Warning that escalating building costs could impact on 'affordable' housing supply

Analysis from the New Economics Foundation (NEF) claims that both areas’ supply of social and affordable homes could suffer massively as a result of labour and materials shortages, Covid-19, and Brexit.

When new housing developments are approved, local councils can require developers to make a percentage of their new-builds available at affordable prices or to pay money towards building some elsewhere.

But the NEF says that rising building costs are set to make it financially unviable for companies to do so without construction becoming unprofitable, while calling for the government to reform the planning system to address the problem.

The think tank predicts that both Newcastle and Northumberland would see social and affordable housing supply secured through the planning system, via the use of Section 106 legal agreements, completely eliminated as a result – as was the case in eight out of 10 councils it studied in the North and Midlands.

By contrast, areas like Bath, Cambridge, and Kensington and Chelsea are at no risk at all according to NEF’s study.

However, councils in both North East areas studied hit back at the warning – with civic centre officials in Newcastle insisting there was “no evidence” to support it.

Northumberland County Council said that it believed that rising build costs were “temporary”.

A spokesperson added: “The council is optimistic that affordable housing will continue to be delivered by the development industry on schemes already committed, and on new schemes.

“Indeed, during the current financial year 2021/22, around 70 affordable homes have been completed in Northumberland, while construction has started on a significant number of others.”

The Office for National Statistics data puts the costs of construction materials at 19.8% higher in July 2021 compared to July 2020.

A Newcastle City Council spokesperson said: “There is no evidence that supports the assertion that social and affordable housing would be eliminated through changes to the planning system – the changes are still unknown and there’s been a lot of speculation.

“However, we have expressed concerns to government about the proposals in the Planning White Paper (August 2020) about the potential impacts of the changes, removing the ability of councils to collect funds through Section 106 Agreements and removing their ability to set locally determined Community Infrastructure Levy (CIL) replacing it with a nationally set levy. This would not take account of local circumstances and prevent us from collecting the funds we need to support schemes.

“We accept that rising costs of materials and labour shortages will put pressure on delivery but as the research itself says this is a national issue and not specific to Newcastle or Northumberland.”

Rose Grayston, senior programme manager at NEF, said: “Communities in the North and Midlands could be left without the same tools as southern councils to prevent homelessness and sustain construction jobs, making it harder for these places to bounce back from the ravages of the pandemic. It’s critical that the government acts to reform the planning system in England to deliver the homes communities want and need by diversifying the housing supply.”