Housing policy in England has been focused on the overall supply of housing in recent years. This briefing considers the case for an increase in social rented housing, barriers to its development, and prospects for a “step change” in supply.
Why social rented housing?
Social rented housing is provided by a social landlord, normally a local authority or a housing association, with a rent set at around 50% of market rents.
For residents, it is the most affordable housing tenure and offers long-term security of tenure. Arguments in favour of social rented housing also include the need to move rising numbers of homeless households out of temporary accommodation, unaffordability and lower housing standards in the private rented sector, and the potential to reduce expenditure on housing benefits by moving private renters into social housing.
Commentators also argue for investment in social housing to provide an economic stimulus, pointing to housebuilding as a proven form of counter-cyclical investment to support the construction industry during a recession. The 2022 UK Housing Review (PDF), from the Chartered Institute of Housing and the University of Glasgow, questioned how much ‘levelling up’ between the regions could be achieved without delivering more social rented homes.
How much social rented housing is needed?
Research for the National Housing Federation (NHF, 2021) estimated there were around 1.6 million households with unmet housing need that would be best met through social renting (PDF).
Research conducted by Heriot-Watt University for the NHF and the homelessness charity Crisis (2018) called for 145,000 new affordable homes each year in England of which 90,000 should be for social rent. These estimates were based on an analysis of the backlog of housing need at that time (for example, homeless households in unsuitable accommodation), combined with projections of household growth.
The Housing, Communities and Local Government (HCLG) Select Committee endorsed the Heriot-Watt research in 2020, saying there was “compelling evidence that England needs at least 90,000 net additional social rent homes a year.” The Committee also said that a social housebuilding programme should be “top of the Government’s agenda to rebuild the country from the impact of COVID-19.”
The Government response to the Committee’s report, Building more social housing, rejected calls for a revised definition of affordability, to treat social housing investment as infrastructure spending, and for a social housebuilding programme as a specific response to the pandemic.
The Affordable Housing Commission, an independent group of housing experts established by the Smith Institute think tank, also endorsed the call for 90,000 homes for social rent in its March 2020 report.
How has the supply of social rented housing changed?
The social housing sector has shrunk in the long-term. In 1979, local authorities and housing associations let 5.5 million homes. This number declined by around a quarter over the next 40 years, reaching 4.1 million in 2022.
While the number of homes provided by the sector has grown slightly in the last decade, the availability of homes for social rent has fallen as different products, such as Affordable Rent (homes let at up to 80% of market rents), have become more common. Before 2011, most new affordable homes delivered were homes for social rent – but by 2022/23, this had fallen to 15%.
Other factors affecting the supply of homes for social rent include Right to Buy sales, conversions from social rent to Affordable Rent, and demolitions.
In this briefing we estimate the number of homes for social rent fell from 4.0 million in March 2013 to around 3.8 million in March 2023, based on data published by the Department for Levelling Up, Housing and Communities (DLUHC) and the Regulator of Social Housing.
What are the prospects for more social rented housing?
In 2018, Theresa May’s government abolished caps on the amounts local authorities could borrow to invest in housing as part of a commitment to build “a new generation of council homes to help fix our broken housing market”. The Government anticipated that removing the borrowing caps would enable councils to build around 10,000 new homes per year.
The £11.4 billion Affordable Homes Programme 2021-26 is now expected to deliver 157,000 new homes between 2021 and 2026, against a target of up to 180,000. Of these, 33,550 are expected to be homes for social rent. Updated guidance in February 2023 described social rented housing as “a priority for the fund” and said social rent specific grant rates could be accessed in all parts of the country subject to meeting Homes England’s value-for-money assessments.
Michael Gove, Secretary of State at DLUHC, told ITN’s Daniel Hewitt in July 2023 that he “would like to see 30,000 new social homes being built at least every year”.
However, social housing providers face challenges in increasing the delivery of social rented housing. These include:
- limited grant funding from central government.
- restrictions on the use of Right to Buy receipts (although additional flexibilities were introduced on 31 March 2023 for two years).
- financial pressures from inflation and the need to improve standards in existing stock and meet decarbonisation requirements. 26% of respondents to the Housing Sector Survey 2023 (PDF) cited financial capacity as the biggest challenge for building homes.
- the cost of borrowing.
Shelter’s Unlocking Social Housing report (April 2022) looks at the barriers to develop social rented housing in England and covers several of the issues and suggested responses referred to in this briefing. The Local Government Association (July 2023) has set out a six-point plan to produce a “generational step-change” in council housebuilding.
Inside Housing magazine has launched a Build Social campaign, calling on all political parties to commit to building substantial numbers of social rented homes. Labour, the Liberal Democrats and the Green Party have made such a commitment.