Audit Wales – the official auditor of the Welsh public sector - published a report on Affordable Housing in September 2024. The report was prepared for presentation to the Senedd by the Auditor General, who is independent of the Senedd and the Welsh Government. The Home Builders Federation’s Planning and Policy Advisor for Wales, Mark Harris shares the report’s key takeaways and examines what it means for home builders.

Audit Wales’s report examined whether the Welsh Government is making good use of its resources to deliver its social homes target and associated benefits. It considered the progress that has been made towards the current target of delivering 20,000 homes during this Senedd term, the prospects for achieving it, related expenditure, and how action on affordable housing is managed and governed.

For context, the home building industry has played a pivotal role in delivering the supply of new Affordable Homes via Section 106 Agreements in recent years. Furthermore, the planning system in Wales doesn’t materially differentiate between social home building and the building of any other tenure of homes. Therefore, many of the issues highlighted by the report concerning affordable housing delivery are familiar and of relevance to the industry.

What does the report cover?

The report includes some key facts and figures which show how expensive the delivery of new affordable homes is, including Welsh Government spending £1.27 billion to deliver between 8,859 and 9,197 new homes… This equates to around £140,673 per dwelling.

The primary conclusion of the report is that ‘the delivery of affordable homes has been slow and more expensive than initially expected, partly due to pressures outside of the Welsh Government’s control. If the Government is to meet the 20,000 social homes target by March 2026 it will need to spend significantly more than planned. It will also need to deliver all the schemes in its pipeline, some of which are considered risky …’

Finally, the report goes on to make seven recommendations. The first two relate to the delivery of the current target, suggesting ‘detailed scenario planning’ for 2025/26 and clearer reporting around type of home and energy efficiency. The remaining five relate to developing a long-term approach to delivering affordable housing.

How is the report relevant for the industry?

Firstly, the report recognises the role of the private home building industry in delivering the Welsh Government’s social housing target of 20,000 in this Senedd term (2021-26). For instance, they note that the figures for affordable housing delivery include affordable homes on private developments secured through ‘section 106 agreements’. Although the report does not go into much detail on this, Welsh Government statistics show that in the first two years this source delivered 2,130 of the total 5,107 affordable homes [42%].

Furthermore, many of the findings and recommendations of the report apply equally to the provision of private housing in Wales and highlight some of the issues faced by private home builders. For instance, Local Development Plans (LDPs) continue to use past build rates as the starting point for their housing allocation calculation. This issue is highlighted by recommendation 4, which suggests a review of the approach to housing need and demand:

• R4: ‘The Welsh Government should review the approach to housing needs assessment, including:
• assessing why national estimates appear to have significantly underestimated the scale of existing need and how that can be rectified
• developing its understanding of underlying demand, as well as need, as part of its assessment methods.

The issue of lack of capacity and resources in local planning authorities is also identified in recommendation 7 and is an issue HBF has long been highlighting. Indeed, in real terms authorities’ net planning expenditure has fallen by 50% since 2008-09, and the average time taken to determine planning applications is above Welsh Government targets.

The report recommends that:

• R7: ‘In line with its commitments in response to previous Auditor General and Public Accounts Committee recommendations, the Welsh Government should work with local government partners to develop sustainable solutions to the capacity and delivery constraints in local government planning services.’

This is not a new issue and was previously highlighted by the Auditor General for Wales in their 2019 report on the effectiveness of local planning authorities in Wales, as well as the Competition and Markets Authority’s (CMA) Housebuilding Market Study in February 2024.

Finally, the report identifies a number of other potential barriers to progressing new builds including environmental constraints around sustainable drainage (SuDS) and phosphate discharge requirements, land supply issues, and capacity in the planning system.

As HBF members will know, all of these are relevant to the delivery of private homes, with SuDS still causing significant delay since its introduction in 2019.

What does the report mean for the delivery of new homes?

Audit Wales’s report comes within the context of a nosedive in housing delivery in Wales.

A total of 4,756 new dwellings were built in the 2023/24, well below the annual 7,400 target suggested by the Welsh Government’s Future Wales: National Plan 2040.

While annual delivery below 7,400 has unfortunately been the case for many years, 2023/24 was particularly notable as it saw the second lowest number of new home completions in Wales since records began.

Therefore, Wales has been underdelivering new homes for many years across all tenures, and the report highlights many of the systemic issues which have caused this - including a lack of resources in LPAs, and a plan-led system that slows down housing delivery. The report also reaffirms that we need to deliver more homes annually in Wales, both affordable and private, confirming the findings of other recent reports.

On Tuesday 17 September 2024, the new First Minister in Wales Eluned Morgan announced the priorities for the new Government including a promise of more homes for social rent and reforms to the planning system. The government has also accepted the recommendations of the Audit report in principle. What remains to be seen is whether these changes will speed up the delivery of all much-needed homes in Wales - not just social rented ones.

HBF will continue to work with the Welsh Government, particularly the new Cabinet Secretaries for Housing and Planning, to find solutions to these issues so that the delivery of new homes in Wales can be increased in the years ahead.

If your organisation has HBF membership, you can help shape our asks of Welsh Government by joining our Wales Planning Group.