Select committee inquiry
The Affordable Homes Programme since 2015
Closed
What the inquiry looked at
“The Department for Levelling Up, Housing and Communities (DLUHC) is responsible for the Affordable Homes Programme, intended to supply new affordable homes for people to own or rent. The programme is managed by Homes England outside of London and the Greater London Authority within London. Building on previous inquiries into Starter Homes , the regulation of private renting in England and levelling up and the UK’s housing crisis , the Committee will question senior DLUHC officials on how the Programme is delivering affordable housing and whether it is supporting wider government commitments, such as meeting housing needs and the net zero strategy. If you have evidence on : How the different phases of the programme are delivering new homes; Latest progress under the 2021-2026 programme, or Whether the programme aligns with other cross-government initiatives - please submit it here by Wednesday 14 September 2022.”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of Twenty-Ninth Report - The Affordable Homes Programme since 2015 ↗
The Department is unlikely to meet its housebuilding targets – falling short by 32,000 homes from its original 2016 and 2021 Programme targets. The 2021 Programme is struggling to meet its public target of ‘180,000 new homes should economic conditions allow’. It is currently forecasting to achieve 157,000 new homes against that target and there are considerable risks ahead, including construction inflation, of which the Department does not seem to have a grasp.
The Department estimates it will spend £20.7 billion between 2015 and 2032 to provide 363,000 new grant-funded affordable homes. Through the 2015 and 2016 Programmes, the Department forecasts that 206,000 new grant-funded homes will be built. There is a clear demand for more social homes for rent, a tenure which is the only real affordable option for many people. Homes for social rent provide the highest value for money, but it is a ministerial decision that half of homes to be built under the 2021 Programme are for ownership rather than rental. And yet the Department has not calculated potential savings from reducing the number of people in temporary accommodation which is costly to the taxpayer.
As well as the total of homes the Department has sub targets for different categories of housing which it is also struggling to meet. For the 2021 Programme, the Department is set to miss its targets to deliver 10% of homes in rural areas and may struggle to deliver 10% of homes as supported homes (where support, supervision or care is provided alongside).
The Department does not focus support to local authorities with the highest housing needs. It specifies an overall target for new homes that local authorities should see built in their area but does not use the Programme to help individual councils meet these targets. Local authorities lack strong powers to shape development in their local areas as they face penalties if they do not approve enough development proposals put forward by housing providers to meet their overall targets.
The Department has also not quantified potential savings by providing homes that could reduce local authorities’ spending on adult social care. On net-zero, the Department’s thinking was not advanced when it set up the 2021 Programme. It did not set any standards for homes to be net-zero, which may lead to expensive retrofitting occurring in the future. The Department fails to publish transparent data on where homes are built by local authority, or information about the type or size of homes, making it difficult to hold the Department to account.
What the government said
The government responded on 24 February 2023. The deadline was 7 February 2023.
Summary written by Accountability Index from the government's response.
The government says it agrees with most of the Committee's recommendations, disagrees with the recommendation to assess demand for social rent, and sets target implementation dates between Summer 2023 and Spring 2024.
- On a revised delivery plan for the 2021 programme, the government agrees. Following a review with the delivery agencies in Spring 2023, it "will report to the Committee with updated targets for programme delivery" (target date: Summer 2023).
- On social rent, the government "disagrees" with the recommendation to assess demand, saying it is for local authorities to assess need. It will confirm the programme's ability to deliver an "increased proportion" of social rent homes alongside its overall delivery targets.
- On local need, the government agrees to "consider additional ways to work with LAs", while stating that the programme already has several mechanisms to match delivery with local need. It will "seek to improve" granular benefit cost ratio assessments for successor programmes.
- On annual reporting, the government agrees to report to Parliament each year on programme delivery (target date: Summer 2023). It notes it does not currently hold all the data requested and has no quality measure, and "will confirm the information it will be able to share in its first report".
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 19 August 2022 to its close on 24 February 2023. The dashed mark is the deadline Parliament records for the government's response.
- Oral evidence 22 Sep 2022
- Report 7 Dec 2022
- Government response 24 Feb 2023
- Correspondence 12 Dec 2022
What it recommended 17 recommendations · 6 conclusions
2Housing providers do not always build in areas of higher demand.
Recommended (the committee's words)
Housing providers do not always build in areas of higher demand. There is a mismatch between where housing providers build compared to areas of highest need. The Department tells local authorities how many homes, not just affordable homes, they should deliver each year but does not use the Programme to target local authorities with the highest need for housing. Under strategic bidding, housing providers only state the region, not the local authority, in which they intend to build. Local authorities lack power to shape development in their local areas and have few powers to insist that housing providers build the right type of homes for local people. Recommendation: The Department should consider how it can work with local authorities to take greater account in the Programme of local need for affordable homes.
3We are concerned that the number of homes being built for social rent is not...
Recommended (the committee's words)
We are concerned that the number of homes being built for social rent is not enough to meet demand. There is huge demand for social rent homes which is the only real, affordable option for many people. Despite this, the Department has a target for just 33,550 homes for social rent under the 2021 programme. The Department has shown that homes built for social rent provide higher value for money than those built for ownership, but decisions around tenure are policy decisions made by ministers. The Department notes that building more homes for social rent within the existing funding envelope would lead to fewer homes overall. The Department is consulting on capping the increase in rent that housing providers can charge, which risks reducing the number of new homes built for rent in future. Recommendation: The Department should assess how much demand there is for social rent and set out how it will use the Programme to better meet this.
4The Department does not quantify potential savings in some areas, such as temporary accommodation, into...
Recommended (the committee's words)
The Department does not quantify potential savings in some areas, such as temporary accommodation, into the Programme. Surprisingly, the Department can identify, but not quantify, savings in areas such as temporary accommodation and adult social care that the public purse could make through the Programme. For example, from the estimated 8,500 households that could move out of temporary accommodation by 2026–27 through the 2021 programme. The Department needs 6 The Affordable Homes Programme since 2015 to improve its knowledge, so it can factor in these further savings when it allocates funding. The Department urgently needs to understand and quantify the savings that building more supported homes can make to local and central government spend on adult social care. It then needs to work harder with the Department of Health and Social Care to overcome the barriers to delivery, particularly in London. The Department does consider welfare savings such as savings to housing benefit and quantified these for the 2021 programme. Recommendation: Before the next iteration of the Programme, the Department should quantify the wider savings it could make to areas such as adult social care and temporary accommodation.
5New homes built under the Programme may need expensive retrofitting to meet net-zero standards in...
Recommended (the committee's words)
New homes built under the Programme may need expensive retrofitting to meet net-zero standards in the future. The Department did not set any standards around net-zero for the Programme and relies on housing providers to comply with relevant standards. This lack of foresight when setting up the 2021 programme means that housing providers may need to retrofit the homes they are currently building. The Department has not quantified this potential cost, and we are not convinced by its claim that introducing net-zero standards for the 2021 programme would necessarily have led to housing providers building fewer homes. Housing associations warn that retrofitting their existing stock will increase strain on their funding and resources, potentially limiting future delivery of housing. The Department says that the future homes standard should ensure that homes built after 2025 do not need to be retrofitted. Recommendation: The Department should clearly set out the impact of including net-zero requirements in the next iteration of the Programme.
6The Department does not publish satisfactory data on the type, tenure, size, quality, or location...
Recommended (the committee's words)
The Department does not publish satisfactory data on the type, tenure, size, quality, or location of homes built under the Programme. The Department does not, for example, publish data on the number of homes built, where they are built, what size they are or whether they are for ownership or rent. Furthermore, the Department does not routinely publish data on the Programme’s progress. The public, parliament and stakeholders understanding of the programme and its performance is hindered by the lack of meaningful data available in the public domain. The Department agreed to the notion of annual reporting and acknowledged that updating forecasts is useful and sensible. The Department could learn from High- Speed 2 where we called in 2020 for more transparency and open reporting from the Department of Transport, since when the Department for Transport has been providing six-monthly updates to Parliament which have been useful to all parties. Recommendation: The Department should report annually to Parliament on the performance of the Programme with detail on types, tenure, size, and quality of homes built by local authority area. The Affordable Homes Programme since 2015 7 1 Building new homes
1On the basis of a report by the Comptroller and Auditor General, we took evidence...
Concluded (the committee's words)
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Levelling Up, Housing & Communities (the Department) and Homes England about the Affordable Homes Programme.1
7The Department acknowledged that its section on risk within business case for the 2021 programme...
Recommended (the committee's words)
The Department acknowledged that its section on risk within business case for the 2021 programme may have been inadequate. We pressed the Department and Homes England over significant risks that may mean housing providers build fewer homes than forecast.11 The Department told us that it has a fixed budget for the Programme, and must deliver within it.12 The Department acknowledged that these significant risks could mean that housing providers build fewer homes. Significant risks include large increases 5 C&AG’s Report, para 1.13 6 Q 38 7 C&AG’s Report, para 2.3 8 Q 39 9 Q 40 10 C&AG’s Report, para 2.13 11 Qq 63–64, 69–76 12 Q 52 The Affordable Homes Programme since 2015 9 in the cost of materials and labour.13 The G15, a group of large housing associations in and around London, told us that its members, in some areas, report 15%-30% increases in material and labour costs.14 The Department told us it expects that larger providers will manage cost pressures by using contingency funds and other sources of funding to plug the gap.15 We questioned the Department and Homes England further about the labour force, skills shortages and delays with the planning system. Homes England confirmed that these ‘non-inflationary headwinds’ led to around a 20-week delay in completions last year. The Department told us that it has secured some extra funding for local planning departments, and that housing providers are using modern methods of construction a great deal, and looking to a different labour model as well as a different construction model.16 Where homes are built
8The Department specifies the overall number of homes (not just affordable homes) that local authorities...
Recommended (the committee's words)
The Department specifies the overall number of homes (not just affordable homes) that local authorities should build each year, through a calculation known as the ‘standard method’. Local authorities must follow this unless they have exceptional circumstances, and face penalties under the Housing Delivery Test, if they do not deliver against their target.17 The National Audit Office found there is not a strong match between areas of high housing need and where housing providers build under the Programme.18 Shelter raised concerns there is no objective measure of demand for housing, outside of the total number of new homes delivered across England.19
9We challenged the Department about whether housing providers build homes where they are needed most.
Recommended (the committee's words)
We challenged the Department about whether housing providers build homes where they are needed most. The Department does not allocate funding from the Programme based on its calculation of local housing need.20 Under strategic bidding, housing providers only state the region, not the local authority, in which they intend to build.21 The Department told us that local authorities state what mix of housing they would like when developing their local plans, and that housing providers follow these.22 The Department relies on housing providers to interact with local planning authorities and build homes where needed most, while ensuring value for money.23 We pushed the Department, noting that local authorities must meet overall targets for new homes, so are pressured to approve new homes, even if they do not meet the most pressing local need. The Department acknowledged that local authorities have to consider a trade-off between meeting local housing need, expressed by the total number of homes built, and their type.24
10The Department told us it tried to ‘strike a balance,’ between a centrally driven approach...
Recommended (the committee's words)
The Department told us it tried to ‘strike a balance,’ between a centrally driven approach to need versus a local approach. The Department explained that outside London, Homes England identifies whether proposals for new homes are acceptable value for money, guided by local land supply and policy. Housing providers must then build homes 13 Qq 63, 64 14 Written evidence submitted by G15 group, dated September 2022 15 Q 63 16 Qq 69, 72 17 C&AG’s Report, para 4.4 18 C&AG’s Report, para 21, Figure 13 19 Written evidence submitted by Shelter, dated September 2022 20 Qq 59–62 21 C&AG’s Report, para 4.3 22 Q 45 23 Q 52, 59, 60 24 Qq 45–46 10 The Affordable Homes Programme since 2015 within the timeframe of the Programme. The Department decides how much funding to allocate to London and the rest of England .25 For the 2021 Programme, the GLA will receive 35% of the Programme’s funding, down from a 50% split of funding for the 2016 programme. The National Audit Office found that the 2021 programme achieved a much higher benefit cost ratio in London compared to the rest of England.26 The Department commented that there are other policy considerations, aside from benefit cost ratios, that determine the split of funding between London and the rest of England.27 Homes for social rent
11We asked the Department about the number of homes designated for social rent, given social...
Concluded (the committee's words)
We asked the Department about the number of homes designated for social rent, given social rent is the most affordable for tenants; and the type of tenure most needed. We stressed the human impact that a lack of homes for social rent has. A lack of homes forces people to live in hostels or private accommodation in which they move around every few years; leading to children having to move school or travel long distances. The Department commented that it was acutely aware of housing pressures across the country and the associated impact on people, but it said that it must maximise what can be achieved from its available resources. It said that while the 2016 and 2021 programmes were very large capital investments, they alone are not sufficient to completely eliminate the housing pressures faced.28 As part of its 2021 business case, the Department modelled the economic benefits of the Programme compared to costs, by tenure and region.29 The Department told us that getting into the high 2s, 3s, 4s and 5s indicates a very strong benefit-cost ratio and an excellent use of public money.30 Compared to other housing tenures, social rent has the highest benefit cost ratio, at 3.4.31
12Homes England told us that, under current plans, it forecasts achieving 14,300 homes for social...
Recommended (the committee's words)
Homes England told us that, under current plans, it forecasts achieving 14,300 homes for social rent under the 2016 programme, exceeding its target of 12,500 homes. For the 2021 programme, the Department told us it set a sub-target of 33,500 homes for social rent, which it forecasts meeting.32 Shelter argued that the Department should refocus the Programme to deliver more homes for social rent.33 The Department said that ultimately decisions around tenure are for Ministers to make, and it is the role of officials to ensure ministers understand the trade-offs when setting targets. The Department told us that if it did focus the Programme entirely on social rent within a fixed budget, there would be fewer homes built.34
13We asked the Department about the potential impact of the proposed cap on social rents...
Concluded (the committee's words)
We asked the Department about the potential impact of the proposed cap on social rents that it is currently consulting on. The rent cap could prevent housing providers from increasing rents by CPI + 1%, as envisaged.35 Business LDN warn that the Government’s proposed rent cap will leave housing providers with a significant shortfall in their finances resulting in less building of new homes.36 The Department told us that it may introduce a 25 Q 59 26 C&AG’s Report, para 2.2, Figure 5 27 Q 79 28 Qq 47, 49–50, 52 29 C&AG’s Report Figure 5 30 Q 61 31 C&AG’s Report, Figure 5 32 Qq 47–48 33 Written evidence submitted by Shelter, dated September 2022 34 Qq 48, 52 35 C&AG’s Report, para 1.8 36 Written evidence submitted by Business LDN, dated September 20222 The Affordable Homes Programme since 2015 11 cap as tenants could otherwise face unaffordable increases. The Department accepts that lower forecast rent will have a knock-on impact on the Programme, potentially leading to housing providers building fewer homes for social rent. The Department told us it was considering how it could quantify the effect of the rent cap n its consultation response.37 37 Qq 65–68 12 The Affordable Homes Programme since 2015 2 Realising wider objectives Wider government savings
14The National Audit Office report found that the Programme could bring greater value to other...
Recommended (the committee's words)
The National Audit Office report found that the Programme could bring greater value to other parts of government, for example, in reducing the numbers of people in temporary accommodation. Local authority spend on homelessness has increased 50% in real-terms from 2015–16 to 2020–21.38 London Councils highlighted particular high levels of homelessness and use of temporary accommodation in London.39 We asked the Department whether it has done a cost-benefit analysis of reducing the numbers of people in temporary accommodation. The Department told us it estimates that the 2021 programme will take 8,500 households out of temporary accommodation, but could not quantify the associated financial savings.40
15The Department also commented that adult social care is another important example of the links...
Recommended (the committee's words)
The Department also commented that adult social care is another important example of the links and benefits that come from investing in housing, and that it is conducting research to quantify these savings.41 We asked the Department whether the 2021 programme was suitably aligned with wider government decisions on adult social care. The Department told us that the Department of Health and Social Care (DHSC) is now much more involved in the Programme. It is considering how it can work more effectively with the DHSC, for example through DHSC’s Care and Support Specialised Housing Fund. The Department recognised there are challenges over aligning on-going funding for care support services, and that it needs to further its understanding over how to deliver supported homes in London.42 The developer, McCarthy Stone, welcomed the announcement of the older people’s housing taskforce in the Levelling Up White Paper and would like to see 30,000 new specialist homes a year.43
16We pressed the Department as to why it does not consider these wider savings when...
Recommended (the committee's words)
We pressed the Department as to why it does not consider these wider savings when it allocates funding through the Programme. The Department told us it is working on improving its research base to do so but contended that the great majority of the financial benefit of the Programme would still accrue from land value uplift.44
17In contrast, the Department does consider welfare savings and quantified these in the 2021 programme...
Recommended (the committee's words)
In contrast, the Department does consider welfare savings and quantified these in the 2021 programme business case. The Department’s modelling showed that delivering new homes for social rent in London leads to significant savings in future housing benefit costs, compared to other regions. The Department forecast that over a 30-year and 60- year period respectively, 69% and 110% of the grant funding needed to deliver a home for social rent is repaid by forecast housing benefit savings.45 The Department noted that these savings are very long term, with the payback period measured in decades. The Department told us that it was an option to allocate more money to London, but this must be balanced with other policy considerations.46 38 C&AG’s Report, paras 22, 4.10 39 Written evidence submitted by London Councils, dated September 2022 40 Qq 40, 52 41 Q 53 42 Qq 82–84 43 Written evidence submitted by McCarthy Stone, dated September 2022 44 Q 81 45 C&AG’s Report, paras 22, 4.9 46 Qq 78–79 The Affordable Homes Programme since 2015 13 Net-zero standards
18The Department did not set out to use the Programme to advance the government’s net...
Concluded (the committee's words)
The Department did not set out to use the Programme to advance the government’s net zero objectives. The Department and Homes England did not include any specific targets around net-zero for the 2021 programme. Instead, housing providers must comply with existing and future environmental standards set out in the planning design guide and building standards.47 The Department said it expects that housing providers will follow the national design code. Homes England said that the overwhelming majority of homes under the 2016 programme will get an energy performance certificate of B, C or better.48
19The Department told us that it could have set higher standards from the outset for...
Recommended (the committee's words)
The Department told us that it could have set higher standards from the outset for net- zero, but that doing so would likely reduce the number of homes delivered. We challenged the Department on this assertion, because it had not modelled the extent to which it might have been reduced. The Department replied that it ‘was probably not exactly where it wanted to be,’ at the end of the 2021 programme but will be better in the future.49
20The National Audit Office found that neither the Department nor Homes England modelled the potential...
Concluded (the committee's words)
The National Audit Office found that neither the Department nor Homes England modelled the potential costs of needing to retrofit homes built under the 2021 programme, to meet net zero standards.50 The Department said that the future homes standard, when it is introduced from 2025, will mean that homes after this date will not need to be retrofitted.51 The G15 group told us that the future homes standard will add at least £5,000 to the cost of a new home and that existing social housing stock will require wholesale regeneration. The G15 group and Business London warn that retrofitting existing stock will increase strain on funding and resources, potentially limiting new supply.52 Transparent reporting of progress
21The Department does not expect to deliver the intended benefits of the 2021 programme, and...
Recommended (the committee's words)
The Department does not expect to deliver the intended benefits of the 2021 programme, and there are significant risks that could mean housing providers build fewer homes than forecast.53 We asked the Department about whether it would be revising its published targets, notably the 2021 programme target of “up to 180,000 should economic conditions allow” when in practice the Department was working to a forecast of 157,000. The Department explained that these were ambitions set out at the start of the Programme. We suggested that the Department could consider annual reporting to Parliament on progress. The Department told us it is content to update the Committee when it next produces a forecast. The Department agreed to the notion of annual reporting but will need to work on its precise form.54 In 2020 we reported on the High Speed 2 programme and made recommendations around the need for greater transparency and for regular reporting of progress to parliament. The Department for Transport accepted our recommendations and has since published very useful six-monthly update reports on progress, in the form of a written statement to Parliament.55 47 C&AG’s Report, para 23 48 Qq 54–55 49 Qq 55–56 50 C&AG’s Report, para 4.16 51 Q 57 52 Written evidence submitted by G15 group, dated September 2022 and written evidence submitted by Business LDN, dated September 2022 53 C&AG’s Report, paras 14,15 54 Qq 85–89 55 Public Accounts Committee, High Speed 2: Spring 2020 update, 3rd Report of Session 2019–21, HC 84, 17 May 2020; Treasury Minutes, Government responses to the Committee of Public Accounts, CP 270, July 2020. 14 The Affordable Homes Programme since 2015
22The Department said that it thought the National Audit Office recommendation to annually update forecasts...
Concluded (the committee's words)
The Department said that it thought the National Audit Office recommendation to annually update forecasts was useful and that it was a sensible thing for the Department to do.56 The NAO report had also noted that the Department accepted that it needed to make improvements around data and performance reporting, including that it needed to develop a consistent approach to forecasting housing starts, completions and spend by Homes England and the GLA, and improve its capability to stress-test and report these.57
23We commented that it would be good if the Department transparently published data on the...
Recommended (the committee's words)
We commented that it would be good if the Department transparently published data on the tenure, area, and size of new homes.58 The NAO report used internal data from the Department, Homes England, and the Greater London Authority with regards homes completed and spend.59 Rentplus UK raised concerns over the lack of information over how many shared owners buy their home outright, and the lack of official data on the incomes of those benefitting from shared ownership.60 Homes England said it is not aware of whether it tracks what percentage of a home shared owners purchase, but probably do so indirectly. Homes England acknowledged that it was too soon to know how shared ownership may be impacted by potential changes in the mortgage market.61 56 Q 87 57 C&AG’s Report, para 3.17 58 Q 91 59 C&AG’s Report, figures 16–19 60 Written evidence submitted by Rentplus, dated September 20221 61 Qq 91–95 The Affordable Homes Programme since 2015 15
Evidence
Oral evidence sessions 1
- 22 Sep 2022The Affordable Homes Programme since 20153 witnesses, listed belowparliament.uk ↗
Who gave evidence 3 witnesses
- Emran MianDirector General, Regeneration, Department for Levelling Up, Housing and Communities
- Jeremy PocklingtonPermanent Secretary, Ministry of Defence
- Peter DentonCEO, Homes England