How a National Housing Conversion Fund could prevent a housing crash

Paul Hackett (pictured), secretary to the Affordable Housing Commission and director at the Smith Institute writes on why a National Housing Conversion Fund can help tackle the social housing shortage. 

The government cannot turn the housing market around overnight – the widely anticipated slump in demand will follow the economic cycle – but it can prevent the worst outcomes and protect the most vulnerable. Intervening now to protect tenants by buying up private rented homes and kickstarting development on stalled sites would be a sensible way forward. Such an approach has been used in past recessions, including by the Conservative government.

The fall-out from Covid has yet to feed through to lower house prices and cutbacks in new housing starts.  But when it does there will be much less social housing – in part because grant subsidies remain too low and many housing associations depend on profits from market sales and developer contributions in a buoyant market to cross-subsidise their social rented housing.

Pent up demand, aided by the cut in stamp duty, may continue to bolster some segments of the housing market, but the prospect of sharply rising unemployment, the phasing out of protection from evictions and landlords increasingly anxious about falling rental yields will create serious problems for the growing number of low income renters, especially in low demand areas.

A market contraction will put downward pressure on rents in some places. But it will also further expose the prevalence of poor quality private rented properties, and where yields are falling more private landlords may want to sell or re-let. Rather than ignore the problem private rented homes could be switched to social housing.

The Affordable Housing Commission is calling for a step change in the supply of genuinely affordable new homes, with grant rates returning at least to 2010 levels. This is urgently needed, not least to rebalance the housing system away from an over-reliance on a fractured private rented sector.

However, other interventions are also necessary. So, alongside an expanded affordable housing programme the Commission is calling for a National Housing Conversion Fund to bring empty and run-down properties back to life, stimulate activity on stalled sites by ‘flipping’ private homes to social and affordable housing, and assist landlords exiting the market, while addressing the acute shortage of homes at truly affordable rents.

The Commission’s report, ‘A National Housing Conversion Fund: buying properties to boost affordable housing supply’, proposes conversion grants for social landlords and community-led organisations, with funding continent on improving housing conditions and supporting the local economy.

The report’s headline analysis shows that a £1.3bn Fund could deliver 42,500 new social and affordable homes with the majority at social rents, as well as generate 9,300 new jobs. This would provide an immediate boost to the economy and generate tax revenues and benefit savings. Repairing PRS homes would also help upgrade the housing stock and reduce carbon emissions.

The government must think ahead and do all it can to head off a housing crash. A National Housing Conversion Fund should be part of that forward planning. It won’t on its own solve the affordable housing crisis. But it is a tried and tested way in a downturn of protecting tenants and preserving the supply of decent, affordable homes.

Photo Credit – Jarmoluk (Pixabay)