A radical social housing strategy from the new economics foundation, an independent think tank, sets out measures that could deliver one million affordable homes in five years despite the Spending Review cuts. The strategy is based on reducing the cost of land and capital.

The Government plans to save £1.7 billion a year on the social housing budget by setting a target of building 150,000 homes over the next four years. But the country needs 200,000 new homes a year across all sectors just to keep pace with ever growing demand. There are currently 1.7 million households on the housing waiting list.

The strategy proposed by the foundation would firstly reduce the cost of land by imposing an 80 per cent capital gains tax on all land sales over £80,000 per acre. The revenue generated would go to a National Land Fund to subsidise the cost of social housing. The tax would be supported by restricting planning permission for large residential developments to social housing developers. This would reduce the value of much of the undeveloped land in private hands. Local authorities and housing associations would be able to sell the land to private companies, subject to detailed regulations on how often they do this and how they spend the profits.

The cost of capital would be reduced by introducing a new bond scheme, linked to the retail price index. Housing associations pay 6% p.a. on bank loans: a bond scheme could lower this to 3.5% creating substantial savings for social housing landlords. Housing benefit payments would be linked more closely to bond yields, which could lower interest rates even further.

Charles Seaford, author of the report ‘One Million Homes’ said: “If the Government takes bold action, we can reduce the cost of social housing to taxpayers while also reducing homelessness and improving people’s lives. A million new, low carbon, affordable homes in the next five years is an ambitious goal, but our analysis reveals that it is eminently achievable.”