1. Economics
June 14, 2017

Employers could provide a unique new source of housing supply. Here’s how

By Grainia Long

In the general election, the voice of business was curiously absent. But following the result and amidst political uncertainty, the need for employers to make their voice heard and play a role in tackling the housing crisis will be crucial.

The case for recognising housing as a form of infrastructure, capable of contributing to economic growth, has been made by housing bodies and economists for years, and has gained particular salience as housing development reached historically low levels.

Since the market crash, continuing challenges in driving new supply upwards, changing tenancy patterns and increased cost of housing has encouraged organisations such as the Confederation of British Industry (CBI) to enter the debate, citing the housing crisis as a problem for business. In its report, the CBI pointed to the lack of affordable housing as hindering firms’ ability to recruit and retain staff, leading to long commutes impacting on workers’ productivity.

Business is right to voice its concern. The relationship between the cost of housing and incomes has been dysfunctional for years. This is evident from data showing the extent to which housing costs constitute a drag on incomes. A recent Resolution Foundation report shows that, when costs were included in a wider consideration of living standards, over half of households across the working age population have seen flat or falling incomes since 2002. The role of housing wealth, debt and costs needs to be much better understood by policy makers as we plan for the future.

But it also needs to inform employment and local economic policy. The availability of affordable housing is critical to employers’ access to talent, and to their competitiveness.

The 2017 white paper was an opportunity to provide renewed policy focus on the relationship between the housing and labour markets, between house prices and wages, and set a direction for greater involvement of employers in housing supply. The paper made references to the extortionate costs of housing and the 2.2m people with below average incomes who spend more than a third of their income on housing. It also recognised the importance of the proximity of a skilled workforce for growing businesses.

However, the solutions it offered to these problems are generic and linked to boosting supply overall, rather than focusing on practical actions to bring together employers, local authorities, planners and housebuilders. I would argue that employer partnerships have the potential to provide a unique new source of housing supply.

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Early attempts to target affordable housing to particular profiles of workers were mainly government-led, but some employers also began work to secure affordable housing for their staff. NHS Keyworker first emerged in the early 2000s: by proactively using its land assets, it established partnerships with housing providers to develop affordable residential accommodation for its staff.

Since then, the model has developed in scale and popularity, with several housing associations in England developing sites in partnerships with NHS employers. Universities across the UK have also increasingly considered large-scale development of staff accommodation, using their own land, as an opportunity to attract global talent.

Scaling up this model throughout England and further afield is possible. But its growth is dependent on more employers being willing and able to invest land assets in housing, on making the model more flexible, and allowing employers to find new ways to use subsidy more effectively. It will require employers and government to think innovatively and there are a number of steps that could be taken to expand this form of provision.

First, options should be sought to attract other entrants to employer partnerships: for example, an NHS Trust could work in partnership with a local commercial employer, using land and other capital as subsidy. Second, planning policy could play a greater role in encouraging employer partnerships. If employer partnerships in health are considered a priority, plans should be made to contribute to local health needs.

Third, VAT exemptions on affordable housing schemes should be extended to key worker schemes delivered through employer partnerships. Fourth, models should be considered to attract other public sector employers to invest land or other forms of subsidy. Finally, local authorities are best placed to offer incentives to companies considering investment in their area.

The soaring cost of housing on employee incomes, and the scale of in-work poverty, presents an enormous challenge for government and for employers to recruit and retain talent. There are excellent lessons to learn from partnerships between NHS Trusts and housing associations, and in time, between other public sector employers with land to invest in housing.

A combination of vision, proactivity and smart use of land assets by employers, local government and housing associations give great cause for optimism. While there are benefits to be gained for all stakeholders, the ultimate prize is a productive and happy labour force, with decent living standards.

Grainia Long is the non-executive director of Thames Valley Housing.

This is a shortened version of an essay which will appear in the Lyons Edited Collection to be published by the Institute of Public Policy Research (IPPR) on Thursday 15 June.

The essays in the collection build on the work of the original Lyons Housing Commission in seeking to help the new government to orchestrate a bold and sustainable increase in the supply of new high quality homes of all tenures.

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