The coalition government’s “affordable homes” programme has already been declared a great success by the Housing Minister Grant Shapps; somewhat prematurely it has to be said. It will, we are told, deliver 170,000 “affordable homes” by 201215. So the coalition government is responsible for delivering 170,000 new homes? No, and not just because they aren’t built yet either. As the NAO reports

● 72,000 of these homes are part of the previous government’s “National Affordable Homes Programme”.

● 2,500 are not new homes but part of the ‘mortgage rescue scheme’ allowing home owners in difficulties to stay in their homes.

● 15,500 of them are “homelessness change programme”, “traveller pitch funding”, “empty homes” and “support to develop and improve hostel accommodation”.

Strictly speaking the coalition government’s “affordable home” element is 80,000, which includes “affordable” rent (up to 80% of market rate) as well as “affordable home ownership”. Of the 80,000 target 62,954 will be “affordable rent” and 17,046 “affordable home ownership”. London will get more than a quarter of these and more than a third of the money available.

The “affordable home ownership” suffers from a somewhat broad definition. It includes part-buy, part-rent. So, for instance, the Observer recently disclosed that the “affordable homes” programme in London included a 25% share of a £705,000 flat. The combined mortgage and rent for this would be £2,322 a month. A BBC radio programme in December of last year showed that “affordable homes” could in fact mean a home neither affordable nor new .

The original target for “affordable homes” by the coalition government was 56,000. On this basis the NAO report has declared the programme to be a success, being oversubscribed. However, the coalition government’s programme represented a 60% reduction in the funding of the previous government’s “National Affordable Homes rogramme” (£4.5 billion over the four years starting 2011-2012, compared with £8.4 billion over the three preceding years ). The funding for each home is only £20,000 compared to £60,000 under the NAHP.

The providers have to spend £12 billion of which the government funding is only £1.8 billion, so they will have to borrow around £6 billion according to NAO. The remaining £4 billion comes from “additional sources” including the higher than social rents and converting existing properties from social rent to affordable rent and property sales “principally through shared ownership”. Although we don’t know the figures from the NAO report it’s clear from this that the programme will lead to the loss of social rent homes.

Since the new homes are in large part funded by higher rents from tenants, one of the consequences of this is that there will be an increase in housing benefit that the government will have to pay out over 30 years to the tune of £1.4 billion. HB would, of course, be lower for ‘social rent homes’.


The NAO report raises a number of potential problems and risks associated with the programme. Firstly, 56% of the programme (45,000 homes) will not take place until the last year of 4. The NAO says:

“Some 51 per cent of schemes are indicative, because they have not been identified, are not sufficiently progressed, or do not yet have planning permission. However schemes that are planned for late delivery are more likely to be provisional and are therefore inherently more uncertain. Providers that have indicative sites are still expected to deliver on their offers, so if these fall through other sites will need to be found within the same time frame.”

There are a number of other risks that the providers face.

“Once contracts have been signed, the key risks to delivery are borne by providers, as the contracts they have with the (Homes & Communities) Agency commit them to complete at a fixed price and by 31 March 2015. The Agency’s contracts with providers state that funding can be reduced if delivery targets are not met. If providers fail to deliver, and if the Agency does not consider the reviewed plan to be achievable, the Agency may reduce the number of new homes agreed in the contract.”

The NAO says that “The Programme increases providers’ financial exposure. The sector faces challenges in getting bank financing for capital investment, and the cost of supporting both existing and future debt.” Moreover some of the providers have had to offer additional collateral, generally in the form of assets, to lender because of using financial derivatives to reduce their interest rate risk. Use of derivatives, of course, is a very risky strategy.

As for the “affordable rent”, some of the providers, particularly in London, are doubtful that that they will be able to charge the rents at levels they originally agreed. The average rent will be 75% of market levels.

A miserable substitute for tackling the housing crisis

The coalition government’s “affordable homes” programme was dreamed up as an alternative to Council house building. It was designed to pass on much of the cost of new homes to tenants by way of rents above the ‘social rent’ level. The programme is a miserable substitute for tackling the housing crisis. Indeed the government programme is worsening the crisis. The introduction of the enhanced ‘right to buy’ will reduce the number of available Council homes for the 1.8 million households on the waiting lists, despite the promise of ‘one for one replacement.’ Private rented accommodation is progressively becoming unaffordable for more people, hence the increase in the number of private renters on HB – more than 500,000 in just over three years – and younger people, often weighed down with debt from their education, cannot afford to take out a mortgage.

According to the government’s own estimate there are 232,000 additional households emerging every year, but the level of building is barely half of that required. Yet Grant Shapps is not prepared to let mere facts get in the way of his threadbare propaganda . The coalition government has its own version of ‘newspeak’ in which unaffordable homes become “affordable homes” and “success” means a decline in ‘social rent’ homes and the overall number of homes built.