LGA - Potential £320 billion windfall from new generation of high quality social housing

30 Oct 2018 09:28 AM

Councils could generate £320 billion into the country’s economy over the next 50 years if they were able to build a “new generation” of high-quality council housing, the Local Government Association has said.

The analysis, which looks at four different future economic scenarios, demonstrates how new social housing will deliver huge gains to tax payers. The worst-case economic scenario still results in a £102 billion return.

Unlike investments in most other public services and infrastructure, investment in social housing generates returned income through rents, while also creating savings in the huge annual housing benefit bill.

Investment would also create significant wider economic gains such as increased productivity, jobs, and increased tax returns, as such a large proportion of construction revenues remain in the domestic economy.

Town hall leaders want to see a national ambition to work towards delivering a new generation of 100,000 high quality social homes every year.  

Research for the LGA and partners by Capital Economics has found:

Last month, the Prime Minister responded to calls from the LGA to remove the borrowing cap which has prevented councils from building at scale. The LGA is urging the Chancellor to fulfil that pledge and set out plans for the borrowing cap to be removed entirely as part of the Budget.

The LGA is also launching a report showcasing how councils are building new homes. It reveals councils’ focus on high standards, supporting local small builders, creating jobs and training for local people, and building on sites and for people that others are not.

Lord Porter, Chairman of the Local Government Association, said:

“The LGA had been in conversations with the Chancellor Philip Hammond, Housing Secretary James Brokenshire, and the housing team at No 10, to secure the lifting of the housing borrowing cap and it was great to finally get it over the line last month.

“There was rightly universal acclaim of the decision by Theresa May to lift the cap which has been severely hampering the ability of councils to play a leading role in tackling our chronic housing shortage – it is the right thing to do, and everybody knows it.

“The last time we built enough homes councils built 40 per cent of them. We need to get back to those levels if we’re to tackle our housing crisis, which is why we need to look towards delivering a new generation of 100,000 high quality social homes a year.

“The gains are enormous. Investments in social housing could generate returns up to £320 billion over 50 years, helping countless families along the way by creating local jobs and building homes people need and can afford.

“Councils have been quietly getting on with building some outstanding new homes, they now need to be free to deliver them at scale. This is because the future of council housing will deliver high quality and innovative design, support local builders, create local jobs and training, and build where the market will not.

Case studies

Birmingham City Council is now the most productive house builder in the city. It is driven by the motivation to increase the number of homes, to improve the quality and design of housing, to regenerate run down areas. It aims to build approximately 1,200 council homes between 2018 and 2021 using nearly £140 million from its HRA. If the borrowing cap was lifted, the council could build a further 18,000 homes by 2031.

East Riding of Yorkshire Council is committed to building more homes needed locally, and in particular to meet the needs of the most vulnerable and to support independent living, and to ensure there are enough good quality new homes. It currently aims to develop 100 new homes each year but is ambitious for further flexibilities to increase supply.

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Notes to editors

  • The research papers by Capital Economics, commissioned by the LGA SHOUT, the National Federation of ALMOs and ARCH, are available upon request.
  • The £320 billion figure is composed of savings from housing benefit, money generated from rental income and investment incurring in the economy as a result of new housebuilding. This was calculated in a new report by Capital Economics on the impact of Brexit on housebuilding, which is available on request.
  • Read LGA’s report on innovations in council housing, setting out specific case studies from across the country.
  • Every £1 invested in a new social home generates £2.84 in the wider economy, according to the  ‘case for social housing report’, which quotes the UK Contractors Group report. Every new social home would generate a saving of £780 per year in Housing Benefit, according to a recent setting social rents report, with the figure being worked out as the difference between private and social rent over a year.

Innovation in council housebuilding

We are pleased, through this new report, to share examples of councils that are working to deliver homes that communities need now and into the future. The case studies of council housebuilding show how councils are opening up opportunities to build good quality homes that are designed to be accessible, affordable and energy efficient.

Read now