Around 8,500 Affordable Homes due to be built in the next 12 months are at risk, as social housing providers pull back from taking on new Section 106 contracts, causing delays to housing delivery and undermining national housing targets, research from the Home Builders Federation (HBF) shows.
The analysis estimates that around 900 completed Affordable Homes are currently standing empty due to a lack of commitment from social housing providers to take them on, with thousands more at risk.
Under Section 106 agreements, local authorities mandate the number of Affordable Homes developers must deliver on new sites. These homes are purchased by Registered Providers (RPs) at a reduced price.
Under this delivery model, home builders are responsible for around 45% of all new Affordable Homes each year. Yet, the approach relies on RPs’ ability to take on new homes, and a ‘perfect storm’ of economic and policy challenges facing the Affordable Housing sector has seen a gradual decline in bids for S106 Affordable Homes in recent years.
Without contracts in place for these homes, housing delivery grounds to a halt as developments are stalled, phased differently or even rendered unviable altogether. Meanwhile, in some instances, Affordable Homes are left standing empty.
In the last three years alone, at least 700 housing developments are estimated to have been delayed due to a lack of commitment from social housing providers, resulting in reduced availability of housing of all tenures, prolonging the housing crisis, and deepening housing inequality.
The impact also intensifies pressure on small and medium home builders. With capital tied up in uncontracted units, often funded by loans, SMEs’ cash flow is jeopardised, subsequently hindering investment in future phases or projects.
With the situation becoming increasingly concerning, earlier this summer, more than 90 HBF members penned a letter to Housing Minister Matthew Pennycook, urging Government intervention.
The letter called on Government to encourage a greater acceptance of the use of cascade mechanisms in Section 106 agreements by Local Authorities and for them to engage constructively with renegotiations when a registered provider cannot be secured, to ensure homes can continue to be built and provide reassurance that if an RP cannot be found, the Affordable Homes can be changed to an alternative tenure or as a last resort, a payment made to the LPA in lieu of the Affordable Housing.
Without greater flexibility, the gap between housing supply and ambitious government targets is set to widen further.
The Government is also encouraged to consider allowing the use of Homes England grant funding on Section 106 Affordable Homes for a time-limited period to help ensure that much-needed affordable new homes are not lost in the short term.
Neil Jefferson, Chief Executive at the Home Builders Federation, said: “Against rising affordability pressures and increasing numbers of families living in temporary accommodation, it cannot be that Affordable Homes are left standing empty.
“Government’s social and Affordable Housing announcements were a welcome step to giving Registered Providers confidence to plan long term, but they are doing little to ease the immediate constraints of delivering Affordable Housing through Section 106 agreements.
“Right now, an estimated 100,000 private units are stalled, which not only threatens the supply of much-needed homes but also risks the livelihoods of regional businesses and hardworking tradespeople up and down the country.
“While Government’s housing announcements have been welcome, as it stands, housing associations are unable to bid and private buyers unable to buy, leaving the housing outlook increasingly uncertain.”
