Supply Problems Impacting Building of Affordable Homes

Rising building costs and materials shortage making some schemes unviable

Affordable homes already in short supply in London

London’s affordable housing market is facing “choppy waters” due to a combination of rising building supply costs, supply chain issues and cladding removal bills, the London Assembly has been told.

Speaking at City Hall on Tuesday morning (19 October), London’s Deputy Mayor for Housing Tom Copley told the housing committee that rising building costs along with shortages of materials and labour in the construction industry could “have a serious impact on scheme viability” moving forward.

The committee also heard that housing associations and other social landlords face “competing priorities” between maintaining existing buildings and developing new homes, with the cost of remediating fire safety defects and decarbonising homes reducing the capacity to build new ones.

The Mayor of London still has around 43,000 affordable homes left to start by 2023 under the Government’s 2016-2023 Affordable Homes Programme, while 35,000 new homes will be built with the 2021-2026 funding.

While the housing committee was told that commitment to these programmes remained “very strong”, they heard that issues currently facing the sector could have a “significant impact” into future housing programmes within five to 10 years.

Difficulties in securing construction materials such as glass, bricks and timber have led to some suppliers “cancelling deliveries”, according to Lucy Grove, head of external affairs at the National Housing Federation, while addressing building safety issues remains “extremely costly”.

In the last financial year, there were just over 9,000 affordable homes completed in London despite challenges caused by the Covid-19 pandemic. Newham saw the largest share of new affordable homes with 1,275 completions.

But Darren Levy, director of housing for the London Borough of Newham, has warned that the “future pipeline” of affordable housing is likely to feel the effects of the current issues.

Mr Levy said: “We’re seeing materials, labour all increasing in cost. [There are] supply chain issues. There’s a general lack of stability. The labour market is becoming more challenging, there are fewer skilled operators available, and they have to a certain extent got a number of suitors in the construction industry in London… I do think, going into the next five to 10 years, it will have a significant impact into that future pipeline.”

But housing associations also face financial challenges, as resources are diverted away from new developments to remediate fire safety issues on existing buildings.

Richard Hill, vice chair of the G15 group of housing associations within London, said: “I think it’s probably right to say that some of the G15 members particularly have looked to focus more on building safety and investment in existing properties and that has meant that development numbers have gone down. That is not a lack of commitment to meeting housing need, it’s certainly not a lack of commitment to hitting the targets that the mayor has set for this programme, but it is the reality of the overall operating environment.”

It is estimated that G15 housing associations face a £3.6 billion bill to fix safety issues over the next 15 years, which Mr Hill said could have been used to build around 72,000 new affordable homes.

Since 2015, just over 72,000 homes have been started under the 2016-2023 Affordable Homes Programme.

Labour Assembly Member Sem Moema, who sits on the housing committee, said: “How is it the case that we are in the position where we have to pick between new homes and existing homes? We still have a housing crisis to deal with. Surely it would have been the case, irrespective of whether Grenfell happened and we had to look back at the way in which homes were built, that there would have been plans to continue to build homes but also to manage existing homes.”

Despite the issues currently facing the affordable housing sector, Tom Copley told City Hall on Tuesday that he is “very confident” that the Mayor of London would meet his target to start 79,000 new homes in the next five years.

Joe Talora - Local Democracy Reporter

October 20, 2021