Developers claim thousands of affordable new-build homes are left empty because councils and housing associations are not buying them

The Government will allow developers to “flip” newly built affordable social housing and sell them at a higher price to private buyers across England, The i Paper has learned.

Developers will be given the green light to convert homes agreed as affordable housing during the planning process into properties that can be sold to investors or owner-occupiers. The plans could be announced as early as next week.

Experts warn the scheme would reduce the number of affordable homes available, and it comes after the Government slashed affordable housing targets in London in a bid to hit its target of building 1.5 million new homes by 2029.

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The latest move follows a meeting between Housing Secretary Steve Reedand the Home Builders Federation (HBF), which represents private sector developers.

According to the trade body, 8,500 new homes due to be built in the next 12 months across England risk standing empty because affordable housing is not being bought up by councils and housing associations.

But housing experts warn any private sell-off would result in the potential loss of thousands of properties each year, as developers look to scale back their obligations to build affordable homes in future.

“We will lose affordable homes that are already built, and then not build as many in years to come,” said a housing industry insider familiar with the discussions.

However, a source close to Reed said the scheme would be time-limited to “clear the decks” of unsold affordable homes before the Government conducts a “hard reset” of the system.

Property analyst Neal Hudson, of Henley Business School, said he feared any reset would only lead to fewer affordable homes being built.

He said: “How do you unwind all of this when the housing market improves? And get developers building affordable housing again.”

Developers would be allowed to sell empty affordable homes on the more lucrative private market (Photo: Getty)

Affordable homes are usually purchased by a local authority or housing association below the market rate.

They are then made available for social rent at around 50 per cent of local market rates, for affordable rent at up to 80 per cent of market rates, or for shared ownership.

The average new-build home in England was priced at £446,000 in April this year, well above the average resold property at £286,000.

Housebuilders and developers argue that properties are sitting empty because local authorities and housing associations are not financially able to buy the affordable homes they are building.

In Cricklewood, north London, a major development of 250 residential properties is currently stalled because the developer, Chase New Homes, cannot find a housing association partner to buy 38 affordable homes.

Developers must complete affordable homes first, and can thus be left with cashflow issues which delay the rest of a project when they do not sell.

However, Fiona Fletcher-Smith, chief executive of housing association L&Q, which manages about 95,000 homes across London and the South East, told The i Paper that the poor quality of some new-builds meant housing associations are often unwilling to purchase them.

She said: “We’ve been rejecting some of the homes built for shared ownership in London because they simply weren’t up to scratch. We prefer to buy from a handful of trusted providers now.”

Fletcher-Smith added that “complicated management arrangements” can often leave housing associations and leaseholders financially liable for problems and repairs. “We’ve got buildings where that makes it very difficult to get repairs done,” she added.

Steve Turner of the HBF disputed that new-builds were not of the “quality” required, but said “specifications” required by housing associations meant they were often not taking them on.

“Housing associations may want homes built to meet future regulations, for instance, they may not want homes with gas boilers because they want electric heat pumps,” he said. “But if we’ve supplied gas, we can’t easily change it.”

Around 1.3 million households in England are currently on social housing waiting lists, largely due to a shortage of homes. That is the highest since 2014, having risen 16 per cent since 2020.

Janice Morphet, a former local planner and now a professor at University College London (UCL), said allowing developers to “flip” affordable homes could have a long-term impact on affordable housing supply.

“This change would make it very difficult for local planners to negotiate anything like the number of affordable homes needed,” she added.

“It would create an assumption among housebuilders that they can just say: ‘It’s too difficult to get affordable homes sold,’ and then duck out of their obligations.”

Council sources told The i Paper they suspect developers “have deliberately built affordable homes which are too expensive” so they can make the case to sell them on the private market.

One local authority insider who is concerned about the change said: “Once these homes are flipped to market sale, they can be sold to anyone at any price. This, combined with the decision to cut affordable housing requirements, is the opposite of making sure we build housing for people who need it most.”

Turner, of HBF, denied the claim, adding: “Moving along stalled affordable housing contracts will help us meet [Labour’s] 1.5 million [new homes target], but the Government also has to do something to decrease the cost burden on developers.

“A better approach would be to ensure that there’s sufficient funding for affordable housing, providing developers with certainty and cashflow.”

Housebuilders have been lobbying the Government to allow the private sale of affordable homes for some time, The i Paper understands. Previous housing secretary Angela Rayner launched a “clearing service” aimed at getting the homes sold. She wanted to “protect new social housing stock”.

Sources close to Reed say he is trying to solve an “inherited problem” of new-build affordable homes sitting empty.

It is understood that the Ministry of Housing, Communities and Local Government will look to ensure affordable homes are only sold privately as a last resort, and that they are aware of problems with the quality of some new-builds.

Ministers are also understood to be looking at guard-rails to avoid an “open season” for builders to ditch affordable housebuilding. These could include forcing developers to register unsold affordable homes so the Government can monitor any sale process.

A ministry spokesperson said: “We know there is an issue here that needs fixing if we are to end the housing crisis we inherited.

“We are currently working closely with developers, providers, and councils on a solution that will get Britain building and solve the legacy problem of uncontracted and unsold affordable homes.”