Housing supply

Warning that escalating construction costs could impact the supply of ‘affordable’ housing

Affordable accommodation in Kingsmead, Wooler.

An analysis by the New Economics Foundation (NEF) claims that the supply of social and affordable housing in both regions could suffer massively due to labor and material shortages, Covid-19 and Brexit.

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

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

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The think tank predicts that Newcastle and Northumberland would see the provision of social and affordable housing secured by the planning system, via the use of Section 106 legal agreements, completely phased out as a result – as has happened in eight of the 10 tips he studied in the North and the Midlands.

In contrast, areas such as Bath, Cambridge, Kensington and Chelsea are at no risk according to the NEF study.

However, councils in the two North East areas investigated hit back at the warning – with officials at Newcastle Civic Center insisting there was ‘no evidence’ to support it.

Northumberland County Council said it believed the rise in construction costs was ‘temporary’.

A spokesperson added: ‘Council is optimistic that affordable housing will continue to be provided by the development industry on schemes already committed and on new schemes.

“Indeed, in 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.”

Data from the Office for National Statistics put building material costs 19.8% higher in July 2021 than in July 2020.

A spokesman for Newcastle City Council said: ‘There is no evidence to support the claim that social and affordable housing would be eliminated by changes to the planning system – the changes are still unknown and there are had a lot of speculation.

“However, we have raised concerns with the Government over the proposals in the Planning White Paper (August 2020) over the potential impacts of the changes, removing the ability of councils to raise funds through agreements under the Article 106 and removing their ability to define the locally determined community. Infrastructure Levy (CIL) replacing it with a nationally set levy. This would not take into account local circumstances and prevent us from raising the funds we need to support programs.

“We accept that rising material costs and labor 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 program manager at the NEF, said: “Communities in the North and Midlands could find themselves without the same tools as southern councils to prevent homelessness and maintain construction jobs, which would make harder for these places to bounce back from the ravages of the pandemic. It is essential that the government act to reform the planning system in England to provide the accommodation that communities want and need by diversifying the supply of accommodation.