The delivery of 17,400 affordable homes in England and Wales has been delayed as housing associations face significant financial shortfalls. A survey conducted by the Home Builders Federation (HBF) highlights a growing bottleneck, with 139 construction sites stalled and the government’s target of 1.5 million homes increasingly at risk.
Section 106 Agreements and Financial Constraints
Under Section 106 agreements, private developers must allocate a portion of new housing developments to affordable homes. This mechanism accounted for 44% of the 62,000 affordable homes completed last year.
In the past 12 months, housing associations have faced substantial financial pressures :
- £6 billion is required for post-Grenfell safety upgrades.
- Millions are being invested to meet enhanced social housing standards.
- Rent caps below inflation have squeezed revenues, limiting financial flexibility.
These challenges have forced housing associations to prioritise the safety and efficiency of existing properties over acquiring new stock.
Kate Henderson, Chief Executive of the National Housing Federation (NHF), noted : “A lack of financial capacity has led many housing associations deciding that buying homes delivered through Section 106 is not a viable option compared to, for example, grant-funded homes.” Many homes under Section 106 agreements are reportedly too expensive or fail to meet quality expectations.
Delays Affecting Housebuilders and Government Targets
The inability to sell affordable homes has disrupted private housebuilders, leading to delays in developments with secured planning permissions.
Neil Jefferson, Chief Executive of the HBF, stated: “Small development sites are being prevented from starting and larger sites are being paused.”
The delays put the Labour government’s 1.5 million homes pledge at risk. Deputy Prime Minister Angela Rayner previously described the plan as “the biggest boost to social and affordable housing in a generation.” However, mounting financial constraints threaten its success.
Section 106 Clearing Service Introduced
In response, Homes England, the government’s housing delivery agency, has launched a Section 106 clearing service. The platform allows developers to advertise unsold affordable homes, offering housing associations and other providers an opportunity to step in.
A Ministry of Housing, Communities and Local Government spokesperson said: “We know developers have reportedly faced issues selling Section 106 affordable housing, and this government has taken decisive action to fix this.”
The clearing service is part of wider reforms aimed at accelerating housing delivery and streamlining the planning system.
Calls for Additional Solutions
While the Section 106 clearing service provides temporary relief, industry leaders have called for further government intervention. The HBF proposes that housing associations be permitted to use state grants to purchase Section 106 homes, rather than restricting funding to homes they construct themselves.
Andy Wilford, Head of Land and Planning at Esquire Developments, said: “It is a problem that is affecting ‘oven-ready’ sites and those that have already managed to navigate the complicated planning process.”
Rising Costs and Resource Demands
The sector also faces rising construction costs, driven by increasing material and labour expenses. Housing associations must balance these challenges while addressing simultaneous demands to :
- Deliver energy-efficient homes to meet net-zero targets.
- Comply with updated post-Grenfell safety regulations.
- Improve existing housing conditions following cases such as the death of Awaab Ishak in 2020 due to prolonged mould exposure.
These pressures have strained resources, forcing associations to prioritise repairs and safety over acquiring new homes.
The delay of 17,400 affordable homes in England and Wales highlights the significant financial pressures facing housing associations, compounded by rising construction costs, safety upgrade requirements, and rent revenue constraints.
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