Why the current affordable housing model is no longer working

Undisputedly,  Britain is experiencing a profound and protracted crisis in affordable housing delivery, especially in London. But was Milton Friedman correct: will the crisis result in real change, and will existing ideas meet the challenge? I am optimistic the crisis can be resolved, but we must look at new ideas rather than double down on those ideas that led us into crisis.

First, how much of a crisis?

2024/25 saw the highest affordable housing delivery (64,762 additional affordable homes) in the UK since 2014/15, but fell well short of need, estimated to be over 180,000 affordable homes pa.

More concerningly, the likelihood of meeting need, or even repeating the woefully under-par 2024/25 figure is very slim. Only 45,418 affordable homes were started in 2024/25 and Social Rent accounted for just 19% of affordable homes.

The New London Plan is expected to deliver 88,000 new homes each year, representing 22,000 new homes per quarter. However, in the second quarter of 2025, the NHBC revealed that just 904 new homes were registered in London: a staggering 21,096 fewer and down 59% from the same period the previous year.

Almost two years after the government’s manifesto pledge to ‘deliver the biggest increase in social and affordable housebuilding in a generation’ and ‘prioritise the building of new social rented homes’, it is time to ditch the current model for delivering affordable housing which it is clear to see isn’t working.

There are many reasons why the delivery of affordable homes has been so poor, but the underlying issue is that affordable housing delivery has largely been outsourced to the private sector through Section 106 contributions. In a buoyant market, private developers can sometimes carry this burden while maintaining the delivery of private homes at scale, but in a more turbulent market the model fails.

The model we rely on is flawed

Even in a strong market, few private developers can deliver more than 30% affordable housing, which falls short of expectations in London, for development on the Grey Belt and in future new towns. As we have seen, where there is a divergence between viability and political expectations, the current model can halt the delivery of all housing, not just the affordable component.

On the assumption that we need to deliver over 180,000 affordable homes pa, and if the target of 300,000 new homes pa is met, 60% of all new homes would need to be affordable. Under the current cross-subsidised model this is unachievable, so other sources of delivery must be considered. Britain has not delivered more than 300,000 homes a year for fifty years, when the public sector was responsible for nearly half of all new homes and almost all new affordable homes. Today, the public sector’s contribution is negligible.

I am not arguing for a return to the 1970s but there is a need for the state do more than plan and regulate – it must also be a buyer, commissioner, landowner, developer and most importantly an effective partner.

Public land needs a public purpose

The public sector can, and must, pull the levers that are not available to private sector developers. One is land ownership and assembly, where the public sector can take a longer-term approach. The government should empower the public sector to adopt long-term stewardship, social and economic benefits.

There is also an opportunity for government agencies, such as Homes England, to ensure developments such as new towns and transport-led growth opportunities, help deliver more affordable homes. Utilising their land assembly powers, Homes England and mayoral authorities should deploy land with clear objectives around affordability, tenure balance and infrastructure.

Mixed tenure

It is important to avoid segregated communities which would inevitably lead to social division. Mixed tenure developments are equally important for private and public sector developments.

Working with the private sector, the public sector can shape tenure mix, incentivise the delivery of Social Rented homes and support new genuinely affordable homes. Importantly, an increased role for the public sector must not only prioritise social rented homes. Many households are slipping between the cracks of qualifying for social rent and being able to afford market rents. New tenures, including Build to Rent can help here, providing secure discounted market rent properties alongside traditional tenures.

Joint ventures

The skills gap is affecting even the most ambitious public sector organisation. This is a significant change from the 1970s. Today few local authorities have the resources or skills in house to deliver development directly. Public / private ventures enable the public sector to provide land, funding streams and political backing and the private sector to provide delivery capability and expertise, access to finance and risk management.

Funding delivery

The commitment by the government to significantly increase public funding for affordable housing is welcome, but this additional money must provide investment in local authority planning teams, land assembly, and technical capacity. It should also support those public sector organisations with to the ability to roll out new schemes.

Conclusion

We must accept that affordable housing delivery is a shared responsibility. That is not a compromise but a realistic plan for delivery in a market that can no longer exist on wishful thinking.

Only by embracing new ideas can we ensure that the current crisis brings with it real change.