There is substantial need for sub-market housing across England, but the mix of solutions varies across the country, by region and by local market. Different levels of discount are required in different places, and there is a continued role for homeownership support. Policy choices around tenure and funding that reflect this could significantly improve the impact of a constrained grant funding pot.

We have updated our 2017 analysis to look at the scale and nature of sub-market housing need. The findings are stark. With house prices, mortgage rates and market rents all now higher than in 2017, housing affordability has been stretched further and further. The Government’s recently proposed changes to the standard method for housing need adds up to c.373,000 homes per year across all English local authorities. We estimate that, based on this figure, around 187,000 homes need to be sub-market homes. A significant step change in delivery is needed but as identified in 2017, this need varies greatly across the country. It is clear that a ‘one size fits all’ housing policy fails to address the variety of issues faced in different markets.

Our estimate of sub-market housing need is based on calculating the number of households currently excluded from the housing market, in addition to maintaining the current provision of affordable housing. The estimate aims to provide for all emerging households priced out of the current housing market. We then translated this total need into a proportion of annual housing delivery (assuming delivery at c.373,000 homes per year, the proposed Government policy aim).

Meeting local housing needs 

Looking at need at a local level reveals a varied picture across England. Many parts of London and the South currently build less than 20% of the sub-market housing required to meet our estimate of need. Much of this is concentrated around London, the Home Counties and the south coast, traditionally very expensive and supply constrained markets. There are also notable rural hotspots where delivery is well short of need, in parts of the South West and East Anglia. As part of our response to proposed reforms of the planning system, we noted that in many places the English planning system assumes uniform standards or district-level policy that fails to capture the important nuances around actual economic geographies.

In the North and Midlands, there are many local authorities where delivery would need to increase significantly to meet need, on a similar scale to the South. But there are some local authorities in these regions which are delivering within 25% of their estimated need, or in fact are meeting it already – we found that there were seven local authorities where current average delivery meets our estimated need figures.

These are often isolated pockets of higher development activity. For example, districts such as Stratford-on-Avon and Ribble Valley have higher levels of affordable housing delivery in part due to greater volumes of overall housebuilding generally (with S106 delivery enabling increased affordable housing delivery in turn). These areas will be picking up the overspill of demand from constrained urban markets such as Birmingham.

_{Read the articles within Spotlight: Beyond a one size fits all housing policy below.}