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Affordable Housing Investment Has Double the Expected Impact

By +Eric Jafari

Affordable Housing Investment Has Double The Expected ImpactThe government's investment in affordable housing has twice the impact originally expected, making the case for the coalition to pour more money into the sector. A new report has shown that at least twice as many homes are being built under the scheme than forecast under the Treasury's current economic model.

The government assumed that every pound invested in affordable homes would be worth 50p. This is an average "additionality" of just 50 per cent and works on the belief that affordable housing displaces housing of other tenures, so one out of every two homes funded with public money would have been built anyway by another developer. However, a study by Savills - commissioned by the g15 group - revealed that this simply isn't the case.

Keith Exford, chair of g15, explained: "Savills' independent research found that under current market conditions the government achieves at least an equal return on investment in affordable housing outside central London. In some cases, affordable housing development can actually provide a supply catalyst and take additionality beyond 100 per cent."

This means there is now a "strong case" for the Treasury to adjust its additionality model to ensure investment is accurately calculated and "fairly compared with returns from other possible targets". Under an adjusted model, it is expected that the argument for investing in affordable housing will become a convincing one for investors.

Savills found that affordable housing provisions provide an early cash flow benefit to developers and is capable of unlocking sites that otherwise would not have been developed. These sites can often be large, complex, expensive and risky. Many of these locations lie in London, which is in desperate need of affordable housing.

Under the government's scheme, housing associations are buying land in their own name, developing mixed tenure schemes and ensuring every pound invested generates a much higher return. Following dramatic cuts in funding for affordable housing, Mr Exford claims the report acts as a testament to how much more the coalition could deliver by investing further in scheme.

04 March 2013

Tags

Investment in Affordable Housing,Housing Development,Government Housing Scheme