Did you know housing associations and councils own almost 11,000 fully-built but unsold homes, intended for shared-ownership or market-sale, sitting empty on sites across England? The unpredictable market conditions created by the pandemic have made it tough for social housing providers to sell some of their homeownership stock, which they typically use to cross-subsidise the homes that they rent, including for social rent. While there are many intractable problems in housing policy, this really isn’t one of them. The government should use its spending review today to give these unsold homes a new lease of life as social rent housing.

This idea has been promoted by the National Housing Federation, Shelter and Lord Best’s Affordable Housing Commission. In fact, it already has implicit backing in government policy: in July, the government brought forward £130m of capital funding under its Next Steps Accommodation Programme for social landlords to acquire and refurbish 3,300 homes, including unsold shared-ownership and market-sale homes. But there is an opportunity to do far more.

The latest quarterly survey from the Regulator of Social Housing reported the number of completed but unsold affordable homes for sale (of which shared ownership is the most common type) reached 7,906 in June 2020. 3,460 of these homes had been ready and waiting for occupants for more than six months. In addition, social landlords held 2,816 unsold market-sale homes, 1,520 of these for more than six months. That’s a total of 10,722 homes sitting empty. While social landlords report that some of these properties have been reserved or sold subject to contract, others will struggle to find buyers in the uncertain market conditions created by the pandemic. This is especially true for unsold affordable homes for sale, where the numbers sitting unsold for more than six months increased by a staggering 43% between March and June this year.

“While there are many intractable problems in housing policy, this really isn’t one of them.”

Each of these currently empty homes represents an opportunity to house someone in need – just as the country prepares for a sharp increase in housing need as part of the inevitable fallout from the pandemic. The government’s furlough scheme is due to end on 31 March, while an effective partial ban on evictions until 11 January offers little help to those already struggling to pay the rent. Where there are easy, low-cost ways to increase the supply of genuinely affordable social rent homes, the government must take them without hesitation.

The beauty of this idea lies in its ease and speed of implementation. Unsold shared-ownership and market homes are ideal for conversion to social rent housing. Since they are already owned by social housing providers, the government would not need to facilitate a purchase, but could instead simply and quickly use the existing subsidy system to apply the grant for each home be converted to social rent.

The precise level of grant needed to do this will vary between places and depending on the original home type. In most places, market sale homes could be converted to social rent with a grant of £70,000 per home, to cover more of the cost of building the home. In the case of Affordable Homeownership products like shared ownership, homes will already have received around £28,000 in grant, so could be converted to social rent for £42,000 per home. If we assume social landlords would choose to convert two-thirds of their current unsold Affordable Homeownership stock and a third of their unsold market-sale stock, the government could deliver an additional 6,439 social rent homes, virtually overnight, for £302.4m. That’s more than the total new social rent supply for 2018/​19, which stood at 6,287 homes.

In reality, it is likely that the number of unsold homes has increased further since June, and higher grant rates would be required to convert unsold homes in London. But even if these estimated costs were doubled, this could comfortably be funded using the £700m underspend from the current Shared Ownership and Affordable Homes Programme. All the chancellor needs to do in his spending review is bring unspent money back into the current grant programme and clarify that it can be used more flexibly to convert unsold homes.

While demand for shared-ownership and market homes is distinctly shaky in many places, the demand for social rent homes is ​“virtually unlimited” in most of the country, according to the government’s recent Independent Review of Build Out Rates. The need for social rent homes is only set to grow as the full economic consequences of the coronavirus crisis become clearer. In fact, social rent is the only tenure of housing whose revenue stream is entirely independent of current volatile market conditions, since social rents are set by a government formula. Converting unsold homeownership stock to social rent therefore has an important role to play in supporting the social housebuilding sector, getting empty homes into use and providing much-needed ​‘safe’ revenues to housing associations and councils.

Of course, increasing flexibility in how existing funding can be used is no substitute for the serious increase in investment and land reform needed to build enough social rent homes to meet need. But it is an action the government can take immediately that will deliver additional social rent homes quickly enough to support households thrown into financial difficulty by the impacts of the pandemic, without spending a penny of additional public money beyond what has already been planned. Doing so will prevent homelessness, provide the demand needed to get empty homes into use and support social housing providers’ revenue in uncertain times. This must surely be a no-brainer for a chancellor looking for smart ways to manage the ongoing crisis.

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