Government spends four times more subsidising private housing than building affordable homes

The Government is spending four times as much – some £32bn – subsidising private housing as it is building affordable homes for low income families, a report has revealed.

The study showed 79 per cent of the total housing budget is currently spent on higher-cost homes for sale, including through the controversial Help to Buy scheme, but just 21 per cent, around £8bn, goes to affordable homes for rent.

The annual review carried out by the Chartered Institute of Housing (CIH) exposes a significant shift away from programmes that lead to new homes being built.

In 2010-11 the Government contributed £2.5bn to the Affordable Homes Programme but by 2015/16 that had fallen to just £285m.

In total, the amount of public money going to help housing associations build new homes has dropped from £3.8bn in 2010-11 to £1.3bn last year.

It comes after the most recent data showed that Conservative ministers have completely stopped funding new social housing, which is 30-40 per cent cheaper than affordable housing.

The new report is published on the day the independent Grenfell Tower Inquiry is set to begin, and also coincides with the three-month anniversary of the fire, in which at least 80 people died.

Government ministers have received criticism for not investing enough money in building and maintaining homes for people on low incomes.

The CIH report reveals that the number of affordable homes being built with Government money has fallen by 50 per cent since 2010, from 56,000 to 28,000.

Instead, money has been diverted to help middle- and high-income households get on the housing ladder. For example, around £5bn of loans have been given to buyers via the Help to Buy Scheme established by George Osborne in 2013. Spending on private homes for sale also covers shared ownership properties and discounted "starter homes".

The CIH called for a shift in spending to help people on lower incomes afford homes.

Its chief executive, Terrie Alafat, said: “People on lower incomes are finding it increasingly difficult to make ends meet as they experience the impact of stagnant wages, rising inflation and welfare reform cuts. These factors and the shift towards ‘affordable rent’ all mean that housing is becoming increasingly unaffordable in many parts of the country.

“We know we need to build more homes to get to grips with our national housing crisis – our UK Housing Review briefing highlights that annual supply remains at least 30,000 homes short of household growth. But it’s not just about building more homes; it’s about building more affordable homes for people on lower incomes. The Government needs to take an urgent look at rebalancing the housing budget and investing more in genuinely affordable homes for rent.

“The November Budget gives the Government a golden opportunity to rebalance investment away from the private sector towards affordable housing without having to increase its overall commitment to housing.”

Critics say that, because affordable homes can cost up to 80 per cent of market value, they are not affordable for millions of people on low incomes.

However, Conservative ministers have prioritised building affordable homes over social homes.

As a result, since 2010 the number of new social homes has plummeted by 97 per cent, from almost 37,000 in 2010 to just over 1,100 last year.

Ministers have also prioritised the building of “starter homes”, properties for sale at a 20 per cent discount.

Responding to the report, Labour accused government ministers of “washing their hands” of responsibility for building affordable homes.

John Healey, the Shadow Housing Secretary, said: “Affordable housebuilding is at a 24-year low as Conservative ministers have washed their hands of any responsibility to build the homes families on ordinary incomes need.

“Ministers have tried to hide their failure to build more affordable homes by branding more homes as ‘affordable’. The Conservative definition of ‘affordable housing’ now includes homes close to full market rent and those on sale for up to £450,000.

”Public concern about housing is around the highest level for 40 years. Millions of families are struggling with high housing costs. Faced with this, ministers have turned their back on the way they can help most: by building low-cost homes to rent and buy.

“Phillip Hammond must use the Autumn Budget to reverse the damage his Government have done in the last seven years and back Labour’s plans to build thousands more genuinely affordable homes.”

The CIH called for more investment to maintain existing social homes – a need it said had been exposed by the Grenfell disaster. It said the Decent Homes Standard, which is used to measure whether a property is of an acceptable quality, has not been updated for ten years and that funding for helping landlords to maintain their properties has been scrapped.

“Essentially, investment in the existing social stock has been left for landlords to finance from rents, while government has been cutting their rental income and will continue to do so for another two years”, the report said.

The Department for Communities and Local Government has been approached for comment.