MPs demand greater government investment in social housing as competing financial pressures on providers exacerbate “chronic” shortage

The Levelling Up, Housing and Communities (LUHC) Committee has repeated its call for the Government to invest further “to build the social homes the country needs”, warning that the sector is under “serious financial pressure, although it remains resilient for the time being”.

In a report, ‘The Finances and Sustainability of the Social Housing Sector’, the committee said: “The sector has been presented with massive bills for decarbonisation, fire safety and regenerating old homes. At the same time, the maximum rent social housing providers can charge has been unexpectedly capped by the Government.

“In order to deal with the financial headwinds, social housing providers have cut the amount they plan to spend on building new social homes. This reduction in new building has been necessary for social housing providers to remain financially secure.

“However, this comes at a time when the country needs to build significantly more social housing and if this continues it will present a major problem for individuals that need social housing. Moreover, all stakeholders are clear that England has been facing a chronic shortage of social housing which must be addressed.”

The committee described the Government’s current use of grant to fund mainly affordable rent and shared ownership as “inefficient” when these homes can be financially viable with no direct grant.

It recommended that the Government should conduct an early assessment of the adequacy of grant funding allocations and how much social rent is to be supported.

The MPs said the Government should also assess the role of appropriate private investment providing affordable rent or other forms of tenure in order to free up grant funding to better support more social housing provision.

“As a first step the Government should set and publish a target for the number of social rent homes it intends to build each year,” the report suggested.

The committee said it had heard of encouraging signs that private investors were able to fund the building of more social homes. However, it said it was “imperative” that these investors are properly regulated and committed to long-term investment in the sector.

The MPs said ‘land value capture’ - for example section 106 agreements, which use the change in the financial value of land as of result of granting planning permission to fund Government objectives including the building of social homes - presented an opportunity to finance social housing.

The report recommended that the Government and local authorities should use their planning powers to ensure that the price of land does not inhibit the development of new social homes. It also said that the Secretary of State “must be prepared to be flexible with the powers provided by the Levelling up and Regeneration Act”.

As well as the financing of social housing development, the report also identified issues with the costs of maintaining social housing and the different financial risks faced by registered providers.

The committee noted that the social housing sector has to make expensive improvements to the homes it has, but had “received too little help from the Government to meet these costs”.

It added: “Many social homes, like other buildings, need to find money for fire safety work, but the Government still refuses to provide the social housing sector with the same fire safety funding as the private sector: this must be changed.”

The  report meanwhile recommended that the Government give greater weight to the positive benefits of regeneration so more funding can be made available for regeneration.

Homes England should also increase the flexibility it offers housing providers on funding for replacing homes, the committee said.

Finally, the report said that where registered providers face more financial risk, the Regulator of Social Housing should engage with them more regularly.

Clive Betts MP, Chair of the Levelling Up, Housing and Communities Committee, said: “The social housing sector is crucial for providing shelter and support for millions of households.

“Social landlords are, however, buffeted by a range of serious financial pressures. There is a chronic social housing shortage. There are pressing demands to invest in improving homes, so they are not blighted by mould, damp, and leaks, and to decarbonise the housing stock, and fix building safety defects.

“More social homes are needed. The Government must act to fix this situation by committing to focus investment on building the social homes the country needs.”

Responding to the report, a London Councils spokesperson said: “Without more government investment it is hard to see anything but a bleak future for social housing.

“Our analysis shows London boroughs face a black hole of £700m in their social housing budgets over the next four years, despite the desperate need to improve housing conditions and build new homes in the capital. With resources massively squeezed, it feels like we’ve been left with mission impossible.

“Social housing is crucial to tackling London’s homelessness crisis. It’s a vital component of the capital’s social and economic success, and we should all want the sector to thrive. Boroughs are as keen as ever to work with ministers in ensuring more resources are secured for boosting social housing in London and across the country.”

Harry Rodd