Learn why the property development industry is an important aspect to the affordable housing crisis

Affordable housing is fundamental to health and well-being of people and to the smooth functioning of economies. Over time it has become increasingly difficult for developers to gain planning permission for different sites around the UK due to a slowing in process from council job cuts and development feasibility becoming more challenging. In addition to this traditional lenders are increasingly reluctant to approve loans to developers, and this is having the biggest impact on small to medium (SME) property development companies.

It needs to be highlighted that developments always deliver affordable housing, where viable due to a clause in the section 106 affordable housing act. It is a planning legislation which requires developers to include a portion of affordable housing in their developments, which is then often sold to housing associations. It is the primary driver of affordable housing delivery, with 45% of housing association homes (14,437) developed using the mechanism in 2016/17, according to figures complied by the nation housing federation.

The importance’s of small developers in helping address the imbalance between housing demand and supply cannot be understated, and off course the push for affordable housing which is given to the government. Policy and initiatives designed to encourage SME developments to achieve their maximum output new build homes are needed. Doing so ensures the UK effectively uses its available resources, increasingly the housing stock and making the property market accessible for prospective home buyers.

What can the government do to narrow the housing-affordability gap?

Unlock the land supply is an important aspect to narrowing the affordable housing gap. Land is one of the largest property development expense and securing it at an appropriate location can be difficult. In the largest global cities, many parts of land remain unoccupied or underused. Some of them may belong to government and could be released for development or sold to buy land for affordable housing. Reducing construction costs would encourage developers to challenge bigger project, which is turn would lead to more affordable housing, so the obvious solution is to allow taller buildings.

Lowering financial costs for buyers and developers, will lead to improvements in underwriting would help make banks safely make more housing loans to lower income borrowers. Governments could help cut the financial costs of developers by making affordable housing projects less risky by guaranteeing buyers or tenants for finished units.