Rate of affordable housebuilding must triple to tackle housing crisis

The government has set an overall housebuilding target of 1.5 million new homes in five years. It pledged to deliver “the biggest boost in affordable and social housing for a generation”, but ministers have not yet set a specific affordable housing target.

Meeting the 187,000 affordable homes target would require a significant increase in building. Around 58,000 new affordable homes were completed in 2022-23, with similar numbers expected for 2023-24.

However, the report noted that affordable housebuilding “seems to have peaked” in 2023. Construction starts in the alternative sector (predominately affordable housing) fell by over a third in the 12 months to September 2024.

Separately, the G15 group of large London housing associations has warned that starts by its members were down by 76% in the capital in 2023-24, and down 37% outside London.

Providers face significant challenges to development, from construction cost inflation to higher finance costs and a slowdown in the wider housing market. Policy interventions such as the social rent cap have also constrained landlords’ financial capacity.

The report said that local need for affordable housing varied considerably across England, due to varying house prices and rents. The greatest shortfall in affordable housebuilding is in the South, where an additional 62,608 affordable homes are needed each year to meet need. London requires an uplift of 34,116 affordable homes a year, while the North requires 16,603 and the Midlands need just 15,442.

In London and much of the South, Savills recommended that housing need would be best met by prioritising social rented homes, as the biggest discount to market pricing is required in these areas. In other regions, the mix of tenures is likely to be more varied, with a greater range of intermediate and homeownership homes.

The report suggested that, to meet housing need, 76% of new affordable homes in London should be social rent, compared with 42% in the South, 19% in the Midlands and just 16% in the North.

Savills said a new Affordable Homes Programme from 2026 must contain expanded grant funding, while local authorities and metro mayors should have more power to decide whether affordable homes should be offered for rent or shared ownership, and at what level of discount. Further details of the new Affordable Homes Programme are not expected to be announced until the government’s Spending Review in spring 2025.

Steve Partridge, head of the affordable housing consultancy at Savills, said: “Unmet affordable housing needs are enormous, and they vary between and within regions. Future housing policy should be sufficiently flexible to recognise regional variations, with grant funding directed towards supporting new homes that will have the biggest impact on people’s housing challenges.

“Affordable homes of all tenures are required if we are to build the homes people need and solve the housing crisis. This is important to consider as the government creates a new housing strategy for England from spring 2025.”