Trickle down housing policy: we need a new approach

Successive governments have prioritised private housebuilding to fix this country's housing woes. And they have neglected their own responsibility to directly meet housing need.

Millions of people face unaffordable rents, struggle to move out on their own or are trapped homeless in temporary accommodation. But our current government might be returning to the same discredited housing policies that pushed England into the housing emergency in the first place.

Today, Shelter has published a report on why the government must urgently adopt a need-led approach to housing policy. This approach must have 90,000 new social rent homes a year at its heart.

Without it, the government's 1.5 million homes target will not meaningfully improve housing affordability. And it won't meet pressing housing need, especially for those at the sharpest end of the housing emergency.

Private housing delivery will not address England's staggering levels of housing need

'Trickle down' housing is our name for when governments prioritise private housing over social housing. It's the idea that by encouraging private developers to build expensive homes, improvements in affordability will trickle down to everyone. The trickle down theory goes like this:

• private developers build expensive new homes, and wealthier households move in

• they free up properties for others, creating a chain of people moving into slightly better properties

• these moves filter down to free up cheaper properties for lower-income families to rent, thereby meeting a genuine housing need

Sounds odd? As the past 40 years of worsening affordability shows, the trickle down approach has not worked. It's theoretically unsound. And it's built partly on flawed or overstated assumptions.

When the chains break down

For instance, these 'chains' of moves from the filtering effect never get started if new build flats remain empty as investment properties. Or the chains break down before freeing up cheaper properties. This is especially a concern in England because of our regressive property taxation system.

Who isn't helped?

Moreover, trickle down housing won't help the 1.5 million so-called 'concealed' households in England. These are households who are forced to live with others as they can't afford to live elsewhere. Neither will it house the 132,000 homeless households who are stuck living in temporary accommodation.

Trickle down housing is supposed to put downwards pressure on lower end market rents. And to increase the availability of cheaper properties. But these changes are generally nowhere near enough to enable lower-income families to find suitable homes.

One optimistic study from Germany found that a 1% increase in new housing supply lowers average rents by 0.19%. Another study in New York found that, within a 500ft area, rents decrease by 1% after a 10% increase in the housing stock [1]. 'Concealed' and homeless households aren't just trying to find a slightly better property in the market to move into. They're unable to enter the market to begin with.

Affordability is getting worse

Evidence shows that worsening affordability for low-income private renters and rising housing need stem largely from cuts to social housing and housing benefit [2].

Overall housing subsidies are government support to help people afford housing, either in bricks and mortar as social homes, or in cash as housing benefit payments. Analysis by the Joseph Rowntree Foundation shows these overall housing subsidies have fallen sharply, from 16.5% of the day-to-day cost of housing services in 1979 to 11.5% in 2019-20 [3].

To meaningfully improve affordability and address urgent housing need, we must maximise social housing delivery. The government must also unfreeze the local housing allowance (LHA) to support with housing costs. Frozen LHA rates push low-income households who can't access a social home towards poverty and homelessness [4].

What's the government doing, and will the 1.5 million new homes target work?

So, how is the government doing on meeting housing need? There has been progress: the end of Right to Buy. A £39 billion, 10-year Social and Affordable Homes Programme that will average 18,000 new social rent homes a year.

These are both significantly bigger steps than previous governments. But this remains far short of the 90,000 social rent homes a year needed to end the housing emergency. Meanwhile, the continued LHA freeze is further pushing low-income private renters towards poverty and homelessness.

Other aspects of the government's housing policy are in tension with the urgent need to ramp up the delivery of social rent homes. They have set a target to build 1.5 million homes in this parliament. Without enough investment in social homes, the government is relying heavily on private developers to hit this aim.

In the face of low private housing delivery, developers are now using the 1.5 million homes target to lobby for developer-friendly policies. They claim that cuts to affordable housing requirements will speed up private housing delivery. And the government looks like they might be giving in, as they are:

• slashing the amount of social and affordable homes required for fast track planning permissions in London from 35% to 20%

• proposing to exempt sites of 10-49 homes nationally from delivering any social housing at all – instead requiring a cash payment with no guarantee that social homes will ever be delivered

But, as the last 45 years demonstrates, policy changes to prioritise private housing delivery over social housing are largely counterproductive. These policies sit within the wider, ineffective trickle down framework.

Developer profits

Lower affordable housing requirements tend to translate into greater profits for developers and/or landowners (i.e. higher land prices). This is due to viability loopholes that the government often fails to address. It's estimated that we've lost 1,000 affordable homes (60-70% social rent) to this loophole across just 23 sites analysed in London between 2023 and 2025.

Limitations of private supply

There are deep-seated, inbuilt limits to private housing supply in this country. It's dominated by a speculative development model that responds to housing demand (including as an asset) rather than housing need. Planning reform alone won't unravel this.

Planning reform, including increased land release, is unlikely, at least in the short to medium term, to meaningfully reduce house prices or improve affordability.

Schemes that inflate house prices

Although not currently proposed by this government, policies like Help to Buy encourage developers to build more homes by boosting demand for expensive new properties. These schemes actually inflate prices and mainly benefit a narrow group of buyers, many of whom would have been able to buy anyway.

Social housing – will it be the government's missed opportunity?

Ramping up social housing delivery in England to 90,000 new social homes a year represents a major opportunity for the government. They can demonstrate credibility and stand out from previous administrations that have failed to tackle or have actively worsened the housing emergency.

But instead, the government finds itself in a muddle. It's falling back into the failed trickle down housing approaches that won't significantly increase private supply or improve affordability. Meanwhile, fewer social and affordable homes get built.

With homelessness at record highs, the government now faces a choice. Continue with the approach of the past that fuelled our housing emergency. Or strike out a new path which clarifies the purpose of the government's housing mission: to tackle the huge need for genuinely affordable homes. To succeed, this new path must be built with social housing at its heart.

What can you do?

Call on the government to make sure developers build their fair share of social homes. Help us respond to their consultation today.

References

1. Mense, A. (2025) The Impact of New Housing Supply on the Distribution of Rents, Journey of Policy Economy Macroeconomics, 3, (1). Available at: https://www.journals.uchicago.edu/doi/10.1086/733977; Li, X. (2021) Do new housing units in your backyard raise your rents?, Journal of Economic Geography, 22(6). Available at: https://academic.oup.com/joeg/article-abstract/22/6/1309/6362685

2. Mulheirn. I., Browne, J., Tsoukalis, C. (2023) Housing affordability since 1979: Determinants and solutions, Joseph Rowntree Foundation. Available at: https://www.jrf.org.uk/housing/housing-affordability-since-1979-determinants-and-solutions

3. Mulheirn. I., Browne, J., Tsoukalis, C. (2023) Housing affordability since 1979: Determinants and solutions, Joseph Rowntree Foundation. Available at: https://www.jrf.org.uk/housing/housing-affordability-since-1979-determinants-and-solutions

4. Joseph Rowntree Foundation. (2026) UK Poverty 2026: The essential guide to understanding poverty in the UK. Available at: https://www.jrf.org.uk/uk-poverty-2026-the-essential-guide-to-understanding-poverty-in-the-uk