In December 2010, the government announced the Affordable Homes Programme (the Programme), under which there is £1.8 billion capital funding in government grants to social housing providers. The Department for Communities and Local Government (the Department) has overall responsibility for the Programme, which is delivered by the Homes and Communities Agency (the Agency) through contracts with housing providers.
The Department expects the Programme to support the provision of approximately 80,000 homes in the four years from April 2011 to March 2015. The Agency secured commitments from providers to build 24,000 more homes than its initial target of 56,000. Through negotiation the Agency reduced the average grant per home to £20,000; a third of that under the previous programme. At the time of our hearing in July 2012, construction had started on 13,800 homes.
It is not yet clear whether the Programme will deliver better value for money in the long term. The reduction in the grant paid to providers for each home will be funded in part by housing providers being able to charge higher rents to tenants, leading to an estimated £1.4 billion increase in housing benefit payments over 30 years. The Programme therefore shifts cost from one department to another.
The Department needs to do more work to understand the impact of the Programme on tenants and its interaction with wider welfare reforms. On the one hand more of the new housing, both for rent and for sale, may be taken up by people on higher incomes so that the programme fails to meet the most pressing housing need. At the same time, the poorest tenants may be unable to afford the higher rents. Those who receive higher benefits may in turn find it even harder to find employment that pays enough and so there will be more people who are more likely to be locked into benefit dependency. We are also concerned that the allocation of funding does not fully target people and areas of greatest need.
Delivery of the new homes is heavily skewed towards the end of the Programme, with many due to be built in the final year on sites which are not yet confirmed, or have not received planning permission. This leaves very little room for slippage. The Agency will need to maintain a tight grip on progress and act promptly to address any delay if the Programme is to deliver all that is promised.
The Programme has taken advantage of housing providers' current ability to borrow and so finance a greater proportion of the cost of building social housing themselves. This has been based on balance sheets strengthened by the rise in property values. However, this is a one-off opportunity and it is far from clear whether providers will have the financial capacity to take part in another round of the Programme after 2015. The Department will need to give the sector more certainty about its future plans as soon as possible. We welcome the prospect of 80,000 new homes, but with 4.5 million people waiting to be allocated an affordable home in England, it will not solve the shortage of social housing alone, and wider action is needed.
On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Communities and Local Government and the Homes and Communities Agency on the financial viability of the social housing sector and the Affordable Homes Programme.