need and demand. One is based on the Welsh Government’s official 2011-based projections of household formation. The other, higher, estimate assumes that more households will be formed. Depending on what estimate you choose to use, the number of additional homes that Wales needs in the social sector annually varies between 3,300 and 4,200 respectively.

“Social sector”, as defined in the research, includes not only local authority and housing association homes, but also homes in the private rented sector where housing benefit is used to pay the rent as well as owner occupiers who have purchased their homes under Right to Buy and similar schemes. This means it isn’t directly comparable with the Welsh Government’s official target for “affordable homes”.

Delivering more affordable homes

In recognising the reliance on the housing association sector to deliver new affordable homes, the Welsh Government entered into a housing supply pact with the sector’s umbrella body, Community Housing Cymru, in 2014. A similar pact was agreed with the Home Builders’ Federation (HBF) in September 2015. That included a commitment from the HBF to work with housing associations to deliver affordable housing as part of private estates.

The challenge facing the current, and future, Welsh Governments is to meet housing need and demand in Wales. Dr Holmans suggests that achieving that goal will require “a return to rates of house building not seen for almost 20 years, and an increase in the rate of growth of affordable housing.”

While overall house building has seen an increase recently, in 2014-15, there was a decrease of 8% in the number of affordable homes delivered compared with 2013-14.

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