Innovating assets - The UK Experience by Malcolm Morley*
Housing demand far outstrips its supply. This imbalance increases the price of housing and often reduces the ability of local people to access it to meet their needs. Therefore, councils in the United Kingdom have to encourage the supply of affordable housing and help to secure access to it for local people in housing need.
The term 'affordable housing' is a misnomer as in an open market all housing is affordable if someone is able to buy it. The price and therefore affordability is determined by the market. The term 'affordable housing' in Council speak relates to subsidised housing.
Two types of subsidy are provided. Subsidising the cost of housing to rent or subsidising the price of the housing to buy. Subsidising individuals to enable them to buy in the open market is also used but this is different to providing 'affordable housing'.
The amount of public subsidy for providing 'affordable housing' has reduced significantly and this has meant that it has become increasingly difficult particularly to achieve 'affordable housing' for rent.
Even with low interest rates, the cost of land and building has meant that the rents required to cover the cost of providing the housing are too high for local people to afford.
Shared equity housing has become a favoured means of providing access to 'affordable housing'.
Shared equity housing is where individuals are able to buy a percentage of the equity of the house with the remainder being retained by a housing provider.
Additional amounts of equity are capable of being purchased at the prevailing market rates when the individual is able to do so.
The housing provider charges a rent to the individual to cover the costs of the equity it retains.
In the past the providing a public subsidy in the form of discounted or free Council land along with housing grant for developments meant that 'affordable housing' in significant numbers was achievable.
It has become increasingly difficult to sustain this approach with the reduced funding available.
One of the ways that is increasingly being explored to tackle these challenges is the use of asset backed development vehicles.
These are where a council creates a joint venture for developments with private sector developers using its land to build housing for sale. Councils contribute the land for development and the developer contributes the cost of building the housing.
As an equity partner in the joint venture, the Council can decide to take its profit from the development in the form of 'affordable housing' rather than money. The Council's land and development profit is effectively turned into a subsidy for the provision of the 'affordable housing'.
How to ensure that access to the 'affordable housing' provided is retained in perpetuity for local people rather than just the first buyer benefitting is a key issue. Council assets can, however, be a catalyst for addressing community needs. A radical look at Council assets along with innovative thinking can create new ways of working and meet the needs of local people.
*Malcolm Morley is Chief Executive of Harlow District Council and can be contacted via the Editor, email email@example.com The views expressed in this article are not necessarily those of his employer.