Originally published on Room 151 (8th July 2024)
Cath Webster, CEO of Thriving Investments examines how LGPS investors can help local authorities to attract keyworkers by providing the capital to fund affordable housing.
The extent of the UK’s housing crisis and need for new, affordable housing across the country is clear to all, it informed core manifesto policies ahead of the general election and the new deputy prime minister has housing at the top of her list, but a new research report highlights where the need for keyworker housing is most acute.
Thriving Investments, the investment manager that is part of Places for People group, commissioned research from Price Hubble to pinpoint the least affordable areas for housing for keyworkers. The research ranked 283 Local Authorities across eight different indicators of housing stress to see which were the least affordable for those on lower quartile to median incomes. Components measured included not only rent to income ratios, but also the ability to buy homes, analysis of the length of housing lists versus total stock, rental growth and population growth, the age of renters and the distance that renters live from their workplace.
Across the most unaffordable top quartile of locations, 44% of key worker renters would need to spend more than 30% of their take-home income to be able to rent a home at the average rent, while the average percentage of key worker renters spending this much income on rent across all UK local authorities is 33%. In the most unaffordable areas of London, this figure rises as high as 80% (Westminster), 74% (Camden) and 70% (Hammersmith and Fulham), whilst outside of London, the worst locations are Arun in West Sussex and Elmbridge in Surrey (both 52%) and Slough (50%).
Although affordability is a well-documented issue in London and the south-east, regions throughout the country also fared poorly across several metrics. For example, York, Bath, Manchester and Nottingham had the smallest proportion of rental stock accessible to low-earners, whilst the greatest pressure on rental stock is found in Cardiff and Newport in Wales and Bolton in the North West, where, as a result of historic population growth and a lack of new development, five year growth in rents is above 40%.
The research shows that whilst the scale of need is weighted heavily towards dense urban markets, simply due to the size of these rental markets, the scale of need outside these metropolitan areas is also significant. This demonstrates the huge opportunity for a range of housing providers to invest in local housing to cater for this important but oft overlooked demographic, in order to deliver impactful investments to the areas that need them most.
Keyworkers – defined in the research as those with lower quartile to median incomes in each Local Authority – are often called the “squeezed middle”. With long waiting lists for social housing, these keyworkers are forced to find accommodation in the private rental market which they find increasingly difficult to afford. As such, they either live further and further from their workplace, remain at home with parents, or are often sharing poorer quality housing. Discount Market Rental tenures squarely cater for this demographic and by providing high-quality affordable homes close to places of work, Local Authorities can help to attract and retain talented workers across a wide range of industries and occupations. Shared Ownership, an alternative affordable homes-to-buy tenure, also caters well for this demographic looking to get on the housing ladder in core keyworker locations.
The report was commissioned to identify where institutional investors, including LGPS, could direct investment to provide the most impact by creating new homes in the right location and at the right price-point. Thriving Investments manages the New Avenue Living Fund in Scotland, which has over 1,000 homes in the Mid-Market rent tenure (a discounted rental tenure) and provides new, energy-efficient housing for customers on median to lower incomes. Following the success of that fund, the investment manager is now looking to replicate the strategy across England and Wales, prioritising the markets highlighted by the research as those with the greatest need.