Christopher Worrall, BSc Project Management for Construction student, shared his dissertation research with an innovation panel formed by Family Mosaic to evaluate future trends and options in supply and demand for housing.
Currently there is a growing gap between the supply and demand of housing. The consequence of this is two-fold: an increase in both for-sale and rental house prices results in an increase in the number of people who cannot afford to buy or rent in the open market and do not qualify for social housing. In addition, the high price of property prevents many of those in social housing from owning their own property – creating a log-jam in the social housing sector and further exacerbating the problem of supply.
A number of policies have been proposed to tackle this problem of supply and demand, and to open up a more diverse housing offer to those who can’t afford to buy. Most recently the Mayor’s Draft Housing Strategy proposed a two-tier approach for the next round of bidding, away from the current Affordable Rent product averaging 65% of market rent. It proposes a ‘capped’ rent of around 55% of market rent for the low-income households, and a ‘discounted’ rent closer to the 80% ceiling for those in employment.
Panel member and housing expert, Peter Redman, indicated several possible outcomes of the Mayor’s 10-year plan on specific tenures and other major shifts in stock type that could occur. The most striking outcome was that a supply of capped low rent housing would not keep pace with the decline in London’s social rented housing stock. In effect, the programme will deliver more stock for those on moderate to high incomes, but not for London’s lowest income households unless those on low incomes take up subsidised higher rent dwellings, making the tenants more dependent on welfare benefits; or London’s growth in households skews towards those on higher average incomes – neither a desirable solution to the intermediate problem.
Student, Chris Worrall discussed his research on the US model of affordable housing delivery with the Innovation Panel. Based on a unique double-tax break, the Low-Income Housing Tax Credit (LIHTC) has potential to increase the number of affordable housing stock, particularly for those on less than average incomes. The LIHTC is a successful public-private partnership mechanism that has drawn billions of dollars of private sector investment into the affordable housing sector in the US and helped deliver 2.5m homes since 1986. Over 40% of all LIHTC dwellings house those on ‘Extremely Low-Incomes’.
In light of this success in the US, there is now a growing appetite in the UK for adopting such a scheme, especially since the government has significantly cut grant funding for private registered providers, with those in the non-profit sector being hardest hit. The catalyst LIHTC has provided the US in attracting private sector equity throughout the onset of the recession has been remarkable. The need to make the financial viability of affordable housing schemes more feasible in the UK is stark, and adopting such an approach could contribute much of the needed affordable housing to rent across London and the UK.
For more details email: christopher.worrall.11@ucl.ac.uk