The housing delivery debate is often discussed as the balance between building more social housing and more private market housing, either for sale or rent.
Olivia Harris is chief Executive of Dolphin Living
But for a growing number of households, neither of these options is affordable or accessible.
Andy Burnham has, quite rightly, placed housing at the centre of his government’s agenda and recognises the importance of affordable housing in supporting communities and economic growth.
Central to this is the notion of a council housing renaissance, with a renewed focus on building and operating affordable housing.
As the government continues to outline its agenda, there is a clear role for rental housing at a discount to market rent (DMR) to address the divide between social and market-rate housing, and to provide a complementary housing offer to support the workers who will drive Burnham’s economic vision of renewed industrial capacity and urban regeneration.
The next step is to turn that into a clear plan for delivery and outline how DMR can both deliver significant socioeconomic benefits and help address the viability challenge that is stymieing housing delivery.
DMR offers the opportunity to boost affordable housing supply, potentially at lower subsidy levels
The first action is to overcome scepticism about the need for DMR. While there should always be a push to increase social housing, there are households that do not qualify for such housing, yet cannot afford market rents, particularly in high-cost areas like London. For them, this gap can be a difficult one to bridge, especially in the context of rising rents, and it is where DMR can have a meaningful impact.
Research commissioned by Dolphin Living forecasts that the number of households priced out of London will grow by a third in the next 10 years to 1.2 million households. More social housing would reduce these numbers, but not clear them, based on current social housing supply projections.
New horizon: London needs more housing at discounts to market rents to address a lack of affordable homes
For workers who might otherwise come into contact with their local authority via homelessness as their market rent becomes unaffordable, DMR provides an affordable option before they reach crisis point, and an alternative for households in temporary accommodation, helping to reduce the overall temporary accommodation bill.
The second point is to recognise that local authorities alone cannot fulfil the need for more DMR, due to financial pressures and depleted development teams in many areas. This opens up private and third-sector providers’ potential role, alongside councils, in delivering a broader rental offer.
Improving viability
The third point is to highlight the role of DMR in improving viability and helping to unlock more affordable homes across London. Delivering social rent homes at scale requires significant subsidy and DMR offers the opportunity to boost affordable housing supply, potentially at lower subsidy levels, allowing more affordable homes to be provided overall. This is particularly important in a weak housing market, with many developments stalled due to slow market sales. Increasing the proportion of affordable homes would make schemes less dependent on market sales.
DMR can also help councils to use social housing stock more effectively, as DMR homes can be offered to households that are willing to give up a social tenancy by downsizing, upsizing or moving location, freeing up social homes.
Another reason DMR works well is because the homes are intended to be available for as long as households need subsidised rent. When a household’s circumstances change and they are earning enough to afford market rents, they are no longer eligible and can then move to their next home, freeing up affordable stock. This movement is important to create a housing ecosystem that works effectively.
Taking all these points together, it is evident why it is necessary that DMR receives appropriate funding and clear delivery frameworks so that it can play a significant part in the housing market.
As the new government focuses on increasing housing delivery, the success of housing policy should not only be measured by the number of homes delivered, but in the wider socioeconomic benefits that they bring beyond the construction period and developer returns.
In summary, DMR is not the whole missing answer to the housing crisis, but it has been a missing piece of the solution, and one that deserves more attention in the government’s new housing agenda.
Olivia Harris is chief Executive of Dolphin Living