By +Eric Jafari
The 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
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
Investment in Affordable Housing,Housing Development,Government Housing Scheme