​Targeted funding and the right tenure mix: how to ensure the NPPF can deliver the housing we need

The housing sector in England is not short of challenges at present, whether it is the soaring use of temporary accommodation, the battle against rising energy bills or the lack of appropriate homes for older people. Everyone who works in and around the sector supports the call for a massive increase in the delivery of social and affordable housing.

The updated National Planning Policy Framework has just been published and a new housing strategy for England is due to be unveiled in the Spring, alongside the spending review. The primary aim is the delivery of the government’s election manifesto pledge of building 1.5 million homes in the next five years. Hopes are also high that the Housing Strategy will set out a strategic policy and financial framework to support housing associations and local authorities to address the pressures they face.

A key question, therefore, is: what is the need for social and affordable housing at a local level in England and what changes in supply are necessary to meet this need?

Recent Savills research has analysed housing need against supply at the local authority level. We found that the amount of newly completed developments reached an eight-year high in the 12 months to March 2023, with around 58,000 affordable homes delivered, although the trend is now downwards. Due to a variety of barriers (development cost inflation being the most prevalent), the landscape for the development of affordable homes over the next few years looks nowhere near as strong as previously.

Our research found that, even at 58,000 affordable homes, this would fall well short of the affordable housing need identified by the government’s own methodology.

This finds that around 373,000 homes per year are needed across all English local authorities each year. We have calculated that around 187,000 of these need to be affordable homes – both figures suggesting a need for a massive increase in development.

Regional housing requirements

One of our key findings is that the need for affordable housing varies across the country. When setting out policies, funding should be targeted to the regions that need it most where households in need can most benefit.

Under the new NPPF and as part of the delivery of the national housing strategy, discussions will need to take place within local authorities and combined authority (mayoral) areas to develop plans for where homes are built and the balance of affordable tenures that are needed. More social rented housing is needed everywhere, however a ‘one size fits all’ approach to tenure delivery will not address the varying issues facing different markets.

Many local authority areas in London and the South are seeing less than 20% of the required affordable housing built to meet our estimate of need. This is mainly concentrated around London, the Home Counties and the south coast, where housing tends to be more expensive. Many rural hotspots are also particularly falling short on delivery, such as parts of the South West and East Anglia. Similarly, many local authority areas in the North and Midlands would need to increase development substantially to meet the current need, similar to the South.

Tailoring development by area

Our research shows that in London and across the South, housing needs would be best met by providing social rented homes, as the biggest discount to market pricing is required in these areas. Additional tenures would still be needed as well as social rented supply, especially when supporting scheme viability and to meet the needs of other households that may be able to access housing at a higher cost than social renting but not at the full market – key workers are a particular example.

In other areas, we anticipate the mix of tenures will be more varied, with a larger scope for intermediate and affordable home ownership tenures as part of the total affordable housing supply.

>> See also: National Planning Policy Framework at a glance

>> See also: NPPF: Government drops 50% affordable housing requirement for grey belt sites

For example, the North of the England would benefit most from an increase of all affordable home ownership tenures, alongside making more homes available for social rent. Similar needs are facing communities within the Midlands.

Regions already meeting delivery

In some individual local authority areas, housing delivery is within 25% of estimated need, and in some cases, need is already being met. We found there were seven local authority areas where current average delivery matches our estimated numbers.

Usually, these are specific pockets of higher development activity. Areas such as Stratford-on-Avon and Ribble Valley have greater amounts of affordable housing development. This is due to larger levels of overall housebuilding, with Section 106 delivery increasing the amount of affordable housing supply. Areas such as these will be picking up the overspill of need from strained urban markets, such as Birmingham.

Looking to 2025 and beyond

The government’s Housing Strategy for England will focus on the aim to deliver 1.5 million homes during this parliament. The NPPF is an important building block, but for these homes to make an impact on addressing the housing crisis, it is clear that a significant proportion need to be affordable tenures.

More social rented housing is needed everywhere, but this needs to be accompanied by a mix of other affordable tenures to match need with supply across all areas of England.

Steve Partridge is head of Savills Affordable Housing Consultancy and Lydia McLaren is Associate Director in Savills Research.