The United Kingdom, particularly the Midlands and Birmingham, is facing a critical social housing crisis that demands immediate and substantial reform. The current system, heavily reliant on the Section 106 (s.106) model and grappling with limited funding accessibility through Homes England, is failing to meet the growing need for affordable housing.
In this article, Joanna Lee-Mills (Partner and Head of Social Housing Development, Shakespeare Martineau and Member of CNM’s Housing and Communities Leadership Board) examines the issues plaguing the social housing sector, focusing on the Midlands and Birmingham, and proposes necessary reforms to deliver social housing more effectively.
(June 2024)
The S.106 Model: A Flawed Approach
Section 106 of the Town and Country Planning Act 1990 allows local authorities to secure contributions from developers to mitigate the impact of developments on the local community. Originally intended to ensure new projects benefited existing residents, it has become the primary mechanism for delivering affordable housing. However, this model has significant drawbacks:
Dependency on Private Developers: The s.106 model relies heavily on private developers, making social housing provision subject to market fluctuations.
Negotiation Challenges: Developers often negotiate down their commitments, often arguing that higher percentages impact on financial viability for delivery.
Location Issues: Affordable homes have in the past, been placed in less desirable parts of developments.
Quality Concerns: There is often a misconstrued perception that affordable homes are of lower quality.
In Birmingham, the limitations are stark. According to the Birmingham City Council’s Housing Revenue Account Business Plan 2024-2054, only 20% of new homes built in the city in the past five years were affordable, despite higher targets. The Langley Green Development for example, approved in 2022, initially promised 40% affordable housing. Post-negotiation, this dropped to a staggering 15%, with most units relegated to the development’s periphery.
Homes England: Funding Accessibility Problems
The effectiveness of access to the funding streams and opportunities afforded by Homes England is hampered by several factors:
Limited Funding: In 2024, its total Midlands investment was £450 million—enough for roughly 1,500 homes at £300,000 each, barely scratching the surface of Birmingham’s 17,000-application waiting list.
Complex Application Process: Many find the application process overly complex.
Focus on Home Ownership: A significant portion of funding focus promotes home ownership rather than social renting.
Regional Disparities: There is a perception that London and the Southeast is favoured which requires further examination.
The Need in Birmingham and the Midlands
Unfortunately, the latest data for the Midlands paints a grim picture:
Temporary Housing: In Birmingham, as of March 2024, there were 4,300 households in temporary accommodation, costing the council £21 million annually – enough to service loans for building over 1,000 new local authority homes.
Social Housing Shortage: Only 1,200 social homes were built in Birmingham between 2021 and 2024.
Regional Disparities: The Midlands saw 5,500 social homes completed in 2023-24, versus 12,000 in London.
Affordability Crisis: Birmingham’s average private rents rose by 25% between 2021 and 2024, widening the gap in terms of affordability.
The Right to Buy Scheme: A Double-Edged Sword?
Whilst this programme has helped many tenants become homeowners, it has significantly reduced housing stock. Across the Midlands, over 200,000 social homes have been lost since 1980, with less than 15% replaced. Some of the issues stemming from the success of this scheme include:
Diminishing Stock: Birmingham has lost over 37,000 council homes, with only about 10% of those having been replaced.
Quality Loss: Often, the best-quality homes are purchased.
Private Landlords: Many Right to Buy homes are now rented out at higher rates.
Financial Impact: High discounts hinder replacement funding.
Health, Education, and Long-term Costs
It is clear that poor housing significantly affects health and education. A 2024 University of Birmingham study found children in temporary Birmingham accommodations were twice as likely to develop respiratory issues, and 40% more likely to underperform in GCSEs.
The study estimates each child in poor housing costs the NHS and education system an extra £3,000 per child annually. With 2,800 Birmingham children in temporary housing, this amounts to an £8.4 million yearly cost, making investment in social housing a public health and education imperative.
Political Landscape and International Comparisons
With a date now set for the General Election, housing is a key manifesto issue. The Labour Party pledges 150,000 new social homes annually, with 15% of those being in the Midlands. The Conservatives focus on home ownership schemes, while the Liberal Democrats propose council borrowing caps removal. Additionally, the new Metro Mayor for the West Midlands Richard Parker has pledged to create 200,000 social rented homes annually until the end of the decade.
Internationally however, the UK lags. In countries such as Vienna, Austria, 62% of their populations reside in social or subsidised housing, using a land value capture model where the city buys land cheaply, develops it, and uses profits for more housing. The Netherlands mandates 40% social housing in new developments without negotiation. Such models offer valuable lessons we should be looking at in further detail.
Brexit, Technology, and Local Initiatives
Brexit’s impact on the Midlands’ construction sector is significant. Material costs are up 20%, and labour shortages are acute, with Birmingham builders reporting a 30% drop in EU workers. This underscores the need for both import strategies and local training initiatives.
Technology offers hope. Modular construction, where homes are factory-built and assembled on-site, is gaining traction. A Coventry pilot with Homes England built 200 units 40% faster than traditional methods. In Birmingham, the Icknield Port Loop development uses cross-laminated timber, reducing carbon footprint by 80% compared to concrete construction.
Local initiatives also show promise. The Stirchley Co-housing Project, where residents designed and manage their 40-unit community, reports higher satisfaction and lower turnover than traditional social housing. Birmingham City Council is now exploring how to scale this model.
The Need for Reform
To deliver social housing more effectively, the region requires significant reforms to be considered, encompassing a wide range of focal points. Some of these might include:
- Overhauling the s.106 model:
– Making affordable housing contributions non-negotiable, at for example, a bold 40% in higher demand areas.
– Ensure equal quality and distribution.
- Enhance the functionality of Homes England:
– Increase its Midlands budget to say, £1.5 billion.
– Simplify applications and shift focus to social renting.
– Open a Birmingham office for local needs.
- Direct Government Investment:
– Fund 100,000 new social homes annually, with 10,000 in the Midlands.
- Empower Local Authorities:
– Relax borrowing caps; Birmingham estimates this could fund 5,000 homes over five years.
– Grant-replace every Right to Buy home.
- Reform Right to Buy:
– Allow council suspensions in high-demand areas.
– Extend qualification to 10 years and use 100% of receipts for replacements.
- Land Value Capture:
– Reform taxation so communities benefit more from price increases. The West Midlands Combined Authority projects this could generate £200 million annually for housing.
- Rental Reform Impact:
– 2023’s reforms, capping rent rises, may increase social housing demand. Monitor and adjust plans accordingly.
- Pension (and other) Fund Investment:
– Structure social housing as a stable, long-term investment. Discussions with the West Midlands Pension Fund show interest in a £300 million pilot.
- University Partnerships:
– Birmingham’s universities are innovating in affordable construction. For example, Aston University’s timber-frame design could cut costs by 25%.
- Brexit’s Impact:
– Brexit has raised Midlands’ construction costs by 15%. Push for training and visa adjustments might help to mitigate this.
- Home Quality:
– Adopt “Decent Homes+” focusing on well-being. Birmingham’s Centenary Square development has demonstrated that it increases community cohesion.
- Regional Powers:
– Use West Midlands’ devolved powers for local solutions like brownfield regeneration.
- Technology and Innovation:
– Employ modular construction. A Coventry pilot built 200 homes 40% faster.
– Use green tech; Birmingham’s eco-homes use 60% less energy.
- Community-Led Projects:
– Support land trusts. For example, Stirchley Co-housing shows strong community bonds.
- Media Campaigns:
– Launch for example, a “Midlands Homes for All” campaign to help destigmatise social housing.
Conclusion
The social housing crisis in the UK, particularly in the Midlands and Birmingham, requires urgent and comprehensive reform. With over 4,300 Birmingham households in temporary accommodation – costing £21 million yearly and harming children’s health and education – the need is rapidly becoming critical.
Solutions span policy, finance, and technology: overhauling s.106, boosting Homes England, direct investment, reforming Right to Buy, using pension (and other) funds, and embracing innovations like modular construction. Post-Brexit challenges and rental reforms add complexity but also opportunities.
Richard Parker’s goal of creating 2,000 new Midlands social rented homes annually is indeed ambitious, but achievable. Birmingham’s universities, devolved regional powers, and community projects can offer unique strengths. Moreover, a focus on affordable and social housing is economically sound; investing now in quality housing in the region will save millions of pounds in health, education, and temporary housing costs.
This is about more than units – it is about community resilience. Homes are not just places where people live – it’s where they belong. By reforming how we deliver social housing, the Midlands can lead the UK in creating not just buildings, but genuine homes and stronger communities.
The views reflected within this article of those of the author.
ABOUT OUR AUTHOR:
Joanna heads up the Social Housing Development team at Shakespeare Martineau and specialises in affordable housing development, acquisitions and disposals. Having worked for registered providers since 2001, Joanna has frequently acted as project lead with large multi-disciplinary teams for the development of social housing, stock transfers or swaps. Her expertise encompasses s106 or land led acquisitions, and development agreements for golden brick or turnkey schemes.
Previous projects have seen Joanna as project lead on the country’s then largest tenanted stock rationalisation transaction involving a complex funding model, and also the country’s first stock swap.
Joanna’s role is instrumental in the strategic growth and direction of the social housing development team and its interface with other sector teams from around the firm. Notably, she is keen to promote collaboration and working closely with colleagues across the firm’s planning, construction and residential development departments in order to provide clients with a seamless and rounded affordable housing service offering. Joanna is heavily invested in her client relationship and profile raising role, often procuring pipeline not only for her team but other departments in the wider sector team also.
With a keen interest in knowledge sharing on sector specific challenges, Joanna has written articles on issues such as stock rationalisation, the impact of the Green agenda on the built environment and the importance of joint ventures and public private partnerships towards the housing crisis, having been published in Inside Housing, Social Housing and other specialist property publications. She is an active participant in the housing sector and local business community, being on the Board of Directors at Auxesia Homes, TAG Network Midlands Limited and Colmore BID.