Why is there a shortage of social housing?

Why Is There a Shortage of Social Housing?

A continued failure to build enough new homes and the ongoing impact of Right to Buy has led to social housing being sold off quicker than it can be replaced – with the sector now at crisis point according to many analysts.

New research has found that the number of homes available for social tenants in England has plummeted by more than 200,000 over the last decade. According to the Chartered Institute of Housing’s 2023 UK Housing Review, as reported in the Big Issue, there are now 218,000 fewer homes available for social tenants than in 2012. As such, councils and social housing providers up and down the country are under huge pressure to find decent, affordable homes for families in an era characterised by soaring house prices and unaffordable private rents.

Why Is There a Shortage of Social Housing?

The UK has a long history of housing shortages, dating back to the aftermath of World War II when much of the country’s housing stock was destroyed. 

Although the government built a significant amount of social housing in the post-war years, with 4.4 million new homes constructed over the following three and a half decades according to Shelter, this declined substantially in the 1980s, 90s and 2000s. 

By the year 2021-22, just 7,528 new social homes were built, compared to over 94,000 in 1980 as a direct result of shifting government policies and a lack of funding. It was reported late last year that forty councils in England built no new social housing at all in the last five years because of government cuts.

But it’s not just a lack of construction that has seen social housing waiting lists grow to an estimated 1.1 million people. Another key contributor to the social housing shortfall is the controversial Right to Buy scheme, which allows council tenants to buy their council home at a substantial discount. This has caused a massive problem as social housing has been sold off much faster than it can be replaced. 

According to analysis by the Local Government Association, around 100,000 homes are expected to be sold through Right to Buy by 2030 – with just 43,000 homes replaced.

Even for those who already live in social housing, a lack of funding has led to some tenants being forced to live in virtually uninhabitable conditions – something which has been widely reported in the media over the last few years.

On top of all this, the cost of housing generally, both to buy and to rent, has increased significantly in the UK in recent years. This has made it more difficult for people on low incomes to find suitable housing, including social housing.

What Can Be Done to Tackle the Social Housing Crisis?

With some families facing waiting lists of up to ten years to find a home, it’s clear that urgent action is needed.

Back in March 2020, the government announced a new £12.2bn Affordable Homes Programme with funding for social rent and supported housing, along with a commitment to new homes using modern methods of construction (MMC).

In addition, a further £1bn support package was announced to increase housing benefits so that local housing allowances will cover at least 30% of market rents in the UK. 

How Private Investors Can Help

Another solution to the social housing crisis comes from the private sector, with a scheme that allows councils and housing associations to acquire properties from large landlords on long 25 or 30 year index-linked leases for letting to social tenants. 

By acquiring blocks of property assets at scale, the scheme allows them to more quickly expand housing stock without the significant upfront investment that would be required to build new homes.

While criteria for the scheme is determined on an individual basis, social housing providers are typically looking for investors with a large portfolio of properties that will usually be required to be unencumbered. 

At Avora Capital, we have invested significantly in the social sector to provide investors with an opportunity to invest in social housing while helping families find a home.

For more information on this opportunity, please reach out to us using the contact form on this page.

Important note: The information provided in this article is general in nature and does not constitute personal financial advice. If you are unsure whether an investment is right for you, please seek professional advice. If you choose to invest, the value of your investment can both rise and fall so you may get back less than you put in.

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