The cost of delivering a new affordable home has increased by 42% in London and the South East in less than 10 years, according to research from Network Homes.
That’s an increase of £85,000, meaning it now costs £285,000 to build each new affordable home in the region – adjusting for RPI inflation between 2010 and 2018, the average cost per home would be £247,210 today, so actual costs per home are 15.3% higher
Network conducted the research amid recent criticism that housing associations are not building enough social rented homes – even though surpluses are higher than they have ever been.
It used real examples from its grant-funded development programmes in 2008-11 and 2016-21 to assess the impact of changes in the housing association development finance model and the wider land and construction markets on the development of social rented homes.
Commenting on the findings, Network Homes chief executive Helen Evans said: “We greatly welcome the additional funding the government is putting into social rented housing and the improved grant rates on offer.
“But the reality is housing associations in London and the South East will generally still need to provide on average over £200,000 in loan finance, internal subsidies and cross-subsidy from sales to deliver each new social rented home.
“In the last 10 years we’ve seen people’s incomes squeezed by recession, austerity and more insecure work patterns, while there have been big increases in the price of land for housing and in construction costs.
“This has had a serious impact on what it costs to deliver a home and on what people can afford to pay for housing, exacerbating the affordability crisis from both ends. Government policies on housing grant have also changed substantially.
She added: “It’s too simplistic to suggest that housing associations can just turn on the social rents taps in these circumstances.
“We certainly want to make the most of new government and regional government policies to build more genuinely affordable homes, but we need to do so in a way which is financially responsible and maintains the financial health and stability of our organisations.
“We owe this to all the people already living in our existing homes.”