Why is it harder than ever to develop social homes?

With demand for social housing at an all-time high, Senior Policy and Research Officer, Wendy Dearden, explains why these homes are harder than ever to develop – just at the time when they are needed the most.

For generations, social homes have played a vital role in meeting the housing needs of people in Wales, providing quality, affordable accommodation on long-term tenancies for those unable to buy their own home. Today, a record number of people are waiting for a social home, including 11,721 individuals living in temporary accommodation.

A lot is going on in our housing system at the moment to make it difficult to find an affordable home, but it’s the shortage of social housing which is the greatest problem for those with the lowest incomes.

Welsh Government have set a target to deliver 20,000 homes for social rent during this term of the Senedd, but progress is slow and it’s accepted that this number won’t be met. Only 5,775 homes had been delivered in the first two years, 4,780 of which were actually homes for social rent.  

Looking back, between the mid-1940s and the mid-1970s, around 8,000 new social homes were being built every year in Wales. So why are things so difficult now? To sum it up in three words – land, cost and consent.

Social housing is generally funded through a combination of subsidy – normally a capital grant from Welsh Government – and private finance, raised by the landlord and paid back through the rent. Both elements of this package require tests of viability to enable lower, affordable rent levels.

The cost of both land and construction can force a proposed social housing development to be abandoned.

The cost of land for sale in the open market can often be prohibitive, and its availability will depend on the landowners’ assessment of when it makes sense to sell. Social housing developers will also be competing with those providing market housing at a profit.

There has been a long-held call for public landowners, such as councils, the health service, and Welsh Government itself, to support social housing development through land disposal of their land at less than market value. However, stretched public sector budgets mean that often every potential penny from the sale has already been pre-emptively spent elsewhere.

The cost of construction has also gone through the roof – literally. As the Cabinet Secretary herself has acknowledged, before the pandemic, between five and seven houses could be delivered with £1 million of capital grant: now that’s looking more like four on a good day. It could have been foreseen that new local carbon technologies would add to the cost of construction. More of a surprise was the rising cost of materials due to supply issues and competition from elsewhere in the construction market.

Available private finance is being diverted to improve the homes for existing tenants rather than develop new ones

The recently revised Welsh Housing Quality Standard and agenda for decarbonisation of social housing have come largely unfunded. The result has been social landlords being forced to reduce their development ambitions and the number of new social homes that they can financially support.

Planning consents are in decline causing concern for the pipeline of new homes.

The process of applying for planning is lengthy and complex with much uncertainty along the way. It is also common for statutory consultees across the public sector to cause delays and drive up costs. Other approval processes such as those for drainage bring further requirements and confusion.

It’s easy to fall into the mindset of “we’re doing the best that we can.” but is that a good enough answer to the family living in a cramped hotel room?

At the Bevan Foundation, we don’t think so. That’s why we’re starting new research work to explore these challenges further and look to develop workable, innovative solutions to unlock the systemic blockage to building social homes at scale and providing a permanent place to call home for everyone.

As you can see, there’s much to do. Our recommendations will be informed by conversations with a wide range of people involved in social housing development either as a landlord, developer or planner. If you’re interested in supporting our work, then please get in touch.