The UK’s independent public spending watchdog, the National Audit Office (NAO), looked at the government’s Affordable Homes programme to see if ‘value for money had been achieved’.

Affordable housing is housing for rent or sale intended for those whose needs aren’t met by the market, with rent up to 80% of local market rents, while the scheme also includes shared ownership.

The Department for Levelling Up, Housing and Communities (DLUHC) overseas the programme for England, delegating management to Homes England (outside of London) and to the Greater London Authority (GLA) which then grant funds to housing providers to deliver affordable properties.

Forecast shortfall in Affordable Homes delivery

The government forecasts it will spend £20.7bn on grant funded homes through three rounds of Affordable Homes programmes between 2015 and 2032, providing 363,000 homes. This is split between £12.2bn on 258,500 grant-funded homes outside of London and £8.5bn on around 104,500 homes in the capital. Under the 2016 programme, it forecasts it will achieve 96% of its target – 241,000 starts against a 250,000 target by March 2023.

However, the NAO noted there will be a 32,000 forecast shortfall in the number of homes expected compared with the published targets. But it added there is also a risk that fewer homes are completed than currently forecast because of building cost inflation, a shortage of materials and labour as well as other challenges.

It said that while the programmes targets “have a focus on the number of new homes built” and “clear targets” about the tenure eg rent or for sale of housing it wants housing providers to supply, “there are few targets based on wider factors such as the quality or size of homes or environmental standards”.

The NAO said the DLUHC “has not fully defined the wider outcomes it wants from the programme, such as reductions in fuel poverty and the creation of mixed communities, or set out what success would look like”.

Further, the watchdog said the department “could be more ambitious” in how the affordable housing scheme supports wider government objectives, such as how it contributes to the net-zero commitment.

Improved oversight of the scheme required

Meanwhile, it also criticised the DLUHC oversight of the GLA as the authority sent performance reports to the government “containing insufficient information on GLA’s management of the programme”. It listed a lack of information on spending, which later revealed £1.8bn of funding given to the GLA between 2015 and 2021 had been committed but not yet used to pay housing providers.

“DLUHC accepts these payments were a basic error of programme management. DLUHC has started to make improvements to its governance and oversight of the programme, including in data and performance reporting”, the NAO stated.

Elsewhere, the NAO said “there is a lack of strong incentives for housing providers to deliver affordable homes in areas of high housing need or in the most unaffordable areas”.

Gareth Davies, head of the NAO, wrote: “The programme is not delivering a high proportion of affordable homes in areas that the department assesses have high general housing need. In addition, housing providers are delivering fewer homes in more unaffordable areas, measured by the difference between local house prices and wages.”

As such, before the end of 2022, it recommends that the DLUHC develop plans “to mitigate the risk that the objectives for delivering affordable homes may not be achieved, and continue to improve its oversight of the programme”.

It said for the next iteration of the programme, DLUHC should consider what information it needs to improve its understanding of housing need in local areas; review how targets are set and monitored and be clear on how it contributes to wider government objectives, such as net-zero.

Davies added: “Since 2015, the DLUHC has made improvements to the running of the Affordable Homes programme, but there are still areas it needs to address.

“It should reassess targets to ensure the programme is delivering affordable homes in areas that need them the most. It should also use the programme to bring about greater value to other parts of government, and advance wider efforts around net zero.”

‘Affordable homes central to our levelling up mission’

A DLUHC spokesperson, said: “Increasing the number of affordable homes is central to our levelling up mission and the Affordable Homes Programme has always been focused on driving up supply of much-needed homes across the country.

“We welcome the NAO’s report, which recognises the programme is forecast to deliver around 400,000 new homes – despite the global headwinds resulting from the pandemic, supply chain pressures and the current economic climate.”

The DLUHC is investing £11.5bn in the next phase of the Affordable Homes programme.

The Future Homes Standard will come into force in 2025 setting new requirements for the environmental impact of affordable housing stock.