The economic impact of social housing

October 2024: This month’s newsletter examines how building 90,000 social housing units across the UK has a significant economic and social impact, not only for the housing sector but also for the broader economy. Our collaboration with the National Housing Federation (NHF) and Shelter revealed that the economic benefits go well beyond the construction of said homes, benefiting both the Exchequer and the wider society.

Cebr has been a trusted partner for clients looking to understand the broader economic and social impacts of their investments. By combining economic expertise with sector-specific knowledge, Cebr generates tailored insights that highlight both direct and indirect benefits. In this blog, we highlight our recent work with the NHF and Shelter , where our net present value (NPV) analysis showed that building 90,000 social homes a year would generate a total of?￡86.5 billion?in economic and social benefits over 30 years, compared to an investment cost of?￡35.4 billion. This would result in a?net positive value of ￡51.2 billion.

The Economic Impact of Building 90,000 Homes

The construction and management of 90,000 social rent homes represents a considerable investment in the UK economy. Our analysis revealed that this would be expected to generate a total of ￡48.2 billion in economic activity and support a total of over 350,000 full-time equivalent (FTE) jobs across a wide variety of sectors, from skilled labour in the construction industry to professional services such as architecture, planning, and engineering. In addition to creating jobs, this surge in activity generates demand for raw materials and construction equipment, boosting industries throughout the supply chain.

Benefits to the Exchequer ….

The government would see substantial fiscal savings and revenue returns from building 90,000 social homes each year. Our analysis estimated a positive NPV of?￡11.9 billion?over a 30-year period for the Exchequer.

The shift from higher private rental sector (PRS) costs to lower social rent levels would save the Exchequer an estimated?￡4.5 billion?over 30 years, through savings on housing benefits alone. This is because a significant share of housing benefit expenditure currently supports low-income families in private rentals, where rents are much higher than in social housing. Our analysis demonstrated how shifting households into social homes – where rents are typically set at 50% of market rates – would result in considerable savings.

We evaluated these fiscal impacts by mapping out how tenure shifts from the private rental sector to social housing would reduce benefit claims. This involved a granular assessment of rent differentials, regional housing benefit data, and tenancy patterns to estimate the reduction in housing benefit payments and the cumulative long-term savings for the Exchequer.

…. and to communities

Perhaps the most compelling element of this housing initiative is the long-term impact it will have on UK society. In the long term, the benefits extend well beyond fiscal savings. Increased housing availability stabilises prices, reduces commuting times, and improves productivity, all while enhancing local economies. Cebr estimates that the wider socioeconomic benefits, including reductions in crime and healthcare costs, could amount to an NPV of ￡31.4 billion over a 30-year period (of which ￡16.8 billion will indirectly accrue to the Exchequer). By continuing to support large-scale homebuilding, clients working with Cebr are helping shape the future of the UK’s housing market and economy.

Building for a Stronger Future

For our client, this collaboration with Cebr has reinforced their role as a key player in tackling the UK’s housing challenges. By highlighting both the direct and indirect economic benefits of homebuilding, they have positioned themselves as a thought leader, contributing valuable insights to policy discussions and helping shape the future of housing in the UK.

As the UK continues to grapple with housing shortages and affordability concerns, building more homes is essential not only to meet demand but to support the wider economy and ensure long-term fiscal sustainability. Through continued partnership with industry leaders, Cebr remains at the forefront of these crucial conversations, providing the economic insights that will help guide the nation’s housing strategy for years to come.

Tristan Carlyon, Head of Research and Analysis at NHF said:

“The work has formed a key part of our engagement with officials and with leading political figures, both before and after the election, highlighting the potential of housing delivery to drive economic growth. It’s given the wider sector a common understanding to rally round, meaning our messaging is co-ordinated and consistent. Key headlines from it are now regularly used in press releases, comments and interviews – it’s become a fundamental part of our established evidence base.”

If you are interested in undertaking an economic impact analysis or learning more about it, click here .