Measures to address housing crises are far from enough – and here’s why

It’s being reported today across a number of outlets that Rachel Reeves and the Treasury have agreed to spend £500 million more on new affordable homes.

The extra funding is topping up existing funding from the prior government’s five year Affordable Housing Programme, but will this even begin to touch an ever worsening crises across London and beyond?

Reports state it could fund 5,000 homes which is far from sufficient given homeless people in London alone have now reached 183,000 and homeless households are up from 63,443 to 68,807 in just a year.

Those households are being housed in extremely expensive hotels, B&Bs, HMOs and various other poor quality housing costing vast sums to government finances both local and national.

This week alone London Councils stated around £1.4 billion is now being spent annually for temporary housing with various councils moving closer to collapse. That’s up 68 per cent in just a year.

And what happens when many people move from temporary housing into private rentals owing to a lack of new social homes? Much of the cost then switches from councils towards central government adding to a national housing benefit bill now estimated to be as high as £30.5 billion a year according to the UK Housing Review 2024.

£500 million for new homes? It’s barely scratching the surface particular when the population is also rising sharply.

The budget for new homes from 2021-26 under the Affordable Housing Programme is £11.5 billion and proven to be far from sufficient. A rise of £500 million means little.

Problems abound

If we look at London severe problems appear in all corners. This past week council’s have been pleading with government for funding.

Let’s take Greenwich borough as an example where total homeless household total have risen to more than 2,000 from a quarter of that a few years ago.

The council are now block-booking entire hotels while selling public land to balance the books. Public land that could be used to alleviate the crises.

Lewisham this week stated it is now seeing 3,000 homeless households. The council state costs of “£85m a year, up from £65m last year (an increase of 30%).”

Newham are facing a bailout as finances are in a dire state mostly due to housing.

But this isn’t only a London problem. Dartford this week sees another council report showing severe pressures. Last month I covered a council meeting highlighting a starkly worsening picture as from December 2023 to July 2024 the number of households placed in all types of temporary accommodation increased by 24%”, with 474 households placed in temp/emergency housing in 2023/24.

Basildon just over the Thames? Direct costs to the council have risen from £592,000 in the 2021/22 financial year to £1.9m last year. A further 31% rise this year may cost £3m by the end of this year.

These costs are the tip of a far, far larger iceberg below adding to billions nationwide.

5,000 homes is not enough

One major issue is London council’s lacking funds to build social homes then seek cheaper areas outside the capital.

Then outside the capital councils struggle, and seek places further out. This domino effects spreads ever wider to areas far away already seeing their own chronic issues.

You then have councils like North Norfolk seeing spend on placing people in bed and breakfasts increase by 335% over the last five years.

This week it was revealed that costs in Derby are up 400 per cent in recent years. This is happening everywhere. North, south, east and west.

5,000 homes is not enough

In this context of a rapidly worsening picture for many in terms of poor quality housing and vastly rising costs, £500 million is a pittance. Penny change when housing benefit costs owing to low levels of available housing – private, social and council – are £30.5 billion annually and rising.

For 40 years the UK has built far fewer social homes by a substantial margin than was built the prior 40 years – and in particular a vast drop in council housebuilding that started under Thatcher, continued under Major, Blair, Brown then the coalition and beyond.

Meanwhile the Tories, Labour and Lib Dems now argue amongst themselves while all have been part of government’s for 40 years that have failed so severely.

While funds for building new council and social homes fell substantially since the 1980s, spend on housing benefit has risen greatly with billions heading now to hotel groups, B&B operators alongside House of Multiple Occupation and private landlords. A direct transfer of public funds to private interests.

That £30bn figure for housing benefit and £1.4bn cost in London for temporary housing exceeds levels spent on building new homes. In 10 years more than £200bn have gone towards housing benefit. Incredible sums and squandered funding that due to ideology didn’t go towards building new social and council dwellings.

For 35 years after 1945 in the UK both Labour and Tory fought to build ample truly affordable homes. For the past 40 they’ve appeared to compete (along with the Lib Dem coalition government) to build as few as possible. And it’s a situation that Reeves appears happy to continue if the £500 million figure is anything to go by. Failed orthodoxy will continue.

Can we afford it?

One response sometimes heard is can we afford to build new homes? Fiscal black hole and all that.

But of course that “black hole” is only getting worse through not building new homes. Can we afford not to build new homes at lower rents when spending £30.5 billion annually – and rising – on housing benefit (due to high private rents and a subsidy to private landlords) alongside £1.4bn in temporary housing costs in London alone?

The UK managed to substantially build affordable homes post-war when the country was truly on its knees and saw a vastly higher debt to GDP figure than today. And while it built big for 35 years, government debt to GDP levels decreased substantially.

Building new housing not only provides mass employment but stable, low cost housing in time helps across society. Expensive, insecure private renting (which now totals well above 4 million households and exceeds social renters in the UK) or living in a B&B is dismal for children’s education, employment and health. It sucks money from renters pockets that could be spent in the wider economy.

Right to Buy has also decimated stock without replacement. Changes there appear to take discounts back to levels up to 2011. Nothing too transformative and a level it was during the 2000s when housing pressures were already getting worse and housing benefit bills rising sharply.

5,000 new homes is not enough

Proposed rental reform from the new government will perhaps help in places but certainly not eliminate the wider crises. Here’s a depressing anecdote that symbolises all that’s wrong right now: Recently a family I know were given a Section 21 eviction notice. Private renters, both parents work, always paid rent on time. Two children. Two months to leave.

Rents have vastly increased in recent years so they’d have to pay four week’s higher rent and a five week deposit. Find a place then pay hundreds for a removal company.

Needless to say that was too much in two months. Around £4k was needed in a tight timespan. They’ve ended up in temporary housing 15 miles away. Nowhere near children’s schools. Not near work with a far longer commute and then childcare issues picking up children. Abysmal for the economy on multiple fronts.

That’s the reality and impacting ever more people. I’ve been there. Getting a credit check when I last moved as a private renter took two weeks. “Do you have a wage slip from 3 years ago at a past job?”. Sent that. Wait four days. “Tenancy agreement from three years ago”? Another three days wait. You get the gist. A removal company wasn’t ready for 10 days. That was all after finding a place that is halfway affordable – which is not easy.

It’s telling that business groups are also asking government for serious action. Having staff suddenly forced to move far from employment does nothing for productivity.

5,000 homes is not enough

For those hoping this government would be a step-change then what we’re hearing suggests not. £500 million is as good as tokenistic and will help but a fraction. It’s inadequate by a substantial margin. Well, that’s being kind. It’s inadequate by a vast, vast amount.

And that’s both financially and socially. What will it take for government to wake up? Decades of problems are compounding year on year. Ideology and orthodoxy rules – and one that’s clearly failed.

Except if you’re one of those specific interests doing very well out of this crises, it’s quid’s in. That money train isn’t ending soon.

For the rest of us – whether homeless, a private renter or a taxpayer – it doesn’t look like things are getting better soon.