Learning from the land of opportunity: Could a US-style system of low income tax credits boost affordable housing in the UK?

low income housing tax credits 3

The government is on the hunt for ways to fund affordable housing without increasing short-term public borrowing. A group of activists and researchers believes there is a solution in operation across the Atlantic. As part of Building’s Funding the Future series, Carl Brown finds out more

What do you do if you have an ambitious pledge to build 1.5 million homes and constrained public finances?

Keir Starmer’s Labour party put the figure at the heart of its general election campaign and has moved with speed on measures to reform the planning system in a bid to get Britain building. Starmer’s hope is that removing planning red tape and delegating fewer schemes to local planning committees will help to speed up the supply of housing.

But, as the National Housing Federation points out, the target will not be met unless the government also significantly boosts affordable housing, which traditionally has been heavily reliant on grants. The trade body estimates that 90,000 social rented homes are needed each year to meet current levels of housing need.

The problem is that this would require billions in upfront grant funding if the government were to meet a significant proportion of the cost. The Centre for Economics and Business Research (CEBR) has estimated the cost of building these homes to be £35.4bn. If government grants cover just a third of it, this would be a cost of £11.8bn.

The CEBR points out that the investment would pay itself back within three years as the benefits to the economy would outweigh the cost.

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