This paper proposes that the government support the construction of affordable homes in London by guaranteeing that Housing Benefit payments will rise in line with inflation for specified new homes.
While housing affordability worsens in London, more and more is being spent on Housing Benefit payments for tenants living in the private rented sector. Using this funding to build more affordable homes has a powerful logic behind it. But converting ‘Benefits to Bricks’ is not straightforward, given the scale of up-front investment needed to build more affordable housing.
This paper proposes that the government support the construction of affordable homes in London by giving a guarantee that Housing Benefit payments will rise in line with inflation for specified new homes, thereby providing investors with the certainty that they need to invest at preferential rates.
These guarantees, worth £2.4 billion over ten years, would:
- Support the construction of 250,000 affordable homes to rent, enough to house almost all the Housing Benefit claimants in the private rented sector in London, with rents estimated to be just over half the level of those charged in the market.
- Help government save money from the point of first occupation: if market rents continued to rise above inflation, the long-term savings could be significant.
The guarantees would be backed by government, but administered by the Mayor of London. This would allow the housing delivery to be commissioned in the right locations across London, as part of sustainable mixed-income communities.