Wales is in the midst of a housing crisis and increasing the supply of social housing is essential to address it, according to the Senedd’s Local Government and Housing Committee.
As of March 2024, the Welsh Government was less than halfway towards reaching its target to build 20,000 new low carbon social homes for rent between 2021 and 2026.
With more and more public money spent annually on keeping homeless people in temporary accommodation that’s often of poor quality, the Committee decided to scrutinise the Welsh Government’s performance on increasing the number of social homes.
The Committee’s report, published in November, called for the Welsh Government to develop a long-term strategy, increase capital funding, and take steps to make more land available.
Of the report’s 17 recommendations, three were rejected by the Welsh Government. These included a call to establish a national development corporation to lead on delivery of large-scale sites.
Other rejected recommendations were for action to increase construction sector capacity, and for a separate housing standard for acquisitions so that greater numbers of existing properties could be purchased and turned into permanent social homes.
A “critical mass” of social housing
The Welsh Government agreed with many of the Committee’s views. It acknowledged the need for a strategy for housing delivery that looks beyond the horizon of individual Senedd terms. Its recent White Paper includes proposals for a long-term strategy.
It also accepted the need to increase capital funding. The 2025-26 draft budget increases capital spending for affordable housing to £437 million, almost a third higher than the previous budget.
The Welsh Government agreed with the need for more resource for local planning authorities, to help address the delays and complexity that housing providers often encounter. Its recent consultation proposes to increase planning fees and revise the planning performance framework.
The Welsh Government also agreed to look again at a funding solution for community-led housing projects, a proposal it had previously rejected in November 2022.
And it accepted in principle that social housing should form a bigger percentage of Wales’s overall housing stock. Currently, social housing comprises 16% of Wales’s housing. The Committee heard evidence that nations need a “critical mass” of at least 20% to balance out prices in the private market.
The Welsh Government committed to “undertake analysis to understand the steps needed to secure a higher percentage and to inform timescales”.
This signals a shift in the Welsh Government’s policy thinking. The current 20,000 target is a gross target that doesn’t take account of losses of stock due to sales or demolition. Some stakeholders have pointed this out as a potential weakness.
The target is also based on outdated housing need estimates – the Welsh Government said these will be revised in autumn 2025.
Land
Another shift in the Welsh Government’s approach is its land policy. Land was a major theme in the inquiry, with some witnesses suggesting that the Welsh Government should do more to harness the financial benefits generated whenever land values rise as a result of infrastructure investment or rezoning.
There are different ways to capture this land value uplift, including through taxation and section 106 planning obligations, but the Committee heard that one of the most effective ways is through governments purchasing land.
During oral evidence to the inquiry, Welsh Government officials revealed that they were in the early stages of scoping a land strategy, recognising a need to “be more strategic” in how the Welsh Government’s Land Division (now the Place Division) acquires land.
As well as recommending more land value capture, the Committee called for support for local authorities to help them stand firm with developers when negotiating section 106 contributions.
It called for more transparency in land ownership, more building on smaller “infill sites” in existing communities, and for the Welsh Government to redouble efforts to seek powers to introduce a Vacant Land Tax.
All these recommendations were accepted by the Welsh Government in full or in principle. However, one aspect of land policy wasn’t mentioned in its response.
Compulsory purchase is a tool that can enable the assembly of large sites. There are powers in the Levelling Up and Regeneration Act 2023, as yet unused, that allow Welsh Ministers to direct that affordable housing developments are in the public interest. This would allow compulsory purchase of land at less than full hope value.
Some witnesses said that a fair and effective approach to compulsory purchase could have a positive impact on supply. While the Committee didn’t make a formal recommendation, it said it hoped the Welsh Government would make swift progress on its previous promise to consult on these powers.
Rejected recommendations
Housing providers told the Committee that acquisitions could be a bigger part of the solution with more flexibility in energy and space standards. While Committee members didn’t want to see a lowering of standards, they were persuaded by witnesses, including those representing social tenants, who argued that more flexibility would be a reasonable response to the scale of the housing crisis.
Tenant engagement organisation TPAS Cymru said the Welsh Government should be “thinking how we can still meet the health and safety needs of tenants, but how we can ensure that we're still taking tenants out of hotel rooms and putting them into accommodation.”
In its response to the Committee, the Welsh Government said it didn’t “wish to create a situation where quality expectations were lower for some homes.” And during draft budget scrutiny on 15 January, officials revealed that the current acquisitions programme was oversubscribed to twice its capacity with properties already compliant with standards.
The Welsh Government also rejected a recommendation to develop a strategy for attracting more people into the construction industry, saying that “significant actions are already being taken”.
Finally, it rejected the Committee’s proposal for a development corporation, saying that the Place Division can deliver the same outcomes at lower cost.
This was one of the proposals most strongly backed by inquiry witnesses. The Committee heard that such corporations had worked well in other countries and in Wales’s own recent past.
Witnesses said that a development corporation doesn’t need to be large but must have the right mix of skills, legal powers, and purpose.
Whether the Welsh Government’s Place Division has what it needs to enable large-scale development, remains to be seen.
Catch up with the debate on the private rented sector this Wednesday on Senedd.tv, or view the transcript afterwards.
Article by Jennie Bibbings, Senedd Research, Welsh Parliament
