Intermediate housing – part of the solution to the affordable housing challenge?

A few years ago ‘intermediate housing’ was all the rage. A flood of research emphasised the need for housing options for those priced out of owner occupation but unable to access social housing, and showing how, in places like London, this missing middle included almost everyone. Conference programmes were dominated by discussions on the best way to meet this need, and hardly a week went by without the government, an RSL or a developer launching a new intermediate product. But since then intermediate housing seems to have become distinctly unfashionable.

The main reason, of course, is the crash. As housing finance expert Andrew Heywood outlined when opening the latest Future of London Breakfast Seminar, affordable housing policy is now at a crossroads. The affordable housing sector has seen two decades of investment based on a mixed funding regime of private finance facilities and grant investment. However, the assumptions upon which our ability to finance and deliver the range of affordable tenures and types required to meet market need and demand have, since 2007, shifted significantly, and as a result, practitioners across London are in search of a clear and effective policy response to this challenge. 

Can intermediate housing form part of this response? Initially, it may appear unlikely, given that it now looks rather as though intermediate housing products were another product of boom thinking. When Section 106 money was rolling in and the mantra was ‘doing more with less’ grant, shared ownership seemed a canny way to boost the amount of affordable housing and extend homeownership to hard pressed middle income families without busting the bank. Or was it to offer a route out of social renting? Or to deliver more mixed communities? Or all of the above?

Brendan Sarsfield, Chief Executive at Family Mosaic Housing Association is clear that as the policy purpose of intermediate housing was not well defined, it was vulnerable to panic decisions. So when the bust came, lots of providers piled out of shared ownership, worried that demand would dry up in a world of falling prices. This was a reasonable fear, as demand is not the same as need – at least not to an economist. Andrew put it very succinctly: ‘those most in need are usually least able to muster effective demand’- otherwise known as money. According to his presentation there were 5,000 unsold intermediate homes in April 2010, half of which had been on the market for over six months, and the contraction in prices, build rates and lending looks set to continue for the foreseeable.

With shared ownership out of favour, renting is back in. Lots of planned shared ownership homes were hastily repackaged for intermediate rent, a hitherto neglected product used mainly for health service workers brought in from abroad. The eternal quest for a viable model for quality, large scale private rental development also acquired new urgency – and we might just be getting there. Alisdair Chant outlined how Berkeley Homes has taken the plunge and launched the first investment fund for new build, private rented housing, with an HCA investment of £45m. The 555 homes earmarked for the scheme will come from private units in the firm’s pipeline – so this ‘middle market’ housing supply is not at the expense of affordable homes.

Finally, the seminar heard Mark Baigent explain how Greenwich Council had launched its own special purpose vehicle (another term to have fallen out of fashion) to convert vacant social street properties to long term intermediate rent for working families. They must be doing something right in Greenwich: this neat scheme has actually got consent from the Secretary of State, without the dread words ‘novel and contentious’ even being mentioned. Those of us traumatised by repeated failures to get similar vehicles through central government approvals should take note. It must help that Greenwich have gone for a straightforward model, free of financial alchemy, and have defined the policy goal upfront: to encourage social mobility by supporting people on low incomes who want a bigger and better home to give up their social tenancy, thereby providing a bridge between social renting and market renting or home ownership.

Regardless of funding changes, market trends or policy fashions there is clearly both a need and a demand for more and better middle market housing options. Let’s hope the ideas we discussed are a sign that this vital part of London’s housing economy is emerging from the storm, and heading for maturity.

Toby Lloyd
Navigant Consulting