Financing affordable housing's reinvention

Affordable housing is not the only part of the solution to levelling up. Many experts think that it is the most important thing that can drive economic growth, help working families, and help the country reach its goal of being net zero.

The focus of an important webinar hosted by Legal & General on the same day that the UK hit record-high temperatures was to find new and creative ways to pay for the building of affordable housing.

Anne Ashworth, who used to be the editor of the Times' Bricks & Mortar section, opened the event by pointing out that the rising temperatures were a good reminder of how important it is to have good quality, sustainable homes.

"Britain needs homes that use less energy, are cool in the summer and warm in the winter, and are built in a way that helps us reach our net zero goals," she says.

"How can the local government, metro mayors, universities, businesses, and investors work together to build such housing?"

A high-level panel made up of top politicians, private investors, and delivery partners looked into this important question.

One thing that everyone on the panel quickly agreed on was how big of a challenge it is for the country to scale up delivery.

There are 1.4 million families waiting for social housing. These families need a great place to live at a price they can afford.

John Godfrey, who is in charge of Leveling Up at Legal & General, says that the needs of those 1.4 million households must never be forgotten in this debate.

"Leveling up is usually talked about in terms of places," he says.

"But there are also people involved. And I don't think the people in those 1.4 million households feel like they're getting a leg up right now. It's just the right thing to do."

But solving the problem of low-cost housing comes with a big price tag.

Simon Century, who is the Managing Director for Housing at Legal & General, gave some hard numbers to show how big the job is and how many resources are needed.

"Over the last 20 or 30 years, there have always been between 40,000 and 50,000 new affordable homes built in the UK," he says.

"But most people agree that we need three times as much. Each year, £34 billion in funding is needed just to fill the gap of an extra 100,000 people. This is a lot of money."

Clive Betts, who is a member of parliament and chairs the Select Committee on Levelling Up, Housing and Communities, is sure that part of the answer to how to pay for this must come from the central government.

"People of all political stripes now agree that we need to build more affordable housing," he says.

"We need a clear promise from the government that it will use grants to pay for social housing. The Social Housing Grant was the part of the public sector where austerity led to the biggest cuts in 2011. We should look into how to fix that."

So does Simon Century.

"You can't give people subsidised housing without giving them more money," he says straight out.

But for Century, the solution is more than just letting the government spend more.

He also says that the government has a big part to play in making long-term stability possible so that investors can help build affordable housing.

He says that the lack of certainty about a future rent settlement is one area where it's hard to get private sector investment going.

"Without long-term certainty, it's very hard to invest on a large scale," he says.

"It makes a huge difference to give investors a sense of stability."

Even though everyone knew how big the problem was, there was also optimism about new ways of investing that could speed up delivery.

There are already signs that the results can be life-changing when private money and public sector leadership work well together. Gareth Bradford, who is in charge of housing for the West Midlands Combined Authority (WMCA), has seen this effect in his own area. He thinks that the problem of affordable housing can't be solved by the government alone.

Instead, he talks about the need for new partnerships that take into account what each sector can do best.

"A public-private solution is needed," he insists.

"If you can get the government to be very clear about its goals and plans for an area, you can get the private capital that we know is there to flow."

Some places, like the West Midlands and Greater Manchester, are already doing well with this approach.

The kind of decentralised structures that Bradford talks about are giving people new chances to come up with new ways to run things at the local level.

John Godfrey says that even though progress has been made, the UK still has a long way to go if it wants to close the productivity gap, which is a key part of the levelling up agenda.

He complains that the government keeps trying to micromanage delivery partners closer to the ground. He says that the way the government gives out money now is like "handing children candy out of jars."

But the panel thinks that with strong local relationships and strong political leadership, there is now a new chance to change how affordable housing is provided in communities.

Finding ways to put some of the UK's £6 Trillion in pension funds into housing that meets social, economic, and environmental goals will be a key part of this.

"This is money for your retirement," says Simon Century.

"We want long-term returns that are relatively stable and tied to inflation. I can't think of a more natural way for them to get together."

John Godfrey says that this can not only help people who need a place to live, but it can also meet the changing needs of pension holders, who want to see investments that help society as a whole.

"It would be great if everyone who got a pension thought, 'Not only am I paying for my old age, but I'm also giving my kids a better chance to live somewhere nice when they need a home,'" he tells us.

This is the idea that everyone on the panel agreed on. More investment, more houses, and more growth in the economy. With a mix of government money, private money, and local leadership, that vision might finally become a reality.