PwC: Affordable housing investment proposal could generate billions

By Rob Starr, Content Manager, Big4.com

In a new report, ‘The Numbers Game: Increasing housing supply and funding in hard times’, L&Q and PwC test four affordable housing investment scenarios in the search for a new and sustainable model post-2015 . One of these is a new Social Equity Fund generated from better use of housing association assets.

A Social Equity Fund of £5.6 billion would finance 42,500 affordable homes a year, enough to provide 25% of a 170,000 a year homes target. The Social Equity Fund would be created by raising rents for just 5% of better off, non-benefit dependent tenants, plus increased asset management flexibilities sanctioned by government. The capacity generated would be ring-fenced for new affordable housing development.
Rents would be kept to an average of 35% of net income for tenants to maintain affordability. Capital subsidies to support ‘safety net’ social rent homes for poorer and more vulnerable tenants would provide an important extra boost to overall affordable homes provision.

“A ‘golden triangle’ of factors determine whether enough new affordable homes get built by housing associations – funding availability, land supply with planning , and the flexibility of the operating environment,” says Richard Parker, partner, PwC. “If housing associations had more flexibility, our work suggests they could deliver across the broad rental market, including the private rented sector as Sir Adrian Montague’s report suggested, but more work is needed on planning and long term funding. ”

A much larger Social Equity Fund of up to £20 billion is possible by increasing rent across the board to a new affordable level – above the current average but below the Affordable Rent maximum. The scope to boost the Social Equity Fund further through greater asset management flexibilities, without impacting on government cost, is also strong.