Affordable Housing Shortfall: Why It’s Driving Up Rents in the Private Rental Sector

The UK is facing a critical shortage of affordable homes, and it’s having a direct impact on the private rental sector (PRS). With an annual shortfall of 128,000 affordable homes, demand is spilling over into the PRS, pushing up rents as people struggle to find housing. According to Savills, a staggering 187,000 affordable homes need to be built each year to keep pace with demand, yet the current output falls far short.

The Growing Need for Affordable Homes Across the UK

Back in 2015, the annual need for affordable housing was 70,000 homes, but today that figure has skyrocketed to 187,000. Savills’ recent research highlights that affordable housing supply has peaked, and construction starts are down by over a third in the past year alone. This decline in affordable housing construction is causing a ripple effect, impacting renters who are already struggling with high prices in the PRS.

Why the South of England is Feeling the Squeeze

The shortage of affordable homes is particularly severe in the South of England, where an extra 62,600 homes are needed each year to meet demand. As more people turn to the PRS due to lack of affordable housing, landlords can raise rents due to high demand, making it even tougher for individuals and families to find affordable homes.

Proposed Solutions: What Needs to Change?

Savills’ experts propose several policy measures to address the affordable housing crisis. These include a long-term rent settlement to strengthen housing providers’ financial capacity and clear guidance for planning policy. Additionally, decentralising funding decisions to local authorities and regional mayors could help direct resources to where they’re needed most. The government is now consulting on a five-year rent settlement, allowing social housing rents to increase in line with inflation.

A Diverse Approach: Building Homes Across All Affordable Tenures

The report underscores the importance of building affordable homes across different tenures, including social rent, intermediate rent, and affordable ownership options. By offering a variety of affordable housing types, policymakers can better address the unique needs of different regions, helping to reduce pressure on the PRS and ease the housing crisis.

Time to Act: Shaping the Future of UK Housing

With the government set to introduce a new housing strategy in 2025, there is hope for a balanced approach to address regional disparities and meet the housing needs of the UK’s diverse population. As demand for affordable homes continues to rise, it’s essential to implement solutions that alleviate the strain on the PRS and help keep rents manageable for everyday renters.

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