“Property downturn could reduce number of affordable homes built by 25%”

“major downturn in the housing market could reduce the number of affordable homes built by a quarter, the property firm Savills has warned.

Savills estimates that about 100,000 new homes a year – a third of the government’s 300,000 target – need to be priced at levels below the going market rate, whether for rent or for sale.

However, only 43,498 such homes were built in England in the financial year 2017-18, albeit 10% higher than the previous year, according to government figures.

Many were built for so-called “affordable rent”, where rental costs are capped at 80% of local private sector rents.

Negative gearing report finds housing less affordable now than at height of the boom.

About half of affordable new homes, 22,000, were built through section 106 of the housing act, for social rent, affordable rent, intermediate rent and shared ownership.

Section 106 is a planning clause requiring developers to include a proportion of affordable housing in their developments, which is often sold to housing associations.

It accounts for 53% of all affordable homes built, passing the 50% mark for the first time in six years.

However, if there was a major housing downturn akin to the late 1980s, early 90s or 2008, when prices and the volume of transactions crashed, the number of section 106 affordable homes would be halved to about 11,000, Savills predicts.

A housing slowdown is also likely to lead to fewer of those homes being constructed. House prices have been falling in London and parts of the south-east for more than a year but values are still rising elsewhere in the UK.

Chris Buckle, Savills’ research director, said: “From the end of the last cycle in 2007-8, we saw a roughly 50% fall in section 106 affordable housing completions to fewer than 4,000 homes.

“Although we are not predicting a market downturn, the housing market is slowing and this could result in fewer section 106 affordable housing completions.”

The Savills analysis comes after official figures showed the number of new homes built for social rent has fallen by almost four-fifths in a decade – while more than 1 million families are stuck on waiting lists for council housing in England.

Only 6,463 homes were built in England for social rent in 2017-18, down from almost 30,000 a decade ago.

In London and southern England the affordable housing shortage is particularly acute. An estimated 42,500 households need homes priced below market rates every year but over the last three years only an average of 5,600 were built a year, leaving an annual shortfall of 36,900, Savills says.”

https://www.theguardian.com/business/2018/nov/26/property-downturn-could-halve-building-of-affordable-homes-savills

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