The delivery of thousands of affordable homes by private housebuilders is being held up because social housing providers are unable to buy them, research has shown.
A study found 17,400 affordable homes in England and Wales with planning permission could not be built because housing associations did not have the financial capacity to bid for them.
The Home Builders Federation (HBF), which carried out the survey of 32 housebuilders, warned the situation was pushing Labour’s plan to build 1.5m homes by the end of the parliament “further from reach”, and would mean those most in need of housing would remain homeless.
Affordable housing providers can buy stock from private builders under section 106 agreements in planning rules, and accounted for 44% of the 62,0000 affordable homes completed last year.
However, in the past 12 months private housebuilders have found it increasingly difficult to off-load these homes, as housing associations have faced increased financial pressures.
Housing associations have instead prioritised investing in making existing homes safer, better quality and more energy efficient rather than buying and developing new ones. Private builders are required to include a proportion of affordable homes in new developments.
Housebuilders have said their inability to secure section 106 sales is holding up new developments, with those surveyed reporting that the start of 139 sites were delayed because of the issue.
The latest figures will raise concerns that Labour’s homes target will not be met. The deputy prime minister, Angela Rayner, has said the plan to build 1.5m homes include the “the biggest boost to social and affordable housing in a generation”.
Neil Jefferson, the chief executive of the HBF, said the lack of housing associations taking on the affordable housing meant small development sites were being prevented from starting and larger sites were being paused.
Andy Wilford, the head of land and planning at the Kent-based Esquire Developments, said the situation was affecting builders across the country and put the government’s target at “substantial risk”.
He said: “It is a problem that is affecting ‘oven ready’ sites and those that have already managed to navigate the complicated planning process.”
The National Housing Federation (NHF), which represents housing associations, said financial strains in the sector had affected investments.
The NHF estimates it will cost its members £6bn in total to ensure their buildings meet post-Grenfell building safety rules.
Hundreds of millions of pounds are also being spent to meet new rules brought in to improve social housing conditions after the death of Awaab Ishak, a two-year-old boy who died in 2020 after prolonged exposure to damp and mould in his social home in Rochdale.
Housing associations’ finances have also been squeezed by sub-inflation caps on the amount they can charge tenants.
Kate Henderson, the chief executive of the NHF, said: “A lack of financial capacity has led many housing associations deciding that buying homes delivered through section 106 is not a viable option compared to, for example, grant funded homes.”
She added that section 106 homes being offered by builders were often too expensive, while associations were also put off by the poor quality properties made available.
The HBF is now calling on the government to allow housing associations to spend state grants on buying section 106 homes, rather than just on the homes they construct themselves.
To tackle the problem, Homes England, the government’s housing delivery agency, last week launched a section 106 clearing service, which provides a platform for private builders to advertise details of uncontracted affordable homes they have planning permission for but can’t sell.
A Ministry of Housing, Communities and Local Government spokesperson said: “We know developers have reportedly faced issues selling section 106 affordable housing, and this government has taken decisive action to fix this.
“Working with Homes England, we have set up a new clearing service to help unlock delivery of these vital homes to those that need them most and we would encourage developers to engage with this.
“More widely, we have also taken steps to reform the planning system and accelerate progress as we seek to deliver 1.5 million homes as part of this government’s Plan for Change.”
