The affordability conundrum

Buying a home in the South East is expensive for first-time buyers. It’s even tougher in Brighton, with homes out of reach for many workers. The table below illustrates just how difficult getting on the ladder can be. This takes different levels of worker pay in Brighton and Hove with general assumptions around loan to income values and the deposit needed.

A single income is not enough to afford the vast majority of homes on the market, with the median worker only being able to afford 3.1% of the sales from the last year. A dual-income household fares better, but even two median workers can only afford 41% of the sales from the last year. This also assumes a 25% deposit which works out at more than £80,000, or 16 months’ worth of gross pay. That kind of equity is likely to be unattainable to many without saving for many years or without the help of the Bank of Mum and Dad.

Supplying the market

In recent years, Brighton simply hasn’t built enough housing. Increasing the delivery of new homes can help get more people onto the market if they are targeted correctly. Over the past three years, fewer than 400 new homes have been delivered each year on average across Brighton & Hove. Looking forward, the annual requirement for new delivery is 1,230 new homes. It is currently hard to envisage delivery getting anywhere near that level.

In the last decade, the sale of new homes in Brighton has made up no more than 5% of total sales per year. Brighton has seen very low levels of delivery, with net new supply making up just 0.3% of existing stock on average over the past three years. For context, new homes have been delivered at three times that rate nationally, with net new supply as a proportion of existing stock at 0.9%.

There are mitigating factors which impede development. Land in Brighton and Hove is highly constrained, with the South Downs National Park to the north and the English Channel to the south. If Brighton is to increase its housing delivery, new build schemes will have to be largely urban in-fill and dense in character. In the words of 1980s pop sensation Yazz, the only way is up.

While overall delivery in the city is low, Brighton and Hove has delivered a higher proportion of affordable stock than both the South East and England. Affordable supply over the last seven years, comprising Social Rent, Affordable Rent, Affordable Home Ownership and other forms of sub-market housing, made up around 13% of annual delivery in the South East and 14% nationally on average. Brighton and Hove, by contrast, delivered 26% of its total delivery as affordable over the same period. In absolute terms, however, this amounts to just 114 affordable homes per annum.

It will be important for the city to sustain this proportion of affordable delivery as it attempts to boost development overall. However, it bears emphasising that people cannot live in percentages. Meeting Brighton’s need for affordable homes means more homes, not just for a greater proportion of them to be affordable.

Boosting Delivery

One way in which the development of homes can increase with absorption accelerated is through Build to Rent. In less affordable markets such as Brighton, there is likely to be huge demand for professionally managed rental homes with good amenities. Developers and investors alike look set to meet that demand with the likes of First Base, Legal and General, Watkin Jones and Moda all with Build to Rent developments in the pipeline.

On the affordable housing front, like many other local authorities, Brighton and Hove Council is leading the way through its own development vehicle: Homes for Brighton & Hove. It is doing this through a joint venture with housing association Hyde Group. The partnership will look to deliver schemes with 100% affordable housing, equally split between rent and shared ownership. The latter will be key in improving access to home ownership, especially to those with lower incomes and smaller deposits.

Homes for Brighton & Hove has two developments in the pipeline with planning consent having been granted earlier in 2020. The two schemes combined will deliver 346 homes, which would go some way to boosting delivery in the city. Indeed, those two schemes would produce almost as many homes as were delivered in total in three of the last seven years. The partnership aims to deliver 1,000 new homes over five years, targeted at local people.

This will help boost supply and bring delivery closer in line with the national average, but more progress is needed. As of March 2019, there were over 8,600 households on Brighton & Hove’s housing waiting list. The Homes for Brighton & Hove partnership is a good start, but Brighton needs to find many more affordable homes to address this level of housing need.

Brighton will continue to be a desirable place to call home. However, without an uptick in new supply across various price points, the city will continue to be unaffordable for many resulting in a lack of housing choice. That lack of housing choice will also ultimately impact on the commercial success of the city. With decreased mobility due to lack of affordable housing, employers will be less able to attract talent and ultimately economic growth will suffer as a consequence.

View all of our latest Brighton Cross Sector research here.