Financial strain on housing associations and affordability requirements slow construction
The UK is on track to complete only half of its annual 300,000-home target, with affordability requirements creating bottlenecks, according to a survey by Knight Frank.
The poll of more than 50 homebuilders found that financial strain on social housing providers and stricter rules requiring developers to include affordable housing are contributing to delays. Some builders are now considering reducing the proportion of affordable homes on their projects.
Prime Minister Keir Starmer’s government has pledged to build 1.5 million homes over five years, equating to 300,000 per year. However, critics argue that the reliance on social housing providers — many of which are approaching borrowing limits and struggling to raise equity — makes the target difficult to achieve.
Rising costs associated with decarbonisation and fire safety standards are also adding pressure to housing associations, limiting their ability to support the affordable housing push.
“Housing associations once played a crucial role in supply but now struggle to deliver high volumes, causing delays for developers,” said Anna Ward (pictured), senior analyst at Knight Frank. “The impact of Labour’s housebuilding push will be limited unless financial constraints on housing associations are addressed.”
Bottlenecks surrounding the UK's affordable housing push will derail Labour's goal of building 300,000 homes this year, a Knight Frank survey shows https://t.co/KjnCfmq3Gg
— Bloomberg UK (@BloombergUK) February 10, 2025
Almost one-third of developers surveyed cited weak demand for affordable housing, alongside broader economic concerns, as key factors affecting construction activity this quarter.
The survey also found that around 80% of homebuilders are struggling to find buyers for their affordable units, with many housing associations scaling back development due to financial pressures. In response, some developers are seeking to shift units from social rent to shared ownership to maintain viability.
Despite these challenges, housebuilders are seeing a boost in sentiment due to cooling inflation and the prospect of interest rate cuts later this year.
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